HC Deb 02 May 1893 vol 11 cc1807-33

Order read, for resuming Adjourned Debate on Question [1st May], "That the Bill be now read a second time."

Question again proposed.

Debate resumed.

*MR. BROOKFIELD (Sussex, Eye), in moving— That this House is unwilling to sanction a Bill which involves the continuance for another year of a tax upon tea, said, he thanked the right hon. Gentleman (Sir William Harcourt) very sincerely for his kindness in affording him facilities for bringing forward that Motion. He should not have intruded on the place usually occupied by the hon. Member for Leicester (Mr. Allanson Picton) if the hon. Member, for some reason best known to himself, had not shown a desire to abstain from controversy on that occasion. He was only now following the course which the hon. Member himself took in 1889, when he moved a Resolution. He had the pleasure of supporting the hon. Member on that occasion, and he had no doubt that the hon. Member would return the compliment now. He had long been opposed to the Tea Duties, and it was not from any sudden interest in the subject or from any unworthy motive that he now brought the subject forward. He opposed the Tea Tax on three grounds—firstly, because he thought it an objectionable tax in itself; secondly, he thought that under present circumstances it was a hypocritical tax; and, thirdly, he thought it was a tax based upon unsound principles. It might, of course be very well said that all taxes were objectionable from some point of view or other; but there was a general agreement that some taxes were a good deal more objectionable than others. Most people had agreed of late years that objectionable taxes were such taxes as those imposed upon light and air, like the Window Tax of evil memory; taxes upon knowledge, or supposed sources of knowledge, like the Paper Tax; and also taxes upon food. Hon. Gentlemen on the Liberal side had certainly surpassed themselves in denouncing all attempts to impose or re-impose anything of the nature of a tax upon food. He believed that, to do hon. Members justice, if it were in the power of the House to re-establish the whole system of taxation and start on some new basis the Tea Duties would not be included in the programme of any Government; for the principles on which they were originally imposed had no application whatever to present circumstances. At the time the Tea Tax was first imposed, in 1660, tea was a luxury. The new China drink, as it was called, was misunderstood; now it was a common article of food used by the humblest and poorest classes. In 1660 the duty imposed was 8d. per gallon of the tea actually made; they treated it as if it were wine. They charged on the gallon that was sold in the public-house. It was not till 1689 that this duty was repealed and the Customs Duty of 5s. a pound was substituted. Now it was of some little interest to notice that as far back as 1692 this high Customs Duty was brought down to 1s. a pound. Long after that, in 1784, after various vicissitudes, it got up as high as 119 per cent. It was Mr. Pitt, he believed, who reduced it to 12½, when the yield became about half what it was when at 119 per cent. In 1834 an experiment was tried which was interesting in connection with the agreement expressed between the late Chancellor of the Exchequer and the present Prime Minister— that it was impossible to put differential duties on the various kinds of tea, for Souchong was taxed at 3s., Bohea 1s. 6d., and so on, though the arrangement was not maintained. To come down to more recent times, in 1853 the late Mr. Disraeli and the present Prime Minister, by successive stages, brought the Tea Duty back again to 1s., as in 1692. Then came the Crimean War, in which it was raised again; but in 1863–4 the present Prime Minister brought it down once more to 1s. On that occasion the right hon. Gentleman told the House with unusual solemnity that, so far as he could look into the future, the reduction was a positively final measure. Hon. Members best acquainted with the right hon. Gentleman's usual course of action would not be very greatly surprised to learn that in the following year he himself reduced the duty to 6d. a pound. There it remained till two or three years ago, when the late Chancellor of the Exchequer reduced it to 4d. a pound, where it now remained. He hoped to see the day when that 4d. would be also removed. He would now ask what had been the effect of those successive alterations in the import duties on tea? The effect had been to change tea from being an article of luxury, the use of which was restricted to the few, into a common article of food in general use amongst the many. He thought that he might add, without being accused of preaching, or, if he might say it without offence, of adopting the methods of some hon. Gentlemen opposite, that the poor who were the largest patrons of tea as consumers were also the most deserving of the poor, and those whom it should be a matter of public policy to encourage. It appeared to him impossible to defend the imposition of this particular tax on the grounds of justice, and difficult even to do so on the grounds of expediency; but for hon. Members opposite, for the great Liberal Party, to defend this tax at all, ought to be, it appeared to him, almost impossible. It would be generally admitted that if there wore two things that hon. Gentlemen opposite asserted more than anything else before the country, those were that they were the friends, the staunch advocates of temperance, and the stern guardians of what was called cheap food. He should like to ask for whom they were now doing a service—was it the Temperance Party or the consumers of cheap foods?—when they systematically made or when they continued to make tea much dearer than it ought to be? That he should lay stress on this point was natural, remembering the utterances of right hon. and hon. Gentlemen at the last General Election, when in various quarters of the country the Tory Party were denounced for their supposed tendency towards the encouragement of drunkenness and the taxation of the food of the working classes. They could now, at least, point to the fact that it was to the Liberal Party that the country owed the re-imposition of this tax. He assumed that when the right hon. Gentleman and his friends had to prepare the Budget a question naturally arose how those £3,500,000 that were required were to be raised. No doubt the right hon. Gentleman felt that it would be a serious matter to propose any change of the large Revenue Duties raised on tobacco, though, so far as public policy went, something might be said for that. But hon. Gentlemen opposite were claiming many virtues, and, in fact, at the last Election took all virtue in the abstract under their special protection; and surely it was within the scope of their ingenuity to devise some tax a little less objectionable and a little less in sharp conflict with their own principles. He was not going to say that the working classes should not pay taxes; they ought to pay their share of the taxation of the country when they wore so largely represented in the Parliament of the country; but it was remarkable that in deciding how to raise this portion of their Revenue the right hon. Gentleman and his friends seemed to have said—"Let us tax the working man, and not only the working man, but the most deserving of his class. Do not let us catch him at the public-house and tax any of those deleterious compounds which we have been denouncing; we shall only get into further difficulties if we attempt legislation of that kind. Let us pay him a visit at the cottage, at his breakfast table and his tea table— And while the bubbling and loud-hissing urn Throws up a steamy column, and the cups That cheer but not inebriate, wait on each,' —let us read him a lesson as to the vanity of human wishes, and explain to him the difference between our professions at the time of a General Election and our actual practice when we are in the enjoyment of place and power." It was these reflections which had led him to stigmatise this tax as hypocritical and inconsistent. But he would lay more stress on the argument as to the principle on which this tax was based. He believed the principle to be entirely unsound. The late Chancellor of the Exchequer, who on general matters of taxation held, he believed, almost identical views with the present occupant of the Office, in a speech delivered a few years ago, said that the basis of our taxation was very narrow. He thought that was a remarkable utterance, which might well be laid to heart, and he thought that until the present system was changed many Chancellors of the Exchequer would have to admit that our basis of taxation was extremely narrow. But he would go further, and, using the word "narrow" in a different sense, he would say that the principle upon which our taxation was based was also extremely narrow. What was that principle? It was not only that no Protective Duties should be imposed upon foreign competing products for fear of injuring the foreigner, and not only that no Revenue Duties should be imposed on competing foreign products for fear of benefiting the Englishman, but that when by sheer stress of circumstances we were obliged to impose a tax of some sort on non-competing foreign products, special steps should be taken to see that it did not either injure the foreigner or benefit the Englishman. That appeared to him to be illogical and rather overdoing it, but it was the principle on which our taxation was based. Hon. Gentleman opposite often gloried in it, though he sometimes thought that their enthusiasm grew a little fainter with the advance, possibly, of education, and the still more rapid advance of Trades Unionism, and with the general march of events throughout what was called the civilised world. The civilised world took very singular and obstinate views of this question of taxation—views which were supposed to be confined to the stupidest of the Party to which he had the honour to belong. Now we actually allowed £65,000,000 worth of competing foreign manufactures to come into this country without paying any duty whatever. He did not see that that was particularly reasonable. They did impose a tax for Revenue purposes on certain non-competing products that came into this country, but he thought that it was a singular comment on freedom of trade, or what was called freedom of trade, that if the free-born Englishman in this free country —the home of Cobden and Bright—in this 19th century said that he would try to produce the same thing that was sent to us, and which we taxed for Revenue purposes, he would either be heavily mulcted, or, if he persisted in the practice, positively dragged to prison. What was passing in his mind was the ill-starred attempt of a few agriculturists in Kent a short time ago to produce tobacco. He was inclined to think it would have been better policy on the part of the Excise authorities of that day if they had allowed these enterprising gentlemen to proceed, for, to do them justice, the commodity which was produced was not of that kind and quality to encourage the public in investing largely in it. But he objected very much to the principle of their being fined for the benefit of the foreigner, and, in fact, to foreigners enjoying protection at the expense of the people of this country, at all events, to that small extent. The answer to all this kind of argument, which would first occur to anyone in a responsible position would be this—"How are you going to raise the Revenue? We must have this money, or it will upset our arrangements. If it is not voted we must have a change of Government." He was so sorry the hon. Member for Leicester (Mr. Picton) was still conspicuous by his absence, though they sometimes caught glimpses of him outside the doors of the Chamber. With great humility, he (Mr. Brookfield) would point attention to this fact: there were £65,000,000 worth of untaxed labour-competing foreign manufactured articles imported into this country at the present time. He mentioned that merely as an illustration, and as offering a fruitful source for experiments of the kind he had ventured to suggest in the interest of temperance and cheap food. Had hon. Members of that House examined recent Returns? They would find it was as he had said, that £65,440,000 worth of foreign manufactured goods were annually imported; and did the House realise that out of this large sum as much as £11,000,000 worth of silk was imported every year? What objection was there in the thing itself, or in the ordinary nature of things, or on political grounds, why silk should not contribute to the Revenue just as well as tea? Would it not be difficult to prove to an audience like the one which would assemble shortly at the Imperial Institute, tinged with a considerable Colonial element, that it was a sacred duty to tax tea but a crime to tax silk? He could not understand the extraordinary narrowness of mind which made politicians at the present time allow their fellow-men every conceivable latitude on religious, political, and other questions; but when they ventured to suggest a 10 per cent. duty on many millions of foreign manufactured goods, including silk, gloves, jewellery, and artificial flowers, they were regarded as outside the pale of rational society. He who ventured to hint at such a duty was looked upon, not only as eccentric, but as a sort of social leper, and was considered to be partially deranged. But such a man would only be doing what the largo majority of the human race were in the habit of doing. He would not trouble the House with a complete list of the articles which might be taxed, but would only say that if he were asked for an alternative suggestion he should point to the fact that to raise £3,500,000 they had only to put a tax of 10 per cent. on £35,000,000 of the foreign manufactured goods to which he had referred. Of course, there were many other alternatives. If there should ever be a Ministry which should include himself and several of his friends who sat near him, with sound agricultural views, he dared say they would astonish the world by the things they would propose in the way of taxation. He had purposely abstained from mentioning cereals; if he had mentioned anything with regard to cereals the old accusation about the loaf and cherished notions about cheap food for the people would all have been trotted out as if he had never dealt with all this as he had done. He could not help, however, reminding the right hon. Gentleman that the duty, or registration foe, or whatever it was called—the old wheat registration fee of 1s. per quarter —was taken off for no good reason whatever by the late Lord Sherbrooke. It did no one any harm whilst it was imposed, and it did no one any good when it was taken off. That tax at the present time would yield the respectable sum of £2,000,000, which could be deducted from the £3,500,000 Tea Duty. It was worth considering whether the reason which the late Mr. Lowe gave for taking off that tax—namely, that it tore away the last rag of Protection, was not a rather puerile and unbusiness-like reason. In connection with this question he ventured to hope—perhaps it was a vain hope on his part, but still he cherished the hope—that he might receive the support of some of the hon. Members opposite. Knowing most of them to be men of remarkable candour and consistency, he was only able to assume what they would do in the future by what they had done in the past; and some researches he had made into the pages of Hansard enabled him to see the course that some of them had taken. For instance, he found that the hon. Member for Northampton (Mr. Labouchere) said a short time ago in the House of Commons— The question is whether this is in itself a fair tax. I deny that the Tea Duty is a fair tax. The hon. Member for Northampton was not in his place to repeat his denial, and it was much to be doubted whether he would have repeated it if he had been. The hon. Member for Leicester (Mr. Picton) on a former occasion worked himself up into a state almost of frenzy, a state of religious enthusiasm, upon the iniquity of this tax upon the people's tea, and the hon. Member's peroration was of the most glowing kind, almost a model of eloquence. He concluded by saying— I invite all friends of temperance who do not think it fair that beer and tea should be taxed almost alike or much too nearly alike; I invite all genuine Radicals and all those prudent Conservatives who agree with me that a kindly Socialism is the best preventative of a fierce and destructive Communism, to vote with me on this question. There were the "prudent Conservatives" who had followed the hon. Member's advice; and if the hon. Member did not stick to his principles on the present occasion, they would be forced to the conclusion that he preferred his "fierce and destructive communism" to that "kindly socialism" which he used to patronise in his more youthful days. On the former occasion, even the Chancellor of the Exchequer gave a sort of benevolent countenance to this Motion against the Tea Duty, but he was then sitting on the Opposition side of the House. In commenting upon the Motion of the hon. Member for Leicester, the Chancellor of the Exchequer said— I feel in sympathy with a great deal that has been said by the hon. Member for Leicester "— that, of course, any Minister or ex-Minister would say—but the right hon. Gentleman concluded by saying— The Government hereafter will have to reconsider our whole system of taxation, and a good deal will have to be done in the direction indicated by the hon. Member for Leicester. He (Mr. Brookfield) should listen with great interest and respect to what the Chancellor of the Exchequer would say in defence of his taxation proposals, and he should watch with still greater interest the course which some of his followers would take upon it. Nevertheless, he should always adhere to the opinion that, apart from electioneering phrases and all that, to remove this taxation would be a sincere boon to the cause of temperance and to the general advantage of the working man. He had said that, before sitting down, he hoped to make it clear to the House that he was not one of those who thought the working man should pay nothing at all towards the taxation of the country. In his opinion, the tendency of the present day was to pamper the working man a great deal too much. It used to be said that taxation without representation was tyranny; he thought that representation without taxation was also tyranny, and that the working man with the great share of political power he now enjoyed should be asked to pay his fair share in maintaining the apparatus of civilised government. But he appealed to the Government for a less objectionable tax than this one on tea, and whatever the result of this discussion, he hoped that in the future they would see this tax entirely removed by the general consent of Parliament.

MR. H. R. FARQUHARSON (Dorset, W.)

had great pleasure in seconding the Amendment of his right hon. Friend. Among other reasons for being desirous to second this Amendment was the fact that the right hon. Gentleman the Chancellor of the Exchequer, in his Budget speech, expressed the opinion that he anticipated a small increase from the Tea Duties in the present year. He, himself, was interested in the Tea Duties, and he was very much struck with that expression of opinion by the right hon. Gentleman, because, in the last financial year, the amount of tea consumed showed a considerable decrease upon the amount consumed in the previous financial year. He was sure the right hon. Gentleman must know that during the first three months of this year—that was to say, January, February, and March—the amount of tea consumed in this country decreased by nearly 3,000,000 pounds. He observed the Chancellor of the Exchequer dissented, but he had to state to the right hon. Gentleman that he had obtained these figures from the Board of Trade Returns. The deliveries of tea for the first three months of 1892 were 52,158,000 odd pounds, and for the first three months of this year 49,300,000 odd pounds, being a decrease of 2,750,000 pounds, representing a loss of something like £50,000. He contended that under no system of finance could these Tea Duties be supported or even defended. If they were to have Import Duties at all, there were two plain principles upon which they should be founded. First and foremost, they should insist, as far as they were able, that the foreigner should contribute as much as possible of that Import Duty, and they should so arrange the Import Duties that they should really be an encouragement to British industries. But this Import Duty on tea fulfilled neither condition. On the contrary, it was so arranged that every penny of the £3,500,000, that was raised by this tax was drawn from the consumers of this country, and it certainly afforded no encouragement to any single British industry. He would venture to make a suggestion by which they could obviate this duty on tea. Supposing they transferred the Tea Duty to some article that competed with a British-grown article—say even upon wheat and wheat meal imported into this country, what would be the result? Last year the amount of wheat and wheat meal imported into this country was about £37,000,000 worth, and a 10 per cent. duty on that would put them in possession of the £3,500,000 produced by the Tea Duty. Let them suppose that the imposition of such a duty raised the price of wheat in this country by £3,500,000, where would the people of this country be worse off? They would, it was true, have to pay £3,500,000 more for wheat, but they would pay £3,500,000 less for tea, so that they could not possibly be worse off than they were before. They would be merely paying the same, but at the same time they would have a more prosperous agriculture, and consequently a more prosperous country. There was another important reason why they should consider this matter from the standpoint which he put before them. A great deal had been heard about Imperial Federation — even the Prime Minister, he believed, had expressed himself favourable to it—but how was it to be brought about? If there was one thing more certain than another it was that if it was desired to establish Federation between England and the Colonies —at all events, in matters of trade—they must treat the Colonies at least as well as they now treated foreign countries. But this was precisely what they did not do. Silks, satins, furs, and feathers were imported from abroad without paying a penny of duty, but tea from the Colonies paid an exorbitant—an almost vindictive—tax. The question had become one of Imperial interest within the past few years. In 1886 scarcely 30 per cent. of the tea imported was British-grown tea; but in 1890 70 per cent. was British-grown tea, in 1891 74 per cent., and in 1892 84 per cent. This tea did not come from China or the self-governing Colonies of Australia, which were quite able to look after themselves, but from India and Ceylon. India sent 112,000,000 lb. of tea, which had to pay a duty of something like £2,000,000. Was this fair to India, which they obliged to take their cotton free? It could not be contended that it was. Ceylon sent last year 62,000,000 lb. of tea, and the ships which carried the tea picked up en route fruit and silks and other articles of produce from foreign countries. The tea from Ceylon before it reached the consumer had to pay a duty approaching £1,000,000, while the foreign products came into this country free. These were strong reasons for the abolition of the Tea Duty. He had much pleasure in seconding the Amendment, and he hoped the Chancellor of the Exchequer would rise in his place, sacrifice his Budget, and save his patriotism.

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

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


I should be extremely happy to sacrifice my Budget if I could deal with the Tea Duty and many other duties besides; but I am afraid that, in sacrificing the Budget, I should have to sacrifice things very much more important than the Budget. The hon. Member for the Rye Division has challenged me to defend the Tea Duty, but it is not my business at all to defend that duty, and I do not propose to do so. If I had the means of now repealing the Tea Duty nothing would please me more than to repeal it. But the hon. Member must remember that the condition of things is not favourable to such a repeal. It might be done where there is a surplus and not a deficit. The hon. Member for West Dorsetshire, who seconded the Motion, says that his great objection to the Tea Duty is that it is a protective duty. Well, I confess that is not the ground upon which I myself would oppose the Tea Duty. On this occasion there has been more courage on the part of the Seconder than on the part of the principal, who has shrunk from proposing a duty upon corn. The Seconder has not shrunk at all, but at once proposes to substitute a duty upon wheat. I confess I am not prepared to throw over the Budget in order to propose a duty on wheat as a substitute for a duty on tea. Both hon. Members, with true orthodox faith in Protection, say that a duty ought to be put upon articles coming from abroad which were produced at home, and not on articles which were not produced at home. When they referred to the duty which is raised by putting 1s. or so upon corn they forgot to observe that the price of the commodity is only raised to the extent that the Exchequer is benefited, and that where a protective duty is put upon commodities produced at home all that is got is the money on the commodity that comes from abroad, and that no money is got from raising the price of the articles produced at home; but the consumer would have to pay infinitely more than the grain to the Exchequer by the tax put upon the imported article. I am not really endeavouring to convert the hon. Member for the Rye Division, for I know it is as impossible to convert the hon. Member as it would be for the hon. Member to convert me. Therefore, I think it is possible for us to agree to differ upon this question. Can the hon. Member seriously suppose that upon this occasion the House is going to repeal the Tea Duty or any other duty, and that the Government will undertake to impose either a duty of 10 per cent. on all commodities imported from abroad or, in deference to the bolder and larger view of the hon. Member for West Dorsetshire, a duty upon wheat? Those are the only substitutes which are suggested for the Tea Duty. As I have said, it is not at all necessary for me to defend the Tea Duty, or to say that I think it is a good duty to retain if there were any other duty to take its place. I must ask the hon. Members not to persist in this Motion, for they must see and feel that it is an impracticable proposal at the present time.


said, he was surprised that the Motion had not come from the hon. Member for Leicester (Mr. J. A. Picton). He had spoken and voted with him several times on similar Motions; and it was to be regretted that the hon. Member had no longer the courage of his convictions. Hon. Gentlemen opposite seemed to act not according to the merits of the subject under discussion, but according to which political Party was in power. The Liberal Party at the last Election won seat after seat in the agricultural constituencies by accusing their opponents of a desire to tax the food of the people, and by advocating a free breakfast table for the poor man. He looked forward now to Radical Members flocking into the Division Lobby on this question to redeem their pledges and vote against the Government. He protested against the attempt of the Chancellor of the Exchequer to make it appear that a tax on wheat was the alternative to a tax on tea. There were plenty of sources from which the revenue from tea could be derived. He should vote for the Motion as a protest against the mistaken fiscal policy of the Government. Those articles which did not compete with home industries should be admitted free, and the Exchequer should be recouped by taxes on articles which did compete with home industries.

MR. A. C. MORTON (Peterborough)

said, that the hon. Member suggested a tax on the food of the people.


Only on manufactured luxuries, such as silks and feathers.


said, that if a tax were imposed on silk, the agricultural industry, which was one of the largest in the country, would soon demand a tax on flour and wheat. He would rather have a tax on tea than on the food of the people. If they would show him how they could do without it at the present time he should be very glad to join in having the tax abolished. The only way to raise the Revenue which the Tea Duty supplied was to reduce Expenditure. Would the agricultural Members vote for a reduction of, say, £3,500,000 in the bloated Expenditure of the country? If they did—if they went with him in cutting down the Estimates—he would vote with them against the Tea Duty. To ask the House to vote against Her Majesty's Government simply for the sake of Protection was very absurd, and a thing Radical Members were not likely to be deceived by. They were pledged to a free breakfast table, and the duty on tea would be abolished directly a sufficient amount of money to compensate for the loss of the tax could be secured—and that might be secured, almost at once, by the exercise of judicious economy. As to the proposal to tax silk and other articles of foreign manufacture, he would say to hon. Gentlemen opposite, "If you are honest in your desire to protect British manufactures, protect them yourselves by refusing to buy or use any others. Buy silks of British manufacture—buy British wine; you will find it cheaper; it will not do you any harm, and you will be putting a stop to expenditure on goods of foreign manufacture." It was absurd for Tory Members to talk of Protection in the House when they had not even dared to mention it to their constituents at the General Election. And then they spoke of a "prosperous agriculture." If they wished to bring prosperity to that languishing industry let them get rid of the landlords, and hand the land over to the workers on the soil on fair terms. They would make it pay. [Cries of "Divide!"] Hon. Members were willing to allow 95 per cent. of the time of the House to be taken up with discussing Irish affairs; but they were unwilling to allow matters that concerned 35,000,000 of the people of England and Scotland to be discussed even for a short time. As this was a Motion not for the purpose of doing away with the Tea Duty on its merits, but for doing away with it for the purpose of Protection and taxing the food of the people, the hon. Member could not expect the support of the Radical Party. If a Motion were made to get rid of the duly and to replace it with some tax upon the wealthy classes, or to make up for its loss by a reduction in the bloated Expenditure of the country, he should be glad to support it. Let them, as advised by the late Mr. Cobden, give the Government a reduceed sum, and compel them to carry on the affairs of the country with it. He had no doubt they would be able to carry on those affairs efficiently even if the Revenue were reduced by £3,500,000.

Amendment negatived.

*MR. BARTLEY (Islington, N.)

said, he had intended to move an Amendment; but as that was no longer in his power, he would explain the object of it. The notice he had given was— That no system of taxation can be accepted by this House which does not secure that the larger incomes shall contribute at least an equal amount in the pound to the Revenue to that contributed by smaller incomes, and which does not impose a smaller rate of Income Tax on incomes derived from present industry to that imposed on incomes derived from realised capital. He had on many occasions during the past six or seven years brought forward this question on the Budget. He had done so, and had divided the House when his own Party was in Office. Therefore, he supposed he was fully entitled to bring the matter forward now that the Conservative Party was in Opposition. Hon. Members on both sides had agreed with the principle of his Amendment on several occasions, but he had not succeeded in hitting off the exact point. Sometimes his Amendment was considered to be too sweeping. Sometimes it was said that the principle was good, but meant a great deal of change; sometimes the proposal was criticised as only taking up one branch of the subject; and somehow or other there had always been a reason found for not voting for it, but he believed the real reason why hon. Members had not supported him in large numbers was that they did not wish to embarrass the Government. Well, this evening it would be an advantage that they could not go to a Division, and consequently could not embarrass the Government. His points were two. If adopted, they would strike very deeply at the roots of our fiscal system. They would so seriously affect the Budget and the present system of taxation, that he acknowledged they would lead to considerable difficulty and change in our fiscal system. He urged, first, that by our present system the larger the income the less that income paid in the £1 towards the Imperial Exchequer. That; was a proposition which was quite clear and distinct, and he rather gathered from some remarks of the right hon. Gentleman the Chancellor of the Exchequer the other day concerning the Budget that he did not altogether dissent from the proposition. The second point was that our system of Income Tax, by being the same in rate in incomes derived from realised capital as that derived from industry, was unjust and impolitic to all classes of workers in the country. If these two propositions were correct he would, he thought, have proved sufficient to show that the present general outline of our fiscal system was faulty; and that being so, however great the difficulty it might involve, the Chancellor of the Exchequer should not shrink from rectifying the evil at the earliest possible moment. To prove his first assertion—namely, that the larger the income the less it paid in the £1 to the Imperial Revenue. This country raised, roughly speaking, for Imperial purposes about £75,000,000 a year. Taking the whole income of the country from the highest authorities, such as Mr. Giffen, the late Professor Leone Levi, and others, it was computed that from earnings and professional salaries the amount received was about £1,300,000,000. Taking those figures, it followed that if the whole taxation for Imperial purposes were raised by Income Tax alone, every £1 would have to pay 1s. 2d. a year. He did not say that that was absolutely microscopically exact, but it was so near the mark that he did not think it would be disputed. It would be acknowledged that 1s. 2d. in the £1 was a larger sum to take from the man earning only £1 a week than from the man earning £3, £4, or a larger sum a week. But his contention was that they were taking, under the present system, more than 1s. 2d. from poor men, and less than 1s. 2d. from rich men with large incomes. If he could establish that, he would have shown that the present system was inequitable. Take two or three typical families. A family of five members, earning £1 a week, who drank and smoked in moderation, would pay about £3 18s. 9d. a year towards the Imperial Revenue, or a little over 1s. 6d. in the £1. This family, earning £1 per week, would pay to the Revenue 4d. in the £1 above the average if every person paid alike. This seemed to him a very startling result. He had estimated that a certain amount would be expended in alcohol, and teetotalers would say that this was a foolish way of spending money. He acknowledged that money could be better spent, but that was not the point they were arguing. They had to deal with the habits of the people, on which the fiscal system of the country was based. It might be said that the total abstainer did not pay anything like £3 18s. 9d. a year towards the Revenue. That was true. A family of five, all total abstainers and non-smokers, earning £1 a week, would probably only contribute about 4d. in the £1 towards the Revenue. Such families as these, no doubt, existed, and much had been done to promote their welfare; but if the total abstainers had their own way, and induced every family to adopt that system, the Chancellor of the Exchequer would of necessity have to put some other tax on these virtuous people. But he thought they might leave total abstainers out of consideration altogether, because they were so few. Taking the case of a family earning £2 a week, they would contribute something like £6 0s. 5d. to the Imperial Exchequer, or just about 1s. 2d. in the £1. The man with £3 a week, if a moderate man, would contribute rather less; therefore, the £1 a week man would pay to the Exchequer more per £1 out of his £1 than the £2 a week man, and the £2 a week man would pay more than the £3 a week man. Of course, if they went below £1 a week they would come to an even greater anomaly. It seemed to him that these facts showed that the system was not a correct one, but when they came to the family earning £500 a year, the anomaly continued. Assuming that moderate amounts of beer, wine, tobacco, and so forth were consumed, the family would pay to the Exchequer £28 17s. 6d., or exactly 1s. 2½d. in the £1. If the amount he calculated was too little, of course the anomaly became greater. It was said that in the case of a family of this class allowance ought to be made for servants and for guests entertained. He did not think they ought to consider them at all. because if the servants lived in the house their housing and keep were part of their wages, and they contributed their share to the Revenue. In the same way, if a man entertained guests one day they entertained him another, and thus the effect was neutralised. Then take the case of a man with £10,000 a year. If he paid 1s. 2d. in the £1, it would amount to £583; but on the most liberal estimate all he contributed to the Imperial Exchequer was £400 a year, which would be 10d. in the £1 as compared with the man who earned £1 per week, and who contributed 1s. 6d. in the £1. If they went above this and took a man with £100,000 a year, the anomaly was still greater, but of course there were very few indeed of those persons. Looking at these matters in the most superficial manner, it was clear that the man who earned something like £1 a week paid, roughly speaking 1s. 6d. out of that £1 to. the State; the man who earned £2 paid 1s. 2d.; the man who earned £500 paid 1s. 2½d.; the man who received £l0,000 paid 10d.; and the man receiving between £10,000 and £100,000 paid something a little more, but nearly equivalent only to the present Income Tax—6d. or 7d. in the £1. If his calculations were correct—and he should watch with some interest to see if the right hon. Gentleman the Chancellor of the Exchequer could refute them—it was clear that the present basis of taxation was wrong. The richer a man got the less in the £l he would pay to the Exchequer, and of course it was immensely harder for the man who earned £1 a week to pay 1s. out of that £1 than for the man who earned £10 a week to pay 10s. It therefore seemed to him that, although the labour of altering the system would be very great and serious, still he thought every impartial person would acknowledge that somehow or other the present system did work out in this way, and that the richer people did not pay as much as they should. No doubt that House, as a rule, was composed of rich men; therefore they ought to be scrupulously careful to see that there was no cause or complaint in regard to this taxation. His second point was that the man who derived his income from his own industry, and the man who derived his income from invested capital, stood on a different footing. He had often called attention to the anomaly which existed in regard to these two classes of taxpayers. The person who earned his income by his daily labour had to provide for many things which the other need not provide for. He had to provide for illness and accidents and for his family in the event of his death. The individual who had money in the Funds or in securities had not to do that, therefore he was saved that amount of practical taxation. He was sure there was a general feeling in the House that some change should he made in the system which taxed these men equally. Something should be done to alter the system by which the industrial class now paid exactly the same as the class deriving their income from spontaneous sources. He had been accused of advocating a graduated Income Tax. He objected to that—not from theory, but because he was convinced that it was impossible to calculate it or work it out. It was attempted in America, but he thought it was a bad system there. Every man declared him- self to be a so many thousand dollar man, and he was rated at the amount at which he returned himself. In America the names of the taxpayers and the incomes they professed to have were published, but people in this country would object to that. Such a system would lead to misstatements and awkwardness, and, to his mind, it would be better to have an Income Tax on a different scale for those persons who derived their incomes from industry and those who derived them from capital. He would not deal with the question of the large number of persons earning small amounts who paid Income Tax, for that they had gone into the other day, and he thought the right hon. Gentleman the Chancellor of the Exchequer had agreed with him in his remarks. What he was driving at was this: that the House should recognise that the time had come when it should be distinctly laid down that there should be two scales of Income Tax for the two great sources of income. Years ago the amount derived from incomes from investments was comparatively small, land being the only source of income. But now, with the enormous accretions of savings in all parts of the world, incomes derived from securities of all sorts—Railways, Colonial Investments, and Companies—amounted to several hundreds of millions, that the time had come when they should separate the two great branches of taxable incomes. He did not wish to lay claim to this suggestion as a novelty. It was not a novelty in any sense; it was an old story. No doubt there were difficulties in the way; but he thought that at the end of the 19th century we ought not to be prevented from doing what was right simply because it was difficult. Lord Brougham, when the Income Tax was introduced, spoke in favour of this distinction, and in 1842 an Amendment was moved to omit from the tax professional or trade employments or avocations, which Amendment was supported by Lord John Russell and Mr. Hume. The Chancellor of the Exchequer would say that the thing was difficult to do in 1842, and it had been as difficult to do it over since, and that a great number of persons had turned their attention to it without avail. Still, he did assert that it was obviously so fair and just that there should be a difference made between those two classes of income, that the Chancellor of the Exchequer should finally take it in hand. As regarded the very poor payers of Income Tax from capital, some relaxation might be made at the bottom of the scale, as was done now, in fact, in regard to all incomes. When objection was made to dividing incomes into two classes, it should not be forgotten that there were several scales at the present time. The Chancellor of the Exchequer would agree with him that Schedule B was not the same as the others, nor was it always the same in different parts of the country. When the Income Tax was 6d. in the £l, England paid 3d. and Scotland and Ireland 2¼d. under that Schedule; and all they wanted was a fresh scale, chiefly in Schedule D, so that there should be two scales corresponding to the two branches. He had dealt with this question in a very hasty way, as he did not wish to delay the House, but he had desired to put these facts before the House as he had done in former years. The matter was well worthy of consideration. The taxation of the country must become larger and larger. The Chancellor of the Exchequer had pointed out that the tendency was for it to increase. We were increasing our Expenditure in many directions, and were talking about giving pensions to this class and the other. He did not say he objected to that, but the fact remained that we were increasing our Expenditure. The richer people were, at the same time, paying less than the poorer, which showed that there was something wrong in our fiscal system. He thought, also, when he had shown that those persons who had to work for their living, and had nothing to depend upon but their own health and strength, were taxed for the Income Tax exactly the same as those who could properly spend every penny of their income, as it continued after their death, he had demonstrated that two serious anomalies ought to be taken in hand. Although he fully acknowledged that a period when there was a deficiency in the Revenue was not a very happy one for making a large change in taxation, he thought the House should, year by year, try to educate public opinion on the subject with which he had been dealing. If the basis he had advocated were adopted, he believed it would tend largely to the stability of the country because any injustice in taxation, especially in these days of a widely extended public Press, was very apt to lead to universal discontent.


I think the House has listened with interest and instruction to the speech of the hon. Member, who, as we all know, has taken a great and intelligent interest in these questions of taxation. He has raised two points to-night. Upon the first I can only express my entire concurrence in the view he has stated. I have not had the opportunity of examining the figures upon which he bases his conclusion, but I have arrived at the same opinion as he has expressed— namely, that the richer people in this country pay less in proportion than the poorer people towards taxation. That is a very important proposition, and the fact that it has come from the other side of the House is, I think, of good augury for financial reform in this country. There is no doubt whatever that the larger percentage of the Revenue of this country is raised by indirect taxation, and the great burden of indirect taxation must necessarily fall on the poorer and humbler classes of the community. On the second point I am afraid I cannot go with the hon. Member altogether so completely. As he said, it is a very old story—a story as old as the Income Tax itself. The subject was raised in the days of Pitt and also in the time of Sir Robert Peel, and the hon. Member referred to a statement made regarding it by Lord Brougham. It was also the subject of a memorable Parliamentary conflict in 1853. Mr. Disraeli, in his celebrated Budget of that year, introduced the principle of a distinction between the incidence of Income Tax upon capital and that upon what are called industrial earnings. On that occasion the present Prime Minister (Mr. W. E. Gladstone) delivered a speech which was memorable in the history of finance, and since that time the principle of making such a distinction has been practically abandoned by all responsible financiers in this country. It has never been revived by any responsible Government or any responsible Opposition since 1853, and that, I think, is a strong argument for saying that the principle has been found incapable of practical application. The hon. Member opposite, however, had a predecessor who made the question his own. The late Mr. Hubbard, a most respected Member of this House, constantly brought the question forward, and one occasion he moved the Adjournment of the House, and discussed it at great length as a matter of pressing and urgent importance. The hon. Member opposite (Mr. Bartley) brought the subject forward in 1891, and was answered by the late Mr. W. H. Smith in a speech replete with that commonsense which was one of marked characteristics. I have really very little to say, except to concur in the arguments used in that speech. The hon. Member said truly the other night that the persons affected by the Income Tax who increase in numbers are those at the bottom of the scale. But that shows not that the persons at the lower end of the scale are descending in social position, but that they are rising. Numbers of people who have not been affected by the Income Tax are rising into the regions of the tax. The hon. Member has spoken to-night of taxing people who have only £3 a week, but no man with that income is touched by the tax.


I merely referred to those persons in connection with smaller incomes paying a larger sum in the £1 than larger incomes.


Certainly, but I wish to point out that a man must receive more than £3 a week, or £150 a year, before he is affected by the tax. And that is not all, because the man with £200 a year does not pay on the whole sum, but only on £80 a year, and the man with £300 a year pays only on £180. If relief is to be given under the Income Tax, which always has been, and always must be, a very unequal tax, it ought, in my opinion, to be given in the direction in which it has hitherto been given — that is to say, by raising the point of exemption or, at all events, by raising the point of abatement, which is now £400 a year. I think that in a flourishing condition of finance it would be possible to raise that point. There are many reasons why the suggested distinction between incomes derived from capital and those derived from industrial sources cannot be made. The matter was referred to a very powerful Committee in 1861, and the Chairman of that Committee, Mr. Hubbard, brought forward a plan for dealing with the distinction. That Committee included the present Prime Minister, Mr. Cardwell, Mr. Lowe, Sir S. Northcote, and many other experienced men; and after dealing fully with that plan for differentiating between the two classes of income, they reported that it presented no basis for a practicable and equitable readjustment of the incidence of the tax. The Committee added that they— Felt so strongly the danger and ill-consequences to be apprehended from any attempt to unsettle the present basis of the tax without a clear conception of the mode in which it is to be reconstructed, that we are not prepared to offer the House any suggestion for its amendment. That is now more than 30 years ago, and since the Report of that Committee no one who has had the responsibility of dealing with the matter has thought it possible to carry out the proposal which is now made by the hon. Member. There is a preliminary objection to making that distinction which I think all responsible financiers regard as almost fatal. You cannot make the funded interests of the country subject to such an exception. It is a necessary consequence of the obligations of public credit that the Funded Debt should not be made a subject of exceptional taxation. The result is, that you would have to except the Funded Debt from the operation of the differentiated tax, and it will be seen that this could not be practically carried out. There is another objection to the proposal. It is no doubt very seductive to say that a man who derives his income from industry and trade ought to be taxed at a lower rate than one who derives it from what are called spontaneous sources. You may take a person deriving a small income from industry and a person deriving a very large income from capital, and you may say it is very unfair that both should be taxed on the same basis. But just reverse the process. Supposing you were to say that a business like Guinness's ought to be taxed at a lower rate than the income of the half-pay officer or the widow with £300 a year derived from invested capital? Then, again, there is another difficulty. How much of the income of a business is industrial, and how much is due to capital? In a large concern in which a great capital is invested how are you going to distinguish between the profit which is due to the personal industry and intelligence of the proprietor and that which is due to the invested capital? You would have to analyse the profit and tax part on one scale and part on another. I do not see how we are to overcome that difficulty. I have already pointed out that by means of the abatement the difficulty which the hon. Member is seeking to put an end to is already met to a certain degree. Mr. W. H. Smith, in the speech I have referred to, pointed out that there is another compensation. He said, speaking of the Death Duties— An impression obtains that this realised capital is in the possession of the rich people. I am perfectly ready to acknowledge that there are a great many rich people who possess a large amount of realised capital, but in dealing with it we must bear in mind that the enormous majority of owners of realised capital are poor people. If that is so, the hon. Member will see that it is absolutely carried out by both the duties on realised capital. Then he goes on to say— If you lay down the principle that you are to tax realised capital at the rate exceeding 1s. in the £1, at which realised capital is now paying, you must consider the ease of those who are dependent upon very small incomes derived from realised capital, and I will venture to suggest that there is hardly any class in the community who deserve more consideration, and, I may say, commiseration, than the class of poor persons with a small income only derived from realised capital. There is another compensation to which I should like to call hon. Members' attention. I have here some extraordinary figures, and hearing in mind the importance of this question, I think I ought to read them. I do not for a moment maintain that the Income Tax is, or could be made, an equal tax in its incidence, and I want to point out the difficulties lying in the way of redressing its inequalities. The net amounts upon which Income Tax is levied are—under Schedule A, £177,000,000; under Schedule 15, £25,000,000; under Schedule C, £41,000,000; under Schedule D, £306,000,000; under Schedule E, £36,000,000. Schedule A, generally speaking, is concerned with realised income or realised property. Schedule C is the Schedule relating to incomes derived from the funds and other sources of that character; Schedule E is the Schedule of salaries and incomes of that kind, and Schedule D relates to incomes derived from trades and professions and from the profits of public companies and foreign investments. It is a curious fact that under Schedule D more than half of the tax is paid on what may be called spontaneous incomes, and is money derived from investments in public companies and from foreign investments; and of the money appearing as derived from trades and professions a very large amount comes from great industrial enterprises, such as Guinness's. It is impossible in cases of that kind to determine which are properly to be regarded as industrial incomes and which as incomes derived from capital. Under Schedule D, speaking roughly, two-thirds of the whole tax are really a charge upon capital and not upon earnings. With regard to the abatements that are allowed, the figures of the different Schedules show, when examined, that there is a greater indulgence in the case of industrial incomes than in the case of incomes derived from capital. In the one case there is an abatement of £40,000,000, as against an abatement in the other case of £85,000,000 on a very much smaller amount. There is a good deal done in the direction suggested by the hon. Member in the relief of men at the lower part of the scale, there being an indulgence in favour of industrial incomes, as compared with what are termed spontaneous incomes derived from capital, but I am not at all prepared to say that there is not more that could be done and ought to be done in that direction, when the finances of the country allow. I hope the hon. Member will see that I have endeavoured to appreciate his argument and to give my reasons for the policy being adopted in regard to this question.


said, that inasmuch as no amount of investigation could make the Income Tax a fair tax, the country had a right to complain that in a time of perfect peace, and when there was no special pressure upon the taxation of the country, the Government proposed to raise the Income Tax. The Chancellor of the Exchequer had spoken of the deductions made in favour of industrial incomes; but he would like to point out that no deductions were made on property of a perishable kind. There were many industries carried on for a limited number of years, in the course of which the source of income was completely worked. If a man invested his capital in a business of that kind, he i ought to be allowed a reduction from the gross profits, in order to recoup himself for his capital outlay; hut, with the exception of the case of machinery, no such deduction was allowed. He hoped the time would come when some Chancellor of the Exchequer would endeavour to remove the hardship which was caused by no deductions being made on profits diminishing in the process of trade. In conclusion, he could only again express his regret that enterprise should be encouraged by an increase of the Income! Tax at a time when trade was had and depression had set in.

Question put, and agreed to.

Main Question put, and agreed to.

Bill read a second time, and committed for Thursday.


When will the Committee be taken?


On Thursday.