CUSTOMS AND INLAND REVENUE BILL (No 215).

HC Deb 13 May 1889 vol 335 cc1867-906

Order for Second Reading, read.

Motion made, and Question proposed, "That the Bill be now read a second time"

MR. PICTON (Leicester)

, in moving "That this House is unwilling to sanction a Bill which involves the continuance for another year of the present duty on tea," said: The right hon. Gentleman the First Lord of the Treasury has expressed a hope and an expectation that this stage of the Customs and Inland Revenue Bill will be a very brief one, and that the discussion of the provisions of the measure will be deferred until the Committee stage is reached. Now, I venture to think that no stage of the Bill would be as appropriate for the consideration of my Motion as the present one, because if the Motion should be carried it would be absolutely necessary to re-construct the taxation of the year upon wholly different principles. I therefore think I am justified in asking the House kindly to listen to me shortly before we proceed to the later stages of the Bill. In bringing the Motion forward again this year I am quite prepared to be charged with importunacy; but my experience of the House of Commons has impressed me deeply with the wisdom contained in the well-known parable of the unjust Judge. Not that I would charge this House with injustice; but I think that all suitors to this House would do well to follow the example of the poor widow who, by her importunity, wearied the Judge, and in the end got her request. I feel obliged to take this course; it is widows and poor women who constitute by far the larger number of clients, in whose behalf I am about to make this appeal. It is of no use to tell me that the question does not excite any clamour out of doors. Wise legislators would prefer to render clamour unnecessary on a question like this rather than wait until the public mind is excited. I am afraid that the Chancellor of the Exchequer, with all his well-known financial skill, has been during his tenure of office, the sport of popular passion. Instead of pushing forward to higher applications those principles of just taxaation, which he learnt from even a greater master than himself, he has been watching from the serene height of his official position the toiling world of business and labouring men below, in order that like a bird of prey he might suddenly pounce down upon the weak and unwary. In the first place he tried the Cart and Wheel Tax, but was speedily frightened off; he then seized upon pleasure horses and was thrown off again. This year he has swooped down upon the thrifty hoarders of personalty in order to persecute them, for the benefit of the sacred landed interest. I think the right hon. Gentleman would do better if he were to give up this vain attempt to balance one selfish interest against another, and to seek out rather what is safe and just for the whole community. I can find no better justification for my Motion than the words of the right hon. Gentleman himself in the speech in which he introduced his Budget. He said: It is our duty to have a special sympathy for the struggling professional or trading class —for the men with incomes from £300 to £700 a year, whose situation requires them to spend all, or nearly all, they earn, leaving no margin, or a very small margin, beyond their expenditure. Sir, we are asked to show sympathy for certain classes of income taxpayers, but if we are called upon to deal tenderly with those having incomes of from £300 to £700, because they have to spend all, or nearly all that they earn, leaving no margin, or scarcely any margin, still more tenderly ought we to deal with those who, with all the agony of struggling, cannot make both ends meet, and who have to spend more than they earn, and if they have any margin at all have it on the wrong side. It is to the case of these poor people that I am calling attention, and I earnestly hope that I shall not plead in vain. The right hon. Gentleman, in the very next sentence after that which I have quoted, said that he would look to the surplus which could be put by rather than to the resources which could not be diminished without imposing sacrifices out of proportion to the sacrifices made by other Members of the community, or to use another phrase, he said he would lay special weight upon accumulations. Now, Sir, it is precisely because the Tea Duty is flagrantly at variance with those principles laid down by the Chancellor of the Exchequer that I am attacking it now. I shall prove that the Tea Duty is a plunder of poverty and distress. Tea has become a necessary of life; it is a special consolation to the poor and heavy laden when they are overdone by daily toil. The tired seamstress, the exhausted washerwoman, the poor under-paid teacher all find refreshment in their cup of tea, and you will often hear a hard-working woman declare at the end of the day that she cannot keep on unless she has a cup of tea. Now, the tax upon tea amounts to sixpence for every pound consumed by these patient, suffering, laborious people. And, again, I contend it is a case of plundering poverty and distress. Sir, if I could gather into one picture the thousands of garrets in this great Metropolis, and in other large cities and towns which are the haunts of ill-paid and suffering women; if we could only realize the temptations ever pressing upon them to partake of drinks which bring madness and dishonour in their train, I do not think I should plead in vain when I urge that this kind of refreshment should be lightened of the tax, and should be made as cheap as possible. For without any deviation whatever from the strictest lines of political economy, by taking off this sixpenny tax upon tea, we could actually add about a week's wages to many of the most poorly paid labourers in our country. This is a consideration which the House ought not lightly to disregard. We are asked to mulct these poor creatures in a week's or half a week's wages in order to build ironclads, and to provide soldiers, gunpowder, and weapons of destruction. Why, if that proposal were made now for the first time in so many words to this House, the proposal would be scouted, and yet that is what we are actually doing by enforcing this tax upon tea. In many poor houses tea is drunk as often as four times a day. I know there are very few hon. Members in this House who drink it so often, but that is simply because they have a sufficiency of beef and mutton and of other generous sustenance, and they can get ample stimulants for the brain without drinking tea. But people who have to live on bread and herring for breakfast, bread and bacon for dinner, and bread and dripping for tea or supper, cannot be so satisfied, and need some stimulant, and if they do not have tea they must partake of some other drink which is most dangerous for them. Prudence and industry induce these people to drink tea instead of beer. Two of the reasons, then, upon which I ask the House to abolish this tax upon tea are that it is drunk by those who are in abject poverty, and that it is partaken of for reasons of self-control, prudence, and industry. Are either of these fit qualities for taxation? Surely a just Government would do all it possibly could to encourage properties like this. Now, Sir, I wish to lay before the House some few considerations to show how very disproportionate this tax is, which has to be borne by the ranks of labour. I say the ranks of labour, because I prefer using that phrase to saying working classes, because, in my opinion, the ranks of labour do not constitute a class at all; they form the vast majority of the population. Professor Leoni Levi, in his book on "The Wages and Earnings of the Working Classes," published, I believe, in 1885, holds that those who work for wages are two out of three in the population; but then he separates from these workers for wages the lower middle class, whom he treats as having incomes ranging from £100 to £110 per year. Now, Sir, for my purpose in regard to the tea-tax, I contend that the lower middle class must be reckoned in the ranks of labour, because an income of £100 or £110 does not raise them beyond the needs of this class. Therefore if I add the lower middle class to Professor Leoni Levi's workers for wages, I find that altogether they constitute five-sixths of the whole proportion of the country. The question I am urging upon the attention of the House is whether the sixpence a pound they pay for tea is a fair share of taxation, and whether it presses fairly or unfairly upon them. Now, I need not ask whether they ought to pay in general to the sustenance of national expenditure, because my point is that they pay in a much greater proportion than those who are more comfortably off. In the first place, they drink a great deal more tea, and consequently they have to pay a greater share of this taxation. In the next place, I have to urge that the taxation is much heavier in the lower qualities of tea, in proportion to the charge on the higher qualities, because it is sixpence a pound all round. And whereas, while on the tea costing four-pence half-penny or fivepence in bond, the tax amounts to more than 100 per cent on the value, in the case of tea costing two shillings and sixpence per pound it is only 20 or 25 per cent. Therefore at least seven-eighths of the tax upon tea falls upon the shoulders of poor. It may be said that they do not drink it as strong as the rich people do, but then they cannot afford to do so; but that makes my case all the stronger. They want tea as a gentle stimulus, but because of the tax they are obliged to drink it so weak that it does not do them much good. Therefore I contend they are robbed of their just dues by a tax which presses, I believe, iniquitously upon them. I take it that the tax upon beer amounts to about two-pence per gallon, or about a farthing per pint. Well now, I find that according to one calculation made by the officials in the Tea Room in this House, sixteen pints can be made from one pound of tea, and that gives you a tax of a little less than a halfpenny per pint. But this is strong tea, and I have consulted an authority who takes an opposite extreme, and says it is possible to make 42 pints out of a pound of tea. If you take the extreme estimate, you find that even then the taxation upon tea amounts to half-a-farthing per pint, so that while everyone who drinks a pint of beer has to pay one farthing to the tax gatherer, the drinker of this weak tea has to pay half-a-farthing for the privilege of drinking a pint of that. Sir, I do not think that that is a proper proportion, and I appeal to the friends of temperance in this House whether such a tax should be imposed upon tea. Take the consumption of a poor family, consisting of a father, mother, and three children, whose wages come unitedly to 20 or 25 shillings per week. As a general rule they consume half a pound of tea per week, though I know that there are some families which have to be content with less. I have come into contact, for instance, with a labourer earning 11 shillings per week, who had to be content with a quarter of a pound of tea per week, until after his children had left home. Then, although he was earning just the same wages, he and his wife increased their quantity; thus showing that before they had had to stint themselves of what was necessary for their comfort. Remember, the consumption of half a pound of tea per week represents 13 shillings a year, paid in taxes, which is more than many agricultural labourers earn in one week. Is it to be wondered at, Sir, that a revenue obtained from such a source as this should prove inelastic? Last year the Chancellor of the Exchequer informed us that the consumption of tea just kept pace with the population; this year we are informed that the proceeds from the tea tax were disappointing, the increase had only been one-third per cent, whilst the population had increased at the rate of one per cent. I know that the right hon. Gentleman explained that this was mainly attributable to the increased use of Indian tea. But here, Sir, I find a very strong argument on my side, because it is precisely the discouragement imposed by this tax on a growing trade with India which forms one of the strongest points against the duty. It is true that the use of Indian tea has increased considerably at the expense of Chinese tea, and experience shows that if only you abolish the tea duty the trade in Indian tea would increase by leaps and bounds, to the great benefit not only of our poor population at home, but of our vast population in India—in that great dependency of which we are never weary of boasting, as one of the brightest and most splendid jewels in the British Crown. Surely we ought not to discourage a profitable and growing industry, like the tea trade in India, by enforcing this duty of sixpence per pound. Now, Sir, I should like to sum up my arguments in opposition to this tax. In the first place, I have shown that it is borne to the extent of seven-eighths by the ranks of labour. I have shown that it presses particularly on misery and suffering; that it is a tax on temperance, and that it bears an improper proportion to the taxation on beer. It takes an appreciable part out of the income of the worker; it discourages the consumption of tea, and finally, it is unfair in its operation to our great dependency of India. But, Sir, I cannot sit down without alluding to some of the objections which are sure to be made against my proposal. The Chancellor of the Exchequer regretted last year very much that there were so few objects upon which he could lay his hands for taxation; but remembering the beneficent course of financial reform by which the great Leader on this side of the House had thrown so widely open our trade, and had removed taxation from all necessaries of life with the single exception of tea, the right hon. Gentleman acknowledged the justice of the doctrine that taxation should be upon accumulations and not upou matters of consumption. I suppose I shall be told again that there are very few subjects possible for taxation, and that it is inexpedient to lessen them still further. I only wish the right hon. Gentleman, the Chancellor of the Exchequer, would have the courage of his opinions expressed in his recent speech, and that he would look forward to the true ideal of taxation, which I take to be this, that with a few exceptions for certain luxuries, all Imperial taxation ought to be drawn from realized property, whether in land or funds. I would not go so far as Henry George, who advocates one single tax — a tax only on land, but I do think the land might yield a great deal more than it does at present. I know when such a proposal is made, there is a great outcry from hon. Members opposite about the poor landed interest. That interest is always complaining. It reminds me of the hypochondriac, who thinks that he has all the diseases under the sun, when in fact, he only wants a little fresh air and exercise. And so it is with land. If you get rid of all the settlements, entails, mortgages, and game laws which keep it down, it would once more flourish, and it would be able to bear much more taxation. I know that we are told that it cannot bear more because it yields only 2½ per cent to investors, but it must not be forgotten that land owners or investors, in land are quite willing to consider that the prestige that goes with the possession of land, and the political influence which attaches to it are equal to another 2½ per cent. Sir, if the land were treated on more commercial principles than it is now, it would be capable of yielding very much more to the exchequer. I contend, however, whatever may be the proportion that should be raised from land, we ought to get a far larger part of our taxation from realized property, whether personal or real, from accumulations in fact. We are told that there are ten thousand millions of accumulations in this country, and if we charged these with only a quarter per cent, we should get twenty-five millions of income. There I suggest is a resource for future Chancellors of Exchequer. If they will only put the tax on these accumulations, they will be able to abolish income tax, and also abandon these imposts on the necessaries of the poor. The Chancellor of the Exchequer has more than once indicated that he is strongly at variance with the doctrine that the scanty incomes of the labourer should be altogether free from taxation. I do not think that that is so dreadful a thing at all in a wealthy nation like this, and I think where the labourers are nearly, if not all, quite on the borders of pauperism, they have claims upon our consideration, which have not always been attended to. As regards these accumulations, we ought to see how they have been gathered together. It is because the landowners have been living in a prosperous country, and a country to a considerable extent depending for its prosperity on the energy and industry of its labourers that the value of the land belonging to many of the proprietors has enormously increased. I know noble Lords who possess land in the neighbourhood of great towns. Their ancestors got it in times long gone by for an old song, and now it is worth £20 or £30 the square yard, and that without the slightest effort on their part. They never had anything to do with the trade of the community that made their land so valuable, and have never done a stroke of eommercial work in their lives. Whilst they neither toiled nor span, industries have been growing up, and the value of their property has increased in consequence. I am not in favour of dividing the goods of the rich amongst the poor, but I am in favour of showing a generous consideration for the poor because they have not sufficiently shared in the prosperity to which they have so largely contributed. Again, under the present system of wages, labour does not share as it ought, in the profits of industrial enterprise. Wages are, as everyone know, fixed by the standard of the necessary cost of living. If the standard rises, wages must rise or work must stop. If the standard falls wages must fall. There are companies which distribute dividends of 16, 20, and even 25 per cent, and they are not ashamed to pay 9s. and 10s. a week to their poor female workers. I do not say for a moment that they ought to make paupers of these people, but I do say that out of the 16 or 20 per cent, some 5 or 7 per cent might very well be divided amongst the poor workers at the end of the year, and then they would have a share in the profits. It is because they have not got that at the present time time that I think they should be generously considered in the matter of taxation, and that it is very cruel, indeed, to ask them to pay 6d. a pound on their tea. I may be told that this savours of socialism. Well, Sir, I shall not be at all terrified by that observation. I am justified in being comparatively callous to it, for the right hon. Gentleman the Member for Derby (Sir W. Harcourt) said with much point a short time ago, in public, "We are all socialists now." I quite understand and I do not wish to misinterpret that remark. There is a sense in which it is perfectly true. It is only by socialism, in the best sense, which I am sure is what the right hon. Gentleman had in his mind, that we can discourage communism, which would eat the heart out of the community. It is only by putting all our common interests upon a common basis, and causing the abundance of the rich to make good the want of the poor, in our public affairs, that we can ease the load of the poor in life, and show them something better than the vicious communism which is often preached to them. Being recently in Scotland upon a Royal Commission I heard much there about "the common good." I had not heard the phrase used in the same sense in our English towns. In Scotland they seemed to speak of corporate property as "common good." It is an admirable phrase. I wish we had not only the phrase, but the principle amongst us. Surely a fair share of the accumulations of which I have been speaking are a debt owing to the community, which has not had its legitimate proportion of them. I am afraid I can scarcely hope for a majority upon this question, but I feel impelled to go to a Division upon my Motion. I invite all those hon. Members who really believe in the doctrines preached by the Chancellor of the Exchequer with regard to the incidence of taxation upon surplus, I invite all who think threepence a week too much to take in taxes on tea out of the wages of a poor family, I invite all friends of temperance who do not think it fair that beer and tea should be taxed almost alike, or much too nearly alike, I invite all genuine Radicals, and I invite also all those prudent Conservatives who agree with me that a kindly socialism is the best preventative of a fierce and destructive communism to vote with me. I beg to move the Resolution of which I have given notice.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "this House is unwilling to sanction a Bill which involves the continuance for another year of the present Duty on Tea"—(Mr. Picton),

—instead thereof.

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

Sir W. Lawson (Cumberland; Clockermouth)

formally seconded the Motion.

MR. GEDGE (Stockport)

I think, Sir, it would have been kinder of the hon. Member, who has ingeniously taken us round the whole range of political economy and social economy and taxation in general, if he had given us a little hint of it in his Amendment so that we might have been prepared to reply to him. I do not, however, intend to follow him over all the ground he has covered, I wish simply to ask the House to consider whether this tax is or is not a proper tax to be levied, having regard to the fact that it produces four and a half millions sterling a year, collected with very little expense or friction. I think we shall nearly all agree that the working man who earns weekly wages should pay some taxes. As, unfortunately, it is necessary to raise money by taxes every year in order to keep the machinery of Government in motion, I think everybody ought to contribute his share towards the total amount wanted. As every man enjoys the benefits of living under a properly organized Govern- ment, every man ought to pay something towards the cost; and especially now that everybody possesses the voting power. Upon the voting body, of whom the poor form a large proportion, depends the decision of many great questions, such as that of war and of peace, in which questions of expenditure are largely involved. I do not think it would be for the advantage of the country if large classes of the people escaped taxation altogether; and how are you to get at the wage- earning classes unless you tax some article of general consumption? They certainly do not pay income tax or house tax, and it rarely happens that they pay the Death Duties. There is nothing they pay taxes on except the tax on the tobacco they smoke, the tax on beer and the tax on tea. I would point out that the poor families who are spoken of as being severely handled if they have to pay as much as 13s. a-year upon their tea, their wages being assumed to be the same sum per week, because the tax is a 52nd part of their income, do not in some cases confine themselves to the consumption of tea, but the father and mother generally take beer also and the father smokes tobacco. If a man smokes an ounce and a half of tobacco a-week he will pay 4d. upon that, and he and his wife will perhaps have to pay 3½d. a-week in taxation upon their beer. It must also be remembered that the man who pays an income tax of 6d. in the £, pays in that tax alone a 40th of his income, and he also pays the Tea Duty as well as the House Duty, and various other taxes which the poor man escapes. While we should be very glad to see the burden of the Tea Duty lightened if it could be, it does not seem to us to be a very large amount to pay. The general objection to indirect taxation upon articles of consumption like bread is that the poorer a man is the greater the proportion of his money that goes in taxation upon the articles taxed. I think, however, with regard to tea, that it is drunk in families very much in proportion to the income. In many families they use half a pound of tea per head a week. We know the fashion of tea-drinking now—tea in bed in the morning, tea at breakfast, tea at four o'clock, and tea after dinner. The result is that the rich man pays in proportion far more of the Tea Duty than the poor man. If this tax were abolished, as the hon. Member proposes, what taxes would the teetotal working man pay? I do not wish to tax teetotalizm, but it seems to me that the teetotaler gets the benefit of the system of Government equally with the man who drinks beer, and I do not see why he should pay nothing whatever. His teetotalism and his thrift enable him to bear the burden of taxation better than others of his own class. I think it is probable that before long the teetotalers will not smoke any more than they drink now. I know the Salvation Army, which is having great popularity amongst the masses and is doing a great deal of good bars tobacco as well as beer and endeavours to get its young people to take the pledge against both. It seems to me that the teetotaler ought to pay some tax, and if you take off the tea duty he will pay none. There are difficulties in the way of making it an ad valorem tax, and the result is a certain inequality. There are, however, inequalities in all things. The teetotaler ought to pay some tax, and therefore I think this tax ought not to be abolished.

*THE CHANCELLOR OF THE EXCHEQUER (Mr. GOSCHEN,) St. George's, Hanover Square

I do not complain of the hon. Member's introduction of this subject, which he also brought forward last year. Evidently he has the matter very strongly at heart, and he may be right in indulging in importunity in bringing it forward. I am not, however, so satisfied with the somewhat grotesque description he gave of the financial policy I have pursued. I must say I think he exaggerated and perverted the history of the last three Budgets in a somewhat extraordinary fashion, and I hope he will excuse me if I do not follow him in that portion of his speech. I object to some of the phrases he used because I think they are likely to do harm. When he speaks of taxation which is imposed for the purpose of the government of the country as plunder, he uses a phrase which is unnecessarily strong and which is a dangerous phrase to employ. I may point out that there has been no additional taxation of tea for any purpose whatever. The duty has remained at its present level since 1866. If the working classes pay that duty, they pay it, as my hon. Friend (Mr. Gedge) has justly pointed out, for the whole machinery of government under which they live, and for the maintenance of the institutions which they enjoy. I certainly hold that every person should contribute something towards taxation. It is quite competent for the hon. Member to contend that some one class pays more than its proportion. I think, however, the hon. Member goes too far when he pleads that the working classes ought to make no contribution whatever to taxation. He indulges in a fallacy which is very frequently advanced when he argues his whole point on the basis of the very poorest class. All taxation bears with very great severity on the poorest people. The hon. Member referred to the poorest class, to whom, no doubt, the Tea Duty is a most important item, but if his resolution were adopted, he would bring about a result which would not be in accordance with the wish of many of those who belong to his Party —namely, that a large class of persons would contribute nothing whatever to the revenue. The hon. Member considers that we ought to relinguish altogether the £4,500,000 or £5,000,000 sterling we derive from this tax, and he only throws out one suggestion to meet the financial difficulty that would thus be created—namely, that we should put a tax upon accumulations. The hon. Member lays hold of a phrase of mine to the effect that we should look to accumulations rather than to profits. I think it is scarcely doing me justice to suggest that as a general proposition on which I should be glad to rest the whole taxation of the country. He takes a rather fantastic return of the aggregate accumulations of the country, and upon that he suggests that we should raise a duty of 1 per cent. This proposition means that if you have a person possessed of £10,000, and receiving £300 a year income from it, you are to take £100 from that £300 every year.

*MR. PICTON

I think the right hon. Gentleman will do me the justice to remember that I did not propose that. I said ¼ per cent.

MR. GOSCHEN

Then the income tax the hon. Member would propose upon the £300 a year would amount to £25, which is rather a heavy annual tax to put upon such an income. I really think the hon. Member has not thought out his proposition in this respect; nor has he examined the Return in detail, or he would have seen that, in order to make up the £8,000,000,000 he mentioned, £300,000,000 are put down as belonging to people who are so poor that they do not pay income tax at all. Upon that group of persons the hon. Member would levy this enormous tax. Again, farming stock and implements of husbandry are included in the Return. I need not labour the point, however, because I think it would be long before any responsible statesman would think of imposing such a tax. There is, no doubt, a tax of the kind in the United States, but I have read of the fraud and perjury to which it leads, and I know statesmen in America speak of it with sorrow and regret. The hon. Member said he thought from the lessons I have derived from the finance of my right hon. Friend the Member for Mid Lothian (Mr. Gladstone) I might have conceived it to be my duty to repeal this tax; but the House will remember that the tax has stood where it now stands since 1866, that in the interval we have seen the income tax reduced from 6d. to 5d., and from 5d. to 4d., and from 4d. to 3d. when the right hon. Gentleman was in office, and that nevertheless the Tea Duty has not been touched. It must also be remembered that the price of tea has fallen to such an extent that less is paid for tea now than would have been paid if there had been no duty at all twenty years ago. We are glad to think that the falling off in the price of this article has contributed so much to the comfort of the poor. I do not maintain that the duty must always remain at 6d. I do not think it is a very light tax. But what the hon. Member proposes is that we should impose other taxation now in order to replace the 4½ millions sterling we should lose by taking off of this duty. I do not think there are many Members of the House who would be willing to face that. In a year when there is a large surplus to dispose of, tea would have a good claim to some consideration, but I maintain that it would be a deplorable error of judgment to abolish the Tea Duty altogether and thereby to establish the principle that a large proportion of the population need never pay any taxes at all. I think the House would be scarcely prepared to create such a gap in the Revenue of the country as would be created by the abolition of the Tea Duty.

SIR W. HARCOURT (Derby)

I feel sympathy with a great deal that has been said by the hon. Member for Leicester (Mr. Picton), and certainly the duty on tea cannot be regarded as a light duty. Comparing the duty now with the cost price of tea, it is a much heavier duty than it was some years ago. Pro rata with the value of the commodity, the duty is a high one. We may congratulate ourselves, at all events, if the Tea Duty is to remain, that it seems probable, from what we have heard this evening, that the measure for raising the price of sugar is likely to be indefinitely postponed, and the hon. Member for Leicester has that consolation, though he may be unable to enforce his views as to the Tea Duty. We have voted a large sum for public expenditure, and we must find the money for this expenditure. It must be remembered that if the Tea Duty is not to be removed, other taxes have to be imposed, and this is due to that enormous and, in my opinion, preposterous expenditure to which we are committed. The Chancellor of the Exchequer, in a speech made in the country some months ago, maintained that he had a good surplus, and that everything seemed favourable to his Budget, but then there were demands made upon him that ruined his Budget. Well, they have ruined his Budget. In a time which we may call, as compared with recent years, one of public prosperity, the Chancellor of the Exchequer with a large surplus has to come forward and make proposals for increased taxation. What is the reason of this? It was given by an authority that will be accepted by hon. Gentlemen opposite, Lord Beaconsfield many years ago, when he, in a lucid interval—I mean not to Lord Beaconsfield, but to the Party—denounced bloated armaments, and said, "expenditure must depend on policy." There never was a time that afforded a more conspicuous instance of the truth of this. What is the situation? The hon. Member for Leicester might very fairly have made a demand for the reduction of the Tea Duty. I think a very fair and very proper demand it would have been. He would have said to the Chancellor of the Exchequer, "you have got a surplus which according to all rules of finance has hitherto been distributed among the different classes of the community;" and the reduction of the Tea Duty would have been a very fair contribution towards the relief of the taxation of the most numerous class in this country. Well what is the situation? The additions you have made in this one financial year to the expenditure of the country would have almost enabled you to repeal the Tea Duty altogether. I think it is not very far short of £4,000,000 you have added to the expenditure of the country this year, and, mind you, that addition has been made in face of the declaration of every Member of the Government last year that expenditure at that time (last year) was amply sufficient for the necessities of the country; therefore, this is a new discovery made by the Government themselves in 12 months that it is indispensable to make this enormous addition to the expenditure of the country. If you go into a policy of this kind you cannot decrease the Tea Duty, and, indeed, you have to increase taxation not only in the Death Duties and the Beer Duty, but you must go on adding to every source and commodity for taxation. There was a very alarming and ominous phrase in the statement of the Chancellor of the Exchequer that "he wished he had more sources of taxation." So, I suppose, in the future we must look to have duties raised from other commodities and other sources of taxation. I thought this one of the most alarming sentiments I ever heard from a Chancellor of the Exchequer in this House. It seems we are to revise the financial policy of many years, which has been so beneficial to the people of this country, not in regard to the Sugar Duty only, but in the principles of general taxation. The great object of that policy was in 1841, according to Sir Robert Peel, to diminish the taxed articles in use among the people of this country, and after the lapse of all these years since 1841 we have, I think, for the first time a Chancellor of the Exchequer standing up in the House of Commons holding out a prospect of imposing taxation on other and more numerous articles than those taxed hitherto. That is not, I think, a pleasant prospect; but it is the inevitable consequence of the policy you are pursuing. There are missionaries and apostles of extravagance going about the country. As I read this morning, there is a political partizan adjutant-general making a violent Party speech, a thing totally unheard of in our Army organization before. I have never heard of anybody in the position of adjutant-general holding language and behaving in the manner pursued by the present adjutant-general. All this is intended to inflame expenditure; and if you have enormous expenditure you must have increased taxation. I see the hon. Baronet the Member for Sussex (Sir W. Barttelot) opposite. He does not like, as he said, some of the proposals made, though I have no doubt he sympathises in the objects which make that taxation necessary; but everybody will have to suffer under a policy of this kind, and the fair expectation which the working classes might have had of relief from taxation is gone. The Chancellor of the Exchequer had a surplus to begin with. I am speaking of the surplus of the coming year, upon which every Chancellor of the Exchequer is to be congratulated. I never congratulate a Chancellor of the Exchequer on what is called a realized surplus, because a realized surplus is merely the result of incorrect Estimates. The theory of the finance of this country is that each year you should only ask from the people as much as is wanted for the year with a small and reasonable margin that you may not be on the wrong side at the end of the year. There should be a margin of from £200,000 to £300,000. I think that the Chancellor of the Exchequer allows a margin of something under £300,000. If at the end of the year you find yourselves with one, two, or three millions more than you estimated, that is because you placed the produce of the year's revenue too low and the expenditure too high. You can manufacture a surplus to any extent by that process, but if your Estimates are reasonably correct you ought never to exceed, say half a million surplus. I find last year, and I have pointed it out—not blaming the Chancellor of the Exchequer particularly, for it is an established habit—that the Estimate of stamps was a great deal too low. This year we find the revenue from stamps exceeding the Estimate by nearly half a million, and there is the same thing with the income tax—an excess of half a million or thereabouts.

*MR. GOSCHEN

On enormous sums.

SIR W. HARCOUT

Yes, but you are habitually dealing with these sums. Great credit is due to the permanent officials for making as close an Estimate as they can, but to be out by half a million under one head is more than ought to be reasonably expected. But what is the consequence? You levy on the year, it may be, a million or more more than you want, and then you say what a fine surplus; but in my opinion it is not a sound system, and a departure from the principle that you should only ask in the year for what is wanted in the year. The Chancellor of the Exchequer parted with two millions, I thought unwisely, appropriated for the reduction of the Debt, but by this system of miscalculated Estimates we get the money back again, and so, like Penelope, he does at one time what he undoes at another. While he makes his Estimate on the assumption that the two millions are no longer to, be appropriated to the Debt, he raises the money all the same through the system of incorrect Estimates, and it goes to the liquidation of the Debt. So far as it results in this manner I am glad, but surely this is not the proper way in which it should be done. It ought to be done by correct Estimates of revenue and expenditure. I only say this by way of parenthesis, because I am speaking of the Budget proposals for the coming year. The Chancellor of the Exchequer has to deal with the liquidation of the debt; he cannot hope always to recover in the same manner the two millions he has given away. But we find in the National Debt Bill he proposes to make away with a third million, practically making three millions, that is, what he has gained from the reduction of the interests on the Debt. But for the Bill as the law stands this million would have gone to the reduction of the Debt, as, of course, that would have constituted part of the Sinking Fund going to the reduction of the Debt. The result of the financial arrangement is that he practically diverts from the Fund for the reduction of the Debt three millions, which by law is appropriated to that purpose. That, I think, cannot be denied.

MR. GOSCHEN

The right hon. Gentleman will surely see that only two millions are diverted, the other million comes out of interest.

SIR W. HARCOURT

It is really only a matter of phraseology. In the National Debt Bill, the Chancellor of the Exchequer says that the permanent charge for the reduction of the Debt shall be £25,000,000 instead of £26,000,000, and that "25" shall be substituted for "26" in Section 1 of the Sinking Fund Act.

MR. GOSCHEN

The right hon. Gentleman will excuse me interrupting, but I have no opportunity of reply. He states that the Sinking Fund is £26,000,000, but that is a fallacy. £26,000,000 is not the Sinking Fund, it includes both the Sinking Fund and the interest. It is unfair, I think, to make the statement that a million is withdrawn from the payment of the Debt, while clearly that million comes from the saving in interest.

SIR W. HARCOURT

It really is only a question of phrasing. The Chancellor of the Exchequer will admit that if he had not proposed a special Act that million would have gone to the reduction of the Debt. I do not care how you put it, that is the effect. I will describe it in any form of words you may prefer. It is necessary to legislate to prevent the money going as it would have gone to the liquidation of the Debt. I only draw attention to this to show what is the operation of this inflated expenditure on the financial condition and taxation of the country. I show, first, that you have by your policy diverted this amount from the sinking Fund. I give you credit, of course, for having diminished the interest on the Debt. I do not dispute that for a moment. One of the beneficial consequences of that reduction ought to have been either lowering of taxation or redemption of more debt. Instead of that, however, three millions a year, which would otherwise have diminished the Debt, have not gone to the benefit of the taxpayer. On the contrary, increased taxation in the form of Death Duties and beer tax is being levied. I wish to be fair to the Chancellor of the Exchequer, so I mention, of course, that besides increased expenditure, there has been contribution to local taxation; but this does not alter the fact that you had this year a good surplus, from which we ought to have expected relief from taxation, and certainly no diversion from the fund for the reduction of debt which had accrued from the conversion of interest. Instead of that you are obliged to call on the House for additional taxation, and that is simply accounted for by the enormous increase made in the expenditure of the country. With respect to the Amendment of the hon. Member for Leicester, I can only say that I have voted, and shall on every occasion vote, against the additional taxation. But as the money has to be found, I could not vote for striking off four or four and a half millions of taxation on this occasion, and can, therefore, not vote with my hon. Friend, as I am not prepared to suggest an alternative tax. Nor do I think that this is a fitting opportunity for raising those larger questions with respect to the incidence of taxation which my hon. Friend has raised. They are most important questions, such as are going to command the keenest interest in the future. There is no doubt the charges that have been made in the electoral conditions of this country, the greater voice given to the humbler classes of the community will inevitably lead to that voice being heard on the subject of relative taxation. It is right that should be so; it is one of the objects with which the electoral extension was made. I hope these matters will be approached in a reasonable and prudent spirit. I have never seen any indication myself on the part of any great number of the people of dealing with the subject in other than a reasonable manner. I have no hesitation myself in expressing the opinion that realized property does not bear a fair share of taxation. I believe that, without laying down any proposition that there should be any class of the community exempt from contribution to the public burden. I do not contend that at all; but I do say, so far as I have considered the subject, that I think realized property ought to bear a larger share than it does at present. I will not go further into this question now; it is one that will have to be carefully considered. The people of this country will make themselves heard on the question, and I expect that they will demand that the expenditure on armaments shall be less extravagant than it is at present. The Government will hereafter have to reconsider our system of taxation, and a good deal will have to be done in the direction indicated by the hon. Member for Leicester so as to give relief to all classes of taxpayers in the country.

*MR. HALLEY STEWART (Lincolnshire, Spalding)

The Chancellor of the Exchequer has referred to the extreme cases dealt with by the mover of the Resolution as if they formed the main subject matter of the Motion of my hon. Friend (Mr. Picton). My hon. Friend pleaded for those whose incomes range from 20s. to 25s. a week, but in Lincolnshire and among my constituents the average wage of the agricultural labourer is only 12s. a week, and I see from the Registrar General's Report that there are other counties where the average is only 9s. a week. On incomes such as these hon. Members can hardly imagine what the pressure of a 6d. tea tax is. There has been a fall in the price of tea, but we are not indebted to the Government for that, and the incidence of the duty remains the same. Passing through a town in Lincolnshire last week, I saw tea advertized at a shilling a pound, and it was sold by the Mayor of the borough. It is certain that that tea did not cost him more than 4d. a pound, and every pound had to bear 6d. duty. Tea is quoted in the market at 4d. a pound. The House will realize the enormous inequality of the impost. The tea of the rich man, at 2s. or 2s. 6d. a pound, pays 6d., and the poor man's tea, at 4d., equally pays 6d.; the first is taxed 20 to 25 per cent, the latter 150 per cent! Let the House realize the weight of this burden upon those who, with wife and family, have to make both ends meet on 1s. 6d. per day wages. "Every man must pay something," says the Chancellor of the Exchequer, "for the luxury of Government." Yes, but the working man does pay something. He gives his toil. What more can a man give to the service of his country? When a man rises at five o'clock in the morning and works until six in the evening, is not that enough service? Do you think it just to exact 3d. or 4d. a week besides from the man who struggles to bring up his family on 9s. a week? The exigencies of the Budget—the exigencies of Party—today may require assent to this Tea Duty; but I am sure that many who will vote for this Tea Duty are really opposed to it. I believe the time is coming when Members opposite instead of blindly sustaining the Government of the day, will vote according to their convictions and exercise pressure upon them with as good an influence as they have done against the Sugar Convention.

MR. LABOUCHERE

Taxes, though evils, must be levied on somebody, and I agree with the Chancellor of the Exchequer that everybody who has a vote ought to contribute something to taxation. Taxation and representation ought to go together if we are to have any sound system of financial Government here. But, admitting that we have to levy taxes and that every person ought to pay in some sort of way towards the Revenue of the country, the question is, whether this in itself is a fair tax? I deny that the Tea Duty is a fair tax. In your income tax, whoever dreamt of charging the same amount on all income taxes, whether large or small? You have an inhabited house tax, but whoever would dream of charging the same amount on a palace and a hovel? My main complaint of this tax is that it is an ad valorem on tea, and that you make the poor man pay a certain sum of money, which, in comparison with his income, is far greater than the sum you make the rich man pay, by your income tax and your other taxes. You charge a higher rate to the poor man than to the rich man, because, whilst the poor man pays, say, only 1s. a pound for his tea and the rich man 2s., the duty is the same on each description. And yet the poor man and the rich man drink about the same amount of tea, for though the rich man can afford any quantity, he cannot drink beyond the amount which fills him. This tax is, to all intents and purposes, a poll tax on all individuals, the poor man getting less for his money than the rich man. It is said it would be impossible to do away with the tax, and it is asked "If we abolish this, where are we to raise the money? "Well, I am not the Chancellor of the Exchequer. I as a Member of the Opposition have only to express my opinion when I object to a certain method of raising money, and it is the Chancellor of the Exchequer's duty to find means for raising revenue which are satisfactory to all parties in the House. I dare say the duty is a difficult one to perform, but that is why we get a clever man as Chancellor of of the Exchequer. We poor men are only here to protest against what we think unfair. We have heard the question again and again, when it has been proposed to do away with a tax, "Oh, but where are we to get the money?" You had a tax on sugar; you abolished it, and yet you managed to get the money somewhere else. You have abolished other taxes, and yet have always managed to recoup yourselves. We want to lay down the principle that we shall have a tax that will net every one according to his means, and yet place no tax on the necessaries of life. No one would think nowadays of putting a tax on bread, because it is a necessary of life, and I think that tea may be regarded as equally a necessary. We are told that this tax has not been altered for a long while, but that is no reason why it should never be altered. It is quite true as the Chancellor of the Exchequer says that Chancellors of the Exchequer come and go, and, with all respect to the right hon. Gentleman, personally, I hope he himself may soon go — but that is no reason why this objectionable tax should go on for ever. The right hon. Gentleman the Member for Derby supports the tax and says he must vote for it, because we have agreed to the expenditure, and he cannot at a moment's notice say where the money is to be taken from if not from the Tea Duty. That is his position as an ex-Chancellor of the Exchequer. But we, who are more independent, are not bound by such ties. We say we think the tax unjust, and therefore we will vote with the hon. Gentleman who has introduced the Amendment. The Amendment does not say that the duty should be altogether abolished, so that those who object to the amount can vote for it. Those who, like myself, object to the whole tax, can likewise vote for it, and also those who object to it being an ad valorem duty. Personally I object to the duty on all these grounds, and therefore have no hesitation in voting for the Amendment.

SIR G. CAMPBELL (Kirkcaldy)

I entirely agree that indirect taxation presses very unfairly on the poor, but I think that if this tax were removed it would lead to increased intemperance in tea which would be used by the poorer classes in the place of milk in the bringing up of the young. In my opinion relief ought rather to be given to currants and raisins, which are almost entirely consumed by the poor. With regard to the Death Duties, I hope the Chancellor of the Exchequer will give hon. Members an opportunity of taking the sense of the House on the question of the duty on personalty. The right hon. Gentleman has admitted that anomalies still exist in his proposals, but I take it that I should be ruled out of order if I were to move to add to the burden of one particular class, the duty of proposing increase of taxation resting entirely with the Government.

*MR. BARTLEY (Islington, N.)

I wish to say one or two words on the subject brought up by the hon. Gentleman opposite, though I do not at all agree with him in the necessity or desirability of doing away with the duty on tea. I should say that those who go into the general subject of taxation will agree that the poorer classes do pay a larger amount in proportion to their earnings than the richer classes. This is in no way a party question, but a question which must be considered before very long I hope that for the simple reason that the temperance habits of the people are growing, it will before long become absolutely necessary for the Chancellor of the Exchequer to overhaul and rearrange the general model of his Budget. The man earning 10s. or 15s. a week who takes a moderate amount of beer, tea, and tobacco in proportion to his earnings pays a larger amount in the shape of Imperial taxes than the richer man, and the man who is at the bottom of the income tax scale is more nipped than those higher up. I do hope the time will come when we shall be able to readjust these duties and taxes in a more satisfactory manner. I maintain that it is not just that the man who earns £40 a year or 15s. a week should pay more per £ of his earnings than the man who earns £1,000, £2,000, or £3,000 a year. On a previous occasion I was reported as having spoken in favour of a graduated, rising income tax. I did not do so. Whether or not it will ever be proposed it is not for me to say; but this I do assert, that a graduated income tax going the other way is very unfair to the poor, and I therefore hope that before long the Chancellor of the Exchequer will see his way to an adjustment of the incidence of taxation fairer to the poorer classes than it is at the present time.

The House divided. — Ayes, 216; Noes, 121.—(Div. List, No. 106.)

Main Question again proposed.

MR. LABOUCHERE

I desire to call the attention of the Chancellor of the Exchequer to the agreement which was arrived at three years ago, after a discussion in the House, that all packets of adulterated coffee should be marked outside as adulterated. There is a very strong feeling on both sides of the House that this precaution is not enough, but that the amount of the adulteration ought also to be marked outside the packets. I hope that the Chancellor of the Exchequer will seriously take the matter into consideration before next year.

*MR. GOSCHEN

This is a matter for my right hon. Friend the President of the Board of Trade, rather than for me, but I will look into it.

MR. H. KNATCHBULL-HUGESSEN (Kent, Faversham)

I wish to express my deep regret that the Chancellor of the Exchequer, in casting about for the means of raising the money necessary to make provision for the National Defences, should have placed the burden upon the two interests which are the least capable of bearing attack. The Death Duties will form an additional duty upon land, and the Beer Duty, although it may fall immediately on the brewers, will ultimately affect the growers of barley. Under these circumstances I think that this is a vexatious tax, because it is not necessary for raising the money wanted by the Chancellor of Exchequer. The whole sum the right hon. Gentleman proposes to raise is £300,000, and I think there was much force in the remark of the right hon. Member for Derby (Sir W. Harcourt) that the right hon. Gentleman has been in the habit of under estimating his surplus. I think it would have been better if he had been a little more sanguine on this occasion, and that he had over rather than under estimated. There are two or three courses which the Chancellor of the Exchequer might have taken, any one of which would have avoided the agitation to which his present proposals have given rise. I contend that with regard to the whole of this taxation it was a most legitimate opportunity for having recourse to the Sinking Fund, because the purpose is a national one. I believe that posterity would be better off if it had to pay off a little more debt, rather than bear the additional burdens which would be imposed on them if we were unfortunately defeated in a great war. As to the Beer Duty, there was another course open to the right hon. Gentleman which I have not heard indicated, and. that was to have recourse to the imposition of a registration fee of 1s. per quarter on imported corn. This fee, which was abolished in 1863, was a source of considerable revenue, while its incidence on the individual taxpayer was very small indeed. By its aid the Chancellor of the Exchequer would raise a large sum, and at the same time infringe no sacred principle of the fiscal policy. Another course which was open to the right hon. Gentleman was to impose an Import Duty on foreign hops and barley. Free traders complain that the imposition of an Import Duty increases the price of the article to the consumer, but that argument cannot be used in this case because the price of beer would remain the same even if an Import Duty were imposed upon foreign hops and barley. If the Chancellor of the Exchequer had taken that course he would have avoided the dissatisfaction and irritation which have been caused by the present proposal, and he would have raised a sufficient sum of money without the necessity of imposing an additional farthing of taxation. A small Import Duty upon foreign hops would raise more than £300,000. In the last place the right hon. Gentleman would have given a helping hand to a dying British industry—namely, the growth of hops.

*MR. S. BUXTON (Tower Hamlets, Poplar)

I am afraid that the principles advocated by the hon. Gentleman will not commend themselves either to the Chancellor of the Exchequer or the bulk of hon. Members in this House. He desires to suspend the Sinking Fund and to put a Protective Duty on corn and hops. [Mr. KNATCHBULL-HUGESSEN: "No."] Well, upon barley. I know that he says the duty is not a Protective Duty, but I understand that he wishes to place an Import Duty upon two articles of consumption without placing an equivalent Excise Duty upon the same articles; and that I must call a Protective Duty. I believe that the proposals of the Chancellor of the Exchequer so far as he proposes to provide for the national defences by taxation have met with pretty general approval. I doubt, with the exception of the brewers themselves, whether anyone objects to the very small increase in the Beer Duty. It has been said by the hon. Member for Leicester (Mr. Picton) in his comparison of the taxation upon tea and beer that the taxation upon beer, considering that beer is an intoxicant, as compared with the taxation upon tea is very light indeed. And whether or no the Chancellor of the Exchequer can make out his case in regard to "specific gravity," he can at least plead necessity—that he wants the money. As to the further increase of the Death Duties there is little difference of opinion on either side of the House in regard to the general principle involved, that considererable taxation should be raised from them. I and his hon. Friends, however, are by no means satisfied with the assurance of the Chancellor of the Exchequer, as carried out in the Bill, that realty will in any way contribute its proper proportion to the taxation of the country. There are three ways in which realty gains an advantage over personalty. In the first place, while the whole estate in regard to personalty is considered, only the actual succession of the individual is taken in regard to realty. In the second place the Succession Duty can be paid in four half-yearly instalments, and practically the second half is not due for four years after the death of the testator. Indeed, five-eighths of the whole Succession Duty is not payable until four years after it is due, while in the case of personalty it has to be paid at the moment. Then the Bill, as drafted, will, I understand, give realty a great advantage over personalty in the mode in which the capital value is assessed. By Clause 6 of the Bill the capital value is to be based solely on the net annual value. I should be glad to learn definitely from the Chancellor of the Exchequer whether the capital value is to be appreciated by considering the net annual value alone. If that is so, then in a large number of estates of very great capital value, but very little annual rental value, the Succession Duty charged will be something infinitesimal compared with the permanent value. I have a large estate in my mind of which the net annual value is almost nothing—only some £200 or £300 a year—and yet it is a now valuable estate the saleable value of which is something like £200,000 or £300,000. Is the market value not to be taken into account, and is the estate to he charged merely on the annual rental value? As I understand the Bill, also, the calculation of the rental is not to be taken as if it were a permanent, fixed annual rent, but as though it were merely a case of leasehold, to be calculated at the outside as lasting 95 years. In order to ascertain the capital value of such an annuity we are referred to the Succession Duty Act of 1853. The total value of £100 rental is there capitalized at a maximum value of 24 1–3 years' purchase; but will not the Chancellor of the Exchequer assent to the proposition that much land in this country—especially luxurious estates, or estates that some day will be suitable for building purposes—is bought and sold at an infinitely higher value than 24 1–3 years' purchase? Some estates, indeed, are bought at 33 years' purchase, some even at 50, and yet in this case the maximum value upon which an estate can be charged is 23 or 24 years' purchase. How is the right hon. Gentleman going to arrive at the value of estates the capital value of which upon the rent is infinitesimal, whereas the real capital value is very considerable? The hon. Member for Faversham suggested that instead of further taxing beer that a further encroachment should be made on the sinking Fund. I think that the Chancellor of the Exchequer has already gone much too far in that matter, and I trust that the right hon. Gentleman will not take the advice of the hon. Member. The Chancellor of the Exchequer says that the whole of the objection urged by many hon. Members to his proposal for dealing with the Sinking Fund this year is founded on the fallacy that in their opinion the Sinking Fund is a fixed annual amount, whereas it is no such thing. No one, so far as I know, made any such assertion. Everyone knows perfectly well that the essence of the so-called new Sinking Fund is not that it is a fixed annual amount, but that it is an increasing annual portion of the fixed Debt charge, which is applied to the redemption of Debt as savings are realized. The point of the Sinking Fund is that every saving effected is to go to the further reduction of Debt. The Chancellor of the Exchequer, in carrying out his financial proposals, has twice during the last three years infringed on the Sinking Fund. In 1887 he did not actually infringe on the principle but he reduced its effective by no less than £2,000,000 a year, and now he is doing a still worse thing. For the first time since it was instituted, the principle of the Sinking Fund has been infringed, the principle that every saving within the annual fixed charged, should be applied to the further reduction of Debt. He has reduced the amount this country is annually to pay towards the redemption of Debt to the lowest sum it has reached during the last 80 years. He has reduced it to a figure less by £4,000,000, than 30 years ago; to a figure much less than what our fathers paid when they were bearing an infinitely greater load of taxation, and when the income tax was much higher than at present. He has reduced the Sinking Fund by no less than £3,000,000 a year; and this he has not done in order to carry our fiscal reforms, but simply and solely to reduce the income tax by 2d. in the pound; and by so doing he has rendered future fiscal reforms much more difficult. He knew very well that one of the most popular things a Chancellor of the Exchequer could do with the taxpayer was to reduce his income-tax.

*MR. GOSCHEN

It is the least popular.

MR. BUXTON

It was most popular with the supporters of the Chancellor of the Exchequer, and certainly more popular than imposing or maintaining taxation for Debt purposes. I fear that it is but beating the air in these days to advocate the more rapid reduction of the National Debt. The Chancellor of the Exchequer the other day spoke of our Debt as now being under £700,000,000; but he forgot to add the £36,000,000 of Debt which last year he transferred from one account to another. Such a Debt as this, which is the largest National Debt except that of France, ought to be a subject of great anxiety to the country. Taking it all round, we are reducing it very slowly. In the last 30 years we have reduced it by something like £100,000,000 only, and he would be a bold man who, in the present state of European politics, will prophecy that it will be reduced by as large a sum in the next 30 years. The right hon. Member for Derby has shown that so far as the Chancellor of the Exchequer is concerned, he is in the habit of under estimating the revenue. Any large surplus at the end of the year in the revenue only indicates that he has made a miscalculation, while any reduction in expenditure is due to his colleagues. If the Chancellor of the Exchequer, who relies upon these amounts of surplus as justifying him in the reduction of the Sinking Fund, would look back a few years, he would find that at the end, including his own years of office, there was on the aggregate number of years, not a surplus, but a deficit. The truth is that the only mode in which we can hope to reduce the Debt is by applying an annual sum for that purpose. There is one great danger which this country has to look forward to, and that is the competion of America in the markets of the world when that country adopts the principles of free trade. Ultimately, it is certain that America will abolish her protective duties, and we who are now able to compete with every other nation will then have a great commercial rival who will have got rid of her debt, who has no great expenditure on army and navy, and who has every physical advantage which we have, and many which we lack. There will then be the greatest possible danger of this country losing its commercial supremacy. In that state of things our National Debt would be a very serious hindrance, and it is to be regretted that two of the principal financial acts of the Chancellor of the Exchequer should be to infringe upon the Sinking Fund, and to reduce by a large sum the annual amount we are paying towards the reduction of the National Debt.

*COLONEL ANSTRUTHER (St. Andrew's Burghs)

The beer tax must necessarily fall to a greater or lesser extent upon the industry that is least able to bear it—the barley growers of the country. Farmers in arable districts find that at present prices they cannot grow wheat at a profit, but they do look to some small margin of recompense from their barley crop. Now, hon. Gentlemen know well, that it is these very farmers in arable districts who have suffered most severely from the agricultural depression, and, moreover, they have not reaped any advantage from the revival of trade. On this account, if for no other, they especially deserve the sympathy of this House, and they are the last class to have any further taxation placed upon them. The increase of the duty caused by the proposal of the Chancellor of the Exchequer to lower the alcoholic standard of the beer will undoubtedly cause the brewers to use less malt, and it has already caused a widespread feeling of alarm among the farmers of the Eastern Counties. In this way the Chancellor of the Exchequer, although no doubt he thought he was taxing a class who could afford it, is also taxing another class who cannot afford to pay. I hope that if the Chancellor of the Exchequer cannot see his way clear to raise this sum of £300,000 by some other method, he will be able to assure the agricultural interest that it is merely a temporary tax, and that he will remove it at the first opportunity which offers.

*MR. BARTLEY

I should like to say a word upon the subject which has been referred to by the hon. Member for Poplar (Mr. S. Buxton). I fully agree with what he has said in regard to the reduction of the National Debt, and, looking to the future of this country and of America, I think it would have been wiser this year, instead of reducing the Sinking Fund, to have left it as it was. I considered that the saving to the country from the reduction of the interest on the National Debt would have been very well applied in reducing the Debt itself. In the event of war, or when America becomes a free trade country, I have no doubt whatever that we shall find ourselves so heavily handicapped by our enormous debt and heavy expenditure in the shape of taxation, that it will be almost impossible to compete with the United States. With regard to the Income Tax, I have, on several occasions during the last three or four years, brought the question of the mode of collecting the tax before the House. I hope the Chancellor of the Exchequer will this year, as he promised some years ago, be able to alter the whole system of assessments and appeals and the mode of payment for the collection of Income Tax by poundage. Owing to the present system of collection, the tax is not always one upon net income. In times of declining trade there is no doubt that the system of payment on the three years' average earnings bears extremely hard on small tradesmen. I trust that the right hon. Gentleman will be able to tell us that he does look forward to some system which will enable him to do away with the anomalies of this tax. My complaint is that of late years the Income Tax Assessor, instead of taking into account the distressed circumstances of the payers of Income Tax, has been engaged in making the screw tighter. No doubt it is only right that a man should pay upon his full income, but there are hardships which do arise in connection with this tax which render: it exceedingly unpopular, and which might and ought to be removed.

*SIR E. BIRKBECK (Norfolk, E.)

I do not intend to follow the hon. Member in the expression of opinion as to an Import Duty on foreign barley, but I do wish to enter my protest against the proposal for an increased duty on beer, and I do so on behalf of the farmers of East Anglia. They object entirely to the imposition of a tax on the produce of the land, which comes in about the worst of the ten years of depression which they have experienced. They object to the proposal also that this tax is to be allowed to go on for seven years. The Government have described this tax as a homœpathic dose, but I can assure the right hon. Gentlemen that it will most seriously affect the barley growers. There are many hon. Members, representing county constituencies where they do not grow barley, who will not consider the matter of any moment; but, in those parts where they do grow barley, it is a subject of very great importance. I am confident that if every Member of the Cabinet farmed a thousand acres of land in a barley growing district, or if Sir Algernon West had a thousand acres of barley, this tax would never have been imposed. I can assure my right hon. Friend that had Mr. Clare Sewell Read been in the House he would have spoken in no unmeasured terms upon this question. I do hope the Chancellor of the Exchequer will give us the assurance that this is to be a tax limited to one year. If not, then I, for one, shall place an Amendment on the Paper restricting the proposal to one year.

*MR. GOSCHEN

I waited to see whether any hon. Member would rise, but as no one has done so, I may assume that I have heard all the objections to the Budget before us. My hon. Friend the Member for North Islington referred to a subject in which I take considerable interest—namely, the manner in which our income tax collectors are paid. As a matter of fact no officer in the service of the Inland Revenue is paid by poundage at all; and in the case of local collectors, where they are paid by poundage, the localities have the removal of the grievance in their own hands, but the desire to maintain patronage seems to outweigh the desire to protect the income taxpayers. I do not give up the hope that it may be possible to deal with this matter when opportunity offers. Several of my hon. Friends have suggested that, instead of fresh taxation, I should have made another inroad on the Sinking Fund; but the observations of several others would lead to the conclusion that I had already gone too far in that direction. The hon. Member (Mr. S. Buxton) has just put forward the view that our Debt is dangerously large, but I would point out that while our Debt is large the interest upon it is less than that of any other country.

MR. S. BUXTON

Not than America.

*MR. GOSCHEN

I think that on the whole Debt it is. America is able to borrow part at 3 per cent, but other portions of her Debt still continue at higher rates of interest. The hon. Member will remember that it is not only the capital amount of the Debt, but the burden of the Debt which has to be taken into consideration. The hon. Member suggests that our Debt charge is less than it used to be, and that it ought to be greater. Well, if we have reduced the interest, surely that is one reason for our Debt charge being so much less. We have been at work for many years reducing not only the total amount, but the rate of interest of the Debt, and therefore it is natural that the total Debt charge also should be reduced. The hon. Member thinks it a fair description of what I have been able to do with regard to the Debt to say that my two performances have been to withdraw two millions from the Sinking Fund, and I forget what the other performance was, but certainly it was not the conversion of the Debt. The fact that I have managed to convert 500 millions from 3 to 2¾ per cent is a matter of no importance whatever in his eyes.

*MR. S. BUXTON

My right hon. Friend will not do me the injustice of misrepresenting what I said with regard to the Sinking Fund. No one on this side of the House forgets to appreciate the very great financial operation of the conversion of the Debt, but I was speaking simply of the infringement on the Sinking Fund.

*MR. GOSCHEN

The hon. Member has perhaps not sufficient experience of the House to be perfectly aware of the effect of what he said. The hon. Member said, practically, that my Budgets would be remembered, for two performances, of which the conversion of the Debt was certainly not one. Had his words been uttered in Poplar, they would have been taken in their literal sense, and not as he interprets them. But while I cannot go along with the hon. Member for Poplar in his somewhat extreme views as to the National Debt, I should be unwilling to diminish further the amount of the Sinking Fund; and as we have undertaken a heavy extra expenditure it seems to me right that some portion, at all events, should be raised by the present generation. My hon. Friend says that future generations will derive the benefit, but I am not sure that future generations will not have to do what we are doing now. However that may be, the Government seem to have taken a fair middle course by imposing the chief part, but not the whole, upon the present generation. The hon. Member for Poplar asked me a question with regard to the principal value. The hon. Member has managed to make his speech on this point at the present stage of this Bill, although the right hon. Gentleman the Member for Mid Lothian had indicated that it would be most convenient that the matter should be discussed at another stage. I suppose the hon. Member was perfectly within his right in so doing, but I am sorry that the Leaders of the Opposition were not in their places when he made his speech, to have heard from him his view of how the principal value should be taken. He stated correctly enough that the maximum principal value of real property, according to the Bill, was 24½times the annual value. He was dissatisfied with that because some property may be sold at 33 years' purchase. He did not remember that this proposal of putting the maximum at 24½ times the annual value was taken from the very proposal of the Government of the right hon. Gentleman the Member for Mid Lothian in 1885. That proposal took the principal value in the same way, and certainly I do not propose to suggest any more oppressive way of estimating the principal value upon property than that of my predecessor dealing with this same question. I have yet to reply to the remarks of my hon. Friend behind me on the subject of the Beer Duty. Of course I regret the great anxiety excited by this proposal. I regret that, because a tax of 3d., or not quite as much, is to be put on every 36 gallons of beer, the idea has got abroad that the consequences will be disastrous to barley growers throughout the country. The idea comes from a much larger increase—that of 1s. suggested in 1885 whereas now it is only 3d. It is said that by this addition of 3d. the barley growers will be placed at a very great disadvantage. I can only say to those hon. Members who represent the views of barley growers that I feel convinced that is an anxiety which they need not entertain. What does this theory of the great danger to barley-growers from this small tax involve? It involves the assumption that the brewers have got it in their power to pay what they like for the barley which they buy. I have asked this of the brewers, and I ask this of you, "If the brewers are in that position that they can dictate terms to both the consumer and the barley grower, and that they can threaten the grower of barley that, if the Government puts the slightest additional tax upon beer, they will pay so much less for barley, why do they not do that now?" If it were contended that there was no margin of reasonable profit between the present price of beer and the cost of that beer, I admit at once that the tax would have to come either from the consumer or the producer, but it would be a hold assertion that the margin of profit in the case of beer is as narrow as this. When it is said the margin of profit is so small that the brewers must throw this extra tax on the barley growers, I ask the House to take the case of sugar. When sugar rose the brewers might at once have said, "Now that the price of sugar has increased we shall immediately begin to pay less to the growers of barley, because we cannot afford to lose the difference." This is a matter in regard to which I am afraid I shall never be able to persuade the barley growers or brewers, but, as I have said, I most distinctly assert on behalf of the Government, that there is in our opinion no reason why this additional tax on beer should affect the barley growers in such a manner as their friends in this House seem to think. At the same time, I do not think there is any other tax that could be imposed, which, would upon the whole, be fairer, although I am fully aware that this tax, like every other, must lead to a considerable amount of dissatisfaction and friction. The hon. Gentleman near me thinks it might be possible to avoid raising this sum of £300,000 by running the risk of not having a surplus this year; while the right hon. Gentleman the Member for Derby and other hon. Members have said—I think the hon. Member for Poplar (Mr. Sydney Buxton) took that position—that we are wrong in making estimates that will leave us with considerable surpluses. I, for one, dispute that position, and say that it involves a most dangerous doctrine. If we were to cut our estimates too fine, we should run the risk of finding ourselves with a deficit, and with a tax revenue of £70,000,000. What we have provided is, after all, a very small margin indeed, when we consider the vast num- ber of possible accidents. To avoid the risk of a deficit, it is absolutely necessary that we should be exceedingly careful. I cannot accept the view of my hon. Friend behind me that we can afford to run the risk of having a deficit; nor do I think it would be a proper course if we were to ask for the whole of the proposed increase of taxation from realized property alone, or from any other single source. It has been held that when there is a considerable remission of taxation some relief should be given to all classes, and also, when new taxes have been proposed, it has been considered sound and conservative to make more than one interest contribute. These are the explanations I have to offer with regard to a tax which has caused some anxiety to the Friends of the Government, but I may add that in all the imposts under the Bill the Government have endeavoured to observe justice between various classes.

*SIR J. LUBBOCK (London University)

The Chancellor of the Exchequer has not answered ones point raised by the hon. Member for North Islington (Mr. Bartley) with reference to the system of three years' average on the collection of income tax on business incomes. Formerly people engaged in business used to pay on the average of three years, and if the current year were lower than the average the payment would be proportionately reduced; whereas, under the present system as the hon. Gentleman has pointed out, personsin business often are obliged to pay income tax on profits they have not earned. This is felt to be a considerable hardship, and I hope my right hon. Friend will consider the point in the course of the ensuing year. I believe the change was made without anyone interested in it having the least idea of what was being done, and while I do not complain of the mode in which the Bill has been drawn I would point out that it has to be read along with other Acts, and the process is so complicated that it is almost impossible to understand the clauses by their own context. I hope, therefore, my right hon. Friend will consider the point when he will be sure to see what amount of justice it will be necessary to render. While I am on my legs I may also say a few words with regard to what has fallen from the hon. Member for Poplar (Mr. Sidney Buxton) as to the Sinking Fund, because I think that in strict justice to the Chancellor of the Exchequer we are bound to admit that as much will be done now as before the alteration of the interest on the National Debt, and I think the hon. Member for Poplar has hardly appreciated how much we are indebted to the Chancellor of the Exchequer and the Secretary for the Treasury in resisting claims on the public purse, and thus securing a surplus. Still I cannot help regretting that the Chancellor of the Exchequer has not seen his way to do more towards the reduction of the National Debt. With regard to the questions affecting farmers, there is one point I should like the right hon. Gentleman to consider. Hon. Members will see from the 19th Clause of the Bill, which deals with the income tax, that the English farmers will have to pay a duty of 3d., while the Scotch and Irish farmers will only have to pay 2¼d. I do not see why English farmers should have have to pay a higher rate of income tax than those engaged in business of the same kind in other parts of the kingdom; and I think it will be well worth the while of the Chancellor of the Exchequer on some future occasion to consider whether it would not be right to make the rate in all parts of the kingdom the same.

*MR. C. GRAY (Maldon)

Although I am very sorry the Chancellor of the Exchequer should have proposed to increase the beer tax, I do not take, quite so gloomy a view of that proposal as to the effect it will have on the East Anglian barley growers as is taken by some of my hon. Friends behind me. At the same time, I wish the right hon. Gentleman had only asked us to support the proposal for one year instead of seven. There are many different opinions on this side of the House as to whether it will or will not affect the interests of the English barley growers, and I think it better that we should not be committed to an uncertainty for seven years. The right hon. Gentleman has said a rise of 3d. per barrel could not be a very serious question, but if a barrel of beer is brewed from two bushels of malt that would mean a tax of 1s. a quarter on the barley, and that would be a very large sum indeed. There are very few of us who make 1s. a quarter profit on on our barley; we have not done so for the last two or three years, and if we had to pay 1s. a quarter on the produce during that time it would have taken away all our profits. I quite understand that those who are not farmers may look on 3d. a barrel as a trivial sum, and I do not mean to say that I anticipate the proposal will make a difference of a whole shilling per quarter, but I think it would be a very unpopular tax, and even if it be considered only a straw on the back of the British farmer, I regard it as the last straw that can be placed on that already almost broken back.

SIR R. PAGET

I wish to put before the Chancellor of the Exchequer with reference to the income tax that there are strong claims upon his consideration with regard to the incidence of that tax—I allude to the way in which it presses on the owners of real property, whether houses or land. The Budget of last year, so far as it affected real property, was a Budget of readjustment; but in the present Budget I see no readjustment whatever. We do not complain that special circumstances make it necessary to impose a duty which brings thoroughly within its purview all classes of property, real and personal; but I do hope that the readjustment of taxation is only postponed for the present, and that in years to come we may not be disappointed in seeing readjustment carried still further, considering the necessity there is for striking an equilibrium in this matter. One more word. I must express my regret that circumstances prevented the Chancellor of the Exchequer from realizing the hope which he held out to us last year, that we should receive £800,000 in aid of local taxation from the wheel and horse tax. I will not enter into the question of the desirability of the tax itself, but I will express a hope that the Chancellor of the Exchequer will consider this subject again in future Budgets. I am not one of those who take exception to the present Budget. I only look upon it as still leaving the equilibrium to be restored.

*MR. GOSCHEN

In reply to the hon. Baronet the Member for London University, I may say that objection has been taken by high authorities to the system upon which the assess- ments of business incomes to the income tax are made, and I will take care that it is carefully looked into. I will also look into the question of the position of the English farmer, as compared with that of the Irish and Scotch farmer. I have already stated to the House that I do not wish a single farmer to pay income tax on more than the actual income he earns. It is for that reason that farmers are now allowed to assess themselves under Schedule D. I can assure hon. Members that all their suggestions shall be carefully considered. Reviewing the discussion which has taken place, I find myself in this position:—I am asked to replace the Sinking Fund, in its original position, i.e., to give up £3,000,000 of Revenue available to meet the expenses of the year, to give £800,000 in aid of local taxation, not to impose a beer tax, or indeed any new tax, and nevertheless to conduct the present business of the country, and to provide for Naval Defence. These are the impressions which I derive from the present discussion, and I trust my hon. Friends will see in the large and incongruous demands which are made upon me some of the difficulties which Chancellors of the Exchequer have to face.

Question put, and agreed to.

Bill read a second time, and committed for to morrow.