§ Order for Third Reading read.
§ *THE CHANCELLOR OF THE EXCHEQUER (Sir M. HICKS BEACH,) Bristol, W.I undertook, in moving the Third Reading, to give to the House some information with regard to the details of the revenue and expenditure of last year, and the influence which the great increase in the revenue last year may have upon the revenue receipt of the year in which we now stand. Hon. Members will see from the Paper which has been presented* that the total receipt from taxation in the past year amounted to as much as £129,757,000, or £11,900,000 in excess of the revenue of the previous year. Of this sum £9,917,000 went to the Local Taxation Account, £396,000 more than the previous year; and £119,840,000 was received by the Exchequer, an increase of £11,504,000 over the receipts of the previous year. I do not suppose that so enormous an increase as that for
* See Appendix I. to this volume.1448 one year over its predecessor ever happened before by the purely automatic effect of taxation. I think that out of the revenue of the year only £800,000 was due to increased taxes, and therefore practically the House will see that the revenue of last year increased by no less than £10,700,000 over the revenue of its predecessor purely by the automatic, increase of existing taxation. Now, I should like for a few minutes to detain the House by an inquiry as to how that extraordinary increase has accrued. Hon. Members will recollect that in forming my estimate of the yield of the revenue for the year just closed, when I introduced the Budget on March 5th,* I stated that my calculations were based on figures arrived at a few days before I spoke, and that since then there had been remarkable clearances of dutiable articles by which those figures might be largely disturbed. As a matter of fact, the disturbance was very much larger than I had anticipated, and this will appear from a brief examination of the receipts from Customs and Inland Revenue last year. The total receipts from the Customs revenue by the Exchequer last year were £23,800,000; my original estimate of these receipts had been £21,770,000, and my estimate of March 5th was £22,130,000. The actual receipts were £2,950,000 in excess of the revenue of 1898–99. Such an increase obviously cannot be accounted for in any ordinary way. The great bulk of this increase was due to clearances in anticipation of increase of duty. Those began as far back as January 25th last, but they culminated on the two days after the announcement of the date when the Budget would be introduced, between March 3rd and 5th, and I may state that in those two days there was an excess of receipt from Customs of as much as £1,975,000 over the receipt of the two corresponding days of the previous year. £380,000 of that excess came from tea, £1,250,000 from tobacco, £245,000 from foreign spirits, and £100,000 from other dutiable articles. In the same way, between March 1st and 5th, the excess of receipts from British spirits was £1,473,000 above that of the corresponding days of the previous year. If I go into the details of the customs revenue I think this will* See The Parliamentary Debates. [Fourth Series], Vol. lxxx., p. 53.1449 come out even more clearly. Foreign spirits were originally estimated to produce £4,310,000; the estimate of March 5 was £4,680,000, and the amount which was actually produced was £4,910,000. After carefully calculating how much of that revenue was really due to last year, my advisers assured me that £240,000 of it were receipts that ought to have come into the present year and had been a wrongful gain to the year that has closed. My original estimate of receipts from tea was £3,970,000; on March 5th I estimated them at £4,200,000, and they actually produced £4,750,000. My advisers considered that out of that the sum of £625,000 was really due to this year, and ought to have come into this year's accounts. Nearly as much as one-seventh of the total consumption of tea for this year is tea that paid duty last year, and the duty on it, therefore, does not come into this year at all. Tobacco has been rather a failing revenue. My original estimate of the yield of tobacco last year was £10,840,000; the estimate of March 5th was £10,700,000, and the actual receipts turned out to be £11,510,000. That was solely due to the great clearances on the 3rd and 5th of March, as much as £760,000 of the proper revenue of this year being put into the revenue of last year. The original estimate of the receipts from wine was £1,680,000, and the actual amount produced was £1,740,000, of which it is estimated that £80,000 properly belongs to the receipts of the present year. Even those concerned in dealing with dried fruits were so alarmed at a possibly increased taxation that as much as £20,000 was paid by them in anticipation of increased duties, which went wrongfully into the receipts of last year. The total Exchequer receipts from Excise last year were £32,100,000, or £2,900,000 more than the receipts for 1898–99 and £2,250,000 more than my original estimate. Beer, of course, was not affected by anticipatory clearances, the duty being levied in a different way, and the receipts from beer amounting to £11,890,000, were very slightly above what I had originally estimated them to be.
§ SIR WILLIAM HARCOURT (Monmouthshire, W.)Can the right hon. Gentleman give the total figures?
§ *SIR M. HICKS BEACHOn spirits the total receipts were £19,632,000, or 1450 £2,212,000 over my original estimate, and £1,132,000 over my estimate of March 5th. Spirits had begun to be cleared in anticipation of an increase of duty as soon as the middle of January, and that culminated on the first five days in March. The total result of the figures I have detailed to the House is this—that there was something like £1,700,000 of Customs receipts gained to the year that has passed at the expense of the present year, and £l,500,000 of Excise. There have been some other increases in the revenue beyond my anticipations, due to other causes. Stamps produced £100,000 more than I expected on March 5th—£8,500,000 in all. I stated then that as the income-tax was almost entirely paid in the current quarter it was too soon to tell how much the income tax was likely to yield. It actually did yield £150,000 more than I expected—£18,750,000 in all. But the death duties defeated me again. I put the death duties on March 5th at £13,300,000 to the Exchequer, and £4,171,000 to the Local Taxation Fund—£17,471,000 in all. Then I remember there was some wonder at the extraordinary increase of the death duty yield for the year. But, as hon. Members will already have seen, their yield amounted to even more than that. A sum of £14,020,000 went to the Exchequer and a sum of £4,453,000 to the Local Taxation Fund—£18,473,000 in all from death duties. There was a very great increase in the total amount both [...] realty and personalty that paid estate duty last year. In the previous year the amount of realty paying estate duty was £49,395,000; the amount of realty paying estate duty last year was £57,760,000. The amount of personalty paying estate duty in 1898–99 was £198,801,000; last year it was as much as £229,600,000. With regard to the yield of these duties, I may say that February had been a very good month, and it was considered, and I think rightly considered at the time, that March was not likely also to be exceptionally good. But in March the personalty paying estate duty increased no less than 50 per cent. over the corresponding month of last year. There seemed to be a sort of feeling during the last quarter on the part of solicitors that if wills were not brought in for payment during the quarter there might be some increased taxation, and during March no less than £440,000 was received from estates 1451 paying high rates. These are reasons why my estimate of the total yield of the death duties has been so much exceeded. With regard to expenditure, I have little variation to make from the Estimates which I gave on March 5th, but that variation is on the right side. The ordinary expenditure of the year is £110,505,000; the war expenditure, £23,217,000; total, £133,722,000. Against this there is an Exchequer revenue of £119,840,000, leaving a deficit of £13,882,000—nearly four millions better than the Estimate I present on March 5, when I stated to the House that there would probably be a deficit of over £17,770,000. That deficit is met by £8,000,000 of Treasury Bills, by £2,550,000 first instalment of the War Loan, and by a temporary draft on our balances of £3,332,000, which will be repaid on Tuesday next from the second instalment of the War Loan. There is only one matter with which I have now to detain the House, and that is a matter which concerns the future. What effect is this illegitimate gain of nearly £4,000,000 in the receipts of last year likely to have on the probable receipts of the year that is before us? I am afraid we shall lose in two ways. We shall lose, of course, to some extent by failing to receive from those goods that were cleared with such ardour on March 3rd and 5th the increase of duty which the Committee sanctioned on March 5th. I made allowance for that loss in my calculations on March 5th, because—I do not know whether it escaped the notice of hon. Members—I took no credit at that time for the receipts from the increased duty between March 5th and 31st. I practically had put those receipts against the loss from anticipating clearances which I felt sure would occur, and I balanced one against the other. Now, owing to this great amount of clearances there has been a greater loss under that head than I expected, and I think there will probably be a loss of Customs on the coming year, by reason of the increased duty having been escaped, of something like £215,000. But that is a small matter compared with the loss of the original duty which properly belongs to the year and which has gone into the receipts of the previous year. The effect, of course, is to transfer the proper revenue of 1900–1 to the revenue of the year 1899–1900, because a considerable part of the dutiable goods which will be consumed during the 1452 year have already paid duty and will not produce any revenue this year. On the other hand we may fairly consider that some gain may be expected from the increasing prosperity of the country. Every year that passes really seems to show a greater improvement in our trade and a greater power of consumption; and, although I have shown the House that we have practically lost for the year that is to come £1,700,000 from Customs and £1,500,000 from Excise—£3,200,000 altogether—yet I do think we have in the reason to which I have just referred a set off against a considerable portion of that loss. I think, Sir, that if I reduce my estimated Customs receipts for the year in which we now are from £25,017,000, the estimate of March 5th, to £23,620,000, I shall make a fair estimate of the probable receipts from Customs in the year before us. The House must remember that the Customs revenue is not as growing a revenue as the revenue from British spirits received by the Excise. In spite of these anticipations there has been a very considerable clearance of British spirits during March and up to the present time, and I think we may safely say that if we reduce the estimate of Excise revenue from £34,350,000 to £33,550,000 that will be a fair estimate of what we are likely to receive. Then I am bound to admit to the House that there is another matter in which I think it necessary to make a change. I think some surprise was expressed at my estimate of the receipts from the income tax, and I have seen various calculations to prove that I have put them much too low. I think those calculations did not sufficiently take into account the certain effect of a large increase in the rate of income tax upon the receipts. In the first place, there is a much greater temptation to evasion and to the return of smaller profits than a man has actually received, when the tax is a shilling instead of eightpence in the £. In the second place, there is also a greater risk of bad debts owing to non-collection of income tax; and, further, there is a much greater tendency, when the income tax is high, and a very proper tendency, on the part of those entitled to exemption or abatement, to make claims for relief which they would not have thought of making if the tax stood at a lower level. For all these reasons I considered in March that a shilling tax would probably 1453 yield about £85,000 less for each penny of the tax than it had yielded when at 8d. But, on the other hand, I have to consider the fact, and it is a very gratifying fact, that the yield of the income tax at 8d. increased by £750,000 in 1898–99 over the previous year, and by £750,000 in 1899–90, or £1,500,000 in two years; and I think we may be confident that that increase is still going on. Therefore I propose to raise my estimate of the receipts from income tax from £25,300,000 to £25,800,000. I think, too, that the present aspect of the stamp revenue would justify an increase of £150,000 on my original estimate. Now I will give to the House the detailed figures of the probable revenue. I have explained that the receipts from the larger estates under the head of death duties during the year were entirely unexpected, and I do not think I should be justified in increasing that estimate. From Customs I expect £23,620,000, Excise £33,550,000, estate duties £13,000,000, stamp duties £8,550,000, land tax £800,000, house duty £1,650,000, income tax £25,800,000, being a total of £106,970,000. Adding to that £20,550,000 of non-tax revenue, which I think should be left at the same figure I gave on March 5th, there is a total estimated revenue of £127,520,000. On the other hand, as to expenditure, there are Consolidated Fund charges, amounting to £21,360,000, after allowing for the suspension of £4,640,000, the repayment of capital wrapped up in terminable annuities, which the House has practically agreed to accept, and to that I have to add £619,000 for interest on the War Loan, making the total Consolidated Fund services £21,979,000. The Supply services amount to £128,082,000, making a total of £150,061,000 expenditure. The revenue being deducted from that the deficit will work out at £22,541,000. Add to that the actual deficit of last year, £13,882,000, and there will be an aggregate deficit for the two years of £36,423,000, and this will be provided for partly by Treasury bills for £8,000,000, and the remainder by the proceeds of the War Loan, which will leave, after replacing the amounts temporarily taken out of balances, a margin of £1,127,000, besides, of course, the further borrowing powers of £5,000,000 which are included in the War Loan Act, and which have not 1454 yet been exercised. I stated on March 5th that we should no doubt require a considerable portion of that sum, quite apart from war expenditure, for the purpose of increasing military and naval reserves, of guns, ammunition, stores, and so forth. I have to thank the House for the patience with which they have listened to what I am afraid has been a dry statement; but I thought it right to put before the House, what I was unable to do on March 5th, details of the actual receipts of the past year, and, of course, it was necessary that I should make the corrections which followed from the increased revenue we have received, both in the general financial situation and in the probable result of the revenue of the year to come. I hope the House will consider that, as a whole, the result of last year has been most satisfactory, and that our prospects for the future are by no means bad.
§ Motion made, and Question proposed, "That the Bill be now read the third time."—(Mr. Chancellor of the Exchequer.)
§ *SIR WILLIAM HARCOURTThe right hon. Gentleman has laid before the House with his usual frankness, clearness and ability the situation as it now stands; but I do not think we can possibly pass this occasion by without recognising, whether we look at expenditure, or whether we look at revenue or debt, that it is one of the most momentous financial events which has happened in the last half of this century. I do not find fault with the right hon. Gentleman, because I know the circumstances which have led him to make what would otherwise be regarded as a premature Budget statement; but the result has been that we have not been able to give to the actual financial situation even the ordinary consideration which would be given at a time much less important than the present. We are now on the Third Reading of the Finance Bill, and for the first time we are receiving the true account of the condition of our monetary affairs in the past year and the estimate of what we are to expect in the future; and that at a time when the revenue of the country has been beyond comparison greater than at any former period, when we are imposing taxes I think to a larger amount than any man now in this House has ever known, and 1455 increasing the Debt by an amount which has not been known since the great war. That is a situation which certainly ought to demand from the House of Commons very mature consideration, as regards both the past and the future; but we are not able—I am not complaining of that—to give it the consideration we might expect it would receive, and which we ought to give to it, because it has always been a standing rule, founded on common sense, that when we hear the statement of the Chancellor of the Exchequer for the first time we must take time to consider the bearing of that statement on the finances of the future year. Therefore we have never hazarded an opinion on a statement such as we have just heard from the Chancellor of the Exchequer without taking some days to master the figures, but we are now going, practically speaking, to-night, after a discussion necessarily brief, to dispose of the greatest question of revenue, of expenditure, of taxation, and of debt that has ever been brought before the House certainly in my life time. That is a warning, I think, against early Budget statements, and I hope there will never again be occasion for it. Our minds have been very much perplexed by what is called the provisional Budget. We have just mastered that and now we find that the expectations formed by the authorities of what the revenue was likely to be were out to the amount of £4,000,000. We used to reckon in the old days that to be out a million in the year was rather bad, but when you come to have upon a single year a surplus of £9,500,000, you may call that a very large order indeed. I cannot help looking at this matter as I have looked at it before, and asking myself what would have been the situation if there had been no war with a realised surplus of £9,500,000. What could you not have done with a surplus such as that. You are contemplating a mass of reforms in this country. Such a surplus might have given you old-age pensions or a system of secondary education. It might have given you many things for which money is sorely needed, but instead we have increased taxation and a great accumulation of debt. It is not only the mouth of the Chancellor of the Exchequer that must water at such a prospect as that—a realised surplus of upwards of £9,000,000.
§ *SIR M. HICKS BEACHThis surplus, to the extent of more than £3,000,000, is due to anticipatory clearances which would never have existed but for the necessity of increasing taxation.
§ *SIR WILLIAM HARCOURTThat only shows the difficulty created by being obliged to deal with these figures at a moment's notice. I had no idea until this moment that the right hon. Gentleman put the result of the anticipatory clearances at upwards of £3,000,000. At any rate, that would leave a surplus of £6,000,000, and that is a comfortable surplus which gives great hope for the future, because if you can get apart from these exceptional circumstances a surplus of £6,000,000 you may expect an additional million from the increase in the population and in the ordinary contributions to the revenue. The £6,000,000 you have realised would have gone to the liquidation of the debt instead of their being an increase of debt. The surplus of £6,000,000 in the year that is past would have given you the expectation of a very large revenue in the next year—probably larger than the present. This would have been the prospect you would have had but for the war. The Chancellor of the Exchequer has admitted that, whereas he put the deficit on the past year, including the war expenditure, at £17,000,000, it will now be only £13,000,000. The consequence is that the resources he requires to meet the expenditure of the present year will be £4,000,000 less than he had anticipated in his provisional statement. Now, I desire to ask what is going to be done with those £4,000,000? Of course, what you are looking to is the operation of what would have been a surplus upon the debt, and I do not know whether I am right in suggesting that, if you have a deficit of £4,000,000 less than was estimated, it would be reasonable to expect that you would require only half of eight millions of Treasury bills that you raised for the purposes of the year which is just concluded. If that be so, I would submit to the right. hon. Gentleman that it might be possible to diminish the addition to the Treasury bills which he has already proposed.
§ *SIR M. HICKS BEACHI intended to intimate that our position is better, no doubt, though not to the extent which 1457 I think the right hon. Gentleman suggests, and I think that possibly I may not require to raise some of the five millions of Treasury bills which I still have in reserve. But, of course, the future, as the right hon. Gentleman knows, is most uncertain.
§ *SIR WILLIAM HARCOURTI am speaking really from the final Paper of the right hon. Gentleman where he puts it in figures that his deficit is now, according to present calculations, thirteen millions as against seventeen millions which appeared in the provisional Estimate.
§ *SIR M. HICKS BEACHBut a considerable portion of that gain is a loss to the revenue of this year.
§ *SIR WILLIAM HARCOURTAfter all, the foundation of all our finance is in dealing—whatever may be the causes of shifting revenue—with the actual expenditure. The keystone of the whole is that each year should be complete in itself; and that therefore you cannot, unless you go into that vicious system which in foreign countries goes by the name of virements, and transfer the revenue of one year to another. You must treat the revenue and expenditure of one year as complete in itself. Therefore, I am looking at the present revenue of the year 1899–1900 by itself. The right hon. Gentleman has so treated, and properly treated, the matter, and has given us the figures of the expenditure and revenue of that year; he has drawn a balance and shown a deficit in his provisional statement of seventeen millions, but now, in the final account, it is reduced thirteen millions. If it had been a surplus he would have been obliged to apply it to the National Debt; at any rate, the accounts must have been kept separate. I only say this by the way. What I was urging upon the right hon. Gentleman was that he must have benefited in some form or other by getting £4,000,000 more of revenue in the past year than he expected; and I venture to say that he had better apply those £4,000,000, whether he has got them in in meal or in malt, to the diminution of the Floating Debt, rather than to any other purpose. The figures of the whole revenue are certainly most astounding. It is impossible that anybody could have apprehended that the wealth of the 1458 country should have developed itself in the degree it has done in the last two years. I only hope that we shall not abuse the willing horse by treating that revenue in the way that people do of whom it is said, "Money easily got is easily lost." I come now to the question of what is going to happen in the year which is to come. I never venture to challenge the estimates of a Chancellor of the Exchequer. He has sources of information which are open to nobody else, but we cannot regard him as infallible. And certainly of late there has, it seems to me, been a very much greater difficulty in forming an opinion upon the probable revenue of the country than used to be the case. That may arise from various causes. It has happened, no doubt, in the present case to the exceptional conditions of this rush upon dutiable articles. But that is a thing to which you are always subject. Even without any war, there may be circumstances which suggest the necessity of increasing the revenue, and, remember, it was not only on March 2nd that this rush took place. The right hon. Gentleman has told us in his speech that it began as early as the middle of January.
§ *SIR M. HICKS BEACHOn tea.
*SIR WILLIAM HARCOUBTThat is so, but people in the month of January begin to think of what the liabilities of the country are likely to be, and of the consequences which will follow from those liabilities. Therefore, this is an element which is not confined to the present year, though, certainly, it has probably never assumed the startling proportions it has done in this year of war. The Chancellor of the Exchequer, in the clear statement which he always gives to the House, has not given that which I should like to have seen—that is, his estimate of the revenue of the future upon the basis of existing taxation, because that is the real basis on which every estimate is, and ought to be, formed. First of all, knowing the revenue of the last year, you form your estimates upon what you expect to be the revenue of the next year on the basis of the present taxation, and according as there is a deficit or a surplus you frame your taxation. The right hon. Gentleman has not given us his estimate of Customs on the basis of the present taxation. This makes it an 1459 extremely difficult thing for us to examine his figures. The right hon. Gentleman seems to have only a modified confidence in the continued prosperity of the country. I see he makes no alteration in the death duties. He has put them down at £13,000,000, which is lower than the actual result of their yield in the year which has just concluded by something like £1,000,000. Has he put it down a million on account of one particular death?
§ *SIR M. HICKS BEACHI did not want to repeat myself. I explained in my previous statement the very exceptional amount we have derived from the estates of millionaires, beyond the single one to which the right hon. Member refers.
§ *SIR WILLIAM HARCOURTI know that the right hon. Gentleman talked of a windfall that was not likely to be repeated. I do not know, but there may be a large quantity of east-windfalls in the present year. With reference to that particular windfall of which the right hon. Gentleman spoke, I think it is common knowledge that there accrue in this year two of the greatest London estates that have ever fallen or are likely to fall in. No man can criticise the calculations upon which the finance for the coming year is based upon a statement of this character. I think this statement and the conditions of its finance ought to have more mature consideration than we can bestow upon it to-day. I was about to ask, What of the balances? According to the last Return they are lower than I have ever known them—three and a half millions.
§ *SIR M. HICKS BEACHWe shall replenish them on Tuesday with four and a half millions from the War Loan.
§ *SIR WILLIAM HARCOURTIs that loan to be used to steady the balances?
§ *SIR M. HICKS BEACHYes.
§ *SIR WILLIAM HARCOURTI have endeavoured to shorten the observations I had to make on this complicated statement, and I have endeavoured to deal with it, I hope, in no captious spirit. I congratulate the right hon. Gentleman upon the magnificent revenue which he 1460 has had at his disposal, and I hope there may be happier times in which he may be able to dispose of a revenue equally great for what I will call happier ends.
MR. GIBSON BOWLES (Lynn Regis)I agree with many of the observations of the right hon. Member for West Monmouth, all the more as, as he says, that these figures are entirely new. They are the most serious figures ever put before the House of Commons, and it is impossible to deal immediately with them. Therefore, I am merely going to pass over them in the lightest possible way. The first thing that occurs to me is the extraordinary increase in the error of calculation. It is sometimes called a surplus, but whether it is a surplus or a deficit, it is always an error. The Budget estimate of revenue for the year 1899–1900 was £111,200,000; but the realised revenue was £119,800,000, so that the total error amounted to £8,600,000. That was the amount by which the Chancellor of the Exchequer was out in his calculations for the year 1899–1900. The right hon. Gentleman has explained part of it; but the larger part of that error arose out of the miscalculation of the death duties, in which there was a mistake of no less than three millions of money in a gross total of eighteen millions, or something between 25 and 33 per cent. Up to 1894 there was no item of revenue that could be so closely calculated and which left so little margin of error as the death duties; but from 1894 there has been no item of revenue that has given rise to so many errors in calculation. There has never been a less mistake than a million, and this year it is three millions.
§ SIR WILLIAM HARCOURTIt is an increase.
MR. GIBSON BOWLESI do not care whether it is an increase or a decrease. When the right hon. Gentleman says that he is satisfied so long as it is an increase, and that so long as the Chancellor of the Exchequer under-estimates his revenue by three or five or eight millions, he is content, does he realise that it is quite possible that the error may be, one of these fine days, on the other side? I believe that it is just as likely that it may be. The truth is that the death duties are placed on such a basis that you rely 1461 on a very small number of persons for a large amount of this revenue. That is a very dangerous basis, because if one or two of these persons fail to die within the year you lose an enormous amount of revenue, and your calculation is thrown out. A tenth of the number of estates pay nine-tenths of the whole duties, and if that tenth failed the whole of your calculations would be thrown out. I must say that I think the right hon. Gentleman has under-estimated the probable revenue from death duties next year. This year they produced fourteen millions payable into the Exchequer, besides four and a half millions payable to the Local Taxation Account. That is a total revenue of eighteen and a half millions. I cannot suppose myself that the death duties will show a diminution in the present financial year, as compared with the last, of so much as a million. It is perfectly true that the right hon. Gentleman had a considerable number of millionaires last year, but these millionaires are steadily on the increase. Moreover, there are two enormous estates that are going to be paid for this year, as is well known. In addition to that there is that great ally of the death duties, and of the Chancellor of the Exchequer, probable disease. The right hon. Gentleman knows that in the influenza year his revenue went up enormously, and if we have another influenza year the revenue will grow up steadily. I cannot suppose any circumstances which will justify an anticipation that the death duties which gave us fourteen millions this year will only yield thirteen millions next year. This brings mo to another point. I complain that the right hon. Gentleman is in the habit of under-estimating his revenue.
§ SIR M. HICKS BEACHA very good thing, too.
MR. GIBSON BOWLESMy right hon. friend says, "A very good thing." I am not sure that it would not be a matter of consequence if you had a surplus of eight or nine millions which would go towards the diminution of the National Debt. But the right hon. Gentleman always lays his hand on the surplus, and puts it to something else. Therefore it amounts to this, that you are being taxed higher than you need be in order to give the Chancellor of the Exchequer more 1462 than he actually requires. I want to call attention to the extraordinary falsification of the national accounts which results from the habit of interception. If the intercepted amount had been added to the 148 millions, the nominal expenditure of last year, there would have been a total expenditure of 156 millions; and if the expenditure of next year were treated in the same way it would amount to 173 millions. So that there is a gross total of £156,000,000 for the year that is past and of £170,000,000 for the year to come. There was once a party in this House which made itself the apostle of peace, retrenchment, and reform; the derelicts of that party are still, cast up by the winds and waves, on the opposite side of the House, but they have given up their old cry. I do not know anybody now who is for peace; I do not know any party that is for retrenchment; and those who are for reform are for Socialism. I am glad to recognise that there is one consistent advocate for retrenchment, and that is the right hon. Gentleman the Member for West Monmouthshire, and as he is in earnest, I will tell him the only way, in my opinion, to insure retrenchment in this country. It is a fact that at present the country is bursting with prosperity, and people do not care how much taxes they pay, or how those taxes are spent, or what is done with them. The reason is that the vast majority of voters who send representatives to this House do not pay taxes at all, or they do not know that they pay them; and the way to raise in the country again a party interested in expenditure, and anxious to bring about retrenchment, is to make people pay taxes and make them know that they pay them. The incomes of this country amount to 1,600 millions, and a 4d. income tax upon that would give £26,000,000. If you leave out 800,000,000 of people who have less than £160 a year, 8d. on the remainder would give £26,000,000 also; but as you only levy income tax on 500,000,000, you have to put on a 1s. tax and you get the less sum of £25,000,000. If you made every man feel that he was paying his quota of taxation, then you would be forming a force which would not be long before it would produce in this House a party in favour of retrenchment. That is a suggestion which I make to 1463 hon. Gentlemen opposite who have no cry. This is the first real Budget that has been given to us, because the other was only a temporary Budget; but, as we are told, the circumstances of this year are quite exceptional, and if the Chancellor of the Exchequer has under-estimated the estate duties, and has not been quite sound in some of his financial calculations, we must forgive him, and we must take it that he is justified in taking exceptional measures to meet an emergency. Being above all anxious for retrenchment, I say, impose taxation all round in the interests of the national Treasury and economy of expenditure.
*MR. JAMES LOWTHER (Kent, Thanet)I can cordially agree with what the hon. Gentleman said in his concluding remarks, I being one of the only Members who, in season and out of season, have protested against the want of support this House now affords to any suggestion of retrenchment. The present expenditure, of course, is distinctly exceptional, and that being so I shall not deal with it. It is the automatic and steady increase of expenditure which I think the House would do well to consider. Of course, the supplemental statement which my right hon. friend has now made it is idle to criticise at this final stage of his financial scheme. No good can come of criticising the figures, which we are bound to take as he gives us. But I think, as this House is about to part with this Finance Bill, I should be justified in drawing the attention of hon. Gentlemen to the dangerously narrow basis on which our financial system rests. I do not wish to take this opportunity of putting forward any views which may be said to be of a pessimistic nature, and I am not going to suggest remedies of a protective character, but I hope my not suggesting them will not be taken as evidence that I have abandoned my views on that subject. But without reference to any system of that kind, I should like to see our financial system placed on a sounder basis. Exception has been taken to my speaking of this as a Little England Budget; but I do call it so. It is a Budget framed by the Chancellor of the Exchequer essentially without having regard to, or any idea of meeting the wishes of, the other component parts of the Empire. The great self-governing colonies have suggested 1464 time after time, and have taken steps recently in the direction of, preferential treatment being accorded to trade within the limits of the Empire. It has not been put forward by persons without authority, because these steps were founded on resolutions passed at a conference held at Ottawa in 1894, to which representatives were accredited from all parts of the Empire, and which was presided over by a special representative of Her Majesty's Government. The resolutions were adopted practically with unanimity, and are an index of the direction in which colonial opinion has moved. This was the resolution—
That provision should be made by Imperial legislation enabling the Dependencies of the Empire to enter into agreements of commercial reciprocity, including the power of making differential tariffs with Great Britain and with one another.The right hon. Gentleman the Chancellor of the Exchequer has, I am sorry to say, never concealed his dissent from those views, and has always adopted a frigid attitude with regard to them.
§ SIR WILLIAM HARCOURTAnd the Colonial Secretary, too.
*MR. JAMES LOWTHERThe right hon. Gentleman opposite says, "And the Colonial Secretary, too," by which he means, I take it, that he also has adopted the frigid attitude which the Chancellor of the Exchequer has always displayed in the matter. We have heard a good deal from the Colonial Secretary of drawing closer the ties which connect the colonies with the mother country, and I certainly think that the right hon. Gentleman opposite is doing the Colonial Secretary an injustice if he says he sympathises with the frigid attitude of the Chancellor of the Exchequer. The Colonial Secretary said—
There is a universal desire amongst all parts of the Empire for a closer union between the several branches, and in their opinion it is desirable, nay, it is essential, for the existence of the Empire as such. Experience has taught us that this closer union can be most hopefully approached in the first instance upon its commercial side.
§ SIR WILLIAM HARCOURTYou should have heard what he said the other night.
*MR. JAMES LOWTHERThen I presume the right hon. Gentleman means 1465 that the Colonial Secretary has reversed his opinion on that subject, but I do not read the remarks of the Colonial Secretary in the sense in which the right hon. Gentleman has done. I rather understood him to express his idea of a system on which he was emphatic—the abolition of all duties between the various portions of the Empire, but at the same time putting a tax upon all imports from countries not British. That, however, is altogether impracticable, because there is not a single colony which would fall in with such a system. The colonies depend to too large an extent for their revenue upon the levying of customs and import duties, and therefore no colony would be likely to fall in with any such system. Now the Chancellor of the Exchequer the other day* took exception to my referring to this subject in connection with the duty on tea, and my right hon. friend went so far as to say that there was not one of the self-governing colonies whose representatives had adopted the resolutions I quoted which was a producer of tea; but I took the liberty of correcting my right hon. friend, because, as a matter of fact, the tea-growing industry of Natal is one of which very great hopes are entertained, and one to which its Government attaches great importance. Now I might remind the House that the principles embodied in the resolutions of the Ottawa Conference were urged with still greater emphasis at a conference of the Colonial Premiers held in this country during the Jubilee celebrations in 1897. The Colonial Premiers in conference in June, 1897, passed the following resolution—
That in the hope of improving the trade relations between the Mother Country and the Colonies, the Premiers present undertake to confer with their colleagues with the view of seeing whether such a result can be properly secured by a preference given by the Colonies to the products of the United Kingdom.Notwithstanding my disclaimer in connection with direct taxation I might remind the House that the colonies have in some instances given effect to this resolution. One is the Government of Canada, the head of which within a few days of the passing of the resolution was personally decorated with the gold medal of the Cobden Club; this recently decorated gold medallist, who was a party* See page 387 of this volume1466 to this resolution, who I believe in fact took the chair at the meeting at which that resolution was unanimously passed, has given effect to that resolution, the Finance Minister of Canada having this very year introduced a Budget under the provisions of which products of the United Kingdom, and of such colonies as conform to the resolution, were to be admitted not only at an advantage of 25 per cent. less than foreign goods, which advantage was accorded two years ago amidst lively demonstrations of patriotic feeling amongst all parties in Canada, but are from the present time to be admitted at an advantage of 33⅓ per cent. For every two dollars paid on imported British goods three dollars would be paid on foreign. That is the Budget of the gold medallist of the Cobden Club, and I am bound to say from an Imperial standpoint that it is a very great improvement on the Budget of my right hon. friend, who might, I think, with advantage go to the shrine of the Cobden Club, and if he follows this example need not despair of being decorated with the gold medal. This is a question which has made enormous strides throughout the Empire during the last few years. When it was first brought forward in the Canadian Legislature it was a party matter: the Liberal party of that day did not identify themselves with it. What has happened since? All parties are so enthusiastic in its favour that when the recent Budget was brought in members of all parties rose in their places and joined in the National Anthem. Moreover, the House must bear in mind that Canada is by no means alone in this patriotic financial action, as the principle in question was recognised by all the Premiers of the colonies assembled in London three years ago. During the same time the Government of this country have not been altogether inactive on the question, and I should be doing them a wrong if I did not remind the House that the Government have abolished the treaties with Germany and Belgium which precluded our entering into these reciprocal relations with our colonies. The Government has removed the shackles from our hands, and we are free to move, and my right hon. friend would find the whole of the Empire at his back if he were to make a step in this direction. It was unfortunately, as we know, not so long 1467 ago the fashion to treat the colonies as if they were no concern of ours; we went our way and left them to go theirs, and if those ways led to different courses it did not matter. That is not the view held now. When even gold medallists of the Cobden Club come forward and identify themselves with this movement what ground can my right hon. friend have for holding aloof from it? It may be said that the exceptional circumstances of this year are not favourable to embarking in any departure from our financial system, but I cannot recognise that. I believe it would be well received throughout the Empire, and I hope further time will not be allowed to go by without some step being taken in regard to it. If further time is allowed to go by great disappointment will be raised in the colonies, and great temptation offered by other communities who are notoriously desirous to enter into fiscal relations with portions of the colonial Empire, to the prejudice of the mother country. I hope that this niggling and peddling system of finance, without any reference to the promotion of trade between this country and its colonies, or the growth of food in this country, will be abolished in future. The present Budget is one without grasp; the right hon. Gentleman has put burdens on the backs of the people, and is raising money in the old way without any regard to national opinion, and I hope that we have seen the last of these peddling Budgets.
§ *MR. LOUGH (Islington, W.)We cannot fail to recognise that we are in a most serious situation as regards the financial system of this country when such a statement as that presented to us to-night has to be made in a great hurry on the Third Reading of the Finance Bill. I am glad to see that a great many hon. Members have recognised what struck me at the commencement, that this Budget was brought in, and that great burdens were thrown on the public without due consideration. The Chancellor of the Exchequer has made a greater under-estimate than has ever been made before. I think this is a very serious matter. One conclusion that arises from it is that last year we had a peddling and unsatisfactory Budget, disturbing trade and imposing many fresh burdens; we had a number of new taxes raising about a million, and we now find that the revenue was 1468 under-estimated by £6,000,000, and that all the new taxes were unnecessary. I do not think that the figures we have had placed before us to-night really rest on a sound basis, and to illustrate that I point to one matter. The right hon. Gentleman has told us that these payments of duty commenced in the month of January, and he mentioned tea particularly. I wish to call attention to one incident which occurred in that business which really accounts for a large anticipatory payment, and at the same time does not justify the Chancellor in drawing the conclusion he has drawn. There is a fashion among certain tea companies of rivalling each other in regard to the amount of the duty cheques they paid on tea. One was £85,000 because a rival trader had paid £75,000 before. These large cheques were merely anticipations, and this was done for the purpose of advertisement, although it seems to me a very foolish practice. The Chancellor of the Exchequer is, therefore, not justified in saying that the payments were made merely to anticipate the Budget. When we compare the amount paid into the Exchequer in the last week of the year ending 31st March with the week before we cannot help being struck by the fact that a very much smaller amount was paid during the last week of the year. No money was paid in from the Post Office or the Telegraph Office, and a very small sum from Customs and Excise, while £4,750,000 was paid in the week before. That makes me think that we have carried over, from the year ending 31st March, quite as large an amount of revenue that will give benefit to the next year as any of the anticipatory payments of Customs and Excise to which the Chancellor of the Exchequer has alluded. If this be true, the Chancellor of the Exchequer is greatly miscalculating his revenue.
§ SIR M. HICKS BEACHIt is not true.
§ *MR. LOUGHI now come to a firmer basis of fact. We have had nearly £10,000,000, one way or another, of taxation revenue more than was expected in the year just closed. I have stated on this subject before that with such a gigantic revenue the Chancellor of the Exchequer might have been much more sparing in the imposition of new taxes. I said then that the only new 1469 tax required was 2d. on the income tax. No one made the slightest response to my suggestion. I am strongly of the same opinion, that with such an excess revenue the Chancellor should have hesitated before imposing the new taxes he has imposed. We can now see that we ended the past year with £10,000,000 available for the war without a single new tax, and there would have been £11,000,000 probably available next year, so that without any new taxes we might have £30,000,000 in three years available for the war. What is the spirit animating the Chancellor of the Exchequer in this matter? The House appears to think that the taxpayer makes no sacrifice if he is not called upon to pay new taxes. This is a great fallacy. It is one of the many financial fallacies that have become common in this country. The taxpayer will in the first place have to sacrifice the relief to which he would have been entitled. The right hon. Gentleman the ex-Chancellor alluded to the splendid relief that might have been given if £6,000,000 or £9,000,000 had been applied to the relief of taxation. The taxpayer has lost that. Everybody has to make a great sacrifice in connection with the war. There have been large subscriptions to provide for the dependents of those who have been killed or wounded in the war. There has been a sacrifice of money in the country in the withdrawal of breadwinners who have fought the battles. There is scarcely a family in the land that has not made a sacrifice, and in such a year it would have been a far more excellent thing to have avoided an increase of taxation rather than add to the many burdens to which I have alluded. Practically every trade in the country from which revenue is raised has been disturbed by this Budget. The Chancellor has promised to take off these taxes as soon as he can. There is a great disturbance to trade in the way of taking off taxes—perhaps it is nearly as great as in putting them on. These important industries should, I think, receive more attention from the right hon. Gentleman than they have hitherto done. I desire to make a protest against the ready way in which the Chancellor has put heavy burdens on the country, when I think they might to a large extent have been avoided. I desire also to allude to the protest made by many of my hon. friends from Ireland. 1470 In regard to Ireland I think the protest made against everyone of these taxes forms one of the most extraordinary incidents in the finance of this country. Nine-tenths of the hon. Members from Ireland opposed the imposition of any one of these taxes, and I think there is a great deal to be said for the contention that they are unnecessary. They protested, on grounds which seemed to them very good, against the imposition of these burdens. No British Member paid the least attention to the Irish Members. It is sometimes said that taxation without representation is a great evil; but there is a greater evil than that—and that is the paying no attention to the constitutional complaint and protest of people who appear to enjoy constitutional and representative rights. All the hon. Members devoted their attention to was their own country, and their voice was not heard in regard to it. That is a very serious situation. I would like to put this question: what do you think that, within the limits of the Constitution, Irishmen should do next? They practically represent the whole country unanimously, and no attention has been paid to them. I desire simply, for my own part, to protest in conclusion, as I did in the beginning, against this Budget. I think a great deal more money is to be raised than is necessary. It has caused a great disturbance of the commerce of this country, and I think it will prove very oppressive to many who have quite sufficient burdens to bear.
§ *MR. HERBERT LEWIS (Flint Boroughs)I rise to ask if the Government will consider the important question of the graduation of the income tax. I made a similar appeal some three years ago to the Chancellor, and it received a favourable response. The Chancellor of the Exchequer extended the principle of graduation by exemption in a manner that gave satisfaction, I believe, to both sides of the House as far as it went. But now that the income tax has been raised to 1s. in the £ the question has become more urgent than before. I have from time to time received a considerable number of letters on the subject from people all over the country who are interested in it. It has been stated over and over again by hon. Gentlemen on both sides of the House, and I make the same complaint, that the larger 1471 incomes are not taxed in proportion to their ability to bear taxation. I admit that considerable steps in that direction have been taken within the last few years, but the disproportion still remains, and it is that disproportion which it is the duty of the Government to remove or minimise as far as possible. An income tax of 1s. in the £ bears very hardly indeed upon persons with small incomes. I make that statement taking into account the deductions now allowed in respect of them. But there is a further question which affects the bulk of the nation. If a careful inquiry were made into the amount which a man receiving wages of £1 a week has to pay in taxation, and if what he has to pay were compared, let us say, with what is paid by persons receiving salaries of £100, £200, £300, and £500 a year, it would be found that the working man in proportion to the salary he receives, pays taxation enormously in excess of that which is paid by persons in a better financial position than himself. The Chancellor of the Exchequer has done a little to remedy these inequalities of taxation, and I am grateful to him for
§ what little he has done, but there is still a vast field for the exercise of his reforming talent in that direction. I recognise that everything cannot be done at once in this regard, but I would appeal to the right hon. Gentleman, as I appealed to him on a former occasion, to consider whether, in the event of his being in the position in which he now finds himself twelve months hence, he will not propose to the House of Commons a very different system of taxation indeed from that which now prevails in regard to its incidence upon different classes of the community. I would ask him to distribute the burden more equitably. I agree entirely with the principle that every class in the community ought to bear its full and equal share of taxation. All that I ask is that its incidence should be proportionate to the means of the taxpayer, and in making this appeal I believe I have, although I only speak as an individual, behind me a large body of opinion and sentiment.
§ Question put.
§ The House divided:—Ayes, 103; Noes, 16. (Division List No. 99.)
1473| AYES. | ||
| Arrol, Sir William | Finch, George H. | Monckton, Edward Philip |
| Austin, Sir John (Yorkshire) | Finlay, Sir Robert Bannatyne | Moore, William (Antrim, N.) |
| Baker, Sir John | Fisher, William Hayes | More, Robt. Jasper (Shropshire |
| Balfour, Rt. Hon. A. J. (Manch'r | Fitzmaurice, Lord Edmond | Morton, Arthur H. A. (Deptford |
| Barnes, Frederic Gorell | Foster Colonel (Lancaster) | Murray, Rt Hn A Graham (Bute) |
| Bayley, Thomas (Derbyshire) | Foster, Harry S. (Suffolk) | Purvis, Robert |
| Beach, Rt. Hn. Sir M. H. (Bristol | Garfit, William | Pym, C. Guy |
| Bethell, Commander | Gibbs, Hn. A. G. H (City of Lond. | Renshaw, Charles Bine |
| Bhownaggree, Sir M. M. | Giles, Charles Tyrrell | Ritchie, Rt. Hon. C. Thomson |
| Bond, Edward | Gilliat, John Saunders | Robertson, Herbert (Hackney) |
| Bowles, Capt. H. F. (Middlesex | Goldsworthy, Major-General | Samuel, Harry S. (Limehouse |
| Bowles, T. Gibson (King's Lynn | Gordon, Hon John Edward | Schwann, Charles E. |
| Brodrick, Rt Hn. St. John | Gorst, Rt. Hon. Sir John E. | Sidebotham, J. W. (Cheshire) |
| Caldwell, James | Graham, Henry Robert | Sidebottom, Wm. (Derbysh.) |
| Cavendish, V. C. W (Derbyshire | Green, Walford D (Wednesbury | Sinclair, Louis (Romford) |
| Chamberlain, Rt. Hon. J. (Birm | Hamilton, Rt. Hon. Lord G. | Skewes-Cox, Thomas |
| Chamberlain, J Austen (Worc'r | Hanbury, Rt. Hon. Robert Wm. | Smith, Hon. W. F. D. (Strand) |
| Charrington, Spencer | Hazell, Walter | Stanley, Edw. Jas. (Somerset) |
| Clare, Octavius Leigh | Heath, James | Steadman, William Charles |
| Coghill, Douglas Harry | Helder, Augustus | Strauss, Arthur |
| Collings, Rt. Hon. Jesse | Houston, R. P. | Thornton, Percy M. |
| Colston, Chas. Edw. H. Athole | Hudson, George Bickersteth | Tomlinson, Wm. Edw. Murray |
| Colville, John | Kay-Shuttleworth, Rt Hn Sir U | Tritton, Charles Ernest |
| Cooke, C W Radcliffe (Hereford) | Kimber, Henry | Ure, Alexander |
| Cox, Irwin Edward Bainbridge | Knowles, Lees | Webster, Sir Richard E. |
| Curzon, Viscount | Lawrence, Sir E Durning- (Corn | Weir, James Galloway |
| Davies, M. Vaughan- (Cardigan | Lawson, John Grant (Yorks.) | Whiteley, George (Stockport) |
| Dewar, Arthur | Lea, Sir Thos. (Londonderry) | Whitmore, Charles Algernon |
| Dickinson, Robert Edmond | Leigh-Bennett, Henry Currie | Whittaker, Thomas Palmer |
| Donkin, Richard Sim | Long, Rt. Hon. W. (Liverpool) | Williams, Joseph Powell- (Birm |
| Doughty, George | Lonsdale, John Brownlee | Wyndham, George |
| Douglas, Rt. Hon. A. Akers- | Loyd, Archie Kirkman | |
| Doxford, Sir Wm. Theodore | Macartney, W. G. Ellison | TELLERS FOR THE AYES— |
| Dyke, Rt Hon. Sir Wm. Hart | M'Killop, James | Sir William Walrond and Mr. Anstruther. |
| Faber, George Denison | Mellor, Colonel (Lancashire) | |
| Fellowes, Hon. Ailwyn Edward | Middlemore, J. Throgmorton | |
| NOES. | ||
| Abraham, William (Cork, N.E.) | Molloy, Bernard Charles | Wilson, Henry J. (York, W. R.) |
| Austin, M. (Limerick, W.) | O'Brien, James F. X. (Cork) | Wilson, J. H. (Middlesbrough) |
| Curran, Thomas B. (Donegal) | O'Connor, T. P. (Liverpool) | |
| Doogan, P. C. | O'Malley, William | TELLERS FOR THE NOES— |
| Kilbride Denis | Roberts, John Bryn (Eifion) | Captain Donelan and Mr. James O'Connor. |
| Macaleese, Daniel | Sullivan, Donal (Westmeath) | |
| M'Dermott, Patrick | Tanner, Charles Kearns |
Bill read a second time and committed to a Select Committee of five Members, three to be nominated by the House, and two by the Committee of Selection.