CUSTOMS—TEA.

HC Deb 19 April 1904 vol 133 cc568-609

Motion made, and Question proposed, "That in lieu of the duty of Customs now payable on tea, there shall be charged on and after the twentieth day of April, nineteen hundred and four, until the first day of August, nineteen hundred and five, the following duty (that is to say):—

"Tea, the pound …Eight pence."—(Mr. Chancellor of the Exchequer.)

SIR H. CAMPBELL-BANNERMAN (Stirling Burghs)

The right hon. Gentleman has discharged himself of a task of unusual difficulty in a manner which,. I am sure, has earned the admiration of the House. I think I should not do justice to what is in all our minds if I did not allude to one personal difficulty which I need only allude to for the purpose of putting it aside. It is that the right hon. Gentleman finds himself, as it appears to most of us, in a position presenting some incongruity between the office which he holds and the opinions and ambitions which he does not conceal in fiscal and trade matters, and, possibly, even with the avowed policy, so far as we can know it, of the Administration of which he is a member. And, therefore, he must have expected that all he said to-day would be scrutinised by every one who listened to him with a view to discovering whether there was anything which might appear to any of us, whatever our opinions on this vexed question may be, to be of a subterranean character applicable to that question. I think the right hon. Gentleman must have been conscious of a certain peculiar interest on that ground which pervaded the Assembly which he was addressing. On one or two occasions, I think, he made an observation which, to a very sensitive ear, might appear to have a further meaning than appeared on the surface, but on the whole, I think, in this respect as well as in the lucidity and completeness of his statement, the right hon. Gentleman has acquitted himself most admirably.

The right hon. Gentleman had a task of great difficulty to? undertake. We have not known a financial position so serious in our time. In the second year of peace, after the war taxation had been only partially reduced in the first year, the rest of that war taxation is not only to be maintained but absolutely to be increased, and the right hon. Gentleman has found himself obliged, as he thinks, to add to the indirect taxation of the country at a time when it is universally admitted that that branch of taxation had not received the relief it was entitled to last year. The right hon. Gentleman has at least shown courage, of different kinds perhaps, in two particulars. He has maintained unequivocally the Sinking Fund, which, as he says, is the great resource of this country in an emergency. But, at the same time, he has shown another sort of courage in proposing, I venture to say, two of the most unpopular taxes which could be brought forward by any Chancellor of the Exchequer—namely, an addition to the already high income-tax and an addition to the tax upon tea. The right hon. Gentleman has touched upon a vast number of most important subjects which will require the due consideration of the Committee, and I wish to repeat, on behalf of the Committee, the claim which was made last year and acknowledged by the right hon. Gentle-man who was then the spokesman of the Government. That is the claim that we should have an ample opportunity of discussing, not this or that particular Resolution, not the individual taxes that are interfered with, one after another, but also the general policy of the Budget. This question arose last year, and members of the Committee then found themselves stopped from what they considered was the the full discussion that was required of the general financial situation on the ground that, unless there was a general agreement on the subject, and, of course, subject always to the acquiescence of the Chair, they must confine themselves to the limits of the particular Resolution. The then Chancellor of the Exchequer acknowledged that there was "a good deal in the argument, and if he should have again to bring in a Budget he should take care that the House was not put into the position in which, to his regret, it now found itself." I think it only right, and a matter of duty to the other Members who are interested in the subject, that I should distinctly claim that the Government should allow not only the general discussion on the first Resolution to-night, but on another Resolution which will give that ample opportunity which, I am sure, the right hon. Gentleman himself would agree ought to be given. I am not going to enter upon all those elaborate and detailed questions which the right hon. Gentleman has so ably dealt with. I am not sure that, on this occasion, our interest has turned so much upon conjectures as to the particular tax which is to be increased or modified, or imposed or abolished, or on any other of the details of the scheme of taxation. The great governing fact which stands over the whole finance of the year is the enormous growth of expenditure. I regret that the right hon. Gentleman did not make his survey a little more complete by saying something upon that point. He was severe upon the local authorities. He said it was necessary to call "Halt!" in the process of expenditure, and he seemed shocked by their extravagance; but he had not a word to say as to the huge Estimates for which he is himself responsible.

* MR. AUSTEN CHAMBERLAIN

I referred to borrowing.

SIR H. CAMPBELL-BANNERMAN

Well, but nobody needs to borrow unless he spends, and the way to get rid of the necessity of borrowing is to refrain from spending. We used to have little admonitions from the right hon. Gentleman the Member for Bristol which I am bound to say—I have often remarked it before—did not appear to have much effect. But we have not had even the blessing of a homily or an admonition from the present Chancellor of the Exchequer, who, perhaps, bases his neglect of that part of his usual performance on the knowledge and experience he had of the ineffectual results of those speeches. I believe it is to this growth of expenditure rather than to ingenious devices for meeting the charge and covering up the cost that the country should direct its most earnest attention. The facts speak for themselves. For the hundredth time I will repeat some of them, because they ought to be constantly brought before the House. Our national expenditure in 1886 was £92,200,000. In 1895, with some variations, it still remained at £93,900,000. The estimated expenditure for the coming year is £142,300,000. The Navy has gone from £9,400,000 in 1870 to £17,600,000 in 1895 and £42,100,000 in 1905. The Army has risen from £12,300,000 in 1870 to £18,700,000 in 1895 and £32,500,000 in 1905. And we have been told by the Secretary of State for War himself that we must expect an increased expenditure in the next year and the year after because of the re-armament, which is at present concealed from our view by the fact that it is being mainly defrayed by India. This is a state of things which requires only to be recited in this House, surely, to invite to it the most earnest and serious attention of the Committee.

And let me say that the right hon. Gentleman referred incidentally to a further expenditure which is going on and which is often allowed to pass without notice. I refer to the expenditure from capital under a series of Acts which are hidden away from the public and often from Parliamentary knowledge. And this expenditure is being rapidly developed. The money is expended and is repaid by annuities which are charged on the ordinary Estimates. I am quite aware of the convenience and advantages of this system. It gives continuity to the administration of the works undertaken. It prevents the confusion and disturbance created by the periodical necessity of surrendering balances. I daresay it is economical in some respects. It frees the hands of the administrating authority, but its by-product, if I may say so, is the concealment from the country of this expenditure that is going on. I will recite the Acts. They are the Barracks Act, 1890, the Naval Works Acts from 1895 to 1908, the Military Works Acts from 1897 to 1901, the Telegraphs Acts from 1802 to 1899, the Uganda Railway Acts from 1896 to 1902, the Niger Company Act, 1899, the Pacific Cable Act, 1901, Public Offices (Acquisition of Sites) Act, 1895, Public Offices (Whitehall Site) Act, 1897, and the Land Registry (New Buildings) Act, 1900. I venture to say there are many Members of the House who are not in the least aware of the extent to which this expenditure is going on. At the end of 1892–93 the total liability under legislation of this kind was £621,000. What does the Committee think it is now? At the end of 1902–3 it was £27,408,000. Here is, practically, £27,000,000 added to the National Debt in ten years, and it is a growing expenditure. The amount spent last year was £8,119,000, and the amount expected to be spent in this year is £9.789,000. Therefore, besides the ordinary expenditure charged against revenue, with which we are familiar in the Estimates, we are spending this year £9,750,000 and concealing it from ourselves by charging it against capital. We talk of the Sinking Fund, and I have said how much we approve of the stern virtue of the Chancellor of the Exchequer in not tampering with the Sinking Fund, but here is an expenditure that obliterates the Sinking Fund.

SIR M. HICKS BEACH (Bristol, W.)

No.

SIR H. CAMPBELL-BANNERMAN

It goes far to do so.

SIR M. HICKS BEACH

No.

SIR H. CAMPBELL-BANNERMAN

The right hon. Gentleman, who is well acquainted with these things, will, I hope, explain them to the House, and if he can explain them satisfactorily no one will rejoice more than I shall. These are facts which, it seems to me. give importance to this Budget, and I mention this subterranean expenditure, as it were, only by the way, in order to impress upon the House the fact that the enormous sums which we see on the face of the Estimates do not include all our liabilities. These facts appear to me urgently to call upon us to arrest, while we may, the headlong extravagance of recent year's. This is a question which far transcends Party interest. It is the interest of us all to maintain the financial strength of the country, and also as Members of the House of Commons to show that we are not idle and indifferent to such progress of expenditure. I trust that the House. of Commons will not be slow to discharge its first duty in this matter, and will not be content with discussing taxes which may be imposed or removed, or general administration, but will discuss the source and origin of all the evil, which is the growing expenditure of the country.

* MR. RITCHIE (Croydon)

My first duty, an agreeable one, is to congratulate my right hon. friend the Chancellor of the Exchequer upon the great ability with which he has discharged a duty which he has rightly described as on this occasion especially difficult. He has stated the views he holds and the proposals he makes with such clearness that they are perfectly plain to the Committee, which, as I myself know, is by no means an easy task. I very much regret that my right hon. friend was placed in the difficult position of having to meet a falling revenue, and I regret it the more because it may be, and no doubt has been, contended in many quarters that it was my own proposals of last year which have landed my right hon. friend in his present difficulty. Sir, I have myself received many congratulations from friends that it has not been my duty on this occasion to perform my right hon. friend's task, congratulations which do doubt were well intended, and I will therefore, take the opportunity of saying that I should have been glad if anything I could have done could have relieved my right hon. friend from the difficulties created by last year. My right hon. friend has stated with great clearness the various circumstances which led to the revenue being considerably less than was anticipated last year. Those who have occupied the position know well that a Chancellor of the Exchequer has to rely, and properly to rely, for the estimates he makes on the advice he receives from those efficient officers of the State who have for so long performed their duties admirably. It must not be supposed that these estimates are made in anything like a haphazard way, they are made after most complete inquiry into all the various circumstances that are likely to affect the revenue, and I for my part did what I am sure my right hon. friend has done—I went very carefully into every item of the estimates with my advisers, being most anxious, above all things, that the estimates of revenue should not be excessive. I did not feel justified, after the inquiry and discussion, in making material reductions on the proposals put before me, and if I had made any reductions they would certainly not have been in any degree adequate to the deficiency, which, unfortunately, has arisen.

My right hon. friend has stated, quite truly, that the falling off of the revenue is largely owing to a cycle of bad trade. But last year there were no indications of sufficient magnitude to justify a Chancellor of the Exchequer in inferring that this falling off would occur. Many circumstances have led to it. There have been" the aftereffects of the war. It was anticipated that after the war there would be a very considerable revival of trade, especially with South Africa, but nothing of the kind has occurred; on the contrary, the trade with South Africa last year has not been so good as it was in previous times. Then there has been the disturbance in the cotton trade, which has been very injurious to a large number of people. I do not wish to touch on any controversial subject just now, but my own belief is that the controversy which unhappily has taken place in connection with our fiscal policy has made trade perhaps somewhat less than it would otherwise have been. But however that may be, I think I am justified in contending that, as far as the falling off in the revenue is concerned, it is of a character that could not have been foreseen either by myself or my advisers last year. One reason which my right hon. friend gave, although unsatisfactory to him from the point of view of a revenue collector, must be satisfactory to the House—namely, that, to some extent at least, the falling off in the consumption of beer and spirits was owing to the Licensing Act of 1902. That Act has undoubtedly made everyone more careful; it has hindered the drunkard from getting more drink, it has made the dispenser of drink more careful in selling, and I think it has had some effect in removing the abuses of drinking which unfortunately occur in a large number of bogus clubs. However slight the effect may be, that it has had any effect is matter not for regret but for sincere congratulation.

My right hon. friend has said that the repeal of the corn tax was more costly than had been anticipated and that the advantages were less apparent. How costly the character of the repeal may be is a matter over which no one had any control; it merely depended, I imagine, on dealing fairly with the people who were engaged in the trade who had paid the tax and had large stocks in hand. I am sure the Committee will feel that I myself acted rightly in dealing fairly, and indeed generously, with those people and in making remissions.

* MR. AUSTEN CHAMBERLAIN

I did not criticise the repayments made, I did not say that they were not necessary or justified. On the contrary I think my right hon. friend was quite right to make them.

* MR. RITCHIE

My right hon. friend has suggested that the advantages anticipated were not very apparent, although earlier in his speech he said that one of the reasons for the deficiency in the revenue was a very bad harvest. Surely my right hon. friend will not argue, when there has been a bad harvest, that, although the price of bread has not been reduced, the consumer does not therefore receive any advantage from the remission of this tax. It is impossible to say exactly what has been the effect, how much or how little, because of other circumstances which have to be taken into account, but, in view of the years of bad harvest. I think it was a matter not for regret but congratulation that the tax was taken off. However, I do not say that in any controversial spirit.

My right hon. friend has said that expenditure had been increased by three items. One of them was the extra expenditure in Somaliland. None of us anticipated that anything like that expenditure would be necessary, but I certainly am not one of those who desire to say one word against the expenditure. We entered upon that campaign for very adequate reasons, and we are bound to carry that campaign through to a successful termination, whatever the cost. No one regrets the cost more than do the Government, and for my part I make no complaint against them for the extra expenditure. With regard to the Naval Estimates, if my right hon. friend meant to imply that I cut down naval expenditure in a way that made the Estimates inadequate, I am sure my right hon. friend will accept from me the statement that there is no foundation for that implication.

* MR. AUSTEN CHAMBERLAIN

What I said was that I understood from the First Lord of the Admiralty that there was some doubt as to what sums were required; that my right hon. friend undertook to provide a larger sum than was included in the original Estimates if experience showed that it would be necessary; and that the sum which was needed was even larger than was anticipated.

* MR. RITCHIE

I was going to say that the whole matter of dispute between my noble friend the First Lord of the Admiralty and myself was a mere matter of £200,000 upon the question of contract work. I declined to add £200,000 more to the Estimate for contract work which might not have been earned. It has turned out that the contractors have done more work than I anticipated they would do. With regard to the purchase of the Chilian battleships, in my opinion the Government were amply justified in that expenditure. It would have been most unwise if the Government had allowed them to go to a foreign fleet, when they might have altered the balance of power, but I warn my noble friend that we shall expect to see some reduction in future Naval Estimates on account of the transaction. I do not say that the naval programme of the Government ought to be reduced, but I do say that the expenditure on these ships ought to be regarded as an anticipatory expenditure, which should reduce by so much the Naval Estimates of a future year. Both sides of the House will acknowledge that my right hon. friend has met the deficit in the revenue in a bold and statesmanlike manner. Some people may find fault with my right hon. friend for the depletion of the Exchequer balances, but, under the circumstances, I think my right hon. friend was justified in utilising some of those balances. It has always been the practice when there has been a deficit, and when taxation has been high, for a sum to be taken out of the balances, and, therefore, I have no fault to find with my right hon. friend on account of this proposal.

There is one thing on which I heartily congratulate my right hon. friend, and that is his decision not to touch the Sinking Fund. It is an easy thing to reduce the Sinking Fund, but a difficult thing to justify, and I am convinced that he was wise in not touching it. I think my right hon. friend was perfectly justified in adding a penny to the income-tax because I am perfectly certain that I should not have taken 4d. off the income-tax last year had I anticipated that there would have been such a fall in the revenue; therefore, no fault can be found with my right hon, friend in putting a penny on the tax, which would have remained on last year if the deficit could have been anticipated. I was glad to hear that my right hon. friend intends to appoint a Departmental Committee to inquire into the subject of the income-tax. There is a very large field of inquiry for such a Committee, and I can only say that for my part I shall be glad to render such assistance in the matter as I can. I do not propose to say anything about the tobacco which is a complicated question; but I am sorry my right hon. friend has thought it necessary to increase the duty on tea. Tea has done well, said my right hon. friend, and therefore let an additional tax be put upon it. That may be an excellent Chancellor of the Exchequer reason, but it has always appeared to me unfair that people who pay most freely should be most heavily taxed. I am not, however, prepared to say that in this matter my right hon. friend has been unwise in acting as he has done. I should have preferred to see a higher duty put upon tobacco; but I do not press the point, because I know there are difficulties connected with an increase in the duty on tobacco. I am sure the Government will attend to the request of the Leader of the Opposition that adequate time shall be given for the discussion of the whole Budget. Owing to a misunderstanding, partly, I am afraid, my fault and partly the fault of the Front Opposition Bench, an opportunity was not given for a full discussion of the Budget last year, and I then promised on behalf of the Government that care should be taken to prevent a repetition of the mistake. My right hon. friend remarked that the indirect taxpayer had not received adequate relief last year. In my opinion the indirect taxpayer has received perfectly adequate relief. It must be remembered that a larger share of the burden of taxation last year was borne by the income-tax payer than by the indirect taxpayer, and that consequently the direct taxpayer had a more urgent claim to relief, which could not possibly be set aside. In conclusion, I have again to offer my right hon. friend the heartiest congratulations upon the manner in which he has discharged the difficult task that has fallen to him as Chancellor of the Exchequer.

* MR. HALDANE (Haddingtonshire)

said the House would not blame the right hon. Gentleman for Croydon for being out in his estimates last year. The period was an exceedingly difficult one, and that the estimates were inaccurate was not the fault of those who advised the right hon. Gentleman. Whether or not the cause was a cycle of depression he was not quite sure. It was perfectly true there had been a period of depression but it was of a different kind to that to which they had been used in the past. At other times, when depression had occurred, it had been general in its character, affecting many countries, but of late the depression had been local and he was not sure whether it. was not due to a shortage of the purchasing power of this country owing to the withdrawal of capital from its proper channel owing to the war. All would be agreed in congratulating the right hon. Gentleman the Chancellor of the Exchequer upon the way that he had performed his task in bringing in his Budget. He had kept up the high reputation of the Chancellors of the Exchequer of this House for lucidity. Lucidity was the characteristic of the right hon. Gentleman's speech, and it was a quality for which they were all grateful. The right hon. Gentleman had had a difficult task to perform and it was impossible at this moment to make criticisms as to details. The right hon. Gentleman was to be warmly congratulated on having had the courage to refrain from suspending the Sinking Fund. but the right hon. Member for Croydon, he thought, had been a little too generous in his defence of the Exchequer balances. It was quite plain the Exchequer balances could not be touched without the money obtained there from being charged to capital, and therefore the defence which had been made by the right hon. Member for resorting to the Exchequer balances, although it might be right to resort to them under the present circumstances, could not be allowed to go without question.

With regard to the income-tax, the Chancellor of the Exchequer had done quite right, and he had explained that the country could not afford even the reduction of last year, not because of the circumstances the right hon. Member for Croydon had before him, but because the estimates of that season had turned out to be too sanguine. He regarded, however, the imposition of the additional tax upon tea with the greates suspicion. Nothing was more plain than the fact that successive Chancellors of the Exchequer had not made any inquiries lately into the incidence of indirect taxation; as to how the incidence of the revenue raised fell upon the taxpayer, especially in regard to indirect taxation. Indirect taxation was a matter which required a great deal more investigation than it had received, and as regarded the tax on tea he proposed to {reserve his criticisms until the time came to deal with the matter specifically. He was glad the right hon. Gentleman had intimated his intention to appoint a Departmental Committee to inquire into the income-tax, but the incidence of the income-tax was very wide and he was not quite sure that the terms of reference for the proposed inquiry would carry the matter far enough. The difficulty of collection was far more stringent than it had ever been, and he was not quite sure whether the right hon. Gentleman would not have to consider whether he was not killing the goose that laid the golden eggs. It was extremely difficult to differentiate between the different kinds of profits, especially when they were made by persons only casually in this country. The whole burden of the income-tax required very careful reconsideration. The principles remained the same as they were in the early fifties, and before long they would have to be revised in a much more comprehensive sensen than had been stated this afternoon if the full efficiency of that tax was to be realised. He was glad to hear there was to be no additional tax on alcohol. Some of that tax pressed now very heavily on certain individual industries, and he could state case after case, if necessary, of industries being starved in this country owing to the duty on alcohol as, for instance, the cellulose industry. He congratulated the right hon. Gentleman on having dealt with the tobacco duties in a scientific spirit. Cigars were now to be manufactured in this country far more than before. Whether they would be of the kind that one would expect to receive from the right hon. Gentleman he did not know, but an opportunity was to be given for the manufacture of cigars for export.

They did not, however, need to go into the details at this stage, but they could turn their minds to the broad issues which the Budget disclosed. He doubted whether the Budget realised the very serious situation in which the country was at the present time. There was no doubt that in the last twenty years the annual income from all sources had been steadily growing. The annual income was calculated in 1882–3 at £14,000,000,000; in 1891–2 it was £16,000,000,000, whilst in 1902–3 it was probably no less than £20,000,000,000. That was a very great increase in twenty years. It meant an increase of annual income of 38 per cent., as against an increase in population of 15 per cent., or an increase of income per head of the population of 20 per cent. On the other hand, the growth of expenditure from 1873 to 1883 was £1,000,000 a year; from 1883–4 to 1896, including the period when the right hon. Gentleman the Member for West Monmouthshire was at the Treasury, there was a period of economy during which the increase of expenditure was not more than £750,000. Then came a change of administration and in the following eight years the increase of expenditure was over £50,000,000, or an increase of £6,250,000 a year. The right hon. Member for West Bristol appeared to dissent. He had retired from the Government before that limit was reached; but he made a most remarkable speech, substantially to this same effect, in September, 1902, which contained one of the most valuable warnings which had been given to the country for some years. The Votes which were responsible for this enormous increase of £50,000,000 in eight years were the Army and Navy Votes. During the period from 1883–4 to 1893–4 the Army Estimates had increased by £14,000,000, whilst during the same period the Navy Vote showed an increase of £24,000.000. Educational expenditure had also increased by £9,000,000. That was a striking expenditure. He was the last to wish to reduce the naval expenditure in any way that would prevent the Navy being the most efficient that could be obtained, but it could not be forgotten that that efficiency was relative. The position of other Powers had to be considered, and he thought the time had come when a thorough-going diplomatic effort should be made to arrange with the great Powers to put a check on this startling rate of increase. He was glad to see in the Army Estimates that something like a beginning had been made, but the Navy deserved consideration from the point of view of highest statesmanship for the purpose of dealing with this important question. The National Debt was another serious matter. In 1897 Consols reached the figure of 113⅞ whereas in 1903 they were as low as 86⅞. Then, too, the Government recently issued their guaranteed 2¾ per cent. Land Stock at 87, which meant that they were paying about 3¼ per cent. for money. That was a startling alteration in the state of the national credit which could hardly be accounted for by the increase of local taxation and local loans, though he quite admitted that there had been a tendency to come into the market with local loans in competition with the Government, which had made the position of the Government weaker than it used to be. The fact that 3¼ per cent. had now to be paid as against less than 2½ per cent. eight years ago was a serious matter to be taken into account. Then there was the question of local rates, which, for the last year, had been estimated at £55,000,000, and it had been calculated that these had doubled in the last twenty years. Local debt amounted to upwards of £400,000,000, but a large part of that was reproductive, being represented by telephones, water supply, lighting, tramways, and other services which brought in returns. The unremunerative portion of the debt might be taken at one-half the total amount. Be that as it might, local and Imperial taxation together amounted to the formidable sum of over £190.000,000. It was true that that was only about 10 per cent. on the national income, but had anybody any serious idea of what was the incidence of that taxation, how it was distributed between the various classes of the population, and how more was to be obtained if the emergency arose?

He did not think it was any use having an inquiry into expenditure. Expenditure was a matter of policy, and policy was a matter of which this House and the nation had to judge. But on the question of expenditure and the raising of revenue the House and the nation were very much in the dark as to the incidence of taxation, and he would like to see a Royal Commission, containing the very best statisticians and economists of the country with some of the first men of business, set to work and devoting, if necessary, two or three years to the task of furnishing the country with a thorough Report on the subject. The Income-Tax Commissioners and the Board of Inland Revenue were certain to have masses of information of the most useful kind with regard to the distribution of the national income and the way in which taxation fell upon it. He agreed that it was not easy to see how the existing sources of taxation could be increased. He congratulated the right hon. Gentleman on the extreme lucidity with which he had placed his Budget statement before the Committee, and he had made these criticisms of a general character in the belief that they concerned subjects which ought to be dealt with at an early date by one occupying the responsible position of Chancellor of the Exchequer.

SIR M. HICKS BEACH

The right hon. Gentleman opposite has dealt with much knowledge and ability with many important subjects connected] with the financial situations of the country. He has gone far beyond the finance of this particular year, but I think his main desire was to call the attention of the Committee to the great difficulties of the present situation. In that I entirely agree with him. But if the difficulties are such as have been described, all the more credit is due to my right hon. friend the Chancellor of the Exchequer for the admirable and courageous manner in which he has performed his task to-day. My right hon. friend was good enough to refer in a very friendly way to the relations which used to exist between us at the Treasury. I can only say that if my views on fiscal subjects in any way modelled the opinions of my right hon. friend, he has amply fulfilled to-day, in performance, the promise which he gave in his early days at the Treasury. I recognise, as the Leader of the Opposition recognised, that in this matter my right hon. friend had a difficult and delicate task to perform. He has views on fiscal subjects with regard to the future from which I unhappily differ, but not a trace of those views was to be found in his speech to-night; and I welcome with even greater satisfaction the fact that not a trace of those views is to be found in the proposals of the Budget.

What was the situation with which my right hon. friend had to deal? It was none of his making. Nobody can blame him in the smallest degree for the fact that there has been in the past year a deficit of £2,750,000 in our revenue as compared with the estimate of his predecessor, and an increased expenditure beyond the Estimates of about the same amount, making altogether a realised deficit in the year of nearly £5,500.000. Nor should I wish at all to blame his predecessor my right hon. friend the Member for Croydon. I know too well the difficulties of framing estimates of revenue for the coming year. I was more fortunate. In my time the country was more prosperous, and my estimates of revenue were, with one exception, invariably exceeded in the result. Sometimes they were very largely exceeded, but I always confessed to the Committee—and I hold the opinion strongly—that no Chancellor of the Exchequer ought to take credit for a revenue far in excess of his anticipations any more than he can fairly be blamed if, owing to depression of trade or other causes, the revenue falls short of his estimates. The pride of a Chancellor of the Exchequer should be to make the yield of the revenue and his estimates, as nearly as possible, balance.

Now, what is the manner in which my right hon. friend has proposed to deal with the deficit of the past year? There is one point in regard to that deficit to which I wish to call attention. I have said that I do not in the least blame my right hon. friend the Member for Croydon, but I do think that greater caution should have been exercised by him and the responsible heads of the Revenue Departments with regard to the estimates of revenue last year from Customs and Excise. What are the facts? My right hon. friend was advised to estimate his receipts from Customs at £207,000 beyond the yield of the previous year, but there was an actual falling off as compared with the yield of the previous year of £583,000. That was a mistake of nearly £800,000. Then my right hon. friend expected an increased yield from Excise of £600,000, and there was an actual decrease of £550,000, a mistake of £1,150,000. What happened in the year before? In the year before that—the last for which I was responsible—Excise had shown a considerable falling off. The Excise had shown a falling off of £600,000 in 1902–3 and Customs a falling off of £767,000 as compared with my estimate, and in the year 1901–2 the receipts from Excise had been equally discouraging. I mention these matters, not in order to suggest blame to any one, but in order to express a hope that my right hon. friend the present Chancellor of the Exchequer has taken warning in the framing of his estimates for the coming year from this steady falling off, especially in Excise. I notice that he estimated his receipts from Excise next year on the present basis of taxation at within £50,000 of the receipts in the present year. Well, I hope he has taken account of the tendency to fall off and also of the fact that he has had the benefit of an additional day in the year that has just passed. I hope the same with regard to Customs.

But there is still another matter. My right hon. friend the Member for Croydon has said to-day, and we must all feel that if we could only be wise before the event instead of after it, we should all have agreed last year that it was wrong to reduce the taxation of the country by so large an amount as was actually remitted, and my right hon. friend has said that if he had known how the year would turn out he would not have taken off a penny of the income-tax. Well, I think there are a good many people who will be disposed to go a little further. I supported His Majesty's Government last year in the repeal of the corn duty, for which I was responsible; I did it with the greatest reluctance, but I did it because I believed it to be the least of two evils. I believed it to be better that that duty should be repealed than that it should be used as the first step in a policy of preference or protection. But, Sir, I had another reason for supporting the repeal of that duty. That was because my right hon. friend the Member for Croydon as Chancellor of the Exchequer expressed in his Budget speech to the House a strong hope that he would be able so to reduce the increase of expenditure that he might be justified on that account also in remitting the amount of taxation which he proposed to remit. Well, I trusted, and I said so at the time, to the sense which I hoped right hon. Geatlemen on that Bench had at last begun to feel of the danger of this increasing expenditure, and that that would induce them to stop the increase and justify the remission of the corn duty. But what has happened? We have seen again an increase in the present year of £2,750,000 on the Naval Estimates, for which I am bound to say that in my opinion no sufficient reason has yet been given. We have seen Estimates produced by the Secretary of State for War which he has declined himself to defend or even to excuse except as merely provisional Estimates, necessary in the transition stage towards a time of greater efficiency, and, I hope, of diminished military expenditure. It is in those circumstances that my right hon. friend the present Chancellor of the Exchequer has been deprived of a penny on the income-tax, and of £2,500,000 from the corn duty, a duty which I still think, as I told the House two years ago, when once established would do very little practical harm to anybody, whatever might be said against it in theory, and the repeal of which, so far as I know, has done no good whatever to any body. That is the position in which we now stand, thanks to the remission of these taxes last year.

How does my right hon. friend propose to deal with this deficit due to the past year of £5,400,000? I do not quite understand, I confess, his proposals on that score. He appropriates, in the first place, from the balances £3,000,000 which has been paid into them from the Transvaal Guaranteed Loan for advances made by this country to the Transvaal and the Orange River Colony, I think, in the year 1902–3. I do not quite understand for what object those particular advances were made, and I would remind my right hon. friend that, though the money was taken from the balances to make those advances, yet it got into the balances from the loan which I borrowed in the year 1901–2. It was borrowed money, borrowed for the purposes of the war, and, having been borrowed, I must say I think that in strictness it ought to have been applied to the redemption of Exchequer bonds or to the redemption of some form of debt, rather than applied to pay off a deficit in the balancing of the finances of any particular year. But I do not at all wish to say this by way of criticism of my right hon. friend the present Chancellor of the Exchequer, because, on my conscience, I believe that if I had been in his place I should have done exactly the same thing. I think that we owe him so much for having declined the temptation to take anything from the Sinking Fund that we may well forgive him this proposal with regard to the £3,000,000. Then, having taken these £3,000,000, my right hon. friend proposes to draw still further upon the balances towards the deficit of £5,400,000. I do not quite gather to what extent he draws. [An HON. MEMBER: The whole.] No, I do not think it was the whole, because he proposes to appropriate certain dividends arising from unclaimed stock, and waiting demands from the owners of that stock, who never appear, a course which I think is perfectly justified by the precedents of former years, and I can only congratulate him on having so fortunate a windfall. That he has put, I think, at £1,000,000

* MR. AUSTEN CHAMBERLAIN

I propose to realise to that extent.

SIR M. HICKS BEACH

Well, I hope my right hon. friend will be careful about the realisation, because these funds are invested in Consols, and we all feel that this is not precisely the time at which it would be advisable to realise Consols if it can possibly be avoided. But that would account for £4,000,000, out of the deficit of £5,400,000. I do not quite understand how the remainder is to be dealt with, and perhaps when he comes to answer my right hon. friend will explain this point. When he came to the imposition of taxation for the coming year I certainly understood that he only provided for the deficit of the present year. He proposes to provide for that deficit by imposing an additional penny on the income-tax, 2d. per lb. on tea, and by certain changes in the tobacco duties, which he thinks would produce him a revenue of £550,000. I will not attempt to discuss the proposed changes in the tobacco duties. I sympathise with my right hon. friend in one of his proposals, that with regard to imposing greater taxation on the imported leaf without the stalk than is now imposed upon it, as compared with the tax on the imported leaf with the stalk. But I would venture to give my right hon. friend a little warning with regard to the tobacco duties. It is a very dangerous thing, as I know from experience. The trade is a very sensitive trade. Tobacco is an article not merely of consumption here but of manufacture, and you have to consider the question of the manufacturer, the dealer, and the consumer; and when you are dealing with an article which produces a revenue to this country of something like £12,500,000, it may very well be that changes of this kind may so disturb the trade as to bring about the loss of a greater revenue than you ever expected to gain. I merely give my right hon. friend that caution without professing at the present moment to be able to speak on this matter with the technical knowledge which any discussion of it would demand.

Next I come to the duty on tea. I congratulate my right hon. friend in that he has chosen tea [OPPOSITION cries of "Oh" and MINISTERIAL cheers] in the circumstances as the main source of his new indirect taxation. I think that he was absolutely right when he had to impose fresh taxation for the coming year to divide his proposals between direct and indirect taxation, and I think that, having regard to the circumstances of the present revenue which he has detailed to us, tea was certainly the best subject that he-could have chosen for that purpose. There is one point only which I would venture to suggest. I hope that he will get the £2,000,000 which he has every right to expect from the additional 2d. on tea, but I have found in more than one year that if there was one article more than another which lent itself to the machinations of those acute gentlemen connected with trade who are always clearing goods in the anticipation of an increase of duty or holding them back from clearance in the anticipation of a reduction of duty—if there was one article more than another which lent itself to this it was tea. I have been deprived of a large amount of revenue in some years by these operations, and I hope my right hon. friend will not find when next January and February come, if he continues to be, as I devoutly hope he will continue to be, Chancellor of the Exchequer, that the Estimates presented at the beginning of the new session look so favourable for the reduction of taxation that the dealers of tea may be tempted during the last two months of the financial year to keep back their tea in the hope of a reduction of the 2d. instead of clearing it, as they ought to do, to meet the demands of my right hon. friend. I think my right hon. friend is right in adding to the duty on tea on this main ground. Tea is an article of almost universal consumption. It is not the subject of any manufacture in this country, and therefore the Exchequer receives from the tax on tea a larger proportion of the burden that falls on the people than from many other matters that I could mention. But I hope my right hon. friend will not be attacked, as I was attacked, with regard to the duty on tea. I remember when I proposed to maintain or increase—I forget which it was—the duty on tea I was met by an enthusiastic fiscal Member—my hon. friend the Member for Sheffield—with the proposal that I should apply colonial preference to the question of tea. I resisted that proposal. I called the attention of the Committee to the fact that if I accepted it I should lose most of the revenue I expected to derive from tea, and that our colonial fellow-subjects were able to drive foreign tea pretty well out of the market without any preference at all. I hope that no similar attack will be made on my right hon. friend. I hope he will not be told that this tax, which does nothing more than yield a large sum to the revenue at the least possible cost to the consumer, is an unscientific tax, because it does no good to distressed producers in this country. I hope my right hon. friend will not excite bitter hostility on the part of tea producers in India and in Ceylon because he has not only not listened to their desires, if these desires exist, for a preference on tea—he has not only not listened to desires which were expressed to me for a reduction of the existing duty on tea—he has not merely dissembled his love with regard to them, but he has kicked them downstairs by the proposal of an additional twopence on tea. Well, I should entirely sympathise with my right hon. friend in the resistance to any such attack which, no doubt, he would feel it his duty to offer.

Now I come to the income-tax. My right hon. friend proposes an addition of a penny on the income-tax. That raises to my mind very grave questions which were alluded to by the right hon. and learned Gentleman the Member for Haddingtonshire, and were alluded to, and obviously felt, by my right hon. friend the Chancellor of the Exchequer himself. It is surely a very grave matter that in time of peace, when every proposal before us, I hope, tends to show better and more peaceful relations between us and two of the greatest nations of the world than have been the case for many years—it is a grave matter that at such a time we should be asked to raise the income-tax to a 1s. in the £. My right hon. friend expressed his feeling that we were dangerously reducing our resources in the event of war coming upon us by such a proposal as this. Is it not obvious that if the income-tax had been, before the commencement of the South African war, a shilling instead of eight-pence, this country would have lost for the purposes of the war no less than £10,000,000 a year, which would have had to be raised by some other; form of taxation. That being so, I think it is a very serious matter that we should be asked now for an income-tax of 1s. in the £1. But this raises a question to which I confess I attach some little importance. Who will feel this taxation most? Not the rich man. There is a sort of idea in the mind of some people that the income-tax is a rich man's tax. Why, Sir, rich men do not much mind what taxation you put upon them, except in regard to the death duties. No; those whom the income-tax really affect are the income-tax payers who are above the income-tax limit and yet do not possess an income of more than £2,000 a year. They are the most heavily taxed and rated class of people in this country. Of course, our present system of abatements does something, and in some cases does a great deal, to reduce the poundage of the income-tax upon incomes below £700 a year. But when you have 1s. in the £1 of income-tax, I confess it does seem to me that there is great reason in the demand that something of this kind shall be further extended. It is not as if we were asked to impose this tax for a year only. Can any one of us hold out much hope to the income-tax payers that it is likely to be lowered next year or the year after? My right hon. friend told us that he hoped for some relief next year from the cessation of the war in Somaliland, which I hope by that time may not have been renewed, and also from some reduction in the Army Estimates, which I hope we may receive, although we do not receive it this year. But I do not believe that the Chancellor of the Exchequer next year will be able to reduce the 1s. in the £1 income-tax. If that be so, it looks something very like a permanent burden upon a class of persons who, I think, are ill able to bear it. Is it not possible, by way of an extension of abatements or by some system of graduation, to make the income-tax on a certain poundage less heavy upon these people, if not more heavy upon those who are richer. To my mind there has never been any objection in principle to a movement of this kind. We know very well that we have graduation in the death duties; we have graduation in the house duty already. The difficulty is its practical application to the income-tax. I confess I doubt its practicability, but what I would earnestly press upon my right hon. friend, as I pressed upon the late Chancellor of the Exchequer the right hon. Gentleman the Member for Croydon last year, is that this question of the practicability of some extension of abatements or some kind of graduation should be examined by the practical skilled Committee which he intends to appoint to deal with the income-tax. I cannot but think that this is a moment when this claim may very fairly be made. If it should be possible that any result should come from it which would relieve the income-tax payers, I think nobody ought to be more grateful than the Party of which I am a member. But if it should be impossible, all I can say is that I fear that you will create in the minds of the payers of income-tax a very grave and discontented feeling towards the Government of the country, and towards the authorities, as regards the amount of taxation which they are called upon to pay.

It may be impossible, I do not know— Hope springs eternal in the human breast. I may be impossible for the present Government to stop the increase of expenditure. That is a matter which must occupy a good deal of our time in the d bates on this question. The right hon. and learned Member for Haddingtonshire quoted some figures with regard to the annual increase of expenditure in this country in late years; I will just mention some of them. I have looked back to the year 1881–2, twenty-three years ago, and I find that in that year the total annual expenditure of the country was £85,500,000. For the seven years following it increased at the rate of £500,000 a year; for the seven years again following that it increased at the rate of £2,250,000 a year, and for the nine years ending this year it has increased at the rate of £1,250,000. I say such an increase cannot go on. If it goes on, in my belief it will impose a burden of taxation that this country will not stand. It has already imposed upon us £23,500,000 of taxation primarily imposed for war purposes, but maintained in time of peace and added to this year by my right hon. friend to the extent of another £1,000,000. If this is to go on, in my belief the burdens of the taxpayer will become so great that there will be a reaction in this country which will not only sweep away us who may be held responsible for it, but will do what is very much worse. It will diminish expenditure to such an extent as to destroy that efficiency which those who are responsible for the present extravagance, as I believe it to be, are always telling us it is their one desire to maintain.

* SIR HENRY FOWLER (Wolverhampton, E.)

The speech which we have just heard—a memorable speech in every sense of the word—will strike the House as having some special peculiarities in it. The right hon. Gentleman the Member for West Bristol was himself Chancellor of the Exchequer during eight of those years to which he has so wisely, so accurately, and so well, called attention in referring to the financial position of the country at the present time. My right hon. friend the Member for Haddingtonshire made a very apt address to the House, showing the financial position of the country, both on its favourable side and on its depressing side. The right hon. Gentleman who has just sat down has, without referring to the unfavourable side, very much deepened the colour of the picture which my right hon. friend drew of the unfavourable side. But the right hon. Gentleman the Member for West Bristol, although in his closing remarks he warned the House, in language by no means too strong, as to what the possible result—I think I may say the certain result—would be, if this policy which has been pursued during the last eight or ten years is persisted in. did not touch the real point, where the difficulty arises, and where we have a right to complain against those who have held office during that period. No one. of course, complains of the present Chancellor of the Exchequer, who has discharged his duties in a manner which has commanded the admiration of the whole House. A more lucid, clearer, and. I think, a fairer speech has seldom been made by any man occupying the position. What I want to bring home to the Committee and to the right hon. Gentleman the Member for West Bristol and his colleagues before he left office, is that the responsibility for our present position does not rest with the present Chancellor of the Exchequer. Lord Beaconsfield said that finance was a question of policy. Though it be the duty of the Chancellor of the Exchequer to be the careful and strict guardian of the public purse, it is not in his Department to settle the general policy of the Government. During the last few years we have had too much isolation of Departmental as distinguished from Cabinet control. If finance be a question of policy, who is responsible for the general policy of the country? The Minister who is responsible for the expenditure of the country is the Prime Minister. I am not referring to the right hon. Gentleman personally; but I say it is the bounden duty of the Prime Minister, who is the only man who can control, and ought to control, and has the means of controlling, all the Departments of State—he is the man specially responsible to the Crown, to the country, and this House, not only for the finance of the country, not only for its commercial policy, but also for its foreign relations—for those international relations which tend to war or peace. He is responsible for the expenditure of every Department in the State. Now, I cannot say what is behind the veil of the present Cabinet, but I think there is an impression—and I do not think it is an unfounded one—that there has been, of late years, a laxity of financial control, that the Departments have been independent, that they have spent what they liked. I am only saving what everybody in official life knows to be true. Let me recall to the attention of the House and of the right hon. Gentleman the Member for West Bristol the speech that he made a little more than twelve months ago. He was then Chancellor of the Exchequer. In that speech he stated that for years before the war, during the war, and after peace was declared, he protested against the growth of expenditure to his colleagues, and that these protests were received with indifference; and he called attention—and I am now quoting his actual words—"to the absence of active, firm, and continuous support of the Prime Minister." I followed the right hon. Gentleman in that debate, and I said that no more serious charge had ever been brought by a Minister against his colleagues. I recognised that the Cabinet was one and indivisible, and of course it was personified in the person of the Prime Minister. That charge has never been refuted; the Prime Minister has never noticed it. He has never said that it was a mistaken view, nor that it was an incorrect view.

THE PRIME MINISTER AND FIRST LORD OF THE TREASURY (Mr. A. J. BALFOUR,) Manchester, E.

I was not Prime Minister then.

* SIR HENRY FOWLER

In Juno. 1903?

MR. A. J. BALFOUR

I have never been Prime Minister when the right hon. Gentleman was Chancellor of the Exchequer.

* SIR HENRY FOWLER

I beg the right hon. Gentleman's pardon. I was assuming that the right hon. Gentleman the Member for West Bristol was longer in office than he was. I do not wish to make this a matter personal at all; but I want to point out that the Prime Minister, as such, is responsible to the House and the country. We desire to reduce our expenditure and so to reduce taxation; and we do not want to realise all the calamities pointed out by previous speakers to-night. We have got to reduce expenditure. This is a purely peace Budget. We are presumed to have got rid of, to have wiped off, everything of the past war, and yet we are told—a new Chancellor of the Exchequer comes down and tells us—that in peace, as essential to a peace Budget, we are bound to provide this enormous sum of money—including nearly £70.000,000—for the military and naval expenditure of this country—a sum which has never been equalled before in a time of peace. Therefore we must raise this heavy taxation. From what the right hon. Gentleman the Member for West Bristol has affirmed, the 1s. income-tax is likely to be permanent, with additional taxation on the poorer classes; and we have no prospect held out of a reduction as years go on. And this will go on until the House and the country determines that there shall be a reduction in expenditure. Do not let us be met with the usual sneer, viz., that the Opposition are indifferent to the position, and power, and honour of the country. My right hon. friend behind me spoke very strongly as to what he felt about the Navy. I do not think there is a man on this side of the House who would not uphold the doctrine that we must have all the protection which the strongest Navy in the world can give us. Nobody has charged the right hon. Gentleman the Member for West Bristol with being a Little Englander, or that he is indifferent to the naval supremacy of the country. Rut. he has been behind the scenes, and he says he believes there is no ground for the increase of naval expenditure which we are incurring this year. Whatever we may feel with reference to the Navy, there is no difference as to Army expenditure. The right hon. Member for West Bristol expressed his own opinion, which I am afraid is true, that there is little prospect of a reduction in the Army. We are at liberty to say two things. We are opposed to a great territorial and expensive Army; we believe that we are spending a great deal more upon our Army than there is any necessity to spend, and that we are not getting our money's worth for it.

There are steady increases going on in other branches of our expenditure, and I am not sure that those increases should be regarded as necessary. We have been told to-night that the next seven years are by no means to be cheeseparing times. In fact, the right hon. Gentleman goes on an ascending scale: that we will have our taxation increased year after year. We must put our foot down and say, "Thus far, and no farther." Sir Robert Peel said that there were risks which must be undertaken. We are in danger of a growing expenditure in all Departments of the State. The regularly increasing expenditure has become epidemic. It is not confined to the military or naval Departments, there is a general tendency to extravagance all round. That is the great lesson we learn from this Budget to-night—the first peace Budget we have had propounded to us since the war. The details cannot be discussed to-night. It is not fair to the Chancellor of the Exchequer, or to our constituents. Nor is it necessary. But I will say that I, for one, dissent from the views of the Chancellor of the Exchequer, and from those of the right hon. Member for West Bristol, with reference to the tea duty. I agree with him that this is a tax which everybody pays; that we are dealing with a tax on a commodity of universal consumption; and that, possibly, there is as little wastage in the result of that tax as in any other; but it is a tax that presses upon the poor. For a large section of our working classes tea is essentially an article of food. That tax was 4d. before the war; and now the proposal to-night is that in a peace Budget it should be 8d. What other tax-has been increased at the same rate? The right hon. Gentleman has alluded to the tobacco duty. I wish the Chancellor of the Exchequer had restored the position as it was before the Member of Bristol's proposals which the right hon. Gentleman made some years ago. He took 6d. in the lb. off the duty on tobacco, and at the time of the war he only put 4d. on. I said at the time that I thought he should have replaced the whole of the 6d.; and even then it would not have been novel or unfair, because it was a tax which had been paid ever since the time of Sir Robert Peel, except when Sir Stafford North cote increased it, and that rate had produced no general dissatisfaction. But whether it be a tea duty or a tobacco duty, I agree that we have not yet got to the bottom of the incidence of these indirect taxes. You may say that this man pays so much in the £1 and that man pays so much in the £1; but you must have regard to the purse from which he has to pay.

I cannot sit down without congratulating the Chancellor of the Exchequer upon his courage about the Sinking Fund. I think that it is, perhaps, the most favourable feature of his Budget. He has had the courage to resist, the temptation, in order to avoid the increase of taxation, to tamper with the Sinking Fund. We have heard a great deal about the price of Consols and the depreciation of securities. I believe that one of the causes, and by no means the least of the causes, of the depression in the money market has been the impression that even the fear of a suspension of the Sinking Fund creates in the mind of the capitalist class, and I strongly commend the Chancellor of the Exchequer for the courage he has displayed in declining to tamper with the Sinking Fund I will ask the Prime Minister to make perfectly clear his intentions regarding the discussion on the Budget because it is evident that some of the Resolutions, as they involve new taxation, will have to be passed to night. Vote A has been passed again and again on the understanding that upon a subsequent occasion there would be a full debate on the Budget proposals on a Subsequent Vote. I hope the right hon. Gentleman will give the pledges which he gave last year before the House is asked to consent to the Resolution.

MR. A. J. BALFOUR

I should not have risen at this stage of the debate had it not been for the appeal made to me by the right hon. Gentleman. I think I can give him a perfectly satisfactory reply, so far as that appeal is concerned. My right hon. friend the Chancellor of the Exchequer will ask the House to pass, before it separates to-night, the tea duty and the new tobacco duty. That is absolutely necessary for renewal purposes. But the fact that it has to be passed tonight might, unless special arrangements are made, unduly hampers the debate on the finances of the country. The only way to reconcile the liberties of the House with the interests of the Exchequer is to pass by consent the Resolutions required for new taxation, and then to take a general debate on one of the other Resolutions. I think the convenient course will be to put down the income-tax Resolution first on Thursday, and on that Resolution it will be understood that the main debate on this stage of our proceedings upon the proposals of my right hon. friend shall be taken by the House. The right hon. Gentleman made an elaborate attack upon me as Prime Minister. Perhaps I had better reserve anything I have to say on that question until Thursday or some later stage of this Bill. He must not take me as agreeing with any of the strictures he has passed upon the Government and its relation to expenditure.

MR. JOHN REDMOND (Waterford)

I would have liked to reserve until the general debate on the Budget the few remarks I have to make on the subject, but, I will not do so because it is impossible for me or my colleagues to be at the House on Thursday. Ireland is the poorest portion of the United Kingdom, and it is proper that Ireland's voice should be raised in the clearest manner and at the earliest opportunity possible on the question of the imposition of additional taxation. One of the commonplaces of these debates on Budgets in past years has been the complaint which was once made by the right hon. Gentleman the Member for West Bristol that it was unfashionable to preach economy in connection with Budgets. That is not the case with hon. Members from Ireland, because they are forced upon all occasions such as this to make the gravest complaint against the rapid and extraordinary increase in taxation. It was not possible for any Member of this House to hear the concluding remarks of the hon. Member for West Bristol without serious misgivings as to the future. The right hon. Gentleman quoted figures which, if properly appreciated, would create a sensation in the public mind. He showed that in the year 1881–2 the expenditure of the country was a little over £85,000,000. but it now amounted to £150,000,000. These figures are appalling. How can this Budget, in the face of such a fact, be regarded as a peace Budget which the right hon. Member for Wolverhampton has described it to be? Moreover, no hope is held out of any serious diminution of expenditure in the future. The right hon. Gentleman the Member for West Bristol, whos3 opinion in this matter I prefer to that of the present Chancellor of the Exchequer, took that view, and even believed that next year it would be impossible to reduce income-tax. So far as Irish Members are concerned, they are absolutely helpless in the matter and hopeless. They cannot look to the future with any hope or confidence. They have had the same story, year after year, of ever-increasing burden upon Ireland. Obviously, the right hon. Gentleman the Member for West Bristol considered they were reaching the limits of taxation. So far as Ireland is concerned, this limit has been reached long ago. The power of the Irish people to bear taxation has been practically exhausted. I would emphasise the extraordinary fact that the linking of Ireland with the richest nation in the world has proved her ruin. No matter how poor Ireland might be, if she were on her own resources and not linked with England, this extraordinary burden would not be placed upon her. England might be able to afford wars in Somaliland, South Africa, and Tibet, but Ireland could not. Would the right hon. Member for. West Bristol apply the principle of differential treatment to Ireland as he wished to apply it to the income-tax payer? The taxation proposed to be placed upon Ireland by this Budget would amount to about £400,000 a year, or, in other words, Ireland would be called upon to pay one-tenth of the whole of this new taxation. In the year 1895, the Royal Commission reported that Ireland ought not to pay more than one-twentieth. That was a unaminous decision, but it was not accepted by everyone as correct. A good many of those who signed the Report thought it was altogether an excessive estimate of what Ireland ought to pay. Since then Parliament has imposed millions of additional taxation upon Ireland, and now this year the Government come forward and propose new taxation.

Now, as to the new taxation, the right hon. Gentleman the Member for Wolverhampton has told us that it will hit the poor. But it will not hit the poor in this country half so much as the poor in Ireland. There are poor and poor, and I say there is no kind of poverty in this country so deep and so wretched as the poverty which is to be found in the congested districts in Ireland. In these districts tea is an absolute necessity of life. I remember a couple of years ago quoting in this House from the Report of the Congested Districts Board specimens of the budgets of the average families in these poor districts. Some of them went down as low as £8 a year, but as a specimen of the best class of those budgets I remember representing those of a well-to-do family whose income was a little over £20 a year. Well, of that £5 17s. 0d. went in tea. On this point let me read a couple of passages in the evidence given by the Bishop of Raphoe the most rev. Dr. O'Donnell, who lives in the midst of these people, and who is intimately acquainted with their circumstances. He is asked this question— Passing from that point to the question of the food of the people in the congested districts has your Lordship any remark to make?—Yes. The food of the people in the congested districts has greatly changed, as the fashion of people's clothes has changed, or the material out of' which the clothes are made. It has changed and become more expensive and, in my opinion, not better. More white bread is eaten and more tea consumed, but no more meat, less meat. I would say that the Irish farmer with a valuation of under £10 a year is a vegetarian. On Sunday he may have bacon, but those who are valued under £4 a year, and they are the overwhelming majority, have no kind of meat except two or three times a year. In the congested districts the food is vegetable food. Then he is asked with reference to the increase of the consumption of tea and he answers— A change has come about in the food of the people of congested districts. Much of the substantial portion is composed of potatoes when they have a supply. When the potatoes fail the main food is Indian meal. —that is the yellow meal used in kennels, not entirely because it is not sufficiently good food for the dogs. Has the prejudice to the Indian meal disappeared? To a large extent. Now will the House listen to this— Sometimes the poor people have milk but often they have not, even with their stirabout, and the nature of this food is such that the want of milk has a great deal to do with the large use of tea in the poorer parts of Ireland. When a man has hard work and has for dinner only stirabout, a little tea with some bread is really a necessity of life to enable him to go back to his task. Now there is an article of food, an absolute necessity of life of these people, that you are going to tax. You are going to put on Ireland an additional tax of about £300,000 a year upon tea, and the budget of every one of these poor families will be so much the worse by the fact that what they are compelled to pay extra upon tea will leave them so much less to spend upon bread. It is a cruel tax. Its pressure upon the poor is terrible, and it is much more, as I have said, upon those in Ireland than in England. Let me say one word about this matter. This indirect taxation is a more serious grievance in Ireland than in England. I have been for years preaching in this House the doctrine that the direct and indirect taxation ought to be brought down somewhere near a level. You have done it in this country. You are never tired of boasting in this country that you have brought down your direct taxation to about the same as your indirect taxation. But in Ireland you have never made an effort in that direction. The indirect taxation of Ireland is 75 per cent. of the whole—I think 75 per cent. at least. And therefore when you put taxation of this kind upon the Irish people you are refusing to remedy the incidence of taxation upon the poor.

Now I hope when we come to the Second Reading of the Budget Bill it will be possible for my colleagues and myself to raise the broad question of the over-taxation of Ireland, and to do so with the necessary detail. I do not propose to do it now, I have only risen at this moment to make my protest—I know it will not be an effectual one—my immediate protest, against this additional burthen upon Ireland and especially against the cruelty of seizing upon this article of tea, above all others, which will strike a deadly blow at the homes of the poorest people of our country. It is the story year after year. I really think that English Members, if they would dispassionately consider the matter, ought to be impressed by the extreme patience of the Irish people under the burthens that have been laid upon them, and of the extreme patience of their representatives. You sometimes are impatient with our ebullitions of temper, when, perhaps goaded out of that placid temper which you affect in this country, we give rein for the moment, to our passion or our ill-temper. You are amused and you reprove us, but if you remember how, generation after generation, we and our grandfathers and fathers have come to this House almost begging of you to save our poor people from unjust burthens, that we have come here and gone away empty-handed and have had to go back to our people and tell them that you might as well be addressing the nether millstone as the average Member of this House, who knows nothing of Ireland, who has never been there, and cares nothing about Ireland, who will not take the trouble to listen to Irish wrongs, who will not take the trouble to make himself informed upon them—I say if you remember these things I think you ought in fairness to be astonished at the continued patience, at the persistence, in the face of defeat and disappointment, with which we pursue these efforts to get justice from this House. For these reasons I protest in the name of Ireland against this Budget; I protest against increasing taxation at all, and I especially protest against imposing a further burthen upon the poorest of our people.

SIR EDGAR VINCENT (Exeter)

said the hon. Gentleman to whom the House had just listened was, he thought, rather forgetting the liberality of England in the matter of the Irish Land Act of last year, and he thought the accusation of the absence of generosity did not lie very well at present.

Mr. JOHN REDMOND

said they denied altogether the generosity. On the statement of the Chief Secretary, every penny of the money was being provided out of Irish funds.

SIR EDGAR VINCENT

said the very means by which the money under that Act was raised were very largely, if not entirely, the result of the contribution of England. The present financial situation was one of grave difficulty, almost unprecedented in the finance of this country. His right hon. friend had faced the situation with courage; his only complaint was that he had not, perhaps, gone far enough. The Sinking Fund which he had so wisely maintained he should have been glad to see increased, because the present Sinking Fund was largely illusive. He should be the last to minimise the responsibility of the Prime Minister, but it was not fair to attribute our financial duties either to one Party or to one man. The financial position of the country—responsibility for which must be shared by both sides of the House and by the country at large—was worse than it had been at any time during the last fifty years. The gravity of the position had not been adequately realised. There had been at the head of the Administration for the last few years two distinguished statesmen, both of whom came from that part of the country from which we expected the severest economy, namely, Scotland, and he could not attribute extravagance to them. An extravagant Scotchman was a great rarity and the succession of two rather prodigal Scotchmen in power was a combination against which the gods would fight in vain. What mortal Chancellor of the Exchequer, then, could hope to be successful against such a combination? What was the result to which this conjunction had brought the country? He believed the financial position was worse than at any time during the last fifty years. Expenditure was admittedly out of hand. Annual increase succeeded annual increase with the regularity of the seasons, and no one appeared to have either the will or the power to arrest the dangerous progress. Taxation was at an unprecedented level for time of peace—a level admittedly dangerous in that it trenched upon our reserve against emergency. National credit was lower than at any period during the last twenty years, and, relatively to the credit of foreign nations, it was lower than at any period during the last fifty years. A certain laxity and confusion in the control over Estimates exercised by this House was perhaps a partial cause, and he regretted that the old simplicity of financial statements of which we had been proud appeared to be gradually disappearing. The inclusion of expenditure under the Works Bills in the Budget Statement was a step in the right direction.

Taking expenditure first he would briefly state the facts on which he based his opinions on the points he had mentioned. Since 1893 our total expenditure had grown from £90,000,000 to £140,000,000, an increase of about 55 per cent. or more than £4,500,000 a year. Such a rate of increase of expenditure was out of all proportion to the increase of population, the increase of trade, or the increase of national production. According to the best statistical authorities, the natural increase in the produce of a tax, assuming no change were made in the system of taxation, amounted to about £2,500,000 a year; therefore an increased expenditure of £4,500,000 or £5,000,000, meant that an annual increase of £2,000,000 in taxation had become necessary. In the course of ten years, extravagant expenditure had been equivalent to an increase in the income-tax of 7½d. in the £, and if the present rate were continued, a further increase of 7½d., or some equivalent increase of taxation, would become absolutely necessary. The only alternative was an increase of borrowing—a course that was viewed with abhorrence by every sound financial authority. We had already made too large an appeal to credit. Where had the £50,000,000 increase of expenditure gone? £40,000,000 had gone to the Army and the Navy. That increase of expenditure was defended, not so much on the ground of national necessity as on the plea that, compared with foreign nations, we were bound to maintain our relative position. It was therefore germane to the question to consider what had been the increase in the military expenditure of foreign nations. Our military expenditure (including Works Bills) in the course of ten years had increased by no less than 120 per cent., whereas the increase in the case of Germany was only 30 per cent., of France 25 per cent., of Austria even less, and of Russia only 6 per cent. Last year the military expenditure of the Empire, including India, was £90,000,000, whereas in Germany it was £43,000,000, in France £45,000,000, and in Russia £47,000,000. Our military expenditure had more than doubled in ten years, and in the case of no other country had it increased in greater ratio than 30 per cent. It might be said that the large cost of our military establishment was due to the system of voluntary enlistment, but he had shown on previous occasions that the cost of the pay in the Army and the Navy represented only a fraction of the total, and that the great bulk of the expenditure was attributable to material, equipment, nourishment, and other essentials; so that the excess of our military expenditure over that of foreign nations could be attributed only in very small degree to the system of voluntary enlistment as opposed to conscription.

As to taxation, of the £33,003,000 of new taxation imposed for the war, £27,000,000 were now necessary for peace expenditure;. He contended, however, that even with this large increase in the burdens of the country, we were not properly meeting our obligations. From all the estimates of expenditure as against revenue, the expenditure on borrowed capital, on Works Bills, was excluded. On the one side was the Sinking Fund of £6,000,000 or £6,500,000, and on the other side was he would not say secret borrowing, but "footnote" borrowing to the extent of more than £6,500,000. Last year it amounted to £7,000,000, and this year the Chancellor of the Exchequer feared it would amount to £10,000,000. Instead of paying off the borrowings made on account of the South African War, we were adding £3,000,000 to them. This constant recourse to the money market necessarily had a decided effect on cur credit. He submitted that the financial position of the country required the most careful consideration. After allowing for the reduction of interest on the Debt from 3 per cent. to 2½ per cent., it would be found that the course of our credit during the last five years had been distinctly less favourable than that of the credit of the great Empires of the Continent. Everyone must recognise that this comparative decline of our borrowing power would be a distinct disadvantage in any grave emergency. In the fourth place there was a tendency not to revise the estimates of expenditure presented to the House as fully or with as complete knowledge as was desirable. A Select Committee which sat last year made certain proposals under which hon. Members would have been able to call witnesses before them to go into the details of all items of expenditure. He believed that some measure of that kind was urgently necessary, and he regretted that the right hon. Gentleman the Prime I Minister had not seen fit to accept the proposals which were made by that Select Committee. He trusted, however, that he would be able to carry out that which they all desired, namely, to give the House an opportunity to discuss the present system of Estimates at as early a date as possible.

There was a further point to which it appeared to him necessary to draw the attention of the Committee. This country was becoming more and more dependent upon foreign funds for the maintenance of its financial position, and it was within the knowledge of everybody acquainted with financial affairs in the City that at the present moment foreign investments in British stocks were larger than they had ever been before. Although he would be the last person to quarrel with those foreign bankers who provided them with the money which they stood so much in need of there could be no question that the position was some what less satisfactory than when this country was self-contained and self-supporting. They had heard a good deal about the desirability of this Empire being self-supporting as regarded food. He ventured to say that the argumen in favour of this country being self-supporting in regard to money and credit was still more worthy of consideration.

The conclusion he had arrived at regarding all these points was that it was the bounden duty of the Chancellor of the Exchequer to assert the paramount claims of the financial situation to the earnest consideration of His Majesty's Government. Their finances were out of order and they must be put right. That appeared to him to be the most vital business before the Government and the country. In the second place he hoped the right hon. Gentleman would discard all those dodges of account which seemed to obscure the true situation, and which prevented the House and the country from understanding the real necessity and reality of the case. In the third place he ventured to express the hope that the right hon. Gentleman would realise that no system of taxation, however scientific, could put £100,000 or £1,000,000 into the coffers of the Treasury without taking it from the reproductive forces of the country. The more the Government spent on the Army and Navy the less the country had to spend on other things, and he trusted the Chancellor of the Exchequer would not be misled by the idea that scientific taxation could produce money from the clouds. This kind of taxation might obscure the incidence but it could not diminish the burden. In his opinion the only remedy for this position of things was to reduce the expenditure which rendered such heavy taxation necessary. He trusted that the Chancellor of the Exchequer would understand that what was urgently required was to reduce the expenditure in order to diminish the burden which now rested upon the trade of the country, and which in his judgment gravely prejudiced their position in case of war. If the right hon. Gentleman would grapple with the problem bravely and courageously, as he had no doubt he would, he was convinced that he would obtain from private Members on both sides of the House a support far in excess of anything which he might anticipate.

* MR. ASHTON (Bedfordshire, Luton)

said that hon. Members on both sides of the House appeared to recognise that the finances of the country were really in a critical condition at the present moment, but, nevertheless, he could not accept everything that had fallen from the lips of the hon. Member who had just sat down. He had spoken of the largely increased expenditure during the last twenty years, and he said that both sides of the House were equally to blame in that respect. Speaking for the Opposition side of the House he could not accept that position, at any rate for the last twenty years. The right hon. Gentleman the Member for West Bristol had told them that, during those twenty years, in the first seven years of that period the expenditure had only grown by £500,000 a year, but for the next seven years it grew at the rate of about £2,500,000 a year; and for the last nine years it grew by £4,250,000 a year. He could not forget that during the greater part of that time right hon. Gentlemen and hon. Gentlemen opposite had been responsible for the finances of the country, and for the first seven years during which the expenditure of the country was only raised by £500,000 a year they had at the head of the inances of this country a right hon. Gentleman who sat on the opposite side of the House, to whom was due more than to any other man the fact that during the last half century the expenditure of this country had been kept down—he alluded to Mr. Gladstone. It was owing to the fact that Mr. Gladstone was in office that the expenditure only rose by £500,000 a year, and it was because he was absent from the Government after that time that the expenditure had risen. He thought they were now in want of another man like Mr. Gladstone who would put his foot down and check expenditure. The right hon. Gentleman the Member for West Bristol did his best, but after a time he was overpowered by his extravagant colleagues, and he had to resign his position.

He wished to say a few words about the deficit of the past year, but before doing so he wished to congratulate the Chancellor of the Exchequer upon one point in his speech, and that was the way in which he accounted to them, for what they all deplored, namely, the decrease in the genera! trade of the country which had so much affected the revenue. He was glad to notice that he did not account for that falling off in the trade by what he would call Birmingham reasons. He told them straight that the falling off in their trade was in the first place mainly duo to the war; and, secondly, to the usual rise and fall in the prosperity of the country which took place time after time. He congratulated the right hon. Gentleman upon the fact that throughout his speech there was no sign whatever of the doctrines of tariff reformers. There was one point, however, in which he approached very near to those doctrines, and that was in regard to the tobacco tax. He did not pretend to understand much about the complicated details of that tax, but it appeared to him that he proposed to put 1s. extra on foreign cigarettes without putting an excise duty on home cigarettes. With regard to the question of the deficit, the Chancellor of the Exchequer gave them some very encouraging figures as to the way in which the Sinking Fund had worked in spite of the deficit with which he had to deal. That deficit amounted to £5,500,000. The right hon. Gentleman said he was able to show them that by means of the Sinking Fund the Debt had been reduced by £8,000,000. Even then, with the £3,000,000 that came out of the Transvaal Loin there was still to go towards the Sinking Fund £5,000,000. He congratulated the right hon. Gentleman upon that fact. But it was all very well to talk of having reduced the Debt, but what had been done to meet the deficit? He had met it only so far as £1,000,000 was concerned by making use of the unclaimed dividends on the National Debt. So far as the other £4,500,000 was concerned it was being met by the creation of fresh debt. The right hon. Gentleman had taken £3,000,000 which had already been raised and which ought to have gone to reduce the Debt, to reduce his deficit, and he had also taken £1,500,000 out of the balances. They heard a great deal Last year about the wonderful Sinking Fund that was going to be established, and a beautiful picture was drawn of how it was going to reduce the National Debt by £9,000,000 a year, and they were told that at the end of fifty years they would entirely extinguish the debt. It was rather a come-down to be told now that really about £500,000 was going this year to the Sinking Fund. That was a lamentable result during a year of peace. The late Chancellor of the Exchequer had made some very serious miscalculations in his Budget estimates last year.

And, it being half-past Seven of the clock, the Chairman left the Chair to make hi3 Report to the House.

Committee report Progress; to sit again this evening.