FINANCE BILL.

HC Deb 20 May 1897 vol 49 cc954-1012

Order for Second Reading read.

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

*MR. JAMES LOWTHER (Kent,Thanet)

proposed to leave out from the word "That" to the end of the Question, in order to add instead thereof the words in the opinion of this House, the existing fiscal system of the country is unequal to the continually increasing demands of the public service, and that the time has arrived for recourse being had to more varied sources of taxation. He said that Her Majesty's Government themselves had called attention to the pressing need of an investigation of this subject, because the Chancellor of the Exchequer, in his Budget speech last year, drew special attention to the difficulties which anyone occupying his position might find himself in in the event of having to find some means of adding to the revenue. It was true that the other day the right hon. Gentleman spoke in terms which betokened great confidence on his part as to the condition of our revenue at the present time, but the fact remained that no longer ago than last year the Chancellor of the Exchequer drew attention to the extremely narrow basis upon which our system of revenue was founded, and in doing so he was only following in the footsteps of his predecessor the right hon. Gentleman the Member for West Monmouthshire. Last year the Chancellor of the Exchequer said:— There has been a gradual transfer of burden from the indirect to the direct taxpayer of this country…That, I think the Committee will see, has been a progressive and remarkable change. I do not say the policy is wrong. There is no doubt that under it the industry and enterprise of this country, our commerce and trade, and our wealth, have been enormously developed, and, therefore, I suppose we may say it is justified by its results. But I must point out that our system as it now stands does not add to the popular support which any Chancellor of the Exchequer can enlist in aid of economy. The right hon. Gentleman went on to say:— The indirect taxpayer of this country is very moderately burdened—indeed, very lightly burdened, if he neither drinks nor smokes. We have arrived now at this position—that in time of peace we have an Income Tax of 8d. in the pound, we have Heath Duties at a point which, I suppose, hardly anybody will wish to increase, and we have indirect taxation levied only on a few articles of great consumption. We had a system of revenue which was only capable of expansion in time of need in practically one or two directions, and he did not think his right hon. Friend, or anyone who was likely to occupy his place, would assert that our present revenue from Customs and Excise was one on the stability of which we could reckon. When the time came that the country was in a less prosperous condition, down went these sources of revenue. What had they to replace them? Nothing, as far as he could see, but the income tax. He passed over the possibility of anyone increasing the death duty. He did not think that even the right hon. Gentleman the Member for West Monmouth would suggest the possibility of augmenting the revenue in the direction of the Death Duty. That was a tax which was most unpopular in the country. It was a tax which was not only oppressive to those who had to pay it, but was the occasion of very grave inconvenience to those who, though they did not personally pay it, were indirectly interested in it on account of their employment terminating through its harsh operations. When, he carried the House on to the diminution of the purchasing power of those persons, they would easily see that, from one cause or another, there was no class of society which did not, to some extent, feel the effect of the burden which these death duties had imposed. Nor from a merely revenue standpoint must sight be lost of the fact that this was a tax upon capital and not income, and that while loose cash (or "free personalty," as the Chancellor of the Exchequer styled it) had already found means of largely escaping its operation, real estate would be subjected to a steady diminution of its liability to duty through the deductions in respect of charges arising out of provisions for previous payments of that impost. Hence a shrinkage of revenues as time advances. How did they stand with regard to what he might call their general system of finance? The other day the Chancellor of the Exchequer referred to the fact that the country had doubled its income during the last 60 years, but he omitted to tell them that in the future he saw no reasonable prospect of keeping their national expenditure within even its present enlarged bounds. His right hon. Friend knew perfectly well that, year after year, the demand for an increase of expenditure went on. The House of Commons, so far from curtailing expenditure, was the direct cause of a vast deal of extravagance. [" Hear, hear!"] He thought there would be general concurrence that no limit could possibly be placed upon their Army and Navy, so far as the present was concerned, but there were many items in their Civil Service which that House would do well to more closely supervise. ["Hear, hear!"] Instead of this, the Government was egged on by Members from all quarters of the House to continually increase the national expenditure. There was one point in connection with their expenditure which he ventured to think was a matter of some danger. He had already referred to the fact that the bulk of the voters paid little or nothing in the shape of taxation. That being so, there seemed to him less chance than there otherwise would be of any effective curtailment and control of their national expenditure. The Chancellor of the Exchequer in his Budget speech of 1895 said:— I wish to put before the Committee the present condition of our financial system. I wish to ask them to consider, at their leisure, what the position may be of a Chancellor of the Exchequer who in some future year may have to meet and continue an enormous increase of expenditure under this system of taxation, and to ask them whether they are quite sure that in such circumstances our present financial policy can be retained. He thought his right hon. Friend did good service in addressing those words of warning to the House. It had been the fashion in many quarters to speak of their financial system as a matter which they ought to be proud of, and any idea of departing from it to any large extent was absolutely scouted in some quarters. He would remind the House that, at the present moment, their much vaunted system had produced, both in Scotland and in Ireland, the loudest protests on the ground that it was contrary to justice, and that those two countries were not fairly treated under its provisions. That being so, he hoped he should not be charged with having raised a discordant note amidst the general satisfaction with which their existing financial system was viewed. On the contrary, he thought the bulk of the House would be of opinion that the time had arrived when, in the words of his Amendment, recourse must be had to some more varied sources of taxation. They relied, in a time of peace, upon the income tax, and upon the income tax alone, to make up any deficit that might, arise in their national income. He thought the Chancellor of the Exchequer and any Member of that House who took any interest in the soundness of their financial system must feel some misgiving upon that point. There could be no doubt that having recourse to the income tax as their main financial prop in a time of peace was contrary to all the axioms which had been laid down in the past. He had endeavoured to deal separately with this question so far as the revenue was concerned, as distinguished from the development of our home trade. The two subjects were different, and, in his judgment, should be kept distinct from each other. Now, as to the directions in which they might fairly look for some increase in the taxable area. Of course he should be told that there was no need for any change. He hoped he had disposed, at any rate, of that reply. The right hon. Member for West Monmouth only the other day congratulated the House and the country that "times had mended and improved," he was not quoting his actual words, but simply the purport of his observations. He said that prosperity had recurred even to agriculture, and that corn had risen in price; and he went on to say that there was an end to what he called the "miserable German scare." But the right hon. Gentleman did not speak for everyone, even of his own Party on that subject; for the late Prime Minister had drawn the attention of the country, in words which he thought were very justly weighed, to the exposure of the dangers to British trade contained in that very able work by Mr. Williams. "Made in Germany." The right hon. Gentleman appeared to be amused by his reference to that work; but he thought that whether they shared Mr. Williams's views or not, hon. Gentlemen would agree that it was a most able work, and it was one which any person who read it might derive very great instruction from. No doubt exception was taken to certain groups of statistics, and letters were written and official memoranda were published endeavouring to refute Mr. Williams's statements. In his reply, however, he demolished all his critics, including the right hon. Gentleman the Member for West Monmouth. He could only recommend the right hon. Gentleman to re-read "Made in Germany," and also to cast his eye over the very able exposure of the attempted replies which followed Mr. Williams's statement. Now, how did this question of "Made in Germany" stand? Lord Rosebery called attention to it, and he suggested that the Government should appoint a small Committee to go into the subject, and see how the facts really were. The Government did appoint a Committee. He was not sure that he could have honestly said that he thought that Committee an impartially chosen body. He thought he could have almost written the Report of one, at any rate, of its members, before the Committee began its labours. But, as far as the memorandum went, which he might say was the official reply to "Made in Germany," it practically and substantially confirmed the bulk of Mr. Williams's examination of the case; and, although it endeavoured to put a more hopeful gloss on some of the figures he quoted, it was bound to admit in the end that unless British trade was better attended to by those who were engaged in it, and unless certain steps were taken, there was a poor prospect for this country as regarded its competition with many other countries. Now, as to our produce and manufactures. There could be no doubt, of course, that the figures of to-day compared with 60 years ago showed an increase in our export trade. At the same time they showed an alarming increase in imports. They showed that we were more and more dependent upon imports of foreign goods; and that in too many cases in which we used not only to supply ourselves but were the largest exporters to all parts of the world. The imports were not only breadstuffs and raw materials, but it appeared from official statistics that £100,000,000 worth of manufactured and partly manufactured goods were annually brought into this country—goods which in every instance could be produced quite as well from our own resources at home. Now that, he thought, would be admitted to be a very serious consideration. They were told that they had, at any rate in some particular directions, maintained the superiority of England as a manufacturing and exporting country. But when they came to analyse the figures, they found that while the production of British textiles had immensely shrunk, there had been a large increase in the export of coal, which was, of course, a raw material, of pig iron, which was practically a raw material, and in machinery. Well, machinery was a form of export which the House would possibly realise carried with it very large and perhaps dangerous issues —because we were supplying other countries with the means of eventually doing without us, and of not only supplying themselves, but in many cases; successfully competing with us in the markets of the world. ["Hear, hear!"] He would now, with the permission of the House, point out in what directions he ventured to suggest that recourse should be had to more varied sources of taxation. He knew it had been the habit in that House to attack the tea duties, and to say that the tea duties—and the duties on coffee, chicory, dried fruits, cocoa, and other articles would come within that category —from which we derived about 4½ millions sterling per annum, ought to be abolished or reduced. It was constantly pointed out that they were duties on articles which we do not produce in this country, and that the burden might be fairly transferred from those articles to articles which were capable of being produced at home. Now, he entirely shared those views, and the reason why he had not committed himself to supporting a Motion for the reduction of the tea duties was that because unless and until some adequate substitute was provided by means of which the consumers of tea and kindred articles should contribute to the revenue, he held that it was unsound finance to abolish them without supplying in their place some indirect taxes to which the bulk of the population would contribute. Otherwise they would be adding still more to the position that those who called the tune did not help to pay the piper. There was a Motion the other day which he could not associate himself with for abolishing the tea duties and supplying their place by taxes upon imports of foreign manufactured articles. Now, although he approved of abolishing the tea duties under proper conditions, and although he was distinctly in favour of a duty on foreign manufactures, he did not consider the one an equivalent of the other from a sound point of view of finance; and he thought it well to mention this because it might appear somewhat inconsistent not to have supported a proposal both sides of which commended themselves to one's judgment. He ventured to suggest that there was a means of providing revenue without unduly burdening the people which would enable our home products to be fairly encouraged without materially adding to the burden on the people. He had already mentioned that a hundred million's worth of foreign manufactured goods annually came into this country. A very small impost upon them would produce a very handsome addition to the national Budget. ["Hear, hear!"] And he did not think anybody would be able to make any Party cry, or to make any political claptrap out of a tax of that kind. He had no wish to shirk the issue when he was asked what tax he would propose to substitute for the tea duties. They were told the people of this country would never submit to a tax on the necessaries of life. Well, the articles included under the tea duties were certainly necessaries of life, and to transfer the impost from one brunch of the necessaries of life to another would be in no shape or form an injustice to the consumers. A very moderate tax on imported corn, known as the shilling registration duty, which was most unwisely abandoned by Mr. Lowe within his Parliamentary recollection, would now produce (according to the present Chancellor of the Exchequer) something like 2½ millions. A 2s. registration duty would produce close on five millions, and, therefore, more than replace the tea duties. Would it produce any inconvenience to the consumer to transfer this charge from the grocer to the baker? If anyone was foolhardy enough to pretend a social revolution would result from the transfer, he would remind him that nearly one-half—certainly two-fifths— of the corn duty would be paid, not by the consumers of bread, but by the consumers of barley, oats, maize, etc. What would be the cost to the people of this country of this impost on corn? He had heard no less a person than the late Chancellor of the Exchequer talk about the oppressive effect of a tax upon corn. It was a stock argument that in 1812 corn went up—he thought it was only for a week or two—to about 180s. a quarter, and when the average selling price for the year was 126s. a quarter He had Board that mentioned as a specimen of the outrageous injustice of the landowning class, that the landowners in Parliament ground down the people and made them pay these huge prices for the necessaries of life on purpose to bolster up rents. Hon. Gentlemen who had looked into this point were fully aware that the high price of corn which at that time temporarily obtained was not due to any duty. In 1812 the duty was a merely nominal registration duty of about 8½d. When prices were high in the early part of the century they were not due to the imposition of duties, which were practically taken off altogether at that time, but were due to the condition of war which then prevailed, cutting off supplies from abroad, and to bad harvests. Those who said that the people of this country would be cruelly oppressed by any recurrence to the corn duties could not be aware how ridiculously small the effect would be. He himself was not in favour of any fixed duty, but of a sliding scale. However, for the purpose of argument, he would assume that under the operation of a sliding scale it happened that a duty of 5s. per quarter was imposed, which would not, according to precedent, raise the selling price by more than half the amount of such duty. Even taking it that, the selling price was increased 5s., it would only mean to the bread consumer the large sum of one half-farthing per day, seven-eighths of a penny per week, or 3s. 9½d. per individual per year. He had indicated that under these conditions the tea duty might very fairly and on sound financial principles be remitted. The tea duty worked out at 2s.3½d. per head of the population. Even if the sliding scale should involve at any given time a 5s. duty on corn, that left a balance as against the consumer of only 1s. 6d. for the whole year, and that he urged was a matter that need not alarm anyone. A 5s. duty would produce no less a sum than £12,250,000 in the year, therefore, he thought he had shown the Chancellor of the Exchequer how he could get a balance of between £7,000,000 and £8,000,000 by abandoning the tea duty and substituting a duty of 5s. upon corn. Would any one, after that, tell the House that there would be bread riots, disturbances, and all the rest, if so moderate an impost was adopted? By means of reciprocal relations with other parts of the Empire they might obtain their food supplies under conditions which would at the same time develop the resources of the Empire and secure them against being wholly dependent upon foreign food supplies. He did not wish to identify himself with the free admission of colonial produce—no colony had ever asked for it or was prepared to grant it in return—but what he did advocate was a preferential tariff under which the food stuffs and other commodities of their colonies would come into this country upon more favourable terms than those of countries outside the limits of the British Empire. He had shown that many millions were within the reach of the Chancellor of the Exchequer if he thought fit to rise superior to the prejudices which had so restricted the taxable area he had in his hands. He did not think any one would assert that it was possible to do without fresh sources of taxation for any great length of time. He could promise any Chancellor of the Exchequer who embarked upon some sounder system of finance a hearty support from the great bulk of the producers of this country, if, in the course of the financial measures, they were protected from some of the dangers to which they were now exposed from undue and excessive foreign competition. Would any hon. Gentleman deny that the pre-eminence of this country was rapidly ebbing in some of the staple industries? The cotton trade, for example, was not partaking of that general prosperity which the Chancellor of the Exchequer appeared to think prevailed all over the country, but was dwindling, and in many instances was actually being extinguished.

MR. GEORGE HARWO'OD (Bolton)

As connected with the cotton trade, I feel bound to say that that statement is not correct. ["Hear, hear!"] I am not speaking of my own personal experience, but from a knowledge of the trade as a whole. The Lancashire cotton trade has not dwindled, but has distinctly improved. ["Hear, hear !"]

*MR. JAMES LOWTHER

replied that whatever might be the case in the hon. Gentleman's immediate neighbourhood, he feared he would not find confirmation from many other parts of Lancashire.

MR. HARWOOD

I am not speaking of my own immediate neighbourhood, but of the condition of the trade of Lancashire as a whole, of which I have fair knowledge. ["Hear, hear !"]

*MR. JAMES LOWTHER

could only say that many persons largely engaged in the Lancashire cotton industry formed a very different estimate of its prospects from that of the hon. Gentleman. He had heard of instances in which private concerns had been shut down, in which machinery which was giving employment to large numbers of workmen in Lancashire had been transported to Bombay or Japan, and was now being used in the production of cheap articles in the Far East. He did not believe it could be denied that the condition of the cotton trade in this country was one to occasion great alarm. Many of the limited liability companies were getting scarcely any dividend, and even those were anxiously considering whether they should not move to places where they could carry on their businesses under more favourable conditions. He challenged the hon. Gentleman opposite to find any authority to show that capital could be so advantageously spent in Lancashire as it could be in Japan or Bombay. The truth was that not only had our great industry of agriculture shrunk, but the textile trades were also languishing, and so far from our keeping pace industrially with other countries, we were already lagging behind. He hoped that the House, while not interfering on this occasion with the financial proposals of the Government, would at any rate afford his right hon. Friend some encouragement with a view to the discovery of some varied sources of income. The Resolution would, he hoped, afford an opportunity for some suggestions being made which might be of use to his right hon. Friend. He, of course, did not ask him to take back his Budget and recast his financial system at five minutes' notice; but he thought he was justified in asking him to look at the relative progress made by other countries under different fiscal systems, to rid his mind of the idea that our prosperity during the last 60 years was due to the present system, and to consider how far he could obtain some fresh sources of taxation which would enable our financial system to rest on a more sound basis. He begged to move his Amendment. ["Hear, hear!"]

MR. VESEY KNOX (Londonderry)

said he rose to support not so much the speech of the right hon. Gentleman, as the actual terms of his Motion. The House had had many opportunities of discussing the incidence of direct taxation and its burden on the country, and he was one of those who believed that, on the whole, the Budget of the right hon. Gentleman the Member for West Monmouthshire had effected desirable changes in the incidence of direct taxation, for it had gone in the direction of putting the heaviest on the broadest shoulders, and making the rich pay proportionately more than the poor. The reason why he supported the Motion was that he ventured in deference to bring before the House a suggestion that the time was rife in some measure to deal with indirect taxation in the same way, and to endeavour to secure that a similar proportion of indirect taxation should fall on the poorer classes. It was now the principle of all Chancellors of the Exchequer to levy as large a sum in the way of indirect taxation as possible, upon as few consumable commodities as possible; to levy it on those commodities, not in proportion to their value, but in proportion to the quantity consumed. Therefore, necessarily, the commodities selected for taxation had been those which were consumed most largely by the masses of the poorer people. Indirect taxation need not necessarily fall upon the poor than the rich. For instance, a tax was levied on silk in America, and a large revenue was obtained from it.

MR. BARTLEY

How much does it bring in?

MR. KNOX

Over £2,000,000; and it brought in less than it might if there were an excise as well as an import duty. It an excise as well as a customs duty were applied in this country in the case of silk, he ventured to think that five or six millions might be raised, without materially affecting the amount consumed. There had been very little change in indirect taxation for 30 or 40 years. Thirty or forty years ago, when the commodities taxed were very much dearer than now, a fixed duty in gold was placed on commodities which the people were most accustomed to consume. As years went by those commodities had become much cheaper. That was true of all articles of taxation. It was true of beer, of tobacco, and of spirits. Therefore, the effect of the system had been that in proportion to the value of the commodity the tax had been growing heavier year by year. Ten shillings was worth more now in commodities than it was 20 or 30 years ago, and although the duties were fixed nominally, owing to the increase in the value of gold, the duties had really been steadily rising, and had become larger in proportion to the value of the commodity. For instance, the value of spirits before the duty was paid was now only 1s. 6d. a gallon, this low price being due chiefly to changes, he would not say improvements, in the method of manufacture. Thirty or forty years ago the price was something like 3s. 6d. a gallon; therefore the duty was very much heavier now in proportion to the value of the commodity. He knew that by many Free Traders it was said to be a necessary part of Free Traders that duties should be levied as specific duties and not as ad valorem duties, but he found that that notion was confined to England. The Free Trade Party, the Democratic Party, in America, was in favour of the ad valorem duty. So was the Tariff Reform Party in Canada. Why, in the face of these facts, was it considered in this country that there should be any necessary connection between specific duties and Free Trade? It might be urged that there was greater difficulty in the collection of ad valorem duties; but it would probably be found that every change made in taxes with a view to making their burden more equable would involve some increased difficulty of collection. The Liberal Party had shown themselves, in the matter of direct taxation, in favour of taxing the rich more heavily than the poor; why should they not, whenever they had the opportunity, seek to apply the same principle in regard to indirect taxation? He had never been able to understand why the same rate of duty should be charged on the common tobacco consumed by the working man and on the more expensive kinds smoked by the middle and upper classes. Indeed, when they took this and other similar cases they would find prima facie ground for thinking that in enforcing specific and not ad valorem duties, Cobden and those who acted with him were actuated by the feeling of the middle classes, whose desire was to escape as far as possible from the burden of taxation. At the present time the taxes paid by the middle classes were very small indeed when compared with those paid by the poor. A very interesting speech was made on a recent occasion by the hon. Member for the Spen Valley Division The hon. Member had good reason for being opposed to any change in our fiscal system. He was a most ardent prohibitionist. He had no need for alcoholic liquors and wished nobody else to consume them. To him the present system was an ideal system, because it placed so largo a part, of the taxation upon the shoulders of those who consumed alcoholic drink. But a very large number of the teetotallers of this country consumed a good deal of alcohol without, however, contributing to the revenue. Mr. Bannister, the Government analyst, in his evidence recently before the Licensing Commission, said that he had analysed herb beer and several so-called temperance drinks, and he found that the lowest proportion of alcohol contained in any of them was 2.9 per cent., while in one case it was as high as 13.7 per cent.—very much higher than the average percentage of alcohol in ordinary beer. [Laughter.] The hon. Member for Spen Valley had advised Irishmen if they wanted to reduce their taxation to add more water to their whisky. He calculated that if they attempted to make, with the use of whisky, a liquid not more heavily taxed than beer they should have to add 63 parts of water to one of whisky. He did not know whether that would be a liquid likely to meet with a large measure of consumption. [Laughter.] But what he wanted to point out was that it would contain less alcohol than liquor which was consumed by teetotallers, and on which no duty was paid. There were three classes of liquor drinkers in these countries—Irishmen and Scotchmen who consumed whisky, the average Englishman who took his alcohol in beer, and that minority of Englishmen who took their alcohol in temperance drinks. [Laughter.] The Irishman was taxed for his alcohol about six times as heavily as the Englishman who drank beer, while the Englishman who was wily enough to take his alcohol in temperance drinks of course escaped taxation altogether. [Laughter.] He contended that we ought so to rearrange our indirect taxation that the burden would fall more heavily on the rich than on the poor; and that we should attempt to catch the teetotaller who at present escaped almost entirely from indirect taxation. [Laughter.] Incidentally such a modification would have the effect of lightening the burden which pressed upon Ireland, and that was his principal reason for suggesting it. Personally, he did not think it would be possible to entirely remove the financial injustice under which Ireland suffered without imposing different financial systems upon the two countries, but he held that while maintaining the financial union between Great Britain and Ireland, it would still be possible by some such re-arrangement of indirect taxation as he had suggested to lighten the burden which pressed so heavily upon Ireland now, and to reduce appreciably the grievance from which Ireland suffered.

*CAPTAIN PRETYMAN (Suffolk, Woodbridge)

called attention to the question of the Death Duties. His complaint, he said, was not so much in regard to the amount of the charge which these duties involved upon property, as to their unequal incidence. He did not say that the total amount of property in the country taxable for Death Duty could not afford to pay the sum which those duties now produced if evenly distributed, but he did say that the present incidence of the duties, while leaving some classes of property almost untouched, fell with extraordinary hardship upon certain individuals. It had been said that it would only be fair to give those duties at least a three years' trial before the question of making an Amendment in them was raised. That period of trial had now elapsed; and the best way of approaching the subject of amending the tax was to consider whether the objects which the right hon. Gentleman the late Chancellor of the Exchequer stated he had in view in introducing that particular form of taxation had been attained. Those objects were four in number—to equalise the payments on realty in proportion to the payments on personalty; to avoid the complications and difficulties which existed under the old duties; to secure that the extremely rich, the millionaires, were "bled;" and to avoid any injury to agriculture by the imposition of the new estate duties. He asserted that not a single one of those objects had been attained, and that, on the other hand, great hardships had been inflicted by this new form of taxation. ["Hear, hear !"] To take the minor points first, it was the common opinion amongst lawyers that greater complications and difficulties existed under the new system than had prevailed under the old; and as personal property—the form of property usually possessed by the extremely rich — was easily transferred, the millionaire was well able to avoid the new duties by transferring his property during life. ["Hear, hear!"] But a more important point was whether the equalisation of the payments in respect to realty and personalty had been attained. A nominal equality might have been attained, but certainly not a real equality. The different conditions under which realty and personalty existed had not been fairly taken into consideration. The responsibility of landlords was often talked about. The landlords did not deny that responsibility, and they were willing to act up to it. It was expensive. It included, among other things, the employment of a large number of persons about the estate, and the keeping of tenants on the land by means of improvements and reductions in rent. But no such responsibility fell upon the owner of personalty ["Hear, hear !"] Again, the peculiar indivisibility of landed property had not been taken into account. A man who had his property invested in stocks and shares had no difficulty in selling out a portion of his property in order to pay the duty, and what remained was not affected by the transaction. But a man who had his entire capital vested in a business, a trade, or a landed estate was in a totally different position. He had to break oft' and sell a portion of his business or property, or, on the other hand, to fully mortgage that business or property in order to pay the duty, thereby greatly reducing the value of what remained, and perhaps making it difficult or impossible to carry on the business. Then there was another point of inequality between realty and personalty. That was the power of avoidance which personalty had—the power of escaping the duty by transfer before death. The Chancellor of the Exchequer speaking in the House on May 10 said:— The only other suggestion that has been made, so far as I know, is the one by the hon. Member for Northumberland, viz., that I should in some way or other stop what he characterises as an evasion of the Death Duties. I take it that he means that people are making gifts in their lives instead of leaving their property to their heirs. In my opinion, that is a very proper practice, and certainly as long as I am Chancellor of the Exchequer I will do nothing so tyrannical and so unjust as to interfere with the liberty of a healthy man to dispose of his property to whomsoever he will. That which was a proper practice in the view of the Chancellor of the Exchequer was confined entirely to personalty, because while realty was almost invariably in settlement, personalty was almost invariably free. Evidence that avoidance was now practised in the case of personalty was to be found in the Budget speech of the Chancellor of the Exchequer. The right hon. Gentleman stated that within the last 12 months the amount of realty upon which duty was charged had increased by ten millions sterling, while the amount of personalty on which duty was charged had decreased by ten millions sterling; and the right hon. Gentleman attributed that state of things to the avoidance of duty by personalty. [" Hear, hear !"] Further evidence of that fact was contained in a letter written to him by a friend. The Act is naturally avoided as much as possible, said the writer. Its intense injustice is the cause. I believe they will get less out of my small property than they would have done under the old law, for if I live another year, except the coat on my back, I shall have little else." [Laughter.] "I know one large merchant who said he should make his sons partners and buy an annuity, and damn the Bill." —[laughter]—"and I don't know one friend about here who has not done all he can to evade the Act. Sooner or later this must tell. Remember Gladstone on our Irish policy, 'I don't say an unjust law ought to be broken, but I do say it will be."' [Laughter and cheers.]

He would quote a very high authority on this subject, the First Lord of the Admiralty, who said, on the introduction of the Act of 1894:— I was advised by the Inland Revenue that after you had reached a certain point in putting on Death Duties you would then easily reach the point where the increase of duty would not necessarily bring you in an increase of revenue. … A man now says, I think it better to retain the control of my money in my own hands and will leave it to my sons when I die, but if you are going to take several thousands of pounds from the family money and waste it by paying it to the Exchequer —that was a very strong phrase coming from an ex-Chancellor of the Exchequer —[laughter]— it would form a very potent motive for distributing the money during the lifetime of the testator. He thought he had quoted sufficient authority to prove that the avoidance of the duties was and would be practised, and was a force with which they had to reckon. And in this respect these duties were only following the general law in regard to taxes of this character. Land tax originally imposed upon all property including personalty, salaries and stock in trade, was so effectually evaded by all but land that it was eventually repealed except in regard to realty, and now fell upon that class of property only. The same had occurred in regard to rates, and this was forcibly pointed out by the present Chancellor of the Exchequer when discussing the 1894 Budget, therefore—in the history of the land tax and of rates, they found precedents for this state of things. In regard to the distribution of the load on the two classes of property, the inequality was very great. They ought to consider in many cases, not only the weight or amount of the load, but the manner in which it was placed on the particular body which had to bear it and the particular condition of that body. The right hon. Gentleman opposite had acted much as would a man who insisted on putting the saddle of a horse on a camel, and distributing the burden which was to be borne in exactly the same way on both. Also this extra burden was imposed principally on realty, and so upon agriculture, at a time when agriculture was in its worst condition. The right hon. Member for West Monmouthshire denied that these duties galled the shoulders of those who paid them, and based his contention on the fact that the Estate Duty was usually paid in one sum rather than by instalments. On April 29 of this year the right hon. Gentleman said:— So far from the pressure being undue, and so far from the instalments being necessary, people find it more convenient to pay the Death Duties at once; is not that testimony to the fact that these funds have been provided without undue pressure on the taxpayer, and do not gall the shoulders of those who have to pay them? The right hon. Gentleman had, he believed, authorised the payments by instalments, with the idea of somewhat lightening the burden of those who had to pay them. [Sir W. HARCOURT signified assent.] Yes, but he forgot that the old duty was payable only out of income, and, therefore, payment by instalments did facilitate their payment. But this was a charge of a totally different character; it was a charge upon capital. If he could show that the actual incidence of the duty was in some cases in excess of the income available to pay it for each of the eight years in which the instalments were to be paid, he thought he should have proved the right hon. Gentleman's contention to be incorrect. In such cases the only resource of the person who had to pay the duty was either to mortgage his property or to sell a portion of it, and that was the reason why the duty was usually paid in a lump sum instead of by instalments. ["Hear, hear !"] He would take the ordinary case of a landed estate producing £10,000 a year. At 20¾ years' purchase which the right hon. Gentleman the Chancellor of the Exchequer told them was the average assessment, it would pay on £207,500; the duty at 6½ per cent, would be £13,500, and if paid in instalments with the 3 per cent. interest it would amount to £15,000. The instalments, in round figures, would thus be about £2,000 a year for eight years. If the money was raised on mortgage a man could obtain £13,000 at a cost of about £500 a year in interest. The successor, therefore, had before him the alternative of paying £2,000 a year for eight years, or £500 a year permanent charge. But there was also another strong inducement to raise the money in this way. Supposing he died when this payment was incomplete, or shortly afterwards, that mortgage was deducted from the value of the property before the next duty was payable, and the duty of the next inheritor would be greatly reduced. In the other case, if he starved himself for eight years to pay the very large charge to the Exchequer, he became simply an unpaid agent for the Chancellor of the Exchequer for the sole purpose of placing his successor in a similar position. It was just as easy to pay off a mortgage as to pay the Chancellor of the Exchequer, and supposing a man found it convenient and easy to save his income he could do so.

*SIR WILLIAM HARCOURT Monmouthshire, W.)

I had no idea it was; so easy. [Laughter.]

*CAPTAIN PRETYMAN

said perhaps the right hon. Gentleman would not think it so easy when he had finished. [Laughter.] Besides the estate duty as above, there was the succession duty to pay, which, except in the case of lineals, was a very large sum, and must be paid out of income. There were also certain charges, not mortgages, for younger children and dowagers, for which no rebate was given, and which must be paid out of income. Though in some cases these did not exist, they usually did, and were very heavy indeed. He would take, in illustration of his argument, the concrete case of a property which was in the course of paying the duties at the present time —the Rufford properly, which was situated in Nottingham-shire. Within the last 15 years that properly had paid no less than £88,000. He had a letter from the solicitor to the property saying that at the minimum figure the succession duty now payable would be £50,000 and the estate duty £100,000. The available net income of the properly after agents' expenses had been paid was now £19,000 a year. [Sir W. HARCOURT signified dissent.] But he had it from the owner of the property in his own handwriting, and he assumed that he knew his own affairs better than the right hon. Gentleman knew them. ["Hear, hear!"]

*SIR W. HARCOURT

No such charge would be possible.

*CAPTAIN PRETYMAN

The right hon. Gentleman had no notion what was possible under the Finance Act. [Cheers.] When the right hon. Gentleman brought in the Act he evidently did not know the hardships it would inflict. ["Hear, hear!"]

*SIR H. FOWLER (Wolverhampton, E.)

What is 20 years' purchase at £19,000 a year? [Ministerial cries of "Order!"] Why, £400,000.

*CAPTAIN PRETYMAN

As a matter of average that was so. But he was taking a concrete case. It was a question of fact. It was all very well to ask what would happen on the law of average.

*SIR H. FOWLER

The law prohibits it being more than 25 years purchase.

*CAPTAIN PRETYMAN

That is on gross income. Gross income is a totally different thing. [Cheers.] The Succession Duty of £50,000 in the case he was considering involved a charge on the owner of property, which must be paid out of income, of eight instalments of £6,000 a year each. He had also to pay in the form of charges to younger children and others—who had a life interest in the property chargeable with duty and aggregated with what he received— £3,500 a year. This deducted from the total income left him £9,500 a year as available income. Out of this he had to pay £100,000 in Death Duties. According to the right hon. Gentleman it would be easy to pay that in eight instalments of £12,000 a year each. [Cheers.] the right hon. Gentleman was a distinguished financier, and if he could show how eight instalments of £12,000 a year could be paid out of an income of £9,500 he would eclipse the financial feats he had previously attempted. He submitted that on a concrete case he had absolutely proved that it was impossible for the owner of this property to pay this duty by instalments, but owing to the exigencies of the case and the enormous amount of duty, he must borrow the money and pay it in a lump sum. The right hon. Gentleman, however, actually stated that the fact that it was paid as a lump sum showed it did not gall his shoulders. A letter from the owner of the property said:— I think we should be quite safe in putting the number of employés whom I have been obliged to discharge from Rufford, because I cannot find money to pay them, down at 40. A very large number of these are married men with families, and the misery is very great, especially among the old ones, who feel it will be very difficult to obtain employment elsewhere. Everyone would allow that among the glories of England were the country houses and the amenities of country life, and the right hon. Gentleman opposite had done a great deal to destroy those amenities. [Cheers.] Another gentleman wrote that, he was reduced almost to beggary by the Death Duties. He had reduced his personal expenses to a minimum. He travelled third class, and it was only by discharging old servants that he could find the money. He refused to take the responsibility, and would not pay the duty. If the Chancellor of the Exchequer proceeded against him, these old servants would know that it was not of his own free will that he discharged them. ["Hear, hear!"] in what cases did these particular duties fall with extreme hardship? He would quote the prophetic words of the present Chancellor of the Exchequer, uttered when the Budget was introduced in 1894:— In cases of lineal descent, the new Estate Duty will cover the Succession Duty. But where estates do not descend lineally, Succession Duty will be exacted plus the Estate Duty. That will impose an enormous additional burden upon estates of the kind I allude to (agricultural estates). It is no sufficient answer to say that these estates will only be calculated on their fair marketable value. When you have property in the country reduced to such a point as I have described, any additional burden is infinitely more killing than it is on property of larger value. It will simply ruin the holders of that property. The case he himself had quoted bore out that contention. The right hon. Gentleman further said:— In my opinion, that increase of the Death Duties ought not to be made. In the circumstances of the moment it will be grossly unfair upon the owners of agricultural land. This bore particularly on the point that, in certain individual cases, excessive hardship would fall on the owners of property owing to their having to pay on two separate scales, and on the highest scale in each instance. There must be certain cases where, both on the hereditary scale for succession duty and on the graduation scale according to the value of the property for estate duty, properties came under the highest scale for both; and in these cases it was so punishing that it ruined the holder of the property. Before these duties were imposed in 1894 the amount of duty which realty paid in proportion to personalty was one-tenth. Now it was one-fifth. That double amount represented a larger proportion than the true value of realty as compared with personalty in this country.

*SIR H. FOWLER

It includes house property.

*CAPTAIN PRETYMAN

Certainly. What answer would he receive about these hardships of which he had spoken? He would be told, in regard to settlements, that estate duty was only payable once in a settlement, and that this was such a large relief to that class of property that it had no particular right to complain. The right hon. Gentleman said when he brought in the Budget of 1894, and speaking of the additional 1 per cent. settlement duty, "in this manner we levy the same amount on the estate as if left absolutely." Therefore, that is to say, that the 1 per cent. is calculated as an absolute monetary equivalent for the duty which it has escaped, owing to the property only paying once in a settlement. So it cannot be set up as equivalent for want of equalisation or anything else. They would be told that the income tax relief given under the Budget, and the relief given under the Agricultural Rating Bill last Session were an equivalent for these particular duties. He maintained that the relief given was not one iota more—it was considerably less— than the fair proportion agricultural land should pay of these particular taxes without reference to Death Duties. That, he believed, was common to all who had studied the question from an agricultural point of view. The one could not be held up as compensation for the other. He regarded this relief in relation to the Death Duties as relief on the henwife principle. What he meant was that it was as if a henwife excused herself to the fowl, whose neck she was about to wring, by reminding it of what a good meal she had recently given to the inhabitants of the poultry yard. He regretted that an Amendment to enable the owner of life interest in real estate to transfer it without becoming liable to duty just as the owner of property in fee could transfer it, which he had put upon the Paper last Session, and which had been postponed in consideration of an undertaking then given by the Chancellor of the Exchequer to pay the costs of both parties in a suit to determine the present state of the law on this point and other Amendments relating to the Death Duties, had been ruled out of order, because the Budget Resolution to amend the law relating to was founded did not contain the usual Resolutions to amend the law relating to Customs and Inland Revenue. Many regarded the present as an opportune time to ventilate the subject, and it was hoped the Amendments would have been discussed and judged on their merits. He did not know whether the difficulty could by any means be got over, but if it could, he was sure it would be the wish of the House it should be. Had this not occurred, he should not have needed to refer to particular Amendments now on Second Reading, but as the Amendments could not now be put down he would ask the House to allow him shortly to refer to them. ["Hear, hear!"] He contended that some maximum should be imposed, and suggested that no property should pay more than 15 per cent, of its capital value under the Act within a period of 16½ years, that was, half a generation. The next point on which remedy was required was that of husband and wife. At present a husband and wife were regarded as the same and one unit for the income tax, but were regarded as separate for the payment of Death Duties. The next point was a very simple one, and related to insurance policies. If any person starved his income to insure against the duties, the sum received at death was liable to duty. He suggested that where an insurance was effected in the name of the Controller of Inland Revenue, no duty should be charged upon it. Again, hardships arose in respect to aggregation. Aggregation, when combined with graduation—and to graduation as a principle he did not object—inflicted the greatest hardship. If a large sum went to A, and only a small legacy to B, B had to pay on as high a scale as A. On what principle could that particular form of duty be defended? There had recently come under his notice the case of an old female servant who was left a house of the capital value of £226, and an annuity of £20 a year, and was required to pay £60 duty. There was hardship also in regard to valuation. If an owner of property chose to settle a sum of money upon a child on marriage, the Revenue Department insisted that for purposes of duty an actual valuation should be made on his entire property. Another point concerned agricultural property. The allowances made for outgoings were absolutely and entirely insufficient; 12½ per cent, was nothing approaching a fair estimate for the necessary outgoings. ["Hear, hear!"] The Chancellor of the Exchequer might say to him, "If I yield to you on these points, where should I get the money required?" One penny of the income tax now raised two millions sterling, and he very much doubted whether, if all the suggestions he had made were carried into effect, it would cost the Chancellor of the Exchequer so much as two millions. He felt that if he had an income, it was fair and just and right he should pay a proportion of that income to the maintenance of the State, and in proportion as that income-was large, so he ought to pay a large share. But what he objected to was that under the form of these duties a heavy charge was made on an individual absolutely irrespective of the fact whether he had any income to pay it out of or not. Having shown these grievances, and suggested some remedies, he ventured to say that in this particular form of taxation the very maximum amount of hardship had been imposed on individuals with the minimum of result to the Chancellor of the Exchequer. He did not think it would be possible to impose a tax which could fall with greater hardship on individuals than this tax did. He did not like to accuse the right hon. Gentleman the Member for West Monmouthshire of having imposed this tax with the object of injuring those who had to pay it, but he reminded the House of what the right hon. Gentleman the Colonial Secretary said only a few nights ago, when referring to the Workmen's Compensation Bill. The right hon. Gentleman said there were two kinds of social legislation, punitive and remedial. That remark applied also to taxation; there was punitive taxation and taxation which was levied as evenly as possible simply with the object of raising the money that the Chancellor of the Exchequer required. In the opinion of a large number of individuals, the right hon. Gentleman the Member for West Monmouthshire could not be exonerated from a desire to impose punitive taxation upon the landed classes. That, at any rate, was the impression made by speeches delivered by some of the right hon. Gentleman's supporters at the time the question was before the country. The Conservative Party had opposed the imposition of these duties, and now expected that some consideration would be given by this Government to the grievances he had enumerated. They admitted that last Session was one of stress and storm, but this year affairs were in a different position, and he and others would regret exceedingly if this opportunity could not be taken, of, at any rate, reviewing the situation. The Secretary for the Colonies, speaking in that House on the 13th of this month, said:— When it is a matter of justice a small number of people have as much right to consideration as a large number. They believed that a reconsideration of these matters was a matter of justice, and it was as a matter of justice that he ventured to commend it to the attention of the House. [Cheers.]

On the return of Mr. SPEAKER, after the usual interval,

MR. HARWOOD

wished to explain a remark he made in the course of the speech of the right hon. Gentleman the Member for Thanet. He feared that his interruption might be misunderstood in particular in regard to the cotton trade. He did not wish to be understood as saying that the cotton trade was exceptionally prosperous. As one interested in the trade, it would have been distinctly unwise. What he did wish to impress on the House was that the argument the right hon. Gentleman (Mr. James Lowther) was using, that the cotton trade was declining, was illusive. When he said that the trade had certainly improved, he referred to no particular district, but to the whole trade generally. The right hon. Gentleman drew pathetic pictures of mills being dismantled and machinery being removed. Such cases, of course, had occurred in every large trade or business that did not keep abreast with the times; but to mention isolated cases of that kind proved nothing in regard to the general condition of a trade as a whole. The right hon. Gentleman endeavoured, if he might say so, to perform the operation of putting salt on a bird's tail by asking if he would recommend anyone to invest money in the cotton trade. As one interested in the trade, it would, of course, be suicidal in him to give such advice. He might be perfectly prepared to invest his own money, and the very reason why he should invest his own would be a reason why he should not advise anyone else to do the same. Had the right hon. Gentleman been in his place, he should have liked to invite him to pay a visit to Manchester, the centre of the world's cotton trade. He should be only too happy to introduce him to the Exchange, and secure him an audience; and he was sure that, whilst his unvarying humour was nowhere more appreciated than in Lancashire, his economic theories would suggest to his listeners the idea that he was a sort of economic icthyosaurus, or whatever other extinct animal he would like to be compared with. The notion that the cotton trade was languishing was absurd. Even the right hon. Gentleman's suggestion that the cotton trade was not so prosperous recently was a proof of the soundness of the fiscal system under which the country had been lately governed. The extraordinary prosperity of the trade years ago attracted more capital than could be absorbed with profit, and the consequence was that a time of prosperity was followed by a time of comparative adversity. But these large increments of capital were now being absorbed, and the trade was gradually getting steadily prosperous; and it was, again, another instance of the soundness of the fiscal system under which we were governed. He would not attempt to follow the argument of the hon. Member who last spoke as to the Death Duties. He was not responsible in any way for that legislation, and he would not pretend to criticise its details or answer the hon. Gentleman's objections; but what he wished to impress on the hon. Member and on the House was that those who were connected with manufactures, and represented large populations had a firm conviction that the land had not borne its fair share of the national expenditure. The hon. Member said that they wanted justice. He considered that they were having justice, and that the injustice was to be found in the condition preceding this last arrangement with regard to the Death Duties. His opinion—and he knew it was shared by great numbers of the population on both sides of politics—was that under any arrangement, whatever Parliament did, the land always became ultimately the greatest beneficiaire in the prosperity and security of the country. Take, for example, the expenditure on the Army and Navy, necessary and right as it was. Who was it that, after all, benefited most by that expenditure? It was the owners of real property. Personal property was transitory; it melted away; it could be moved. But real property was the one item in the national estate which benefited most by strengthening the Army and Navy and preserving the integrity and safety of the realm; and they in the manufacturing towns held that a fair share of the expenditure on the defensive forces of the country had not hitherto been borne by those who had derived the chief benefit from it. ["Hear, hear !"] He did not, however, rise so much in regard to this matter, as he wished to call the attention of the House—and particularly that of the Chancellor of the Exchequer —to an inference from a remark which fell from the right hon. Gentleman the Member for Thanet, a remark which in substance had been made very frequently during the Debates on this Bill. The right hon. Gentleman said that they had to raise an income of 112 millions, and the Chancellor of the Exchequer, in the most interesting speech in which he introduced the Bill, told the House that they had to raise an income of £109,750,000. He called the attention of the Chancellor of the Exchequer to the fact that what the right hon. Gentleman called his final balance sheet was drawn up on principles of unsound book-keeping. What the majority of the people in the country meant by national expenditure was expenditure on national objects, but not on objects which were purely matters of private business. What he objected to was the inclusion of the item for the Post Office and Telegraph Services, which was not national expenditure in the ordinary sense, but private business. The same observation applied to the Suez Canal shares, the profit of which only was shown; but what they wanted was to see what they were spending and receiving as a nation.

MR. T. LOUGH (Islington, W.)

said that if a change had been made in the wording of the Amendment, he would have been able to vote for it, but as submitted by the right hon. Gentleman be could only render it moral support. The right hon. Gentleman contemplated supplying the Chancellor of the Exchequer with more money, and he offered to give the public a present of 4½ millions at the price of levying a tax upon them of 11 or 12 millions. On the other hand, he, in opposition to the right hon. Gentleman, wanted economy introduced into the national finances. Our expenditure at present was monstrous; it was growing too rapidly. He thought that there were 17 subjects of taxation at present, but the main subjects were only four or five. Personally, he did not want a large number; he thought there might be eight. The broad principle on which he supported the right hon. Gentleman was this. When they had only a few subjects of taxation the taxes were levied on the poor people. The more the number was extended the more they caught the rich. The Chancellor of the Exchequer in his speech took the case of a poor man in 1837 and a poor man in 1897, and he showed the difference in the pressure of taxation which had taken place in that period. The right hon. Gentleman claimed that nearly all the change that had taken place had been effected by increasing the tax on property. He had had an interesting calculation upon that statement sent him by a correspondent, who pointed out that, although the tax on property had increased, the total increase since 1837 was only £29,000,000, while the increase of the taxes paid by the poorer classes was £27,500,000. The three subjects taken in this calculation were beer, spirits, and tobacco. In 1837 the total amount raised by the duties on these three articles was" £ 16,000,000, whilst in the Chancellor of the Exchequer's Budget the amount was put at £43,750,000. That in itself showed that the national revenue was not levied entirety at present, or, indeed, as far as it ought to be, on the increase of taxes on property. Where as in England in 1837 the poor would have paid 12s. 8d. per head, in Ireland at the same time the taxes would only have amounted to 4s. 10d. per head. But after 60 years, whilst in England the poor man instead of 12s. 8d. paid only 7s. 4d., a great decrease, the poor man in Ireland paid 7s. 7d., or a substantial increase. The change, therefore, had not been equal all over the country, and had pressed not only on Ireland, but the change that had taken place in the spirit duty had pressed very hard on Scotland as well.

*THE CHANCELLOR OF THE EXCHEQUER (Sir MICHAEL HICKS BEACH,) Bristol, W.

said he did not think the hon. Gentleman's figures were correct, and he was bringing into the calculation articles which he did not bring in at all in the comparison he made. The articles he alluded to in his Budget statement bore the same rate of duty in England as in Ireland.

MR. LOUGH

accepted the correction, but said that, at any rate, in the three articles he had referred to, there had been this growth in the tax. His point, therefore, was that a great part of the increase of taxation during the 60 years had been paid by the very poor. He could not follow the right hon. Member for Thanet in his proposal to put a duty on corn, which would make the poor man pay more in taxation than he did at present. A duty of 5s. per quarter on corn instead of increasing the selling price by half-a-crown, as the right hon. Gentleman had said, would increase it by double the amount of the duty, for the consumer would not only have to pay the net amount the Chancellor of the Exchequer levied, but a large profit on that amount as well. Instead of putting a tax on bread he would suggest as subjects for taxation silk, cider, and perry. Cider and perry were taxed until 1825 and 1830, when the tax was taken off because they were intoxicants used by the English and not by the Scotch and Irish. The right hon. Member for Thanet had recommended that a duty should be placed on all manuactured goods brought into this country, but he was of opinion that such a system would do a great deal of harm. With regard to the Finance Bill itself, it was so simple that it was difficult to criticise it. The Chancellor of the Exchequer showed that he had preserved a balance of £500,000 for contingencies. That, he submitted, was far too much. Again, with the large surplus he had the right hon. Gentleman should have made some attempt to deal with what were known as the small breakfast-table duties. Altogether, he thought a considerable reduction of taxation might have been made this year if there had been any inclination in that direction.

*SIR HERBERT MAXWELL (Wigtownshire)

said all who had experience of county constituencies in 1895 could testify how general and strong was the anticipation that the injustice done to real property in 1894 would be dealt with as soon as the Unionist Party were returned to power. At that time, as his hon. and gallant Friend the Member for the Woodbridge Division had shown, the present Chancellor of the Exchequer expressed the opinion that the new Death Duties would under a certain combination of circumstances prove the ruin of owners of that class of property.

*THE CHANCELLOR OF THE EXCHEQUER

I distinctly stated to my constituents, and it was published throughout the country during the General Election of 1895, that, the Death Duties having been enacted, it appeared to me impossible to repeal them or to alter them in any material form.

*SIR H. MAXWELL

could assure his right hon. Friend that he did not wish to appear as an unfriendly critic. [The CHANCELLOR of the EXCHEQUER: "You are !"] He had no wish to adopt an unfriendly attitude towards the Chancellor of the Exchequer, but the last interruption seemed distinctly unfriendly towards himself. He ventured to say that the views which the Chancellor of the Exchequer expressed in 1894 in that House were much more widely known and deeply taken to heart by the constituencies than any he confided to his constituents in Bristol in 1895. The Leader of the other wing of the Unionist Party, the Duke of Devonshire, delivered at Buxton, on June 14, 1894, a speech which attracted widespread attention. In that speech the Duke spoke of the "enormous exactions" imposed by the then Chancellor of the Exchequer on those succeeding to landed property, which, he said, would bring about a great change in the manner in which the incomes derived from the Devonshire estates should be expended. Naturally that speech excited not unreasonable anticipations of what the policy of the Unionist Party would be should they return to power. Now, approaching, as they were, the end of the second year during which the present Government had been in office, it did not seem unreasonable that large numbers of persons throughout the country should look for some fulfilment of those expectations, which, rightly or wrongly, were founded on the action of Her Majesty's present advisers while they were in Opposition. The relief afforded in the Budget of last year to owners of valuable works of art did not touch the far wider and deeper interests of those dependent on the land for their income. In a well-known phrase, the right hon. Member for Montrose had said:— Rest assured that taxation, however spread, however disguised, falls eventually on the shoulders of the industrial classes. And the crippling of those who held the land by the imposition of undue burdens must affect those who were dependent on them. There were many hon. Members opposite who hailed with frank satisfaction anything tending to weaken the landlords. [Opposition cries of "No !"] Such sentiments had many times been frankly stated from the Benches opposite. But hon. Gentlemen who held those views ought to remember that, in striking at the landlords, who were comparatively few in number, they were wounding tens of thousands behind the landlords. ["Hear, hoar!"] The Duke of Bedford—one of the largest landowners in England—had lately published a statement as to the revenues of his estates. He showed that on the two properties—Woburn and Oakley—comprising 51,600 acres, the expenditure from 1816 to 1895 had been about £4,230,500; and that after excluding all expenditure on Woburn Abbey, its park and farm, there was at present an annual loss of £7,000 on those estates; while the Death Duties on them were estimated at £65,000. If that was the result on one of the largest properties in England, it could not be considered that landlords were altogether selfish in protesting against the incidence of these Death Duties. He had recently heard of a property in the south-west of Scotland which had been in the possession of the same family from the time of the Celtic chiefs. That family had supplied many public servants to the State, many of them had occupied scats both in this House and in the Scottish Parliament before the Union. They had resided constantly on their estates, and fulfilled the ideal of country gentlemen. The gross rental was about £13,000 a year; and, the owner dying last year, the heir had to pay in Death Duties £32,000—equal to at least five years' net income from the estate. The result was that the heir was plunged into debt, and, for the very first time in the history of the property, it had to be advertised to let for sporting purposes. He might be told that the heir could sell, but what class would benefit by a forced sale? And he had yet to learn that the Conservative Party identified itself with the view that it was better for property to pass out of the hands of those who had had it so long. If the Government really sought to anticipate the end of the present land system in this country, then it must be a question with himself and others how far they would follow them in that policy. [Cheers.] For many years he had been an active Member of the Conservative Party. For 17 years he had been a Member of the House of Commons, and for six years he had held office under a Conservative Prime Minister; and he was loth to believe that the Unionist Party had adopted this unfriendly attitude to the landed interest. If they had not, but believed that, on the whole, the ownership of land as understood and practised in Great Britain had tended to the welfare and advancement of all classes connected with the land, then he urged the Government to consider what means could be taken to relieve that system from burdens which in the end must prove intolerable, and to protect it from impending dissolution. He hoped to see the Chancellor of the Exchequer adopt in 1897 or 1898 some policy which was more in harmony with the views which he and his colleagues had professed in Opposition in 1894. [Cheers.]

*THE CHANCELLOR OF THE EXCHEQUER

Mr. Speaker, before I allude to the general question raised by the Amendment my right hon. Friend has moved, I should like shortly to refer to the charge made against me by the hon. Member for Bolton, whom I do not now see in his place. The hon. Member referred to the mode in which the Budget accounts were presented to Parliament; and he suggested that it would be more business-like and more in accordance with what he called proper book keeping, if in future I entered in those accounts; the net receipts from such services as the Post Office and the telegraphs, in place of entering on one side the expenditure and on the other the gross receipts. The hon. Member is ignorant of the fact that in 1854 Parliament, by an Act passed at the instance of Mr. Gladstone, deliberately provided for its own advantage and for the information of the country, that the statement of accounts should be furnished just as they are now. ["Hear, hear !"] It is, therefore, not in my power, without disobedience to the law, to carry out the suggestion the hon. Member has made, which, in my opinion, would be a serious disadvantage to Parliament and to the public, and which would not enable a fair account of the expenditure and revenue of the country to be presented. ["Hear, hear!"] I have found myself in this Debate in what I suppose is the invariable position of a Chancellor of the Exchequer. I have had to suffer more than once during the past Session for what has been called a disposition to too great economy. [Laughter.] Even on the very Bill that preceded this Bill this evening, there was more than one speaker who complained that, owing to my parsimony, an insufficient sum had been provided for the necessitous Board Schools of England; and I cannot but repeat, in reply to the hon. Member for Islington, the statement which I ventured to make in introducing the Budget, that the great spending department of this country now is the House of Commons itself. ["Hear, hear!"] But while expenditure is demanded from all quarters of the House for almost every conceivable object, I am in the unenviable position of being grudged taxes wherewith to meet those demands. ["Hear, hear !" and laughter.] I will admit that my right hon. Friend the Member for Thanet does not grudge me taxes.

MR. JAMES LOWTHER

No: I would give you some more. [Laughter.]

*THE CHANCELLOR OF THE EXCHEQUER

But my right hon. Friend does not intend to devote them to expenditure. Under his well-known theories that Protection would be the best policy for this country, he invites me to repeal the tea duties, to levy a 5s. duty on corn, to levy duty on all manufactured goods, which, I think, he would find it impossible to define—[" hear, hear !"]—for the great proportion of what he would call our manufactured imports are goods which are further manufactured when they arrive in this country—["hear, hear!"]—and, having given me additional revenue in that way, he proposes to devote it, not to expenditure, but to the repeal of existing direct taxation either in the way of income tax or Death Duties. I do not wish to follow my right hon. Friend into the controversy between Protection and Free Trade. He did not dwell on that this evening. I know he believes we are rapidly going down the Bill. I know he believes that other countries are, owing to their policy of protection, able to compete with us on much more favourable terms; that our pre-eminence as a manufacturing country is ebbing; that we are lagging behind; and that the relative progress of other countries is greater than ours owing to their different fiscal systems. To my mind, the very fact of the enormous revenue that is raised by the present system of taxation is an answer to that charge. ["Hear, hear!"] I do not wish, to weary the House, but I could go into statistics as to the comparative trade of the United Kingdom and of our great neighbours, France, Germany, and Italy, for a period of ten years which would show, first, that we have an enormous preponderance over any other country in the bulk of our trade; secondly, that the fall in prices may have been rather a source of profit than of loss to this country, because it has been a fall in prices, not only of the manufactures which we export, but of the raw materials which we import—["hear, hear !"]—and, thirdly, that although the actual value of trade may have diminished, it has diminished less in this country than in other countries. ["Hear, hear !"] I could still further show, in answer to my right hon. Friend's comparison of our imports with our exports, that not only do we receive an enormous advantage from our foreign investments coming back to us in the shape of imports, but also that we are, in fact, the carriers of the world, and that from our shipping, which amounts, I think, to half that of the whole world, we receive what is an enormous amount, equal to 100 millions a year, to pay for the import trade of this country. ["Hear, hear !"] I do not quite understand what is the object of my right hon. Friend. As I think I have already shown, our existing fiscal system is equal to the present demands. Of course, it may be argued that the distribution of our taxation is unfair, that direct taxes should be abolished and indirect taxes substituted, or vice versâ; but I say our system of taxation is at present equal to the demand. ["Hear, hear !"] But I entirely admit, in answer to my right hon. Friend, that do not wish to draw back in any way from what I said last year. I do think that the narrow basis of our present system of taxation may become a source of danger. In the event of a period of serious depression of trade, or, of course, much more hi the event of a great war—if we should be so unfortunate as to incur it—we should have to seek for other sources of revenue besides those from which we at present draw— ["hear, hear !"]—and, as I said last year, I do not envy the task of the Chancellor of the Exchequer who has to make such a search. I am not at all prepared to say that our present system of taxation, whether direct or indirect, is infallible. I am not at all prepared to say that we might not make some changes, by additional taxation upon articles now subject to taxation, by reducing taxation upon articles now subject to taxation, or by introducing additional articles into our system of taxation, which might be to the public advantage. All I say is that I am satisfied with the present system so far as the present needs are concerned. Now, the hon. Member for the City of Derry suggested that another change should be made in our system of indirect taxation; he suggested the inclusion of some articles, such as silk, within the list of dutiable articles, which, I think he would find, if he went into the matter, would not produce anything like an amount which would counterbalance the inconvenience of placing them on the Customs list. But he also made a much larger suggestion: he suggested a system of ad valorem duties in place of our existing system of indirect taxation. Now, Sir, the system of ad valorem duties was, if I may say so, knocked on the head by Mr. Gladstone, I think, in the year 1860. ["Hear, hear !"] He pointed out—I believe it was in a Budget speech—with, I think unanswerable force, how the system of ad valorem duties was a most injurious interference with the freedom of trade, how it vexed and worried all those who were concerned in trade with minute and difficult restrictions which were much more felt by them than an increase in the duty on the articles which were subject to duly. He also pointed out that it was a very important element in our system of indirect taxation that the revenue should be easy of collection, and that a system of ad valorem duties materially interfered with the facility of collection. I certainly am not prepared—plausible though the suggestion may be that it would be better to levy a higher duty on the more valuable articles—to go back to a system of ad valorem duties. [Cheers.] But, Sir, the principal event in this evening's Debate has been the speech of my hon. Friend the Member for the Woodbridge Division of Suffolk. ["Hear, hear!"] If he will permit me, I would like to say that I have seldom listened to a speech in this House with greater pleasure; it dealt with a most difficult and complicated subject, a subject which, as the right hon. Gentleman opposite knows, and I know, is one of the driest with which anyone can be called upon to deal, with a lucidity, eloquence, and ability which I think it would be very difficult to surpass. ["Hear, hear !"] I have no word to say in complaint of my hon. Friend's references to myself on this matter, and, of course, it is not for me to defend the right hon. Gentleman who sits opposite. I was an opponent, as is very well known, of the Finance Act of 1894; I opposed the increase then made to the Death Duties on two grounds—first, because I objected to an increase of Imperial taxation on real property without something being done to relieve real property, and especially agricultural land, from the burden of rates; and, secondly, I objected to the indefinite provisions of the Finance Act of 1894 with regard to the valuation of agricultural land for the purpose of the Death Duties. I think the right hon. Gentleman opposite will bear me out in saying that throughout the discussions on that Bill those were the two grounds on which I based my objection to it, and practically when it was found impossible to induce him to meet us on the first point, and when on the second point he had accepted the Amendment of my right hon. Friend the present Leader of the House, I no longer argued against the principle of the Bill. Subsequently, both in public and in private, and in speeches which certainly have been reported and which are pretty well known, I consistently maintained that so great a change in the system of Death Duties having been once established by Parliament, it could not be repealed or altered in its material particulars unless it was shown to fail in the object which it was intended to achieve. In my judgment, Sir, there were points in regard to which the Act of 1894 required amendment. I examined those points very carefully last year, and I carried through Parliament certain alterations in it. Another point of very great importance to which my hon. Friend the Member for the Woodbridge Division (Captain Pretyman) referred, is the question of the power of the owner of a life estate to free the property from Death Duty by giving away his life interest during his life. As the House is aware, I have consented on behalf of the Treasury to bear the cost of a test action to show what the law is, and that action, I believe, is now pending. I do not agree with, at any rate, some of the criticisms which my hon. Friend passed on the Finance Act of 1894. He said that it had not decreased the complications of the law relating to Death Duty. Well, Sir, I do not know that any law could decrease those complications. It doubtless, on account of the magnitude of the charge which was made, increased those complications for a considerable period after it became law, and even now the office concerned has hardly arrived at complete working order. There have been delays which are a very fair subject of complaint, but I think in future those delays will be corrected. Then my hon. Friend said that millionaires had not been caught as was intended by the right hon. Gentleman opposite. Well, Sir, that is not my experience. [Laughter.] I think I have shown to the House this year and last year that the millionaires had been very considerably caught—["hear, hear !"]—and I was very glad to hear my hon. Friend say he did not object to the millionaires being caught, because I confess I have never had very much sympathy with millionaires in this matter. ["Hear, hear!"] Then he further said that the position of realty and personalty had not been equalised. Well, you cannot entirely equalise in fact the position of realty and personalty. Some of the points which my hon. Friend alluded to in regard to this were, I think, very fair ones, but I maintain that last year we did a great deal to carry out the views which I expressed when the Finance Act of 1894 was under discussion as to the relief which ought to be given to agricultural land from rating in consequence of its being placed on an equality with personalty under the Death Duties. I thought, I confess, that the grant from the Exchequer of £1,330,000 a year, as it has proved to be, in relief of the rates on agricultural land, was a material concession, and I was rather disappointed that my hon. Friend this evening should refer to it as a very small matter. My hon. Friend referred to cases of hardship which had been caused by the Finance Act of 1894, and he quoted one which has, to some extent, come under my own observation. But, not knowing the case would be referred to, I have not had time to verify the facts. He referred to the Rufford estate, and gave figures showing that enormous sums had been paid by the several owners during the last 15 years by way of Death Duties. He spoke of it as an instance of an agricultural estate. I do not think it is quite fairly described as an agricultural estate. I am not personally acquainted with it, but I am informed that its total value, although, the acreage is not large, is something like £1,000,000, and that value is mainly due to mineral or building rights. But, however that may be, the facts are these. The estate belonged to a nobleman who died in 1844, having entailed it upon his four illegitimate sons one after another and their issue. If he had wanted to hand over to the State by way of Death Duty as large a proportion of the value of the estate as was possible, he could not have taken a better course. Each of the sons being strangers in blood had to pay 10 per cent, succession duty, and the other day the present owner had to pay 10 per cent, succession duty because he inherited, not from his own father, but from the original settlor, and will have to pay a large sum by way of estate duty. I do not know how much it is, because I think the figures are not settled, but I do not think it can be as much as was suggested. But the bulk of the Death Duties paid on the estate is in no way due to the Finance Act of 1894. [Opposition cheers.] It is due to the old law passed in 1853, under which succession duty is payable by strangers in blood at the rate of 10 per cent.

MR. JAMES LOWTHER

Capital value now; not life interest.

*THE CHANCELLOR OF THE EXCHEQUER

That depends on the interest taken in the estate. If only a life interest were taken, succession duty would only be paid on the life interest. The bulk of the sum paid and payable on the Rufford estate has been due to the succession duty. No doubt a large sum will be payable by way of estate duty. But then it must be remembered that the estate is worth £1,000,000. [Opposition cheers.] I confess I have thought—not that it was possible to do anything which would place illegitimate children on any other footing than that of strangers in blood, because that would involve other serious alterations in the law—but that when the right hon. Gentleman, in the case of lineals, allowed succession duty or legacy duty to merge in the estate duty, he hardly went far enough. There may be ground for considering whether with regard to legacy and succession duty, in the case of those who are not lineals, there is not hardship under the present law—at any rate, in the case of brothers and sisters—and I will undertake to examine the matter and see what can be done. Generally on this subject I was very reluctant last year to deal with amendments of the Death Duties, because I felt that in attempting to relieve hardships, I might be inflicting worse hardships. The matter is so complicated that it is only with the greatest care that any change can be made. I admit that the Amendments required may not have been exhausted by the legislation of last year. There may be other points not affecting the main principle of the Act or leading to anything like a repeal of it which ought in fairness to be dealt with, and I promise they shall have my attention. My hon. Friend suggested changes which might cost something like £2,000,000 a year. How is that to be found? [Captain PRETYMAN: "A penny on the income tax!"] What he had in his mind may have been only the transfer of the burden from Death Duties to a penny in the income tax on property now subject to Death Duties. But that would be a matter of extreme difficulty. If you put a penny on the income tax all round you would tax trade in order to relieve realised property. [Opposition cheers.] I do not think that is a proposal I should like to submit to the House of Commons. For the present I have only to ask the House to deal with the Motion. I hope they will not consent to the Amendment of my hon. Friend, which I believe he is not anxious to press to a Division. If it means anything, it means the substitution of Protection for our present Free Trade system. If there be any truth in his pessimistic opinion as to the future of this country, I can only say that I believe by such substitution our fall would be certainly sooner and greater than it would be under our present system. [Cheers.]

*SIR WILLIAM HARCOURT

To-night we have on the Paper two Amendments in the names of two most distinguished supporters of the Government. My right hon. Friend the Member for Thanet has an Amendment which, if carried, would destroy the Government and their financial proposals, and that Amendment is founded upon the proposition to which the Chancellor of the Exchequer has already called attention, viz., that "the existing fiscal system of this country is unequal to the continually increasing demands of the public service, and that the time has arrived for recourse being had to more varied sources of taxation." Last year the existing fiscal system of the country produced an unexpected surplus of £5,000,000, and this year a still more unexpected surplus of about £3,000,000, find that is the condition of things in which my right hon. Friend states that the fiscal system of the country is unequal to the continually increasing demands of the public service. [Laughter.] That does not commend itself logically to my mind. The conclusion I should have arrived at is that the time had arrived, not for an increase, but for a diminution of the sources of taxation— ["hear, hear!"]—and if I have any fault to find with the financial arrangements of the Chancellor of the Exchequer, it would be that he has not drawn that conclusion in the manner I should have expected. So much for the first attack on the Government from their own supporters. Then comes the speech of the hon. Member for the Woodbridge Division of Suffolk, and I desire to associate myself with the Chancellor of the Exchequer in the well-deserved compliment he has paid to him. ["Hear, hear!"] There is no pleasure greater than to see the younger Members of the House come forward with such distinction as he has gained. [Cheers.] I myself was the principal victim of the hon. Member's attack, yet I fully share the sentiments of the Chancellor of the Exchequer; but what was the conclusion at which the hon. Gentleman arrived? The right hon. Gentleman the Member for Thanet arrived at the conclusion that we were to have a 5s. duty on corn, which, of course, would be a satisfaction to the agricultural interest. He was of opinion that a 5s. duty on corn would mean an increase of 20 per cent, in rents.

MR. JAMES LOWTHER

I suggested a sliding scale.

*SIR W. HARCOURT

I am glad the right hon. Gentleman is aware of the existence of a sliding scale, because in the course of his speech he gave some curious figures with reference to the corn duties in the earlier part of the century. The basis of that sliding scale was that there should be a minimum price of 80s. a quarter, but the time came when people were more enligtened, and some 20 years afterwards it was admitted that the agricultural interest could exist at a minimum of 60s. a quarter. ["Hear, hear!"] Well, that is the proposal of the right hon. Gentleman for the benefit of the agricultural interest; but then the Member for Suffolk concluded his speech with a proposal that the agricultural interest should be relieved from the unjust burden under which they suffered by the addition of a penny to the income tax. [Laughter.] That was to produce £2,000,000, to be devoted to the relief of the agricultural interest. When you combine these two proposals you get, I think, £5,000,000 from the hon. Member for Thanet, £2,000,000 from the Member for Suffolk, and the Chancellor of the Exchequer, as he has already told us, has given them £1,500,000. That makes £8,500,000, which is the combined proposal of them all for the relief of the agricultural interest at the expense of the other interests of the country, ["Hear, hear!" and laughter.] Of course, the burden of the 5s. duty on corn would fall on the consuming class, or the poorer and wage-earning class. The proposal of the Member for Suffolk is that the £2,000,000 should fall on the industrial and professional classes for the relief of the agricultural interest.

*CAPTAIN PRETYMAN

I did not say the agricultural interest particularly. I said that business and trade suffered as well.

*SIR W. HARCOURT

I thought the argument was confined to the agricultural interest, but now the hon. Gentleman says it will also go in relief of the millions. Then comes the paltry contribution of the Chancellor of the Exchequer, who has given £1,500,000 to the agricultural ratepayer and nothing to the urban ratepayer. I do not intend to-night to join the band of persecutors of Her Majesty's Government, but if the House would allow me I should like to make a few brief remarks on the general aspect of the Budget. I join the Chancellor of the Exchequer in congratulating the House and the country on the immense revenue it is possible to raise under the existing system of taxation. ["Hear, hear !"] With reference to the Budget accounts, I agree that the present system is the right one—that you ought to show all the receipts on one side and all the expenditure on the other. That is exactly the complaint we have always made with reference to the system of accounts unfortunately introduced some years ago in dealing with local taxation. I admit that in consequence of our remonstrances the Chancellor of the Exchequer has greatly improved these accounts, because he shows for the first time on the official paper how much of the Imperial revenue is given to local taxation, instead of keeping it out of the account, as it had been kept out before. I was also happy to hear in his Budget speech that he always spoke of the Imperial revenue as the whole revenue, and not as revenue excluding from it that part which under the unfortunate phrase interception had been kept out of the account, and given to local taxation. In order that we should understand this thing we should speak of it as it is. The Imperial revenue of this country is not the £104,000,000 which goes into the Exchequer; it is the £112,000,000 which is raised by your taxation, of which you give away £9,000,000 to local taxation. ["Hear, hear!"] And it is not merely £9,000,000 which is given to local taxation in that form; there is also £3,000,000 on the Votes in Supply which goes in aid of local taxation, so that at this moment out of Imperial revenue local taxation receives £12,000,000. That is the actual fact, and people ought to get it clearly into their minds; and it is due only to the former confusion of the public accounts that that has not been thoroughly understood. I hope in the future the Chancellor of the Exchequer will complete the reform and bring in these local taxation contributions as what they are —as money collected as Imperial revenue and handed over as a subsidy to local taxation. I rejoice, and I think everybody ought to rejoice, in the immense yield of the present system of taxation. I entirely agree with the Chancellor of the Exchequer that it is a proof, a most signal proof, that the financial system of this country is founded on a sound fiscal and commercial basis, and also upon a sound basis of currency—[cheers]—which has made this country the principal commercial nation of the world, and the money market also for all quarters of the globe. Customs have increased. What does that prove? It proves that the wages of the people are good. The income tax has improved to an extraordinary degree. I rejoice especially in that, because, though it was my duty to increase the income tax, I introduced large allowances in the tax. I remember the First Lord of the Admiralty—I do not say unjustly —expressed his fear that that might interfere with the framework and the security of the income tax, which is one of the great pillars of the revenue. What has happened? These allowances have no doubt been a great relief to the humbler payers of the income tax, and yet so great has been the prosperity of the country that the loss, which amounted to £1,500,000 upon these allowances, has been recouped since by the increase of the tax. That included, no doubt, the allowance under Schedule A, for which the hon. Member for Suffolk said, "No, thank you." He was willing enough to accept the reduction and the relief to the agricultural interest, which amounted to £200,000 under Schedule A; but now he says, "I don't count that; that was our due anyhow." But what used to be the old argument? The old argument was— You pay higher under Schedule A because you do not pay probate duty. I set to work to equalise the two, and it was found that the one was much larger than the other. Of course, when the relief under Schedule A was given it was given in consequence of the redress of the inequality under the probate duty. The income tax shows the increase of the profits of the country. What does the increase in the Death Duties show? That evidences the increase of the accumulated wealth of the country. [Cheers.] The hon. Member for Suffolk talked of these duties being evaded, and says, "You don't get hold of the millionaires." Then where does that increase of £4,000,000 come from? Who pays that?

An HON. MEMBER

Realty.

*SIR W. HARCOURT

Did the hon. Member rend the Chancellor of the Exchequer's speech? Out of £14,000,000 paid in Death Duties, what did the agricultural interest pay?—£800,000. [Laughter and cheers.] The increase of Customs is remarkable. The Chancellor of the Exchequer estimates his Customs' receipts for the coming year at £21,500,000. Now, that is nearly £2,000,000 more than the average that has been raised by Customs for the last 15 years. It has been a standing rule of Chancellors of the Exchequer one after another that when the Customs have reached the point of £20,000,000 there has always been a relief to indirect taxation under the head of Customs. It was done in reference to the tobacco duty. It was done by the First Lord of the Admiralty in respect to the tea duty. You have now got indirect taxation under Customs really £2,000,000 higher than has been the average levied upon the people of this country. The Chancellor of the Exchequer reckoned that there would be a great diminution of the stamp duties, and I think his calculation was reasonable enough. He thought the insane Stock Exchange boom in the Kaffir Circus could not continue, and he put down his estimate of receipts for stamps by £650,000. But he received exactly the same sum this year that he did last year; and why? He has told us this remarkable fact — that that £650,000 has been made up from the stamps upon the transfer of properties in consequence of the greater dealings in the transfer, especially of real property. That, I think, is a highly satisfactory state of things. What accounts for the permanent stability of the revenue is that it depends upon averages and not upon particular receipts. My valued Friend, Sir Alfred Milner, has often spoken of the law of average as being the deity that presides over the public revenue. In astronomical observations you may find errors in the instruments, but, after all, they correct one another, and so you will find when one source of revenue has fallen off another has increased. If you look upon the whole tide of the revenue you find it is flowing in the right direction, and you may neglect the fact that in particular cases there may be a falling off, because there will be a corresponding advantage in other cases. The growth of the income tax is extremely satisfactory. I do believe that by the relief that was given in 1894 to the lower classes of income tax payers you have strengthened the income tax, inasmuch as you have made it more tolerable to those who were the less able to pay it. But, in my opinion, an income tax of 8d. is too high —["hear, hear!"]—in time of peace— if, indeed, we live in, a time of peace. It is a burden which I am not disposed with the hon. Member for Suffolk to increase. ["Hear, hear!"] As to the Death Duty, let me say it is most remarkable how that duty has conformed to the original estimate. What was the estimate I presented to the House in 1894? I said that in the first year it would yield a million. It yielded £990,000, I think. I said that in future years it would yield between £3,500,000 and £4,000,000. Last year it yielded £50,000 above £4,000,000, and this year it has yielded about £50,000 under £4,000,000. That is a most remarkable conformity with the expectation formed. The hon. Member for King's Lynn, who I notice is absent, predicted not merely that we should not get anything in addition, but that we should lose even what we had, and he preached the doctrine, I will not call it of evasion, but of handsome and liberal avoidance. [A laugh] But he preached it to deaf ears. Some people dispose of their property in that way, but still there always remains a good deal of human nature about man, and one of the qualities of human nature is that people like to keep possession of their property. [A laugh.] Some people do dispose of their property very much to the advantage of their younger friends. I hope the hon. Member for Suffolk has benefited by the system of avoidance and evasion. [Laugher.] Still there are many people, and quite as many as we over expected, who stick by their own. Rather more do that than we expected, because part of our calculation was that when you impose a new tax or increase an old tax you will not get quite as much as you did from the lower taxation, that there always will be a leakage. All that formed an element in the calculation. I see no reason whatever to expect that things will be very different in the future. The Chancellor of the Exchequer mentioned that this last year there had been a, diminution in the amount of free personalty, but that was the very thing that was pointed out in 1894–95 by the hon. Member for King's Lynn, who said, "See, you have lost all this money by evasion." What happened the next year? It went up again and you got twice as much as you had lost before. This year you have lost again, but next year you may gain again. I am not, therefore, prepared to say that that is likely to be a continuing source of loss. The hon. Member for Suffolk referred to agricultural land. Let us see what agricultural land contributes to the death duty. Out of £14,000,000 personalty contributes £11,500,000 and realty £2,500,000, and that includes house property. How much does agricultural land contribute to the £14,000,000? £843,000. The hon. Member for Suffolk was rather indignant with me because I had referred to the fact that the owners of realty thought it more convenient to pay down on the nail than to pay by instalments, and he gave me credit, which I think was only just, that I had arranged these instalments because I thought it would facilitate the payment of the duty by the owners of real property. I was told that their land had mortgages on it; that they could not borrow, that they could not sell, and that it was impossible for the money to he raised. Therefore, I said, "Very well, let there be eight years to pay instalments." ["Hear, hear !"] Yes, but when the thing comes to be tested, £1,700,000 is paid in full and only £162,000 is paid in instalments. ["Hear, hear !"] That is one-tenth. Therefore, it is not true that the money could not be got. On the contrary, it is got, according to the hon. Member for Suffolk, with the greatest facility. The hon. Member gave the House as an illustration the case of a man who had £10,000 a year; his Death Duty was £13,000, and he borrowed it on mortgage at the cost of £500 a year; but I cannot see that a man who has an income of £10,000 a year for his mortgage, and has to pay £500 a year is doomed to everlasting ruin. The hon. Member also introduced the Rufford case, but the peculiarity of that case has been explained by the Chancellor of the Exchequer. He has shown, perfectly truly, that the result of the excessive burden in that case has nothing whatever to do with the legislation of 1894. ["Hear, hear !"] It is the commonest thing for people in society to say, "Oh that abominable Budget of 1894. Just think, a man has got to pay 10 per cent, here and 8 per cent, there." But the Budget of 1894 did not impose the 10 per cent. It existed before. It did not impose the 8 per cent., because of that 4 per cent, existed before. It is nobody but the millionaire who pays 8 per cent., and, therefore, the extent to which the Budget of 1894 altered the thing is the extent, between 4 per cent, and 8 per cent, arising from the properties that already paid 4 per cent.; and when they get properties of £250,000 I think they pay 7 per cent., or 3 per cent, additional. And it is really said that men who leave a property of £100,000, because under the provisions of the Act of 1894, they have to pay 1½ per cent, more than they did before, will make away with all their property and live in absolute want!The ignorance and exaggeration which have been applied to this case are really quite inconceivable, and the figures I have given, I venture to say, are absolutely true. What of these extraordinary ruins of which I hear so much, and of which, I am happy to say, amongst my friends I see so little —and many of them have succeeded to very considerable estates? I had a letter the other day from one whom I believe to be the very richest man in the country at the present day, and who always does me the favour, when a person of considerable estate dies, to write to me to call attention to his ruin. [Laughter.] He wrote to me the other day about the succession of a friend of mine—and a friend of everybody's in this House—to an estate. "Do you know," he said, "that so-and-so will have to pay £100,000 in death duty?" I wrote back and said,— I am extremely glad to hear that my dear friend and yours will have to pay £100,000 in Death Duty, because that would not be possible unless his clear income was £50,000 a year; and I did not believe he was so well-off. [Laugher.] When we hear of these things, do let me ask the hon. Member for Suffolk to take this as a rule, and I think he will find it works out pretty accurately—that the estate duty cannot in any case exceed two years' income. ["Oh !"] The hon. Member will find that is so. Let me give his own example. He gave the example of a man with £10,000 a year; and what was the sum he had to pay? According to the hon. Member £13,000, I think. That was not one-and-a-half years' income.

*CAPTAIN PRETYMAN

What I said was that this was estate duty only, and the particular hardship to which I referred was in a case when the extreme scale of succession duty and of estate duty fell on the same person. The case I quoted was of a man with £10,000 a year, and the £13,000 he would have to pay was estate duty only. I particularly said I did not consider the amount of the duty so much the hardship as the distribution of it by all falling upon a particular individual.

*SIR W. HARCOURT

I am only concerned to defend the estate duty. You may take it as a general rule that when you are dealing with largish properties the estate duties will not exceed one and a half year's income, and that when you come to the largest properties they will not exceed two years' income, and if you have eight instalments by which to pay you cannot be called upon for more than a quarter of your income in a year. Or if, as the hon. Member suggest, the money is borrowed on mortgage it will, of course, be very much less. It is, therefore, patent that many of the statements that have been made are exaggerations showing extreme ignorance. Let me come to the great grievance voiced by the hon. Member for Suffolk. He admits that what is paid by the agricultural interest is £843,000 out of £14,000,000. But at the time when this burden was imposed a relief was given under Schedule A of £200,000, reducing the burden to £600,000. Let me put before the House the profit and loss account. I take the £800,000. As against that the agricultural interest has received from myself a humble contribution of £200,000; it has received this year in rates from the Chancellor of the Exchequer £1,330,000, it received in land tax £100,000, making in all nearly £1,700,000. Therefore, upon the balance the agricultural interest is more than £800,000 to the good. The fact is that the agricultural industry has enjoyed such advantages in the past that when those who are interested in it find themselves placed upon the same footing as other people they regard themselves, as the hon. Member for Suffolk says, as the objects of punitive legislation. The hon. Member could not have desired to impute to me any malicious intention, because he knows that punitive legislation against the agricultural interest never entered my mind. Why should it be supposed that I desired to deal with that interest differently from other interests? My own personal prejudices were rather in favour of than hostile to that interest. The agricultural interest by the legislation of the last three years has been placed in an extraordinary favoured position. It was put upon an equal footing in 1894, but it has received since that time double the amount of the burden then put upon it. It has received £1,700,000 in relief of taxation which has not been extended to other classes of the community. You have given it relief in respect of rates. You say that such relief is due to everybody, but you have not given it to everybody. You have given it only to this class on whose behalf the right hon. Member for Thanet claims that you should put a heavy duty upon corn. The Chancellor of the Exchequer has spoken very reasonably upon the subject of the Amendment of the Death Duties. I said last year and I say again that if it could be shown that there is any unfair or unjust pressure upon any particular class, there would be no one less disposed than I to object to their Amendment. I did not allow last year any feeling of amour proper to interfere with any just Amendment of the law. But, as the Chancellor of the Exchequer and his advisers know very well, this is a most complicated system, and if you begin to pick the mortar out of the wall you do not know how soon the whole edifice may crumble to pieces. Anybody who deals with a great tax, whether it be the death duties or the income tax, must beware how he deals with the framework of the great fisal resources of the country, and, therefore, I feel sure the Chancellor of the Exchequer will be extremely careful—however plausible the grievance may appear to be—not to make any changes which will endanger a resource which is greatly required in consequence of the high expenditure of the country at the present time, and which cannot be safely tampered with. That is all I desire to say on the subject of the Death Duties. But I have a word to say upon the manner in which the Chancellor of the Exchequer has dealt with the surplus which was at his disposal. When it was suggested on the introduction of the Budget that various taxes should be imposed, the Chancellor of the Exchequer said he was not disposed to put on any new taxes on account of the disturbance they would make to industry and to trade. In that I entirely concur, but I see no occasion for putting on additional taxes. But the Chancellor of the Exchequer had a considerable sum at his disposal this year and last year, to deal with either in grants or in relief of taxation, and he has adopted a particular plan to which I desire to call attention. I want, for the purpose of what I am now saying, to leave untouched the one-and-a-half millions which he calls his surplus this year, out of which he has provided—and very wisely provided—the improvements in the Post Office; out of which he has taken £500,000 for additions to the Navy, with which we have yet to deal; £200,000 for troops in South Africa, in regard to which the discussion is postponed, and very properly postponed, until it can be properly taken; and £500,000, which he reserves as margin. That I do not deal with; but I deal with the surpluses which he has disposed of. Now he has disposed, in agricultural rating and in grants to Scotland and Ireland, of £1,660,000; he has given the Voluntary Schools £600,000; he has given up in land tax £100,000; and he has made alterations in the Death Duties to the extent of £200,000. Well, that added together makes about £2,600,000. That is the manner in which he has disposed of the two and a half-millions—in round numbers — which he had to deal with after providing for the vast expenditure which has been added to the public service in the last two years. Well now, this is a night, apparently, of alternative Budgets. The right hon. Gentleman the Member for Thanet has proposed a 5s. duty on corn. The hon. Member for Suffolk has made his proposal, that is an additional penny on the income tax. I claim my right, therefore, to put forward an alternative Budget—["hear, hear !"]—and a method of disposing of the £2,600,000 which I should prefer to that which has been adopted by the Chancellor of the Exchequer. There has been a great deal said about the tea duties. I am one of those who believe that the indirect taxation of this country ought to be further reduced. [Opposition Cheers.] Sir, if there is anything we have learnt from that important document, the Report of the Irish Financial Commission, it is this—it has proved what anybody who has studied the subject must know to be the case—that indirect taxation presses unduly and disproportionately upon the poorer classes of the community. ["Hear, hear !"] In Ireland it presses unduly upon the whole country, because as a class they are very poor. But it is equally true in England—[" hear, hear !"]—that it presses unduly upon the poorer classes of the English community. Therefore, if you want to carry out the great principle of taxation—that you should put the burden upon those who are best able to bear it and take it off those who are least able to bear it—you ought in the course of your taxation to follow the principle initiated by Sir Robert Peel and carried out by Mr. Gladstone, of diminishing the burden of indirect taxation in its proportion to direct taxation. [Opposition cheers.] Now the proportion is less grossly unjust than it was before household suffrage and when the privileged classes had the sole disposal of the taxation of the people—when they put the whole burden, or almost the whole burden, upon the masses of the people, in the shape of indirect taxation, and accepted hardly any part of that burden for themselves. ["Hear, hear !"] That was the condition of things before the year 1841. Well, we have gone on improving that until at last, as stated by the Chancellor of the Exchequer in his speech, 39 per cent, of the total taxation is raised now by direct taxation, but the larger proportion is raised by indirect taxation. I for one should never be satisfied until the proportions were at least made equal, which they now are not — [Opposition cheers]—and, therefore, I would seize any opportunity of diminishing indirect taxation—first of all, because it is the natural and proper method of meeting the Irish grievance—["hear, hear!"]—which unquestionably bear most unduly upon the indirect taxpayer; and you will also meet the grievances of the poorer classes of the English people by diminishing the proportion of the burden of indirect taxation. ["Hear, hear!"] I know it will shock my right hon. Friend the Member for Thanet, who wishes to increase indirect taxation. [A laugh.] That is just it. There, then, is the issue between us. Your policy ever since 1841— there is no need to go back to an antediluvian period—[laughter]—has been a, policy of increasing indirect taxation in proportion to direct. Our policy is the opposite, that of diminishing indirect taxation, because it is unjust in its burden upon the poorer classes of the community. ["Hear, hear!"] Well, Sir, that being so, if I had had what the Chancellor of the Exchequer bad— £2,600,000 to dispose of—I would have done what, when he had a surplus, the present First Lord of the Admiralty did, which was to take 2d. off the tea duty. [Cheers.] The first Lord of the Admiralty estimated a loss of £1,500,000 in the first year, but he only lost a million, and the Exchequer has not lost more since. I would dispose of £1,000,000 of his two-and-a-half millions and take 2d. off the tea duty, reducing it by one-hall. Then I have £1,600,000 left, and it is a very remarkable fact that that is exactly the sum which would enable you to take off a penny of the income-tax. [Cheers.] On the two occasions, now some years ago, when, pennies were taken off the income-tax, you will find that the sum sacrificed in the first year was something under £1,600,000. There is a very simple Budget, but it has this advantage—that these remissions of taxation would have relieved all classes of the community. [Cheers.] It would not have affected merely the agricultural interest, though I understand that there is nothing which would have been more advantageous to the owners of land and to the country gentlemen than the relief of a penny in the income-tax. It would have gone to them in their lifetime, and it would not have been postponed until the melancholy event of their death. It would have benefited the commercial classes and the professional classes; it would have benefited, above all, those classes from whom the greatest increase of the income-tax comes —those wage-earning classes who by their thrift and industry emerge from the non-paying stratum by their improved condition in life into the income-tax paying class. Therefore, so far from agreeing with the Amendment of my right hon. Friend, who says that the time has arrived when recourse should be had to more varied sources of taxation, I should have been disposed to say that the time had arrived when the great surpluses at the disposal of the Chancellor of the Exchequer should be applied to relieve the burden of existing taxes on the people. The views of the Chancellor of the Exchequer on the subject of the income-tax are rather surprising to me, and show that he moved among classes who are much more prosperous than I habitually meet. [Laughter.] In his Budget speech the right hon. Gentleman said:— There are poisons in the country to whom the Income Tax is odious, although I believe they are a decreasing number. Where does he find this decreasing number?

*THE CHANCELLOR OF THE EXCHEQUER

I think Mr. Gladstone discovered that in 1874.

*SIR W. HARCOURT

But where is the decreasing number? So impressed is the Chancellor of the Exchequer with this view that I saw in a speech he delivered in the North he said that the iron interest was in such a prosperous condition that he expected them to come forward and propose the addition of another penny to the income-tax. The Chancellor of the Exchequer says that he cannot reduce taxes now, but he looks forward to quieter times and a real reduction of expenditure. The right hon. Gentleman is a distinguished rural magnate; but if he expects a reduction of that expenditure he is like the gentleman in Horace, Rusticus expectat—[laughter]—and I doubt very much, although I hope he may live to the age of Methuselah and still be Chancellor of the Exchequer—[laughter and cheers]—at least so long as he belongs to the Party of which he is a leading member—whether he will see quieter times or a reduction of expenditure. The real time for reductions in taxation is when you have got a large surplus, and if you do not make a reduction in the income-tax, or tea duties when you have a large surplus, you never will. It is no use putting it off to times which may be worse and when you may not have the power of making those reductions which are now at your disposal. ["Hear, hear !"] I hope the Chancellor of the Exchequer will excuse me for having suggested a different disposal of the £2,500,000 from the one he has adopted. As he has made away with this money, I suppose the spilt milk is not now to be recovered. [Laughter.] But I hope if he has at a future time surpluses of this description and money to give away, he will not accept the advice of the hon. Member for Suffolk, in spite of the popularity of the income-tax, and although we are told that people are rushing in to pay their income-tax in consequence of the popularity of the present Administration. [Laughter.] I hope the popularity of the present Administration has some sounder basis than the enthusiasm for an 8d. income tax, and when the right hon. Gentleman has money at his disposal I hope he will not accept the advice of the hon. Member for Suffolk and add another penny to the income tax nor adopt the policy of the right hon. Member for Thanet and put a 5s. duty on corn. [Cheers.]

MAJOR RASCH (Essex, S.E.)

wished to support the Amendment of the right hon. Member for Thanet. Although he could not support it in detail he could support it generally, because, while he knew perfectly well that a duty of 5s. per quarter on wheat would bring their derelict land under cultivation, and, as the right hon. member for Montrose Burghs used to say, would make the valleys of Essex smile with golden grain, he could not help thinking that a 5s. duty was a counsel of perfection that the less they asked for the better. He desired to drive home a suggestion which was made by the hon. Member for Deny City. The Chancellor of the Exchequer, as they all knew, was a supporter of the temperance cause. The right hon. Gentleman taxed the brewers, but surely he must know that those manufacturers who turned out British wines were sailing uncommonly close to the wind and were very nearly overpassing the line. He thought when the House knew how far they had gone they would consider that they had already passed the line. Hon. Gentlemen perhaps were not aware that ordinary port and sherry were alcoholised only to the extent of 6 percent., whereas British wines were alcoholised to the extent of from 9 to 15 per cent, in order to stop secondary fermentation. Two million gallons of this stuff were turned out every year, though who drank it he did not know. There was no conceivable reason why the excise should not either charge the makers for the alcohol they brewed or make them use alcohol on which a duty of 10s. per gallon was imposed. This would bring in £100,000 a year to the Chancellor of the Exchequer, which might be allocated in relief of the agricultural interest, and as a sort of complement and supplement to the inefficient relief given that industry under the Agricultural Rating Bill of last year. His hon. Friend the Member for Woodbridge had called attention to the incidence of the Death Duties. Of course they fought the Death Duties in 1894 and got beaten, so that there was no more to be said about them. It was impossible to put the clock back, and they must make the, best of the matter. The hon. Baronet, the Member for Wigtonshire, had told them a harrowing tale of an estate where the Death Duties were so crushing that the estate had to be let for the shooting rights. If the hon. Baronet would only come down to Essex he would find the landowners there uncommonly glad to let their property at 6d. per acre with the shooting rights thrown in. [Laughter.]

MR. JAMES LOWTHER

asked leave to withdraw his Amendment.

SIR H. FOWLER

wished, before the Amendment was withdrawn, to call attention to a serious, if not dangerous, novelty which had been introduced, he hoped by accident, into the proceedings upon the Budget Bill. He believed the general, the almost invariable, practice had been to pass a Resolution that "it is expedient to amend the laws relating to Customs and Inland Revenue." This year that Resolution was not proposed. If that was done intentionally he thought it was due to the House that it should have been informed that such an innovation was being introduced and that the House would in consequence lose an opportunity for control over the whole taxation of the year. If the incident were allowed to pass unnoticed it would be one more step in curtailing the privileges of the House of Commons by this new mode of compressing and altering Resolutions on which Bills were founded. In his opinion the House should be especially jealous of its procedure in connection with the Finance Bill. On this occasion the House found itself confined to two Resolutions, one relating to the tea duty and the other to the income-tax, which would practically render the Committee stage of the Bill a farce. He hoped some assurance would be given that what had been done would not form a precedent for the future?

*THE CHANCELLOR OF THE EXCHEQUER

said he would simply explain what happened. He supposed it had been almost invariably the case that the Chancellor of the Exchequer of the day, besides wishing to renew the income-tax and tea duty, had desired in some particular or other to amend the law relating to customs and inland revenue, and therefore a third Resolution had been carried in addition to the two relating to the tea duty and the income-tax. This year that was not done for the simple reason that he had no alteration to propose in the law relating to customs and inland revenue. He had not the smallest desire to limit the power of moving Amendments on the Budget Bill, and he would undertake, by setting up Committee of Ways and Means, which he hoped he might be allowed to do without debate, to move the ordinary Resolution relating to customs and inland revenue in order to afford any Member the opportunity of raising any question he might desire. He hoped he might appeal to the hon. Member for East Mayo not to raise his Amendment with regard to tobacco at the present stage, on the understanding that a proper opportunity would be afforded him in Committee.

MR. DILLON

thought the offer of the Chancellor of the Exchequer an extremely fair one, and he was disposed to accept it. ["Hear, hear"].

SIR J. BRUNNER (Cheshire, Northwich)

asked the Chancellor of the Exchequer to take into consideration the case where two people, like husband and wife, or father and son, perished together. The Death Duty ought only to be charged once in such a case.

*THE CHANCELLOR OF THE EXCHEQUER

I believe that unless there is clear evidence of inheritance the Death Duty can only be charged once. I do not think there is a real grievance, but if the hon. Member will put down a Question, I will give him a more satisfactory answer.

Amendment, by leave, withdrawn.

Main Question put, and agreed to; Bill Read a Second time, and committed for Monday next.