§ Considered in Committee.
§ (In the Committee.)
§ *THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT,) Derby
Mr. Mellor,—Sir, in laying before the House the Financial Statement of the year, my first duty is to make as clear as I can to the Committee the financial balance-sheet of the year which concluded on March 31, 1893. The financial history of the last six years, which covered the term of the last Parliament, is remarkable and instructive. The right hon. Gentleman my Predecessor in Office, in his first Budget in 1887, had formed a gloomy anticipation of the immediate future of the Revenue, and he took measures accordingly. The Naval Estimates for that year and the next year were largely reduced. The fund set apart for the liquidation of the Debt was considerably diminished. Happily, however, those clouds which seem to have gathered in 1886–7 passed away, and a period of great financial prosperity immediately set in. The Revenue began almost immediately to rise on an ascending curve, which reached its summit level in 1890. The right hon. Gentleman the late Chancellor of the Exchequer was in possession for several years of handsome surpluses; but in 1891 symptoms of a less favourable kind supervened. The top having been reached, the Revenue began to flag, and the late Chancellor of the Exchequer found himself on a descending curve, and his Estimates for 1892–3 were for a Revenue of £541,000 less than the actual receipts of 1891–2. His calculation for the year which has just closed was for a practical equilibrium with the customary margin without any 1028 change of taxation. The Expenditure for 1892–3 was estimated in the Budget at £90,253,000, and the Exchequer issues have been, in fact, £90,375,000, which is an excess over the Estimate of £122,000. I do not desire to oppress the Committee by going into details of very elaborate figures. Of course, all the figures I am now dealing with are in the hands of hon. Members in the Paper which has been circulated. I will, therefore, confine what I have to say to remarks upon those figures which seem to mo to be most material. First of all I have to observe that the Army appears to have cost £89,000 less. That is an apparent and not a real saving. Indeed, the cost has been rather more. There was a surplus coming from grants of 1891–2 which reduced the Exchequer issues of 1892–3. In the Navy there is an excess of £62,000 in respect of 1891–2, which was voted in March. In the Civil Service there was £11,000 loss, and there would have been a larger saving had it. not been for a great increase in the Education Vote. Customs and Inland Revenue are £33,000 less, and Post Office and Telegraphs £199,000 more—an excess of Estimates which was only revealed at the last moment. But for these unexpected sources of Expenditure and Supplementary Estimates, the total would have been well within the mark of the Budget Estimate. It is difficult, if not impossible, to gauge with accuracy the demands of Education Grants, which largely exceed the Estimate which had been formed; and it is impossible, beforehand, to say what the grants for the new year will or will not be. There is always an element of uncertainty. As to the Post Office Expenditure, that is an abyss which no plummet can sound. I shall have something to say on that subject later, which is, and is likely to be, the despair of successive Chancellors of the Exchequer. This is the Expenditure which has been defrayed out of the Revenue of the year. But, besides this, it is very important not to lose sight of the fact that there is a large Expenditure which has been met by borrowing. There was borrowed for the Expenditure of the year £2,056,000. The figures are: Naval Defence Act, £1,150,000; Imperial Defence Act, £285,000; Barracks Act, £535,000; Telephones, £86,000; 1029 total, £2,056,000. This, added to the normal Expenditure of £90,375,000, gives a total real Expenditure of the year of £92,431,000. With reference to an incidental matter of some interest, I should like to make a short statement as to the Expenditure upon the re-coinage of light gold. The amount of light gold to he called in was estimated to be about £43,000,000. In 1891 the late Chancellor of the Exchequer sot aside £400,000 to defray the loss on the re-coinage. Up to March 31, 1893, the light gold brought in has amounted to £18,000,000, and the loss upon this has been £298,419 6s. 7d. It is calculated that there remains to be brought in £25,000,000, upon which the loss is estimated at £355,110, or a total loss of £653,530 on the whole. Of this amount probably £9,000,000 will be brought in during the year 1893–4 at a cost of £144,920. The average loss on the sovereign has been 2.639d., and on the half-sovereign 2.923d. It is expected that the whole renewal will be completed in the year 1895–6, and then there will have been achieved a great work, which I congratulate my right hon. Friend opposite on having begun, and one necessary to the reputation of a great commercial country, the transactions of which are founded on a gold standard. I must now pass on to the Revenue of the year that has concluded. The Revenue for 1892–3 is estimated in the Budget at £90,453,000. A decrease of £542,000 was allowed for by the late Chancellor of the Exchequer, as compared with the Exchequer Receipts of 1891–2. The actual payments into the Exchequer have been £90,395,000, or less than the Estimate by £58,000. I think the Committee will consider that a marvellous approximation on so vast a sum. No person who occupies my position will fail to render his testimony to the wonderful skill, the experience, and the prescience of the officers of the Revenue Departments, who are able to give such accurate forecasts of the finance of the country. It also proves another thing— the extraordinary exactitude of averages, because when you come to examine the details you will find that in many respects they differ from the expectation; but, on the whole, the average comes out all right. I intend only to deal with the more important items. The Estimate of 1030 £90,500,000 has been realised within £58,000. The Revenue from Customs was estimated at £19,900,000; the money actually received into the Exchequer was £19,715,000, or loss by £185,000. I should like to state to the Committee what, perhaps, everyone is not familiar with—the distinction between Exchequer Receipts and net receipts. The Exchequer Receipts are those which the Exchequer receives in the course of the year, and the Exchequer may receive some money belonging to last year. If hon. Members wish to ascertain the yield of taxes they must take the net receipts and examine what is the actual amount of taxation which properly belongs to each year. If, therefore you examine the net receipts the differences are more conspicuous. The Customs net receipts of 1891–2 were £19,828,000, and those of 1892–3 £19,633,000. The falling off in produce was, therefore, £195,000. Comparing the Customs net receipts of 1892–3 with those of 1891–2 we find: (1) a falling-off in spirits of £337,000; (2) tea about stationary (a decline of £12,000); (3) tobacco, markedly better by £182,000; (4) wine, less by £22,000.
§ SIR W. HARCOURT
Tea is slightly below the Estimate. There is no confident belief that it is due to the falling-off in consumption. Tea is a commodity in which dealers are very cautious when the Budget is approaching. I do not speak with any certainty, but I have reason to believe that purchases are held back until it is known what is to be done with tea. I pass now to the Inland Revenue. The Budget Estimate was £54,862,000; the Exchequer Receipts, £55,085,000, or more than the Estimate by £223,000. The net receipts were £54,946,000, or £84,000 better than the Estimate. That again, I think, everyone will admit is a pretty close Estimate on a total of £55,000,000. But here, again, it, is not a question of detail; it is a question of averages. The Excise was £435,000 below the net receipts of 1891–2. The loss is almost wholly on spirits. Beer remains about the same as before. The late Chancellor of the Exchequer estimated a fall on spirits of £200,000; but the fall, in fact, has been above 400,000. I remember that in one 1031 of his Budgets the late Chancellor of the Exchequer spoke of there being a "rush to alcohol." To-day I should rather describe it as a "stampede from alcohol." I also remember that the right hon. Gentleman remarked particularly on the increase in the consumption of one kind of spirit—rum. The discontinuance in the consumption of rum as compared with other spirits is equally remarkable now. Why, I am not in a position to explain. The Spirit Duty is very eccentric, both in its rise and fall. It rises and falls with the condition of trade, but how much and how quickly it is very difficult to explain, and still more to forecast. I now pass to Stamps. Stamps are £245,000 better than the Estimate. The principal head of Stamps refers to the Death Duties, and here, again, the principle of averages comes in. The late Chancellor of the Exchequer estimated a loss on Probate, as compared with 1891–2, of £211,000. The actual loss has been £419,000. The year 1892 is known, and will ever be remembered in the Inland Revenue, as the "influenza year." It produced an abnormal rise in the receipts of Probate Duty, which have since fallen off by nearly the amount of the exceptional produce of that year. The falling-off, therefore, shows that there had not been sufficient account taken of the immensely abnormal rise in the preceding year. In the Legacy and Succession Duty that increase appears in the year following the abnormal receipt of the Probate Duty, because it is collected a year later than the Probate Duty; and therefore is, as I may call it, an après coup of the great receipts of the influenza year, and so came into the receipts of this last year. The right hon. Gentleman estimated the gain in the Legacy and Succession Duty at £232,000; the actual gain has been £671,000. The loss in the one case was double what was expected, and the gain in the other was three times that which was anticipated. Therefore, in regarding this important source of Revenue, we must always set aside the year 1891–2 as altogether exceptional. It made a difference between the year 1891–2 and the year 1892–3 of £838,000, out of a Revenue of £5,000,000 of the entire Probate Duty. Then, as to General Stamps, they have realised, which is a good sign, £49,000 more than the Estimate. The right hon. 1032 Gentleman estimated for a fall of £100,000, and, in point of fact, they have not fallen much more than half that amount. That, in the present state of things, may be regarded, I think, as not unsatisfactory. The great falling-off since 1890 on General Stamps has been due mainly to Stock Exchange transactions. It is not due to a falling-off in the every-day stamp transactions of tradesmen. On the contrary, that source of Revenue is rather increasing. Now I come to, perhaps, the most important head of all, and that is the Income Tax. In the Income Tax the yield has been £70,000 better than the Estimate of the late Chancellor of the Exchequer. The maintenance of the strength and, I may indeed say, the continual growth of the yield of the Income Tax is simply marvellous; and nobody who has not carefully studied the question can understand how, in all the vicissitudes of trade and the apparent oscillations of property, the Income Tax is a source of constantly increased and increasing Revenue. The right hon. Gentleman opposite did a great deal last year to throw light upon this interesting question. He showed how the yield of the Income Tax did not mainly depend upon the principal and conspicuous trades or decline with their depreciation. He calculated last year, accordingly, on a fall of only £400,000 on a total of £13,810,000 in the year 1891–2, which was the highest point at which the yield of the Income Tax ever stood. There were some people, I know, who were sceptical at that time, who said that prosperity had vanished, that distress had come, that there was great trade disturbance, and that it was impossible that the Income Tax would not fall off to a greater degree. I confess I did not join in those doubts, for I knew that the Chancellor of the Exchequer had means of information to which no one else had access. The right hon. Gentleman used on that occasion some words which I will take the liberty of repeating, because they are the real key to the enigma. He said—If I am to judge simply by the Statistical Returns, by the gossip of the City, by complaints in Lancashire, or by the position of Yorkshire, and if I am to listen and the Committee are to be influenced by the general feeling, they might come to the conclusion that there would be a very large gap in the Income Tax Return of the year.1033 He then proceeded to show that, whilst public attention was fixed on the great staple industries of the country—the cotton, the coal, the iron industries—I use his own words—There is a mighty trade going on, there is wealth being rolled up—wealth of which no published statistics exist, but which is, nevertheless, accumulating and adding to the capital of the country.He pointed out that the profits of the cotton trade are less than the aggregate profits of the Medical Profession, and the profits of the coal mines than those of the lawyers. He accordingly put the yield of the Income Tax at £13,400,000 for the year that has just concluded, being £410,000 less than the preceding year. It has, in fact, yielded £13,470,000. The falling-off has not been £410,000, but only £340,000, and the tax has yielded £13,470,000, being £220,000 more than in 1890–1. This is, even in these times of depression, a yield of £2,245,000 to the penny. The growth of the produce of the Income Tax is one of the most remarkable features of our finance. In 1889, when it was reduced to 6d., its yield was £12,700,000. In 1892, only three years later, it was £13,810,000, or £1,100,000 more. Even with the decline last year, it is still £700,000 more than it was in the year 1889. I have had some remarkable figures on this subject taken out, which give the yield per 1d. for the last eight years on each several Schedule separately, which is a far better test than taking it on the whole. These are new figures, and are very well deserving of the attention of the House. They give accurately the real yield of the tax, and are not merely the Exchequer Receipts, which vary very much. Now, in 1886—that is, at the commencement of the last Parliament—the Income Tax yielded £1,980,000 to the penny. In 1893, which has just concluded, it yielded £2,261,000 to the penny. Taking the figures for the Schedules separately, it will surprise many people to learn that the produce of Schedule A, which is land and houses, has actually risen from £670,000 per penny in 1886 to £676,000 in 1893. As everybody will anticipate, it has fallen heavily on agricultural land. It has fallen from £217,000 per penny to £191,000, but it has risen upon houses from £452,000 per penny to 1034 £484,000, so that, taking the two to-gether, there is an actual rise upon Schedule A. Schedule B, which is the Occupier of Land Schedule, has, as might be expected, heavily fallen. It has fallen from £48,000 to the penny to £36,000. Schedule D, which is equally remarkable—it is the profits of trades, companies, and so forth—yielded in 1886 £958,000 to the penny, and in 1893, in spite of the ruin which is said to have attended all trades and to have destroyed all profits, it is £1,208,000 to the penny—the highest it has ever reached. Schedule E, which is the growth of salaries of public employés and of the employés of companies—this, I think too, is a remarkable figure—produced in 1882, 10 years ago, a yield of £118,000 to the penny, and in 1893 it is £152,000. I think that is an analysis that is useful, and it is new. When Sir Robert Peel imposed the Income Tax in 1842 the yield was about £770,000 per penny. It is now three times as much. It would have required in his time an Income Tax of 1s. 6d. in the £1 to raise a similar amount. I have laid these figures before the House, because I think that even in times of depression, and what are called bad times, it is well that the House of Commons and the country should know what is the actual condition of things. The steady and vast growth in the produce of the Income Tax and the Probate Duty is the most irrefragable evidence, in my opinion, of the solid advance in wealth both in annual income and accumulated capital of the nation. It is the conclusive answer to those pessimists who assure us that we are being ruined by a vicious commercial system and a false monetary standard. If we had for 50 years been going on a wrong system the results which we should have to record would be very different from those I have laid before the House. And when we are asked what is the result of that system upon which we have constantly acted, and to which we have faithfully adhered, and I am asked for a proof of it, I would say, looking at these Returns, Si monumentum, quœris circumspice. It is true that this trade or that trade, this industry or that industry, may have its "ups and downs," its adversity and its prosperity; but, as the right hon. Gentleman opposite truly indicated last year, there is a perpetual compensation in all directions, and the 1035 small rivulets of increasing income from every source and the accumulated savings of the country supply the deficiencies of the larger streams. Every year more money is saved, and more capital is invested, and therefore a larger income is earned. I may, perhaps, have detained the House rather long. The Post Office yields no more than the Estimate, a most unsatisfactory lie-turn, considering the great growth of expenditure. The Telegraphs are £80,000 less than the Estimate, 1892–3, a bad revenue. They are £115,000 less than actual working expenses in 1892–3, setting aside the non-payment of interest upon the purchase-money. If you look at the Telegraph Returns since the purchase, including the moderate interest they ought to pay upon the money, the loss on that commercial transaction has been £4,500,000. The whole of this affair was founded on a miscalculation. Six years ago the deficiency was less than £2,000,000. I have told you it is now more than double that amount, and, for anything we can see to the contrary, it is a revenue which is going from bad to worse, and the competition of telephones is not likely to improve it. There remains the Miscellaneous Revenue. The right hon. Gentleman opposite estimated the receipts for 1892–3 at £2,076,000, and the amount paid into the Exchequer was £2,065,000, or a deficit of £11,000. The Committee must bear in mind that though the Revenue of 1892–3 approximated so closely to the Budget Estimate it is greatly below the Revenue of 1891–2. The deficiency of aggregate Revenue is no less than £600,000, comparing the Exchequer receipts for the two years. The taxable Revenue was £540,000 worse, and the non-taxable Revenue was £60,000 worse. Now, having laid before the House as clearly as I can the state of the Expenditure last year and the state of the Revenue, I am now in a position finally to balance the Revenue and Expenditure of 1892–3. The Revenue was £90,395,000, and the Expenditure £90,375,000, leaving a balance of £20,000, a sufficiently close balance-sheet on a Revenue and Expenditure of over 90,000,000. But this I am bound to say in the presence of the right hon. Gentleman—that but for unexpected expenditure on the Supplementary 1036 Estimates we should have fully realised the margin he anticipated. But when we talk of a surplus, even such a miserable mouse as £20,000, we must remember that we have borrowed upwards of £2,000,000 in the course of the year to meet the Expenditure of the year. I will not revive an old controversy between myself and the right hon. Gentleman as to what we are to call that £2,000,000. I have been in the habit of calling it a deficiency of Revenue, as compared with actual Expenditure. I call it a deficit. But I care not what you call it—the House must bear in mind that this balance, which leaves an apparent Surplus of £20,000, is accompanied by the fact that during the year you have borrowed upwards of £2,000,000. I do not know whether I may be permitted to correct an error which I am not sure is entertained by Members of this House, but which I see is entertained elsewhere, that the surplus to which the Chancellor of the Exchequer has to look is the surplus of the year that is past. That is not so. That surplus of the year that is past is devoted to the old Sinking Fund, and the Chancellor of the Exchequer has no control over it. It has nothing to do with the Budget surplus, which is the estimated surplus—namely, the estimated balance on the Expenditure and Revenue of the coming year, calculated on the basis of existing taxation. I must now make a brief statement as to the balances in the Exchequer. On April 1, 1892, the balance was £6,255,000. That included the old Sinking Fund, £1,067,000, leaving a true working balance of £5,188,000. There have been small variations, but on April 1, 1893, the balance was £5,082,000, or a difference of about £100,000, I would say here, on the subject of the balances, that we are subject now to the comparatively new system established by Mr. Lowe, by which the greater part of the Income Tax is collected at the end of the year; and the small balances with which we begin make it necessary to largely use deficiency advances, for a great part of the income does not come in till the end of the year. Before I leave the year 1892–3 I must make a brief statement with reference to the National Debt. The reduction of the Debt proper in the past year has been £6,623,000. Under heads which are not the Debt proper 1037 there has been an increase for barracks of £535,000. But, on the other hand, owing to the rise in the price of Consols, there has been a decrease of savings banks deficiencies of £782,000. So that I am able to say that the net liabilities of the State have been in the year concluded diminished by £7,000,000. I should like to say one word as to the state of the Unfunded Debt. This has been largely increased of late years, both by the operations of conversion and redemption, and also by borrowings for Naval and Military Expenditure. On April 1, 1892, it reached a total of £35,300,000, of which there was in the hands of the public, £17,000,000, in the hands of the National Debt Commissioners, £18,300,000. The right hon. Gentleman opposite—and we have often argued this point—feeling that the Unfunded Debt stood at too high a figure, converted £13,000,000 in the hand's of the National Debt Commissioners into a book debt, which now ranks as a Funded Debt. That accounts for the apparent increase in the Funded Debt of £11,000,000. The Unfunded Debt now remains at £22,313,000, and has been increased by borrowing this year on Treasury Bills for Naval and Military purposes by £1,435,000, making a total of £23,748,000. By the use of the old and new Sinking Funds £3,000,000 has been paid off, so that, the total now stands at £20,748,000, of which there is held by the public £14,522,000, and by the National Debt Commissioners £6,226,000. I am glad that it has been found possible in this way to reduce the amount of the Unfunded Debt. It has been reduced, by the resources at the disposal of the Treasury, by £2,468,000. It is the Floating Debt in the hands of the public which alone need concern the Chancellor of the Exchequer. The Unfunded Debt in the hands of the public now stands only £679,000 higher than it did in 1886, so that, practically speaking, we have gone back almost to the point at which we were before the conversion operation.
§ An hon. MEMBER: What is the total amount?
§ SIR W. HARCOURT
£14,522,000 Treasury Bills (and all of them 12 month bills) are now little more than £6,000,000, and no doubt as opportunity serves they may be still further reduced. I have a 1038 strong opinion that the less the Chancellor of the Exchequer is in the market the better, and that the business of the country ought to be conducted on a large scale, and that to have to deal with bills at intervals of three months is a thing to be avoided if possible. I think I have now stated to the Committee all that is necessary to be said with reference to the finance of the year that is concluded, and I now conic to the far more interesting examination of the finance of the current year. I will begin with a reference to the estimated Expenditure for the year 1893–4. The total estimated Expenditure for the year 1893–4 is £91,464,000. That is a total excess of £1,089,000 over the Expenditure of 1892–3, or, if you compare it with the Budget provision of last year, an excess of £1,211,000 over that, which my Predecessor (Mr. Goschen) found it necessary to provide for. By far the larger part, of that is due to two items. On Education there is an excess of £310,000, and on the Post Office a real excess of £635,000 over the estimated Expenditure of last year. I hope the House will bear that fact in mind. It would appear from the figures which hon. Members have before them that the Post Office excess is only £400,000; but that is because an addition of upwards of £200,000 was made by Supplementary Estimates to the Expenditure provided for in the Budget of last year. I shall have something to say on the details presently. Taking the figure of the estimated Expenditure as I have given it, let me ask attention to this gigantic total of £91,500,000. That does not represent by any means the whole amount, because, besides the £91,500,000, we raise by Imperial taxation an addition of £7,250,000, which goes to the Local Taxation Fund. Therefore the total sum to be raised by Imperial taxation is really £98,750,000, which is dangerously near the £100,000,000 which a few years ago we thought belonged only to times of war and to extraordinary circumstances. Now, Sir, I would ask the careful attention of the Committee to the few figures I am going to give on the subject of Expenditure. I want hon. Members to consider what has been the growth of Expenditure in the last seven years iu this country. I take the net Expenditure given in the valuable Return moved for by my right hon. Friend the 1039 President of the Local Government Board. I am speaking now only of Military, Naval, and Civil Expenditure —expenditure exclusive of the Debt charges— met out of taxes. The increase between the year 1887–8 and the year 1893–4 appears as follows. The Naval and Military Services cost more by £2,600,000, Public Education more by £3,400,000, Grants and Assignments to Local Authorities more by £4,200,000, and other Civil charges more by £400,000, so that the Normal Expenditure of the country under these heads in the course of the last seven years has increased by £10,600,000, or 20 per cent. of Expenditure charged on taxes under these heads. Of course, on the other side must be taken the reduction of the Debt charge by £3,000,000, partly the result of the successful conversion of the Debt by the late Chancellor of the Exchequer (Mr. Goschen), and partly the result of other causes. That leaves a balance of addition to the sum that has to be raised by taxes of about £7,000,000. It may, it is true, be said that the subsidy of £4,000,000 to local taxation is taken from one pocket and put into another. ["Hear, hear!"] Yes; but it is not put into the pocket of the same man, and whether or not it has produced all the advantages which it was intended to secure is a disputed point on which I will not offer an opinion at present. In my opinion, at the commencement of a new Parliament these are figures very well deserving of attention. The question is whether the new Parliament is or is not prepared—and it cannot too soon make up its mind on the subject—to make a similar addition to the Expenditure in the course of its existence. I have called special attention to the Post Office Expenditure. That is not an expenditure which is charged on the taxes, but it results in a loss of net Revenue which has to be supplied by additional taxation. The Estimate for 1893–4 shows an increase over the Budget provision of 1892–3 of £635,000. The increase in 1892–3 was stated by the late Chancellor of the Exchequer at £611,000. Of the increase this year, £486,000 is clue to additions to staff and salaries. Now, let me see the result on the Revenue in the last three years. The estimated increase in the 1040 Exchequer receipts under the head of Postal and Telegraph Services in 1893–4, as compared with 1890–91, is £774,000, and the estimated increase in the Expenditure met out of Postal Votes is £1,602,000, so that in three years on the Post Office alone you have lost £828,000 of net Revenue which, of course, you have to replace by taxation from other sources. Now, Sir, great as has been the aggregate Expenditure for which provision has to be made in the Budget, that does not represent the whole case, as it is irrespective of the money borrowed. Up to 1892 we borrowed £5,000,000, and last year we borrowed £2,000,000, so that in the seven years we have borrowed £7,000,000 in all. Debts which have to be liquidated out of the income of the future. If this money had been provided by taxation the figure I have given would have been greater still; but on an average £1,000,000 a year has been paid out of borrowed money. I had hoped that we had come to an end of these borrowings, but that is not the case. We have still remnants of these obligations. In the course of the present year we have to borrow £1,500,000—that is to say, for the Naval Defence Act, £150,000; for the Imperial Defence Act, £150,000; for the Barrack Act, £600,000; for Telephones, £250,000; and for Irish Light Railways, £270,000, making a total of £1,420,000. This is not a very satisfactory statement to make. We have just succeeded in making both ends meet during the past year, having merely a nominal balance of about £20,000, and we begin this year with an estimated increased expenditure of £1,100,000, which is almost entirely attributable to increased expenditure on Education and the Post Office. The Estimate of the Revenue of 1893–4 is based upon present taxation. I need not say that it is a difficult—I had almost said a perilous—task to attempt to estimate what may be the condition of a Revenue which was estimated last year to fall and has fallen by an amount of between £500,000 and £600,000. It is a formidable fact that the fall in the Revenue is the largest in the latest quarter; but the figures I am going to place before the House I place before it with the reliance I feel—and which, I am sure, the right hon. Gentleman oppo- 1041 site (Mr. Goschen) will feel—in the foresight, experience, and—I had almost called it—infallibility of the permanent officers of the Revenue Departments. The total Revenue for the coming year we estimate at £89,890,000, or £505,000 less than the Exchequer Receipts of 1892–3. Now, I will give the figures under the different heads. We estimate the Customs at £19,650,000, or £65,000 less than last year; Excise at £25,100,000, or £260,000 less than last year; Stamps at £13,600,000, or £205,000 less than last year; Land Tax and House Duty at £2,460,000, or £10,000 more than last year, and Income Tax at £13,400,000 — that is to say, the same figure as that given by the right hon. Gentleman opposite in his Budget last year, and £70,000 less than the actual Exchequer Receipts of last year. That makes an estimated falling-off in the produce of taxes of £590,000. I now come to the Tax Revenue, which we estimate to be as follows:—Post Office, £10,600,000, an increase of £200,000; Telegraphs, £2,480,000, the same as last year; Crown Lauds, £430,000, the same as last year; interest on Suez Canal shares, £220,000 and Miscellaneous, £1,950,000; or £115,000 less than last year. The produce of the Non-Tax Revenue is, therefore, estimated at, £15,680,000, or £85,000 more than last year. Now, I will make one or two observations upon the details. In the Customs Estimate there is an allowance for a fall in spirits and wines, and for a slight increase in tea and tobacco; this is not a great amount—£65,000. Upon Excise we estimate that there will be a receipt of £260,000 less than last year. We have calculated upon £30,000 less on beer, and £230,000 less on spirits. That, I need not say, is necessarily a very problematical Estimate, as when you have a falling Revenue it is very difficult to say how fast or how slowly it may fall. It may be less than we estimate or it may be more. As to Stamps, we estimate the Probate and Estate Duty at £135,000 more, thus going back to a normal figure, whilst we estimate Legacy and Succession Duty at £380,000 less, and General Stamps at £40,000 more. I have already mentioned that we have taken the Income Tax at £13,400,000—the same as the Estimate of last year. I must now 1042 say a word on the Miscellaneous Revenue. This has been largely affected in recent years by the extension of the principle of Appropriations in Aid. Miscellaneous Revenue—always an uncertain item— sometimes overlaps from one year to another. Last year (1892–3) £341,000 due to the Revenue of the previous year was carried over to the Miscellaneous Receipts. This year, perhaps, half that amount may fall in from last year. This item of the Revenue is the residuary legatee of windfalls to the Exchequer. The Miscellaneous Revenue of 1892–3 has had the advantage of the remanet of a quarter's extra receipts in 1891–2 to the extent of £242,000 due to the change in the system of Appropriations in Aid last year. This year the Miscellaneous Revenue will benefit by an occasional windfall from the Treasury Chest Fund. As the right hon. Gentleman opposite is aware, the Treasury Chest Fund is a banking fund or working capital for effecting Imperial payments abroad. It is an accumulation of ancient supplies fixed by Statute in 1873 at £1,000,000, but it has from time to time been reduced. With the diminished number of Treasury Chests abroad, and with an increased resort to the telegraph, the payments can now be effected with a smaller working balance; and it is proposed by Bill to give power to the Treasury to reduce it from £1,000,000 to £700,000, and, accordingly, a balance will be available for the Exchequer, and will be credited to Miscellaneous Revenue, as was done in 1862 by the present Prime Minister and in 1873 by Mr. Lowe, when similar reductions were effected. A Bill for this purpose will be necessary. In order to complete the account of Revenue I will state briefly the Local Taxation Revenue. In 1892–3 there was a fall of £426,000, as compared with 1891–2. That was due to the great and abnormal receipts from the Probate Duty of the influenza year, half of which receipts were appropriated to the purposes of Local Taxation. It is calculated that there will be this year an additional income of £91,000 as compared with the Revenue of 1892–3, so that there will be a partial recovery from the fall. Now, I come to the last chapter with which I shall have to trouble the Committee. I have stated the estimated Expenditure and the estimated Revenue 1043 for the year 1893–4, and I have now to state the balance-sheet as it stands for the present year on the basis of existing taxation. The expenditure, as I have said, is £91,464,000, and the Revenue £89,890,000, leaving a deficit of £1,574,000, which has to be provided for. Well, Sir, I think it will be admitted that this is a very serious state of things, and one for which I think the public mind will hardly be prepared. I have seen some very extraordinary calculations on this subject, none of which come approximately to the truth. Before I sit clown I will ask the Committee to consider, first, the causes which have brought this state of things about, and, secondly, how it is to be dealt with. As to how it has come about, the answer is only too easy and obvious. It is partly due to a deficiency of Revenue, not of a very large amount (not much more than ½ per cent. on the whole), which might be easily dealt with; but it is chiefly due to the vast and progressive growth of Expenditure to which I have already drawn the attention of the Committee. Thus, in the current year we have an estimated falling-off of Revenue of £500,000, but a growth of Expenditure to be provided for of £1,100,000, and that due to engagements entered into over which we have no control. I have already pointed out the great growth of Post Office Expenditure. That has been a growth in wages and salaries to meet the engagements entered into some years ago, which are now gradually increasing. I have mentioned the growth of the Expenditure during the past seven years. I have nothing to say on the subject of that expenditure, and I am not going to enter into any controversy with reference to it; but this, at least, I may say—that those who have authorised, who have encouraged, who have insisted upon this vast growth of Expenditure—and I am speaking now without distinction of Parties, for the growth of that Expenditure has not been due to the action of one Party or the other—are bound to provide the moans of defraying it. It is idle to lay the blame, if blame there be, on one Party or another, on one Government or another. I know there was once in this country an economical Party. There is no economical Party now. I believe the 1044 Prime Minister and myself are the last survivors of that vanished creed. The saying has been attributed to me that everyone is a Socialist now. I do not know whether I ever said that, but this I will say—there are no economists now. Financial economy has gone the way of political economy, and a Chancellor of the Exchequer preaching against extravagance is "the voice of one crying in the wilderness." We hear a great deal about the stinginess of the Treasury. I wish the Treasury had a little more power, as it has the will, to be much more stingy. The Chancellor of the Exchequer may hold up his hands in despair, like the old steward in the Rake's Progress; but the money is spent, and, as the French say, "The wine is drawn and you must pay for it." After all, the causes of this are not far to seek. Economy was possible, was necessary, and even popular, in former days. Governments were compelled to be economical. The people demanded it, and the House of Commons supported it. Sir Robert Peel was an economical Minister. At that time the nation was poor; capital was deficient, trade was bad, the weight of the Debt was crushing, and taxation relatively to the resources of the people was enormously heavy. People were then obliged to "attend" to the pence because they had no pounds to "look after." But now the condition of things is changed; the nation has grown rich, taxation compared to the resources of all classes is relatively light, and this is probably in proportion to its wealth the most lightly taxed nation in Europe at the present time. Therefore it is, perhaps, not unnatural that anyone who comes forward with a proposal for increased Expenditure is welcomed as if he had discovered a new pleasure. Private Members with large hearts and small responsibilities take up some favourite scheme or some favoured class of the community. They demand higher wages, greater pensions; they desire that the State should undertake now duties, fresh responsibilities, larger expenditure. We are eager to create new empires here and annex fresh territory there, to reduce postal charges all over the world, to relieve more rates, to undertake lifeboats, &c. The country is well agitated, the interests are well organised, the House of Commons is well canvassed, 1045 and one afternoon, in the gaiety of our hearts, we pass a Resolution unanimously which is to cost us a few millions when it comes into full operation some years hence.
§ An hon. MEMBER: Payment of Members.
§ SIR W. HARCOURT
I am not making a Party question of it at all. Neither am I complaining—I am only making it clear. I pointed out the other night with reference to a Motion of this kind that it meant £25,000,000. But all the House said was—"Oh, only £25,000,000; how cheap! Let us have it by all means." All these things are very excellent in their way. There is a great deal to be said for them; there is very little to be said against them. That is quite true; but the time comes, and it has come, when you must pay for them. This is the true inwardness of the growth of Expenditure at the present time, and I take the right hon. Gentleman (Mr. Goschen) to witness that the growth of Expenditure is not mainly the work of Governments, but that it is forced on the Government by the House of Commons and the country, who really do not seem to care what they spend. J belong myself, as I have said, to the old school, and I would gladly see less money spent, for I think a good deal of it is wasted. But, if I may reverse an old saying, I would say that those who call the tune must pay the piper. I cannot, however, honestly say to the House of Commons or the country, "If you choose to spend the money, you cannot afford it," for, as I have said, the wealth of the country has increased and is increasing year by year. You may find yourselves in temporary straits, but there is no occasion for apprehension or disquiet. The condition of your affairs is sound, solid, and prosperous. The resources of the country are ample and always accumulating. Let me give the Committee one or two figures on this subject. I will just apply one or two tests of the wealth of the country. The property assessed to Income Tax in 1882 was £601,450,000; in 1892 it was £713,000,000; or a growth of £112,000,000. The property charged to Probate and Succession Duty in 1882 was £147,603,000;in l892 it was £241,453,000, or au increase of £94,000,000. Let me take another class. The deposits 1046 and investments in the Post Office and Trustee Savings Banks were in 1882 £85,036,000, and in 1892 £128,116,000, an increase of £43,000,000. Take the Building Societies, which is one of the investments of the artisan class. The liabilities of Building Societies in 1881 were £43,730,000; in 1891 they were £51,773,000. The total capital of industrial and Provident Societies in 1881 was £7,837,000; in 1891 £16,118,000. In ordinary Life Insurance Companies the premiums in 1881 were £11,898,000; in 1891 they were £14,565,000. In Industrial Life Insurance Companies the premiums in 1881 were £2,245,000; in 1891 they were £5,467,000. These are fair tests of the growth of the accumulated wealth of almost every class of society. I will give you one other test. I have already mentioned the increase in the Income Tax value of houses, but you do not need to go to the Inland Revenue to ascertain that. If you travel by rail you can see the number of houses of every class that are building in every direction, and that is a proof of the large and accumulated wealth of the country. These belong to what may he called the "saving" classes. But if you examine the consumption of articles of necessity and comfort, you will find everywhere signs of the larger resources of the mass of the people who lie below the classes I have referred to. I state these facts in order to say that there is the means to pay, if you choose to pay, and you must choose to pay, if you choose to spend. There may be temporary depression, but there is no permanent decline. On the contrary, there is a gradual growth in the wealth and resources of the country. I venture to lay these considerations before the Committee with reference to the growth of Expenditure and the causes of it. Now, I want to ask—How, then, is this deficit of £1,500,000 to be covered? We cannot shirk it by ingenious contrivances. It has to be met squarely and fairly. We cannot continue to encounter enhanced Expenditure by borrowing. We have already in the piping times borrowed £7,000,000, the liquidation of which its to fall on the years immediately following, when the Revenue will probably be less and the Expenditure more. We cannot recommend the Committee to have recourse to the plan of meeting its. liabilities by encroaching further on the 1047 fund set apart for the liquidation of the Debt. In our opinion that is a fund not to be tampered with in ordinary times and normal deficiencies, but reserved for great emergencies. This is the keystone of sound and solid finance, and we are not prepared further to weaken its foundation. These are courses which the Government are not prepared to recommend. They only tend to encourage extravagance by concealing and palliating for the moment its effects, and, therefore, promoting its growth. There is, in our opinion, only one sound and straightforward method of meeting this deficit, and that is by increased taxation. This is the only policy which is worthy of a solvent and a wealthy nation which finds itself over-spending. Where are we to look, then, for increased Revenue? I concur very much in the opinion expressed by the right hon. Gentleman the late Chancellor of the Exchequer in his Budget speech in 1889, when he established the now Estate Duty, that one of the most fitting sources for increased taxation was to be found in the large and growing accumulations of wealth which are reached by the Death Duties. The old objections to taxing capital no longer hold good. There were days when the country suffered from a deficiency of capital: that is not so now. If there is any defect, it is in the means of the legitimate and sound employment of superabundant capital which has led to so much dangerous and speculative investment in foreign enterprises. I agree, also, most entirely in the principle enunciated by the right hon. Gentleman in the same speech, when he said—On the whole, I think it will be generally recognised that it is the men whose fortunes are considerable who pay least in proportion to their aggregate income and property.Therefore, when I came to the Treasury and there seemed last winter a more favourable prospect, both in respect of Expenditure and Revenue than has since been realised, I spent much time and labour, with the assistance of the able men in the Department and the lawyers, in examining the question, of the reform of the Death Duties. There were two main objects to be aimed at—first, that all property, whether real or personal, settled or unsettled, should be brought into account and valued and taxed on an equal basis; and, secondly, that pro- 1048 perties of large amount should pay at a higher rate than those of less considerable value; and for this purpose the whole of the assets should be aggregated so that a progressive graduation should be applied to the total value of the property of all kinds on an ascending scale according to the whole amount. Upon a careful examination there were found to be no insuperable difficulties, though the subject is a complicated one, in giving effect to these principles, and in ultimately, after a lapse of time, deriving from such a reform of the Death Duties a very considerable increment of Revenue. We should have been prepared to have laid before the Committee proposals to this effect tin's year embodied in a Bill; but, unfortunately, we are precluded from this by two conclusive reasons. The first, which is the least material one, is the question of time. Anyone who has considered this subject, or remembers the Debates on the Succession Duty in 1853, will be aware that the questions relating to settlements and to land are of a highly technical character, requiring, or at least lending themselves to, protracted discussion, and that a Bill of this controversial character would demand an amount of time which the House has not this Session at its disposal. But a more decisive reason was to be found in the fact that the proceeds of a tax of this character cannot be immediately realised; and the estimate of its produce in the first year, even with a high graduation, would not amount to one-third of the sum which I am called upon to find. The House will remember that it has taken 40 years for the Succession Duty to reach one-half the Estimate which the Prime Minister originally formed of it. What I have to do is to find the money to cover this deficit, and to find it at once. We are, therefore, with much reluctance, obliged for this year, and I hope for this year only, to postpone the proposals we were anxious to lay before the Committee. It is, in my opinion, a business which demands a solution at a the earliest practicable time. Now, Sir, I suppose the Committee will have anticipated—the House of Commons is sufficiently experienced in these matters to have discovered my secret—that the only tax by which a deficit of such magnitude can be this year adequately met is an addition of 1d. to the Income Tax. [Cheers.] I 1049 am glad the gentlemen who spent the money are so ready and willing to pay it. This Id. on the Income Tax is estimated to yield £1,750,000 in the first year, which will just cover the deficit and leave a slight margin for contingencies. I know not if the objection will be taken that this is to place the whole burden on direct, and to place no share of it on indirect, taxation.
§ SIR W. HARCOURT
The hon. Member for Sheffield cheers. I will give him an answer from a quarter he will respect. From whatever quarter such an objection comes, I am sure it will not be from the Benches opposite. In the great struggle of 1885, in which our Government was overthrown, the point of attack chosen by the Opposition was the proposal in respect of indirect taxation upon beer and spirits made in the Budget of Mr. Childers. Having a great deficit to encounter, the then Chancellor of the Exchequer proposed to meet his obligations partly by increased taxes on beer and spirits, partly by increase of Death Duties, and partly by increase of Income Tax. The Opposition defeated the proposal for indirect taxation and for increase of the Death Duties; and the right hon. Gentleman the Member for West Bristol (Sir M. Hicks-Beach), who succeeded as Chancellor of the Exchequer, relied simply on the increase of the Income Tax, which was raised to 8d. It was pointed out at the time that this proceeding practically rung the knell of indirect taxation in the future. That was, indeed, denied; but the statements of the Chancellor of the Exchequer substantially admitted it. The right hon. Gentleman said on July 9, 1885—In such times as these it is, I fear, too true that, for purposes of Revenue, we have arrived at the limits of increased taxation on the most important taxed articles of consumption, except, perhaps, one article only, that of tea.It is true he added that such a tax would be so unpopular that a Government could hardly propose it. It is equally impossible now, when the duty has been reduced. He objected to a tax on spirits and beer because it was—Financially unsound to raise the rate of duty on articles the Revenue from which was notoriously decreasing.1050 I have already pointed out to you that the total fall in the last three years in alcoholic duties has been above £1,000,000. The right hon. Gentleman entered into an argument to show that an Income Tax of 8d. was not disproportionately high when the receipts from Customs and Excise stood at £42,000,000, and that when the receipts stood at about the same figure there had been in former years an Income Tax at 9d., and even l0d. If that line of argument be correct an Income Tax at, 7d. cannot be regarded as disproportionate when the yield of Customs and Excise stands at a much higher figure. The objection to placing an additional duty on spirits— in my opinion a very proper source of additional taxation—is that stated by the right hon. Member for West Bristol— namely, that at this moment it is a falling Revenue. The increase of the Tea Duty is out of the question. The addition of a further duty on tobacco by Sir Stafford North cote, some years ago, was a complete failure, and its remission by the right hon. Gentleman opposite has been a signal success. I have, therefore, arrived at the conclusion stated by the right hon. Member for West Bristol, that an increase of indirect taxation in the present circumstances is not possible. We have thought the simple increase of the Income Tax to be the method which secures the requisite amount with the least uncertainty and the smallest disturbance of trade and industry, and preferable to the attempt to raise money by a multitude of small expedients. It may be said that it is unusual to raise the Income Tax, and the Income Tax alone; but I would state that it has been done by almost every Chancellor of the Exchequer who has ever held Office. It was done in 1859, in 1867, in 1868, in 1871, in 1876, in 1880, in 1882, in 1884, and in 1885 it was done. I think that is correct.
§ SIR W. HARCOURT
That is substantially the proposal we have to make in order to meet the deficit. There is only one minor matter to which I must refer, and that is the change in the Stamp Duty. It is one that will interest the right hon. Gentleman opposite. There have been strong representations made to me, and, therefore, I am pre- 1051 pared to make a proposal on that subject. In 1888 the right hon. Gentleman carried a Stamp Duty on a class of securities "which had hitherto escaped taxation on transfer—namely, Foreign and Colonial Share Certificates, and securities transferable by delivery (bonds to hearer) which had not paid the 10s. stamp. There is certainly nothing to be said against the principle of tills impost. On the contrary, there is everything to be said in its favour. They are a class of securities which do not pay, and which ought to pay, Stamp Duty. But, in its operation, this stamp has proved both unpopular and ineffective. It is unpopular because it causes a great deal of vexation and trouble in delivering largo numbers of bonds at short notice, and, being an annual tax, there is difficulty in ascertaining to which, out of a great number of bonds, the adhesive stamp is to be applied. The difficulty is that every single certificate or bond must be examined at each delivery to see if it has already been stamped in a particular year. In the case of a bond, the preliminary question arises whether it requires an adhesive stamp or not. A banker, holding bonds of this description as security for advances, and not knowing when he may have to realise, is embarrassed as to affixing the stamp. Another great objection is in the case of low-priced securities. The stamp being imposed on the face value, the tax may be enormously high as compared with that on high priced securities. It is, therefore, a great hindrance, in dealing with such securities, and loads to such transactions being conducted abroad, where they are not liable to a similar impost. But, in addition to that, the yield of the tax has disappointed expectations. The right hon. Gentleman opposite confidently anticipated £200,000 from it. In the first year it yielded £111,000; in 1890 the amount was £97,000; in 1891 it was £80,000; 1892, £77,000; and 1893, £60,000. It is, therefore, probably not worth while to incur so much inconvenience to gain so little money. But I cannot afford to remit the tax without a substitute. I am given to understand that in the City the dealers would be willing to accept Is. instead of the present 6d. stamp on contract notes in place of the stamp in question. I shall, therefore, include that change in the financial 1052 proposals. If, however, the proposal is not readily accepted, it will he withdrawn, and matters will be left as they are. The produce of the proposed change will probably be something less than that of the present stamp, but not a great deal. I have now to state the final balance-sheet. The estimated Expenditure for 1893–4 will be the same as I have already given—that is to say, £91,464,000. The estimated Revenue will be the same as I have already given, only increasing the Estimate for Income Tax to £15,150,000, giving altogether an estimated Revenue of £91,640,000, leaving a margin of £176,000, which is small enough in a falling Revenue. In order to maintain that slight margin, I shall have, I dare say, over and over again to appeal to the House of Commons to aid me to resist Supplementary Estimates. I promise I will do my part in the matter if the House of Commons will do its part. I am happy to say that I am now able to release the Committee from this long history. I have been advised —I may say I have been commanded—to bring in a popular Budget. No doubt, it is a very agreeable thing for any Financial Minister to find himself in a position to introduce a popular Budget, to be able, as often happened to the present Prime Minister, "To scatter plenty o'er a smiling land." But that good fortune does not at all times befall even the greatest financiers. The only sound foundation of a popular Budget is a moderate Expenditure and a buoyant Revenue. Popularity is not, and ought not to be, the main object of the ambition of the Finance Minister of a great country like this. It is not his business to emulate the professors of sleight of hand, who profess to produce something out of nothing, or to make finance depend upon the popular breath of the moment. His first duty is to see that the financial position is clearly ascertained and prudently dealt with. If he has abundant resources, no doubt there is much room for the exercise of a capacity to distribute the gifts at his disposal to the greatest advantage. But in unfavourable times his principal object must be to make the sacrifices he is bound to demand in the manner which will cause the least disturbance to the trade and industries of the country. This is the moderate task which the financial situation has imposed 1053 upon me, and which I have endeavoured to discharge. If the Committee are of opinion that the proposals of the Government are adequate and appropriate to the circumstances with which we have to deal, I trust they may receive their sanction.