§ *THE CHANCELLOR OF THE EXCHEQUER (Sir M. HICKS) BEACH,54 Bristol, W. When in October last* I obtained the authority of Parliament for the issue of eight millions of Treasury bills towards the expenses of the war, I reminded the Committee that, although at that time it seemed justifiable to entertain hopes that the campaign might be brought to a successful issue by the 31st of the present month, no one could fore-
*See The Parliamentary Debates [Fourth Series], Vol. lxxvii., page 509.55 see either the duration or the total cost of such a war as that in which we were engaged. I did not ask at that time for any additional taxation towards the expenditure on the war, for reasons which I think were approved of by the great majority of the country. I stated that, in my judgment, it would be perfectly possible, and it would be right, that the debt proposed to be incurred should be paid off by the end of the financial year after next; and I think that the yield of the revenue since that date has shown that that expectation was absolutely justified. More than that—in my belief, if to that eight millions it had been necessary to add the thirteen millions which has since been voted by Parliament, I feel confident that, without any material increase of taxation, the debt might have been paid off by the date which I named, having regard to that of which I reminded the Committee last October, the capacity of the Transvaal to bear a reasonable share of the expenses of this war.With regard to that point I entirely adhere to the opinion I then expressed; but I am bound to say that the events which have occurred during the past five months, the claims which must undoubtedly be made for compensation by our loyal colonists in Natal for losses sustained at the hands of the Boers, and the enormous increase in the war expenditure compared with that of which we were then speaking, make me feel that the capacity of the Transvaal to bear the cost of this war is a less important factor—though still an important factor—than I estimated it to be in October last. We must recognise that since that time the whole financial situation has changed. It is not merely that we have had to add £13,000,000 to the £10,000,000 then voted. It is that, in spite of the happy turn which events have recently taken, we feel that there is still so much work before us that it has been our duty to lay on the Table Estimates involving an expenditure of not less than £38,000,000 in the year that is to come on account of the war in South Africa and in defensive preparations at 56 home, which are necessarily a part of the war. Therefore, we have to face a total estimated expenditure of six times as much as that with which we were dealing in October last.
Now, it would have been necessary for me in any case to make an application to Parliament in the course of the present financial year to authorise a loan—for it must have been a loan—of some £5,000,000 or £6,000,000 towards defraying the war expenses to be incurred before the 1st of April, and the heavy payments which fall upon the Exchequer for other matters early in April, up to the date when the Budget is ordinarily introduced. But Her Majesty's Government have had to consider whether a partial proposal of that kind would have been consistent with an adequate performance of their duty to the House and to the country. In the first place, such a course would have been open to some financial objection. The issue of a small loan of that kind, when, from the Estimates presented to Parliament, it was perfectly obvious that a very much larger expenditure was required, a part of which might have to be met by a loan of much greater magnitude, would have been an operation which would have disturbed the money market and have been antagonistic generally to the public interest. Then, those astute persons who are large dealers in dutiable goods, and who have a very intelligent anticipation of future events, have already been taking measures during the existing quarter—measures which I am afraid have been intensified in the last few days—which are distinctly detrimental to the revenue of the country.
But we had to consider not merely the financial aspect of this question. We felt that, having laid these enormous Estimates upon the Table, Parliament had a right to expect from us without delay a full explanation of the financial situation which they involved and a statement of the measures which we, in our belief, thought necessary to meet the exigencies of the public service. We thought, also, that the people on whose judgment and opinion the future course of this war must depend had a right to know what we were doing and to be informed how the grave circumstances with which we had to deal necessitate, in some form or another, an increase of the burdens of the 57 country. But, perhaps, most important of all, we felt that it was right that by the promptitude with which we met our liabilities we should afford proof to our adversaries and to our foreign critics of our earnestness in the work in which we are engaged—proof, perhaps, even more valuable than success in the field. Therefore, my duty to-night is not merely to make a temporary proposal for tiding over the few weeks that will elapse between now and the ordinary time for the introduction of the Budget, but to lay before the Committee an exposition of the measures by which we propose to provide for the expenditure of the coming year, the Estimates of which have been laid before Parliament.
An early Budget is unusual, but it is not unprecedented; and I am sure the Committee will generally feel that those are times in which an early Budget is absolutely justified. But it is a matter of great inconvenience to the Chancellor of the Exchequer of the day. It is no easy thing, in these times of great and rapid increases in our expenditure and revenue, for anyone to estimate eleven months beforehand what will be the revenue and expenditure of the coming year. But that difficulty is enormously increased when these Estimates have to be based, not on the facts of the preceding year, but on Estimates themselves. A great part of our expenditure now, unhappily, is on warlike operations in South Africa. We have, to the best of our power, made Estimates of the cost of those operations during the present year, and the House has voted them; but no one can tell us whether the actual expenditure will be accurately represented by those Estimates. It may be more; it may be much less. Again, I have the facts before me of the revenue for nearly eleven months of the year; but I have nothing but estimates of the revenue of the month which still remains. Therefore I need not detain the Committee by arguing how much the ordinary difficulty of estimating the finance of the coming year is added to by an early Budget. For this reason, in the Paper which is now in the hands of hon. Members, I have directed that it should be distinctly stated that the figures are but provisional figures. I do not think it is possible, with regard to details, to draw any comparison between those figures 58 and the figures of past or future years. But I shall take care that, as soon as possible after March 31st, accurate figures, with regard both to revenue and expenditure for the year 1899–1900, shall be placed before Parliament, by which such a comparison may be made. To-night I shall not trouble the Committee with the ordinary details of the revenue of the year 1899–1900. I will deal more with general figures.
Last April* I estimated the Exchequer revenue of the present year at £111,157,000, that is, at £2,821,000 over the Exchequer revenue of the previous year. In October last I was able to inform the Committee that, in my judgment, that estimate would be largely exceeded; and now I am glad to be able to state that, in my belief the revenue of the present year will amount to at least £116,040,000. I base all those calculations upon figures arrived at before Saturday last. There have been some remarkable circumstances in regard to clearances of dutiable articles on Saturday and to-day by which these figures may be largely disturbed, but the effect of which will, of course, be shown when the full and accurate figures of the year are presented to Parliament.
I estimated, last April, the expenditure of the year at £110,927,000. Since then the House has voted Supplementary Estimates of £745,000; and I had to deduct £1,132,000 of savings. So that the total Exchequer expenditure, but for the war, would have amounted this year to £110,540,000, showing a net surplus of £5,500,000. But, of course, I have to add to that £23,000,000 of Supplementary Army Estimates for the war, and also £270,000 for interest on the Treasury bills of £8,000,000 authorised last autumn. That makes a total Exchequer expenditure for the year of £133,810,000, showing a deficit of £17,770,000, of which £8,000,000 have been temporarily provided for by the issue of Treasury bills. In other words, we have provided towards the war expenditure £5,500,000 from the abounding revenue of the year.
This is the one agreeable feature in my otherwise disagreeable task to-night, and I hope the Committee will pardon
*See Budget Statement, April 13, 1899. (The Parliamentary Debates, Fourth Series, Vol. lxix., page 993.)59 me for dwelling for a few moments at this oasis in the desert. It bears remarkable testimony to the extraordinary industrial activity and commercial prosperity of the year 1899. It is one of a period—I hope of a long period—of prosperous years; but it has been by far the most prosperous of all. And the improvement in our trade has not been gained by any unwise speculation or undue excitement. I believe that it is due to a steady and substantial progress in business. Nor has it been due to the war. The stringency of the money market during some of the winter months; the withdrawal of many thousands of men from their ordinary occupations for military service; the military demands for coal and iron and others of our great staples, and for transport, which must necessarily have increased the cost of our foreign commerce; even the diminution among the wealthier classes of the ordinary festivities of the year—all these things, directly due to the war, cannot have been for the good of trade during the course of the year, and may, perhaps, have even a greater influence upon the year that is to come. But in spite of that the increase of our foreign trade both in exports and imports has been greater than in any previous year. The increase in the value and the volume of our foreign exports has been quite exceptional, and that not merely in coal or iron or textile manufactures, but in all the main articles of our trade, and it has been diffused over the whole area of our foreign commerce. This increase in foreign trade has not been gained at the expense of our home consumer, as it sometimes is in those countries whose manufacturers are enabled to sell cheaply abroad by artificially enhanced prices deliberately secured to them in their home markets. No; all the statistics show that the prosperity of our trade at home has been at least as great as the prosperity of our foreign trade. Prices have risen in almost everything excepting, I am sorry to add, in the important articles of agricultural produce. But the additional amount that we have had to pay for our imports has been far more than compensated by the gain to the nation in higher prices it has received for its exports. The value of what are known as "gilt-edged securities" has, no doubt, largely fallen. But this has not been due to any 60 want of confidence in the country. The simple reason is just this—everybody has found it easy to obtain a far more profitable employment for their capital than by investing it in Government or municipal securities, or railway debentures. Wages have risen considerably; employment has been plentiful; labour disputes have been few and unimportant; and the result of the whole year has been this—that the purchasing power of the working classes has been largely augmented, reacting, of course, on trade, and acting largely on the receipt of the revenue.The receipts in the Customs and the Inland Revenue from the great articles of beer, of spirits, and of tea have increased largely. No doubt, part of that increase is due to the premature withdrawals from bond to which I have already referred; but quite apart from that they have increased largely. Tobacco and wine have not done quite so well. I am free to admit that tobacco has disappointed my expectations. It may be that this is due to the fact that many thousands of our principal smokers are now in South Africa; but with regard to wine, we have had a considerable increase in the receipts from the wine duties. Of course that was expected, owing to the increase of the wine duties last year, but the increase has not been quite so large as I anticipated. I think, really, that is due to the absence of the ordinary festivities in the winter. But there is nothing in the receipts from tobacco or wine, or from the other heads of Customs and Inland Revenue, which in any way detracts from the evidence which all the returns afford of the general prosperity and comfort of the people.
But a more remarkable increase than that under the head of Customs and Excise is to be found in the receipts from the death duties. The receipts from the death duties by the Exchequer during the present year will, I anticipate, amount to £13,300,000, as against £11,400,000 last year. To that you must add the receipts from death duties by the Local Taxation Fund—£4,171,000—making a total receipt from the death duties of £17,471,000. I think that the wildest dreams of the right hon. Member for West Monmouthshire hardly anticipated that this taxation would produce this amount. But now I wish for a 61 moment, if I may, to detain the Committee in examining to what this large increase in this year is greatly due. A substantial part of it, I am glad to say, is due to receipts from estates under £250,000 in value. But I have to place before the Committee a case which, I think, affords a singular proof of the manner in which any estimates of the receipts from death duties in any year may be utterly upset by the mere accident of a single death of the owner of enormous property on whose property very high rates of duty would be charged. You can average the estates under £1,000,000 in value; you can take the receipts from over a period of years, and fairly estimate in that way what the probable receipts may be in the year to come; but when you come to estates over £1,000,000 it is absolutely impossible. In 1896–97 there were five estates of millionaires, which paid to the revenue £436,000; in 1897–98 there were nine such estates, which paid £1,212,000; in 1898–99 there were again nine such estates, paying £941,000—an average for the three years of £863,000. I suppose that if I had taken from that average an estimate of £950,000 from the year in which we stand I should not have been blamed for having taken an unfair estimate. But what has been the actual result? We have received during this year from the estates of millionaires close on two millions in Estate Duty, and the vast sum of £900,000 in Death Duties has come from the estate of one man, a foreigner, who, I am told, lived on 15s. a day in a West End London club. That one person, however unwillingly, has contributed to the Exchequer more than the cost of an iron clad. I am filled with patriotic sentiment at such a contribution to the death duties, but I hope my right hon. friend the First Lord of the Admiralty will not make this a reason for asking for more, because the Committee will see that it is not within the reasonable bounds of expectation that such a windfall as this should occur in subsequent years.
The stamp duties will probably produce £350,000 this year over the Budget estimate. The increase of stamp duties last year in certain points mainly related to dealings on the Stock Exchange. It has not been a very busy year on the Stock Exchange, but I am informed that 62 the increased duties will produce the amount which I estimated.
It is too early to say with any certainty what the receipts from the income tax will be, because, as hon. Members know, the great bulk of the income tax is collected in this quarter, and we have still a month of the quarter before us. But so far the income tax is doing well. We expect to have an increase of revenue from the Post Office, and other sources of non-tax revenue, of £573,000 over the Budget Estimate. I do not think there is any head of revenue which has not contributed something to the surplus which I have described to the House.
I stated that the total expenditure from the Exchequer in the year was estimated at £133,810,000. I have to add to that £9,599,000 to be paid to the local taxation account—an increase of £78,000 over last year—and the expenditure on capital account of £4,847,000, of which £1,861,000 is derived from the surpluses of previous years, on barracks, telephones, the Uganda Railway, naval and military works, and the acquisition of the territory of the Royal Niger Company. The total expenditure for which the State is responsible this year is estimated at £148,257,000, compared with £121,224,000 last year.
The Exchequer balances on April 1, 1899, were £8,919,000. Of this £1,861,000 belongs to previous surpluses, and had been allotted by Parliament to naval and military works. That has been issued during the year, and the Exchequer balances on March 31 next will, I anticipate, be about £7,130,000 unless it be necessary to draw upon them to any extent for war expenditure, which I think should not be done beyond an amount, say, of £2,000,000.
The total debt of the country on April 1 last year was £635,041,000. Of this £7,479,000 was reproductive debt outside the fixed debt charge, borrowed almost entirely on terminable annuities for thirty years, the principal and interest of which are annually repaid by Votes submitted to this House. That debt now amounts to £10,185,000. The total dead-weight debt on April 1st, 1890, amounted to £627,562,000. Of this £583,186,000 was Funded Debt, £36,243,000 the capital value of terminable annuities, and £8,133,000 floating debt in Treasury bills. Since that time we have cancelled £30,715,000 of 63 Funded Debt, of which 28 millions were cancelled by exchange for terminable annuities, the remaining £2,715,000 being reduced by the operation of the Life Annuities and new Sinking Fund. On the other hand, we have increased the capital value of the terminable annuities by £24,242,000, the operation being the result of the provisions of the Finance Act of last year, and we have, as the Committee are aware, borrowed £8,000,000 by Treasury bills since last October. The net result is that the total dead-weight debt has increased by £1,527,000. But for the war expenditure having to be provided for by the issue of these £8,000,000 of Treasury bills, the Debt during the year would have been decreased by about £6,500,000. That, I think, is not a very unfavourable record, but, unfortunately, I have to add to it that out of the anticipated deficit of the present year there remains a balance of £9,770,000 still unprovided for, and when we come to the year before us, I am afraid the prospect is even worse.
Now, the Consolidated Fund services of 1900–1 are put at £26,000,000, an addition of £250,000, being the amount on account of interest on the £8,000,000 of Treasury bills already authorised. The Supply services amount to £128,082,000. As compared with last year's Estimates, the Navy has gone up by £928,000, the Civil Service Estimates by £659,000, Post Office and Telegraphs by £415,000, and, of course, the Army by the gigantic sum of £40,883,000. Of this, £37,797,000 is expenditure either directly on the war in South Africa, or connected with and due to the war—such, for example, as the embodiment of the militia in this country, the enrolment of veterans for temporary service, greater facilities and encouragement for the training of Volunteers and Yeomanry, and the provision of mobile guns for the Volunteers. The total estimated expenditure for the year is £154,082,000, an increase of £43,155,000 over the Estimate of last year.
Now I turn to the estimated revenue to meet that expenditure. I take the existing basis of taxation. I estimate the Customs, after allowing something, though, I fear, hardly enough, for premature clearances, at £21,900,000, Excise £31,800,000, death duties £13,000,000, stamps £8,400,000, land tax £800,000, 64 house duty £1,650,000, income tax £18,800,000—a total tax revenue of £96,350,000. I estimate receipts from the Post Office at £13,800,000, telegraphs £3,550,000, Crown lands £450,000, Suez Canal shares and sundry loans £850,000, miscellaneous £1,900,000—the total non-tax revenue thus being £20,550,000. This makes a total revenue of £116,900,000, as against the expenditure which I have stated, leaving a deficit for the year of £37,182,000. But, in passing, I should like just to draw the attention of the Committee to this fact, that, out of the Army Estimates, to which, of course, that great deficit is due, £37,797,000 are distinctly War Estimates, and you have to add to that £250,000 for interest on the war debt, making altogether £38,047,000 for war services. That is £865,000 more than the deficit. Therefore, I think the Committee will see that the ordinary revenue of the country would well cover in the coming year the ordinary expenditure, including in that ordinary expenditure nearly £3,000,000 for various increases to the Army, such as the formation of twelve new battalions and forty-three new batteries of artillery.
But, of course, it is clear from these figures that the question before the Committee and the Government really is not how the ordinary expenditure but how the war expenditure is to be provided for. Well, now, what is the amount we should consider in dealing with the war expenditure? We have made the best calculation in our power of what in our judgment it would be right for us to ask from Parliament with a view to the successful prosecution of the war. But it is impossible for us to be certain that the war will be concluded by September 30th next. All I can say is that we do not believe that it is probable that the war expenditure will in any case be less than the Estimate which we have laid on the Table of the House. It may be more, but, as against that, you have to consider the happy change in the military situation which has recently occurred, and the fact that the season is fast approaching which, I believe, all our authorities agree in considering is peculiarly unfavourable for the military operations of the Boers. We may be obliged in July or August next, unhappily, to ask Parliament for further provision, 65 but I think we are fairly justified in the hope and expectation that the Estimate which we have placed on the Table will be sufficient to conduct this war to a successful termination.
But I am obliged to add something to that statement. I do not know whether hon. Members have carefully studied the memorandum which was circulated by Lord Lansdowne.* If so, they will see that the Estimates do not include all the expenditure for military purposes which he thinks is probable in the year. An important war like this must necessarily be very costly to our reserves in all departments—to guns, to ammunition, to stores; and we are carefully investigating at the present time what provision should be asked from Parliament to place our reserves, both military and naval, in the state in which the country would desire them to be, and I am quite sure that Parliament will not grudge any necessary expenditure for that service. I feel myself justified in saying that, having regard to the probability of the expenditure before us in the coming year, and also to the provision that must be made for the interest upon any loan that Parliament may sanction towards the war expenditure, I think about 5 millions ought to be added to the 38 millions and the 17¾ millions to which I have already alluded, making in all a total amount of 60 millions, the provision of which we ought to consider with regard to the war.
That is a very large sum, and the question is how can it be provided? I do not think anybody will suggest that it ought to be provided out of the revenue of the year. There are objections, of course, to a Government loan. A Government loan withdraws capital from the money market which might be better employed in reproductive works. But we are talking of £60,000,000. If it were a question of £10,000,000 or £15,000,000 we might fairly claim, as has been said in past years, that it was a matter to be provided out of the revenue of the year. But to impose taxes so high or so numerous as to provide an additional revenue of £60,000,000 would be to cripple industry and fetter the movement of capital and disturb it in its accustomed employment—a far worse evil to the country than
*See Appendix to this Volume.66 the issue of a Government loan. Therefore, I need not argue against the idea that such a sum as £60,000,000 should be provided from the revenue of the year.But I have seen this morning a suggestion that half of it should be so provided, that we should make this an occasion for an entirely new and extraordinary fiscal departure—that we should raise £30,000,000 in addition to our present taxation this year, partly from the income tax, but also from new indirect taxation—a sugar duty, a duty on corn, a duty on meat, a duty on all agricultural produce, and last but, perhaps, most extraordinary of all, in view of what we have done for many years past in cheapening postal communication, by adding £4,000,000 a year to the postal charges for the benefit of the revenue. Well, this is suggested not merely to pay for the war expenditure of the year, but because it is considered that when the war is happily over, in a time of peace, the standing Army of this country is to be increased by 150 per cent., and £20,000,000 a year is to be added to our Army Estimates. I have the greatest respect for the ability of the writer who has propounded these new fiscal doctrines I have no doubt he would be a much better Chancellor of the Exchequer than I am, but all the same I venture to characterise such proposals as these as in my judgment unwise and impracticable to the last degree.
There is a more seductive and a more dangerous idea afloat of quite another kind. It is said, "Oh, this is war expenditure; you will get it all out of the Transvaal some day. Never mind the future; borrow it all now. Raise taxation if you like to pay the interest on your loans—possibly even a small sinking fund." The Sinking Fund which was established at the time of the Crimean War was abolished the first year after the Crimean War was over. There is nothing more comfortable or more agreeable or more easy for a Chancellor of the Exchequer than to adopt this policy of borrowing; but it is the duty of a Minister, and especially the duty of a Chancellor of the Exchequer, not to mind what is disagreeable or what is unpopular if he believes it to be right. And in my belief, and in the belief of all my colleagues, if we adopted such a course as 67 this we should be unworthy of this country and of those who have gone before us. We should be taking the first step on a path of systematic deception of the people, which, if followed, could but end in financial ruin. Let us look back to the history of the past.
There have been two great occasions in the last 100 years in which serious additions have been made—though in very varying degrees—to the National Debt for war expenditure. The first was the great French war, and the second was the Crimean war. I believe that the increase of the Debt during the great French war was no less than £622,000,000. Now, what was the history of that war? In the earlier years of that war, from 1792 to 1798, Mr. Pitt pursued the fatal policy of borrowing each year what he required for war expenditure, and practically providing nothing by taxation except the interest on his loans. What was the result? He borrowed, and he increased the National Debt by £200,000,000. For that increase he got only £108,500,000 in cash. He began to borrow at a rate of interest a little over 4 per cent. By 1797 that rate of interest had increased to 6¼ per cent. and more; and I have no doubt it is true, as I think it was once said, that out of our National Debt there is no less than £250,000,000 for which the State has never received a single halfpenny—a mere sacrifice to capital, to induce it to lend, without reducing in any material degree the interest on the loans. Happily for us, happily for the country, in 1798 Mr. Pitt turned over a new leaf. He raised £10,000,000 by the income tax, and continuously from that time to the close of the great war the expenses of the war were met partly by loans no doubt, but also largely by taxation. Three hundred and ninety-one million pounds were raised during that time by our forefathers in taxation towards the expenditure on that war, and that at a time when the country was poor, when the population was small, when they were willing cheerfully to bear 2s. in the £of income tax for thirteen years of the war, besides indirect taxation of the heaviest kind upon every conceivable article, including the necessaries of life, because they were brave enough to save the country from financial ruin.
68 Then there were forty years of peace, and the country was again called upon for a special effort at the time of the Crimean War. Mr. Gladstone, at the commencement of that war, endeavoured to raise the whole war charges by increasing taxation. That was soon found to be impossible. In 1855 Sir George Cornewall Lewis budgetted for a war deficit of £23,000,000—much less than what I have to find. He proposed to raise of that £7,000,000 by taxation, and £16,000,000 by loans; and if hon. Members care to study the finance of the Crimean War they will find that out of £67,500,000 which that war cost the country, no less than £35,500,000 was met by additional taxation.
And now, at the end of another fifty years—during which we have seen abatements of taxation in which our forefathers never would have believed, during which we have seen the country as a whole rise to a degree of wealth and prosperity and comfort which they never could have guessed—we are again face to face with a costly war. Sir, I do not compare the present war with the great French War; that was a struggle for life or death prolonged for years. I do not compare it even with the Crimean War. We have to fight a brave, a skilful, and a warlike foe, but the resources of the two Boer Republics are but as nothing compared with the resources of the great empire of Russia. But in proportion, in my humble belief, this war will prove more costly than the Crimean War; and I will tell you why. Because we have had to send to the other side of the world by far the greatest force that has ever left this country; and having sent it, in view of possibilities to which I need not do more than allude, we have felt it incumbent upon us to provide, at great expense, for the defence of the country during the absence of that force. Therefore, I think I may say that although we are perfectly justified by the constant practice and the uniform example of our forefathers in deriving a large part of the funds necessary for the prosecution of the war by the issue of a loan, yet we are also bound to call upon the taxpayers of this country for some immediate and substantial sacrifice, instead of mortgaging the industry of posterity for the whole cost of a 69 war, some part of which we, surely, in these days of prosperity are well able to bear.
I think there are some things which, in considering this matter of taxation, we ought to bear in mind. In the first place, I have alluded to the probable duration of the war. I think we may reasonably anticipate that, however prolonged the resistance of the Boers may be, this war in its more acute and costly phase will not be along war. I think that is a reasonable anticipation. Therefore, our necessity being as it is—a temporary necessity for meeting war expenditure—I do not think it is wise, from a financial point of view, to meet a temporary necessity by permanent fiscal changes.
Again, I think we should endeavour as far as possible to meet that temporary necessity by additions to existing taxation instead of by the imposition of new taxation, and certainly that we should endeavour to derive what we need of taxation rather from largely productive taxes than from imposing innumerable small charges here and there, such as many of my correspondents suggest to me, over all kinds of interests and classes in the country, which would raise really a very small total all put together, but which would create extraordinary vexation and worry in the operations and calculations of very many people.
Well, but, Sir, there is another thing. During the last four years the proportions in which our revenue has been derived from direct and indirect taxation have not materially varied. The portion of it derived from direct taxation is rather less—a slightly increasing proportion—than that derived from indirect taxation, but there has been no material variation. I think those proportions are fair. I do not agree with those persons who would desire to upset them largely from either side, and I think that as the result of any fresh taxation we now propose, we should endeavour, as far as may be, that those proportions should not be materially varied. Now, having said this, I will proceed to what I feel the Committee is anxious to hear—namely, what are the precise taxes I am going to suggest.
In the first place, I turn to the income tax. The income tax has always been considered a tax that might properly be augmented on the occasion of a war, and 70 that for the obvious reason that it can be dealt with either by way of raising it when required for a war, or by way of lowering it when the war is over without any practical disturbance, either of trade or commerce. The income tax was the main source from which the Ministers who were responsible for taxation at the time of the Crimean War drew the increased revenue they required; and since that time there has been occasion more than once on which, for our smaller wars or preparations for war, practically the whole of the increased taxation imposed has been drawn through the income tax. But I am bound to say that circumstances since that time have changed. The income tax was the main source in the time of the Crimean War of direct taxation. The great increase of the death duties in our time has made a considerable difference, to my mind, in that respect, and it must fairly be considered in dealing with this subject. On the other hand, since the Crimean War, the incidence of the income tax on certain classes who felt it heavily has been materially lightened. For example, in 1894 the right hon. Gentleman the Member for West Monmouthshire gave what I admitted then and always have admitted since to be a great boon to the owners of property, whether in houses or land assessed under Schedule A, by allowing them a considerable deduction from their assessments in calculating their income tax, which has made a material difference in the poundage of income tax on that class of income-tax payers. Then, again, at the time of the Crimean war all persons with incomes above £100 a year paid income tax. Since then it has been provided that nobody with an income not exceeding £160 shall pay income tax at all, while the lower classes, so to speak, of income tax payers have been materially relieved by the abatements in the income tax on incomes between £160 and £700 a year, which, again, deduct from their income tax some very material poundage, especially in the lower grades. And, therefore, while we have to consider, on the one hand, that the pressure of direct taxation as a whole is greater than it was in former years, so we have to consider, on the other hand, that the incidence of the income tax itself is lighter on those classes who are most heavily burdened. Well, at the time of the French war, as I have reminded the 71 Committee, there was an income tax of 2s. in the £ for thirteen years. I do not propose to impose that now. At the beginning of the Crimean war—before the war began—the income tax was 7d. in the £. It was at once raised to 1s. 2d. in the £, and in the second year of the war it was raised to 1s. 4d. in the £. I do not propose to impose either of those rates now, but I do ask the income-tax payers to make some sacrifice; and, having regard to the past, I do not think they can fairly complain of paying a very substantial contribution towards the cost of this war—namely, an increase of the tax by 4d. in the £ to 1s. in the £ for the coming year. That will produce in the year before us £6,500,000. In the year following there will be arrears to come in of £1,900,000.
Next, Sir, I have a small addition, or rather what I may call a rectification of the law, with regard to direct taxation in the matter of stamp duties which I propose to make. At present, as the Committee are aware, there is a stamp duty of 1s. on what are called contract notes which are delivered by brokers to their clients in transactions on the Stock Exchange. Well, Sir, precisely similar transactions, in precisely the same form, are carried out by brokers in many produce exchanges throughout the country, and in other ways. I propose that the 1s. duty shall also be imposed upon those contracts, and I am told that these transactions are so numerous that the result is likely to be an increase to the revenue by £150,000 a year.
I now turn to what will be more interesting to the Committee—indirect taxation. I said last October that I thought it would be grossly unfair to impose additional taxation upon the income-tax payers alone for the purposes of this war. I still entertain that opinion, and I think we are bound to make considerable increases also in indirect taxation. My principle is this—that so far as may be all should pay something towards the cost of this war, but the richest should pay the most.
§ MR. T. M. HEALY (Louth, N.)Tax diamonds.
§ SIR M. HICKS BEACHNow, last year we raised the wine duties with, I 72 think, satisfactory results. I naturally turn this year to beer. There has been a great increase during the past few years in the production and consumption of beer. In 1895–96 the duty on beet yielded £10,719,000. This year it is expected to yield more than £11,900,000. I propose to impose an additional 1s. a gallon on beer. I beg pardon for exciting the apprehensions of my hon. friends; of course, I mean 1s. a barrel of thirty-six gallons. I estimate that that will produce £1,752,000 in the course of the twelve months.
Having increased the duty on beer, I next come to spirits. Now spirits have been somewhat favoured of late years as compared with beer. In 1894, I think, the right hon. Gentleman the Member for West Monmouthshire imposed an additional 6d. a gallon on spirits and 6d. a barrel on beer. In the following year he took off the 6d. a gallon on spirits, but he retained the 6d. a barrel on beer, and that has remained on beer since. Therefore, so far I think I am right in saying that of late years spirits have been rather favoured. What is the position of spirits? The position of spirits at the time the right hon. Gentleman proposed his duty was a very bad one. The trade was bad, and by his having unfortunately selected too early a date for the cessation of the duty the dealers in spirits, with their natural cunning, were able to delay their clearances, and thus to deprive him of, I think, a very large part of the yield which he expected from the duty. Now, Sir, circumstances, I hope, are different. The production and consumption of spirits has enormously increased of late years. I find that the excise duty on spirits produced in 1895 was £15,603,000, while this year it is expected to produce £18,500,000. I think that, having regard to that fact, we may very properly impose another 6d. a gallon on spirits. I wish to say that, with regard to this as well as the rest of the indirect taxation which I am about to propose, I look upon it as a temporary addition to the existing taxation—I hope merely for the coming year; but I propose in all cases to enact now that the additional taxation shall last until the 1st of August, 1901—not, I hope, that it will be necessary to levy it so long, but that it may be dealt with at the ordinary time in the Budget of the year, and that the date of 73 its expiry may be fixed far enough beyond the Budget to prevent dealers in these dutiable articles from doing what they did in 1894, and keeping back their clearances until the Budget was introduced. I hope that will be clearly understood with regard to the date for which I propose this taxation. My estimates of the yield of it are solely for the twelve months. I estimate that 6d. a gallon additional on spirits will produce £1,015,000.
Now, Sir, we have dealt with the income-tax payer and the consumers of alcohol. I think it will be felt generally that tobacco ought to bear some further burden. I confess it is with great regret that I find myself driven again, after so short an interval, to alter the duty on tobacco. I know the inconvenience to the trade, and I regret it, but I think it would not be fair that tobacco should be exempted from taxation. Now, Sir, what we did in 1898 was this: we reduced the tobacco duty by 6d. in the pound. We also reduced the legal limit of moisture from 35 to 30 per cent. I anticipated a very considerable increase in the consumption from that reduction. My anticipations, I have to admit, have not been realised. It may possibly be that a comparatively small reduction in the price of tobacco does not materially increase the consumption. It may be that the trade statistics, which certainly convinced me that the reduction had reached the consumer, were less accurate than I had supposed. I wish to be perfectly frank, and I have endeavoured to be so. But we have to consider whether we should merely put back the duty and the moisture to the same amount as two years ago, or whether we should do something else. Now, Sir, I confess I am reluctant to again increase the legal limit of moisture. The result of the reduction of the legal limit was this, that the smoker of the cheapest tobacco, which is most watered, got threepence worth more of tobacco in every pound. He bought more tobacco for his money than he did before in place of a similar weight of water. Well, if I restore the old limit of moisture the result would be that the smoker of the cheapest quality of tobacco would lose that tobacco and get water instead, and as water does not pay the tax the revenue would lose also. No doubt the dealer would gain, but I do not see why the dealer should gain at the cost 74 of the consumer and the revenue. What I think would be fair, after having gone somewhat fully into this matter, would be to retain the present limit of moisture and to increase the duty by 4d. in the pound. I would also propose to increase the duty on foreign cigars by 6d. in the pound. I anticipate that will yield altogether an addition of £1,100,000 to the revenue.
We have now got the smokers on our list. But there is a very large population who do not pay income tax, who do not consume alcohol, and who do not smoke, and I think they ought to pay something towards the expense of this war. I look for an article which in our days is comparatively cheap, which is not the subject of any manufacture in this country, or ought not to be, and which is very largely consumed—I look to tea. At the time of the Crimean War the duty on tea was 1s. 6d. in the pound. It was promptly raised by threepence in the pound with practically, I think, no objection from anybody whatever. The duty on tea in 1889 was 6d. in the pound. My right hon. friend the present First Lord of the Admiralty reduced it by 2d. At that time the average wholesale price of the pound of tea was 10.79d., making altogether, with the 6d. duty, 16.79d. per pound. Now I am informed that the average wholesale price of tea is 8.87d. per pound. If I were to add 2d. to the duty, that would make altogether, with the duty, 14.87d. per pound—2d. per pound less than the price in 1889. I propose to add 2d. per pound to the duty on tea, and that will produce £1,800,000 in the course of twelve months, and I do not think that the population at large will have any very fair ground of complaint at the amount they will be called on to bear towards the cost of what the vast majority of them believe to be a necessary war. The total result of the additional taxation I propose will be an increase in the revenue of £12,317,000, besides the £1,900,000 arrears of in come tax which will fall into the future year.
Then I propose to reduce the expenditure. In the year 1885 the country was called upon to find, I think, £11,000,000 towards preparations for war. On that occasion, with the unanimous consent of Parliament, it was agreed to stop the re- 75 payment of capital wrapped up in the terminable annuities belonging to the various Government Departments, and included, of course, in the fixed debt charge for the year. I propose to do the same thing now. That will reduce the expenditure of the year by £4,640,000. I think it would be perfectly absurd that, while we have with one hand largely increased our debt we should be paying off old debt with the other.
Now, Sir, I come to the final balance-sheet. I stated that the public expenditure of the coming year would be £154,082,000. I deduct from that £4,640,000 owing to the procedure I have just stated, leaving the total expenditure £149,442,000. Against that I anticipate a revenue from Customs, £25,017,000; Excise, £34,350,000; death duties, £13,000,000; stamps, £8,550,000; land tax, £800,000; house duty, £1,650,000; income tax, £25,300,000; making a total tax revenue of £108,667,000, and a non-tax revenue of £20,550,000, or a total revenue of £129,217,000, as against an expenditure of £149,442,000, thus leaving a deficit for the year of £20,225,000.
Add to that the expected deficit on this year of £17,770,000, and £5,000,000 which I have stated must be added for the contingencies I have named, and you will find a total of, say, £43,000,000, which I must ask permission to borrow. Part of that will be provided to the extent of £8,000,000 by renewing the Treasury Bills which were issued under the authority of the House given in October last. Therefore there is £35,000,000 of new debt to be incurred.
Now I do not think I need argue that such a sum as this is too large to be added to our floating debt. It would be practically impossible, I think, to deal with it in that way. On the other hand, I confess that in my opinion it would be a mistake to raise it by a new issue of Consols. Of course there are arguments in favour of such a course. Consols are a very large stock. They are very well known, and therefore command a better price in the market, comparatively, than other Government securities. Therefore an issue of Consols might possibly be done at a cheaper rate at the moment than another form of issue. But an issue of Consols would be an issue of permanent debt which this country would be unable to 76 pay off until 1923. Well now, what have we seen lately? A few years ago I was redeeming Consols at the price of 14 per cent. premium. A few years hence, when peace is concluded, the length of the term for which Consols cannot be paid off at par, will, I anticipate, have a great effect in producing a rise in their present value. If I borrow Consols now I should have to borrow, at a rate governed by the present market price of, I think, less than 101, the same debt which a few years ago I paid off at a 14 per cent. premium, and which we may hope in a few years may again be paid off and would have to be paid off at a premium though possibly not so high.
For these reasons I do not think it would be advisable that we should look to an issue of Consols. I think it would be better that part of this £35,000,000 should be reserved—I think probably a sum not exceeding £5,000,000—for a further issue of Treasury bills if required. The rest I should propose to raise by bonds or stock issued for a term of years not exceeding ten. I have reason to believe that it would be possible to place such an issue on very reasonable terms, and I should hope to be able to do it in a way which would not ensure profit merely to a few great and wealthy persons but would bring the whole public into what I may call a war loan and enable them to come forward to the assistance of the country. I would ask the Committee to pass a resolution enabling me to borrow in the manner I have described to the extent of £35,000,000 without fettering me as to the precise terms and conditions of the issue. At the time of the Crimean war, and before it, the Chancellor of the Exchequer of the day used to come down to Parliament on such an occasion and tell them he had contracted with certain parties for an issue of Consols, or whatever the stock might be, at a certain price, and all that Parliament had to do was to confirm the contract when made. I have not deemed such a course desirable now. I ask Parliament to give me authority to borrow, but in my belief it would be contrary to the public interest to specify beforehand the precise terms and conditions of the loan. I will do my best for the State, and then I will come to Parliament and insert in the Bill whatever 77 terms and conditions may have been decided upon.
I do not propose at present to make any special provision for paying on this loan. It ought, in my judgment, to be done at the close of the war, but it would be premature to do so before we know our total liabilities, and how much can be properly exacted from the Transvaal. But I may point out that between now and 1910 we have ample means in prospect to meet whatever may fall upon ourselves. Between 1902 and 1904 the fixed debt charge will be relieved of the converted annuities to the amount of £684,000 a year, and of the great Chancery annuities to the amount of £2,943,000 a year, and, further, in 1903, of ¼ per cent. on Consols to the extent of £1,300,000 a year. I think the Committee will see, without my saying anything further on this point, that ample means are before us to be utilised to any extent that may be right and necessary in the matter of the repayment of the loan now to be borrowed.
I have now finished my task, and I have to thank the Committee for the patience with which they have heard me. We have thought it right on this occasion to endeavour, though it is a time of war, to adhere to the old practice of one financial statement in the year. It is better, and it is fairer to Parliament. We have asked for no more than we believe will be required. We may have to ask for more, but even if in July or August next we should have to ask for more it will be better to have made this large request at once than to annoy the House of Commons with repeated requests, whether for additional taxation or whether for additional loans, none of them adequate to the real emergency of the situation. My proposals may or may not commend themselves to the Committee, but I hope the Committee will feel that, at any rate, I have placed before them, to the best of my power, a plain and honest statement—endeavouring to conceal nothing and to extenuate nothing, however disagreeable the facts or the proposals may be.
But I hope the Committee will agree to my proposals, for I think they are justified by the circumstances of the time, and they are based upon the 78 best financial traditions of the country. This is not a time, disagreeable as increased taxation may be, at which we should shrink from showing our confidence in the resources a four country, or in the self-denial of our people. Foreign nations are watching us, sometimes, I fear, with no friendly eye, to see whether years of comfort, of peace, of increasing wealth, have softened the fibre or diminished the courage and the tenacity of purpose of our race. Our soldiers in the field, from whatever part of the Empire they have come, have shown that they are equal to their forefathers. Our great colonies, though perhaps at first sight not so directly interested in this war as ourselves, have eagerly taxed themselves in men and money for the cause of the Empire. Shall we, who sit at home at ease, show ourselves at such a moment financial cowards? Shall we confess to the world that the cost of a few months of war frightens us out of a financial policy which we know to be sound? No, Sir, I do not believe it. We have placed before this House, during days and weeks, our views as to the policy and conduct of this war. We have defended ourselves, I hope not unsuccessfully, against the imputations and charges that have been made. Opinions on these subjects may differ, but there is one thing on which the great majority of this nation has made up its mind, and that is that, at whatever cost, this war shall be prosecuted to a successful termination. To-day we ask you to provide means to fulfil that mandate of the people. We leave the request in your hands with confidence, feeling sure that the House of Commons will grudge no effort and shrink from no sacrifice which the honour of our country and our duty to the Empire demand. I beg now to move the first Resolution, namely, that with regard to the duty on tea.