COMMITTEE.

HC Deb 04 May 1893 vol 12 cc145-68

Bill considered in Committee.

(In the Committee.)

Clause 1 (Import Duty on tea).

*MR. A. C. MORTON (Peterborough)

said, he had given Notice to move the rejection of this clause, but he was well aware that the Chancellor of the Exchequer could not afford to do away with the Tea Duty. Personally, he should have preferred that he had done that and increased the Income Tax. But the expenditure might have been reduced by £3,500,000 if the right hon. Gentleman had had the courage to do it. He trusted during the present Session to give the right hon. Gentleman many opportunities of voting with him for the reduction of Expenditure. It might be said that the Chancellor would not have money if the duty were abolished on tea; but that was not his (Mr. Morton's) business. He (the Chancellor of the Exchequer) could get money some other way. This was his business: the Liberal Party were pledged to do away with this tax, and, for himself, he was resolved to carry out the Newcastle Programme as far as he could. He hoped that early next Session the right hon. Gentleman would be able to announce that he intended to do away with the Tea Duty altogether.

THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT,) Derby

Like the great Don Ferdinando, we can "do no more than man can do." I cannot repeal the Tea Duty in the face of a deficit of £1,500,000. I am extremely anxious to reduce the duty, but my hon. Friend must feel that in the circumstances of the time it is impossible to take the course he suggests.

MR. PICTON (Leicester)

said, the Government had pledged themselves to give the foremost place to the Government of Ireland Bill, and when that pledge was given they knew what they were going to do. The words of the Chancellor of the Exchequer with reference to this and other reforms in the Budget were as satisfactory as they could expect from any Minister in his responsible position. The right hon. Gentleman was in favour of imposing further burdens on the rich and of relieving the burdens on the poor; and with these pledges he thought the Committee, in present circumstances, ought to be entirely satisfied. Next year, however, they would expect from the Chancellor of the Exchequer one of the greatest Budgets brought forward for many years.

DR. CLARK (Caithness)

did not agree with his hon. Friend. The difficulty would not be in carrying Home Rule through the House, but in carrying it before the country. If the Liberal Party sacrificed everything for Home Rule, and appealed to the country afterwards, he was afraid the appeal would not be favourably responded to. The Government would be told that the old story was being repeated—a Liberal Government came into power and did nothing to give effect to its opinions. He wished to point out the inequality of taxation in the Death Duties, and how the differentiation was in favour of realty and against personalty—

THE CHAIRMAN

Order! The hon. Member is wandering from the point before the Committee.

DR. CLARK

said, if he was ruled out of Order he would resume his seat at once.

Clause agreed to.

Clauses 2, 3, and 4 agreed to.

Clause 5 (Repeal of certain exemptions from the Stamp Duty on receipts).

MR. E. B. HOARE (Hampstead)

said, he would like to have information as to the meaning of this clause. It was an innocent-looking clause, but, somehow, it appeared to him to be somewhat revolutionary in practice.

SIR W. HARCOURT

Anew practice has arisen within the last year or two of cheques having attached to them a receipt in regular form, acknowledging the receipt of the money. Under cover of the Act of 1891 those receipts are headed, "No stamp is required with this receipt," and the consequence is that the receipts escape the stamp. I have consulted several bankers on the subject, and they agree that this evasion of the stamp ought to be stopped. In old days these exemptions arose when the charges were very much higher. When the exemption from a receipt stamp for a cheque was first allowed in 1804 on bills of exchange, cheques were subject to an ad valorem stamp beginning at 8d. and rising to 7s., but cheques now only pay 1d. Receipts were subject to an ad valorem stamp rising from 2d. to 5s., and now they are at Id. The hon. Member, I am sure, would not desire to see any system established that would evade the very moderate receipt stamp of Id. The endorsement upon a cheque payable to order is a necessary part of the cheque, and is not a receipt which would require a stamp.

MR. E. B. HOARE

said, he was perfectly satisfied with the explanation. He had not the least desire to countenance any evasion of the law; but he wished for an actual legal interpretation of the words, which appeared to him to be very wide. Railway dividend warrants, which were drawn with a place for the signature of the proprietor at the bottom, up to the present time bore an ordinary Id. stamp, and were paid at once. He imagined that the Railway Companies considered they had got a receipt, but the matter, which was one of very great importance, required perfectly clear legislation.

SIR W. HARCOURT

I hope the hon. Member will take it from me that the endorsement on a cheque payable to the order of the payee is not a receipt. It is a part of the order to pay which appeared upon the face of the cheque.

MR. E. B. HOARE

said, he held in his hand an ordinary stamp which was put upon cheques and other documents passing through the Clearing House by the banker who presented them. He asked whether that was a receipt?

MR. COHEN (Islington, E.)

, said, he thought the House would be entirely in sympathy with the Chancellor of the Exchequer in desiring to contribute in no way to the evasion of the modest Id. receipt stamp, but he did not believe that the right hon. Gentleman contemplated that a banker's name across a cheque that he had received money in a Clearing House ought to be hereafter subject to a duty which had never before been chargeable upon cheques. If he was right in that, he would ask the right hon. Gentleman to consider whether the words in the Bill would not require alteration so as to make the point clearer?

MR. A. G. H. GIBBS (London)

said, he thought it ought to be made clear that receipts written upon bills of exchange and promissory notes did not require a stamp, for if they did it would be very inconvenient.

MR. BARTLEY (Islington, N.)

said, the Chancellor of the Exchequer might be aware that cheques drawn to order and endorsed were constantly used in the Law Courts to prove payment. He considered that the clause under discussion might be so interpreted that they could not be hereafter used in that way without an additional 1d. stamp.

THE SOLICITOR GENERAL (Sir J. RIGBY, Forfar)

It is quite true that endorsed cheques are used as primâ facie evidence that they come into the hands of the payee, but they are not receipts, although they may continue to be used as heretofore. It is only receipts properly so-called that are met by this clause.

MR. BARTLEY

said, the clause ought to contain a statement to that effect?

MR. FORW00D (Lancashire, Ormskirk)

Will the right hon. Gentleman say whether transfers and conveyances can be properly receipted without a 1d., stamp?

SIR W. HARCOURT

Ordinary conveyances in the body of the deed acknowledge the receipt. For some reason or other there is also endorsed upon the deed a receipt for money. Upon the acknowledgment in the body of the deed no additional stamp is required; but if people choose to write upon the deed a separate acknowledgment, then, no doubt, a 1d. stamp is required. The intention of the Government is to meet the case of evasion.

MR. COHEN (Islington, E.)

said, that in the City there was not the slightest desire to countenance, in any way, an evasion of a legitimate duty —of which alleged evasion he heard for the first time to-night; but, as the right hon. Gentleman must know, it was not easy to compute the millions affected by the stamp put across a cheque by the bankers. He accepted the assurance of the right hon. Gentleman and the Solicitor General that the receipt did not require a stamp, but, inasmuch as there was a doubt on the subject in City circles, and, inasmuch as apparent evasion had been, to a slight extent, resorted to, he thought the City would welcome the concession of the right hon. Gentleman, who was well advised in undertaking not to press the clause.

MR. A. G. H. GIBBS

thought that, as the clause would be open to misconstruction, it would be well to withdraw it.

MR. E. B. HOARE

said, he should make no objection if the right hon. Gentleman would undertake to reconsider the matter so as to introduce a fresh clause in the Bill on Report. He gratefully recognised the right hon. Gentleman's offer to withdraw it; but if it could be so modified as to make its meaning clear, not only to the House, but to Her Majesty's Judges, be should be grateful.

SIR W. HARCOURT

The question as to the Clearing House raises up a doubt. I do not know whether the stamp means a receipt for a balance of money, or that the cheque has been received. If it is a receipt for a cheque it is clear that it would require a stamp, but if for a balance due the case would be different.

MR. E. B. HOARE

said, that every banker put the stamp "received" on the cheque when he sent it to the Clearing House. But he did not consider it a receipt for the money. The paying banker was at liberty to return the cheque.

MR. S. EVANS (Glamorgan, Mid)

hoped the Chancellor of the Exchequer would postpone the clause, because it was clear that the right hon. Gentleman had carried the matter further than had been intended by those who had drafted the Bill. The only cases in which it appeared to him necessary 1o have a receipt were these:—formally in the body of a deed it might have been recited that the whole of the purchase money had been paid, but, as a matter of fact, only an instalment might have been paid. But the ad valorem duty was paid on the amount of the purchase money, and it could not be intended that besides that there should be an additional receipt stamp. The Chancellor of the Exchequer had not informed them whether there had been any decision in a Court of Law as to this question. If there had been there would be no object to serve in following the course provided in the Bill.

SIR W. HARCOURT

As it is desirable that the Bill should pass this week, I would suggest to hon. Gentlemen opposite that they should allow the clause to pass through Committee. I will have the matter investigated tomorrow; and if I am not able to satisfy the Committee on the subject, I will undertake on the Third Reading to recommit the Bill in order to leave out this clause.

Clause agreed to.

Clause 6 (Income Tax).

DR. CLARK

said, he had an Amendment on the Paper to reduce the Income Tax from 7d. to 4d. on incomes under £500 a year, and to impose a graduated Income Tax on incomes above that amount, rising to 2s. in the £1 on incomes above £10,000. He proposed only to move the first part of the Amendment. Last year the hon. Member for Islington (Mr. Bartley) took a Division in favour of a differential Income Tax by which unearned incomes would pay more than earned incomes, and small incomes would pay more than larger ones. This year he (Dr. Clark) found it difficult to draft an Amendment to differentiate because A, B, C, D, and E were so mixed up; but the question of graduation was clear, and he hoped to take a Division on it. The Chancellor of the Exchequer would require to do something in this matter if he wished to be Chancellor of the Exchequer again. He must carry out the wishes of the people to whom Parliamentary powers had been given, and who were desirous of doing what their predecessors in power had done to lighten their own burdens. Formerly, we were ruled by an oligarchy which used to look after its own interests; but we had now become a democracy, and the problem was how to distribute taxation fairly amongst all classes. We were unable to have ad valorem; and so far as the indirect taxes were concerned, the poor paid far too much. Everyone admitted that. The late Chancellor of the Exchequer had admitted it. He had attempted to put an ad valorem, duty on higher class wines, and he had to take it off. It was difficult, as he had said, to do this, the law being evaded and the Revenue losing a great deal of money. They ought to try and make the burden lighter on the lower middle classes. He desired to see the Liberal Party become democratised on these matters. He would suggest that those people who derived their incomes from Stocks and Debentures should make their own returns in future, and should not have the Income Tax deducted by their bankers as at present. This would enable the Income Tax Commissioners to comply with the terms of his Amendment.

Amendment proposed, In page 2, line 38, after the word "Act," to insert the words "on incomes under five hundred pounds the duty of four pence, on incomes from five hundred pounds per annum to one thousand pounds per annum the duty of sixpence, and on larger incomes."—(Dr. Clark.)

Question proposed, "That those words be there inserted."

SIR W. HARCOURT

I rise to Order. I submit that a proposal to increase taxation cannot be moved by a private Member. The latter part of the Amendment seems to me to be out of Order.

THE CHAIRMAN

That is so in regard to the latter part of the Motion. I have only put that part which is in Order. The Amendment stops short at the duty of 7d., so that in no part of the Amendment before the Committee does the hon. Member propose to increase taxation.

MR. BARTLEY

Would that cut out the Amendment down in my name?

THE CHAIRMAN

I do not think so.

*MR. A. C. MORTON (Peterborough)

said, that what he wished to insist on was that the Liberal Party were pledged to a graduated Income Tax. It was all very well to tell them that the particular way they proposed to raise the question was out of Order. He did not care so much about that. All he wished to do was to impress on the Government that they were pledged to institute a graduated Income Tax; and although they might be out of Order in the way in which they sought to do that, it did not matter much. ["Hear, hear!"] Hon. Gentlemen were cheering too soon. He said it did not matter much, because it was the duty of the Chancellor of the Exchequer not to object to the way in which the Amendment was put down, but to put it down the right way himself. If he understood the matter rightly, that was what they paid a Chancellor of the Exchequer for. When the Chancellor of the Exchequer endeavoured to do that they would not question the order of his Motion, but would endeavour to carry it in accordance with the principles and pledges of the Liberal Party. It was admitted by everybody that wealth ought to pay a larger share of the taxation of the country than it did at present; that larger incomes ought to pay more; and that, consequently, there ought to be a graduated Income Tax. He had listened with pleasure to the Chancellor of the Exchequer the other night as to another part of the matter, and he was sure the right hon. Gentleman had made a very useful suggestion. No doubt there were difficulties in the way of imposing a graduated Income Tax, but those difficulties ought not to be beyond the intelligence of a Liberal, especially of a Radical, Chancellor of the Exchequer. The right hon. Gentleman might say that he had Jingo Colleagues to deal with in the Cabinet, and that they would not allow him a free hand; but he (Mr. Morton) wanted to assure the right hon. Gentleman that however it might be with the Cabinet, at any rate he would have the full support of the Radical Party. The people of the country were strongly of opinion that now that the Government was in the hands of the Democratic Party something should be done for them. [Laughter.] Hon. Gentlemen might laugh, but when they were facing their constituents they did not laugh. He did not wish to drive the Tory Party altogether out of existence; but if they desired to exist they must give way to these demands, and assist the Radical Members to obtain a graduated Income Tax and other reforms. The Tory Party might rest assured that they would never get back to power without yielding to these demands. he did not know whether the right hon. Gentleman the Chancellor of the Exchequer had the figures before him which would show what would be the result of a graduated Income Tax upon the Revenue; but if he had, he (Mr. Morton) should like to see them. The right hon. Gentleman said that he had no time to deal with these matters. No doubt they had got to go on with the Homo Rule Bill and finish it, and there was no one in the world more anxious to finish it than he was.

An hon. MEMBER: When?

MR. A. C. MORTON

said, an hou. Member asked "When?" Well, next week. That would give full time for an honest discussion of the Bill. But the people of this country, although willing to do justice to the Irish people, required something for themselves. They required, among other things, that the taxation should be placed upon a fair basis. Up to the present time it had never been fair. The working and industrial classes had always been compelled to pay a larger share of the taxation than the wealthy classes, and they wanted that remedied as soon as possible. They now had a Chancellor of the Exchequer about as Radical as any Member of the Cabinet—

An hon. MEMBER: That is not saying much.

MR. A. C. MORTON

said, an hon. Member remarked "That is not saying much," but he (Mr. Morton) thought it meant a good deal. He hoped that when Radical measures were pressed forward the right hon. Gentleman would be ready to support them. They were entitled to expect from a Radical Chancellor of the Exchequer who adhered to the Newcastle Programme that the incidence of taxation would be altered so as to make it fair to all parties. No doubt the right hon. Gentleman was quite right in saying he had not yet had time to carry out his pledges; but if he could assure the House that he had all these matters before him, and would give his best attention to them, and would endeavour to discover a plan to carry out the object of the Amendment, it would be a source of satisfaction to the whole Radical Party.

SIR W. HARCOURT

The hon. Member is a little hard in imposing upon me the task of discovering a plan for carrying out a satisfactory policy which the hon. Member is unable to discover for himself.

*MR. A. C. MORTON

said, that he proposed a plan, but the right hon. Gentleman objected to on the ground that it was out of Order.

SIR W. HARCOURT

I am afraid it is out of Order; but as to the remarks of the hon. Gentleman, and his advice and that of his friends, I must take them in good part, because we know that they only chastise those whom they love. I am sorry the hon. Member's Amendment is out of Order, because the magnificent sum he would make a present of to the Exchequer would about equal a 2s. Income Tax on incomes above £10,000, and a larger sum on those above £50,000. But, unfortunately, the only part of the Amendment which would benefit the Treasury is out of Order, and that the only part of his proposal that is in Order is that which will tell against it. I think that is quite enough answer to the invitation to agree to this Amendment. I have no objection to the principle of graduation; I think it is just. I agree that the Death Duties ought to be altered, but the reason why I draw a distinction between them and the Income Tax is the different way in which they are collected. Under the Death Duties, you can ascertain the whole value of a man's property; but when you collect the Income Tax, you do not ask a man the value of his whole fortune. If a man has so much to receive in the form of dividends from the London and North-Western Railway, say, you deduct the Income Tax; yon deduct it also in the case of Consols, and, in the case of professional men, four-fifths is collected at its source. I would, therefore, ask hon. Gentlemen to consider how, if they graduate the tax, they are going to collect it at the source? You must assess it at the highest rate from every- body. You must assume that a man has got a higher income, and you must collect the tax at the higher rate. That is impossible, for it would cause great vexation and inconvenience. You would make a man pay at the higher rate, and then apply for a return of the overcharge. I have no hesitation in saying that if you attempt to collect the Income Tax by calling upon each man to disclose the whole of his fortune, you will lose a very large proportion of the tax. That is the reason that has prevented the graduation of the Income Tax, and I hope I have made that plain to the House. That is the practical reason, quite apart from any heroic objection to the proposal of the hon. Member.

SIR J. FERGUSSON (Manchester, N.E.)

said, the remarks of the Chancellor of the Exchequer were directed not so much against what the hon. Gentleman proposed as against the general principle of a graduated Income Tax. He had given excellent reasons against a graduated Income Tax, but his observations did not apply to the proposition to extend the deduction from incomes of £400 to incomes of £500. Hon. Gentlemen on the other side indulged in conventional sneers against the Tory Party on this question, and, therefore, it might not be out of place to remind them that it was due to the Tory Party that the Income Tax was levied at a reduced rate on incomes of under £400. It was Sir S. Northcote who raised the incomes charged at the reduced rate from £300 to £400. That ought to relieve the Tory Party from the charge of indisposition to relieve the poorer part of the community from this impost. Nobody liked to be taxed, and perhaps the Income Tax affected us more sharply than any other tax, and those who felt it most were people with small fixed incomes. Unless Parliament were prepared to depart from the principle of raising a larger proportion of Revenue from direct taxation, he was afraid we must always suffer the annoyance of this direct impost, and those who bore it would grieve under it and be desirous for economy, so that the Income Tax might fall to a lower figure. He ventured to think that if they extended the abatement from incomes under £400 to incomes under £500 a year, in a year or two a strong case would be made out for extending it still further to incomes of £600 a year, and so forth. He thought that the relief given some years ago had been very considerable; and seeing that they were unhappily liable to Income Tax, they should be prepared to see it increased from time to time—certainly when a Liberal Government came into power—and be prepared to bear it a little longer.

DR. CLARK

said, he could not withdraw the Amendment, because, although he could not increase a tax, it would be open for the Chancellor of the Exchequer to do so if the first part of the Amendment were agreed to. As to the practical difficulty of how this proposal was to be carried out, the bankers could easily send a notice to the Income Tax officials that a certain amount was due instead of sending the money itself. That was done in many cases at the present time. In the case of the Directors of Public Companies, the secretaries of those companies made a return of their incomes as Directors, and the Commissioners of Income Tax asked to be paid upon that sum.

*MR. A. C. MORTON

said, he would ask his hon. Friend not to press his Motion after the statement of the Chancellor of the Exchequer. It was no good dividing for the mere sake of dividing. One matter, however, to which he wished to call the attention of the Chancellor of the Exchequer was as to whether he would consent to increase the amount on which abatement would be allowed. He should like to ask the Chancellor of the Exchequer whether he was in favour of allowing some abatement on higher incomes than £400 per annum?

SIR W. HARCOURT

In speaking on the Motion of the hon. Member for Islington (Mr. Bartley) the other night, I said I thought that the only way in which you could reform the Income Tax was by raising the figure to which abatement should be applicable and possibly raising the figure of exemption. It is quite true that Sir Stafford Northcote raised the figure of abatement from £300 to £400, and whenever the finances of the country allow of it. I think it may be taken for granted that it will be raised still higher. At the present moment, without extending the abatement at all, all I can do is to make the two ends meet, and therefore it is idle to propose that I should this year consent to a proposal to cut down the receipts from the tax for the next 12 months. However much I may desire to do so I have not the means this year, and therefore any hon. Member who votes for a proposal of the kind must understand that he is voting for a deficit. I have already stated the objections to the present Amendment. Under the present system of abatement you levy at the same rate upon all incomes. If yon were to adopt a different rate for different incomes, you would entirely disorganise the whole system on which the Income Tax is levied, and I would strongly advise the House not to adopt any proposals of the kind.

MR. A. G. H. GIBBS

said, he was sorry the Chancellor of the Exchequer had not spoken more strongly on general grounds against a graduated Income Tax; but as the right hon. Gentleman had conclusively shown that it was outside practical politics, it was hardly necessary to discuss it. He had not known until now that hon. Gentlemen opposite considered that people who had an income of £500 a year were poor people, and he would point out that it was nearly double the amount which in the Millennium a Member of Parliament was to receive. The proposal of the hon. Member for Caithness (Dr. Clark) was more far-reaching than the Chancellor of the Exchequer seemed to suppose, and he hoped the Committee would not agree to it.

MR. WARNER (Somerset, N.)

expressed a hope that the Chancellor of the Exchequer would give the House some hope that in the near future means would be found of taxing the larger in-comes on a higher scale. There were a great number of Radical Members who felt that it was important that something should be done on the subject.

MR. S. EVANS (Glamorgan, Mid)

said, the Chancellor of the Exchequer had expressed himself in favour of a graduated Income Tax.

SIR W. HARCOURT

I said I was in favour of graduated taxation, but I said that the Income Tax could not be graduated, and I gave the reason.

MR. S.EVANS

said, he was tempted to fall back on the old saying, that "Where there was a will there was a way." He thought that if the right hon. Gentleman had the will in this matter he would be able to find the way. It seemed to him (Mr. Evans) that there ought to be no difficulty at all in having a graduated Income Tax, and that it would be very much better to have such a tax than to resort to the clumsy expedient of having abatements on small incomes. There appeared to be no difficulty in having the tax collected at its source. If the tax were collected at the higher rate on all incomes, those who had lower incomes could claim an abatement and get a deduction made. The pious opinion expressed by the Chancellor of the Exchequer was not of much value, and the only way of forcing the right hon. Gentleman to find a way of carrying his wishes into effect was to divide against him.

MR. COURTNEY ( Cornwall, Bodmin)

said, the hon. Member who had just sat down had suggested a plan of collecting a higher tax upon the larger incomes which would add enormously to the inconvenience and trouble of making Income Tax Returns. His own Return for Income Tax for many years had been extremely simple, because he had made no return at all, all his income being taxed at the sources, of which there were some 50 or 60 altogether. Under the plan suggested by the hon. Member, it would be necessary to enumerate every petty investment, which was now taxed at the source. This would be a misery for anyone who made out the return. It would involve much trouble, and there would be no means of checking it. The hon. Member for Caithness (Dr. Clark) had a method of meeting the difficulty; but if the increased tax were collected through the secretaries of the company paying the dividends, it would be collected in the first instance at the higher rate. The result would be that a very poor man might be taxed in the first place at 2s. in the £1, and would have to apply for a rebate. Surely it was a sufficient answer to the proposition which had been taken up by the hon. Member for Caithness to say that the Chancellor of the Exchequer recognised, as every Chancellor of the Exchequer for many years past had recognised, that the burden of direct taxation required adjustment in some way or other, especially with regard to those classes of persons who were at the end of the scale, and who were undoubtedly exposed to indirect taxation also, but that the only means of making the adjust- ment was through the abatement. Sir Robert Peel had fixed the limit of abatement at £150, whilst the present Prime Minister had raised it rather higher, and Sir Stafford Northcote had brought it up to its present point. The plan proposed by the hon. Member in support of this Amendment was one which would not bear examination. The Chancellor of the Exchequer said he was ready to extend the system of abatement when he was able to do so; but he had pointed out that at present he found difficulty in making both ends meet. As a matter of fact, the right hon. Gentleman had not made both ends meet, because the surplus was entirely dependent upon a windfall which ought really to be appropriated to capital. This being the situation this year, it would be in the highest degree imprudent to accept the Amendment.

Question put.

The Committee divided:—Ayes 46; Noes 243.—(Division List, No. 64.)

*MR. BARTLEY (Islington, N.)

said he did not propose to move the Amendment in his name exactly as it stood on the Paper. Having heard the opinion of the Chancellor of the Exchequer, he proposed to move the Amendment in the following form:— Clause 6, page 2, line 38, after 'seven-pence,' to insert 'but allow an abatement of one hundred and twenty pounds on annual incomes from whatever source between one hundred and fifty pounds and five hundred pounds. The Chancellor of the Exchequer had acknowledged that the people of the lower middle class were about the hardest taxed of any class, and it was to grant them some relief that he now proposed that the abatement at present existing should be extended. Every person now in receipt of an income of between £150 and £400 received an abatement of £120, and the Amendment he proposed was to raise that limit from £400 to £500. The financial effect of adopting the proposal would be very small, and would certainly not exceed £90,000 or £100,000. He hoped, in the interests of a class who were most severely taxed, that the Chancellor of the Exchequer, who had admitted the principle of the Amendment, would agree to accept it.

Amendment proposed, In page 2, line 38, after the words "seven pence," to insert the words "but to allow an abatement of one hundred and twenty pounds on annual incomes from whatever source between one hundred and fifty pounds and five hundred pounds."—(Mr. Hartley.)

Question proposed, "That those words be there inserted."

SIR W. HARCOURT

was sorry to say his poverty and not his will compelled him to decline to accede to the Amendment. The he. Member was good enough to say it would only cost between £90,000 and £100,000. He should have been glad to have acceded to the proposal if he could have done so. But he was sorry to say he had had occasion to consider this very matter, and that, from the calculations that had been made, he had ascertained that it would cost a great deal more than the hon. Member had stated. In fact, it would cost two or three times as much. Although he should have been disposed to accept such a proposal, it was impossible on the present Budget to do so.

MR. HANBURY (Preston)

said, the Amendment suggested nothing novel in the way of a differential tax or a graduated tax. What it did was simply to extend an already recognised and existing system, and further than that it extended it to a limit which the Chancellor of the Exchequer had himself admitted would, in ordinary times, be a proper limit to which to extend it. The adoption of the Amendment would not seriously trench on the Chancellor of the Exchequer's balance.

SIR W. HARCOURT

Oh, yes it would.

MR. HANBURY

The balance of the Chancellor of the Exchequer was about £100,000, and he did not think the right hon. Gentleman would assert it would take up the whole of that.

SIR W. HARCOURT

It will take a great deal more.

MR. HANBURY

Those who had framed this Amendment had gone into figures just as the Chancellor of the Exchequer had done, and they maintained that it would be very little over £100,000, if any. He hoped his hon. Friend would press the Amendment to a Division.

Question put.

The Committee divided:—Ayes 68; Noes 211.—(Division List, No. 65.)

*MR. J. G. LAWSON (York, N.R., Thirsk) moved to amend the clause relating to the annual value of the occupation of lauds, with the object of reducing the duty thereon under Schedule B from 3½d. to 3d. He said this was such a small matter that it need not frighten the most impoverished Chancellor of the Exchequer. It was, indeed, so small that he ought almost to apologise to the agricultural interest for bringing it forward at all; but they had so often been challenged to produce some definite proposal for the benefit of agriculture that they suggested this little measure of relief, which would enable the Government to mark their sympathy with the agricultural community in their present difficulty by giving the farmers some practical assistance. That assistance was very much needed indeed; for it was generally admitted that the agricultural industry was in a very great state of impecuniosity. While the profits of trade bad increased by millions, the profits of agriculture had reached the vanishing point. He estimated that the loss to the Revenue involved in his proposal was only £4,400. That was a very trifling sum—less than the salary of one Cabinet Minister. The Chancellor of the Exchequer would no doubt reply— "Why do not the fanners put themselves under (Schedule D, and pay Income Tax on the profits instead of on the annual value of the land?" The answer was that while fanners were careful in large matters, such as the price of a horse, they were apt in small matters to be negligent about details, and they did not keep accounts as a rule, while those who did keep accounts were not anxious to expose the nakedness of their position. Then, if the farmer wished to go under Schedule D, he would have to give notice before the 5th of June: but at that time he was unable to know whether his profit would be more than half his rent, and which Schedule would be more beneficent to himself. At any rate, the time should be extended to the 5th of August. He hoped the vigorous effort of the President of the Board of Agriculture to get the farmers to go under Schedule D would be successful, for it would induce them to keep accounts. He did not wish to shock the Chancellor of the Excheqner by any wild proposal. He wished to be mild and moderate, and, therefore, he only asked the right hon. Gentleman to relieve the farmers from paying this extra 1d. The Amendment, if carried, might lead to the discomfiture of one Chancellor of the Exchequer: but it would bring joy and pleasure to thousands of the constituents of hon. Members on both sides of the House, and for that reason he hoped it would be accepted.

Amendment moved, to leave out "halfpenny."—(Mr. J. G. Lawson.)

THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT,) Derby

I think no class of the community deserves more sympathy and more indulgence than the farming class which the hon. Gentleman so ably represents; but I believe that, under Schedule D, the farmers would receive much more relief than under the Amendment of the hon. Member. The hon. Member stated that Schedule B was founded on the assumption that a farmer's profits were equal to half his rent, and that a farmer would find it difficult in June to make up his mind whether his profit would be more than half his rent. That is the most optimist view of the position of the farmer I ever hoard. I should have said that a farmer would say he made no profit at all. The farmers had a way out of the difficulty by placing themselves under Schedule I). No farmer whose profit is less than £150 a year need pay a farthing of Income Tax if he chooses under Schedule D. If a farmer makes a profit, why should he not pay like anyone else in the community? The argument that a farmer keeps no accounts would not be considered in the case of other tradesmen, and I do not see why the hon. Member should ask that the agriculturist should be treated in a different manner from other Income Taxpayers. The hon. Member has a right to ask that the farmers should be placed in the same position as other traders. If they make no profits they pay no Income Tax; if they make a small profit they pay a small tax; and if they make reasonably large profits they pay a reasonably large tax. It is a dangerous thing to treat any class of the community on a different footing from the others, and it is a dangerous thing to establish a differential rate of Income Tax. If the hon. Member will only exert himself to induce the farmers to see the advantages they will derive by coming under Schedule D, he will do them a much greater service than the proposal in the Amendment, which I hope he will not press.

*MR BOUND (Essex, N.E., Harwich)

regretted that the right hon. Gentleman had not acceded to the proposal of his hon. Friend, for the amount in question, as pointed out, was but small. In fact, it would have been a reasonable Motion to make to relieve fanners from all payment under Schedule B, and that would have been a great boon to them. The exceptional treatment asked for was owing to the position of agriculture, and the process, almost of extermination, which was going on in his county among farmers due to depression. He asked why the English farmer paid more under Schedule B than the Scottish or Irish farmer? for he had never received a satisfactory explanation on this point.

MR. GOSCHEN (St. George's, Hanover Square)

As the author of the transfer of the farmers from Schedule B to Schedule D, I put it to my hon. Friend whether he will serve the farmer by encouraging him to make this declaration under Schedule B instead of Schedule D? I sympathise deeply with the position of the farmers. The general anticipation is that this year they will make no profits at all. That being so, the best plan for those who have influence over the farmers is to encourage them 1o make their declarations under Schedule D, for under that Schedule, if there is no profit at all, they will not be asked to pay any Income Tax at all. I do not think that the Amendment is so favourable to the farmers as my hon. Friend believe. It would encourage to refrain from doing what it is their interest to do—namely, to keep accounts, in order to be able to show whether or not there is any profit, and I do not think it would be of such advantage to them as making their declarations under Schedule D.

COLONEL LOCKWOOD (Essex, Epping)

asked the Minister of Agriculture whether steps had been taken as to the circulation of a paper among the farmers, showing the advantages of making their declarations under Schedule D?

THE PRESIDENT OF THE BOAED OF AGRICULTURE (Mr. H. GARDNER,) Essex, Saffron Walden

The Board have circulated copies of the leaflet in great numbers to farmers and to the provincial papers. There has been a great demand from all parts of the country for the leaflet, so much so that 5,000 additional copies have been ordered, which will be circulated at once.

MR. ROUND

said, he quite agreed with his right hon. Friend the Member for the St. George's Division as to the necessity of encouraging the farmer to go under Schedule D; but they had to deal with the existing state of things, under which the farmers preferred to go under Schedule B.

MR. FREEMAN-MITFORD (Warwick, Stratford)

asked if the time had not arrived when the three countries should pay equally? Farms in England were supposed to represent half the annual value, and in Scotland and Ireland about a third of the annual value. At the present moment he took it that both the Scotch and the Irish farmers were in a better position than the English fanner. In the Scotch Lowlands it was not contended by anyone that the depression in agriculture had been felt as it bad been in the wheat-growing districts in England, and the Irishmen had got the benefit of judicial rents; therefore, at any rate, in their case they had an advantage over our farmers. He thought, therefore, the time had arrived when the English farmer might legitimately ask the Chancellor of the Exchequer to put matters upon an equality with regard to the three countries.

SIR W. HARCOURT

I am ashamed to say I am unable to answer the question us to the origin of the difference between the three countries; it is lost in antiquity. Whether it was the Treasury or whet her it originated in the Articles of the Union I do not know; but I should imagine it was founded upon some notion of difference in relation to prices in the various countries. But, with reference to the remarks of my hon. Friend, I would say they can bring them all 1o an equality if they all go under Schedule D; that is the way in which you would get rid of these differences; these differential fractions would disappear if everyone would come under Schedule D, as everyone would then be taxed upon the profits they made.

MR. JEFFREYS (Hants, Basingstoke)

said, there was another reason for the difference. In respect to Scotland, allowance was made for the repair of houses, and an abatement was made in consequence, which was not the case in England.

Question put.

House cleared for a Division.

MR. J. G. LAWSON,

seated, and with his hat on, asked, on a point of Order, if he was now entitled to withdraw the Amendment?

THE CHAIRMAN

No; the hon. Member is not entitled to withdraw the Amendment, but it may be negatived without a Division.

Question put, and negatived.

Question put, "That Clause 6 stand part of the Bill."

*SIR A. HICKMAN (Wolverhampton, W.) moved the omission of this clause. With regard to small house or cottage property, he submitted the tax was an unfair one; that an abatement should be allowed in respect of commission; it was allowed to the tithe-owner and ought to be allowed to the cottage-owner. He also submitted that abatement should be allowed for fire insurance. It was allowed upon stock-in-trade and ought to be allowed on property, because if the house was burned down and not rebuilt the tax would be altogether lost to the Revenue. An abatement should also be allowed in case of defaulting tenants; bad debts were allowed to traders, and he wished to know why they should not adopt the same principle with regard to small properties? He did not wish to detain the House, but he would urge the right hon. Gentleman to consider these small matters between now and the time he had to produce the Budget next year.

Amendment proposed, to omit the Clause.—(Sir A. Hickman.)

SIR W. HARCOURT

In introducing the Budget I stated I was very desirous of removing this anomaly, but that it could not be dealt with alone, and I think that the House generally was perfectly satisfied with the declaration I then made.

MR. WINGFIELD-DIGBY (Dorset, N.)

said, that the farmers were told they should come under Schedule D; but for those who had not kept accounts it was impossible for them to apply under Schedule D for 12 months or two years, and they did not know how many of them would be ruined by that time. He merely wished to point out to the Committee that to tell the farmer to apply under Schedule D was of no use whatever— what was wanted was present relief.

SIR W. HARCOURT

The hon. Member is mistaken as to the amount of elaborate accounts that is required from the farmers. The farmers would necessarily have some means of satisfying the Commissioners as to what their real profits have been without keeping a ledger by double entry.

Question put, and negatived.

Clause 6 agreed to.

Remaining Clauses agreed to.

*MR. GIBSON BOWLES (Lynn Regis) moved the following new clause:—

(Amendment of 5 and 6 Vic. c. 35.) The first rule of the first ease under Schedule of Section one hundred of the fifth and sixth Victoria, chapter thirty-five, shall be read as if the words 'average of three years' were omitted therefrom, and the words 'account of the profits or gains of the year,' were inserted in their place, and the words 'Provided always,' to end of rule, were also omitted.

The object of this was to levy the tax on the income, and not, as now, on an average. In other words, the Income Tax was the charge made, not upon the income of any year, but on the total for three years divided by three. No doubt this rule of charging upon an average was conceived and carried out with the intention of being fair to the trader, to enable the losses of one year to be met by the increased income of another, and thus a fair average might be arrived at. That sounded very plausible before they looked carefully into it; but when they looked into it, it would be seen at once that it did not work as it was intended. But even if it did, he should still say the principle was wrong. The object was, not to get a fixed and invariable tax, or a tax that varied very little; the true principle of an Income Tax was that it should vary according to the income; that it should follow the fortunes of the income; that the man who was increasing in prosperity should pay, if anything, more, and the man who was decreasing in prosperity should, if there was to be a difference, pay less; but exactly the contrary principle was carried out through this system of average. Take the instance of a man who in the first year made £1,000, in the next year £2,000, and in the third year £3,000; at the end of the third year he was taxed, not upon the £3,000, but upon the £1,000, plus £2,000, plus £3,000, which was £6,000, divided by three, and he was taxed upon £2,000. Take the converse case, the man whose income, by unfortunate circumstances, went the other way. This man was treated in the same way as the prosperous man, and accordingly he was taxed upon £2,000, the result being that the prosperous man was taxed upon £1,000 less than he ought to pay, and the unfortunate man, who was gradually approaching ruin, was taxed upon £1,000 more than he ought to pay. It might be said that three years was not a sufficient period to take; therefore he had worked out two cases of 10 years. "A," beginning with £1,000 and ending with £10,000, would pay upon £8,500, less than he ought to pay, while "B," beginning with £10,000 and ending with £1,000, would pay upon £8,500, more than he ought to pay. The tax was thus not a fair tax, for either the Chancellor of the Exchequer was having withdrawn from him something to which he was entitled, or the taxpayer was having taken from him something that should not be taken. The Chancellor of the Exchequer told them that the income of the country was steadily increasing; that the wealth of the country was increasing and had been increasing. The result was that under Schedule D there was a constant addition to income in the majority of cases; and it followed from that that, in the majority of cases under Schedule D, the Chancellor of the Exchequer was getting much less than he was entitled to. His proposal was to do away with that, to charge on the concrete income as it stood in the last year, and in that manner the prosperous man would pay what he should pay, and the man who was going down hill, who "was approaching ruin, would not be called upon to pay upon an income which he had not realised.

New Clause (Amendment of five and six Vic. c. 35,)—(Mr. Gibson Bowles,) —brought up, and read the first time.

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

SIR W. HARCOURT

It is rather late in the evening to go in these transcendental theories of taxation. The common sense of mankind has adopted the principle of averages in taxation, and no one would more condemn this Amendment than the trading classes in whose interest it is said to be proposed.

SIR F. DIXON-HARTLAND (Middlesex, Uxbridge)

was very glad that the Chancellor of the Exchequer was not going to assent to this new clause. It was perfectly true that one man would pay too much in one year, but on the law of average he paid what was right on the whole. The hon. Member for Lynn (Mr. Gibson Bowles) had spoken of a man who made a profit on all the three years. Under the present system, if that man made a loss he had a right to deduct his loss, so that in reality he got back part of his loss; whereas, if this new clause were passed, he would have to pay on the profit and get nothing back for the loss; therefore, it was distinctly against the commercial classes that this clause should be passed, and, on that account, he was very glad that the Chancellor of the Exchequer would not agree to it.

Question put, and negatived.

Bill reported, without Amendment; to be read the third time To-morrow, at Two of the clock.