WAYS AND MEANS.

HC Deb 16 May 1892 vol 4 cc985-1082

Considered in Committee.

(In the Committee.)

1. Motion made, and Question proposed, That, towards raising the Supply granted to Her Majesty, the Duties of Customs now chargeable on Tea shall continue to be levied and charged on and after the first day of August, one thousand eight hundred and ninety-two, until the first day of August, one thousand eight hundred and ninety-three, on the importation thereof into Great Britain or Ireland (that is to say) on—

Tea

the pound

Four Pence."

*MR. SYDNEY BUXTON (Tower Hamlets, Poplar)

I believe on this Resolution we are entitled to discuss the Budget as a whole, and to discuss the general financial position and the policy of the Chancellor of the Exchequer. The Budget was a very uneventful and humdrum affair. We were given to understand, however, by the friends of the right hon. Gentleman that he might, if he had chosen, risen superior to circumstances, and have produced a sensational and electioneering Budget out of the unpromising materials at his disposal. We were also given to understand that he declined to take advantage of this opportunity, chiefly out of consideration for our feelings. That may be so; but, on the other hand, it is just possible that the colleagues of the right hon. Gentleman have had vividly in their recollection certain financial incidents in the career of the right hon. Gentleman, and have thought that just before a General Election discretion was the better part of valour, and that it would, on the whole, be a mistake to introduce a sensational or far-reaching Budget. With respect to the Revenue and Expenditure, there is not very much to be said; but I think the right hon. Gentleman is to be congratulated both on the Revenue and the Expenditure of last year. Because, while the Revenue has been elastic, there has been, especially on the War Services, a considerable saving of expenditure. That saving amounts, I think, to something like half a million a year. But I am sorry to see that this saving of expenditure on our Services cannot be considered in the light of a deathbed repentance, because the Estimates of the Army and Navy Expenditure for the coming year are the highest that this country has ever known in time of peace. Under the right hon. Gentleman the expenditure on the War Services has risen from thirty and a quarter millions to the estimate for this year, which, including the money he is about to borrow, is thirty-five and a quarter millions. That is surely a war expenditure in time of peace. As regards the Expenditure of the past year, there are only two items, apparently, on which there has been an increase. These are the Post Office item and Education. In regard to the Post Office expenditure, in so far as it has been one to improve the conditions of service of the employees, to give increased wages to the servants of the Department, I am sure this House will feel no desire to criticise the increase. But so far as it is due to costly and unprofitable expenditure, I quite agree with the sentiment which has been previously expressed by the Chancellor of the Exchequer when he said he intended to "hang on to the surplus" from the Post Office. I hope that the right hon. Gentleman and his successor—whoever he may be—will maintain this idea, for we must remember that probably this is the form of taxation which is most easily paid, and which weighs lightest upon the community at large; and when right hon. Gentlemen desire to give away that surplus, we must not forget that we have sunk sixteen millions in the Telegraph Service, from which we do not receive a single sixpence a year. With regard to education, we must all agree that it is hard on a Chancellor of the Exchequer that he should have had to provide this money for a principle which in former years he greatly deplored—the establishment of free schools. But I think the Committee would feel better satisfied if we were quite clear that this greatly-increased expenditure were being carried out with full regard to the increased efficiency of our national education. I am somewhat afraid that this money is being shovelled out wholesale to the voluntary schools; and that it is becoming, as we feared it might, a relief to the subscribers rather than an assistance to the efficiency of our elementary schools. But the real question in regard to the Budget seems to be whether the right hon. Gentleman has or has not over-estimated his Revenue for the coming year. That is, perhaps, a matter of greater interest to his successor than to himself; but I was somewhat surprised at the large share of personal responsibility which he took upon himself in relation to these Estimates. I think he took a much larger share of responsibility in regard to these Estimates than has usually been the case with Budget speeches in the past. This is not reassuring, for the right hon. Gentleman has, in his former Estimates, been singularly unfortunate; and in his speech the other day he dwelt with the most childlike glee on the fact that during the past year he had had more than one item within a small sum of his actual estimate. The question really is whether the right hon. Gentleman has not overestimated his Revenue for the coming year, and whether, under these circumstances, his estimate is a real and genuine one. For the coming year his estimate of tax revenue is only a quarter of a million less than that actually received last year. But the Committee will remember that the coming year will receive four days less of revenue than the past year, that trade is bad, that there are many disputes going on between capital and labour, that railway profits are falling off, and that there is a great deal of cattle disease and distress in the agricultural districts. Though, no doubt, there was a great temptation to the right hon. Gentleman to cut his coat according to his cloth, I think he has made an over-sanguine estimate, and that we shall find ourselves with a deficit at the end of the year. But, be that as it may, the right hon. Gentleman will admit that his minute surplus has been due to two windfalls. The first due to the checking of the system of "grogging," which might have happened any other year, which will produce the exact amount of the surplus; and the second due to the fact that the Treasury have altered the system of stating our public accounts, without consulting, as we think they should have done, the Committee specially interested in those matters, by which the right hon. Gentleman receives a quarter more of the extra receipts in this year—namely, £230,000, which is more than the surplus he has at his disposal. I am not going now to consider whether the surplus is a genuine one or not, but we all know that while he has a surplus of £200,000 he is going to borrow £2,000,000 during the coming year. On paper the Government have escaped a deficit during their last year of office; and I think it would have been somewhat ignominious if so great a financial authority as the right hon. Gentleman had so piled up his liabilities and so dissipated his resources, that in his last year of office in this Parliament he should have been landed in a deficit. I do not wish to deal further with the financial results of the past year, as the figures are small and of no very great importance; but I think on this occasion—the last Session of this Parliament, and, with out any special reference to the right hon. Gentleman, we may hope the last year of this Administration—we may devote a short time to the consideration of the financial policy of the right hon. Gentleman during the five years he has held his present distinguished office. Perhaps he will allow me to say as regards his great operation on the Debt that I do not think any hon. Member will do anything except give him the fullest possible credit for that operation. It was boldly conceived and cleverly executed, and was simple and successful. It is true, too, the Conversion was somewhat above the real credit of the country; and one envies those who preferred cash to "Goschens"; but the right hon. Gentleman undoubtedly carried through the scheme in a masterly and successful manner. I think, also, as regards the bulk of his dealings with taxation, apart from the mode in which the money has been obtained, and the question whether there might not have been a larger remission of indirect taxation, we shall all admit to have been satisfactory. It is true the right hon. Gentleman came to grief over the Sugar Bounties, over the Wheel and Van Tax, and also on the question of the Publicans' Endowment Bill; and he coquetted with protection over sugar and bottled wines. But so far as the House allowed the right hon. Gentleman to enlarge the area of taxation, he did so in a wise and satisfactory way, by the imposition of certain new Stamp Duties, the imposition of an Estate Duty, and a Duty on Sparkling Wines. The increase of taxation was very much on the same lines. He increased some Stamp Duties, the Succession Duty, and the Duties on Spirituous Liquors. As regards his reductions—though we have thought he might have devoted larger sums to the reduction of indirect taxation instead of giving all his balance to the Income Tax—we are, on the whole, fully ready to admit that they have been satisfactory. The reductions on tea — probably a further step towards its final abolition—on tobacco, and on currants, and in a different category, the reduction of the Income Tax have, no doubt, been carried out in a satisfactory way. We hear a great deal about these reductions, and the right hon. Gentleman takes great credit to himself for the way in which he has carried them through; but it should not be forgotten that while he has reduced the annual taxation to the extent of some £3,500,000, he has done so almost entirely at the expense of the service of the National Debt, because he has reduced the sum devoted to that service annually by £3,000,000. The right hon. Gentleman and his Friends claim great credit for that which has primarily enabled these reductions to be made—namely, the improved trade and the elasticity of the Revenue; but I, for one, do not understand how the action of the right hon. Gentleman or his financial policy has had anything to do with the revived trade, or the elasticity of the Revenue which the country has enjoyed for a period. He has not carried out any fiscal reforms like those in the old days—giving liberty to trade, and so improving trade and commerce. He has carried through no financial reforms which have in any sense given elasticity to the Revenue. If he claims credit for this improved trade, however, will he be prepared to take the discredit, so far as there is any, of the fact that at the present moment trade is falling off, and the Revenue becoming inelastic? But we know very well that it is not the action of the Chancellor of the Exchequer which affects these things; they come in cycles, and we are now, I am afraid, in a period in which we shall suffer for some time from bad trade; but that is quite irrespective of the action of the Chancellor of the Exchequer, just as good trade has been in no way due to his action. In one matter the right hon. Gentleman has failed to fulfil the financial promises he made. He told us on more than one occasion he would deal with the great question of the Death Duties—would simplify, equalise, and reform them. But he has done nothing of the sort. What he has done in connection with them has been to make them, perhaps, more complicated than they were before, and more difficult for any Chancellor of the Exchequer to deal with in the future. Instead of equalising the Death Duties between personalty and realty, he has thrown a considerably heavier burden on personalty as compared with realty. The right hon. Gentleman shakes his head; but it appears from the Statistical Abstract that while he has increased by Succession Duty the burden on realty by £130,000 a year, and by the Estate Duty by £10,000 or £20,000 a year, making a total of £150,000, he has at the same time increased the burden on personalty by £800,000. We do not object to that increase, but what we do object to is that he should have made the proportions between personalty and realty more unequal than they were before. I should have been glad to have given the right hon. Gentleman credit for the fact that by his imposition of the Estate Duty, by his alterations of the House Duty, he had introduced the principle of graduated taxation. But the right hon. Gentleman denies that soft impeachment. The real blot on the right hon. Gentleman's financial policy has been his dealings with the National Debt, apart from the question of conversion. Mr. Lowe once said that the Sinking Fund was a thing made to be robbed, and the right hon. Gentleman has on two occasions reduced the effectiveness of that Fund, and evaded the principle that within the fixed charge every farthing of saving should go to the further reduction of Debt. The right hon. Gentleman has done this without cause; he had not the excuse which his predecessors had in 1885—great war expenses; or in 1860—carrying through great fiscal reforms. He did it practically in order to reduce the Income Tax. He boasts that he has paid off a large amount of National Debt, but that is only a part of the question as regards the Debt. The policy and the financial courage of a Chancellor of the Exchequer lie not so much in the amount of the Debt annually redeemed, as in the amount of the annual charge deliberately proposed in the Budget, and applied for the whole service of the Debt apart from the question of its component parts. Judged by that standard the right hon. Gentleman can be shown to have greatly failed in appreciating the national importance of reducing the Debt. If we take the years usually quoted for purposes of comparison in this House, 1880–1 to 1884–5, and the years 1887–8 to 1891–2, we find that while during their five years of office his predecessors applied to the service 145 millions sterling, the right hon. Gentleman in his five years of office has only applied 127 millions to the same purpose, showing a difference of 18 millions in favour of his predecessors. The right hon. Gentleman, in his present Budget speech, gave us an interesting and careful comparison of the financial position of our forefathers 50 years ago and the position at present—and it would be very interesting to the House if the right hon. Gentleman would give us a Return showing on what basis those figures were founded. He showed that while the population was much less, the consumption per head was very much more nowadays. In those days the country was suffering from a fiscal system which hampered and almost destroyed trade, while now we have practically no import duties which seriously affect trade. But our forefathers were prepared to bear an annual burden of 29½ millions for the service of the National Debt; while the right hon. Gentleman, who has always thanked heaven that he was not as other financiers, but more courageous, is unwilling to propose a larger burden than 25 millions a year for the National Debt. We ought also to recollect that while we are reducing the Debt, and, therefore, the amount applied to its reduction, we are increasing our local liabilities by leaps and bounds. No doubt that is a profitable expenditure; but in looking at this matter we should take our whole national liabilities into account, and not merely the National Debt, in considering the annual burden of the ratepayers and taxpayers of the country. The right hon. Gentleman claims that he has redeemed a larger amount of Debt in spite of these reductions. Even in bulk it is not a fact that he has redeemed a larger amount of Debt in his five years than did his predecessors in their five years. From the great National Debt Return I find that the reduction of Debt in the earlier five years was thirty-five and a half millions, and in the latter five years thirty-two and a half millions; and, in addition, we should allow two and three-quarter millions gift to India in the former period, and three millions for Conversion purposes in the latter. The upshot is that the right hon. Gentleman has reduced the Debt by three millions less than his predecessors.

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

Which Return is it the hon. Gentleman is quoting from?

*MR. SYDNEY BUXTON

The latest Return moved for by the right hon. Member for Derby (Sir W. Harcourt), and the last year from the right hon. Gentleman's Budget speech. I will give the totals again. The gross reduction by the right hon. Gentleman has been thirty-two and a half millions, and three millions cost of the Conversion. His predecessors' gross reduction was thirty-five and a half millions, besides two and three-quarter millions gift to India. It is not enough, however, for the right hon. Gentleman to say that he has paid off as much as his predecessors, because by the operation of our Terminable Annuities and the Sinking Fund, a Chancellor of the Exchequer succeeding another, without even lifting a finger or imposing a sixpence of taxation, should pay off a far larger amount within the Sinking Fund than his predecessors did. I have taken the trouble to add up the amount applied to interest and maintenance during the former five years, as compared with the five years of the right hon. Gentleman, and I find that in the first five years fifteen millions more so applied than during the right hon. Gentleman's five years. That means that without any action of his own he ought to have reduced the Debt by fifteen millions more than his predecessors. Further, in regard to this matter, we ought to consider primarily the amount of reduction which the right hon. Gentleman and his predecessors deliberately provided for and anticipated in their Budgets, and not the amount of realised surplus which is made up by chance, due to savings in other Departments, or to miscalculation of Revenue by the Chancellor of the Exchequer; on neither of which two heads can the Chancellor of the Exchequer claim credit for forethought. If you deal with the matter in that way you will find that the right hon. Gentleman provided in his Budget for a reduction of the Debt to the extent of only 21½ millions, while his predecessors provided for no less than thirty-five millions, so that the right hon. Gentleman provided for over thirteen millions less than his predecessors. The upshot is that while elastic revenue has very much helped the reduction of Debt by producing large surpluses, that has been not in consequence, but in spite, of the action of the right hon. Gentleman. And when we shall feel the evil results of the action of the right hon. Gentleman is not when Revenue is elastic, but when trade has fallen, when Revenue has become inelastic, and when the estimates of revenue are more accurate than they have been during the last few years. And one is afraid that, as the right hon. Gentleman has reduced the Sinking Fund when he had a large surplus and there was no occasion to do it, it will be a great precedent and temptation to his successors to further reduce the service of the Debt when they find trade falling and the Revenue becoming inelastic. The right hon. Gentleman has, on the one hand, not only reduced the Debt service to enable him to remit taxation, but he has been spreading his liabilities over considerable periods in order to avoid increasing taxation on the other hand. I will not enter into that point at present, as the right hon. Gentleman below me will certainly deal with it. I only want to point out this in regard to the matter of spreading liabilities over long periods; the right hon. Gentleman is what he calls equalising the Expenditure, and he claims that in anticipating the increased Revenue from the Suez Canal shares he is not dealing with money which will come out of taxation, but surely he himself will admit that it is identically the same thing whether you anticipate Revenue to come in a future year or whether you impose taxation for this particular purpose. On the broad question of what has been done in regard to this matter we know that he admitted it in his Budget speech the other day, that while he has had in his Budget at the end of the year certain surpluses he had borrowed five millions sterling which had gone to produce these surpluses. There is only one other point with which I wish to trouble the Committee. The whole question of the dealings of the right hon. Gentleman and the way in which he has mixed up Imperial with Local finance is a very large subject; but it is one which very much, I think, affects the right hon. Gentleman's financial reputation. That is a matter on which I do not desire to enter at the present time; but I think it would be very easy to show that he has in his dealings with local finances, instead of simplifying, complicated all our national system of finance which existed before, and that he has very much embarrassed the free dealings with branches of Imperial Revenue; so that by his system of ear-marking certain portions of Imperial Revenue for local purposes he has embarrassed the Treasury and has not given liberty to the Local Bodies. But finally, apart from these questions, there is one serious blot on the financial career of the right hon. Gentleman, and that is that he has succeeded, unintentionally of course, in making our national accounts infinitely more complicated than they were in the time of his predecessors. Those of us who have had the misfortune to endeavour to study in any way the mode in which our national accounts are presented to the country know how complicated they are, how very difficult it is to arrive at the figures one desires to find. All I can say is this, that if they were complicated and difficult before, the right hon. Gentleman has made them very much more complicated; because he has increased the number of funds, he has created all sorts of new accounts, he has taken from the Revenue on the one hand and from the Expenditure on the other hand. Only the other day he made an entire alteration in appropriations in aid of Revenue, which has made it, by comparison between one year and another, almost impossible to arrive at a proper conclusion. The result of his five years of office, as regards this matter at all events, is this: that it is almost impossible to find out what has been the actual operations of the right hon. Gentleman as compared with those of his predecessors except by infinite trouble, and even, I think, with great doubt as to accuracy. Finally, I hope the right hon. Gentleman will not think in what I have said that I have dealt unfairly with what he has done. I assure him that all of us on this side of the House have a great opinion of the financial ability of the right hon. Gentleman. We have been able to congratulate him, I hope, on those matters in which he has been successful; but surely it is our duty, if we think that he has gone wrong, to endeavour to point that out in the House. I do not think that the right hon. Gentleman himself will claim that he has carried through any great fiscal reform, or, with the exception of the Conversion, any great financial operation; and we believe that in many of his dealings, both with Debt and taxation, he has dealt with them not in that courageous spirit which we had hoped from his antecedents, but he has dealt with them in some respects in a cowardly and in other respects in a niggardly spirit.

*(5.35.) SIR W. HARCOURT (Derby)

As this, we may assume, is the last Budget discussion of this Parliament, I think it would not be right that the financial situation should be passed over altogether without some observations. I think my hon. Friend who has just sat down, in the able speech which he has made, has referred to many matters which are well deserving of the consideration of the House and of the country. I am not going to deal at any length with the subject of the Budget itself. I will not call it a humdrum Budget, certainly not in any term of reproach. If it be a humdrum Budget, that is not the fault of the Chancellor of the Exchequer; and I would scarcely call it his misfortune, because happy is the Chancellor of the Exchequer who has no surplus! He has nobody to satisfy, and nobody to tax; and, therefore, the situation as regards the Chancellor of the Exchequer is a fortunate one. But there are certain features, as my hon. Friend who has just sat down very truly said, with reference to the whole system of the finance of the present Parliament which are, to use no stronger expression, very novel in their character. There are circumstances attending the whole plan of finance of which, I think, very few examples could be found in former times. There may have been discovered precedents for some of the things; but I think the Chancellor of the Exchequer has been very learned and very industrious in collecting together so many of the worst examples as he has done, and in condensing them all into a single chapter in a single Administration. He frequently refers to action which has been taken by one side of the House or the other in former times which a certain feeling of reticence prevents one from expressing one's full opinion upon. I would just recall the attention of the House to what the financial situation was when the Chancellor of the Exchequer began his operations. He found himself in possession of what I will not call a surplus of £750,000 in hand. For that I was responsible. The reason why I will not call it a surplus is because it was the result of a suspension of the Sinking Fund in consequence of temporary pressure caused by the Soudan War. We had to suspend, not permanently, but for that crisis and emergency, the amount of the Sinking Fund to that extent. That money was replaced by the yield of taxation; and, therefore, what happened was that the whole amount which was intended to be devoted to the payment of the Debt was so devoted. The old Sinking Fund—that is, the realised surplus—replaced what was taken from the new Sinking Fund. As I am old-fashioned in this matter, where you suspend payment of a debt and then replace that suspension I do not call it a surplus—I call it an equilibrium. And I ask leave to apply the same principle, which seems to me a sound principle, to the finances of the present Parliament. Now, the view that the Chancellor of the Exchequer took in 1887 of the prospect before him was not a cheerful one. On the contrary, at that time it was very despondent. We all remember the very able speech he made, one-half of which was taken up in trying to prove that the produce of taxation had not only been stagnant but, in fact, decreasing. He gave the most unfavourable anticipations of the produce of the Excise, of the produce of Stamps, and especially of the produce of the Income Tax. And the Committee will remember that it was upon that gloomy anticipation of the future before him that he founded, and that he justified, what I must always consider the mischievous operation of the suspension of the Sinking Fund. He said that Sir Stafford Northcote, he was sure, would have taken the same view as he did, because when the fixed charge of twenty-eight millions was settled the Income Tax was then twopence and there was an abundant Revenue. I do not think the Chancellor of the Exchequer did justice to the memory of Sir Stafford Northcote in that respect, because Sir Stafford Northcote had to face a great deal worse position than that which the right hon. Gentleman encountered. The Income Tax, which was twopence when Sir Stafford Northcote established the Sinking Fund, was raised by himself to sixpence in order to maintain the Sinking Fund. There had been for three years in succession a deficit of, I think, upwards of two millions a year; and in spite of that Sir Stafford Northcote maintained the Sinking Fund that he had provided for the liquidation of the Debt in the future; and, therefore, if any justification is to be had in this matter the right hon. Gentleman cannot find it in the example or administration of Sir Stafford Northcote. It is perfectly true that when the great charges came upon the country in consequence of the Soudan War, my right hon. Friend, who is unfortunately absent abroad, the Member for South Edinburgh (Mr. Childers), would have had to borrow money, or to suspend the Sinking Fund for a single year — he took the latter course, as a temporary measure to meet a temporary exigency. That is a totally different thing from a permanent suspension which is to operate in the future. Sir Stafford Northcote raised the Income Tax in order to maintain the Sinking Fund; the right hon. Gentleman destroys the Sinking Fund in order to lower the Income Tax. That is just the difference between the financial policy of the present Chancellor of the Exchequer and that of former Conservative Chancellors of the Exchequer. The Sinking Fund is practically a capital fund; and if you are to reduce taxation out of capital you introduce a principle of finance which has never yet been approved of or acted upon by Finance Ministers of this country; and that was the policy adopted by the Chancellor of the Exchequer at the very commencement of the present Parliament. He did it upon the assumption and upon the averment that the Revenue was permanently depressed, and that there was likely to be no improvement. Fortunately for himself and the country he was in error. If he will allow me to say so, he was splendidly mistaken, because having founded his attack upon the Sinking Fund upon the prospect of a reduced Revenue, he found himself, to use his own picturesque phrase, on an "ascending curve." Every one of those source's of Revenue of which he had complained as being in an unprosperous condition immediately showed themselves full of elasticity. The Excise increased—unfortunately the House and the country cannot appreciate how much, because in this unhappy muddle of the local taxation and Imperial taxation in which we find the accounts, that is all hid away, and we do not know as regards the Excise how much it is in excess of what it was in the year 1886–87, and how much it is even beyond the high water mark of 1875 In the same way with regard to the Death Duties, the country does not know and cannot see that the Death Duties have been increased by a million, which does not appear on the face of the public accounts; and if I wanted a condemnation of this unhappy muddle of accounts, is it not here? I think it is a most remarkable and novel circumstance that in the very able and very full Budget speech of the Chancellor of the Exchequer, you cannot find a single statement of the actual produce of the Revenue of this country. It excludes seven millions of money, raised by Imperial taxes, which has been transferred to the Local Funds. I think it is a most unfortunate example of innovation in finance that we should have a Financial Statement by the Chancellor of the Exchequer which excludes from view this vast amount, on account of this system of paying over the public Revenue to a body with which we are supposed to have nothing to do, and thus we are without any account of the actual amount of the taxes which have been levied by this House upon the people. That complication, I think, is a very great innovation and a very great misfortune. It is a curious thing that it is only through the extreme courtesy which I have always received from the right hon. Gentleman and the Treasury that I know myself what in the past year has been the actual contribution or pay- ment made from the Exchequer to the Local Bodies. You cannot get it till it appears in the Finance Accounts which will come out some months hence. Well, from the figures I have seen, in spite of the reduction which the right hon Gentleman has made upon tea, tobacco, and currants, I find the yield of the Customs is nearly what it was—about the same as in 1886. The Excise, so far as I can judge, is nearly five millions more; Stamps four millions more—half of which goes to the Local Authorities; and the Income Tax, from which twopence has been taken off, shows only a loss equivalent to the reduction of a penny, while the net revenue of the Post Office shows a gain of a million. Now, I do not complain of the Chancellor of the Exchequer—far from it—because of his gloomy and happily unfounded view of the future that lay before him in 1887—I only hope that his anticipation for the next five years may be as ill-founded as the view he took then. But I call attention to this fact, that it destroys the only justification of the policy which he inaugurated in 1887. His whole case on the Budget of 1887 was that the Revenue was bad, that it was likely to be worse, that it had lost all elasticity. The reason why I desire to call attention to this is to show that, ever since 1887, so far from being in want of money, the Chancellor of the Exchequer has been very flush of money; and that, therefore, the policy could not be defended upon the ground that the Revenue was falling. Now, Sir, I want to look at the other side of the account. Was it that he found himself in difficulties in regard to expenditure? Was it that in 1887 he considered there were charges he would have to meet which were beyond those which had fallen on his predecessors? The fact was just the reverse. In the same Budget speech in which he anticipated a falling Revenue the right hon. Gentleman congratulated himself and the country on the fact that the Expenditure of the future would be less than that of the past. He attributed that to the ample—he suggested the more than an ample—provision that had been made by his predecessors for the Naval and Military Establishments of the country. There has been so much misrepresentation upon this subject that I must ask the leave of the Committee for a few minutes to make that perfectly clear. In order that we may not be in error in that matter, I would read the observations of the Chancellor of the Exchequer in his speech in 1887. He called attention to the high charge which had been made for the Navy. He said— Let us hope it may be an extra charge, and not a permanent charge. This extra charge is due to that which is commonly known as the Naval scare of November, 1884"— He does not talk quite so much now of the Naval scare of 1888— And if I call it a Naval scare, I do so without intending to imply either that it was justified or that it was not justified. I simply refer to it as an historical event. In that year the House agreed to an extra expenditure for the Navy of £3,100,000 on ships, and £1,600,000 on armaments. But I believe it is not infrequently the case that such Estimates expand during the course of their being worked out. In this case the Estimate for ships expanded to £3,600,000; and when the Authorities of the time had to deal with the armaments, it was found that the Estimate had not included the necessary amount for new ammunition, and that involved a further sum of £500,000. Now, it is in this very speech that the Chancellor of the Exchequer says that the future and present Estimates will be largely diminished. I have shown what the right hon. Gentleman's anticipation was in reference to revenue. I will now show what was his anticipation in regard to expenditure. The right hon. Gentleman went on: So that we may look forward, I trust, to the fact that at the end of this financial year we shall have arrived at a great diminution of the necessary charge which has been made upon the taxpayers owing to these exceptional circumstances; and there is good reason to hope that the time is not far distant when the Naval Estimates will not require to be swollen by exceptional items such as those which have fallen so heavily upon the taxpayers during the past few years. That was the exceptional expenditure of the Government that preceded the right hon. Gentleman's Government. Then, having referred to all these matters, he goes on to say— The Estimate for the Navy is £12,478,000, as against £13,265,000—a decrease, I am happy to say, of £788,000. Well, then, having noticed the whole of these circumstances, let us compare them with the anticipation which he confidently held out that in consequence of the lavish expenditure of his predecessors upon the Navy, there would be a large diminution in the Naval expenditure of the future. The Government that prepared the Estimates had been in office then for more than six months, though the right hon. Gentleman himself had not been in office all that time. I have other authorities upon that subject besides the Chancellor of the Exchequer. In November of that year, 1886, the First Lord of the Admiralty said— The number of ships in commission, armoured and unarmoured, exceed the combined forces of the three greatest European Powers. That was the statement of the First Lord of the Admiralty. And that was not merely a rash opinion hazarded by a neophyte in office; for I find that on 13th December, 1888, the First Lord of the Admiralty said— At no period of our Naval history during a time of peace has there been so steady and continuous an increase as in the last three years. Two of these were years in which his predecessors were in office. He went on to say— But I do not wish to take credit for having completed this large number of ships, the main credit of which is due to Lord Northbrook. Do not let it be said, then, that the Government found themselves in any difficulty in consequence of arrears in the Establishments of the country due to the neglect and lâches of their predecessors. In July, 1887, the First Lord of the Admiralty, who had then been a year in office, said— I have never said that the Navy Estimates could not be reduced, and the Navy Estimates of this year show a reduction of £800,000 as compared with last year. I said in my memorandum that I was satisfied that for years to come there could be a steady reduction of expenditure. That was the view of the First Lord of the Admiralty. His opinion was that in consequence of the extra work done by his predecessors he could afford to economise in the future. Now, I will carry it still a year further. In the Financial Statement in explanation of the Naval Estimates for 1888–89 I find the First Lord of the Admiralty says this— In describing last year the then position of Naval Finance, I pointed out that, owing to the exceptionally large outlay of the last three years, it would be possible for some years to come to associate a reduction of expenditure with an increase of naval efficiency. And then he says— The experience gained since last year and the opportunities afforded during that time of making a close and accurate comparison between the strength of the Navy and that of foreign nations confirm my previous statement that our relative superiority is undoubted. Therefore, in consequence of what had been done by Lord Northbrook, which the right hon. Gentleman only completed, in his own opinion great and progressive reduction of expenditure might take place, because his predecessors had established the unquestionable superiority of our Navy over that of all European countries. In consequence of that opinion the present Government reduced the Navy Estimates in the first year by £800,000, and in the next year by, I think, £905,000. Now, I have alluded to that because this matter has been grossly misrepresented in the country. I hope that these citations will put an end to those misstatements. I saw an extraordinary speech made by the Secretary to the Admiralty (Mr. Forwood) in which he denied that sufficient provision had been made, and maintained that we had left great arrears which they were obliged to make up in their expenditure. I have now endeavoured to recall the attention of the Committee to the condition of things in 1887, in order to show that the Chancellor of the Exchequer was beginning an unbroken career of prosperous Revenue; that he and his colleagues certainly did not consider, down to 1889, that they would have any call for increased expenditure, especially upon the Navy. They recorded, on the contrary, the fact that the provision made by their predecessors would justify them in making large reductions, which reductions, in point of fact, they made in two successive years. Therefore, I may say that the right hon. Gentleman has been a Chancellor of the Exchequer in clover during the whole time of his administration. He has had good fortune; we all know he has great ability, and he has been able to accomplish, as my hon. Friend who has just sat down has justly and properly admitted, many things which are advantageous to the country. He has reduced the Income Tax, the Tea Duty, the Tobacco Duty, the Currant Duty, and the House Duty; and he has been able to give the country the benefit of free education. I desire, before I go into any criticism upon the other side, fairly and frankly to put forward these matters as things for which the Chancellor of the Exchequer deserves credit, both on account of his good fortune and for the ability with which he availed himself of it. That is not all. He has carried through the great operation of the Conversion of the Debt. He had the good fortune when he came into office to find Consols at a very high price—they were at 101 before Conversion. I shall have a word to say, if the Committee will give me leave, upon that subsequently, because there is a per contra in that matter; but I am only referring to it now as one of the things for which the Chancellor of the Exchequer has a right to take credit. Well, all these things gave him immense advantages. He had a great Revenue, and in consequence of his conversion of the Debt he had a diminished charge upon that Revenue. I draw from these premises this conclusion—that never was there a Chancellor of the Exchequer who had less object, less excuse, less justification for breaking down the Sinking Fund. People in necessity sometimes do strange-things, but for a man in the condition of prosperity in which the Chancellor of the Exchequer found himself for five years to have struck a fatal blow, and a permanent blow, at the provision for the liquidation of the Debt is a transaction which the House will wonder at and which posterity will condemn, because, after all, it is the future that will suffer for it. My hon. Friend has said that it is an example which is very difficult to resist. "If these things are done in the green tree, what will be done in the dry?" If a Chancellor of the Exchequer, in days of prosperity such as have not been known for the last fifteen years, performs tricks of that kind upon the finances of the country, what will you expect shall be done in times when a Chancellor of the Exchequer does not know where to look to make both ends meet? These are the things that we have to deal with in looking at what we may call the moral as well as the financial aspects of this matter. It is not merely that the right hon. Gentleman has broken down the provision for the payment of the Debt incurred in the past; but in this period of exceptional prosperity he has piled up new Debt which he expects future Parliaments to liquidate. I am bound to say I think that is very novel, and not very laudable, finance. I have spoken of the invasion of the Sinking Fund, not to meet a temporary necessity, as it has been suspended before, for a single year. I might compare this with the policy of the Government in other respects. In old days, when it was necessary to suspend the Habeas Corpus Act, it was usual to suspend it for a single year; and so with reference to the Sinking Fund. If a necessity arose for suspending it, it was suspended for a single year; but just as you permanently suspend by your Coercion Act the ordinary law, so here, when with or without—(An hon. MEMBER: Order!)—when the hon. Member has done I will proceed—so here you proceed, not to suspend the Sinking Fund for any special object, but to suspend it permanently, and deprive the future of the benefit of the system which was established. With an increased Revenue and with a diminished Expenditure this has been done. Now, what has been the effect of that? The whole basis of Sir Stafford Northcote's plan was that the Sinking Fund supplied a cumulative source for the liquidation of the Debt. It was not to be a fixed amount applied every year—it was to be an increasing amount as the charge diminished. It was an arithmetical progression which was to have had, and would have had, if it had been left alone, a great and increasing effect upon the reduction of the Debt. Now, the right hon. Gentleman has destroyed the cumulative character of that provision. He says he has been paying off as much as was paid before; but that was not the principle of Sir Stafford Northcote's Sinking Fund, which contemplated that in every year each succeeding Chancellor of the Exchequer ought to have paid off a great deal more than was paid off by his predecessors. Sir Stafford Northcote established a fixed charge of £28,000,000. At that time the interest on the Debt, as you will find if you will look in Column 6, Part 2, of the Debt Return, which gives the net interest payable, was £23,000,000. That left a margin of £5,000,000 for the liquidation of the Debt. But to-day what is the interest? The net interest payable during the past year — I have got these figures by the kindness of the Treasury—is £18,500,000, as against the £23,000,000 which Sir Stafford Northcote had to pay. What is it then to say, "I am paying off £5,000,000 as my predecessors did"? It is quite plain that, if you had left that system unbroken and undestroyed, you would have paid off nearly £10,000,000. You have ruined the system, because you have broken down the cumulative principle upon which it was founded. Now, in one sense, of course, this payment of the Debt is automatic. It is neither to the credit of a Chancellor of the Exchequer how much he pays, nor is it to his discredit. It is fixed, and if he will only leave it alone it works itself. That system of the liquidation of the Debt has been destroyed by the deliberate and wilful act of the Chancellor of the Exchequer in destroying the cumulative principle, and that is done during a period of almost unequalled prosperity. He says he has paid off as much in the four or five years of his administration, which have been taken for comparison, as was done by the previous Government in four or five years of their administration. The Chancellor of the Exchequer and I have had some discussion on that subject. I am not going again to deal in detail with those figures. I have them here, and if you choose to look at the Third Appendix of the Debt Return you will find them. It is an old controversy; the Chancellor of the Exchequer claims to bring in certain assets to the account which I do not consider are properly payments of the Debt. If you will look at the reduction of the Debt for the four years 1882, 1883, 1884, and 1885, and compare it with the four years 1888, 1889, 1890, and 1891, you will find, as a fact, that in the four years of the first period, there was nearly £2,000,000 more paid off than in the four years of the second period. But, as I say, if the Chancellor of the Exchequer could prove that he had paid off £1,000,000 or £2,000,000 more it would not prove anything, because he ought to have paid off much more in consequence of the increased resources that he had at his disposal. How has this operated upon the reduction, because that is the important thing, of the liabilities of the State? You will find, also, in the Debt Return the comparison of the net liabilities of the State at various periods. In the year 1887, a year for which I was responsible, just before the Chancellor of the Exchequer came into office, the net liabilities of the State, you will find, were reduced by £6,658,000. This year, according to the figures supplied to me, they have been reduced by £5,300,000. That is to say, in fact, that in the year before he came into Office, the net liabilities were reduced by £1,300,000 more than they were in the year which has just concluded. That is the result of the system of finance which he has established. But that is not all. It was not only that the Chancellor of the Exchequer had an increasing Revenue; it was not only that he had a diminishing charge on him for the interest on the Debt, but he possessed, in the earlier part at least of his administration, what are called surpluses. I know there is a great deal of ignorant talk outside on this point, as though a surplus were a feather in the cap of the Chancellor of the Exchequer. It is just as much a feather in the cap of any man to get a windfall which he does not expect and which he does not calculate upon. But the principle of the finance of this country has always been to ask from the people in the form of taxes only what you want for the needs of the year; and if you take more than you want, why that is nothing to boast of. It is a pardonable miscalculation of the produce of the Revenue. I do not blame the Chancellor of the Exchequer for having a surplus, because error is always possible, and if it is on the right side so much the better. But with reference to his Estimate of Revenue for the coming year upon which the surplus depends, my hon. Friend who has just spoken and my right hon. Friend the Member for Midlothian (Mr. W. E. Gladstone) have alluded to that. We who have had some Treasury experience were a little surprised to find the manner in which the Chancellor of the Exchequer spoke of himself as being the person who made the Estimates. I know my right hon. Friend the Member for Midlothian has very strong opinions upon that point—that the Estimates of Revenue ought not to be regarded as the personal opinion of the Chancellor of the Exchequer. It would be extremely dangerous if it were so. One of the great securities for the permanent financial administration of this country is that these Estimates are made by the permanent officials of the Revenue and of the Treasury, who act upon certain fixed principles and the Chancellor of the Exchequer does not vouch his own personal opinions and judgment as the main guide in the formation of those Estimates. I believe the Chancellor of the Exchequer did not mean to put it in that way [Mr. GOSCHEN: Hear, hear]!; but certainly in his Budget speech I think he seemed—I have no doubt from an anxiety which I perfectly recognise on his part—to take a little more responsibility upon himself in this matter than is usually done. I do not attempt to question the Estimates of Revenue of the Chancellor of the Exchequer. I think that is a very rash thing to do, for he has much better means of information than anyone else can have in the matter; and pointing, as he did, to the future, I only hope that he may be as happily mistaken in his prognostications of a less prosperous future as he was in the year 1887. But now let us see, talking of these surpluses, what is the fund he had at his disposal. I have shown you how he had an increasing Revenue and how he had a diminished charge and a lowered Expenditure. During the six years from 1887 to 1892 he had surpluses amounting to £8,000,000, and in the previous six years there were surpluses amounting only to £1,600,000. The consequence was that he had a lump sum of £6,500,000 to dispose of to his advantage out of these surpluses as compared with his predecessors. Then he had this other advantage to which I have already alluded—he had so much less to pay in interest on the Debt. I have got the figures here, but I will not trouble the Committee with the details. For the six years from 1881 to 1886 we had to pay £129,000,000 in interest upon the Debt; he had to pay during his six years only £119,000,000. This was owing to a diminished interest—due in great part to his own Conversion, and I thoroughly recognise and admit that; but I am going to ask how it was disposed of. He had the money, from whatever source it came. As against our 129 millions he had only 119 millions to pay. That is to say that on that head he had an advantage of ten millions. Therefore, putting his surpluses at seven millions, and his diminished charges for Debt at ten millions, he had seventeen millions of money to deal with out of these two sources. Now these are things which, in addition to the other advantages to which I have referred, placed him in an exceptionally favourable position. Again, I say, in spite of all this, he diminished the Sinking Fund by three millions, and this three millions a year would give him something like fifteen millions more, in addition to the seventeen millions to which I have just referred. I have made these remarks with reference to the dealings with the Debt, but I now come to the other head. What has he done with reference to the future in respect of new Debt; because we have to ask ourselves what has this Parliament done in its period of prosperity with respect to the future Parliament, which, according to the prognostications of the Chancellor of the Exchequer, is likely to have darker days? If the Chancellor of the Exchequer is right we are now on a descending curve. The Chancellor of the Exchequer has told us we have arrived at an epoch of stagnation, and we may probably see a period of diminution of Revenue. He went into very elaborate and interesting calculations as to which of the taxes gave way first, and he made provision this year only for the first head of defalcation. He made it clear that he thought it was probable there would be a greater decline on other heads of Revenue in the future. In what position has he left the future Parliament to meet these less favourable circumstances? First of all, as I pointed out, he has paid off less Debt in that period than he ought to have paid if he had maintained the Sinking Fund. The future Parliament will have to pay the interest of this fifteen millions, which would be something under half a million. Then there is the lump sum of new Debt which he has accumulated, and which will have to be paid by the next Parliament. Now what is that lump sum? I defy any ordinary man, or indeed any extraordinary man for that matter, to find out from the public accounts what it is the Chancellor of the Exchequer has borrowed, and what it is he is going to borrow. We have every possible sort of document. My right hon. Friend the Member for Bradford (Mr. Shaw Lefevre) has been at some pains to ascertain what had been borrowed. We have had an Estimate put upon the Table of what was going to be borrowed. Then you find after that that a million or a million and a half or two millions less has been borrowed This is stated in this Return. Why? Because the work had not been done. The whole demand for these extraordinary financial arrangements was founded upon the notion of the necessity of doing the work immediately, and now I understand with regard to the contracts for ships they are about a year behindhand, and the money has not been borrowed because the work has not been done. We have had an Estimate for what is to be done this year, and we are told it differs by something like a million from the Estimate of the work to be done which was made last September. Every month, certainly every quarter, the Estimate of what you are going to borrow changes. Under the old system when you paid your way within the year it was totally different. But in the present system when you are running on your accounts into future years you cannot tell what is to be borrowed and what is not. The only ground on which the Chancellor of the Exchequer defended this policy was that the work was to be accomplished within five years. It is quite plain now that it will not be accomplished in five years. Well, I thought from these papers of Estimates which we have had that we were going to get some information upon the point. But this is what I gather from a Return which has just been given to my right hon. Friend the Member for Bradford, showing the net estimated expenditure for the year 1892–93 on the Army and Navy. You will find there £650,000 to be advanced to the Army; you will find £471,000 to be advanced to the Navy, £1,441,000 being the total advance. I was very much puzzled by these figures, because the Chancellor of the Exchequer said he was going to borrow two millions. Then there is a note which, I think, will puzzle many people— The amount of savings on Shipbuilding and Armament Votes of prior years,.… which will probably be required for dockyard work in 1892–93, is £375,000, and as the savings have been temporarily applied to contract shipbuilding purposes, the borrowing under the Naval Defence Act, 1889, may have to be increased by that amount. I read that over many times, but I could not make it out. It appears to be what they call in France virement, and it comes to this: Five years ago they borrowed £500,000 from the Dockyard Account, and applied it to the Contract Ship Account. Now they are going to borrow money on contract account in order to pay that £500,000 back again to the Shipbuilding Fund. If we have the public accounts dealt with in that way, no wonder people cannot make out how much you borrow, or how much you intend to borrow. And when you take the Treasury's own documents, and state what they have borrowed and what they are going to borrow, they say, "What ignoramuses you are. You assume the figures given you are right. Nothing of the kind. We have not done the work we said we would do; we have not borrowed the money we intended to borrow, and you are going about deceiving people." But our only deception consists in the citation of the Government Returns. I confess, though I have moved for account after account—and my right hon. Friend the Member for Bradford has done the same—I should despair of forming any opinion whatever of what the Government have borrowed, or what they intend to borrow; but, happily, the Chancellor of the Exchequer—though it does not appear in the public accounts—gave us two simple figures, which I will take for granted, though I cannot reconcile them to any one of the accounts presented. He said he has borrowed five millions, and he intends borrowing two millions this year. That is correct?

MR. GOSCHEN

Yes.

SIR W. HARCOURT

Then I am very glad to know it. It is quite unnecessary to understand the accounts of the Navy or of the Army, or any of the other accounts which are laid before the House. You have got half a dozen new accounts—the Australian Account, the Imperial Defence Account, the Naval Defence Account, and the Barracks Account—each with a separate and complicated system of liquidation, and all of which have one object, and that is to throw the payment on future years. The thing is so wrapped up that how much is thrown upon future years, or how much has been liquidated in the past I do not know, and I defy anyone to discover. However, now at last we have something definite on which we may rely. The Government have already borrowed five millions, and they are going to borrow two millions this year, and that is what the next Parliament will have to liquidate. That is what Dives leaves for Lazarus to pay. That is the finance we are asked to admire. The Chancellor of the Exchequer said we are to be much poorer in the future than in the past; and in order to console us for that situation, he leaves us seven millions of money, which in his time of prosperity he has not chosen to pay. Then he says, "Oh, you will have the Suez Canal shares," and he is very proud of the success of the Suez Canal investment. Well, many a man at a gambling table is extremely glad that his coup has come off, but very often he is ultimately ruined by it. I take it, however, the money is procured, it is a very fortunate thing for the future to be able to look forward to this resource to meet bad times. If the times are bad there ought to be £500,000 or £600,000 to come in; but then we shall be told, "Oh, yes, but the last Parliament anticipated that, and although you have got bad times you cannot get any benefit from that for four years." The whole of it will be absorbed for that period, and that is not all. You have left on the Consolidated Fund a charge of a million and a half, which will have to be paid up to the year 1896.

MR. GOSCHEN

No; that will be deducted from the seven millions.

*SIR W. HARCOURT

Yes; it goes towards repaying the seven millions. Who are to provide that? The people in 1896.

MR. GOSCHEN

I beg the right hon. Gentleman's pardon. The people will not have to pay extra taxes. The taxes are already imposed to pay that. They will be relieved of the £5,000,000.

*SIR W. HARCOURT

They will have to find the money to pay for work that was done in the last five years. I do not know what the right hon. Gentleman means by having provided taxes. Now I would observe, in passing, that the £1,500,000 charged for seven years on the Consolidated Fund exactly neutralises the sum which the Chancellor of the Exchequer claims to have saved to the country by his Conversion scheme, and therefore no benefit will be felt from that Conversion so long as that charge of £1,500,000 is maintained—until 1896. But then the right hon. Gentleman says all this has been done for the purpose of providing ships for the Navy. How far are you going to carry that doctrine? I understand it when applied to the case of permanent works—for fortifications, or even for barracks—and that for these we may properly call upon future years to bear a portion of the burden. The distinction is familiar to all of us. But what would you think of a Railway Company which charged the cost of rolling stock to capital account? Such a Company would be regarded as being in a state of extreme financial demoralisation. I hear some hon. Gentlemen laugh. I do not know whether Railway Companies are in the habit of charging their capital account for this purpose—for things which perish in the using. Everybody knows that you have hardly built a ship before the experts, with the Lords of the Admiralty at their head, come to tell you that it is good for nothing. You do not proceed upon this system in the other Departments of the State. If you want sites or buildings for public purposes, or even docks, you charge them to Revenue. Then the Chancellor of the Exchequer talks of his surpluses. Now, again, I say it is a very dangerous thing to quarrel about words, and I do not care very much what you call the thing. I always thought a surplus meant a state of account in which your Revenue was larger than your Expenditure. But that is not apparently the new meaning of the word. Up to last year account was rendered only of the ordinary Expenditure; but last year I asked for a Return of the whole Expenditure and the whole Revenue of the year. You had one account called the Public Income and Expenditure, and that showed a surplus of £1,700,000. But when I got my Return I found that the surplus consisted of £1,776,000, which had been borrowed. The Chancellor of the Exchequer may call that a surplus; but I do not. Then I have got a Return for this year, which shows a surplus of £1,000,000; and that is obtained by borrowing £1,800,000. In the old days we used to call that a deficit. In the year that is coming we have an estimated surplus of £200,000, with the information that we are going to borrow £2,000,000. This is the position in which we stand with respect to the surpluses. It is a question, I admit, of nomenclature. If you choose to call an excess of Expenditure over Revenue a surplus, and an excess of Revenue over Expenditure a deficit, it comes to the same thing, so long as you understand the terms you employ. If this thing is to be defended on the doctrine of spreading, I feel almost afraid to characterise that doctrine for fear the Chancellor of the Exchequer should accuse me of ferocious purism in finance. But it is not my ferocity that I would refer to. It is that of the Chancellor of the Exchequer himself in his condemnation of the present system in the person of Sir Stafford Northcote, when he said that Sir Stafford Northcote was guilty of cowardly and flabby finance, because he adopted the plan of spreading the charges which had arisen at the end of the Administration of Lord Beaconsfield. My ferocity is nothing to that of the Chancellor of the Exchequer. But when we come to compare his finance with that of Sir Stafford Northcote, why the latter's was heroic and Spartan finance as contrasted with that the Chancellor of the Exchequer has adopted under circumstances which, I confess, seem to me to have very little to justify it. What is this £7,000,000 of accumulated borrowing? It is a mere post obit—drawn by this Parliament to be paid in the next. Now, just see where the Chancellor of the Exchequer would be to-day if he had adhered to the principles laid down by Sir Stafford Northcote. He would have been paying £3,000,000 more than he does now to the Sinking Fund. He would not have borrowed £1,000,000 in the year just completed, and he would not have increased the Debt by an increased deficiency of £1,000,000 on the Savings Banks due to his Conversion. Therefore, his finance, as compared with that of Sir Stafford Northcote, is on the wrong side to the extent of £5,000,000. Now, with regard to the surplus of the present year, there is an ambiguity about it which I would ask the Chancellor of the Exchequer to clear up. He proposes to reserve an estimated surplus of £200,000. That is got somehow or other out of the Appropriations in Aid; and without going into the question of principle I thought this was clear, that whatever you lost in one way you gained in the other; and if, on the one hand, you diminished the charge you diminished the Revenue to the same amount. Somehow or other, by a feat of legerdemain, the Chancellor of the Exchequer gets £200,000 out of the transaction—that is, I suppose, in consequence of postponed payments.

MR. GOSCHEN

No; it is not postponed payments.

*SIR W. HARCOURT

Then I should be glad to have that explained. It is not quite clear. I am glad to hear that the Chancellor of the Exchequer has done something to diminish the amount of the Floating Debt, the amount of the diminution being, I understand, £800,000. That is not a large amount having regard to the figure at which the Floating Debt now stands. The Chancellor of the Exchequer lays great stress upon the distinction between the Floating Debt in the hands of the public and the Floating Debt in the hands of the National Debt Commissioners. If that is as important as he supposes, it is a very remarkable circumstance that there is no document which I have ever seen stating the amount of Floating Debt in the hands of the public as distinguished from the Floating Debt in the hands of the National Debt Commissioners. In the Finance Accounts there is no such statement. The Chancellor of the Exchequer has a Bill, as I understand, dealing with this very important matter, by the creation of a book debt. That will be a new account—another complication in the accounts. The right hon. Gentleman alluded to the book debt created some years ago by my right hon. Friend the Member for Midlothian, which, he said, was of a similar character. But so far as I can ascertain, it was of an exactly opposite character. My right hon. Friend the Member for Midlothian, having taken a certain amount of money from the Savings Banks in Consols which stood at ninety-two, gave a book debt at par with a view to diminishing the Savings Bank deficiency. Now, the right hon. Gentleman the Chancellor of the Exchequer comes forward and tells us that his operations for the Conversion have increased the deficiency on the Savings Bank by the amount of £1,000,000. Therefore, whatever may be the merits or the demerits of his plan, it seems to be exactly opposite to that of my right hon. Friend the Member for Midlothian. I want now to say one word about the Conversion. I desire to give the Chancellor of the Exchequer full credit not only for his fortune, but for his ability in dealing with that matter; but I am sure that the right hon. Gentle- man, whose primary duty is no doubt to look after the interests of the taxpayers, will admit, as every Finance Minister ought to admit, that nothing is more injurious than that the public creditor should feel that he has been hardly used. He depends very much upon the faith which is placed by the public in that great Fund, the Debt of this country. I am convinced that the Chancellor of the Exchequer, when he assured the fundholder that his Two and Three-Quarter Stock would be worth par, fully believed it, and the holder was induced to believe that Two and Three-Quarter per Cent. Stock for a fixed period would be more valuable than Three per Cent. Stock which was uncertain in respect to Conversion; but it has not turned out to be so. The fact is, that ever since—though I am happy to see that his Consols have been higher during the last few days than they have ever been before—on the whole they have been about five per cent. lower than at the time of the Conversion. Well, of course, that has been a very serious matter; for if you take five per cent. on the amount of £600,000,000 Consols, that has been a loss of £30,000,000 of capital value, besides the loss of interest to the holders of the National Debt. It is not an advantage that Consols should be a less popular investment than they used to be; it weakens the position of the Chancellor of the Exchequer, and it weakens, consequently, the public credit. Here, again, comes in the evil of the diminution of the Sinking Fund. If he had kept those £3,000,000 for the Sinking Fund, he would have had £3,000,000 to invest in Consols, and might to a great degree have maintained their value. Many people are of the opinion that the Conversion—admirable and advantageous as it was to the taxpayer—was not of the same advantage to the commercial community, and that a great deal of the wild speculation from which we have suffered so much in the last three years is due to the fact that people, in view of the depression in Consols after their conversion, felt obliged to seek for other investments. And many people are now prevented from investing in Consols by the fear that they might, on the further reduction of interest, fall to an extent equal to, if not greater than, that which has already taken place. Now, to turn to another matter, in how many things are we left in total ignorance with reference to the finances of the country? Look at the condition in which local taxation stands. There are seven millions of money which have been imposed and collected by the State, and what has become of that money—what has been done with it? What purpose has it served? Of that we hear nothing. The Chancellor of the Exchequer has handed over £7,000,000 to the Local Authorities, and he knows nothing and tells us nothing of what has become of it. I think the time has come when we ought to have a Local Taxation Budget, either from the Chancellor of the Exchequer, or from the President of the Local Government Board. Who will tell us what has been done with the £7,000,000? We do not know how it has been spent; how far it has reduced the rates, or how much has been lost in the sands of a wasteful expenditure by the people who have received subsidies of this description. If we are to have this policy at all I think that the old subsidy system was much better. It was more honest and straightforward. When the Government assigned a definite sum to a particular purpose we knew what became of the money; but now you pretend it is not an Imperial tax when it is an Imperial tax, and you have established the evil system of one authority raising taxes and another spending them. This is as unsound finance as it is possible to have. The hon. Member for Poplar (Mr. Sydney Buxton) alluded to a matter which, in my opinion, is of still greater importance. You have tied the hands of the Chancellor of the Exchequer in respect of the resources of the country. Supposing you want money for an emergency, and suppose it is necessary for that purpose to raise the Probate Duty: there is no particular reason why you should give more money to the Local Bodies because there some Imperial emergency has arisen; and yet the Chancellor of the Exchequer cannot raise the Probate Duty without giving half the proceeds to the relief of local rates. In what a position to place that great Tax! With reference to the Excise licences, that source of Revenue has been taken out of your power altogether, however expedient it may be in the future to do so. You have lost the power of dealing with them. I want to know how all this money has been spent. What has become of it? What good has it done? I have endeavoured to show the great resources you have had at your disposal. The legitimate source for the reduction of taxation in my judgment, and I think in the judgment of all people who have dealt with English Finance before, is the increase of Revenue. But your method of reducing taxes has been by expending capital; that is, by suspending the Sinking Fund and accumulating Debt. But having got these resources—having your surpluses, having your diminished charge, having your fixed charge cut down by three millions—what have you done with the money? You have taken from the Revenue, first of all, nearly £5,000,000 for local taxation. Where has that gone? The Minister of Agriculture has told us. It has gone to the owners of real property; they are the people who have had it. (Cries of dissent.) You must find fault with the Minister of Agriculture for the statement, and not with me.

MR. GOSCHEN

You do not believe that.

*SIR W. HARCOURT

The right hon. Gentleman says I do not believe it. The right hon. Gentleman himself would not have believed it formerly. He must settle the point with the Minister of Agriculture. When with reminiscences of those very able writings with which we are all familiar we found the Chancellor of the Exchequer expending four millions of money in gifts to the rates, he said that was not a thing in which he himself believed, but that it had been forced upon him by the House of Commons. If you did not believe in it, why did you do it? There is no doubt that a great part at least of the relief of the rates goes to the benefit of the owners of property; that cannot be denied. You have taken £4,500,000 off the Income Tax, and that, with the other item, amounts to nearly £9,000,000; but that relief of taxation has been mainly for the advantage of the wealthier classes. Now, what remission is given to the labouring classes? You have reduced the taxation on tobacco, and tea, and currants, and that remission adds up, I believe, to something like £2,500,000, against the £8,500,000 given to the wealthier classes; but as against the £2,500,000 you have taken off you have imposed by fresh taxation £1,500,000 upon the consumer, upon articles of Excise, upon beer and spirits, in order that £4,500,000 may be given to the owners of property. In point of fact, therefore, you have almost neutralised the relief which you have given to the working classes. It is true you have imposed about £1,000,000 upon Estate Duty, and you have taken off a part of the House Duty. I do not know exactly what class contributes that, but I should think it would be the class which the Chancellor of the Exchequer described in one of his speeches as those who wear black coats—that is, those who are between the wealthy and the poorer and operative classes. That is your distribution of taxation. You may dispute about items of a hundred thousand here and a hundred thousand there; but this I will say, that of the wealth and prosperity which has poured in upon you during the last six years you have given by far the preponderance to the wealthier and not to the poorer classes. These are the main charges which I make against the policy of the Chancellor of the Exchequer. But in order that I may deal fairly with him, I will in brief sentences state the proposition I have endeavoured to establish. I think that the policy of the right hon. Gentleman is open to criticism upon these grounds—firstly, that in times of high financial prosperity and with large surpluses, he has without justification broken down the provision for the payment of the National Debt; secondly, that with extraordinary resources at his disposal he has accumulated a debt which he has bequeathed to a future Parliament; thirdly, that his reduction of the charge upon the Converted Debt to the extent of £1,500,000 will be absorbed, at least till 1896, by an equal extra charge imposed upon the Consolidated Fund; fourthly, that in his remission of taxation he has given the balance of advantage to the classes who least required it; and, fifthly, that for the next few years he has forestalled revenue and increased charges in order to relieve a prosperous present at the expense possibly of a far less prosperous future; and the surpluses for the last three years which he has declared are more than countervailed by the obligations he has incurred. It is said that "necessity is the mother of invention;" but the Chancellor of the Exchequer has not had the excuse of necessity for his extremely inventive finance. I think it is very much to be regretted that in times of exceptional prosperity the future should have been thus mortgaged without need and without justification.

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

I am at some disadvantage in following the speech of the right hon. Gentleman, because I feel some compunction in repeating what I have often said before. Half of the right hon. Gentleman's speech was delivered last year, a portion of it during the year before, and a very large number of the arguments which he has put forward to-day have been submitted during every Budget Debate since I have had the honour to hold my present office. It is curious to note, however, that those arguments have very seldom been followed by a test of the feeling of the House. Most of the propositions which the right hon. Gentleman has laid down might have been voted upon in this House, but they have generally been reserved for platform speeches. The right hon. Gentleman was good enough, at the end of his speech, to sum up the propositions, with which I should have to deal. I am obliged to him, because it is often extremely useful to know the exact points of a long speech; but on this occasion I will admit that I was prepared for the attack and the general review of the right hon. Gentleman, because I have previously seen it in so many forms, both in print and reported in the form of platform utterance. The right hon. Gentleman—I think, perhaps not un- fairly—based his repetition of what I may call the various charges that have been brought against us on previous occasions on the ground that we were now probably at the end of this Parliament. Well, I am not ashamed to look back, notwithstanding the criticisms of the right hon. Gentleman, on the record of the last six years. Indeed, but for some of the observations at the close of the speech of the right hon. Gentleman, I should have almost been inclined to say that an impartial observer listening to his speech would have said that he admitted almost as many virtues in my finance as he had found vices in it. He was in general fair in his review of what had been done, and of measures to which he could give his assent; and I am bound to say that, looking to the magnitude of the operations which he applauded, I think the amount with which he found fault would, in the eyes of an impartial observer, scarcely outweigh the merits which he himself acknowledged. I should like to be allowed to follow the right hon. Gentleman through most of the points he has raised, notwithstanding the hour at which I have risen. Let me deal, in the first place, with one point which rather stands by itself; and that is the remarks which he made upon the Conversion. The hon. Member for Poplar (Mr. Sydney Buxton), stated that there were few persons—that indeed there was scarcely a person in this House—who would find fault with the Conversion. But I think the right hon. Gentleman (Sir W. Harcourt) has been from the beginning one of those who have seen in it less advantage to the country than nearly all those who sit on the same Bench with him, and almost every other person in the House and in the country. One can see how little the right hon. Gentleman appreciates the importance of the Conversion when he says that actually for two years the result will be absorbed by the amount that has been put upon the Consolidated Fund to pay for the instalments of the Naval Defence Act.

SIR W. HARCOURT

More than.

*MR. GOSCHEN

No, there are only two years to run after this year of the Naval Defence Annuity; and the right hon. Gentleman puts against these two years the permanent reduction of the National Debt. I will ask the right hon. Gentleman, is it not almost a petty point to take to say that the value of the Conversion is diminished because for two years the result will be absorbed? The right hon. Gentleman will remember—

SIR W. HARCOURT

What I said was that the action would neutralise the great and permanent reduction of the Debt.

*MR. GOSCHEN

I do not venture to say more than that it is rather a petty point. It is true to a certain extent, but it is scarcely worthy of the right hon. Gentleman. Well, then, the right hon. Gentleman says, as I have also seen stated elsewhere, that the reduction of the interest on the National Debt has probably had the effect of driving persons into speculative investments. I have seen it stated in a newspaper that it was possible I had done actually more harm than good by reducing the rate of interest from three to two and three-quarters per cent. But suppose that the Conversion attempted by our opponents had succeeded, would not that have had precisely the same effect? They were anxious in those days to reduce the burden of debt upon the taxpayer, but I do not think it entered in the most remote way into the mind of the right hon. Gentleman the Member for Midlothian (Mr. W. E. Gladstone) that the reduction in the interest on the National Debt might send people into speculation in Argentine investments. That argument has been reserved for the last school of political financiers. Really it is out of respect for the right hon. Gentleman that I deal with the point at all, because to believe that the difference of a quarter per cent. would have the effect of sending people to six and seven per cent. Stocks seem to be quite out of reason and repugnant to ordinary experience. The right hon. Gentleman said that the price of Consols had not turned out as I anticipated. Well, it was not only I who believed that Consols would ultimately, after a certain period, rise to par; but the great majority of persons anticipated it—the bankers and the great body of public opinion thought the policy was a wise one, and supported it as such. The Committee will remember that Consols have suffered during this time not only from the reduction of interest, but also from the Baring crisis and because of difficulties in the City, and also on, account of the changes which the Legislature has thought fit—I doubt whether very wisely—to make in the enactments with reference to trusts, and which have permitted many trustees to invest in other securities contrary to the avowed intention of testators. I think the right hon. Gentleman will see that these things must have seriously affected Consols, which, however, now stand at nearly ninety-eight. The temporary causes which affected them having been removed, I should not be surprised if the prognostications of those who accepted the Conversion were ultimately fulfilled. But I venture to deny in the strongest way that any national disadvantages have followed the Conversion. I do not think the public credit has in any way been shaken by the proceeding. Then the right hon. Gentleman placed in contrast the remissions of taxation which we have made to various classes of the community, and he said that we had given four millions to the wealthy class, and about four millions to the owners of land.

SIR W. HARCOURT

I said real property.

*MR. GOSCHEN

Well, on real property. I do ask this Committee whether it is fair in the first instance to treat the whole of the sum which is remitted in Income Tax as a reduction in favour of the wealthy class; whether it is fair in a right hon. Gentleman holding the position he does in that way to hold up the payers of Income Tax as if there was a conflict between their interests and those of the working classes? Amongst the payers of Income Tax are a large number of men, and women too, belonging to the poorer middle class who are as straitened in their circumstances as are many of the working classes themselves. No doubt the reduction of Income Tax does assist the wealthy; but besides that it assists a class who have had a claim upon the justice of this House, and a class who have generally on every emergency been called upon to pay whatever other classes have been exempt from contributing. I do consider from every point of view that a reduction of the Income Tax from 8d., at which it stood in time of peace, to 6d. was imperatively demanded at the hands of this House. But then the right hon. Gentleman says that there are four millions which we have given to the benefit of real property. I thought the right hon. Gentleman the other day, in the discussion upon the Small Holdings Bill, and particularly upon the question of the rates being divided between the owner and the occupier, spoke of the rate being imposed upon the farmer. But if the rates are paid by realty, what is the advantage of dividing them between owner and occupier? Those who speak of those rates going for the relief of the landlord seem to hold that the occupiers do not pay the rates at all; but a vast number pay the entire rate. I invite any hon. Member to meet occupiers in London, Liverpool, or Glasgow and say to them—"Gentlemen, you are entirely mistaken in thinking you have any interest in rates. You have no interest in paying rates. They are paid by realty—by the owners of property." Is there any hon. Member in this House who really believes that the four millions which have been given in relief of rates have really gone to the owners of property? No!

SIR W. HARCOURT

Will the right hon. Gentleman excuse me? I want to ask him, did he say that the rates have no effect upon the Revenue?

*MR. GOSCHEN

The right hon. Gentleman took the whole of the four millions as going to the relief of the owners.

SIR W. HARCOURT

I said I would not dispute as to the particular figures.

*MR. GOSCHEN

The right hon. Gentleman, however, took the four millions as the relief of realty. I can assure him there are thousands and thousands of occupiers in our great cities who do pay the rates themselves, and who have felt an increase in the rates when it has been imposed, and who have felt a decrease in those rates when it has taken place, and everyone who is acquainted with the subject will admit this to be the case. But now I want to put another point in regard to this relief of real property. I say that by the relief which we have given to local taxation, which has been given to occupiers as well as to owners, and in the main has been enjoyed by the occupiers and has not been enjoyed by the owners — we have assisted municipal finance to such an extent that now the Local Authorities are able to undertake much excellent social legislation with which, otherwise, they would have been quite incompetent to deal. Where would the London County Council be if we had not assisted them by the increased means which have been placed at their command for the relief of the local taxation when they lost the £500,000 in respect of the Coal Duties? Do the London County Council, when they receive this money, think it has gone simply for the relief of the owners? No, they know it is at their disposal; they know they have more money to spend upon open spaces, recreation grounds, sanitary measures, free libraries, and the like—all that is much more possible now than it could possibly be before, when the rating difficulty stood in the way of every possible reform, municipal or otherwise. I frankly say I consider we are forwarding the social movement, and that we have largley assisted to develop Municipal and County Government by sums we have thought it right to place at the disposal of the Local Authorities. So much as regards that part of the right hon. Gentleman's speech which contrasted what we have done for one class with that which we have done for another. The right hon. Gentleman made a further omission. In speaking of what we had done for the working classes, he did not include the gift of free education which we have been able to place at their disposal. I think the right hon. Gentleman would admit—

SIR W. HARCOURT

I did.

*MR. GOSCHEN

But the right hon. Gentleman did not at the end of his speech, when he made his summary, add the two and a-half millions for free education to the two and a-half millions which we have remitted in the way of indirect taxation. I think we may contend that the working man has been as much benefited by being relieved of the threepence or sixpence per week which he had to pay for his children's education, as he is by taking off a further portion of the Tea Duty. It has precisely the same effect in assisting him. I turn now to the staple argument which is used on these occasions—the argument as to tampering, as it is called, with the Sinking Fund. The right hon. Gentleman's argument in this respect was sometimes rather strange. He spoke of the prosperity which has been fortunately developed during the last three years, and then said that during such a period of prosperity we ought not to have tampered with the Sinking Fund. The right hon. Gentleman taxes me with having robbed the Sinking Fund, and his argument that I ought not to have taken that course rested to a great extent upon the development of the prosperity of the country since I have taken that course. I think the right hon. Gentleman will not deny the justice of that statement, although, perhaps, he may think I ought to have restored the Sinking Fund. I do not, however, know whether that is a point of his argument. Well, now, I suggest a new item to the programme of the right hon. Gentleman, who spoke of this as a permanent robbery of the Sinking Fund. Why permanent? The right hon. Gentleman possibly may occupy the position not very long hence which I have the honour to occupy at the present moment. Why, then, should the suspension of the Sinking Fund be permanent? Why should he not restore the three millions to the Sinking Fund? I can tell him how he can do it. Let him take away the three millions which have been given to the owners of real estate; let him take back that which ue charges me with having given to the Local Authorities, and devote it to restoring the Sinking Fund of Sir Stafford Northcote. I offer him a very enticing item to be added to the Newcastle Programme—withdraw the three millions from the money given to the wealthy and the Local Authorities and restore the amount to the Sinking Fund. The curious thing is that while I have been denounced from many a platform for having withdrawn the three millions, and with having given too much to the Local Authorities, I have never seen a single Member who has proposed to diminish by one sovereign the amount which has been placed at the disposal of the Local Authorities. Nor have I seen the slightest disposition to increase the amount of the Sinking Fund should the right hon. Gentleman accede to power. The right hon. Gentleman early in his speech said I had managed to collect all the worst precedents that had been set and press them into my service, and he must observe some kind of reticence in speaking of them. Fortunately I need observe no such reticence. I do not disapprove of the precedents which were wisely set in many cases, and I do not see why I should not state them to the House. The right hon. Gentleman has always denounced me for innovation in finance, but I have generally been able to find a precedent set by very high authority for anything I have done. There are three charges that he made against me—one is that I have tampered with the Sinking Fund, another is that when the Conversion was successful I did not leave the whole amount of the interest saved to the benefit of the Sinking Fund, and the third is that in years of prosperity we have borrowed money and spread the repayment of it as a burden which will fall upon our successors. The right hon. Gentleman knows full well that there are precedents for every one of those courses. The right hon. Gentleman said that the suspension of the Sinking Fund in 1885–6 and 1886–7 was due to the Soudan Expedition, the Afghan business, and other matters. That is true as regards 1885–6, but was it true as regards 1886–7, when my stern critic was presiding temporarily at the Exchequer? The right hon. Gentleman nods his head, but I have read the speech he made on that occasion, and I think he has not lately referred to it. He said the expenditure had become normal. He did not suggest that the Estimates were high in 1886–7, and that they would come down, and that, therefore, he would suspend the Sinking Fund. He could not think of what tax he would impose; he was helpless. He had a deficit of over £500,000, and he did not think of putting an additional tax on cham- pagne, or of increasing the Death Duties, or any of those other taxes for which I have been denounced. The right hon. Gentleman simply said—"I do not know whom I must tax, and so I must suspend the Sinking Fund!" This is the right hon. Gentleman who has been lecturing me for three years for tampering with the Sinking Fund. I will not do him an injustice. Here are his own words. The right hon. Gentleman said that the Estimates would not go down, and he was afraid he could not hold out any hopes of a reduction. He found a deficit of £543,000, "not," he said— Not a very satisfactory result in a time of peace, with the Income Tax at 8d. in the pound. The increase of expenditure was Principally to be accounted for by the large expenditure upon Naval and Military Services, an expenditure which the Committee, I fear, must now look upon as normal… The interesting question is, How is this deficit to be met? In ordinary times no doubt it would be met by an increase of taxation, but I know no class and no trade at the present time which is in a condition to bear additional taxation. As to indirect taxation, I do not look at it with any sanguine hope. Why did not the right hon. Gentleman put on some of those taxes which I ventured to impose afterwards? He had the same advisers at the Treasury as I had, but he could not find £500,000, and, therefore, he suspends two little Sinking Funds, and he poses before the country now as a great defender of the principle of the Sinking Fund. In the same speech the right hon. Gentleman said— If we cannot meet this deficit by increased taxation, we can only meet it by some reduction from the sum now appropriated to the reduction of the Debt. The right hon. Gentleman admitted that the Naval and Military Expenditure was normal, and that there was nothing special in the year except that he could not find taxation, and he made the remarkable admission that Sir Stafford Northcote distinctly contemplated the application of the Sinking Fund to such a purpose as this. That is to meet the normal expenditure of the year, when the right hon. Gentleman did not know how to find means of increasing the taxation. Well, the speech of the right hon. Gentleman today has been characterised by one omission, which I note for the first time upon this occasion. The right hon. Gentleman has not this year quoted the Economist. That is a remarkable fact. When he has to make a speech he generally fills his pockets with extracts from that paper. Now, just for once I will quote a passage from the Economist, I think it is my turn. Here is what that organ, which he chiefly uses for denouncing the present Chancellor of the Exchequer, says— An expediency Budget"—"a very tame and impotent Budget."—"Sir William Harcourt finds himself driven back to the refuge of shiftless financiers, a partial suspension of the Sinking Fund. In mitigation of his shortcomings, however, he pleads he is not going to sin so much as his two immediate predecessors. They laid hands upon nearly five and a half millions of the Sinking Fund, whereas he proposes to appropriate only £800,000." He should "think the Income Tax question over again," and "although it may be beyond the present ability of Sir William Harcourt to arrange for the juster incidence of taxation, even he, if he remains long in his present office, may gain sufficient financial grasp and experience to grapple with the question. Now, the Committee will see that the Economist is impartial in its observations. I confess that when I entered upon office I was not under the awful impression which the right hon. Gentlemen felt as to the sanctity of the Sinking Fund, because in two years running that Sinking Fund had been suspended, one year being a year of normal expenditure. Now, my first crime—the crime for which I have always been attacked—was that I reduced a portion of the fixed charge in 1887–88. The next charge is that I have allowed the whole amount saved by the Conversion scheme to go, not to the Sinking Fund, but in relief of taxation. But here again I have got the latest precedent in the attempted Conversion of the right hon. Gentleman the Member for South Edinburgh. (Mr. Childers). In that attempted Conversion it was arranged that the chief amount should go to the relief of the taxpayer, and not into the Sinking Fund. The right hon. Gentleman may say he does not care for precedents, but they are very important when the public are going to decide between two rival parties, and I should like to know how hon. Members opposite can denounce me for taking a course which a few years ago had the authority of the right hon. Gentleman the Member for Midlothian (Mr. W. E. Gladstone) and other right hon. Gentlemen opposite. Now, what is the third charge? The third charge is that we spread expenditure over a certain number of years. I noted the observation of the right hon. Gentleman with reference to the amount expended upon the Army and Navy in the first years after we came into Office. If you take guns and ships together, the right hon. Gentleman will see there was scarcely any diminution in the Estimates at all. In those earlier years we had to make up immensely as regards guns and ammunition, because, as perhaps the right hon. Gentleman will remember, he did not attach the same importance to having guns ready for ships, and ships ready for guns, as an ordinary Chancellor of the Exchequer might be expected to do. Our predecessors had fallen very much behind, and in one year we were obliged to ask for £1,700,000 for naval guns and ammunition. Now, I frankly admit that in the year 1889–90—not merely from the point of view of the Admiralty, but from that of the Government as a whole—we took stock of our position politically and navally; we looked at the whole situation, and we came to the conclusion that it was absolutely necessary in the interest of the country to make a special effort for increasing the Navy. This is a point which hon. Members and right hon. Gentlemen may challenge occasionally in speeches on the platform, but they have never yet ventured to ask for a straight vote on the question as to whether this further expenditure for the Navy was required. They denounce bloated naval estimates and expenditure as a whole, but they will not go before any popular constituency—or few of them will—and say that the additional sum spent upon the Navy was not money that was well and wisely spent, and for which, as I believe, we have a satisfactory return in the greater security of the country. Well, then, I admit we made a special effort in 1889–90, and here the right hon. Gentleman says we commenced borrowing, but he has forgotten that simultaneously with that slight borrowing we imposed increased burdens upon the people. I may say in regard to this naval programme that the amount of borrowing has been grossly exaggerated from the first, and no one is more responsible for what my right hon. Friend opposite calls the confusion of this matter than the right hon. Gentleman the Member for Bradford (Mr. Shaw Lefevre). He wanted to clear something up, but the manner in which he set about it created half of the confusion. The right hon. Gentleman pressed for a Return and insisted upon it.

MR. SHAW LEFEVRE (Bradford)

I beg to say that the Treasury were consulted as to the form of that Report, and gave their consent to it.

*MR. GOSCHEN

Yes, but not as to what the right hon. Gentleman wanted. We gave the Report because he insisted upon it.

MR. SHAW LEFEVRE

I consulted the Treasury as regards the form.

*MR. GOSCHEN

Yes, but it is not only the form. The right hon. Gentleman created the confusion because he wanted to know—and he always does want to know—in advance certain things which cannot be prophesied at all. The right hon. Gentleman always wants us to say in advance how much in the year we are going to borrow. And now I will come to the point of the right hon. Member for Derby (Sir W. Harcourt). He said: "Look how mistaken you have been in the amounts you expected to borrow. How much better it would have been if you had proceeded under the old system." Now I want to examine these two systems—the old system and what is called the new system. The right hon. Gentleman cannot blame the Government—though he has large capacities for doing so for anything that may happen—if contractors, owing to difficulties, strikes or other obstacles, are unable to deliver their ships as fast as they hoped to do. I think the right hon. Gentleman will admit that the Government cannot be blamed for that. If under these circumstances the Government are uncertain as to the amount to be paid to contractors, what is the wiser and more business-like plan? To put a tax for the maximum amount upon the people when it is possible only half of the extra amount may be wanted, or to borrow a portion of the amount according as the contractors require it, and thus avoid the inconvenience of putting on a tax for money that may not be wanted at all? In 1890–91 we expected to borrow—I admit it freely—some two millions more than we actually did borrow. What would have been done under the old system? We should have provided two millions more by taxation, which would have been extremely inconvenient to trade and in other respects, and at the end of the year it would have been found that it could not be devoted to the purposes which Parliament intended. It would have gone into the old Sinking Fund, and the money would have been re-voted the next year contrary to the intentions of Parliament. Now, the right hon. Gentleman may say, How far will you apply that? Well, I will give a candid answer. I would apply this system only when there is great uncertainty, as there must be when large contracts are put out simultaneously. We had to deal with ten millions, and the point is this—having this ten millions under contract, would it have been wise and business-like to have raised the money unnecessarily? Hon. Members opposite may speak very heroically with regard to the subject now, but I say that under the circumstances it would have been unwise to have raised so much money by extra taxation. We did raise some. Let there be no misunderstanding on that point. We raised two millions extra by taxation, and that was more than we wanted, and we carried a portion over to the next year. I am sorry I have to defend the Naval Defence Act again, but as the right hon. Gentleman opposite has again attacked it, I think I should speak upon the subject. The second point I will make on it is this:—All of us who have been at the Admiralty have found that if you vote more money for construction than you are able to use, the result is a great temptation on the part of the Admiralty to devote a portion of it to repairs and other purposes for which Parliament has not originally sanctioned the Vote. Now, the Naval Defence Act keeps the Admiralty under the strictest possible control. They do not always like it, I admit, and there have been murmurs sometimes to the effect that they are tied too tight. But the result is that we have turned out ships faster than ever before. The guns have been ready for the ships, and we have been able to keep to our programme in a manner that was never done under the old system. I frankly say, notwithstanding the hostile comments that have been made about it, that that Act has enabled us to strengthen the Navy and insure the money being spent as Parliament intended, and it has saved most inconvenient financial results owing to the uncertainty as to delivering ships by contractors. It was for administrative as well as financial purposes that we framed this Act. Now I come to the point as to what burden we have put upon our successors through these operations. Well, the right hon. Gentleman made an admission of which I took notice. The right hon. Gentleman did not object, as I understand, to the steps we have taken as regards barracks.

SIR W. HARCOURT

More defensible.

*MR. GOSCHEN

It is quite as defensible as when the Military Forces Localisation Act was passed by the right hon. Member for Midlothian (Mr. W. E. Gladstone) and his colleagues. The parallel is exact. At that time there were surpluses too, but I do not see that the right hon. Gentleman deducted the amount which he borrowed for the purpose of that Act from the surplus which he had at the end of the year, nor do I see that when any money was borrowed under the earlier Fortifications Act it was considered to affect the surplus of the year. The right hon. Gentleman the Member for Derby (Sir W. Harcourt) is a person who introduces new nomenclature with regard to surpluses, and also I think some new principles. I wonder what the right hon. Member for Midlothian thought when he heard the right hon. Member for Derby deprecating surpluses, and considering that they were on the whole rather to the discredit of the Chancellor of the Exchequer than to his credit, because they showed he had miscalculated his Revenue. My recollection is that at many an election time the surpluses of the Gladstonian Chancellor of the Exchequer have been placarded in very large letters and treated as redounding—as I believe they did—to his financial ability and caution. I am sure the right hon. Gentleman shocked the Leader of the Opposition when he made these observations with regard to surpluses. The hon. Member for Poplar (Mr. Sydney Buxton)—who had a kind of preliminary canter before the right hon. Gentleman spoke—seemed to think that it was extremely easy to make an exact estimate for the year as to Revenue and Expenditure, and he appeared to think that someone is to be blamed if it did not turn out absolutely correct. When he has had, further, that experience to which I presume, from his speech and the position he has occupied in this Debate, he looks forward, he will find that to estimate to between one and two per cent., either upwards or downwards, is not the easy automatic affair which he seems to think. He put a question to me, which was also put by the right hon. Gentleman (Sir W. Harcourt) in very proper terms, as to whether I have introduced any innovation—and I think he rather wished me to disclaim the idea—making myself more than formerly responsible for the Estimates on this occasion than it was usual for a Chancellor of the Exchequer to do. I disclaim the intention entirely. I do not intend to make myself more responsible than Chancellors of the Exchequer usually are, and I may say that I used these terms when speaking of the amount which I put down to Income Tax; "I am advised," and speaking of the services of Sir Algernon West I said— He who has had the chief responsibility in preparing the Estimates. I have acknowledged that general principle, but I am bound to say that the public does hold a Chancellor of the Exchequer more or less responsible for the correctness of the Estimates. I know it has been charged against me that I have habitually under-estimated my Revenue. But any Chancellor of the Exchequer who follows the advice of those who are responsible to him will only err in that matter within narrow limits. He exercises his judgment within narrow limits after most close conference and most intimate communication with his chief advisers. But I will say this—and I think I may remind the Committee of the fact—that whenever the Estimates have been extremely close and come up exactly as we anticipated, I have invariably endeavoured to give the credit to the permanent officers. But if it should be the other way—if there should be an over-estimate, or if there is a deficit, I should not like to come here and say that the fault rests with my responsible advisers. I will make a frank admission. Seeing that this year was a peculiar year, insomuch that I thought we might be on the top of that curve of prosperity to which I have alluded, I thought it my duty to give more than usual care to a personal examination of the Estimates, and to the calculations and communications I have received from my advisers. I hold that I could not acquit myself of the responsibility for those Estimates at the expense of my responsible advisers. I will frankly say, however, that there has been no difference of opinion between us, and I have endeavoured to examine all that came before me with peculiar care on the present occasion. I have been led into this discussion from the point of view of the surplus to which the right hon. Gentleman alluded, but the real point before us is the money we have borrowed. The real question is, whether we can claim a surplus when we borrow for permanent works? The right hon. Gentleman called attention to the works with respect to the barracks, but I do not think he would argue that what we borrowed for the barracks ought to be deducted from the surplus for the year. The chief charge concentrates on the Naval Defence Act, and, as I stated, we have under it spent fourteen millions and borrowed two millions up to the present time. We shall borrow another two millions in the coming year, and we shall then have reached the limit of borrowing, and we shall pay off what we have borrowed in two years. That is to say, this year and two years afterwards.

SIR W. HARCOURT

In seven years from 1889.

*MR. GOSCHEN

I mean this year and two years afterwards. And now what is it that Dives bequeaths to Lazarus? We bequeath to him two annuities, but the right hon. Gentleman will not have to suspend the Sinking Fund—if he should be in office—in order to find money to pay these annuities, because we have imposed the taxes by which those annuities will be paid, and no fresh burden will be put upon the taxpayers in those two years unless it is put on by increased naval expenditure at the instance of our successors. That is the position as regards the Naval Defence Act; and I ask the Committee, bearing in mind what I have said, which is the best for your successors, to leave unfinished ships which they are obliged to finish at a large cost, or to have finished ships with only a portion of the burden transferred to your successors? I can see an analogy in the case of two men, each of whom wishes to repair his house. One man says, "The house has rather got out of repair; I will put it right, and borrow the money and spread it over three years." The other man says, "I will not repair the house at all; I will wait the three years, and let my successor bear all the cost of the repairs." When right hon. Gentlemen opposite went out of Office in 1886 they left six millions due on unfinished ships, which we had to find. Was not that a liability just as distinct as the Naval Annuities which will still have to be paid? I contend that an unfinished ship or a contract entered into is as much a liability as if you had borrowed the money with which to pay for that ship. In both these cases you have a creditor. He may be the contractor, and he may be the person from whom you have borrowed the money; but in either case you have a creditor. Under the Naval Defence Act the burden is extremely small. It will be quickly passed over, and we have provided the means. As regards the Imperial Defence Act, the money will not have to be found by Lazarus out of fresh taxation, but by the windfall of the Suez Canal; so again, I may say whether it is right or whether it is wrong, our successors will not have to find the money. There remains the balance of three millions under the Barracks Act, and that is the only serious item which can be charged against us under these Defence Acts. I admit there is some complication in the accounts, but that must be so; but is it not better that it should be a little more difficult to examine the accounts than that we should leave the Naval programme unfinished or have any of the other disadvantages which I have pointed out? I admit that the system is somewhat complicated, but I say that the advantages have not been too dearly bought. The right hon. Gentleman opposite (Sir W. Harcourt) has developed into an extremely polemical statistician, but in the pursuit of his statistical studies I would ask him not entirely to forget the considerations that a statesman ought to weigh. If we make any changes he looks more at the difficulty in being able to follow the statistics than at the real advantages or disadvantages which may accrue. I do not apply that to the Sinking Fund, which is really a matter of importance; and though I have been very severely blamed, I do not say there are not some advantages in the discussion that has taken place, and in the manner in which the Party opposite have pledged themselves to the maintenance of a permanent Sinking Fund. But while I admit the advantage of that criticism, I must say that it scarcely comes well from one who suspended the Sinking Fund at a time of normal expenditure. Still, I think it is fair criticism, and what I ought to have expected. I have attempted to deal with most of the charges which were brought against me. I have dealt with the question of having tampered with the Sinking Fund, and I think I have made it clear that in other matters there has been great exaggeration. With regard to our naval expenditure, the right hon. Gentleman has said that the rolling stock is always paid out of Revenue by the Railway Companies. I do not think that is quite so, and if a Railway Company incurs a very heavy expense in rolling stock in one year, the account is spread over three or four years. I have not added to capital account, but have only endeavoured to spread expenditure over a few years. The right hon. Gentleman asked me at the close of his speech, in regard to the appropriations in aid, whether our proposal was tanta- mount to postponing payment, and whether it was possible, without trenching on future years, to increase this year's Revenue by £200,000? This does not expose what has been done. The £200,000 in question belongs to the last quarter of the previous year, and was in the hands of the Paymaster General to be paid into the Exchequer on the 1st April. We thus have five quarters, but we do not trench upon the Revenue of the future year. We got the arrears, but we do not touch the future. I have now endeavoured to cover the whole ground. I believe I was right at the time when the Income Tax stood at 8d. to put it at 6d. I believe that if we had maintained the Sinking Fund at its old figure it would have been more in jeopardy than it is at present. Then as regards relief, I say that we have equitably distributed that relief to the best of our ability amongst all classes. We have not given so much to the wealthy as we have to the middle, the lower middle, and the working classes. I have over and over been censured by the Income Tax payers on the ground that we have done too little for the middle classes and that we have done everything for the working classes, but I believe that complaint is very unjustifiable. We have endeavoured, to the best of our ability during the past five years, to distribute those advantages flowing from prosperity so as to assist all classes of the community alike and give them all an interest in the increasing prosperity of the country. The remark has been made that I have boasted of my surpluses. I have never boasted of those surpluses. I do not deny that we have been favoured by fortune, and I trust that I, or anybody else, who occupies this position next year may, notwithstanding some of the more gloomy symptoms to which allusion has been made, may still find that the Revenue will enable us to meet our great and increasing expenditure, which I have often endeavoured to reduce. I am bound to say that in those attempts at reduction I have never met with much assistance from the leaders who sit on the opposite side of the House, and we are now taxed, when General Election draws near, with having increased our expenditure. But I must say that no Chancellor of the Exchequer has ever received less support in his endeavour to reduce Expenditure than I have from my political opponents, when the House has wished to take matters too quickly into its own hands. The right hon. Gentleman was frequently not in the House when Motions in favour of increasing expenditure in certain directions came on.

SIR W. HARCOURT

Free education.

*MR. GOSCHEN

In free education we were pressed to extend the expenditure in every direction, but that was net supporting the Chancellor of the Exchequer. Looking over the five years as a whole, I believe our expenditure has been wise, and of all the expenditure I have incurred there is none I regret less than the expenditure on the defensive Forces of the country, and the expenditure by which we have endeavoured to assist the Municipalities in carrying out the great and expanding work which is confided to them.

*(8.11.) MR. MONTAGU (Tower Hamlets, Whitechapel)

I do not propose to enter into the general discussion of the Budget, but I regret that the Chancellor of the Exchequer has not proposed to regulate certain Stamp Duties with the object of making them less burdensome and more productive. I refer specially to the Stamp Duties on foreign bonds and bills of exchange. I think that a Chancellor of the Exchequer who has had great commercial experience and long training in the City of London should, even in what is presumed to be the last Session of Parliament, endeavour to reform our system of Stamp Duties. Besides, these matters have been brought under his notice in this House and in the Standing Committee to which his Stamp Consolidation Bill was referred last Session. It is, in my opinion, very necessary that these Duties should be imposed with due regard to what obtains in other great commercial centres, so as to prevent the diversion of trade to other countries. The merchant traders and bankers who transact business with foreign countries greatly promote the prosperity of this country. Now, what has the Chancellor of the Exchequer done to preserve the trade and promote the success of the merchants and bankers? The guiding principle ought to be that the Stamp Duties levied here should not advantage our foreign competitors at our expense. Laws affecting international securities, bills of exchange, systems of currency, weights and measures, should be as good—certainly not worse, in this country as those of our neighbours. If it is advantageous to have International Conventions with regard to postal and telegraphic arrangements, why not also assimilate our regulations as to stamps, &c., with those of other great Powers. Now, what are the Stamp Duties in competing countries as compared with ours? In France 1½ per mille, or 3s. per £100; Germany, 2 per mille, or 4s. per £100; Holland, and Belgium, 1 per mille, or 2s. per £100. Here it is 10s. per £100. The Chancellor of the Exchequer has increased our difficulties by the imposition of a novel duty commonly called the Goschen Stamp—an adhesive stamp, bothering everybody because it must be affixed year by year; an annual plague and nuisance. Paris and Berlin are taking the lead over London in financial operations, mainly owing to their reasonable and our unreasonable Stamp Duties. I learn from the best authority that it was recently proposed to issue here a Norwegian Loan, but the negotiations fell through on account of our Stamp Duty, and the loan has been taken in Germany. The Chancellor of the Exchequer kills by excessive stamping the goose which lays the golden eggs. He does not shut out impecunious States from issuing loans here. I have heard of no Argentine complaints of our excessive Stamp Duty, but first-class States prefer other markets. Trade follows in the wake of loans. Besides it is very difficult to know what securities should bear this irritating Stamp Duty. If anybody receives direct from abroad foreign bonds as a purchase or security for an advance he need not stamp them. When the advance is paid off and he is ordered to deliver them for safe custody to the foreigners' agent against a mere receipt he need not stamp them; but if the foreigner asks for an advance from his agent or from the former lender, must the bonds be stamped or must they be sent abroad and again sent here to avoid stamping? Our great Colonies do not yet understand the complex system of Stamp Duties. At the beginning of the year New South Wales and Victoria each issued a loan for about a million sterling in the shape of Treasury bills or bonds. They were similar in tenour and wording, except for one word. New South Wales printed "Treasury Bill," and put on a 1s. per cent. Bill Stamp; Victoria for the same security and length of loan printed "bond," and puts on every £100 a 2s. 6d. impressed stamp, a 1s. per cent. affixed Goschen stamp for 1892, and the holder must affix another if he sells in 1893. So New South Wales pays £500 for its loan, while Victoria has to pay £2,250 on a loan of the same amount. It cannot be right that one word should make all this difference. The revenue from the new stamp was estimated, I think, at £200,000; in 1890 it produced £94,600, and in 1891, £73,000, and I believe that the bankers and merchants lose many times that sum by the diversion of trade by the Stamp Duty. If any particular source of revenue shows signs of a decline investigation is necessary in order to show whether the duty imposed is wisely imposed. The revenue from stamps on bills of exchange and promissory notes has been declining for the last seventeen or eighteen years; it has declined almost a quarter of a million. The revenue from the penny receipt stamp has increased. It is difficult to analyse that source of revenue, but certainly increase of productiveness from light duty is an argument in my favour. It is difficult to give the precise reason for a diminished number of bills in circulation in face of increased population and trade. The chief causes must be that floating capital has increased in effectiveness through the development of banking facilities, and that competition has reduced profits and enforced economy in the use of stamp by inducing the substitution of cash payments. There is a continuous tendency to substitute demand drafts or cheques for short-dated bills and ad- vances for long-dated ones. Most countries have followed our example in imposing this tax on trade—the exceptions are the United States, Canada, Norway, and some parts of Switzerland. It may be said that commerce is safer if based on cash payments, but there are certain disadvantages in connection with demand drafts drawn upon this country; they are sometimes presented a day before the letter of advice reaches its destination, and are occasionally dishonoured. Another disadvantage is that these letters containing drafts are sometimes stolen and then cashed before the owner can stop them. In Austria and Holland bills within eight days' date are exempt from any duty. I propose that bill stamps should be reduced to 6d. per £100. If that does not not meet the approval of the Chancellor of the Exchequer I would suggest that the experiment should be tried with short-dated bills not exceeding one month. This reduction would increase the number of short-dated bills which can be more safely transmitted by post than drafts, a month giving ample time to stop them. If that proved satisfactory the duty on all bills might be reduced to 6d. per £100 with profit to the Exchequer and benefit to trade. The number of bills could also be increased about four per cent. by abolishing the three days' grace, which equals 54 per cent. on seventy-five days, about the average length of bills. The increased use of bills would be promoted by bringing our laws into international accord by abolishing the three days' grace, and making bills due on a holiday payable the next day. I also propose that the stamp on bills drawn and payable outside the United Kingdom and negotiated in this country should be reduced to 6d. per £100. At present numbers of these bills are diverted from this country to the Continent to avoid our Stamp Duty, which is higher than elsewhere. In Germany there is no such duty; in Holland they charge 1d. for any amount; in Belgium and France 6d. per £100; here it is 1s. I feel perfectly certain that if these duties were reduced they would produce a larger income, and would restore trade which is being constantly taken from this country. I say the 1s. per cent. transfer, or Goschen, stamp should be abolished in the interests of trade; stamps on foreign bonds should be reduced to 5s.; bill stamps should be reduced to 6d.; at any rate, for those for one month, or less. I have the opinion of the Bank of England and a great discount company that these short-dated bills have almost entirely disappeared, and do not now form one per cent. of the total number. I do not know if the right hon. Gentleman is aware that circular notes are being issued payable on demand to avoid the ad valorem Stamp Duty. The Chancellor of the Exchequer asked me if I could suggest some other Stamp Duty in substitution for the 1s. stamp on bonds. I would suggest that we should imitate our French neighbours and impose a Stamp Duty on bill posters. The duty in France is, according to size, from 6c. to 24c; but those issued for political purposes bear no stamp. In 1890 this duty produced about £115,000, and in 1891 nearly £120,000; they also levy a duty on painted notices, bringing in an addition of about £13,000 per annum. I should think that amount would be exceeded in this country, and I notice that land is often kept unlet because the letting of the hoarding for advertising purposes brings in more than the land would do. It would be well, also, if the Government had some control over these posters. I can assure the Chancellor of the Exchequer that his reputation, which has suffered in the City, would be greatly restored if he got rid of those irritating Stamp Duties, and took measures to restore the trade which they have driven away.

(8.58.) MR. BIGWOOD (Middlesex, Brentford)

Most of us who had the satisfaction of hearing the Budget speech must have been very favourably impressed with the announcement of the right hon. Gentleman that he would endeavour, as far as in him lay, to distribute taxation in the most equal manner. I do not wish to take up the time of the Committee unduly, but I think, without going very far afield to find a case of unjust taxation, I can come near home, and, in the County of Middlesex, find a state of things which is astonishing, and which, I believe, could not have been contemplated when the Local Government Act came into operation. The position is this—that the County of Middlesex is at the present moment paying an undue sum for the number of policemen that are allotted to it. It has been urged, and, I believe, truly urged, that there is no necessity in Middlesex for the large number of policemen that are there—and they are there for the benefit of Londoners, to attend to race meetings, meetings in Trafalgar Square, and gatherings of various kinds and sorts. I have been to some trouble to collect figures relating to this matter, but, perhaps, before I go into them, I had better say that the manner in which those policemen are paid for at the present moment is by a universal 5d. rate in all parishes. I find there is a provision in the 24th Clause of the Local Government Act relating to the substitution of local grants, which says— The Council of each county shall from time to time as from the said day pay out of the county fund and charge to the Exchequer Contribution Account the following sums. That is my position as regards the Treasury. This is a question which has not just recently cropped up. It has been taken before those gentlemen who in this House represent the Local Government Board without any effect. We have been shuttle-cocked, so to speak, from the Home Secretary, who in his turn recommended us to go to the Treasury. In going to the Treasury last year I think I established my case to the Financial Secretary's satisfaction, for he assured me that I had a good case, but that the Treasury had no funds. Very shortly after that, by questions I raised in the House, I think I may take credit for having put the Treasury in a position of funds by pointing out the leakage of Revenue in the operation of "grogging." But the fund so put into the hands of the Treasury seems not to have been applicable to this particular purpose, and I can quite understand that such a fund could not be ear-marked in any way; but on the principle that one good turn deserves another, I trust the right hon. Gentleman in charge of the Treasury Bench will deem it right and worth his while to pay attention to my claim. With regard to the particular portion of the Act which refers to the payment to the Exchequer, it states in Sub-section K of the same clause that— They shall, if within their county sums are raised by rates for the purpose of the Metropolitan Police, pay to the receiver for the Metropolitan Police District in each year a sum bearing such proportion to the sum actually raised in the same year by rates from the parishes in that county for the said purpose as a Secretary of State certifies to be the proportion which would have been contributed out of the Exchequer under the arrangement in force during the financial year next before the passing of this Act. In Clause 27 it specifies that— When a County Council are required under the provisions of this or any other Act to pay any sum into Her Majesty's Exchequer, or to the Treasury, or to the receiver for the Metropolitan Police District, such sum shall be deducted from the amount payable under the provisions of this Act out of the Local Taxaation Account to such County Council, and instead of being paid to the County Council shall be paid into Her Majesty's Exchequer, or to the receiver for the Metropolitan Police District, as the case requires. This is what happens. Last year the Treasury charged the county of Middlesex £53,519, and Middlesex does not quite see that it ought to pay that amount of money, for whether we take population or rateable value, or whether we take the acreage or inhabited houses—whichever test you take you will find that the amount of money paid by Middlesex is altogether in excess of that paid by any other county. I have taken the trouble to get some figures from twelve counties which are similarly related in population to that of Middlesex. If we take population as the test, we shall find that in Middlesex we are paying 4s. 2½d. for our policemen, against 1s. 5d. in the average counties. If we take the rateable value we shall find that we are paying 9d. against 3½d. in other counties, and if we take the acreage of the county, we find we are paying 1s. 6½d. for our policemen against 6¾d. in those other twelve counties.

THE CHAIRMAN (Mr. COURTNEY,) Cornwall, Bodmin

I do not understand how the hon. Gentleman is connecting this discussion with the Budget Resolution.

MR. BIGWOOD

I really want information from the Chancellor of the Exchequer as to whom I am to appeal to. I should like to hear from him whether it is a matter on which I can approach the Treasury—I have tried all the other Departments in vain—or whether I shall be under the necessity of bringing in a Bill for the purpose. I can quite understand it is not to the point; but I think, having given this amount of publicity to the case, possibly the Gentlemen on the Treasury Bench will give me an answer.

(9.7.) MR. HUNTER (Aberdeen, N.)

There is only one point in the speech of the Chancellor of the Exchequer to which I wish to allude for a moment, and that is to what he said on the subject of free education. The right hon. Gentleman stated that he, at all events, was not ashamed of anything in his career as Chancellor of the Exchequer. Mr. Courtney, if it had been possible to bring a blush to the cheek of the right hon. Gentleman it would have been when he referred to the subject of free education. At the end of the year 1888, when he desired to expropriate £250,000 a year of Imperial taxes to the relief of local rates in Scotland, I remember well getting up at three o'clock in the morning, and making a present to the right hon. Gentleman of an idea. I said to him if he wished to make himself the most popular Chancellor of the Exchequer, and the most popular man in Scotland, instead of criminally wasting the money in relief of rates he would apply that money to free education. Well, Sir, on that occasion the right hon. Gentleman treated me, as I no doubt deserved, as a species of uninspired lunatic; and it would have been impossible even to make a start towards free education if on the following day I had not been able to invoke the services of the late Mr. Biggar, and with his aid the Irish Members occupied a large part of the time of this House which might have been mischievously employed in forwarding the business of the Government, till at last—sweet are the uses of obstruction—the right hon. Gentleman was obliged to take his first step towards free education. As we all know, and as was admitted by the First Lord of the Admiralty, the Government had no love for free education. It was, as he graphically put it, extorted from them by the Scotch Members at the point of the bayonet. But my object in referring to that at the present moment is not to go back upon bygones, but to point out that the right hon. Gentleman, when he did make up his mind to give free education to the working men of England, chose a mode of doing so which was least favourable to them, and most onerous to them, and most injurious. If the right hon. Gentleman had desired really to confer a boon upon the working men he would have employed his two millions not in relief of fees, but in reducing the Tea Duties, or even the Tobacco Duties. If he had employed that money in reducing the Tea Duties, he would have conferred a benefit which would have been equally, or almost equally, distributed over all classes of the community, the larger share of which would undoubtedly have fallen to the most numerous class. In order to give distinctness to this conception, I may point out that the sum of money which the Government applied to free education—nearly two millions—would, if it had been applied in the reduction of the Tea Duties, have resulted in a benefit to every family of 6s. 8d. a year.

THE CHAIRMAN

Order, order! This criticism is not pertinent to the Resolution now before the House.

MR. HUNTER

I was only perhaps going a little wide in order to lay the foundation. The policy of the right hon. Gentleman throughout his whole career has been to reduce the taxation of the rich, and especially on property, and not to diminish the exorbitant burdens on the working classes. Our whole system of Imperial finance is ingeniously arranged in such a way that the richer the man the less the percentage of taxation he is called upon to pay, our whole system of taxation being perfectly graduated. A millionaire is not taxed three per cent. of his income; but the poor man, with an income of £50 a year, is taxed nearer thirty per cent. upon his taxable income. The right hon. Gentleman has said that that portion of the community for whom he had had the most genuine compassion were those who had not less than £150 a year; but five-sixths of the population have less than that amount. For the idle rich he has compassion, but for the working man he has no mercy. The right hon. Gentleman's maxim is, "To him that hath shall be given, but from him that hath not shall be taken away the little that he hath."

*(9.13.) MR. LENG (Dundee)

I was very much surprised that the hon. Member for Whitechapel (Mr. Montagu) threw out a suggestion, which was quite contrary to the principle laid down in the early part of his speech, to put a tax upon bill-posters. He forgot that that would, to a large extent, affect a great number in the printing trade, as well as a considerable number of bill-posters. But I did not rise so much to allude to that as to acknowledge the concession made by the Chancellor of the Exchequer with regard to the fees on the renewal of patents. That concession, although somewhat tardily and reluctantly made, is an important one. Under the new scale the fees will be largely reduced during the earlier years of the patent, more especially from the fifth to the tenth year, and on a very simple and ingenious scale which can be easily understood by patentees. The charge for the fifth year will be £5, and for the sixth year £6, increasing £1 a year until the fourteenth year, the last year of the patent. The total charge will now be £99, as against £154 previously, the great benefit being the reduction in the earlier years. I believe that the augmented number of patents which will be taken out will in the next two or three years more than compensate for the reduction in the fees. I would suggest, however, to the right hon. Gentleman the expediency of making a proportional reduction in the fines now imposed upon those who require a slight extension of time for the payment of their renewal fees, so as to make the fines correspond with, the new scale of fees. At present the cost for one month's extension is £3, two months £7, and throe months—the utmost limit—£10. These fines were rigorous enough when the fees were £10, £15, or £20, but they would obviously be out of proportion to the reduced scale of fees. The existing fines were about one-third of the renewal fees, and in the same proportion, under the new scale, the fine for one mouth's delay in payment should not exceed £1, two months £3, and three months £5. Here, again, such an increase in the number of payments is likely to occur as will fully make up for the reduction in the amount of fines. I will not trouble the Committee with figures showing the remarkable increases both in the number and amount of the fines since 1884, which support this contention. The reduction of the fines follows so naturally on the reduction of the fees that I feel assured the Treasury will not hesitate to sanction the smaller as they have now sanctioned the greater change. There should be the less hesitation to deal in a liberal spirit with the whole of our patent system since it may soon come to be seriously affected by a proposal which has been made in the American Congress. General Bearden, himself an inventor, who declared he had suffered greatly from the defects of the Patent Laws in this country and in America, has brought in a Bill applying the principle of reciprocity to patents, so that British patentees may only obtain patents in the United States at the low charge of £7 for fourteen years, if American citizens can obtain patents at the same rate in this country. General Bearden wishes to enforce on this and other European countries the advantages of the American patent system, which, if they are wise, they will adopt without such compulsion. I wish also to say a few words on another subject. The Chancellor of the Exchequer has been lately refusing his assent to useful expenditure, such as an increase of grants to our scientific colleges, on the plea of want of money. I would point out a way by which, without adding a penny to the taxation of the country, the right hon. Gentleman might safely have estimated on a surplus of from a quarter to half a million. I refer to the drawback allowance of 2d. per gallon on all British spirits exported from this country. This allowance, the right hon. Gentleman stated, amounts to £363,000 a year, or nearly £1,000 a day. I fail, from an examination of the Revenue Returns, to see how that sum is made up, and it evidently includes more than the item to which I have referred. I submit that there is no justification whatever for paying this 2d. per gallon out of Imperial Revenue on every gallon of the large quantity of whisky and other spirits exported from this country. Not only do the distillers enjoy this bonus of 2d. per gallon on all they export, but they are further benefited to the extent of 4d. per gallon by the difference of the duty on all spirits imported as against home-manufactured spirits. The former is 10s. 10d. per gallon and the latter only 10s. 6d. There was a time when there was a reason for this excess of charge on importation, but we live in very different times. Antiquated charges of this kind should not be upheld when the occasion for them has passed away.

*(9.28.) MR. MORTON (Peterborough)

I agree with the hon. Gentleman who has just sat down in regard to the Patent Laws. No doubt we may congratulate ourselves that the Chancellor of the Exchequer has given way to the pressure brought to bear upon him last year on this subject. We may thank him for small mercies, but I for one will not be satisfied until the inventors of this country are treated as well as those of the United States. I gathered from the speech of the Chancellor of the Exchequer to-night that he leaves everything to his successors, and that the Tory Party are going out of power at the General Election. I have noticed that when the Chancellor of the Exchequer makes what is considered a telling speech he generally reminds his audience that he has reduced the National Debt by about one hundred millions. Possibly that may be correct, but if he has done so, he has to that extent confiscated the money of the bondholders, and he must not complain if another Government reduces rent in the same measure, because, personally, I see no distinction between the two. Perhaps the Chancellor of the Exchequer was quite right in reducing the rate of interest, although no great virtue attaches to that action. I do complain, however, that the product of his proceeding in that respect has been wasted either on the Army or Navy. We propose to spend during the incoming year a little over ninety millions, and this with local grants and loans will be increased to nearly one hundred and two millions. In my opinion that amount is more than should be expended on the Government of this country, and I believe that the management of affairs would not be less efficient were the sum smaller. The hon. Member for Dundee (Mr. Leng) has remarked that the general answer to requests for grants in aid of scientific purposes is lack of money. That, I notice, is the general answer whenever money is wanted for useful objects in contrast to the treatment of the Army and Navy. The amount we are to spend on these Services during the current year is, I see, thirty-two millions. That appears to me a monstrous sum, and I am persuaded that a great proportion of it goes in the direction of useless incomes and pensions. That remark, of course, does not extend to the pay of soldiers, because I believe the time is coming when their remuneration will have to be increased. What I do protest against is salaries paid to officers and others who give no return in the form of work. There are one or two other matters I should like to refer to in order that information may be offered by the right hon. Gentleman. One of these topics is the House Duty and Property Tax. On several occasions since entering this House I have called attention to the manner of assessment; but so far I have failed to get a definite answer. The probable reply to it will be that the revenue from those sources would be reduced by an alteration of the assessment. That, however, is not a point about which I concern myself, having no objection to increasing the tax generally, if I could thereby remove an injustice. Last year the House Duty was collected on what is called the gross assessment, and the same form of assessment is observed in regard to the Property Tax. Were local and other rates collected on that basis, there would be not so much reason to complain. Parliament, it should be remembered, has declared that the gross assessment is an unfair assessment, and has solemnly declared rateable value to be the fair value; but the Chancellor of the Exchequer still proposes, in regard to the House Duty and Property Tax, to adhere to the gross assessment. Some years ago the right hon. Gentleman told the country that he was in favour of the alteration I desire. I wish to know whether he retains that opinion, and, if so, why he has not during his term of office done something to carry the change into effect. We may be told that this would entail a re-valuation of property in the United Kingdom. But in answer to that I would point out that there is already every fifth year a re-valuation in London, and a proper valuation in all the large cities and towns. I trust, therefore, that the right hon. Gentleman who has assumed this is his last year in office will give his successor the benefit of his opinion on this matter. I also desire to allude to the Income Tax, in order to urge the adoption of a graduated system, and also in order that I may ask the right hon. Gentleman why he has not attempted to alter the incidence of this taxation. My view is that there ought to be a distinction between tax on realised property and upon income, which is naturally precarious, and, as the right hon. Gentleman has not much money to spare, I should have thought he would have turned his attention to this subject. It is said with great truth that the masses of this country are overtaxed and that it is the classes who are relieved. Now, I should like to see the right hon. Gentleman turn his attention to the Income Tax, and give the country the benefit of his views on that matter while he is in office. No doubt, when he is out of office we shall hear fine speeches from him as to what ought to be done, and we shall be reminded that he cannot carry them out because he is out of office; and, therefore, while he is Chancellor of the Exchequer, I should like to hear his views with regard to the matter I have mentioned. I remarked just now that seven or eight millions yearly are handed over to the Local Authorities as grants in aid. Speaking for myself, I may say emphatically that I do not believe in these grants. Money which comes easily to Municipal Bodies is likely to be spent freely and without that care and consideration which would be the case if the money was raised by direct taxation from those ratepayers to whom they are responsible. But considering that these aids are given, I think the right hon. Gentleman would have organised a fairer system of taxation if he had imposed taxes on the ground values. I know it may be said that that would be a tax on the rich, especially on some Dukes and people of that class; but almost everybody admits now that there should be a tax on that kind of property, and that it is very unfair that the occupier should pay the whole of the rates. There is another matter to which I should like to draw attention. I refer to the duties on tea, coffee and cocoa, and those other articles which constitute the free breakfast table. I think the duties on these articles should be abolished, and that they should be placed on luxuries as much as possible. Now, Sir, we make a large profit out of the Post Office. I find that the income is ten and a half millions yearly, and the expenditure six and a half millions, showing a profit of four millions. It seems to me that we should not charge the people of this country any more than what the postal business costs. The State ought not to go into business for the purpose of making money. At any rate, I think there are some ways in which a portion of that four millions of profit could be better spent than on the Army and Navy. For my own part, I should like to see some part of this large profit devoted towards cheapening the Postal Service to the public. Another item to which I should like to refer is the Death Duties. I think it is generally admitted by all Governments, and by everyone who will take the trouble to look into the subject, that the manner in which the Death Duties are collected is very unfair to the people of this country. I want to see the percentage of Death Duties exactly the same on real property as on personal property. I have never heard a reason why Death Duties should be paid on personal property and not on real property, except that it has nearly always been the object of the Govern- ment of this country to relieve the rich at the expense of the poor and middle classes. The people of this country are now taking a much keener interest in these questions than formerly, and when we have put our house in order by giving Home Rule to Ireland, Scotland, Wales, and England, and to London, we shall have time to consider and deal with these important matters.

*MR. MURDOCH (Reading)

The hon. Member for Peterborough (Mr. Morton), whom we are beginning to recognise as the Admirable Crichton of the other side, has proceeded to enlighten us to-night on the subject of finance, but I do not quite know whether we can take him seriously on the subject. The Debate has not been very lively for the last hour, but I fancied that a deeper gloom settled over the Committee when the hon. Member told us that he intended to come back after the General Election. Amongst the things he told us to-night he spoke of the confiscation that has taken place in consequence of the reduction of the National Debt. I should like to know whether the hon. Member considers that confiscation has taken place when a railway or other company which has debentures running at four or five per cent. is enabled, from its improved financial position, to offer its debenture holders the option of either being paid off or remaining at a lower rate of interest. The reduction of the interest on the National Debt was conducted on exactly similar lines. Every holder of Consols knew, or ought to have known, that the Government of the day had the power, by giving one year's notice, either to pay off the holder at par, or to make terms with him for the continuance of the loan. Her Majesty's Government exercised that power offering the holders money to remain at two and three-quarters per cent. interest for fourteen years and two and a half per cent. in future. What confiscation is there in that process? The Government, in the interests of the country, merely carried out what was for the advantage of the country. They did what the Government was bound to do, and what the Government of the right hon. Gentleman the Member for Midlothian (Mr. W. E. Gladstone) attempted to do; and the reason why the scheme of the Member for South Edinburgh (Mr. Childers) was not successful was because it was too complicated and because it did not follow the proper lines. The right hon. Gentleman the Member for Derby (Sir W. Harcourt) also put forward the idea that hardship had been inflicted on the holders of Consols by this Conversion scheme; and he also put forward the idea, which I think is a fallacy, that in consequence of the reduction of the interest upon the funds the holders had been driven into securities such as Argentines and other risky securities. I must say my own experience is that the people who had held Consols did not go into the class of security to which the right hon. Gentleman has referred but invested in the Debenture and Preference Stocks of the first-class railways. I think everyone who has any banking experience will bear me out when I say that the class which went into Argentine, Brazilian, and Costa Rica Bonds, and bonds of that description was not the class who held Consols. It was a class who always look for a high rate of interest, and with that are prepared to take some risk as to the security of the bonds. The right hon. Gentleman must have forgotten that the number of private holders of Consols is comparatively small. Consols are held chiefly by those who are obliged to hold them. They are largely held by bankers in trust, by savings banks and other institutions, who are compelled to invest in these securities. May I ask the Chancellor of the Exchequer in his final reply to say something as to what is being done with regard to the light coinage in this country? I know that provision has been made in this Budget for the calling in of a certain amount of the light gold which is in circulation; but the Chancellor of the Exchequer on two occasions, referring to the issue of one pound notes, has said that one reason for the issue of those notes was that it would enable a quicker calling in of the light gold which is in circulation. Personally, I thought that was one of the best features of the scheme, and I shall be very glad to hear that the Chancellor of the Exchequer hopes to accelerate the calling in of this light gold.

*(10.13.) MR. RATHBONE (Carnarvonshire, Arfon)

A point that is of the very greatest importance in connection with this discussion is the future prosperity of the country. The Chancellor of the Exchequer mentioned amongst his sources of revenue a sum of £50,000 for the new Charter of the Bank. Surely we are entitled to expect that connected with the issue of this new Charter some effort should be made to put the business of the country on a sounder footing. I do not gather from his speech that he has any immediate idea of taking action with that view, and yet all are agreed that the business of the country now rests on a very insufficient and dangerous basis. The right hon. Gentleman himself demonstrated that in a speech which he made in Leeds; and if he fails now, when people are still under the effect of the warning they received two years ago, to deal with this question in an efficient manner I am afraid he will lose his opportunity, and a few years will witness what he has shown will be a great financial disaster. And if he were not supported by the great bankers in his efforts, I think it would argue something approaching almost to madness on their part. In the winter of 1890 you did not meet a man with any pretension to commercial or financial knowledge who was not prepared to consent to very strong measures being taken to put the business of the country on a proper footing. At that time they were prepared to make sacrifices to secure that end, but that, I am afraid, has now worn off, and the feeling is more languid than it was two years ago.

THE CHAIRMAN

Order, order! The point that the hon. Member is raising is outside the present discussion.

*(10.19.) MR. SYDNEY GEDGE (Stockport)

We have been waiting a long time for this debate, and for what may be called the dress attack which was to be made by the Party opposite upon the Chancellor of the Exchequer. There has been a sort of attack all along the line by the hon. Member for Peterborough (Mr. Morton), but he only fired blank cartridge, and there is no necessity whatever for anyone on this side to attempt to repel his attack. But the right hon. Gentleman the Member for Derby (Sir W. Harcourt), who speaks with past experience, and who seems to look forward to coming to this side of the House at an earlier date than we anticipate, made his particular attack on one point, and one point alone. His complaint was of the failure of the present Government, and especially of their Finance Minister, during their five and a half years of office in not having paid off a larger amount of the National Debt than he did, but I hope to be able to show that the present Chancellor of the Exchequer has reduced the National Debt by at least four times as much in the same number of years as was done by right hon. Gentlemen who are now on the other side of the House. Debt can only be paid off in one or two ways—by reducing expenditure or imposing taxation; but the hon. Member for Derby in his voluminous attack forgot to say in which of these ways the Government ought to have done it. The right hon. Gentleman would not like to go to his constituency having suggested fresh taxation to pay off the National Debt, and he did not show any extravagance on the part of the Government. Taxation might have been reduced in three ways, but I suppose no hon. Member on that side will complain of the three millions additional in relief of taxation. Then the three millions increase of expenditure on our Naval Forces has never been challenged. As to the three millions to free education, I do not think hon. Members would like to go to their constituencies saying they preferred that that sum should go to the reduction of the National Debt. But I say that the reduction of Debt by this Government is four times as great as that of their predecessors. In 1880 the total net liabilities of the State were 739½ millions in round figures; in 1886 that had been reduced to 713½ millions—that is a reduction of 26 millions. In 1891 the total had been reduced to 680½ millions—a reduction of 33 mil- lions; so that while the Government of the right hon. Gentleman the Member for Midlothian (Mr. W. E. Gladstone) in six years reduced the Debt by 26 millions, during the five years of this Government it has been reduced by 33 millions. That is not all; the State does not really owe 680 millions to the people, but simply the amount to be paid annually to the annuitants. In 1880 the annual charge was a little over 22 millions, and in 1886 a little over 21 millions, a reduction of £781,000 only; but in 1891 I find it has been reduced by £2,318,650, which is more than three times as much. Capitalised at 33⅓ years' purchase £781,000 is equivalent to £25,700,000, while the £2,318,650 is equivalent to over seventy-seven millions. Beyond this, in the arrangement for the reduction of the interest on the Funded Debt, there is a provision that in eleven years there is to be a further reduction of ¾ per cent., and the present value of that reduction is no less than £28,800,000. Adding that to the £77,200,000 we get a total of £106,000,000 reduction due to the action of the present Government. When we give these figures it is useless to say that higher taxation should have been imposed, or that useful expenditure should not have been incurred so that the theoretical annual amount set aside for the Debt might have been retained. For these reasons I shall support the Government in the Budget Resolutions.

(10.22.) MR. PICTON (Leicester)

Some hon. Gentlemen opposite appeared to assume that approval of the conversion of the National Debt by the Chancellor of the Exchequer was confined to that side of the House. The right hon. Member for Derby (Sir W. Harcourt) distinctly expressed approval of the conversion, and congratulated the right hon. Gentleman on his success in carrying it out. All the criticisms have been limited to matters of detail in the carrying out process, and not to the principle. The hon. Member for Peterborough (Mr. Morton) expressed strong disapproval of the plunder of the Fund holders as he said, but I regret that anyone should so speak of a very just application of the great credit of this country to a reduction of this annual obligation. The immediate Resolution before the Committee is that dealing with the duty on tea, in which I take a somewhat greater interest. That practically unites with the question of grants in aid of the rates. If I asked the Chancellor of the Exchequer to repeal the 4d. duty on tea he would say, "It is impossible; I have not the money to do it." But he has taken about four millions out of Imperial taxation to relieve the rates. If he had not done that he would have had ample to extinguish the Tea Duty, which only amounts to about three and a half millions. He says this has conferred great benefit on the ratepayers;—yes, upon certain classes, but not upon the larger number. Five-sixths of the ratepayers would be putting money into their pockets if the duty were taken off and the grant in aid taken away. We are told that in 1889 the annual consumption of tea was about 5lbs. a head. Then the average family would not be over supplied with 12lbs. of tea in the year. What is the average rating of a poor man's house? Throughout the whole country the average rating of the workingmen's and artizans' houses is £7 10s. It is impossible to tell how much the grant in aid has reduced the rate on that. But even assuming it has reduced the rate by as much as a halfpenny or penny in the pound it is a greater disadvantage to the poor ratepayer to have to pay four-pence on each pound of tea than to pay halfpenny or penny in the pound on his house. Suppose in one place the grant in aid reduces the rate halfpenny in the pound, a poor man living in a cottage rated at £7 10s. gets relief to the extent of 3¾d. On his tea he has to pay 4d. on the pound, and that on 12lbs. makes 4s., so that he loses by the transaction made for him by the Chancellor of the Exchequer 3s. 8d. By the grant in aid he saves 20s. a year; and he only pays the same duty on his tea. On twelve pounds of tea he pays 4s. in the year. By the transaction he gains, instead of losing, the difference between 4s. and 10s.; in other words, he makes a profit of 6s. I do maintain that by these poor small ratepayers being charged 4s. a year on the average to enable the Chancellor of the Exchequer to relieve the rates they suffer a very considerable loss. That is not the only evil effect of applying Imperial taxation in aid of rates; but I am indisposed to pursue that subject any further, as I desire to confine myself at the present time to this particular instance of needless taxation, that is the duty on tea; and I do most earnestly contend that by the imposition of this tax—for it practically amounts to that—upon an article of necessary consumption, he causes a very great loss and inflicts a very great injustice upon the poor, who are, I suppose, about five-sixths of the population. I do not think that this is the best time to take a Division, and I do not desire to urge the matter further. At the present moment I only desire to raise some protest—and I think we are bound to continue our protest—against what I consider a very unjust mode of taxation.

*(10.40.) MR. H. H. FOWLER (Wolverhampton, E.)

The closing remarks of the right hon. Gentleman the Chancellor of the Exchequer and also the remarks of the hon. Member for Reading (Mr. Murdoch), with reference to the failure of my right hon. Friend the Member for South Edinburgh (Mr. Childers) to carry out his Conversion Scheme, render it necessary that one should make one or two remarks with regard to that Scheme, and with regard to the difference between it and the scheme which the present Chancellor of the Exchequer has carried out in such a successful manner. My right hon. Friend the Member for South Edinburgh proposed a scheme for the conversion of a portion of the National Debt at a time when things were somewhat different from what they were when the present Chancellor of the Exchequer made his proposal. When my right hon. Friend the Member for South Edinburgh made his proposal Consols stood, I believe, at 103; and I think when the present Chancellor of the Exchequer made his proposal they were only a little over 101. Therefore, my right hon. Friend the Member for South Edinburgh was justified in endeavouring to obtain for the Public Purse the full advantage of the Money Market of the day.

MR. MURDOCH

I think what I said was that where the proposal of the right hon. Gentleman the Member for South Edinburgh erred was in consequence of options. If the right hon. Gentleman recollects, there were certain options that were to be converted into Consols.

*MR. H. H. FOWLER

I am not just now discussing the question of where my right hon. Friend erred. What I want to do exactly is to make it clear to the Committee what was the position when he proposed his Conversion Scheme. The Money Market was more favourable then than it was in 1888. The terms which my right hon. Friend the Member for South Edinburgh offered were much more favourable to the fundholder than those offered by the Chancellor of the Exchequer. There were some other peculiarities about that scheme. My right hon. Friend the Member for South Edinburgh was not allowed by the Parliament of that day in any way to deal with trust funds under the control of the Court or the Government, or even with private trusts, without the consent of the cestui que trust. I remember when the late Leader of the House (Mr. W. H. Smith) came down and strongly supported another late Member of the House, Mr. Gregory, when the proposal was carried that there should be no dealings whatever made with Trust Fund Consols except with the consent of the parties interested, and that there should be no conversion of funds under the control of the Court without a number of safeguards conceived in the interests of the fund-holder, which practically gave him an opportunity of expressing his own opinion; and there was no man who was more strongly in favour of that view than the late lamented Leader of the House. The Act of Parliament under which the present scheme was carried out materially differed from that. By the Act under which the scheme now in operation was carried out, the cestui que trust was not bound to give his assent at all—a provision was inserted very adroitly. I often wondered how it was done, and by whom it was done. When the Bill was introduced there were certain provisions inserted in order that the persons interested in the fund might have an opportunity of being heard, and that a trustee should not have power to consent to Conversion without the consent of those for whom he acted; but some words were inserted in the earlier clauses to the effect that accepting new Stock should not be treated as a change in an investment, and would not, therefore, require the consent of those parties whose consent would otherwise be required, and subsequent clauses dealing with consent were quietly dropped. Therefore, practically this Conversion was carried out without the consent of the parties really interested. There were 100 millions of Consols under the control of the Government and the Court, practically, where no consent was required; and, therefore, there was an enormous difference between that operation and the operation proposed by my right hon. Friend the Member for South Edinburgh. But I could tell the hon. Member for Reading another distinction. He said my right hon. Friend the Member for South Edinburgh erred. He did err; but in what did he err? He did not offer any commission to the banker. That was the essential difference between the two schemes.

MR. GOSCHEN

And solicitors.

*MR. H. H. FOWLER

And solicitors, and brokers, if you like. I can give an illustration of the erring of my right hon. Friend the Member for South Edinburgh. My right hon. Friend told me that when he proposed his scheme certain lady friends of his, who were holders of Consols, consulted their bankers as to accepting the Conversion; and the bankers wrote to them telling them on no account to consent to the Conversion—that it would be disastrous to their interests, and that they must at once dissent; and the ladies did dissent, and they did not convert. But when the scheme of the right hon. Gentleman, which was much less favourable to these ladies, came in force, the same bankers wrote to the same ladies urging them to accept the Conversion, and they accepted it. As my right hon. Friend the Member for Derby said, there are two sides to this question. We all admit, no doubt, that the Government of this country ought not to pay one shilling or one penny more interest than the market value of its credit requires; and any Chancellor of the Exchequer who would not take the opportunity of reducing the interest on the National Debt when that interest stood higher than the current interest of the day on similar securities would be neglecting his duty. The Chancellor of the Exchequer has frankly told us to-night what his own belief was at the time he offered his Conversion Scheme to the House. He believed the new Stock would stand at par. He did not believe that that Stock would go down to 95. If he did, that was practically confiscation; that was taking away by force of law and by force of Parliament without consent from the capital value of the property of a most helpless class of people. The difficulty of dealing with property of this sort is that you cannot always prognosticate the amount of its value. My right hon. Friend the Member for Derby has called attention to the effect this transaction had upon the general investment values in the country. What, I take it, my right hon. Friend meant by what he said was that the effect of the operation of reducing the rate of interest on large masses of trust funds was to take them out of the funds and put them into what are called the "gilt edge" securities, the higher class of Debenture Stock, and other Stocks of that description; and that it threw into that sort of investment a large sum of money which was previously held in Consols, and which, invested in that sort of investment, would bring three per cent. The people who held the "gilt-edge" securities, finding them advancing, sold out, and these were the people who subsequently invested in the purchase of the speculative securities to which reference has been made. My own impression is that there was a great dislocation in the investments in the Stock Exchange. The hon. Member says that bankers were the principal holders of Consols, and the Chancellor of the Exchequer said, "What did the bankers think?" We all know that bankers for the last twelve months make it a point to say that they have written down the value of their Consols to 90, which practically amounts to this—that they anticipate that there will be a reduction in the value of their property when a substantial reduction of interest, from two and three-quarters to two and a-half, takes place. I am aware that it has been said that in consequence of the Chancellor of the Exchequer's transaction Consols are rising in value, and are now touching 98. But this is the month of May and I have a very strong impression that the National Debt Commissioners, are buying largely in Consols at the present moment, and that the present rise in the price of Consols is owing very much to the investments made on behalf of the public with public money. [An hon. MEMBER: Government money.] Well, Government money—that is the same thing. I should now like to say a few words upon one or two points to which the Chancellor of the Exchequer alluded in his speech; and the first that I would mention is that section of his remarks which related to the remission of taxes. The right hon. Gentleman justified his action upon the whole question of the remission of taxes by reference especially to the Income Tax. I have gone very carefully into the question of the taxes which have been remitted or imposed by the Chancellor of the Exchequer during the period of five years upon which he has challenged our criticisms to-night. I will say nothing at the present moment about the allocation to local purposes—I will deal with that separately, and will take now simply the reduction and imposition of Imperial taxes. The Chancellor of the Exchequer has reduced the Income Tax by £4,000,000. I am not going to say anything just now about what are called the wealthy classes, and about the classes that are not wealthy; but there is a great line of distinction between the people who get their living by weekly wages and the people who pay a higher rate of taxation in the shape of Income Tax and the other taxes similar to it. Now, I find that the Chancellor of the Exchequer has imposed upon property — he will know the sense in which I am using the word "property"—increased Stamp Duties, increased duties upon Debenture Stock and upon wine; he has increased the Succession Duty and the Estate Duty. This new taxation I put at something over £2,000,000 per annum.

MR. GOSCHEN

More than that.

*MR. H. H. FOWLER

I make it £2,177,000. It is probably realising more now. Therefore I should say that the advantage which the Income Tax-paying class is receiving is £2,000,000. What has been the advantage of the class that is not Income Tax-paying? The Chancellor of the Exchequer has taken off three great duties—at least, two great duties and one very little one—the Currant Duty is hardly worth counting; I think it is something like £200,000 a year. He has taken off upwards of a million of the Tea Duty, and he claims—and my right hon. Friend the Member for Derby (Sir W. Harcourt) conceded, what I am not prepared to concede—that he has taken off a certain amount of the Tobacco Duty. That remission was no boon in any shape or form to the consumer. When Sir Stafford Northcote put on that 4d. in the pound he said that it would add to the price of tobacco one farthing an ounce—that whereas tobacco was selling at 3d. an ounce, it would sell at 3¼d. an ounce, and that, therefore, the consumer would pay the duty. When the Chancellor of the Exchequer came to deal with that he most frankly admitted that that had not been the case, and that the price of tobacco had not been raised one fraction. Tobacco, in fact, was, has been, and is 3d. an ounce. I admit that the addition was a tax on the manufacturers, of which the large manufacturers bitterly complained, and no doubt they recouped themselves, possibly by an increased amount of moisture in the tobacco. I remember one of the largest tobacco manufacturers in England stating to me, after the Chancellor of the Exchequer brought in his Budget—he did not follow the right hon. Gentleman in politics—"I am not going to complain of it, for the taking off of the duty will bring thousands into my pocket." Therefore I do not include the Tobacco Duty in the taxes which have been reduced for the benefit of the working classes; and although my right hon. Friend (Sir W. Harcourt) put the relief which the working classes have received at something like £2,000,000, I prefer to put it at something like £1,250,000. And, so far as the Revenue is concerned, there has been no reduction on that ground. That being so, the million and a quarter having been taken off the same class, the reduction of the Tea Duty is not £1,500,000. I have got it here, though I do not know whether we are to believe these Government statistics now-a-days. It says here, "Tea Duty, result in a complete year."

MR. GOSCHEN

What is the date?

*MR. H. H. FOWLER

The last Statistical Abstract.

MR. GOSCHEN

What is the date of the statistical year?

*MR. H. H. FOWLER

1891.

MR. GOSCHEN

That is the year 1889–90.

*MR. H. H. FOWLER

I beg the right hon. Gentleman's pardon. I have got the receipt here for 1891, when the Tea Duty was £3,412,000; the receipt, when the tax was not taken off, was £4,629,000, and therefore it is not £1,500,000. I suppose the Government accounts must be abandoned as not being correct. I only wish the Treasury would give us something that can be relied upon. I will take, then, the Chancellor of the Exchequer's own figures. Admit that it is £1,500,000, although the Revenue has not been reduced to anything like that amount, still you have imposed—I admit rightly imposed—a duty upon spirits and upon beer, which is practically equivalent to what has been taken off. So far as the consuming classes are concerned, they are neither better nor worse off by the fiscal legislation of the Chancellor of the Exchequer. What he has taken off on the one side he has put on on the other. I think it is a very great improvement—it is better to tax beer and spirits than to tax tea. But out of the enormous sums which have been placed at his disposal in the last few years this is the practical effect, So far as the reduction of taxation is concerned. He gives the Income Taxpayer £2,000,000; he has not given any other class any appreciable figure at all. He says—"Is it no relief to take the Income Tax off?" It is an enormous relief. I quite admit, with the Chancellor of the Exchequer, that the lower class of the middle class, the people who are just struggling up, are very heavily taxed. I believe they are the heaviest, taxed people in this Kingdom, but the way to relieve them is to graduate the Income Tax, and not to relieve those enormous incomes and those enormous properties upon which the bulk of the taxes are raised, and we are not pressing very strongly when, we urge that that is not the proper mode of dealing with it. We come, then, to the question—in connection with that—of the sum which the Chancellor of the Exchequer has apportionted to local taxation. There is great difficulty in finding out what that sum is.

MR. GOSCHEN

Not at all.

*MR. H. H. FOWLER

The Chancellor of the Exchequer says "Not at all." Well, then, am I right in saying that the amount is £7,500,000?

MR. GOSCHEN

Approximately.

*MR. H. H. FOWLER

£7,600,000 has been appropriated for the purposes of local taxation, although about £3,000,000 of a previous grant has been discontinued. Therefore, the increase represents £4,500,000. We have had some considerable discussion as to who bears the burden of these rates. I frankly confess that I am a disciple of the Chancellor of the Exchequer upon that point. I have read his book, his Report, and I have read the very able document he drew up in 1871, and I believe no writer on political economy has more accurately and more fairly described the incidence of taxation as between owner and occupier than the Chancellor of the Exchequer did twenty years ago. The impression he left on my mind was this: that in rural districts, in the rating of farms as apart from house property—that which was expressed very concisely the other night by the President of the Board of Agriculture—the rates upon farms were ultimately paid by the owner of the farm. As rates went up rent went down. In towns I would hold the contrary opinion. I believe that the competition for house property, and other circumstances which the Chancellor of the Exchequer mentioned in his book, show practically what he has said tonight: that the onus, the burden, of the rate in the town is paid by the occupier; and, therefore, while I, of course, would not contend that four millions in these circumstances in aid of local taxation is absorbed by the owner, the question I would ask is how much of this seven and a half millions—of which four millions only is additional—has gone to the town and how much to the rural localities? One of the great grounds of complaint that we have against the Chancellor of the Exchequer, and against the system of finance of the present Government is that that enormous subvention was granted on unsound and unfair principles. The Chancellor of the Exchequer says—"Will you go to Liverpool, or to Glasgow, or to Birmingham, or Leeds, and ask them to give up their subvention in aid of rates?" No; but what they want is to have their fair share of that subvention which they do not get now. I have got here the Report of the Local Taxation Committee—a Committee chiefly of landed proprietors. How do they apportion this seven millions? About half of this subvention goes to the counties, one-fourth goes to London, and one-fourth goes to the other boroughs of England. To appreciate the full force of that allocation, you have got to remember that the entire rateable value of this Kingdom is one hundred and fifty millions, that ninety millions represents the rateable value of the counties, thirty millions the rateable value of the boroughs, and thirty millions the rateable value of the Metropolis. Well, then, you have got the property which is rated at ninety millions, which is paying a much less rate than is paid by either the Metropolis or the boroughs, receiving more than one-half of the contribution. In connection with that, there is the point raised just now by the hon. Member for Leicester (Mr. Picton)—namely, as to the respective share which the different classes of ratepayers receive when Imperial Funds are spent in relief of local taxation. Now, I am going to quote a speech delivered in this House by a very able man a good many years ago. He says— What I have now to ask hon. Members to consider is the effect which these grants in aid of local rates have had on the incidence of Imperial taxation. I find that Professor Leone Levi estimates that the working classes contribute one-sixth to local rates, and the upper and middle classes five-sixths. This estimate was adopted by Mr. Gladstone when addressing this House in 1873. On the same occasion Lord Beaconsfield took the proportions of one-fifth and four-fifths. I am content to take Lord Beaconsfield's estimate, and, if it is a fair one, it follows that the working classes have been relieved to the extent of so much [and he gives the figures], and the upper and middle class so much. What I wish to call attention to is this: that just in proportion as you make grants from the Imperial Exchequer in aid of local rates, you relieve the middle and upper classes to the extent of four-fifths, and the working classes to the extent of one-fifth. If you take a sovereign out of the Imperial Funds—which sovereign I shall be prepared to argue is contributed equally between the upper and the lower classes—and apply it in aid of local rates, the working man will be paying ten shillings and receiving only three and fourpence. Therefore there is another injustice in this transfer. Those who pay rates and those who pay taxes are two entirely different bodies. In his Budget speech of 1887, the Chancellor of the Exchequer fixed the expenditure of the country at £90,000,000 per annum. The expenditure this year, according to the present Budget, is £97,500,000. To this sum we have to add £3,000,000 as the difference in the amount of the Sinking Fund; the large difference occasioned by the new method of dealing with the accounts, and the difference caused by the gross expenditure being now converted into a net expenditure. That cannot be put at less than £1,500,000, and therefore we have practically an increase in five years of not much less than £10,000,000 sterling. That is the salient feature of the finance of the Chancellor of the Exchequer. My right hon. Friend the Member for Derby (Sir W. Harcourt) pointed out to the House the very exceptional seasons of prosperity with which the Chancellor of the Exchequer has been favoured. I would like to point out that the right hon. Gentleman has had at his disposal such funds as probably no other Chancellor of the Exchequer would have again under such circumstances. The increased production of the Income Tax has actually disposed of one-half of the reduction which the Chancellor of the Exchequer has made in it. Last year the Post Office produced £1,000,000 more revenue than it did in the year when the Chancellor of the Exchequer took office. In 1886 the Drink Duty produced under £26,750,000, but last year it produced £31,250,000. Stamps in 1886 produced £11,780,000, and last year they produced nearly £16,000,000. In whichever way we look at the financial position we find an enormous increase in the Revenue. The Chancellor of the Exchequer has imposed additional taxation for additional purposes, and the result has been the granting of free education. I do not detract from the credit which the Government have in passing that measure, but in addition to these enormous contributions to local taxation, the right hon. Gentleman has increased the Military and Naval Expenditure of the country by something like £4,000,000. I do not think that this is a financial result of which, during all these years, the Government have any reason to be proud. The right hon. Gentleman said that there was nothing he was more satisfied with in his expenditure than the enormous increase in the Naval and Military Expenditure. There is something to be said for that view if hon. Members are satisfied that they are getting their money's worth for the expenditure. When the First Lord of the Treasury can find a night to discuss the Report of Lord Wantage's Committee, the House will probably be told that our Army is a delusion and a snare. It has been said that the expenditure on the Navy has not been challenged by the Opposition. I think it is one of the happiest features of Parliamentary Government in this country that there is no instance in which a Minister of the Crown has come to Parliament, and on his responsibility asked for a grant of money for the defence of the country, which has been refused. We have, of course, aright to criticise, and we divided on the Naval Defence Act.

MR. GOSCHEN

On the method.

*MR. H. H. FOWLER

No; on the principle of it—on the principle of depriving the House of Commons of the sole and uncontrolled right of expenditure, and on the association of the House of Lords with the finances of the country. The Chancellor of the Exchequer said that he had a surplus. With great respect I say to the right hon. Gentleman that he has not a surplus. I do not refer to the borrowed money, but on his own figures the Chancellor of the Exchequer has not a real surplus. It seems to me that the debate has left untouched the contention of my right hon. Friend the Member for Derby (Sir W. Harcourt) that in a time of unexampled prosperity the Chancellor of the Exchequer has not paid off the amount of Debt which the country had a right to expect would have been paid off, and that he has made large and lavish grants for the purposes of local taxation. The right hon. Gentleman wants a quotation from the Economist. I should, therefore, like to call the Chancellor of the Exchequer's attention to the following passage, which is taken from the Economist of 29th February of this year.:— The essential unsoundness of Mr. Goschen's scheme of local finance becomes more apparent with every new development of it. The effect of the system instead of being to foster economy is to encourage extravagance. The money which really comes out of the pockets of the people is made to appear as a lucky find, which, as it has come easily, may be suffered to go easily. No one who has had any familiarity with the working of our system of local administration and local expenditure will dispute the soundness of the axiom that if we want true economy the body who spends the money should be the body who raises it. The Chancellor of the Exchequer, however, has made lavish grants which are not being economically or fairly distributed. We complain also that, in the remissions of taxation which the right hon. Gentleman has been enabled to make through the enormous increase in the Revenue during the last few years, he has not dealt with one or two taxes which press heavily on the working classes. The right hon. Gentleman has not availed himself of the opportunity to afford relief in that direction, and he has left untouched the injustice of the Death Duties, the mode in which they are assessed, levied, and paid. Whether it be his fate or that of any one else to deal with the finances of this country in the next Parliament, he may depend upon it that, whether the Conservative Party or the Liberal Party are in power, the country will insist that the injustice of the Death Duties shall be promptly, vigorously, and fairly dealt with.

*MR. GOSCHEN

I will endeavour in the first place to clear up one point about which there is not much to be said. The right hon. Gentleman the Member for Wolverhampton has made some remarks with regard to the Conversion of Consols which I think are rather unfair to the great bodies of bankers and solicitors to whom he referred. I think it was unworthy of the right hon. Gentleman to suggest that the bankers and solicitors gave those who consulted them advice, in the soundness of which they did not themselves believe, for the sake of obtaining the 1s. 6d. per cent. which was allowed them in respect of these Conversion transactions. I do not know what view the right hon. Gentleman takes with regard to the honour of the profession to which he belongs; but I hold too high an opinion of the solicitors of this country to believe that they would wrongfully advise their clients for the sake of the small amount they were to receive. The right hon. Gentleman quoted a particular story which was related to the right hon. Member for South Edinburgh (Mr. Childers), but does he realise this? Is it not fair to bear in mind that the bankers themselves, holding millions and millions of Consols, accepted the Conversion just as they recommended their clients to accept it. Therefore, to suggest that bankers and solicitors really gave improper or hired advice, if I may say so, to their clients, is taking a view of the character of two great bodies in this country which I am sure they do not deserve, and which few hon. Members in political discussion would like to impute. The right hon. Gentleman also suggests that bankers write down their Consols to 90, in anticipation of the reduction of interest, from 2¾ to 2½ per cent.; and, therefore, he suggested that this valuation is in accordance with the estimate bankers make of the future of Consols.

MR. H. H. FOWLER

I said, as a fact, they had written them down. You can put what construction you like upon that.

*MR. GOSCHEN

The right hon. Gentleman put that construction upon it. He does not seem to be aware that the price of Two and a Half per Cents. is now 96. To suggest that, because they expect the present Two and Three-quarter per Cents. to fall to Two and a Half per Cents., they should on that account write them down to 90, seems to me an argument due to carelessness or want of thought on the part of the right hon. Gentleman. It is quite possible that bankers may write down the value of Consols to a little under their real value, as they do that of other securities, so as to have a margin. But I can assure the right hon. Gentleman that bankers would take other means of dealing with Consols than writing them down if they believed they were going to descend to 90. I think they would rather sell out at 96 than write them down to 90. The right hon. Gentleman called the fund-holders a helpless class, but I scarcely think that it is a term which it is necessary to apply to them. The next point touched by the right hon. Gentleman was of a more serious character. He alluded to the remission of taxation and contrasted the remission in the case of different classes. What I wish the Committee to remember is that the 2d., which I had taken off, had been placed upon the Income Tax payers in 1885–86 for a special reason. It was put on at a time when there were special financial exigencies. That purpose being satisfied, the Income Tax payers were entitled to have it removed again. I think, under the circumstances, the right hon. Gentleman himself would have taken the course I adopted, and would have thought that in this case there was a primary claim to remission. The right hon. Gentleman, however, seems to think that, instead of reducing the Income Tax, we ought to have reduced the tea and other duties. I wonder in what school of finance the right hon. Gentleman has been educated, because I remember that in the time of the right hon. Gentleman the Member for Midlothian (Mr. W. E. Gladstone) he did not propose during the whole period of office to reduce the Tea Duty. He proposed to sweep Income Tax away altogether, while leaving the Tea Duty not at 4d. as it is now, but at 6d. It has remained for a Unionist Government for the first time during the last twenty years to make an effort in the reduction of the tax on consumable articles, and yet we have such speeches as those delivered by the right hon. Gentleman the Member for Derby (Sir W. Harcourt) and the right hon. Gentleman the Member for Wolverhampton (Mr. H. H. Fowler), because we do not deal more distinctly with these particular classes. The right hon. Gentleman has argued that the amount of loss to the Revenue must be precisely the same as the amount of relief to the taxpayer, but he forgets to take into account that which all financiers consider—namely, the increase of Revenue which is due to increased consumption when duties are taken off. Therefore, how I calculate my million and a half of relief is this: I take the amount of tea consumed at sixpence and the same amount consumed at fourpence; and as that gives a difference of more than a million and a half, I say that the taxpayer is relieved by that amount. The Revenue has not lost so much owing to the increased consumption. I hope the right hon. Gentleman will do me the justice to say that this is a reasonable explanation, and that it is one which does not entail the rejection of the Statistical Abstract, as he suggests must be the case. Then the right hon. Gentleman says that he will not give any credit for taking off this £600,000 from the Tobacco Duty, because the price remains the same. I explained at the time—I thought, at all events, it was perfectly well-known—that through the watering clauses the ounce contains more tobacco and less water than it used to do, and therefore that the workman does get for the same sum a larger quantity of smoking material than he got before. I can show the right hon. Gentleman great inconsistency in his mode of calculation. When he comes to the Beer Duty, he treats the increase as a burden on the masses; and when he speaks of the £600,000 taken off from the Tobacco Duty, he says that is merely relief to the manufacturer. But beer stands in precisely the same position as tobacco. I do not believe the price of beer has changed. The prices are the same. What I do claim is that both should be treated on the same footing. Either let it be said, in taking off these duties, that both fall upon the wholesale dealer, or let them both be treated as belonging to the working classes. Do not let the right hon. Gentleman say in one case that it is relief of the tobacco manufacturer, and in the other that the burden is placed upon the people. I, myself, think that the simplest way to deal with the matter is to say that, by reducing duties on consumable articles, you are taking it off the consumer. I therefore get a million and a half for tea, £600,000 for tobacco, and I think the right hon. Gentleman must also give me the Inhabited House Duty, considering that the reduction began at a rate which would distinctly affect what I may call the poorest middle class, or the upper portion of the artizans. It has been a very considerable relief to a class which I believe deserve it. Then we come to the most disputed item, the relief given to local taxation, upon which I have joined issue with the right hon. Gentleman before, and probably shall have to join issue with him again. He has taken no notice, and no speaker in this discussion has taken notice, of the fact that this is not merely a question of relief of expenditure—it is also a question of better municipal government. I alluded to this in my speech in reply to the right hon. Gentleman the Member for Derby, but the right hon. Gentleman (Mr. H. H. Fowler) has taken no notice of the point. What I claim is this—and I state it as an absolute fact not to be disputed—that at present a much larger amount of the rates is spent upon what I may call social legislation, that there is a large amount which does not go into anybody's pocket as relief, but is current expenditure. Now I am sorry to see the right hon. Gentleman showed no sympathy of any kind with this expenditure from the rates. He did not enter into—he did not condemn, but he did not enter into—the great and beneficial expenditure from the rates to the advantage of the working classes. He dealt with figures to show that the relief to the working classes is one-fifth and to other classes four-fifths; but does he not know how large a proportion of the expenditure from the rates is directly for the advantage of the masses of the community through Free Libraries, the provision of open spaces, and in other ways? I have spoken of this before—this additional source of revenue is largely spent for the benefit of the masses of the community. Am I to assume that the cost of this social legislation which is offered, and with which I have every sympathy, for the benefit of the masses in large towns and for the beautifying of those towns, is to come from realty only, and that personalty is not to contribute a single shilling? The right hon. Gentleman is very fair in his description of who are the gainers by this relief of local taxation in towns; he admits that it goes to the occupiers, and therefore the whole talk about this money going to the landlords is mere "bunkum," and merely used for rhetorical purposes. But in the country the right hon. Gentleman says rents will be raised. Yes, if the value of land is rising. If I remember the words used, they were, "the pull will be with landlords when agriculture is prosperous," but the landlords will not get any relief in higher rents if agri- culture is not prosperous; they will not be able to raise their rents in consequence of any increase in the relief to the rates; and, meantime, the great bulk as at present will go to the advantage of occupiers. The right hon. Gentleman spoke of the Income Tax and Death Duties, and censured me for not dealing with them. As to a graduated Income Tax, I say again the right hon. Gentleman belongs to a new school, because when it was suggested on this side of the House that some changes should be made in the Income Tax, the right hon. Gentleman the Member for Midlothian said across the Table it would take a century to re-organise the Income Tax. This is not the occasion for the redistribution of the Income Tax. I doubt whether a Session would be sufficient for the purpose. It may be that a time will come when a Session can be given to the discussion; but certainly we could not undertake such a task in the present Session. Now, I think I have dealt with the main points raised by the right hon. Gentleman, except one—that is, the reference to our increased expenditure. I do not understand that there is any of our increased expenditure to which he objects, except our local subventions and our military and naval expenditure. Therefore, the whole controversy turns on this: Have we spent too much on the Army and Navy, and have we been right or wrong in our subventions to Local Authorities? I believe that we have been thoroughly right in our municipal finance; and, as regards our expenditure on the Army and Navy, I say it has never been seriously questioned in the House. The form of it has been criticised, the principle of the control of the House being exercised has been questioned, but the fact of the expenditure being necessary has never been questioned. The expenditure upon free education has not been questioned; the increase in Post Office expenditure has not been questioned; and I say again, as I said earlier in the evening, our expenditure has practically not been challenged in detail or in principle during the course of five or six years. Our expenditure has increased, but I say we have justified it by argument in this House and in the country. Now, there are several hon. Gentlemen whom I have to answer on minor points. The hon. Member for Reading (Mr. Murdoch) has asked me whether the withdrawal of light gold might be accelerated by the introduction of one pound notes. Practically there is no need for taking any measures to accelerate the process, because the Bank of England is prepared to take light gold as fast as bankers are prepared to send it in. We are anxious that the banks should send it in rapidly, as they did in the case of the pre-Victorian gold. Then the hon. Member for Dundee (Mr. Leng) asked me a question in regard to what he called the "bonus" to exporters of British spirit in the shape of the drawback of twopence. I can assure the hon. Gentleman that if he will consult the British distillers in Dundee, if he has an interview with them, I shall be very much surprised if they do not convince him that the twopence fixed some time ago is an entirely legitimate drawback. They claim more—they claim that they are at a disadvantage because the drawback is not greater than twopence; but I have looked into the matter and am satisfied that it would be quite impossible to save the Revenue in the manner suggested by the hon. Gentleman. I am precluded by the Rules of Order from dealing with two subjects raised, but perhaps I may be allowed to just allude to the complaint of the hon. Member for Middlesex (Mr. Bigwood) by saying that it is a matter of local government—the question of the Middlesex police force. Then as to the question of what my hon. Friend the Member for Carnarvon (Mr. Rathbone) calls the new Charter for the Bank of England, perhaps I may be allowed to correct the phrase. There is to be no new Charter, only a fresh agreement with regard to the management of the Debt, the interest on the Debt due by the Government to the Bank, and some other minor matters. The Bill I shall have the honour to introduce will not raise any questions of issue or disturb the relations between the Bank and the State. The hon. Member for Leicester (Mr. Picton) spoke of the Tea Duties and partly anticipated my reply, and I shall be prepared to meet him on another occasion if that is necessary. I must correct one error into which the hon. Member has fallen in thinking that the relief to local taxation does not exceed a half-penny or penny in the pound. In some localities the relief will amount to sixpence, and on an average the relief will be threepence in the pound all over the country. He much underrates the relief which will be given to the poorest ratepayer. Only one other matter remains with which I did not deal in my reply to the right hon. Gentleman the Member for Derby. Last year his figures were not answered immediately, and they were quoted afterwards in the country. I wish to be allowed to state shortly the reduction of national liabilities during the past six years in order to correct the misstatements persistently made. I will take the figures for the last six years and will compare them with the previous six years. In the years from 1880–1 to 1885–6 the reduction of net liabilities was £28,400,000, while in the six years 1886–7 to 1891–2 the reduction of net liabilities has been £38,823,000, showing a difference of £10,423,000 to the advantage of the present Government. These are absolute facts, and I warn hon. Members with regard to all these calculations as to the amount of reductions of Debt, that it is a favourite method with our opponents in dealing with the figures to include, sometimes unintentionally—sometimes carelessly—I hope not with any motive, items which are simply realisations of assets, thereby making the country poorer on one side while paying off Debt on the other. It is by the sweeping up of the money paid in as capital and then paid out as reduction of Debt that the error is made, but the error disappears when you compare the net liabilities at the end of two periods. Let this be fixed as a fact—that by ten millions the reduction of net liabilities has been greater in the last six years than in the preceding six years; and I should be glad—but I do not suppose I shall get my wish—if future controversies are conducted simply on the basis of net liabilities. I will give up the comparison from the amount devoted out of taxation; but, on the other hand, the distinction must be made as to realisation of assets. The figures given by the hon. Member for Poplar (Mr. Sydney Buxton) included the sums paid into the Exchequer as interest by Local Authorities, and he made an error of ten millions in leaving out the surpluses which have gone towards paying off Debt during our time. I think I have answered nearly all the questions put to me. Some very large ones were opened by the remarks of the hon. Member for Peterborough (Mr. Morton); but the hon. Member will excuse, and not attribute it to any want of courtesy, if I do not now enter into them.

(11.52.) MR. PICTON

I am obliged to the right hon. Gentleman for the information he has given me. I am glad to find that the relief is so high as he places it, and am astonished to find it is so. But even supposing it is so high as 6d. in the £1 the amount of actual relief is very small to occupants of houses rented at £7 10s. and as is often the case at £4.

MR. MORTON

I should be glad to have a brief expression of opinion from the right hon. Gentleman as to the principle of levying the Income Tax and House Duty.

*(11.53.) MR. GOSCHEN

The point is a very large one whether it is right the Income Tax and House Duty should be levied on the gross or on the net. My view, as I think the hon. Member knows, is that the present system is an anomaly, and that it would be more fair to levy the tax on the net, but with a change of the kind many adjustments would have to be made. If we made the change by itself we should have the charge made against us that we were relieving realty and the owners of property, adding another crime to the many charged against our financial proposals.

(11.53.) THE FIRST LORD OF THE TREASURY (Mr. A. J. BALFOUR,) Manchester, E.

May I remind the Committee that it is important that we should take the Resolutions now, and that there remains opportunity for discussion at a later stage?

Question put, and agreed to.