FINANCE BILL.

HC Deb 12 June 1903 vol 123 cc760-829

[SECOND READING.]

Order read, for resuming adjourned debate on Question (9th June), "That the Bill be now read a second time."

Question again proposed.

Debate resumed.

*MR. JOSEPH WALTON (Yorkshire, W.R., Barnsley)

I had intended to move that this Bill be read on this day six months, but as that would now be out of order, perhaps I may be allowed to state the main objections which I have to the Bill in the form in which it is now before the House. In the first place, I object to the Bill in that, whilst it is imperative that the national expenditure of the country should be substantially reduced, it provides for an increase of nearly £9,000,000 in the normal expenditure of the country in time of peace, and in addition to £4,500,000 provided for under the heading of war expenditure. Secondly, I cannot support the Finance Bill because it does not adequately provide for the reduction of the National Debt. Thirdly, it fails to provide, in the matter of the remission of taxation, for the relief of indirect and direct taxpayers on equitable lines. Fourthly, it does not provide for the abolition of the coal tax, which, in my opinion, confiscates £2,200,000 per annum out of the earnings gained by the working and exporting of coal. The ex-Chancellor of the Exchequer recently gave to the House and to the country a solemn warning as to what he considered to be a large and unnecessary growth of our national expenditure. He also stated that, in his opinion, His Majesty's Government showed an amount of indifference to this most important question which is disastrous to the best interests of the nation. In surveying the present financial position of the country, not only have we to take into consideration the Imperial expenditure, but we cannot disregard the fact that, in addition to expenditure of between £150,000,000 and £160,000 000 for Imperial purposes, we are expending £110,000,000 a year on various local administrative purposes. That is to say, we have before us, as the Imperial and local expenditure of the country, the gigantic sum of over £250,000,000 a year. I need not enter into any argument, therefore, to show that it is imperative that strenuous efforts should be made in every spending Department of the State to secure a substantial reduction of expenditure. We have before us the figures of 1902–03 showing an expenditure of over £200,000,000. Surely, with such figures before them, the Chancellor of the Exchequer and the Government ought to have taken every possible step to reduce the expenditure for the current year in every Department of the State. But so far from this having been done, we find provision made in this Bill for an increased normal expenditure of nearly £9,000,000 as compared with last year.

What is the position in which we now find ourselves financially as a nation? It is that in eight years the normal expenditure of the country for Imperial purposes has increased by £45,500,000. The Army and Navy expenditure for the year is put at £69,000,000 as compared with £33,000,000 in 1891, or an increase of more than 100 per cent. As compared with last year there is an increase of nearly £4,000,000 in the naval and military expenditure. In this connection the right hon. Gentleman the Member for West Bristol stated in September last, that the money we spent on our Army might be reduced without danger to the defensive forces of the country if the War Office laid out the money to the best possible advantage. Personally, I do not object to whatever expenditure might be deemed necessary by His Majesty's advisers on the naval forces of this country. We are all agreed that it is absolutely necessary for our national and Imperial safety that we maintain the control of the seas. What I venture to submit is that whatever increase in the naval expenditure was deemed necessary for the current year should have been met by a reduction in the expenditure on the Army, and that the £4,000,000 thus saved should have been applied to the more rapid reduction of our inflated National Debt. In order to produce a Budget which, from an electioneering point of view, would appear to be satisfactory to the country, and in order to strengthen the position of His Majesty's Government, I am afraid that an over-sanguine estimate has been made as to the revenue that will come into the National Exchequer during the current year in respect of Customs and Excise. The Chancellor of the Exchequer expects to receive from that source of revenue an increase of no less than £2,800,000. Personally, I happen to be connected with some staple trades of the country, and I shall be only too happy if the sanguine anticipations of the Chancellor of the Exchequer are realised. I honestly fear, however, that we are on the declining grade as regards the commerce of the country, and that the expectations of the Chancellor of the Exchequer will not be borne out by the results of the year. As a result of the swollen normal expenditure of the country, as shown by an increase of £45,500,000 in eight years, there are only £10,500,000 available in time of peace for the remission of taxation. All I can say is that, if the taxpayers of the country are satisfied with such a remission, they are indeed thankful for small mercies.

With regard to the financial situation in which we find ourselves, ought we not to receive from our self-governing colonies in South Africa much larger contributions towards the Imperial expenditure of the country? We have heard a great deal lately about preferential tariffs and preferential trade. What is the actual situation with regard to Canada? Canada at present takes £1,500,000 of revenue out of the £9,000,000 of exports which we send her, and we receive from Canada £21,000,000 of exports absolutely free of any charge whatever. It is also the fact that the British nation provides practically for the Imperial defence of the whole Empire at a cost of 29s. per head, towards which Canada contributes a merely nominal sum, although it is perfectly true that she remits one-third of her import duty, amounting to about £750,000 a year in favour of the British exporters. I need give no further illustrations, but the same applies in regard to Australia and to New Zealand. As to South Africa, are we to understand that, after expending £250,000,000 to repel the invasion of Cape Colony and Natal, we are to be satisfied with a paltry contribution of £30,000,000 from the whole of South Africa? Right through the war certain districts of South Africa have been booming. Places like Cape Town, Durban, Johannesburg and Pretoria, and other places, especially on the coast, have been in a state of great prosperity. The De Beers Preference Shares are worth ten times their issue price, and shares of other mining companies are worth several times their face value. It is idle to tell me that a contribution of £30,000,000 represents in a way a just share of the burden of the war which we waged to preserve the integrity of South Africa. We have received no contribution whatever from Cape Colony, and Natal has undertaken only some slight financial responsibility. I put it to the Chancellor of the Exchequer—Is he satisfied with the £30,000,000 which has been arranged for as the one and only contribution from South Africa towards the cost of the war?

Not only do we find ourselves in a very serious financial position as regard the overburdening of the taxpayers of this country, but we are further injured commercially by the fact that within the last few years we have increased our National Debt by £160,000,000. It is not only our Imperial debt that we have to consider. Our local debt in England, Scotland, and Wales amounts to £360,000,000, in addition to which we guarantee £30,000,000 or £35,000,000 loan in South Africa, and we are also contemplating incurring a financial responsibility in connection with Ireland of £120,000,000 or £150,000,000. The aggregate of our national financial responsibility, Imperial and local, amounts therefore to over £1,300,000,000. What I desire to see in the future is a national balance sheet, both of Imperial and of local indebtedness, having our liabilities stated on the one side and our assets on the other. I am aware that we have assets. Half the local loans relate to revenue producing works; we have also the Suez Canal shares; and in the postal and telegraphic service we possess a valuable asset producing an annual profit of £4,500,000. It would be interesting and useful to have a national balance sheet such as I suggest. One serious result of having suspended the Sinking Fund for three years and increased the debt by £1,60,000,000 is the depreciation in the value of Consols. Consols are the premier security of the world, and they have depreciated by no less than 21 per cent. This ought to have brought home to the people of this country in starting fashion the fact that our financial resources are not unlimited. We had from the Chancellor of the Exchequer an explanation of the causes that have led to the great fall in Consols. I submit that the real explanation is to be found in the fact that in recent years the supply of Consols has greatly exceeded the demand owing to the wealth of the country being limited. We were told that the Sinking Fund provided for in this Bill would wipe out the National Debt, provided there were no increase, in fifty years. I am afraid that that was based not he assumption that Consols could be bought up at 8 per cent. below par. I sincerely hope the Chancellor of the Exchequer does not anticipate that our premier security will remain at 8 per cent. below par. It would indeed be a grievous calamity for the financial future of the country if that proved to be the case. We were also told that the £25,500,000 allocated to the reduction of the National Debt would, owing to the lower rate of interest, secure the same reduction that £28,000,000 did in 1875. I submit that any saving of interest on the National Debt ought to be devoted, not to the reduction of the sum allocated to the reduction of the Debt, but to the more rapid reduction of the principal. This is necessary to secure the national credit. It is a most lamentable fact that, owing to the enormous national expenditure of the last three years, the whole of the savings effected by the nation at the cost of considerable self-sacrifice during the last thirty years for the reduction of the National Debt, should have been entirely swept away, and that we should be face to face to-day with a national debt higher than that of twenty-five years ago.

My third point of objection to the Bill is that it does not give an equitable reduction of taxation to the indirect taxpayer. The Chancellor of the Exchequer is in the position of being able to remit £10,500,000 out of the £45,500,000 increase of the last eight years. The policy of recent years has been to impose an equal amount of direct and indirect taxation. Why then on this occasion should four-fifths of the relief be given to the direct taxpayer and only one-fifth to the indirect taxpayer? In considering the incidence of taxation, everyone is agreed that taxation should, as far as possible, be imposed so as to call upon every man to bear the burden he is able, according to his means. We cannot disregard the incidence of local taxation. Over £50,000,000 is taken out of the pockets of the British taxpayer for local taxation, and of this £50,000,000 an enormous proportion is borne by the working classes of this country. Take the case of a working man hiring a house in London, say at 7s. 6d. per week. No less than one-third of that sum goes for local rates and taxes. He is taxed to the extent of £6 10s. per annum in connection with local taxation for a very poor dwelling in London. Therefore, out of 25s. a week he pays 10 per cent. to satisfy local rates and taxes, and probably another 10 per cent. for Imperial taxes, or 20 per cent. of his entire income. That is a 4s. in the £ Income Tax. And yet we are told that one-third of the population are so poor that they could not be called upon to bear any taxation whatever. In considering how the £10,500,000 surplus should be applied, such facts as I have put before the House ought to receive the serious consideration of the House. Local rates have doubled in London within the last twenty-five years and local rates all over the country have increased 50 per cent. At the present time the Imperial burden of taxation amounts to £3 6s. 7d. per head of the population. Local indebtedness per head has increased, as well as Imperial indebtedness, by leaps and bounds. Local indebtedness in London has doubled in the last twenty-five years, and it now stands at £12 17s. 9d. per head as against £9 16s. 5d. per head in the country. In the whole country it has increased threefold within the last twenty-five years. These considerations drive me to the conclusion not only that it is most inequitable that in connection with this Budget four-fifths of the remission of taxation should be for the relief of direct taxpayers, and one-fifth for the benefit of indirect taxpayers, but, in view of the fact that one-third of the population is practically, owing to poverty, unable to bear any taxation whatever, it would have been much more equitable to have given four-fifths of the relief to the indirect taxpayers and only one-fifth to the wealthier direct taxpayers. In addition to the abolition of the corn tax, of which I heartily approve, and I consider that the House and the nation are much indebted to the Chancellor of the Exchequer for the sound, firm, and unfaltering position he has maintained in regard to this remission. But with all deference, in view of these facts, I think relief would have been more equitably distributed were the Chancellor of the Exchequer to reduce the Income Tax only 2d. in the £ and devote the other 2d. to reducing the duty on tea by 2d. per pound, and abolishing that most flagrantly unjust coal tax.

With regard to the Income Tax the relief given in this case after all relieves that section of the community that least needs relief. What do the whole of the Income Tax payers amount to compared with the whole population? There are probably 800,000 or 900,000 persons paying Income Tax, or equal to about one-tenth of the population, and they possess one-half of the wealth of the country, estimated at about £1,600,000,000. The gross assessment of the Income Tax is in round figures £833,000,000. That sum is possessed by 800,000 people, and it furnishes an average income to every man, woman, and child included in that total, of £200 a year. When you divide the remaining national income amongst the rest of the community it shows that they possess about £18 each per annum. Therefore, I ask what would be equitable in the way of taxation between those possessing £200 and those possessing £18 a year? With regard to the corn tax, it is unnecessary, after the lengthened discussion which has taken place, for me to add my quota, but I heartily approve of the removal of the tax, on account of the fiscal changes which have been suggested. The Prime Minister said that he began to consider Budget speech the necessity of fiscal changes in 1880, but in 1903 he remains still without any settled convictions on the subject. His process of conversion has been slow, and I hope it will be generations yet to come before either he or his successors are converted. I earnestly hope that at any rate we may feel that any proposal to tax the food of the people has now been relegated to the remote future.

I object to this Finance Bill because it does not provide for the abolition of the coal tax, and I think I can show that the coal tax is one which is absolutely unjust and indefensible. The coal tax violates the principle of equal incidence of taxation, and it is imposed upon one great industry only and upon a section only of that industry, and, further, no corresponding tax is placed upon other industries. It is a reversal of the fiscal policy of this country. We are told that this is a free trade Budget, but it cannot be so long as it continues the imposition of a tax which is worse than any protective tax. A protective tax might be imposed for the supposed benefit of the colonies, home producers, and manufacturers, but this is a tax imposed for the benefit only of foreign producers, and it handicaps British producers. Again, it is the only tax imposed upon any British export. Capitalists invested their money in coal mines believing that the fiscal policy of the country would remain undisturbed, and yet, out of the earnings they have gained by investment of capital and the work of the miners, and the providing of ships, the State has, under this tax, confiscated £2,200,000. A more flagrantly unjust imposition was never put on any industry, and how the present Chancellor of the Exchequer can continue it I fail to conceive. [An HON. MEMBER: "Who pays it?"] The late Chancellor of the Exchequer said that the consumer abroad pays it, but I am glad to be able to give upon this point the opinion of the present Chancellor of the Exchequer, who told us that the tax is not paid by the consumer.

THE CHANCELLOR OF THE EXCHEQUER (Mr. RITCHIE,) Croydon

When?

*MR. JOSEPH WALTON

In your Budget speech. The right hon. Gentleman was good enough to send me a copy of it, and in it he says:— The coal tax does not fall on the consumer. It has not injuriously affected the quantity of exports, and I do not propose to interfere with it. Therefore the right hon. Gentleman' declared that this tax would not fall on the consumer.

MR. RITCHIE

Not in this country. When I was speaking I was talking about the tax not falling upon the consumer in this country.

*MR. JOSEPH WALTON

I think I was entitled from what he said to conclude that he meant the consumer of the coal.

MR. RITCHIE

I was talking about the taxes borne by the consumer in this country.

*MR. JOSEPH WALTON

I accept fully the explanation of the Chancellor of the Exchequer, but I concluded that he meant the consumer of the coal. I desire to say that it does fall upon the producer of the coal and not upon the consumer. Upon this question I speak specially for the north of England, where the coal possesses no monopoly of markets. Our exports go to Germany, Holland, Belgium and France, and we have there to compete with foreign coal. Only a certain price is obtainable, and out of that price, by reason of this tax, we receive 1s a ton less at the pit's mouth than if the tax had not been imposed. The Chancellor of the Exchequer stated that no serious injury had been sustained by this tax. It is true that the great coal strike in America and France prevented the great diminution in our exports which would otherwise have taken place. But what are the facts? There has been a diminution in the exports of Durham, Northumberland, and Yorkshire coal to Germany, Holland, Belgium, and France of 2,600,000 tons in 1902 as compared with 1900. The exports to the northeastern ports of Germany, Holland, Belgium, and France were 2,000,000 tons less in 1901 than in 1900. The German exports of coal to Holland, Belgium, and France increased by 1,154,802 tons in 1902 as compared with 1901. The north-eastern exports to the same continental nations decreased by 678,000 tons in 1902 as compared with 1901. Therefore, aided by the bounty given to the German competitors by the British Government, they not only took the whole of that 678,000 tons reduction in our trade which we sustained, but they took in addition an additional trade of 475,000 tons, a large proportion of which we should have secured had we not been handicapped by the British Government with this coal tax, which is a bounty in favour of the foreign producers. The results if we consider them as applying to Holland and Belgium are still more startling. From nearly 3,000,000 tons exported to Holland and Belgium in 1900, we have fallen in 1902 to 1,362,000 tons, whereas, compared with 1901, Germany has in 1902 increased her exports to those countries by 970,000. These illustrations show how the coal tax handicaps British coal owners in their competition in markets where they have to meet the competition of foreign coal owners.

I shall only detain the House by giving two illustrations of how far we are handicapped. They are concrete illustrations. We have supplied the Eastern Railway Company of France for years and years with the whole of their locomotive coal. Last year when the tenders were sent in British coal producers had to charge 1s. per ton to cover the export tax. The German coal producers had no such impost to add, and the result was that the contract for 150,000 tons for the first time for a generation went to the Westphalian coal producers, and was lost to the British coal trade. Just recently we were told by the ex-Chancellor of the Exchequer that we had a monopoly in the north of England in the matter of gas coal. But recently we lost a contract of 100,000 tons for the Hague Gas-works. It was taken by Germany, and in addition to that I may tell the Chancellor of the Exchequer that within the last few weeks we have lost in the Rotterdam market still more important contracts, that have always been held by British coal owners and which have gone now to foreign competitors. This decrease of the export trade has taken place in spite of the unprecedented fall in shipping freights. Shipping freights between the north of England and the Continent, to places such as Hamburg, fell in 1901 5½d. per ton, and in 1902 9d. per ton, as compared with the average of the last ten years. To seven selected ports in the north of France the fall was 6d. in 1901 and 7½d. in 1902, and yet in spite of this we have lost ground to the extent I have described. The ex-Chancellor of the Exchequer said that great advantage was given to the British shipowner by reason of the fact that we allowed him to take any quantity of bunkers for ship's use free of export duty, but he ignored the fact altogether that the more bunkers he took the less cargo he took, and that therefore the earning power of the ship was diminished, while the State received no corresponding advantage in the matter of revenue. But the question does not affect the coal mining industry and the shipping industry only. If we have less exports to take out of this country in the shape of coal, we have fewer ships going abroad to bring back imports to this country for the benefit of the whole community. I know that it is proposed to increase the cost of imports to the British consumer, but at any rate so far as we are concerned we wish to be able to maintain them at a cheap rate in order to be able to compete successfully with protectionist nations and in protectionist markets.

Now the imposition of this tax was justified two years ago on the ground that the coal owners were making huge profits and could well afford to pay the tax. But the singular thing is that inland collieries were making greater profits than export collieries, and why in the name of all that is fair and reasonable this tax should be imposed on export collieries and not on inland collieries has yet to be answered. Take the case of two collieries in the Barnsley Division of Yorkshire. One colliery exports 240,000 tons of coal, and therefore pays under this tax to the extent of £12,000 a year, whereas the other colliery, two miles away, which does not export a single ton, does not pay one farthing of any corresponding tax. I am extremely sorry that the Return I moved for showing the wages and profits in coal mining should only have been issued this morning. I have not had time to go through it, and cannot make any reference to it to-day, but I venture to say to the House that the price of coal generally is enormously reduced in the last two years. Many classes of coal are only worth half to-day what they were worth two years ago. We have arrived at a situation in connection with the coal trade in which it is perfectly true to say that some collieries are working to-day at an actual loss, and some at only a nominal profit, and therefore to continue a huge charge of £2,200,000 on export collieries only, while no other industry in the country is subject to a corresponding tax, is an act of the most flagrant injustice. At any rate if this tax is to be continued it ought to be made an ad valorem duty. How absolutely absurd that coal only at the value of 6s. should be charged 1s. per ton export duty, and that coal worth 12s. per ton should only pay the same tax. Surely the imposition of an ad valorem duty, levied at the pit's mouth, would be the equitable system. But how much more ridiculous is the fact that it pays a coal owner better to sell coal at 5s. 11d. than 6s. 10d. If he sells at 6s. 10d. he has to pay the 1s. duty, but if he sells at 5s. 11d. he escapes it. A stronger proof of the absurdity of the way in which this tax is imposed you could not possibly have. It is absolutely unanswerable.

Then again they levy this duty on a free-on-board price, ignoring altogether that the rates charged to put coal free on board vary enormously. Supposing you sell coal free on board from a colliery that has a 2s. 7d. rate to the port of shipment at 6s. 1d., you receive the balance of 3s. 6d. and of this the State gets 1s. as coal duty, leaving 2s. 6d. to the coal owner. Supposing there is another export colliery from which the carriage to the port of shipment is 6d. per ton, the coal owner can take a contract over the head of his competitors at 5s. 11d., which leaves him with 5s. 5d. per ton, and on that he has no export tax whatever. Therefore in the case of two colliery owners producing in this country exactly the same class of coal, and selling to within 2d. per ton at the same price, one receives 5s. 5d. and the other 2s. 6d. for his coal. I think that nothing could demonstrate the unfairness of the way this tax is levied better than facts of this sort, which I venture to say are absolutely indisputable. If the ex-Chancellor of the Exchequer had levied a 2d. tax on the whole of the coal production of the United Kingdom the tax would have raised more money, and if he had caused the royalty owners to pay 1d. of that, and the coal owners the other 1d., no great complaint would have arisen, because the royalty owners receive their rent on a sliding scale, and during years of inflation they receive an enormously augmented income on coal royalties. We were told when the ex-Chancellor of the Exchequer introduced the tax that one very desirable object in view was to prolong the life of the highest qualities of coal in the United Kingdom. The object of the colliery owners has always been to prolong the life of their best seams, and therefore they have worked the inferior and more expensive seams concurrently with the cheaper and better seams so long as they could make a profit. But what has been the consequence of this coal tax? It has been that as prices have fallen they have ceased working the more expensive and thinner seams, and concentrated upon working out more rapidly the more valuable and cheaper working seams. Therefore the object the ex-Chancellor of the Exchequer had in view in imposing the tax is absolutely defeated, and the opposite result is being produced by the continuance of the tax. Really I must apologise to the House for going into this matter. It is a wide subject, and after all we did not have an opportunity of a general discussion on the introduction of the Budget, and therefore I am sure the Chancellor of the Exchequer does not at all object that we should review the whole of the financial provisions of His Majesty's Government for the present year.

The last point I desire to refer to is the fact that this coal tax has brought about a considerable reduction in the wages of coal miners. In the last two years the wages of coal miners in Northumberland have been reduced no less than 35 per cent., and in Durham 30 per cent., and as their wages are regulated by the selling price of coal at the pit, and as that selling price is reduced substantially when we deduct a shilling per ton for the duty on export coal, the miners throughout the country have had to bear a considerable share of the burden. And now, in face of these facts, and in face of the suggestions that they should pay more for their food supply in future, it is proposed that the tax should be continued. Well now, we have in the present financial year a surplus of ten and a-half millions sterling for the remission of taxation. I wonder if there is anyone in the House so sanguine as to believe that in the near future we shall have a similarly substantial surplus. Therefore it appears to me, so far as the abolition of the coal tax is concerned—the only tax levied on a British export in favour of the foreign producer—if we do not receive a remission of it this year there is small hope of doing so in years to come.

There are many other questions in connection with the Finance Bill that might be referred to. There is the question of the incidence of the Income Tax. I am glad to know that the Chancellor of the Exchequer is having a Commission on this important subject; and I hope it will lead to a further extension of the principle of a graduated Income Tax: that those having a comparatively small income up to £1,000 a year will have to pay less income tax in the future, and that in that way the burden of taxation will be made to fall equitably on all classes of the community. There are other sources of income open to the Chancellor of the Exchequer. I should be glad if he could see his way to a taxation of land values and to the imposition of a penny on every £1 share transfer; and in addition to that I should earnestly desire a huge tax on motor-cars. They are most hideous in appearance, and largely occupied by people most fantastically dressed; they leave behind them, usually, a trail of polluted atmosphere; and they are becoming an increasing source of danger in the crowded London streets, both to men and beasts. I hope the Chancellor of the Exchequer will take into serious consideration a tax on motor-cars so as to prevent their too rapid multiplication. But returning to my own particular question, the coal tax, I trust that before the Second Reading of the Finance Bill is ended the Chancellor of the Exchequer will give my proposal his serious and friendly consideration, and that we may have announced from him in his place in Parliament that he does recognise that this being a tax imposed upon one great export from this country—the only one, and which operates in favour of the foreign and colonial producer—it ought to be remitted. We hear a great deal in these days of giving a preference to our colonies; but at present we do give them many preferences, because we admit into this country their goods duty free while they exact duty on our goods; and we give in certain markets of the world a shilling per ton in favour of the Canadian and Australian coal producer to the detriment of the British coal producer. On all these grounds I submit to the Chancellor of the Exchequer that he should adjust his taxation in a more equitable direction by the removal of the coal tax.

MR. COHEN (Islington, E.)

I have no intention of entering upon such a general survey of the financial programme of the Chancellor of the Exchequer as has been indulged in by the hon. Member who has just sat down. But I am glad that the House, in the discussion of the Finance Bill, has, at any rate, at last reached the point when we can examine the financial proposals of the Government in their general aspect instead of confining and concentrating our attention on a very vital and important branch of these proposals, but still only a branch. I agree with a great many of the things which fell from my hon. friend opposite in the first part of his speech with regard to the National Debt. But, with all respect, I do not follow or agree with him in his observations about the coal trade, because, so far as I and a largo number of persons in the country are concerned, the arguments which he adduced against the continuance of that tax were arguments which would lead to an opposite conclusion. We do not view with alarm, but with satisfaction, the diminution of the export of coal from this country. When the hon. Member informed us, with serious lamentation, that last year there had been a cessation of the consumption of coal from English sources by the great railway companies on the Continent, all I can tell him is that I believe in a great part of this country that cessation of the export of coal will be viewed with satisfaction—at all events, with equanimity.

MR. JOSEPH WALTON

That is selfishness.

MR. COHEN

I do not think that is a right and proper term to apply to a large section of the community. It is certainly an opprobrious one. We do not consider, when we want to preserve our coal for ourselves, that there should be a continuance of the undiminished fertility of our exports, at intense cost, of one of the staple necessities of life in this country. There was another observation which fell from the hon. Gentleman with which I do not agree; and that is about the Income Tax. The largest number of Income Tax payers are people who have a very direct and very urgent claim on the compassion and the sympathy of the Chancellor of the Exchequer.

*MR. JOSEPH WALTON

Hear, hear.

MR. COHEN

I am very glad my hon. friend agrees with that. I claim that the Income Tax payers deserve some consideration, not even in the interest of their own resources—serious and vital as that may be — but in the interest of the resources and the financial stability of this country. The Income Tax has always been treated—and ought to be treated—as a great reserve to which we can have recourse in times of stress and pressure and war. But directly that stress and pressure is over the Income Tax should be reduced to that level from which it can be speedily raised, and from which we can always draw that reserve which is the greatest financial resource this country possesses. I pass now from that portion of the hon. Gentleman's speech in which I differ from him. I am much more with him in his observations about the condition of the National Debt. That fills me, not exactly with alarm, but with considerable anxiety; and I am bound to say that, in my opinion, the financial proposals of the Government this year are not calculated to allay that anxiety. They do not seem to me to supply that provision for times of stress and pressure which it is binding on this country always to make when these times of stress and pressure cease to operate. The Chancellor of the Exchequer gave us, in his Budget speech, some very interesting and elaborate figures, and contrasted the condition of the Debt now with what it was when Sir Stafford Northcote established the New Sinking Fund in 1875. He told us that the amount of the Debt on that occasion was, by a happy coincidence, almost identical with what it was at the present moment. It was then £769,000,000, while it is now £770,000,000.

*MR. JOSEPH WALTON

£790,000,000.

MR. COHEN

The Chancellor of the Exchequer said £770,000,000. At any rate he said that the National Debt then and now was practically identical. But the constitution of the National Debt was then very different from now; and I shall refer to that difference in a moment or two. But there are figures applicable to a comparison of the two periods which are much more significant, and which do not show the same identity of total on these two occasions. In 1875–6 the national income was some £2,000,000 or £3,000,000 below £80,000,000. I think the exact amount was £78,000,000; and of that income Sir Stafford North-cote appropriated £28,000,000 for his New Sinking Fund. At the present time the Chancellor of the Exchequer disposes of an income of £144,270,000: and from that sum the Chancellor of the Exchequer provides £27,000,000 to the New Sinking Fund. I think the House will see that that amount contrasts very strikingly and not very favourably with the £28,000,000 in 1875–6.

But since Sir Stafford Northcote instituted the New Sinking Fund, a new system has grown up which, to my mind, constitutes, if not a great financial danger, at least a considerable financial inconvenience. We have now a system of Treasury bills which has grown up, which raises money which must be paid off in a very short time after the creation of the Bills; and we have a large amount of Treasury bonds in circulation, all of which mature at a fixed date. No one knows better than the Chancellor of the Exchequer that that is a process which has not always been economical, which has frequently been very costly, and at times been attended with inconvenience. I think from the Return moved for by my hon. friend the Member for Exeter we have an amount of terminable debt maturing within a very short time about which it would be very interesting if the House were given some information. The total amount of unfunded debt at the present moment is £75,133,000, and of that amount £30,000,000 is on account of the War Loan not due till 1910; so that, for the purpose of my present argument, that can be set on one side. There are £14,000,000 Exchequer Bonds not due until 1905, so that they may also be put on one side; and there are £10,000,000 bonds due on August 7th next. I do not press my right hon. friend to tell us in what way he is going to meet that pressing liability. I think it is conceivable—and from my City experience I think it likely—that to announce beforehand the way in which my right hon. friend is going to meet that £10,000,000, which he must meet in a little more than six weeks, might occasion inconvenience.

That leaves an amount of £21,000,000 which I take it exists in Treasury bills. That is a very dangerous form for the liabilities of the National Exchequer to take. In 1898 the total amount of the unfunded debt of this country was £8,133,000;it has increased to £75,000,000 at the present moment. I do not believe, as the hon. Gentleman opposite suggested, that the position of Chancellor of the Exchequer, any more than the position of Prime Minister, is hereditary, and I hope that the tenure of office of the present Chancellor of the Exchequer will exist long after the unfunded debt has been cleared off. But I think it is the duty of a Chancellor of the Exchequer, whether he be Conservative or Radical, to try and convert the pressing liabilities of the State in the form of unfunded debt as speedily as possible. I have very high authority for that opinion. The right hon. Gentleman the Member for West Monmouth, who everyone will admit was one of the greatest Chancellors of the Exchequer we have ever had—at any rate, that is my opinion—said on the 24th April, 1893— I have a strong opinion that the less the Chancellor of the Exchequer is in the market the better, that the business of the country ought to be conducted on a large scale, and that to have to deal with bills of small amounts at intervals of three months is a thing to be avoided if possible. That cannot be avoided in times of financial pressure and war. We must raise money for short periods, and the very fact of that necessity ought, in my judgment, to impose upon the Chancellor of the Exchequer the duty of funding as speedily as possible every portion of the unfunded debt that is capable of being extinguished. We know that the Government must hold, and does hold, some of these short dated securities, but the total amount of these unfunded securities should always be kept within such an amount as to leave very little possibility of their getting into the hands of the money market, so that it may not be within the power of the money market to cause inconvenience to the National Exchequer and the Chancellor of the Exchequer.

MR. RITCHIE

Hear, hear!

MR. COHEN

I am glad my right hon. friend, whose experience is unrivalled in all these matters, appreciates the importance of that. Now I come to the second branch of my subject, namely, the Sinking Fund. We are in the habit of calling Sir Stafford Northcote's Fund the "New Sinking Fund." That was applicable when the Fund was first introduced and for a few years afterwards, but it has ceased to have its full force for a great many years. I do not think that we should call it the "New Sinking Fund," but rather the "Sinking Fund." I do not know what is likely to become of the old Sinking Fund. The old Sinking Fund was a capital thing in the old days of recurrent surpluses; but we are never now treated to such luxuries as surpluses. The operation of the old Sinking Fund does not conduce to economy; on the contrary, it almost invites extravagance. We have seen two forces at work which have contributed to the disappearance of surplus after surplus. One is that we have year after year a considerable increase in the number of Supplementary Estimates. I do not suggest that Supplementary Estimates are introduced because the Government wish to make a surplus disappear. I have too much faith in the vigilant eye of the Chancellor of the Exchequer to imagine anything of the kind; but certain it is that Supplementary Estimates can be provided for because of a surplus without causing inconvenience to the Chancellor of the Exchequer, and, accordingly, the old Sinking Fund is invaded and tends to disappear. The other influence operating in the same direction is the intercepting of funds belonging to the Exchequer before they get into that holy of holies. We see funds intercepted which ought to be voted for the extinction of debt—and that system has increased of late years. My hon. friend the Member for King's Lynn has called attention to that several times. My right hon. friend the former Chancellor of the Exchequer defended—or perhaps excused would be the proper expression—the misappropriation—I do not think that is too strong a term—of those funds before they got into the Exchequer, with the result that the surplus which should have been appropriated to the extinction of debt disappeared gradually year after year. Consequently the only Sinking Fund available for the extinction of debt is Sir Stafford Northcote's fund, which has now been re-established. I called attention of the House to the fact that the proportion of £27,000,000 which the Chancellor of the Exchequer appropriates now is inferior to the amount which Sir Stafford Northcote applied in 1876. A half a million has been diverted from what should properly belong to the New Sinking Fund, and the amount was fixed at £27,000,000 instead of £27,500,000. A duty devolves upon the Chancellor of the Exchequer, which I do not think he has effectually borne in mind, of restoring the New Sinking Fund by an amount proportionate to the growth of the debt since the war. Having stated that, it may perhaps be expected of me to make suggestions which, however, I am sure my right hon. friend cannot now carry out. Personally, I do not want the corn tax remitted. I am not going into the thorny question of free trade versus protection. On that question I avow myself as ardent a free trader as my right hon. friend himself. I advocate the retention of the corn tax because I believed last year, and I still believe, that it does not violate the principle of free trade, which is sacred to me, and because the retention of that tax would have enabled us to devote £2,500,000 to the redemption of debt, which has always been a binding obligation on the House of Commons, but which, in my opinion, was never so binding as at the present moment, when we have increased the debt by something like £155,000,000. There is one thing I may say which I believe will increase the force of my argument. I am not one of those who believe in the reduction of national expenditure. Personally I do not wish to see our national expenditure reduced. We cannot reduce expenditure on the Navy; and I do not even know whether we can reduce expenditure on the Army. Therefore, as we cannot reduce our national expenditure, the duty is binding and urgent on us to energetically take in hand the reduction of the debt.

MR. EDMUND ROBERTSON (Dundee)

The Prime Minister told us the other day that neither the House nor the country cared three farthings whether the corn duty was in the Budget or not, and the aspect of the House at this moment is some testimony to the truth of that observation. We have had a very curious debate in the previous sittings on this Bill, in so far that we have been discussing an Amendment limited to the retention of the corn duty, and we have not touched the question under discussion. I do not desire to say anything on this question. I merely wish to ask the Chancellor of the Exchequer whether he can give any explanation as to an alteration in his Budget statement which has caused some mystification. I had not the good fortune to hear the statement made, but I have read the authorised report published in Hansard and corrected by the right hon. Gentleman himself. The right hon. Gentleman has sent to me, and to all of us I suppose, a pamphlet copy of his statement, which, so far as the corn duty is concerned, differs as it seems to me from the speech delivered as reported in the newspapers and in Hansard. There has been a correction made in the pamphlet form of the statement, and whether it has any significance or not is the question I submit to the right hon. Gentleman. It may be that the alteration, although considerable, involving as it does the recasting of a whole sentence, is not meant to have significance. In the Hansard corrected report, the right hon. Gentleman, while speaking on the corn duty, is reported to have said, and he is also reported in The Times as saying— I do not think it (the corn tax) can remain permanently an integral portion of our fiscal system unless there is some radical change in our economic circumstances, or it is connected with some boon much desired by the working classes. The change made in the pamphlet involved the exclusion of a good many words, and the recasting of the whole sentence, so that I suppose the Chancellor of the Exchequer meant it to have some significance. It stated that the corn duty— Cannot remain permanently an integral portion of our fiscal system unless in connection with some radical change in our economic policy. In Hansard he said it could not be permanent unless there was some change in our economic circumstances; in his ultimate version he said it could not be permanently an integral portion of our fiscal system unless in connection with some radical change in our economic policy.

MR. RITCHIE

That is what I said. I did not personally correct the authorised Report in Hansard.

MR. EDMUND ROBERTSON

The right hon. Gentleman has deemed it important to make a most elaborate correction involving a recasting of the whole sentence.

MR. RITCHIE

was understood to dissent.

MR. EDMUND ROBERTSON

The Report in The Times also said "unless there is some radical change in our economic circumstances."

MR. RITCHIE

That is not what I said.

MR. EDMUND ROBERTSON

Then the right hon. Gentleman has unfortunately been misreported both by The Times and by Hansard, but now we have the correct version before us at last, and the right hon. Gentleman does not say that change of circumstances is to be the justification for the imposition of the corn duty as a permanent part of the fiscal system, but that if there is to be a change in the fiscal system the fiscal policy must be changed altogether. The report is in question, and the doubt which has been cast on the position of so many Ministers, including members of the Cabinet, on this question is so great as to justify me in calling attention to what had struck me as an important alteration in what I must still regard as the authorised statement made on behalf of the Government on a question of policy.

MR. RITCHIE

I think it is only right to say, in order to make this matter perfectly plain, and as the hon. Gentleman speaks about my "corrected" statement, that the only statement which I have personally revised is in the pamphlet form in which it has been sent to the hon. Gentleman; and that pamphlet contains exactly the words I used. I was so particular as to the words I used that I read them out to the House, when I made my statement, from my memorandum, so that there can be no doubt about the fact.

MR. EDMUND ROBERTSON

I should have said that the pamphlet version is said to be extracted from The Parliamentary Debates (authorised edition); on looking at which I find "circumstances" was the word used, whereas "policy" was used in what I regard now as the corrected edition. Therefore the right hon. Gentleman will admit that I was accurate in using the words "corrected edition" from that point of view.

MR. RITCHIE

Certainly.

MR. EDMUND ROBERTSON

Now I will pass from that. There is one very general topic which figures in the speech of the right hon. Gentleman, and which has figured in the speech of his predecessors for many years, and which bulked very largely in the speech his predecessor made a few days ago. I allude to the remarks made on the subject of expenditure. I thank the right hon. Gentleman for his aspirations.

MR. GIBSON BOWLES (Lynn Regis)

More than aspirations. Intentions.

MR. EDMUND ROBERTSON

We will not quarrel about a phrase. I thank him for his declarations, and I hope, if not this year, it may be possible to reduce the normal expenditure of the country. I listened with even more satisfaction, not unmingled with regret, to what was said by the right hon. Member for West Bristol the other day. He told us, as I understood, that had his remonstrances been received with a little more sympathy by his colleagues he might not be addressing the House from the place which he occupied. The right hon. Gentleman said he had protested for years against the increase in the normal expenditure of the country. I do not think that statement is altogether fair to his late colleagues, in view of the fact that although he protested against it, by remaining in office he assented to it.

But the right hon. Gentleman had made an appeal to the Prime Minister to give special attention to the enormous growth in the increase of another normal expenditure of the nation. What does that mean? Let the House consider for one moment where the chief growth of normal expenditure occurs, and what chance there is of checking it. In the Civil Service there has been a net increase of £2,000,000, attributable to the educational policy of last year. It is obvious that that cannot be reduced. The Revenue Department has increased by £700,000. I doubt whether in that item a satisfactory case can be made out for any reduction with regard to the Army; though there may be great waste in Army expenditure, there is practically no increase in the normal expenditure this year. In the Navy, however, the net increase has been £3,200,000,—an increase equal to the aggregate of all the other increases. If, therefore, the right hon. Member for West Bristol meant anything at all here was the opportunity for him to lead a campaign of economy in this House. What are the facts? We on this side have tried in vain to direct attention to the one item of naval expenditure which involved an increase of all the other items—namely, the Shipbuilding Vote, and without mercy have been voted down. Why are you asking £1,000,000 more for this Vote this year than last? That is a question which has been frequently put, and I venture to say that we have had no answer to it. It is an answer that can only come from the Prime Minister, or from the Chancellor of the Exchequer, because it is a matter which depends on general policy. The Chancellor of the Exchequer gave in generall terms what I suppose might be regarded as the justification of this increase when he said that, so long as other fleets grew, our Fleet must also grow in size. Now that is a question upon which we wish for further information. We want to know what fleets are growing, and what has happened in the way of a change of standard to justify the demand for this enormous increase in the Navy. I would receive with more satisfaction than I have done the protestations of different Chancellors of the Exchequer on this point if I found that they were willing to justify and defend the additional expenditure. Our complaint has been that our requests for explanation have been ignored. There will, however, be an opportunity later on of raising this point on the remaining portion of the Shipbuilding Vote, and I hope on that occasion we shall have the right hon. Gentleman the Member for West Bristol giving effect to his own declarations in favour of economy, and that we shall have from the Prime Minister, the Chancellor of the Exchequer, or somebody else entitled to speak for the policy of the whole Government, a reason for the great increase. As I shall have other occasions of calling the attention of the House to this topic, I will now pass on to another question.

There has been on these occasions a controversy, or rather a conflict, between the interests, or supposed interests, of the direct and the indirect taxpayer. I do not propose to go into that at any length now, but let me say at once that I do not accept the position which appears to be set up in certain quarters of this House, that justice is done if you merely balance indirect and direct taxation, and place them upon something like terms of equality. It is often said that if you raise as much money by indirect as you do by direct taxation justice is done. I do not, however, accept that theory. From my point of view, indirect taxation, so far as it affects the necessaries of life, involves an inevitable wrong and injustice, and there is no getting out of that. I will not repeat the assertion so often made, on the authority of an elaborate investigation, that one-third of our people are hardly getting a living wage. Undoubtedly an enormously large number of people in this country are far below the living wage line. They are people whose incomes do not admit of their being taxed at all; they are the poorest of the poor; they are the most helpless of the helpless; they are often women, who have no votes, and possibly have to provide for orphan children out of their various small means, and I venture to say that any additional burden placed upon them is a gross wrong. Any burden at all is, in fact, an unfair burden in their case, and so far as taxation goes, I adhere to the principle that you cannot have justice unless a person is first in possession of a living wage, and then you must only tax incomes above the living wage line in equal proportion to their amount. So long as you tax tea and sugar, and even beer and tobacco, you establish the claim of a large section of the community who cannot bear any taxation at all, for relief in the shape of old-age pensions, and I believe that many Members of this House will agree with that proposition. I want, further to point out that this taxation which must involve injustice is made all the more galling to many of us, and all the more indefensible, by the fact that for years and years this House, under successive Governments—Governments belonging to both Parties—has levied this cruel taxation upon the poorest of the poor, while they know there exists untaxed sources of revenue which they refuse to apply to the benefit of the poor. That is a grievance under which both the direct and indirect taxpayers suffer. Not a single farthing additional on the Income Tax will I vote for so long as the Government shuts its eyes to the fact that there are great public values which must be used in relief of taxation, but which they refuse to touch at all.

I am going now to allude to one of the most undoubted cases of that kind. I refer to the endowment—for it is nothing else—out of public funds of one trade, namely, the licensed trade, and to the low duties attached to their monopoly. You have in the case of the licensed victuallers' trade a State monopoly. There never was a clearer case of monopoly. You have refused by law free trade in liquor, you have conferred the privilege of selling liquor upon a small and select class, and the moment you have created a monopoly of that sort, you have made it your bounden duty to take the full monopoly value so created for the use of the State. But you do not do that. The duties are so low that they are no tax at all, they are only an in significant fraction, and that has been proved in a case which recently occurred showing the enormous value of this monopoly. It will be remembered that Lord Grey, for philanthropic reasons, applied for a licence for certain premises and obtained it, and that he was offered £10,000 for the property before he had spent a single penny upon it. Why was that offer made? It was made because it was well worth while for a speculator to get a bare chance of carrying on this business even on the limited scale on which it was proposed to be carried on. Our friend, the late Mr. Caine, whose absence from this House I am sure we all deplore, once had an estimate made of the annual value of the endowment of public-house licences arising out of the fact that the duties are so low, and the figures which were obtained established the fact that you might increase the revenue derived from these duties to £10,000,000 a year, whereas you only get about £1,500,000 now, and that even that £10,000,000 would not exhaust the monopoly value of the licences. If that is true, everything I have said is established as to your present system of annual endowment of a particular trade, and I for my part object not only to the indirect taxation continued by this Budget, but to the income tax and to every other tax so long as a source of public revenue like that is to be wasted as it now is upon a particular class.

What has been the official answer on this point? It is that the duties are given to the local authorities, and that therefore the State would not benefit from their increase, as they would only go to the local authority under the existing law. That is not what I propose. I propose that the true value of the licence should be taken, and that any excess over the amount now given to the local authority should be handed to the State in relief of Imperial taxation, and I believe that if that were done it would extend the revenue of this country to the extent of many millions. I, for one, will never vote for any tax proposed in this or any other Budget so long as this source of revenue is squandered. I would remind the House that the trade have not only, under existing circumstances, a vested interest in their licences, but they have a rested interest in the low rate of duty for which I can see no sort of foundation whatever, and therefore I do hope that some more just system of taxation will be decided upon, because one of the worst features in connection with the question of compensation which has been raised, and which has so long proved a bar to progress in this country, is materially affected by the imposition and maintenance of these very low duties. That is one of the worst endowments, but there is another which is a municipal monopoly to which the same reasoning may be applied. The taxation of land values has been adopted by practically the whole Liberal Party. I should propose to bring to the aid of the Exchequer also the endowments given to local authorities. That is a bad element in our finance. It does not tend to economy that the Exchequer should give endowments to local authorities in aid of municipal enterprises. But if you give effect to the principle of the taxation of land values, and hand the proceeds to the local authorities, then you may fairly ask them to give up the Imperial contributions, and thus you would receive a large addition to the national revenue. I object more to indirect than to direct taxation; I object most of all to taxation on the necessaries of life. I object to all these taxes so long as a single national endowment, not derived from taxation, is unutilised.

*SIR EDGAR VINCENT (Exeter)

There was nothing in the plain statement made by the Chancellor of the Exchequer the other day which I admired more than his declaration of the supreme importance to the country of the maintenance of her national credit. He fully endorsed the view which I have ventured to set forward, that among the elements and factors of the strength of this country in any international contest the power of the national credit is one of the greatest and most essential. But while I agree with all that he said on that subject, I venture very respectfully to differ from him as to the conclusions which he drew respecting the present position of affairs. He said we might joyfully look aside from the gloomy prognostications which had been made regarding the present level of Consols. I venture to think that events which have occurred since he spoke, rather justify the view of a less optimistic character which I have expressed. We have heard a great deal about the success of the Transvaal loan. While I fully admit that the Chancellor of the Exchequer used with extreme skill all the elements in the situation favourable to himself—I am the last to criticise anything he did with respect to that issue—I venture to say that a 3 per cent. loan issued under the guarantee of the British Government at 99 is not a satisfactory line upon which the English Government, or the Colonial Governments supported by the English guarantee, can raise money. A 3 per cent. loan at 99 corresponds to a 2½ per cent. issue At 83. [Mr. RITCHIE dissented as to the issue price being 99.] However, I will not argue that point, but a 3 per cent. loan at par corresponds to a 2½ per cent. issue at a little above 83. Comparing that with the level which was anticipated for the national credit at the time of the great conversion of Lord Goschen, I submit that the whole of our ideas respecting national credit have had to come down. I view it in this way. We hear a great deal with respect to the un preparedness of the country regarding military armaments for naval organisation in case of war. I say that you must also be prepared equally with regard to your national finance. You must be in such a position that if war or any unforeseen crisis comes upon you, you will be able to raise the funds necessary to the making of war rapidly and cheaply. In this issue what occurs? The level at which the stock was offered to the public was extremely low. It was subscribed for very largely, but I think to an unprecedented extent by those who did not intend to be ultimate investors. I think the City of London has never witnessed such a remarkable example of "stagging." People wrote for large lines of stock who were altogether unprepared to keep the stock which was allotted to them, and who are only waiting for the opportunity to get rid of it. In addition to that, we had the assistance of foreign capital and foreign bankers to a very large and almost dangerous extent.

I venture, therefore, to urge most strongly upon the Chancellor of the Exchequer that he should devote his energy and determination largely to the point of improving the level at which our national funds now stand. There is one way by which he can arrive at this end, and that is by a large endowment of the Sinking Fund. The Chancellor of the Exchequer has claimed that the amount which he proposes to allot to the Sinking Fund in the present year is equivalent to the amount allotted to it by Sir Stafford Northcote. I venture to think that the hon. Member for Islington was perfectly right in saying that the amount allotted to the Sinking Fund ought to boar some proportion to the total amount of the revenue and the expenditure of the country. Regarded from this point of view, the amount which the Chancellor of the Exchequer has set aside, even if we take into consideration the further sum which will come to the Sinking Fund in the course of the next few years, is certainly not an excessive nor even an adequate amount. Passing from the general consideration of the theory of the question, I would very respectfully submit to the House that it would have been better finance, although perhaps not so good electioneering, to have reduced the Income Tax by a penny less, and given the £2,500,000 which the additional penny would have produced to the Sinking Fund. I am sure the Chancellor of the Exchequer is above being guided by electioneering considerations, and I am convinced that the common sense of the people of this country is such that they will always support whatever measures may be required to maintain the credit of the country if put forward through respected and official channels. Then there is another point which has powerfully influenced the money market in its depreciation. Of late years the practice has arisen of providing for certain expenditure by means outside the annual account. In the course of the last ten years I believe a total amount of £27,000,000 has been raised from credit in order to meet what has been termed capital expenditure. The purposes for which this money has been raised are the Telegraphs Act, the Naval Works Acts, the Military Works Acts, the Land Registry New Building Act, the Pacific Cable Act, and the Uganda Railway. When this practice was first commenced it was justified on the ground that expenditure of this kind was of an exceptional and extraordinary character, and would not recur. What has happened? So far from diminishing, the sum provided by credit and not met in the annual Budget has increased every year, and the Budgets of future years are already laid under contribution to a large amount under this head. I submit that this expenditure is absolutely indistinguishable from the extraordinary Budgets which in foreign countries have wrought such harm to the finances. Whereas, however, in France the Minister of Finance always endeavoured to prove that the extraordinary expenditure which he provided for would be remunerative, here it is obvious that a large amount of the expenditure will remain unproductive. Can it be contended that we are justified in basing these demands for money in an extraordinary Budget on the ground that they are not likely to recur? It appears to me absolutely certain that in the history of a great Empire, such as ours, with its varying and widespread liabilities and responsibilities, expenditure precisely similar in character to that provided for under these capital issues will come upon us every year, and I submit that the only sound and legitimate method of meeting this expenditure is to pay for it by revenue.

Another practice which appears to be on the increase, and which is not free from danger and objection, is the habit of ear-marking certain sources of revenue and attributing them to special expenditure. The traditional system of finance in this country, and the only proper system, is to have one general account into which all the expenditure and revenue of the country goes. Any departure from that system, whatever may be the motives, and however honest the Minister who proposes it, will invariably lead in course of time to concealment from this House and the public of the real state of the finances.

MR. GIBSON BOWLES (Lynn Regis)

It does now.

*SIR EDGAR VINCENT

My hon. friend says it does now. Well, whatever may be the case actually, in every country where this system has been adopted it has led to disastrous finance, and to the removal from public scrutiny of many financial matters on which the fullest light is always required. In other respects the position of affairs to which the Chancellor of the Exchequer has succeeded does not seem to me quite satisfactory. The opinion is gaining ground, and is, I think, thoroughly justified, that Parliamentary control over expenditure at the present time is altogether superficial, and, so far as practical results are concerned, is almost non-existent. I hope the right hon. Gentleman will take up this subject both as to the amount, of expenditure and as to its control with thoroughness and with a determination to put matters on a more satisfactory basis. Of late years we have had large increases of expenditure in every Budget. I will not discuss now the question of whether or not those increases were necessary, but I would say that it is almost in the nature of a necessary consequence that extravagance has crept in with the rapid increase of the Estimates. In any private business, where large additional charges have grown up, owing to extension of business or any other cause, an extraordinary and special revision of those additional charges is made by a prudent administrator, and now, when, as I hope, we have reached the end of the expansive period of our expenditure, I appeal to the right hon. Gentleman to take the matter in hand personally, and to make a special revision with a view to cutting down all that is redundant, and all for which the country is not receiving the fullest value. Certain expenditure is not only large, but has got out of hand. Things cannot go on in the present way. Although it may be presumptuous to hope that where the late Chancellor of the Exchequer was unable, as he told us, to achieve complete success, anyone else can succeed, yet I would appeal to my right hon. friend not to be deterred by the magnitude and difficulty of the task, but to set about it vigorously and soon.

MR. POWER (Waterford, E.)

The duty of the Irish Members in regard to this Bill naturally is to give every facility to the Government to proceed with their land legislation for Ireland, but it must not be taken from the silence of Irish Members that they are indifferent to the interests involved in this Budget and in the financial condition of this country. Unfortunately, we have too great an interest in the Budget because we are asked to pay a sum which is more than Ireland should be justly called upon to pay. The two great spending Departments are the Army and the Navy. With regard to the Army expenditure, in no uncertain voice we have cried out against that expenditure and recorded our opinions and votes with regard to the objects to which that money is devoted. With regard to the Navy expenditure, none of those vast sums of money are expended in Ireland, and in this respect we have been crying in the wilderness for many years, merely to endeavour to obtain a few little launches to protect our fisheries. Nevertheless the Government gave some assistance in this respect to Scotland to protect their fisheries. With regard to the naval expenditure, we have little or no interest in it, and the colonies have very much more interest in the Navy than Ireland has. The colonies have a large trade to be protected, and, in justice, they should be called upon to pay something towards the maintenance of the Navy, which would be something in the nature of an insurance on their trade. Ireland has no trade to protect, because this country took great care to crush out Irish industries in times past. Consequently to-day we have little or no trade interests to protect in Ireland With regard to the debate that has taken place on this Bill, most people will acknowledge that this country has progressed enormously under the state of things prevailing here under the present fiscal system. This country has an ever increasing population, and no doubt the present system of trade has worked well for such a large consuming population as you have in this country. To my mind it is very doubtful whether this fiscal system has done so well in Ireland; on the contrary, I am inclined to think that it has done us great harm, and in corroboration of that view allow me to quote a few words that were used by a gentleman of high repute in this House—Mr. Childers, who was at one time Chancellor of the Exchequer and a confirmed free trader, who advocated his principles with great ability, and who certainly defended the details of his administration with conspicuous lucidity. What did Mr. Childers say with regard to Ireland in reference to the present fiscal system? He used these words— It may even perhaps be said that just as Ireland suffered in the last century from the protective and exclusive commercial policy of Great Britain, so she has been at a disadvantage in this century from the adoption of an almost unqualified free trade policy for the United Kingdom. Those were the words used by a confirmed free trader, and he acknowledged that, owing to our position, the laws which affected England affected Ireland in a different way.

The free trade policy has not worked well for Ireland, and certainly from an industrial point of view the protective duties that you put on killed our industries. Let me make another quotation from an eminent authority on this subject, and from an authority who was recently quoted by the Chief Secretary for Ireland in one of the speeches he delivered in the south of England. The words are from Lord Dufferin's speech, and he says— From Queen Elizabeth's reign until the Union various commercial confraternities of Great Britain never for a moment relaxed their relentless grip on the trade of Ireland. One by one each of our nascent industries was either strangled in its birth, or handed over, gauged and bound, to the jealous custody of its rival interest in England, until at last every fountain of wealth was hermetically sealed, and even the tradition of commercial enterprise perished through desuetude. What has been the consequence of such a system pursued with relentless pertinacity for 250 years? Debarred from every other trade and industry, the entire nation flung itself back upon the land with as fatal an impulse as when a river whose current is suddenly impeded rolls back and drowns the valley it once fertilised. Those are the words used by Lord Dufferin and quoted with approval by the Chief Secretary for Ireland in one of his recent speeches. This quotation confirms my contention that the laws, which, from an industrial and agricultural point of view serve this country, may inflict irreparable harm upon Ireland. If you look at Irish history, the protection we want industrially is not protection against the so-called foreigner, but protection against our near neighbour England, which has destroyed our industries. My principal object in rising to address a few words to the House on this Finance Bill, was to elicit an answer from the Secretary to the Treasury or the Chancellor of the Exchequer. Some weeks ago † my hon. friend the Member for the Ossory Division of Queen's County addressed this Question to the Chancellor of the Exchequer— I beg to ask the Chancellor of the Exchequer whether he will arrange that millers who hold stocks of imported grain, or products thereof, on 1st April, upon which duty has been paid by themselves or others, will be allowed a refund of that duty. The Chancellor of the Exchequer said that it was not practicable to carry out the suggestion conveyed in the question of my hon. friend. I cannot see why it is not practicable to carry out the suggestion. It is only a few nights since a discussion took place as to the retention of the officers it was necessary to employ in connection with this corn duty. I think this staff could not be better employed than in endeavouring to give a rebate or a refund to those who are duly entitled to a refund under the terms of this Finance Bill. I am well aware that there are some difficulties in so doing, and that it will require a certain amount of care and industry to do so. At the same time I maintain that it is the duty of the Chancel for of the Exchequer and the Government to see that the individual does not suffer, and the difficulty thrown on officials, after all, is not an excuse to offer in defence of the public not getting their rights in this matter. In April, 1880, Mr. Gladstone brought in a Budget Bill in which he proposed to take off the duty on malt. The proposal was not to become effective until the following October. In the last week of September of that year a staff of officers went round and examined the different malthouses, and wherever malt was stored, with the result that within a few weeks, without friction, a refund was made to everyone who was entitled to it, though the condition of things then was very much more difficult than at present. Malt was held then in a great many more places than corn is held now, and it was more difficult to assess. Nevertheless, a † See (4) Debates, cxxi. 1371. staff was employed and a proper rebate was made in every case. I wonder why such action cannot be taken in the present case. I know that the right hon. Gentleman the Chancellor of the Exchequer has gone a long way to meet the views that have been put forward by those who represent the millers of this country and Ireland, but he has left out of calculation the smaller people, and by far the poorest people, those to whom this sum would be of considerable importance. I believe that in cases where the tax does not amount to over £25, little or nothing is done for these people. I know this is a Customs duty, and that there may be some difficulty in dealing with it through the Customs officers, but with extra staff I think the work could be satisfactorily done.

We have had occasion from time to time to approach the Chancellor of the Exchequer in the various positions he formerly occupied. We have approached him when he was at the Board of Trade, the Local Government Board, and the Home Office; and I have to acknowledge that he always met the claims we ventured to put before him in a reasonable spirit, and showed a desire to meet our wishes so far as he could consistently with the duties of his position. He has been in Ireland recently, and I venture to hope that so far from that visit making him less sympathetic, it will increase his sympathies, because he, like every stranger who visits the country, must have been appalled by what he observed there. The position of the corn millers in Ireland differs very much from that of corn holders and millers in this country. Here you have large ports and you are able continually to renew your supplies, but in out-of-the-way places in Ireland you have to lay in a larger stock than people would do in this country, and consequently it is more likely that these people will have a greater amount of corn, on which duty has been paid, at the end of this month than men situated in England are likely to have. My principal object in rising was to ask the Chancellor of the Exchequer to give favourable consideration to this matter. I hope it will not be necessary for me or my friend the Member for the Ossory Division of Queen's County to put down an Amendment in the Committee stage with reference to this matter. It is a matter of little or no consequence to the Treasury, but it is of considerable consequence to the people of Ireland. I hope the hon. Gentleman the Secretary to the Treasury will communicate what I have said to the Chancellor of the Exchequer, and I certainly recommend it to the favourable consideration of the Treasury on the ground of justice.

*MAJOR EVANS GORDON (Tower Hamlets, Stepney)

We heard a remarkable statement from the late Chancellor of the Exchequer the other day—it was a somewhat belated statement as to the real reason for his resignation—that the constant protests he had made to his colleagues with regard to the extravagance of the administration had not been listened to, and he especially referred to the extravagance of the administration of the Army. The present Chancellor of the Exchequer has also hinted that economies might be effected in the Army. I am sure we shall be glad to know what steps he proposes to take in this direction. It is all very well throwing away £2,500,000 of revenue, but it is much more difficult to make economies in such matters as Army administration; and if time permitted I could point out to the right hon. Gentleman various matters to which he might give his attention in order that those most desirable reforms should be effected. We should be glad to know, if he is unable to impress his colleagues with the necessity for such steps, and if not, whether he, too, will resign, and give us his reasons for doing so. But the Chancellor of the Exchequer gave us another very remarkable hint when introducing the Budget. I refer to the question of the collection of the Income Tax. He gave us some startling information with regard to the manner in which that tax is evaded. In fact, he told us that the net which is cast about the taxpayers is full of holes, and that some of the most valuable fish escape altogether. I have a most profound disbelief in the honesty of human nature in regard to matters connected with the taxpayer. If, for instance, there were no Customhouse officers to examine baggage on arrival in this country, how many portmanteaux would come here laden with cigars and other contraband. The Income Tax, or a large portion of it, as at present collected is like a Customs duty, without any Customs officers. Leaving out of consideration those who are taxed automatically, and whose honesty is made for them by the State, there are a number who are free to make any statement they like regarding the amount of their income. It is unnecessary to enter into the details of the system. In London forms are distributed about this time of year by the local surveyor to persons who have to pay the tax. They are supposed to calculate their average profit of the last three years, and, having ascertained this, they make a return which may be honest or not. If the surveyor is satisfied, the assessment is made accordingly; if not, a case can be stated before the Income Tax Commissioners who sit as Judges between the surveyor and the taxpayer. The person appealed against makes a statement on oath with respect to the amount of his profits. It may be that he can be called upon to produce his books in order to substantiate his statement, but I am not aware of this provision, and as a matter of fact books are never called for, and the statement of the person is accepted on oath. The penalty for a mistatement is a £20 fine and three times the duty which should have been paid. It will be observed there is no compulsion whatever for a man to make any statement with regard to his income. He can imitate a certain class of cabmen, and say to the surveyor "I leave it to you." This in many cases is done. It is often extremely profitable to do so, as witness the case quoted by the Chancellor of the Exchequer, where a man was assessed on £5,000, and when subsequently assessed on £50,000 the tax was readily paid without protest.

There are all sorts of other evasions. If I buy shares at £1 and sell in a month's time at £2 there is a profit which should really be taxed and come into the net of the Chancellor of the Exchequer. I should be called upon to pay on the profit thus received, but how many thousands of transactions such as this escape taxation altogether? Then there are flotations in the City—flotations of a most questionable character, constantly brought out without prospectus—companies with registration in Johannesburg, whose shares are quoted at an enormous premium, and on which immense profits must be realised. I should like to know whether gentlemen well known in the City who conduct this class of business are likely to state what their real profits for the year have been. There is also the question of foreign bonds. It is currently believed that people invest in foreign securities and keep them abroad and escape income tax on this part of their income altogether. Then there is a class of traders, chiefly of foreign extraction, who keep no books whatever, and whose profits are consequently never known and never stated. It cannot be supposed that such people as these will give an honest return of their income. The system seems to me to be one much needing revision and careful examination. The Chancellor of the Exchequer has told us that he only needs encouragement, and points out that the whole matter should be thoroughly revised and threshed out. Such a system as we possess would not be tolerated in any other country. The inquiry in Germany is of the most rigid character. Every person in the country has to fill in a complete schedule, showing every source of income for the year. That is a perfectly fair method. If a man has had a good year, he should gladly pay income tax upon it, and if he has had a bad year he has only to state it and his income tax is reduced accordingly. I would recommend the Chancellor of the Exchequer, if he has not already done so, to study the German system, which prevents the constant fraud and evasion which goes on in this country. A man, with whose circumstances I am acquainted, in a town in Germany was recently suspected of having understated his income, and inquiry was made. It was found that he had understated it, and he was promptly fined 200,000 marks or £10,000. I think he will be more careful in future as to the return he makes. The imposition of a swingeing fine on those who misstate their incomes in this country would be to the benefit of the revenue, and it would have a stimulating effect on the honesty of people who have to make Income Tax returns. The Chancellor of the Exchequer himself estimates that if incomes were accurately stated and the tax reduced twopence in the pound, the same revenue as at present derived would be received.

MR. RITCHIE

I said that had been stated.

*MAJOR EVANS GORDON

I believe from inquiries I have made that that estimate is well within the mark, and it is a hopeful source of increased revenue, at all events, which I hope the Chancellor of the Exchequer will not neglect. I trust that before this debate concludes, other hon. Members will add some words to the humble encouragement I wish to give to the Chancellor of the Exchequer to look thoroughly into this matter.

*MR. MOON (St. Pancras, N.)

Four weeks ago it was relatively simple for an ordinary member of the Unionist Party to decide how to vote on the whole or any part of the Finance Bill. It might have seemed weak and unnecessary to remit the corn-tax, but weaker still to re-impose it, and therefore many of us abstained from attending the deputation, and still more voted against the Amendment. However, a great deal has happened since then, and even in the last few days The small contribution I shall make to this discussion will be as to the position of the colonies. The telegrams from the Prime Ministers and Governors have given point to the Resolutions which were passed at the Colonial Conference last year, and with which hon. Members are familiar. They have given point to the feeling which has been experienced in this country at the treatment Germany has meted out to Canada for her loyalty and for trying to I help the mother country. I cannot help thinking that the colonies may feel that the vote of this House on the Amendment moved by the right hon. Gentleman the Member for Sleaford, which was only supported by twenty-four, was an indication that their views are being neglected. The First Lord in his speech on Wednesday night said that hon. and right hon. Gentlemen had been occupied in conjuring up real or imaginary Budgets for the year 1905, 1906, and 1907. I venture to say that we must consider how the attitude we take up now will affect our position in the future, and I should like to claim for myself—and I think there are other hon. friends in the same position—to reserve free liberty of action, if after the discussion and inquiry promised by my right hon. friend the Chancellor of the Exchequer there seems to be ground to believe that the scheme of the Secretary for the Colonies may prove to be beneficial to the Empire.

*MR. BLACK (Banffshire)

Whether the Government is a government of fixed conviction and policy or of no settled convictions, or whether it follows the lead without light, of the Colonial Secretary, or the light without leading of the Chancellor of the Exchequer, or whether it wobbles about in the chaotic nebula of nebulous chaos offered by the Prime Minister, it has one fixed practice at all events, and that is whether in or out of office to look after the friends on which it depends for support. I refer particularly to the tithe of the population represented by the Income Tax payers. I venture to call the Chancellor of the Exchequer's attention to the extraordinary character of the remission of taxation proposed in his Budget. It is really more extraordinary and more striking in its partiality than was the imposition itself. What do we find in regard to the proportion of direct and indirect taxation remitted? We find that while the direct taxation remitted is a real remission, the indirect taxation remitted is no remission at all. What did the Chancellor of the Exchequer bring out in his statement? He brought out that from Customs and Excise he had an additional revenue in the year in which we now are, as compared with last year, of about £3,000,000, so that, in remitting the corn duty, representing about £2,000,000, he has not taken off a single penny from the duties on the food of the people and their daily requirements, but, on the contrary he has added £1,000,000 in the present Budget. I think that is a feature of the Budget which requires explanation, and which will be very difficult to explain away. The Chancellor of the Exchequer, in response to a request by the hon. Member for Poplar, issued a statement which contains some most valuable figures as to what the normal increase in the expenditure of the country has been as compared with the normal income with peace taxation in 1899–1900. It will be found on referring to the ordinary expenditure that it has increased from £110,000,000 to £129,000,000, while the ordinary revenue, apart from the extra taxation imposed for the war has remained nearly stationary, so that in 1902–3 there was a balance of ordinary expenditure to be provided for by extra taxation of £11,000,000. To that falls to be added the £3,000,000 extra expenditure on the Navy, £2,000,000 extra expenditure for education—altogether an extra expenditure for the current year of about £16,000,000 How has that been provided? It has been wholly provided by new taxation from the food and ordinary requirements of the people. Under the Chancellor of the Exchequer's own band we find that from the duties on tobacco, spirits, sugar, coal, corn and flour by means of extra taxation imposed since the beginning of the war in the year 1899–1900, he derived £12,500,000, and from Excise £2,500,000. Altogether, £15,000,000 has been derived from extra taxation imposed since the commencement of the war. To that has to be added £3,000,000 he derives from extra Customs duty during the current year, making £18,000,000. When you deduct from that amount £2,000,000 in respect of the remission of the corn tax, there remains a balance of £16,000,000 imposed ostensibly for the conduct of the war, but which apparently is to be kept a permanent charge on the people. What does it matter to anybody in this House whether 2d. or 4d. is taken off the income tax? I venture to say there are not two Members in the House who would grudge the keeping on of 2d. if it was to make the poor more comfortable. I hope that before the debate closes we shall have some explanation from the Chancellor of the Exchequer why it is that he requires from the poor and starving people, from the submerged third of the population, this immense contribution to the ordinary increase in the expenditure of the country, while he allows other quite available subjects of taxation to go free. Perhaps he will say, as he said the other day, that it is necessary to allow the poor to bear that burden in order that they may feel their responsibilities. We have heard a great deal of fly-blown phylacteries, but was there ever a more moth-eaten phylactery than that? Don't they supply the personnel of the Army and Navy? But even if it be a good argument, I say this: If you take this money out of their pockets as you do, then you should certainly return it in the shape of old-age pensions instead of holding such pensions out as a possible result of the complete recasting of our fiscal system.

Another matter which requires urgent attention is provision for the Sinking Fund. By the regrettable war the permanent debt of this country has been increased £150,000,000. What did we find the Chancellor of the Exchequer saying in 1899, when the war was beginning? He said— I hope no one will suggest that this is a case in which the expenditure for the war should be provided for by a permanent addition to the Debt of the country. To my mind no such permanent addition would be justified except, of course, in the event which I hope we shall never see in my time, that of a war with a first-class Power. That was the programme with which the Government started in 1899. Contrast that with the fulfilment the Chancellor of the Exchequer offers us in the shape of a Sinking Fund on its present scale. The Chancellor of the Exchequer in introducing this Budget said that the Sinking Fund in 1899–1900 was £5,800,000, or .92 per cent. of the. Debt. On the 31st March last the Debt was £770,000,000, and the Sinking Fund £6,600,000, or .85 per cent. of the Debt. In place of having an additional percentage we have a less percentage by way of Sinking Fund, which is a very extraordinary contrast. I hope the Chancellor of the Exchequer will offer a sufficient explanation of it, if he can. He may say, "What about the repayment by the Transvaal?" That repayment is a sham and a delusion, if the necessary expenditure for holding the Transvaal is taken into consideration. The Minister for War told us that the maintenance of troops in the Transvaal cost £4,000,000 a year, which will absorb all the surplus revenue from the Transvaal without imposing a charge for repayment to this country of war expenditure, and will cost us £2,500,000 more, so that the raising of £30,000,000 on the revenues of the Transvaal implies that we are really appropriating for the service of that debt monies which would be more profitably employed in relieving this country of some part of the expense of maintaining the Army in the Transvaal. These are weighty facts which the country ought to consider. This war has not added to our resources. What do the money markets of the world say? "We will only give you ninety for what we gave you 114 a few years ago." Suppose we were embarked on a great European war—which heaven forbid! but which might happen any day—we should be in a very bad way. We are doing nothing to conserve our resources. We are in a period of great prosperity, and surely at such a period the Chancellor of the Exchequer ought to make a very largely increased provision for the Sinking Fund, instead of reducing it below what it was in 1900. We have added nothing to our assets, but much to our liabilities; and consequently we are leaving to posterity a burden which we should not call upon posterity to bear.

*MR. GIBSON BOWLES

The subject of the Finance Bill is always of great importance, but it is more important than ever on this occasion, because this year there has been no general discussion whatever on the financial position of the country. The Chancellor of the Exchequer in introducing this Budget took advantage of the simplicity of the House by barring that out, but the right hon. Gentleman consoled us by promising full opportunity for discussion on the Second Reading of the Finance Bill. This opportunity has now arrived. I regret the absence of my right hon. friend the Member for West Monmouth, who would have brought to the consideration of this Budget the great knowledge and experience and financial skill which he has always shown in discussing the financial position of the country. To regret the apparent indifference of His Majesty's Government would be, perhaps, uncourteous, seeing that there are two representatives of the Government on the Treasury Bench. To the absence of other Members of His Majesty's Government we are becoming quite accustomed. I will only express the hope that the First Lord of the Treasury, the First Lord of the Department especially concerned with finance, will put in an appearance towards the close of the debate. We have now got rid of the Amendment in regard to the corn duty, and we are now in presence of the Bill which embodies the whole finance of the year, and which raises, in its form and in itself, the whole fiscal system of the country as it exists. Every tax imposed, whether by this Bill or by previous Acts, is now under review. I propose, however, to keep strictly within the limits of the Bill, whose Second Reading we are now discussing. There are three new features in this Bill, and three only. One concerns the Sinking Fund, another is that which deals with Income Tax, which I shall not touch upon, and the third the clause which deals with the duty on corn. Let me say one word on that in passing. This clause discloses some want of continuity of purpose in His Majesty's Government, and some vacillation. Last year they sacrificed free trade to registration — that is the name now given to it. This year they sacrifice registration to free trade. Next year they will sacrifice free trade to preferential duties; and the following year they will sacrifice preferential duties to frank protection. [Mr. RITCHIE: "A regular rake's progress."] I adopt that phrase. It is an exact description. That is the course we are promised. I do not propose to dwell upon that, but to say simply that this is a very serious position. At the present moment the Tory Party is as much committed to free trade as sixty years ago it was committed to protection; and if there is to be a great revolutionary change in the fiscal policy of the country, we must have proper notice of it, and be properly asked to sanction it. For my own part, and for not a few on this side as well, I must say that, whether we are for free trade or not, we are for free food; and if the Colonial Secretary proposes in this House, or elsewhere, to put a high tax on the food of the United Kingdom, we should not be long behind him; we of the Free Food Tory Party who believe in cheap food for the people shall enter upon the discussion to which he and the Prime Minister have invited us.

The expenditure for which this Bill provides is, I venture to say, not only vast but unwarrantable; it is as wasteful as it is stupendous. It is growing, and so far as I can gather from the declaration of the Government, it is likely still further to grow. The right hon. Gentleman the Member for West Bristol has told us that his representations to his late colleagues in favour of economy were received with indifference. The right hon. Gentleman also stated, as a general principle, that no Chancellor of the Exchequer could secure the approval of his colleagues for economy unless he had the warm and constant support of the Prime Minister, and he added that had he found more sympathy with his desire for economy he might not have addressed the House from the Bench behind me. It is impossible to avoid the conclusion that my right hon. friend did not get the support in this matter of the Prime Minister. That is confirmed by the Prime Minister's statement on his own behalf. He said we must consider whether we should not raise revenue for other purposes than those of national expenditure. In addition to that the Colonial Secretary has suggested that we may adopt a policy, on which I do not now enter, by which we shall raise a very large revenue from taxes on the food of the people, revenue which we do not want for the normal expenditure of the country, and which will consequently leave a large sum at our disposal. Here you have the First Lord of the Treasury and the Colonial Secretary adumbrating a large increase of revenue, not required for the expenses of the year, but for other purposes. When that happens, the Chancellor of the Exchequer will be in the position of having more revenue than he can possibly use; he will be in the position of the man who found a biscuit, and then went about trying to buy a dog to give it to. However that may be, this prospect, held forth to us by two of the principal Ministers of the Cabinet, certainly promises no diminution, but rather an increase of our expenditure. I appeal to the Chancellor of the Exchequer. That right hon. Gentleman has promised to do all he can to reduce expenditure; his colleagues have promised to do all they can to increase revenue. But when the Chancellor of the Exchequer gets this increased revenue, he will soon find means and ways of increased expenditure. We cannot discuss the scheme so adumbrated now. We know that there are four essential points, which I do not even name, that to my mind render that scheme altogether impracticable. The Prime Minister says that the question is one which requires to be discussed, and investigated. The proper place to discuss, to investigate, to inform the mind of the nation, is this House. If the right hon. Gentleman's desire for information is honest—as I have no doubt it is—he will certainly afford the House an opportunity of discussing the matter in such a way as will not involve a vote of confidence in the Government, but will add to the information at our disposal. In any case, it will be discussed in the country, and those Tories who believe in free food will be on the platform conducting the discussion which the Prime Minister desires and invites. There is no want of loyalty in acceding to the request of our chief; we have confidence in him, we have no intention of deserting him, and we earnestly hope that he will not desert us.

The present expenditure is, as I have said, vast, unwarrantable, and most wasteful. Let me ask the House to realise what the amount is, for I am certain that very few Members have any conception, and I sometimes doubt whether the Chancellor of the Exchequer has any conception, of the real amount. The Chancellor of the Exchequer has stated that the expenditure for the current year is £143,900,000, and for last year £185,400,000. That is a statement which the Chancellor of the Exchequer put forth to the House when presenting his Budget But that statement is absolutely untrue and misleading to the extent of merely £30,000,000. The Chancellor of the Exchequer says that the expenditure last year was £185,400,000, but to this you have got to add the amount levied and paid over to the local taxation account—£9,700,000—which does not appear on either side of the account. You have also got to add appropriations-in-aid; that is to say, the sums received by various Departments (including £1,500,000 from India), and retained by these Departments and expended for their own needs, instead of being paid back into the Exchequer as they should be. These amount to £13,300,000, which also appears on neither side of the account. Let me dwell for a moment on the nature of these appropriations-in-aid and the control which the House has over them. They do not form any part of any of the sums voted by the Committee of Supply. It is true that they appear in a Memorandum, and that they are to be deducted from the gross amount to be voted in Committee of Supply. But they are not voted nor has the Committee any control over them. The result is that the whole of this £13,300,000 absolutely escapes the control of the House. It has been ruled by the Chairman of Committees that you cannot increase or decrease it in any way. The Chair man of Committees is quite correct in that ruling, for these appropriations in-aid are charged by the Treasury on the nation under various Finance Acts giving the Treasury the power to apply these appropriations in aid, and the result is that they entirely escape the control of the House, in defiance of the Exchequer and Audit Act of 1866. That is not all. There was in addition a sum of £6,800,000 last year of what the right hon. Gentleman the Chancellor of the Exchequer is pleased to call capital expenditure. Nobody knows better than the right hon. Gentleman that there is no such thing as capital expenditure possible in this country.

There is no capital account; it is a way of throwing dust over the expedient devised for saddling succeeding years with the proper expenses of the current year. The system is this. You want to build some barracks, or works at Gibralter—good, bad, or indifferent—you want to make a Pacific Cable, or run a railway in Uganda, and you know perfectly well that the House of Commons will not give you the money; but yon bring in a Bill and borrow large sums of money, mainly from the Savings Banks, and you then charge on each year's revenue interest and a Sinking Fund repayment of capital calculated at a certain number of years. And when you have passed the Loan Bill, the country is saddled with the amount until it has been paid off in the manner I have described. That is what the right hon. Gentleman calls "Capital Expenditure." It is expenditure in diminution of loans you have made for certain purposes. Now, therefore, to the £9,700,000 intercepted and paid to local taxation account and the £13,300,000 intercepted and used as appropriations in-aid must be added this £6,800,000 of so-called capital expenditure, and consequently you have close on £30,000,000 as the total amount of expenditure which does not appear in the accounts of the year. In view of these facts it is correct to say that the expenditure last year was not £185,400,000, but £215,000,000, and, assuming that the same conditions will prevail, and they will not be very different this year, the expenditure will not be £143,900,000, but close upon £174,000,000. It seems to me that this is a very serious matter. The account I have given is a true account of the whole expenditure, and that true account is not to be found in any public statement of the accounts of the country. You cannot find it in the Finance Accounts or the Board of Trade Abstract, or in that admirable Return secured by the right hon. Member for Wolverhampton. I say it is monstrous to go on in this way with this system deceiving the people.

But that is not all. There are the Supplementary Estimates which may add much more even to the £174,000,000 already representing the expenditure of the current year. We do not know what amount these will be; we never do until towards the close of the financial year. Now, this Government has undoubtedly been a sinner beyond all Governments in this respect, so much a sinner that I have wondered how the Tower of Siloam has not fallen upon them. They have every year come to this House for Supplementary Estimates. Every year they have confessed that their Budget Estimates were incorrect, and have asked the House to give them from £2,000,000 to £7,000,000 in addition. I have excluded the Supplementary Estimates for the war—for I admit that when there is war Supplementary Votes cannot be avoided. If there is war you can have no financial control; you throw out your money like water, and need not expect any account of it. But, without the war, the Supplementary Estimates for last year amounted to £9,000,000, and you may have many other millions added to this year's total before the end of the financial year. Let the House remember that Supplementary Estimates are usually resorted to by the Chancellor of the Exchequer for the purpose of raiding a surplus which he sees accruing towards the end of the year. What the Chancellor of the Exchequer does is this. I am talking, of course, not of my right hon. friend, but of the abstract Chancellor of the Exchequer. The abstract Chancellor of the Exchequer, when he finds himself in possession of £3,000,000 or £4,000,000 beyond what is required for his expenditure, sends round to the Departments and says—"Now is your chance; bring in your Supplementary Estimates, and spend this money; otherwise the awful thing will happen: it will go to the reduction of the National Debt, and that is a thing which no Chancellor of the Exchequer ever contemplates." The result is that the Departments think of all the things which they want—all the things that are necessary, and all the things which they do not want and are not necessary; and they draw up Supplementary Estimates which absorb all the money that ought to go and otherwise would go to the extinction of debt. I do not think myself that that is likely to happen this year, because my belief is that the Estimates for the year are very generous.

There is one other point which I wish to bring before the House. I do earnestly entreat the attention of the House to the present condition of the control of the House itself over the expenditure at large. The control of the House has almost disappeared. The securities for the control of the expenditure and for audit have been gnawed away by successive Ministers in the various Departments, and they are now absolutely illusory; they, in fact, scarcely exist. The Comptroller and Auditor-General seems to regard himself as an instrument and servant of the Treasury rather than the guardian of the public purse. The Committee of Public Accounts itself is placed in such a position that its reports and decisions do not get the attention to which they are entitled. I do not know whether the right hon. Gentleman the Chancellor of the Exchequer has studied the reports of that excellent Committee on National Expenditure moved for by the hon. Member for Oldham. If he were to study it, he would see the defects of the present system very clearly. This one thing I want to press upon the right hon. Gentleman and the House; If the Public Accounts Committee is to be of any utility whatever, it should be no longer treated as it now is. The Report of the Public Accounts Committee is laid on the Table, and no one reads it except perhaps the right hon. Baronet the Member for the Forest of Dean, who reads everything. Very few other Members look at it at all. The only remedy for that is that a day should be fixed for the reception and discussion of the Report. The Public Accounts Committee is one of the most important bodies in this country; and my belief is that when the Chancellor of the Exchequer looks into it, he will share my conviction that the Committee is deprived of much of its usefulness by the absence of an absolutely inevitable opportunity for the discussion of its Report.

There are other matters which also call for special attention. One is the great abuse by Ministers of grants-in-aid. Grants-in-aid are grants expended by persons other than public officers, that is, by the officers of the Treasury and the various other Departments. Grants-in-aid are made to all kinds of people, from a Crown colony to the British Museum. It is true that there are conveniences attached to making grants-in-aid, if they are only kept within proper bounds. But grants-in-aid have now reached such an enormous extent that they certainly require curbing. Would this House believe that these grants, made as a rule without any condition as to the return of any surplus, last year amounted to no less a sum than £12,600,000. That is a monstrous abuse They ought not to be one-tenth of that sum; certainly not more than one-tenth. It is proper to make grants-in-aid to the National Gallery or to scientific bodies when you wish to encourage them to perform certain work, and that the grant should be left out and out in their hands to be expended in one year or more. That is a very defensible system so long as the total of these grants is small. But not when grants-in-aid have grown to this enormous sum, and when they are extended to expenditure in the Crown colonies, they ought to be treated in the same way as all other expenditure. Then again, the form of the Estimates cries aloud for revision. At present we lose all control whatever over the large appropriations-in-aid that I have mentioned. That is not inevitable. It is perfectly possible to so frame the Estimates that the House shall retain its control over appropriations-in-aid. At present there is no control over them except in connection with the Appropriation Act. Why should not the right hon. Gentleman consult the Public Accounts Committee? It has a claim to be consulted. It is the proper body to be consulted as regards the best form of the Estimates. I earnestly trust the right hon. Gentleman will submit to the Public Accounts Committee, or some other body, or, at any rate, will consider himself how the Estimates can be recast in accordance with these suggestions, which correspond with those made years ago by officials of this House. I could make my right hon. friend a suggestion or two myself, if he cares to have them; but the form of the Estimates should be revised in order that the House should gain control over these appropriations-in-aid.

One last word as to the Sinking Fund. It is true, as the hon. Member for Exeter said, that the Chancellor of the Exchequer can, to a large extent, control the credit of this country, that he can maintain it or depress it by the use he makes of the Sinking Fund. Undoubtedly, when the Sinking Fund is maintained at a high and proper level, the credit of this country is bound to go on increasing. The Chancellor of the Exchequer may issue a loan when he has a large Sinking Fund on such favourable terms as will more than compensate him for any trouble he may be put to to maintain the Fund, or any small sacrifice he may make to keep it up to the proper level. All he gives to the Sinking Fund he will get back again in overflowing measure. Take the instance of the Transvaal loan. In my opinion, the conditions under which the Chancellor of the Exchequer issued that loan were absolutely proper. A loan should be issued at par, and what we have to play with is not the price of issue but the interest. The right hon. Gentleman did issue the Transvaal loan at par, but I would point out to the Chancellor of the Exchequer that whereas, according to the terms of the conversion scheme to which we are pledged, we are assumed to be a two and a half per cent. country, as a matter of fact we are practically a two and three quarter per cent. country; and the Transvaal loan shows that we are even nearer a three per cent. country than a two and three-quarter per cent. country. I say further that if the Chancellor of the Exchequer will persevere in the maintenance of a proper Sinking Fund and allow it to accumulate, he will soon reduce this country from a two and three-quarter or three per cent. country, to a two and a half per cent. country. It all depends upon the Sinking Fund. It is not only your war chest, it is also the great buttress of your credit; and it is on that ground that I attach so great importance to it. Let us see what the right hon. Gentleman has done with regard to the Sinking Fund. I am not going to make any great com plaint about his action. For special reasons the right hon. Gentleman just now is entitled to my special gratitude and support; and, therefore, I am not going to say anything that will give him trouble. The Sinking Fund as proposed for the forthcoming year is not adequate to the enormous increase in our liabilities. Let the House remember that our total liabilities are nearly £800,000,000—£798,000,000. In addition to that, we are shortly to be called upon to find another £100,000,000 for the purchase of Irish land, and a sum of £12,000,000 to induce the acceptance of the £100,000,000 Consequently, our liabilities are increasing at such a rate as to demand an increase of the Sinking Fund.

Do not let the right hon. Gentleman tell me what he is going to do next year. I am not going to have that. We deal with our finance year by year, and neither my right hon. friend nor I can say what the necessities of next year may be or who will be Chancellor of the Exchequer. We claim to deal with our finance year by year, and I must say that this year the right hon. Gentleman has not fulfilled all the expectations I formed of him with regard to his action in connection with the Sinking Fund. In 1895–6, the first year this Government was responsible, the funded and unfunded debt and the terminable annuities amounted to £648,000,000, while the total liability of the State was £652,000,000. What provision was made by the then Chancellor of the Exchequer for the following year. He provided £1,400,000 for the New Sinking Fund. Here let me make a distinction. There are two Sinking Funds; but as to the old Sinking Fund I really pay very little attention to it as an element for reducing the Debt, because I never knew a Chancellor of the Exchequer, when he could, who ever allowed a farthing of any overplus of revenue over expenditure to go to that destination. Therefore, I attach no importance to the old Sinking Fund, but I do attach importance to the New Sinking Fund. At this moment the aggregate liability of the State is £798,000,000, as against £652,000,000 in 1895–6, and the right hon. Gentleman only proposes to apply to the New Sinking Fund £1,554,000. That is really not sufficient. I am well aware that there are other provisions for terminable annuities, but I decline to take them into account. They were provided by the right hon. Gentleman's predecessors, and he must pay them oft' whether he likes it or not. I am dealing only with the region in which the right hon. Gentleman's own free will can act, and that is the region of the New Sinking Fund for this year. If I can show him that he has not provided sufficient for the New Sinking Fund it is no defence for him, and no consolation for me, to say that Mr. Gladstone or someone else years ago provided for these terminable annuities which he must pay. That is not to his merit or demerit. I maintain that the New Sinking Fund is not so much as it should be. But I recognise the right hon. Gentleman's position. I also recognise the value of his declaration that he means to stand for economy, and I am not going to press him as regards the Sinking Fund or anything else just now. The right hon. Gentleman has ranged himself on the side, not of those who are going to levy revenue for purposes other than expenditure, not of those who are going to get vast sums out of the food of the people. He has ranged himself on the side of those who work for economy, and I can assure him that there are many men on this side of the House—staunch Tories—who will stand by him in the cause of economy against whoever may oppose him.

MR. SYDNEY BUXTON (Tower Hamlets, Poplar)

Under other circumstances I should have felt compelled to give this Budget my strongest opposition, because, apart from the abolition of the corn duty, it seems to me to be objectionable in the extreme. But under existing conditions I shall certainly not oppose the Second Reading of the Bill, for I feel it to be my duty to give my support to the right hon. Gentleman and what was called by the hon. Gentleman who has just sat down, the free trade Tory Party. It looks as it some Jonah is to be thrown over by the Government to allay the storm, and I do not wish it should be the right hon. Gentleman, but some other. Apart from its merits the debate has been of considerable value, for it has turned largely on the question of expenditure. I sometimes think that economy is a lost art, but the very powerful speech of the hon. Member for West Bristol the other day, and the speech of the hon. Member for Exeter and the speech to which we have just listened show there is a strong feeling, not confined to one side of the House, to support the Chancellor of the Exchequer in carrying out the policy, stated the other day, of making, a considerable reduction in the national expenditure. I imagine in regard to that he will receive much greater support than he might have anticipated when he first introduced this Budget. The hon. Member opposite has made a great point with regard to the constitution of the Budget and of the necessity of seeing from time to time how we stand; the hon. Member's suggestion that the House should have the full control over national expenditure, and his suggestion with regard to the recommendations of the Committee of Public Accounts deserve very serious consideration. The Public Accounts Committee was originally created by Mr. Gladstone with the object of checking the expenditure of the country and bringing matters to the attention of the House which deserved its consideration. It has ceased to perform that function. The accounts now go to the Committee, which then make certain recommendations to the Departments, and the matter never comes before the House for review at all. I am not one of those who think that the control of expenditure should be taken out of the Departments and placed in the hands of this House, because we should then do away with all departmental responsibility. It has not answered abroad and will not here, but there is no doubt that the question of expenditure is a very serious one for the representatives of this country.

We have been told for the last year or two that the taxation was put on for the purposes of the war, but that is not so. The taxation wag put on to meet our increasing expenditure year by year. If the expenditure of the country had not grown in the way it has the ordinary increase of revenue would have been sufficient to pay all the cost of the war, but the expenditure has grown to; such an enormous extent that it has swallowed up any surplus there might have been, and we have had to pay the tax of the war as well. Since 1895 the expenditure has increased by no less than £42,000,000 a year, and since the same period the revenue has increased by no less than £22,000,000 a year. I hope, therefore, the right hon. Gentleman who has raised his voice in favour of economy will find he is now able to start afresh and overhaul our expenditure in different directions and see what real economy he can bring forth. We should not, now that the war is ended, hesitate to reduce our debt as quickly as we possibly can, and in that regard I entirely endorse what has fallen from various speakers in deeply regretting that the Chancellor of the Exchequer has not seen his way to add a larger amount for the reduction of debt than is in the Budget which he presented. We had some reason to think he would do so, because his predecessor on two occasions stated positively that he in tended when possible to increase the Sinking Fund and to start a new Sinking Fund to meet the war expenditure. He evidently did not mean a new Sinking Fund, because the Chancellor of the Exchequer has drawn it all up in one fixed charge for the reduction of debt. The fixed charge for the reduction of debt, even if no account was taken of the expenditure for the war, if it was in proportion to that of 1899, ought not to be £27,000,000 but £29,000,000. It is essential for the trade of this country that our debt should be reduced as speedily as possible. The war has been a great object lesson to us in the way of getting into debt. We have had prophecies from various Chancellors of the Exchequer every time they have reduced the Sinking Fund that within a limited number of years the Debt would be paid off. The right hon. Gentleman gave us his prophecy in that direction but he rather went back from it afterwards. We have now a debt larger than we have had for the last thirty-five years, and I think under the circumstances the proposals of the right hon. Gentleman are very inadequate. There is another question I should like to refer to, and that is the proportion between direct and indirect taxation. In my opinion the right hon. Gentleman has remitted too large an amount of indirect and too large an amount of direct taxation, and I should just like to say that in my opinion the right hon. Gentleman will find it a very difficult matter—I know his estimates of the revenue are not excessive, and that his estimated expenditure is not under the mark—if at the end of the year he finds that he has underestimated the expenditure and overestimated the revenue, and that there is a deficit instead of a surplus, not to reduce the amount now allotted for the reduction of debt. I should have been glad therefore if the right hon. Gentleman had not remitted so much taxation this year, but had allowed a larger amount to have gone to the reduction of the Debt.

MR. RITCHIE

The discussion of to-day has been a very interesting one, and I do not complain of any criticism of the matters referred to in the Bill. There have been a good many subjects discussed, and of course the House will understand that it is hardly possible that I should go in great detail into the points that have been raised. Opportunities will arise in the further stages of the Bill for the discussion of many of the special subjects referred to, when they can be dealt with perhaps better than on this occasion. The hon. Member who began the discussion to-day devoted a large portion of his speech to an exceedingly important question—the question of taxation on coal. His arguments require to be answered, but perhaps he will consider that I might be taking too much of the time of the House if I were to go into the statistical questions and details involved to-day.

MR. JOSEPH WALTON

May I say that I propose to move to add a clause to the finance Bill on this question? Perhaps that would be a fitting opportunity for the discussion?

MR. RITCHIE

I felt sure that the hon. Member would have some Amendment on the Committee stage which would raise the whole question and enable it to be amply and properly discussed. Many of the points require elucidation and discussion, and I certainly shall not shrink from discussing any one of them on the appropriate occasion which will be afforded to us by the Motion he may put upon the Paper. And so with regard to many other points. The hon. Member for Stepney spoke about Income Tax evasion. Perhaps he was not aware of the fact that I have already undertaken to ask the House of Commons to appoint a Committee to investigate that extremely important subject; and I am glad to think that we shall probably be able to avail ourselves of the services of a very distinguished Member of this House as Chairman of the Committee, and that we shall secure a very thorough examination into what I honestly believe is a practice of evasion which largely tends to diminish the revenue we ought to derive from the income tax. It is very unjust to those who make honest returns, and who pay their income tax honestly, that other people should be allowed in one way or another to avoid their full payment. I hope that no considerable delay will ensue before I am able to put on the Paper of the House the proposed reference, and also the proposed members of the Committee. My hon. friend spoke about the way in which the existing law allowed taxation to be avoided in the issue of foreign bonds, and in the registration of companies. These matters require looking into, and I can assure him that I propose that they should be looked into.

My hon. friend the Member for King's Lynn referred to one or two important matters which he has brought to the attention of the House on more than one occasion, and I think the hon Gentleman who has just sat down also referred to one of the points raised by my hon. friend—namely, the question of local taxation not being included in the statement of national income and expenditure. The House will readily imagine that I have had a good many things to look into since I came into office, and I have not had sufficient time to investigate this very important subject; but so far as I have looked into the question, I think there is a good deal to be said from the point of view taken by my hon. friend and also by the hon. Gentleman opposite. I do not mean to say that I think there is anything seriously wrong—that there is anything in the state of the accounts laid before the House which would make it in the least difficult for any one who desired to get at the total amount to find it for himself. It is al fully stated in one form or another in our accounts, and although it is not done in the form which the right hon. Gentleman the Member for Wolverhampton would like, yet it is readily available to anyone who desires to investigate the subject. I myself, along with my right hon. friend who was then the Chancellor of the Exchequer, have had some responsibility in this matter, because it was part of the Local Government Act of 1888, for which I was mainly responsible; and although I thought at the time that it was a very convenient way of dealing with this money to open a separate account for it, and pay moneys due to that account into the account direct, yet I am quite willing to acknowledge that I think it might perhaps be well if an alteration were made in the direction desired by the hon. Gentlemen who have spoken. It would, of course, require legislation; and there is also this difficulty in connection with it, which I may as well state now—namely, that, as the House knows, the local authorities are entitled to a certain proportion of certain taxes which have been raised and which are collected by the officers of the Inland Revenue. I see a difficulty about continuing that proportion if we are to do as my hon. friend desires. It almost looks as if it would require to be made a fixed sum, but I am not at all sure that local authorities would care to consent to a change of that kind. In one way it might give them more revenue, but in another way it would fake revenue from them. If the gross revenue from these taxes were to go below its present point, of course it would be an advantage to the local authorities; but if it were to go above that point it would be a disadvantage to them, and they would consider that they were losing a certain portion of the revenue appropriated to them by Act of Parliament. I do not say that is an insuperable difficulty. I myself could suggest one or two ways in which the change might perhaps be effected. I hope the House will be satisfied from the remarks I have made that I think something can be done, and, at any rate, I will undertake to investigate the subject. With regard to appropriations-in-aid, that matter has been investigated before, and the balance of opinion, so far as I can see, appears to have been in favour of the existing state of things.

MR. GIBSON BOWLES

That might be so long as the appropriations were small, but not since they have become so enormous.

MR. RITCHIE

So far as investigation has been made it has been in favour of the present system. When my hon. friend says that the control of the House of Commons is not as adequate as it ought to be, I am afraid I do not agree with him. As far as my experience goes, and I have been in the House a good many years now, I have never found that there is any difficulty at all in the exercise of House of Commons control in connection with these appropriations-in-aid. So far as capital expenditure is concerned, I understand from my hon. friend that the Committee which is now sitting is likely to make some recommendations. I am told their Report is in draft and will soon be presented, and I can assure my hon. friend I will carefully examine both Report and evidence, and I have no doubt that some very valuable recommendations will be made which shall receive my full consideration. References have also been made to Supplementary Estimates. I have only had one year at the Exchequer, but, as my hon. friend can imagine, that has not been altogether a favourable one to his suggestion. I do not think he is quite correct in describing the manner in which the Treasury go round to the public Departments towards the end of the year in order to beseech them to see whether they cannot buy something or other which will necessitate Supplementary Estimates. The expenditure which the hon. Member refers to is really expenditure which would appear in a capital account if we had one. It is incurred, after all, on matters which are really appropriate to a capital account, and therefore it is called capital expenditure. While I say that, my hon. friend must not imagine that I regard the Bills which come in for naval and military expenditure and other purposes with anything like satisfaction. I think we ought to do all we can to get something like finality in matters of that kind, something approaching to finality, and to that end we ought to strive. It is said that the House has very little control; but as a matter of fact the sum required for interest and repayment appears on the Estimates every year, and thus the House does have control over this expenditure. In the first place it has to consent to the Bill, and then year by year it has full cognisance of the matter in consequence of the sum put on the Estimates for the instalments of interest and principal.

But undoubtedly the most important point of this discussion is that of national expenditure. I have had many recommendations to bring my own personal influence to bear so as to secure a reduction, but that is not by any means an easy task. The late Chancellor of the Exchequer stated that all his influence in the Cabinet was in the direction of economy, and I cannot understand any Chancellor of the Exchequer who does not bring all the influence he can to bear on his colleagues and preach to them the doctrine of economy. I have heard it stated—I do not know with what truth—that Mr. Gladstone once said that every Chancellor of the Exchequer when he attended a Cabinet meeting should always have his resignation in his pocket. I do not go quite so far as that; but I do say that any Chancellor of the Exchequer who does not do his utmost to keep economical expenditure and administration to the front is not worth his salt. I shall therefore endeavour to exercise such influence as I can to keep down expenditure. But the House will understand that this can only be done within certain limits. The House of Commons itself is not by any means an economical body, nor do I think the community itself is economical. I do not think expenditure is unpopular; it is very unpopular when we have to collect the taxes, and it is unpopular in the House of Commons when we discuss the Estimates. But it is not unpopular in the House on other occasions when we have to discuss abstract Resolutions pressing on the Government to increase expenditure here and there. I agree that the normal expenditure has increased by leaps and bounds and that a large portion of the additional taxation has been levied, not for war expenditure, but for ordinary normal expenditure. The normal growth of the revenue has not been anything like sufficient to meet the great growth in the normal expenditure of the country. I do not shut my eyes to the fact and I agree that it is very regrettable; but when we come to examine the heads under which this expenditure has been incurred it is much more difficult to say how the increase should be avoided. The hon. Member for Dundee asked as to the increase in the Navy and what was our naval standard. The expenditure of other countries has greatly increased; and, though I hope we shall always be on terms of close friendship with them, I must point to the growth of the navies of Germany and the United States. We cannot ignore these facts, for the existence of this country depends on its Navy. We cannot afford to fall below that standard which is necessary to secure our power at sea, not only on account of the safety of the Empire, but for the food of the people, I only wish that foreign countries would enter into a sort of league with us to keep down the enormous expenditure which is being incurred in all these naval preparations. I can assure the House that nothing would give us greater satisfaction than to reduce our naval expenditure if we could do so in company with other countries. But until that can be done I am afraid we cannot look for any decrease in the expenditure of the present time. The normal expenditure of the Army has also been greatly increased; but now when the war is over we hope that we may be able somewhat to reduce the money spent on the Army. But here, again, that cannot be done by a stroke of the pen. Any reduction in the Army must be a reduction which must be more or less gradual.

Something has been said as to the contribution made towards our expenditure by the colonies. I am glad that something at any rate is being contributed. I agree, however, that, having regard to the fact that a considerable proportion of our expenditure is incurred in order to protect our colonies, we ought to have larger contributions from them than we have. I regret very much indeed that Canada does not contribute anything at all to the defence of the Empire, and I doubt whether any part of it derives more benefit than Canada from the expenditure we have to incur in connection with our Army and Navy. I think that the amount of the South African contribution which has been promised is by no means inadequate, having regard to the circumstances of South Africa. The last thing we ought to attempt to do is to cripple South Africa by trying to obtain larger sums than it can possibly contribute. I am in hope, however, that as things settle down more we may get something additional, but to attempt to extract more than the country can afford would be disadvantageous to us in the long run. It is to the development of South Africa we must look for the ultimate benefit.

MR. MARKHAM (Nottinghamshire, Mansfield)

Is not the loan of £30,000,000 a final settlement?

MR. RITCHIE

Yes, as far as the Transvaal is concerned; but it is possible we may get something more from other quarters. It has been suggested that I did not exercise sufficient care in the preparation of these Estimates, and that I have overestimated the amount of revenue that we are likely to obtain. As to that, I can only say that I acted on the advice of those gentlemen whose forecasts almost invariably have proved correct. They may have been too sanguine, but it would not have been right for me to say that they must reduce their Estimates after they had so carefully prepared them. I did not attempt to increase them or to reduce them; but I impressed on my advisers the desirability of making accurate estimates as far as they could. With regard to the National Debt, I entirely agree with everything said, especially by my hon. friends the Members for Exeter and Islington, both of whom have large experience in financial matters, and whose opinions are entitled to very great weight. I have had some experience in matters of that kind; and I entirely concur in the view that we ought to be extremely careful, for the sake of the financial position of the country, to do all that we can to keep up an efficient Sinking Fund. I do not want to go into the details of that Sinking Fund now; the speeches made today have only been a repetition of remarks which have been made before, and to which I have previously had an opportunity of replying. I shall no doubt have another opportunity of replying to them, and I hope that at the proper time I shall be able to prove conclusively that we have done well in regard to this matter; and that while, as we stand to-day, the position is not at all unsatisfactory, in a year or two we shall have a Sinking Fund proportionately very much larger than ever before. When it is stated that we have not appropriated as much for the payment of debt as Sir Stafford Northcote did, I would remind the House that the present proportion of Sinking Fund to debt is infinitely greater than it was in the time of Sir Stafford Northcote. At that time the proportion was .53 per cent. It is now .85 per cent. of the total debt, and in four or five years it will be 1.25 per cent. Thus it will be seen that we have not done badly in that matter as compared with the time to which hon. Members have referred. As to the question of direct and indirect taxation, I will, as the time is somewhat short, reserve my remarks until we get into Committee. I do not understand that there is any desire to oppose the Second Reading of the Bill. It is, on the whole and in its main principles, a Budget which is satisfactory, I think, to the House; and I trust that the House may be saved a division, and that we shall vote the Budget Bill unanimously.

*SIR HENRY FOWLER (Wolverhampton, E.)

I only want to detain the House with two or three observations in reply to what has fallen from the Chancellor of the Exchequer. I think I may say that so far as this side of the House is concerned we are satisfied with the tone of the right hon. Gentleman's remarks on the very grave questions arising on this Budget. The question of national expenditure is, perhaps, the gravest that is raised by this Budget. Referring to Mr. Gladstone in that connection, the right hon. Gentleman had said that Mr. Gladstone's dictum was that every Chancellor of the Exchequer should have his resignation in his pocket. I do not think that Mr. Gladstone meant that the resignation was always to be taken out of his pocket, but only that it was to be a weapon of which the Cabinet was always aware, and which might be called into play at any time. But there was one peculiarity of Mr. Gladstone's Cabinets that whenever the Chancellor of the Exchequer showed himself on the side of economy, and proposed in any way a reduction of expenditure, he had no more powerful supporter in the Cabinet than Mr. Gladstone himself. Finding fault as I do with a great deal of the expenditure that we have to submit to at the present time, I insist quite as strongly as does the right hon. Gentleman on the supreme necessity of keeping up our naval expenditure to the proper point in order to secure the supremacy of this country, whatever circumstances may arise. The duty of the House of Commons is to see that it gets money's worth for its money, and the duty of the responsible advisers of the Crown is to state what, in their judgment, is necessary for the proper maintenance of the Navy. On the Army I will only say that I hope efforts will be made to reduce an expenditure, which there is a general opinion has reached a standard beyond what the necessities of the country require. It is believed that the money voted for the Army is neither judiciously nor economically expended.

With regard to the question of the local taxation account—a matter in which I have taken much interest during the last few years—I think the Chancellor of the Exchequer will find that the difficulties which he advanced are entirely on paper, and have no reality whatever. There is no necessity for any new legislation whatever. All that we want is that the money that goes into the Exchequer shall be stated as in one sum. The statements of our revenue are the most misleading that can be imagined. The Chancellor of the Exchequer comes down to the House and says that the revenue of the year has been £151,000,000. But the revenue has really been £161,000,000. The right hon. Gentleman says that the death duties amounted to £14,000,000 last year. No, Sir, they amounted to £19,000,000, of which £5,000,000 was paid to the local taxation fund. I know the difficulties which the right hon. Gentleman had in forming that fund, which was necessary for his great Act; but those difficulties have now disappeared; and we say that those various taxes, like whiskey money, beer money, and estate duty, should go into their proper place in the Exchequer, as forming part of the national income. On the other side of the account the portions appropriated should be stated as paid into the local taxation account, and then the country would not be deceived. The hon. Member for King's Lynn has raised the question of the great growth of national expenditure; but, in consequence of the way in which we prepare our accounts, we include in income and expenditure a great deal that is neither one nor the other. We say that taxation has increased by so many millions between 1891 and the present time, and we include in that the expenditure which we are obliged to make on our Post Office. Ten years ago the Post Office produced an income of £12,000,000, and required an expenditure of £9,000,000. Now the income of the Post Office is about £18,000,000, and the expenditure on it is £13,250,000. But that is not an increase of public expenditure; it is simply a natural extension of business. The question is—What is the net amount that goes into the Exchequer? You are carrying on a great business in the Post Office, and people are not taxed for it, but the balance of revenue is paid into the Exchequer.

MR. RITCHIE

Why may not the same be said about the Customs?

*SIR HENRY FOWLER

No, that is not the same thing. That is a case of direct taxation, whereas there is no tax associated with the Post Office. Our accounts do not show what is the real revenue and real expenditure of the National Exchequer. As to the appropriation account, which has been criticised, the action of the Treasury has been approved by the experience of those who have had to administer the Treasury, with any interference. Every item is under the control of the House of Commons. With regard to the National Debt, I do not think it is open to the gloomy criticisms which have been passed upon it. I demur altogether to the statement that the price of Console is an indication of the state of the country's credit. The price of Consols depends upon the state of the money market. I remember that in the period of 1866 a leading hanker said to a friend of mine, "If you were to bring all the title deeds of your country to-day to Lombard Street you would not get £5,000 on them." That day a complaint was made in this House that the Hank of England had refused to make any advance on Consols, but the Chancellor of the Exchequer of the day at once took care to set that right. But that was not an indication of a fall of the credit of this country as a country; it was a result of the commercial disruption of the money market. At the present moment Consols have gone down to 92. Any gentleman who thinks that is an indication of a fall of the credit of this country should remember that Consols at a shade under 84 would really be the equivalent of the par price of the Transvaal Loan at 3 per cent. Therefore, Consols still hold their position as the premier security, and, in my opinion, their rise and fall depend on the state of the money market. But there have been times when the rise and fall depended on the Chancellor of the Exchequer, and I hope the Chancellor of the Exchequer will not repeat what I think was the mistake of his predecessor when he bought Consols at 110 and 112 and forced up the price of Consols against himself, he being the only peal buyer in the market. A great deal of the difficulty which has arisen was created by an exaggerated price caused by the chancellor of the Exchequer's expending such large sums of money in Consols on behalf of the savings banks and the Sinking Fund I do not know whether the Chancellor of the Exchequer intends to adopt the Report of the Committee on the Investments of Savings Banks; but I think he will have very seriously to consider it, because if we are to make annual investments of £10,000,000, in a few years it will have a very serious effect. So far as this side of the House is concerned. I think there will be no opposition to the Second Heading of this Bill, but we to reserve ourselves the fullest right of discussing its various points on the clauses of the Bill when they can be dealt with on their merits.

MR. DELANY (Queen's County, Ossory)

The right hon. Gentleman has not replied to my Question as to the drawback on flour.

MR. RITCHIE

Oh, I beg the hon. Member's pardon, I overlooked that. I understand the Question of the hon. Member was why the rebate should be limited to sums of £25 and over. Let me say at once I am not disposed to make any alteration in the limit of the rebate. The reason why I have allowed any rebate at all—a most exceptional course to take—is that I desire to do nothing which will interrupt the flow of corn into the country. There is plenty of time in which small owners could so arrange their stock as to get rid of it before the duty comes off. That was not the case with merchants who had imported large cargoes, and if their business had been checked wheat might have risen to a high price. Therefore, I gave these special facilities so that the trade might go on without interruption. They will not apply to small holders who have had plenty of time between the announcement of the Budget and the 30th of June to get rid of their stock.

Question put and agreed to.

Bill read a second time, and committed for Monday next.