HC Deb 25 October 1899 vol 77 cc697-712

Order for second reading read.

Motion made and question proposed: "That the Bill be now read a second time."—(Mr. Chancellor of the Exchequer.)

SIR W. HARCOURT

I am sorry that I was not here on Monday to listen to the interesting statement of the Chancellor of the Exchequer, but the fact was that I saw it announced in the public journals which are supposed to enjoy the confidence of Her Majesty's Government that the ordinary and established rule when advances of this kind were authorised by Parliament—namely, to provide taxation to redeem those loans—was to be followed on this occasion; and therefore I thought that, as it is not usual to discuss a Budget on the first; night, but on the second reading—which is the stage we have now arrived at—I could abstain for the day from the fogs of London. But, having seen this apparently authorised statement on the Monday, I was astonished to see, when I read the speech of the Chancellor of the Exchequer, that a totally different course had been adopted—that there was no proposal of taxation at all, that the rules of sound finance had been abandoned, and that, in point of fact, what we have now to discuss was what was known in the old Reform days as a "ten minutes Budget." This was announced by the same journal that had given an authoritative statement that taxation was about to be put on, and The Times newspaper sang a pæan of triumph over the Chancellor of the Exchequer. This is the language in which he was addressed by a great supporter of Her Majesty's Government:— It is hardly possible to doubt that a different course was at least contemplated, though it was abandoned, probably at the last moment, in deference to protests which even a masterful and obstinate Minister could hardly venture to disregard. This is a supporter of this Government! Well, I beg here, though a political opponent of the right hon. Gentleman, to dissociate myself from that language of coarse abuse, which, in my opinion, is unjust, unfair, and ungenerous. Though I have been in opposition to the right hon. Gentleman on many questions, upon matters of finance I have fortunately found myself in the position of being able almost universally to agree with him, except in that unfortunate lapse at the commencement of the present session—that lapse from virtue in which he cut down the war-chest of this country by two millions in diminishing the provisions for the Sinking Fund. And, as I regard that as a financial crime, I am sure that the right hon. Gentleman must repent that he committed an unnecessary crime because, as he told us, and I congratulate him upon it, he is expecting a surplus of three millions, and he might have abstained from that robbery. But, Sir, I will say this to the Chancellor of the Exchequer—that he has stood, and manfully stood, by the commercial, by the financial, by the monetary system of this country which has produced those results which you witness in this magnificent surplus; and while you have been able under this system to reduce the taxation of the people you have been able at the same time to realise a revenue twice as great as that before the principles of Free Trade and of sound currency were thoroughly established. Therefore, Sir, I come to the consideration of the ten millions Budget of the right hon. Gentleman with anything but a desire to place myself in opposition to the cause which he has thought it right to propose. Now, there is something in his statement from which I feel bound to dissent; there is a great deal more in that statement with which I am cordially in concurrence. I will state very shortly what are the grounds of dissent which I have from the Budget, because it is a Budget, of the right hon. Gentleman. My objection is that he has departed from the established principle, recognised in past clays by the soundest financiers, of dealing with the supplies voted by this House in the case of war. It is quite true that it is usual and indeed necessary that in circumstances such as those in which we find ourselves you should have a temporary loan—it may be by Treasury bill, but it was usually by Exchequer bonds—because you must have money at your disposal before you can realise the funds which are necessary for your purpose. But this is the principle upon which all sound financiers up to this time have acted, that at the time you authorise the temporary loan you will make by taxation the provision which is to redeem this temporary loan, and you do not postpone the authorisation for the taxation which is to redeem this loan to a future period. Well, Sir, the right hon. Gentleman stated—and to that I feel bound to enter a solemn demurrer—that he thought in the present circumstances Mr. Gladstone would have agreed to the course he has proposed. I feel bound to defend Mr. Gladstone's financial reputation on that subject. Sir, that was not the policy of Mr. Gladstone; it is contrary to all that he ever did, and certainly to the principles upon which he acted. I do not mean to trouble the House with many figures, but I can speedily illustrate it by what Mr. Gladstone did on the outbreak of the Crimean War. First, he had a regular Budget, and he increased the income tax by one-half. The whole amount of it was to be levied in the first half-year, and that was when the income tax realised only one million to a penny. But he had—and this bears very closely on what the Chancellor of the Exchequer said—an interim Budget, when a part of the financial year had expired. And this was his interim Budget. He had then to raise £6,800,000 more than he had expected, and he issued Exchequer bonds for that money, repayable within a definite period. When he issued these Exchequer bonds he made this proposal—the income tax was to be doubled for the second half-year; it was to be levied at Is. 2d. in the pound. There was a little more financial courage in those days than there is now. We are told that the income tax is now 8d. in the£,and you cannot think of raising it, but in that time they raised the income tax, when the country was much poorer, to Is. 2d. in the£.The spirit duty, from which the right hon. Gentleman shrinks, was raised —Irish,one shilling; and Scotch, eight-pence a gallon. Upon sugar £700,000 additional was levied; the malt duty was raised from 2s.8½d. to four shillings a bushel. That was the interim Budget of Mr. Gladstone. Now, Sir, that policy was very strongly attacked at the time, and there is one authority and one only on the subject that I will quote. It was an illustrious authority; it was an impartial authority. I will just read it; it is not long— The next Parliamentary conflict in the House of Commons will be upon finance. Gladstone wants to pay for the war out of revenue so long as he does not require more than ten millions above the ordinary expenditure. That is the very sum you need to-day— And to increase the taxes for that purpose, the Opposition —it was not a Liberal Opposition at that time— are for borrowing, that is, increasing tin debt, and do not wish to impose in the mean time any further burden on themselves. The former course is manly, statesmanlike, and honest; the latter is convenient, cowardly, perhaps popular, but nous verrons." That is a letter dated from Windsor Castle, April 18, 1854, and the author of these sentiments was the late Prince Consort. I quoted that passage in this House twenty years ago, and it is just as applicable and, if possible, more applicable to-day than it was at that period. I have endeavoured to show the House what Mr. Gladstone did in 1854, and the only other figures that I will give are as to his policy in 1859. At that time there was the Chinese war and there was great disturbance in Europe. There was necessity for raising about five million additional money. The income tax was raised by 4d. in the pound, all to be collected in the first half-year. Mr. Gladstone stated that that amounted to levying 7½d. additional, or 13d. in the whole, and in the next year the income-tax was 10d. in the pound. These were days, as I have said, when you only got a million for your penny. Now you get more than two millions for your penny. I need not go further to establish my point. The second course was adopted by Mr. Disraeli in the Abyssinian war; it was adopted by Mr. Gladstone in the expedition to Khartoum in 1884. But I need not labour this point, because the Chancellor of the Exchequer, as I fully expected, says that that was a system that was financially sound. But he said he had other duties and higher duties than those of a finance Minister, aud that was the duty of a Minister of the Crown. It is not very promising when the Finance Minister departs from principles which he thinks sound finance for considerations of political expediency. If we are to have the War Minister saying, "Well, I don't act on the principles I think best," or the First Lord of the Admiralty saying, "I am a Minister of the Crown, I have other things to consider than the interests of the Navy," I do not think that would tend to good administration. But the Chancellor of the Exchequer, as I understand, says, "Oh, if I were to proceed upon what I consider sound financial principles there might be a division of opinion, and that would be a mischievous result in our present situation." There is another view of what is the result of shrinking from asking the country to undergo the burden in support of the war. I do not see here the First Lord of the Admiralty; but I remember the day—before he became a Unionist financier—when he was a sound financier. On the 28th April, 1879, speaking of the disastrous policy of the later years of Lord Beaconsfield's Government, when we had to look upon deficit after deficit, and when the engagements they had made to redeem their own Exchequer bonds were not fulfilled—there were three years of successive deficits— the present First Lord of the Admiralty, speaking upon that subject, said: Let them remember that they were not asked to impose any taxes at present. They were asked to postpone the whole of their liabilities—in other words the country was not asked to associate itself with the action of the Government at all. Now there was no better test of how a policy was approved by the country than when the policy had got to be paid for. Cheerfulness on the part of the country to make the necessary sacrifice would be a proof of patriotism most valuable to Her Majesty's Government, and to bear imperial taxation would have shown what confidence they had in the resources of the country. But the Government had shrunk from that test, they did not think that was a fortunate circumstance in the present state of European affairs. He thought it was of great importance that in these matters they should remember the attitude of other countries, and that other countries were watching us to see how far we carried out a strong, sound financial policy when we were put to it and when we were really pressed. The great military Empires of Europe were watching us; and would it not be curious to see the effect upon them when they found that the money-bags which our plenipotentiaries sat upon at Berlin—he supposed to give majesty and power to their pose—were only stuffed with Exchequer bonds, which some future Parliament, perhaps some future Government, was to provide for, Heaven knows how? Let them look at the example of America, which had a debt of£150,000,000 … … There was an exhibition of an apparently strong policy carried out by weak men. He did not mean men intellectually weak, but wanting in the nerve and courage to face unpopularity. They had shown a want of confidence in the willingness of the country to bear the burdens which were the result of the policy of the Government. He frankly stated that he should not be afraid to face any constituency in the United Kingdom, and say to them, 'Rightly or wrongly we have heavy enterprises on our hands; we are engaged in serious work, not work beyond our strength, but work which requires some sacrifice; subject races, friends, and enemies are watching to see how we bear ourselves; at such a time will you let the foreigner sneer, and say that England is unwilling to pay in cash even for the first instalments of her new responsibilities … … Do not let us be financial cowards, but let us pay our way like men.' He believed that the soundest and most courageous finance was not necessarily unpopular; and he brushed aside any contemptible suggestion that they would like to see the burdens of the country increased in order to increase the unpopularity of the Government—that was not the spirit in which he made those observations … … but when increased expenditure did not mean increased taxation, but only the accumulation of burdens in the future, where, he should like to know, would be the cause of economy? The imposition of taxation was a real and ready way in which the people associated themselves with the actions of the Government. The payment of taxes acted as a sobering force on our national policy. It sobered those who had to impose the taxes and those who had to bear them. Sound finance was one of the best safeguards of their popular constitution, while loose finance was one of its greatest dangers. … … He was anxious to protest against the Budget. It appeared to him to be shabby, flabby, inadequate to the occasion, and to be wanting in that courage which was calculated to secure repute abroad and credit at home. To use the witty expression of his hon. and learned friend the Member for Oxford (Sir William Harcourt): 'Peace, with honour on tick, 'was not a lofty attitude for Englishmen to assume. If it were true that the present Government had inaugurated a new reign—a new era of bold foreign policy, let it be hoped that they would not at the same time inaugurate a new era of cowardly finance. I believe those were very sound reflections on the part of the First Lord of the Admiralty, and I believe that nothing would strengthen the Government in the opinion of this country, and in the opinion of other countries, more than if they had shown that they had confidence in the popularity of their war by asking the country to make a sacrifice for its support. I regret that the Government have not taken that course. The main point of the dissent which I have to make against the proposals of the right hon. Gentleman is this. I believe that the great unpopularity which attended the close of Lord Beaconsfield's Administration, and which led to his great defeat in1880, was because the Government of that day, with their Afghan war, instead of meeting their liabilities, went on postponing them, and this gave the country the impression that they had not the courage of the principles which they professed, or of the cause they espoused. My recollections of what occurred are very lively, because of the great defeat which overcame the Government in 1880. Having stated those views, I gladly pass now from my dissent from the speech describing the financial proposals of the Chancellor of the Exchequer. There is much in that speech of which, I am happy to say, I heartily approve. I speak of the language he held with reference to the duty of the Government to provide the means of redeeming these temporary loans, and I hope at least, that with regard to these declarations of the Chancellor of the Exchequer, we may take it for granted that he is declaring the sentiments and resolutions of a united Cabinent; for it is quite as necessary to have a united front and a united Cabinet in respect of making the financial provisions for carrying on this war as for undertaking the war at all. It is a costly war and must become one of infinite cost. My right hon. friend the Leader of the Opposition said, and said truly, that the speech of the Chancellor of the Exchequer included much sound financial doctrine. So it did. The first declaration of the Chancellor of the Exchequer was this: we have his assurance that there shall be no addition to the permanent Debt. That, I think, is quite clear, and I should think both sides of the House will concur in that declaration. The second declaration of the right hon. Gentleman was that this is not a case for the suspension of the Sinking Fund. That Sinking Fund has been depleted by successive Unionist Administrations. It is now only one-half of what it was before; but as to the remaining moiety we have a pledge from the right hon. Gentleman that that is not to be employed. Though in the case of a great war it is very proper that the Sinking Fund should be suspended, yet there are very strong reasons in this case why that should not be done. I will tell you one reason. When this war is concluded you will have imposed on those who are coming after you a state of things in South Africa which will involve this country in great expenditure. I do not share in the sanguine view of the Chancellor of the Exchequer that when you have conquered the Boers you are going to have a cheap administration in South Africa. You are going to govern a hostile people, you are going to govern them by force, at least for a very long period; and the policy you have adopted in Africa generally will naturally and necessarily involve enormous expenditure. To use the vernacular phrase of the right hon. Gentleman the Under Secretary of State for Foreign Affairs— You cannot do the Cape to Cairo journey on the cheap. You have not paid the first instalment of that enterprise, and you are going to leave to those who come after you the responsibility. That is the reason why you have no right to reduce the fund which is to relieve those who come after you of the Debt as it at present exists. The Colonial Secretary to-night referred to the letter of Mr. Selous. If there is one man who knows South Africa better than another it is Mr. Selous, and after him Mr. Rider Haggard. It is impossible to read their two letters without seeing what is the nature of the task which will have to be undertaken by the British Government at the end of this war. Besides other evils, it will be accompanied by enormous expenditure, and therefore I am glad to record the undertaking of the right hon. Gentleman on behalf of the Government that nothing is to be added to the permanent Debt, and that there is to be no suspension of the Sinking Fund.

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

I did not say "never."

SIR W. HARCOURT

Well, at any rate, at present. I think, at all events, that in view of the present condition of South Africa it should be made a continuing obligation on account of the burden which will fall on posterity. That is my comment on the statement of the right hon. Gentleman that this is not the same case as in 1885, in which the suspension of the Sinking Fund was justified. The third undertaking of the right hon. Gentleman is that this borrowing is one for which provision will have to be made by Parliament as soon as possible. And here I would conratulate the right hon. Gentleman in a task in which we have both co-operated, in a great reduction of the unfunded Debt. The unfunded Debt in 1890 stood, I think, at something like thirty-two millions, and now it stands at eight millions. That shows the wisdom of the policy that has been pursued in reducing the unfunded Debt. And the fourth statement is this—However high the income tax may stand at, it will be the duty of the income-tax payer to take his full share, and a very full share, in providing for such additional expenditure in common with the other taxpayers of the country. Why, Sir, I feel some sense of shame at this whining idea put forward on behalf of the wealthy classes of the burden of an eightpenny income tax when, in the exigencies I have given you, Governments came forward under circumstances like these and the House of Commons without hesitation gave an income tax of 14d. in the pound. That, as I have insisted, was double the present burden, because the income tax then only yielded one million for every penny, whereas you get two millions now. And there was not at that time the relief which has since been given to the humbler payers of income tax, and therefore the payment of the income tax now falls much more on the people who are capable to bear it. Yet what do we see? The great journal which is the representative of the moneyed class of this country calling out that the money that has to be raised for the war may be raised upon anything except the income tax. Then the right hon. Gentleman touched upon a rather difficult topic. He said the Transvaal was to provide not only the expenses of administration and the maintenance of order, but a reasonable sum towards the expenses of the war. Well, Sir, I think he will find that difficult enough, after the war is over, when you have got to administer affairs in the midst of a hostile people. ["No."] Can you doubt it will be a hostile people? For years after the war, as the Colonial Secretary said, there will be this feeling of hostility—perhaps for generations. The administration, therefore, will not be cheap. I doubt very much whether you will get very much towards the expenses of the war. How are you going to get it? I presume that the doctrine of equality of the white races does not mean that you are going to levy it on the Dutch and not upon the English. Very well, you are going to levy it upon the wealth and not on the poverty of the Transvaal. Therefore, the reasonable expenses of the war, fairly enough, will fall upon the gold-hunters, who have been the real authors of the war and who will derive the profits from the war. The Chancellor of the Exchequer has told us the principles which are to govern the next Budget. These are his words— If we had known in April last that we should have been called upon to provide for an expenditure of ten millions for the war in South Africa, I should myself have felt bound to provide for it out of the resources of the year. Mark this. If it be true that last April, had the right hon. Gentleman foreseen this expenditure, he would have thought himself bound to provide for the redemption of those temporary loans, that obligation will come upon him next April. Very well, but similarly the obligation will come upon him next April to make provision for what he expects to be the expenditure in Africa and for the war in the next year. Then he says at theend— We shall appeal to the patriotism of the people next April, and we shall rely that those who have supported us so loyally in the prosecution of this work will not fail us when the proper time comes to pay the bill. I hope that will be the case. But I am sorry to say that there are riot wanting examples where the most solemn pledges have been given that temporary loans of the character we are authorising tonight should be redeemed, and they have not been redeemed. They have been carried over on a sort of Imperial contango. These accommodation bills have been renewed again and again, and Governments have shrunk from relying on the patriotism of the present to redeem them. The proper time, in my opinion, to have made provision for paying the bill was now. That is the sound financial course which Mr. Gladstone began in 1854 and which he repeatedly followed, and it is a course which whenever departed from has led to great financial confusion and disaster. I believe departure from that course was largely the cause of the ruin of Lord Beaconsfield's Administration in 1879. I trust that that will not be the case now. I trust that the Government will stand by the principles declared by the Chancellor of the Exchequer, and that the patriotism of next April will not fail them when it is called upon to pay the bill. I cannot suppose that they doubt that the patriotism of the country would have supported them now. I will say for myself that I can hardly conceive of any proposal with regard to taxation which would have been made by the Chancellor of the Exchequer which I myself would not have cordially supported. So much importance do I attach to the maintenance of this redemption and so great confidence have I in the Chancellor of the Exchequer's sound financial principles that I believe the proposals he would have made would almost have received the unanimous support of the House. I cannot conceive what diverted him and the Government from the intention originally entertained of dealing with this question in the manner in which it has always been previously dealt with; and I greatly regret that that course has not been taken. On the other hand, I find so much in those declarations of the right hon. Gentleman that I have ventured to recall to-night in order that they may not be forgotten, that I, for one, shall certainly offer no opposition to the proposals he has made.

*SIR M. HICKS BEACH

I have great respect for the experience and authority of the right hon. Gentleman on questions of finance, and whenever I have found myself able to agree with him, which has been on frequent occasions, I have been glad to be able to do so. I admit that the right hon. Gentleman is a formidable critic even when I differ from him; but his criticism is less formidable when it comes almost alone, and at any rate after the proposals to which he objects have been accepted with practical unanimity, not merely by the House of Commons at large, but also by the public. On Monday night what happened? It is usual on the introduction of any financial proposal for the Leader of the Opposition to deprecate debate and to postpone the expression of his opinion. But the right hon Gentleman who is the leader of the party of which the right hon. Member for West Monmouth is still, I believe, a member at once rose, and in a most gushing manner for a cautious Scotsman expressed his congratulation to me on the proposals I made and his complete acquiescence in them.

SIR W. HARCOURT

He did not say that he approved; he said he acquiesced, and I acquiesce, and if the right hon. Gentleman will allow me to add a third to the number, he also acquiesced.

*SIR M. HICKS BEACH

At any rate, if the right hon. Gentleman supposes that these proposals which I have made to the House are not proposals of the justice of which I am myself convinced he is much mistaken. I am quite sure there is not one of my colleagues who would have for a moment desired to persuade me to adopt on a question of finance a course of the justice of which I was not myself absolutely convinced. I am far from desiring, as the right hon. Gentleman seems to have suggested, to shield myself from responsibility in this matter and to place it on the Government. I assume the responsibility, whatever it may be, of these proposals; they are mine, and of no one else. The right hon. Gentleman who leads the right hon. Gentleman was supported in his acquiescence by all those around him, and everyone on both sides of the House, with the exception of the hon. Member for East Mayo and the hon. Member for East Clare, who certainly, at any rate, did not agree with the right hon. Gentleman opposite, because they did not only object to borrowing, but they objected still more to any taxation for the purposes of this war. As far as I can understand the right hon. Gentleman is almost alone in the criticism which he has made on my proposals to-night. I demur to his suggestion that I have not proposed new taxation on account of any fear of the popularity of the war, or of any idea that new taxation would not be agreed to by Parliament. I have not proposed now taxation now for the reasons I explained on Monday, because in the first place the future is absolutely uncertain both as to the cost of the war and the amount of it which will fall on this country; secondly, any proposals for new taxation now must necessarily fall on a small part of the population alone, and would be felt by the class subjected to it as a distinctly inequitable addition to their burden as compared with other classes of the community. I do not wish to elaborate the arguments I have addressed to the House. I do not understand, however, the right hon. Gentleman himself to differ from one of those arguments—namely, that, if direct taxation is to be called upon for an additional contribution towards the war, there should be also a contribution from indirect taxation. I think he will hardly differ from the authorities who held that in the seventh month of the financial year the imposition of now indirect taxation is practically impossible. Those are the reasons which induced me to take the course I have taken. Now what is it that the right hon. Gentleman differs from? I really have found some difficulty in ascertaining. The right hon. Gentleman cites the precedent of the Crimean War, and says that at the beginning of a great war with one of the greatest Powers in the world Mr. Gladstone introduced a new Budget and raised taxation very largely both from direct and from indirect sources. Does the right hon. Gentleman compare the present war, which is no doubt a serious one, with the Crimean War? The cases are utterly different, and I cannot imagine any precedent which can be drawn from the one and applied to the other. I did not quite understand what the argument of the right hon. Gentleman was. He complained that I had abandoned the rules of sound finance. He admitted that it was necessary to meet this expenditure in the first place by temporary borrowing, but he said that temporary borrowing ought at the same time to be provided for by taxation. But how much of it? Would the right hon. Gentleman say that the whole of this ten millions, which comes upon us at the end of October, should be provided for by additional taxation within the year? All I can say is that if he made such a suggestion as that, it would appear to me to be simply mad finance, because, as I have already said, in which I think he entirely concurred, indirect taxation now is practically impossible; and, therefore, you would have had to raise the ten millions by an addition to the income tax for this year of at least 4d. in the £,and even more, if the whole sum named was to be paid in the course of the financial year. If that be the financial purism of the right hon. Gentleman, I can only say that it seems to me absolutely impossible, to say nothing of its inequality and unfairness. The idea of the right hon. Gentleman, however, may only be this—that something should be done in the way of additional taxation to test the feeling of the country by the imposition perhaps of a penny on the income tax, or something of that kind. I frankly admitted the other day that there are arguments in favour of that proposal drawn from the experience of the past in regard to the Abyssinian War, the Soudan, and the Bechuanaland Expedition, but I demur to the right hon. Gentleman's contradiction of the views which I attributed to Mr. Gladstone. On turning to Mr. Gladstone's observations on the proposal of Lord Beaconsfield's Government to provide by an addition of a penny to the income tax for a certain amount within the year of the anticipated expenditure on the Abyssinian War, I find that Mr. Gladstone said— It is a very good principle that the burden which has to come upon the year should be met from the resources of the year exclusively, and had we been at the commencement of the financial year it would have been desirable to apply it without mitigation or qualification. At the period so late as this" (much about the same time as the present), "when we are about to enter on the ninth month of the financial year, there is undoubtedly much difficulty in bringing that principle into application. That is a statement which I do not think the right hon. Gentleman will contradict. Then the difference between us comes to this. He would have levied a penny on the income tax. I must candidly say, for the reasons I stated to the House the other evening, that I do not think it would have been equitable, and I do not think it would have been worth while. Whatever may be the result financially of the war in which we are at present engaged, I think it is sounder finance, with all respect to the right hon. Gentleman, and more consistent with common sense, that we should not endeavour to deal with the question at present of the way in which the expense should be met, but that we should defer that to April next, when the Budget of the year is introduced. This is no Budget at all. The right hon. Gentleman has called it "a ten minutes Budget," but it is no Budget at all. It is simply a proposal to meet a temporary exigency by borrowing. I hope in these circumstances the House will not think it necessary to pursue this matter at any length, and that we may be able to take the second reading to-night.

In pursuance of the Order of the House of the 18th day of this instant October, Mr. Speaker adjourned the House without Question put.

Adjourned accordingly at twenty minutes before Nine of the clock.