HC Deb 21 April 1904 vol 133 cc911-40

Motion made, and Question proposed, "That Income-Tax shall be charged for the year beginning the 6th day of April, 1904, at the rate of one shilling."—(Mr. Chancellor of the Exchequer.)

* MR. JOSEPH WALTON,

continuing his speech, said the Imperial and Local expenditure of this country had risen in recent years to £275,000,000, and it must necessarily constitute a most serious strain on our financial resources. The expenditure for 1903–4 amounted to nearly £147,000,000. The revenue, in spite of an income-tax of 11d. in the £ in a time of peace, in spite of the great addition that had been made to taxation otherwise by the increased taxation on sugar and tea, etc.,—in spite of all the increase in taxation, there was a deficit in that year of no less than £5,500,000. The right hon. Gentleman the Chancellor of the Exchequer had appropriated the repaid temporary Tansvaal loan of £3,000,000 and £1,000,000 from the unclaimed dividends which reduced the deficit to £1,500,000; but they must take into consideration the deficit of that year in conjunction with the estimated deficit for the year following, 1904–5, which together would amount to £9,200,000, although £4,000,000 had been provided for; that left a balance of £1,500,000 for the year 1903–4 unprovided for. In the financial statement, which had recently been issued, the Exchequer balances on the 31st of March, 1903, were stated to be £6,637,000, but they had been reduced this year to £4,264,000. He would point out that they would have been reduced to £2,264,000 but for the fact of the temporary borrowing of £2,000,000 on the credit of ways and means. The expenditure for the year 1904–5 was estimated at £132,880,000, while the revenue was estimated at £129,060,000, leaving a deficit of £3,820,000.

Whilst they had had a most interesting statement from the right hon. Gentleman on the question of direct and indirect taxation, he thought some further defence was needed as to the way in which the right hon. Gentleman proposed to provide for this deficit. The Committee could not forget that in the year 1902 the then Chancellor of the Exchequer had stated that the fifteenth penny was added to the income-tax to balance direct and indirect taxation. Owing to the extraordinary financial needs of the country during the course of the unfortunate South African War, additional taxation to an enormous amount was imposed, half of which was direct and half indirect taxation. Last year out of £45,000,000 of additional taxation, £10,500,000 was in the hands of the Chancellor of the Exchequer to give in remission of taxation, when instead of giving relief of taxation on the same basis as it had been imposed, four-fifths was given for the relief of the direct taxpayers, while only one-fifth was given for the benefit of the indirect tax-payers by the abolition of the corn tax. The question of the equitable incidence of taxation was a most complex one, but it was one which demanded, more than ever, the attention of the House and the nation. They must not overlook, in the interest of Imperial taxation, the incidence of local taxation. Out of 6s. or 7s. a week that a working-man paid for his rooms, one-third went for rates. If the man earned 30s. a week all the year round, 10 per cent. went for local rates. He also contributed to Imperial taxation in the form of indirect taxation another 10 per cent., making his contribution to Imperial and local taxation 20 per cent. of his entire income. That was a very heavy burden. He had paid his contribution towards the war in the increased price of his tea and his sugar, which were essentially war taxes, and when the war was over, the expenditure of the country ought to have resumed its normal condition. The working-man had a right to expect that these war taxes would be remitted, instead of which he had to face a Budget showing an additional tax of 2d. in the lb. on tea. The tobacco tax was not called into question on the Liberal side of the House, except so far as it was regarded as a protective tax. With regard to the tax on tea, he held very strongly, that it ought not to have been imposed, inasmuch as only one-fifth of the remission of taxation last year was given to the indirect taxpayers. He hoped that the additional tax upon tea had not been given in order to secure an extra amount with which to bargain in the future in any matter of the rearrangement of our fiscal system. He personally entirely disbelieved any insinuation of that kind which might be made against the right hon. Gentleman, but inasmuch as they had heard of proposals to remit taxation on tea in exchange for the imposition of taxation on bread and meat, it naturally occurred to him that the greater the tax on tea the larger would be the amount in hand with which to bargain if the other policy prevailed.

Speaking of the question of expenditure, and the urgent necessity that existed for retrenchment, he would like to point out that the total expenditure on the Army and Navy in 1891 was £33,000,000, for the year 1904–5, the estimated total expenditure was £66,000,000—double the expenditure of 1891. It had swollen until it amounted to £1 12s. per head of the population of this country. That was a most alarming increase, and it was the duty of the Committee to examine closely into this expenditure and consider whether this enormous strain should be placed on the resources of the country, and also to see that the country got value for its money. The Estimates for 1904–5 for the Army were £29,000,000. The right hon. Gentleman the Member for West Bristol in 1902, speaking at Bristol, said— The money we spend on our Army might be reduced if the War Office laid out the money it got to the best possible advantage, which nobody outside the War Office believes it does. The declarations coming from a Gentleman of the experience, knowledge, and standing of the right hon. Gentleman the Member for West Bristol that a very large reduction in the expenditure of the Army might take place without impairing its efficiency carried great weight. The Army Estimates this year showed a reduction of £5,000,000, the Navy Estimates an increase of £2,400,000. We ought not to shut our eyes to the experiences which were now being gained in the Far East, and for his part he believed it was a huge mistake to spend millions of money on enormous battleships when the experience of the present war showed that by a skilfully laid mine or torpedo—or perhaps in the not distant future a submarine—a battleship could be sent to the bottom in five minutes with all its crew. He asked, would it not be better rather than spend this enormous amount on huge battleships to be content with smaller vessels with heavy guns and heavily armoured which we could produce more quickly at a very much less cost. Every man in this House was convinced of the necessity of retaining the command of the sea, but the experience of the war in the Far East seemed to him to indicate that we were at the present moment proceeding on unnecessarily expensive lines, and that a more effective defence would be provided in the way in which he indicated at a very much less cost to the taxpayers. The enormous expenditure of £66,000,000 for the Army and Navy was, he pointed out, for the defence of the British Empire. Outside the United Kingdom, what contribution was made by the other parts of the Empire? The 5,000,000 of population of Canada enjoyed all the benefit of this huge expenditure, and it contributed nothing towards it. Some steps should be taken by the Government to come to some equitable arrangement, not only with Canada, but with the other self-governing Colonies, so that we might obtain from them—in the not remote future—some reasonable contribution to the enormous cost of Imperial Defence. Of the contribution of the Transvaal of £30,000,000 towards the cost of the war, the first instalment of £10,000,000 was considerably in arrear, and the Committee was entitled to some information as to the position of that contribution of South Africa. He did not believe for a moment that the Transvaal could not find this money, having regard to the price of the shares of some of the mines, which were many times their face value, and taking into consideration the immense fortunes which had been made out there in connection with transport during the war. He had never been able to understand why Natal and Cape Colony should not also have contributed to the cost of the war, which was undertaken, in fact, to repel the invasion by the Boers of those colonies. He certainly thought they should contribute a reasonable portion of the cost.

With regard to our National Debt we had not only now to consider the question of our Imperial debt, but also our local debt. Our indebtedness to-day on Imperial account amounted to £794,500,000, and upon local account to £412,000,000. £35,000,000 went to South Africa, and our responsibilities in connection with Irish land might amount to £100,000,000. These items totalled up brought our national responsibilities to no less than £1,350,000,000. A figure perfectly appalling. The Chancellor of the Exchequer was well advised to draw attention to the question of local expenditure, but he would point out that local expenditure was largely reproductive. Local expenditure amounted to £412,000,000, and, as he had said, that was largely reproductive. Let them compare that with the £230,000,000 wasted on the South African War. There was expenditure it was worth while to make, and there was expenditure that was only waste and folly. It was the unnecessary expenditure which the Committee had to restrict within the smallest possible limits. It was high time that we had a national balance-sheet showing the national assets on the one side, and the national responsibilities on the other, both Imperial and local. He saw with regret that the Select Committee for inquiring into the question of the income-tax, which the right hon. Member for Croydon, when Chancellor of the Exchequer, promised to appoint, was now to be replaced by a Departmental Committee, whose decision would not command the same weight. He. however, thought there ought to be referred to that Committee the questions of the rearrangement of the whole machinery and management of the collection and administration of this tax and of the method of assessment. The present mode of assessment was absolutely antiquated. Some method should be adopted which should be of universal application, and there should also be a readier means of obtaining back money which had been paid in excess. He regretted there had been no announcement of the abolition of the coal tax. That was a question that could be raised on the Finance Bill. He hoped the right hon. Gentleman would include other important branches of the subject in the departmental inquiry, not excluding a graduated system of income-tax.

* MR. SEYMOUR ORMSBY-GORE (Lincolnshire, Gainsborough)

congratulated the Chancellor of the Exchequer that he had seen his way to tread in the ordinary path of finance, and that he had not strayed in the more devious paths which had been indicated by the late autumn campaign. He was glad he had omitted, in introducing the new taxes, a tax on sugar. They had been told that owing to the stocks of sugar in hand the price had not been hitherto very much raised, but when the stocks were exhausted he felt perfectly certain that the cost of sugar in this country would be raised, at a cost to the people of this country every year of at least £12,000,000 to £15,000,000. Referring to the observation of the hon. Member for the Brightside Division of Sheffield that he would not object to seeing the death duties on personalty raised, he looked upon an increase of the duty on personalty more seriously than upon an increase of the duty on realty, because it would mean that the doctor, struggling all his life to provide for his family, and the lawyer, would have their hard-earned savings taxed, while the drone who lived in the mansion close by, and had never done a hard day's work in his life, would look forward to seeing his property go down intact or without any increased duty. The least objectionable of the new taxes was the income-tax, but, nevertheless, a high income-tax, among other drawbacks, automatically reduced the stamp duty, because it narrowed the spending capacity of the community and contracted capital which had been taken towards self-reproduction. Mr. Gladstone, speaking of the income-tax in 1859 and with regard to indirect taxation, said— I am deeply convinced that the facility of recurring to and maintaining income-tax has been the source of that extravagance in government which dates from the Russian War. That was the year Mr. Gladstone had prophesied the termination of the income-tax; it was then 4d. higher than it was in 1853. We were at a similar lapse alter the Boer war. and the income-tax was no higher now in proportion from what it was in 1859, and from what it was in 1855, in the ratio between before the late war and the present time.

With regard to the national credit and the National Debt, Lord Goschen, when he propounded his scheme for the conversion of the National Debt, certainly achieved a great success for a great many years, but he doubted whether he achieved much for the national credit. Our borrowing powers were not the same as those which we had before the conversion. For while the ostensible rate at which we could borrow was 2¾ percent., that was not the actual rate, because there were compulsory powers exercised on certain people who had to buy Consols and could invest in no other security, and therefore that could not be looked upon as the actual standard of our national credit. The flotation of the late Irish loan yielded £3 3s. per cent., and the Transvaal loan £3 2s. per cent., and the actual credit of the nation was not exactly what it was in Lord Goschen's time.

The long and short of it was that the sweet simplicity of the three per cents. had been exchanged for the vicarious irregularity of the two and a halves.

The hon. and learned Gentleman the Member for Waterford told them the other day that the total contribution by Ireland would be about £400,000, and out of that sum £300,000 would represent the tea duty. That would leave only £100,000 for the income-tax and the increase of the tobacco duty. Those figures showed that the income of Ireland, according to its taxable capacity, was a very small one, and it appeared as if that income would further decrease if the Land Act worked as well as they hoped it would work. The Chancellor of the Exchequer could not look in the future for a great revenue from the income-tax in Ireland. He (Mr. Ormsby-Gore) had never been able to ignore the fact that the financial relations between England and Ireland were very unsatisfactory. The Report of the Royal Commission by a large majority set forth that one-twentieth was the most Ireland could be expected to contribute to the Imperial revenue. At the present time taxes were levied in Ireland in a most unsatisfactory manner. Ireland obtained remissions in the dog tax, the carriage tax, the inhabited house duty, and armorial bearings. He would like to see a level struck in these four duties between England and Ireland and have Ireland taxed precisely the same as England. Probably the only tax that would weigh heavily in the event of such a change would be the dog tax, and, having regard to the horde of straggling curs that were usually to be found in Irish villages, an increase in the tax must prove very beneficial by clearing off some of those pests. He hoped no hardship would be inflicted on Ireland by this moderate Budget.

* MR. STUART SAMUEL (Tower Hamlets, Whitechapel)

congratulated the hon. Member for preferring a rise in the income-tax to one in the price of tea, as those opinions were very seldom expressed on that side of the House. It was somewhat significant of the manner in which finance was regarded that the Chancellor of the Exchequer had been the recipient of so many congratulations because he had not touched the Sinking Fund. Those congratulations reminded him of the young lady who was commended for being unaffected. But young ladies had no business to be affected nor had a Chancellor of the Exchequer any business to touch the Sinking Fund; that was an operation that always tended to lower this country's credit in the eyes of the world. He was sorry not to hear the Chancellor of the Exchequer make some reference to economy. They always regarded the holder of that high office as a kind of watchdog and a guardian of the public purse, but he had sought in vain for any reference to economy in the right hon. Gentleman's speeches. They heard a great deal about widening the basis of taxation, but very little about nar rowing the scale of expenditure, and he certainly should have expected the right hon. Gentleman to have given them some hope or suggestion that he would be in favour of reducing the present gigantic expenditure. In these days it was only from ex-Chancellors of the Exchequer that they could expect to hear words of caution and advice with regard to the necessity for reducing expenditure. It was a remarkable thing that no sooner did a Chancellor of the Exchequer quit office than he became actuated by a desire for economy, and it was more disappointing to find a new-Chancellor of the Exchequer assuming office in times of enormous expenditure without expressing himself in favour of reducing it. Reference had been made to the low price of Consols. No doubt the price of our premier security was unduly low, but that was due to the policy of the Government during recent years in admitting a large number of colonial and other stocks to compete with Consols as securities, in which Trustees are allowed to invest the funds entrusted to them. He would suggest that the Government should modify their policy in that respect, and also that relating to the borrowing powers of Corporations of towns having under 100,000 inhabitants. The Chancellor of the Exchequer had given them some very interesting figures concerning the prosperity of the country. If these were evidences that the country was bleeding to death he would be sorry to see any interruption of the process. It appeared to his mind that what the Government had to beware of at the present time was interfering with that prosperity by imposing undue taxation. He alluded more particularly to the increased tax on tea, as, to his mind, that would greatly inter- fere with the demand for that article and, speaking as representative of a working class constituency which was somewhat well known for its sobriety, he was afraid this increase would prove a great hardship. He sincerely hoped that when the Chancellor of the Exchequer came to consider the matter again he would raise the income-tax rather than impose further duties on the food of the poor.

* MR. HENRY HOBHOUSE (Somersetshire, E.)

said he quite admitted that upon the present occasion they had not heard very much in favour of economy, and that instead they had been favoured with the Chancellor of the Exchequer's rosy views concerning the prosperity and wealth of the country. He desired to give one or two reasons why he was an earnest supporter of the present Budget. He regarded it as an honest Budget, a free-trade Budget, and a Budget calculated to bring home to the mind of every taxpayer the necessity for economy in the expenditure on the Army and Navy. The heavy income-tax and the taxes on tobacco and tea might not be acceptable to the general public, but he thought that if any combination would prove effective in persuading electors that the expenditure of the country must be reduced, it was this combination. If they desired to enforce economy, this was the time for them to point a moral and adorn a tale. He regretted that the Chancellor of the Exchequer had not followed the example of his predecessors in commenting severely on the size of the expenditure, because he could not help thinking that it was to the Chancellor of the Exchequer they looked for such advice and admonitions. They all knew how perfectly helpless were the private Members of that House to secure economy of expenditure. It was true that private Members had some power of increasing the Estimates, but when it came to criticising the Estimates, they were very much at the mercy of Ministers. No Estimates could be criticised by hon. Members properly, unless they had far more information placed at their disposal than could be given in the course of a debate. They ought to be given a previous opportunity of examining officials as to the details of the Estimates, which they were called upon to discuss and approve. It was for that reason that he much regretted that the practical proposals made by the Committee on National Expenditure were in danger of being set aside. However wealthy and prosperous the country might be, the increase of the aggregate expenditure shown during the last ten years was most serious. He would not say anything about the war expenditure, but apart from that the rise in the ordinary expenditure had been so enormous that no country could permanently stand it, and no method of reducing that expenditure to reasonable bounds ought to be neglected. He feared nothing would be done in that direction without more motive power from outside, and for that reason he welcomed the present Budget. A heavy income-tax alone was not sufficient to move public opinion in the direction of economy. The Opposition condemned the increase of indirect taxation, but if they desired to strengthen public opinion among the masses in favour of economy they ought not to oppose such an addition to indirect taxation as was needed to produce an honest Budget. This Budget was an honest one. It showed how burdensome our expenditure was, not only to the middle classes, but to the working classes, and it ought to have the support of those who desired to see expenditure kept within reasonable bounds.

MR. BRYN ROBERTS (Carnarvonshire, Eifion)

said he quite agreed with the right hon. Gentleman who had just spoken that more motive power was required from the constituencies, but if that power were supplied the right hon. Gentleman and many of his friends would probably be removed from the House, because the unfortunate position in which the country now found itself was entirely due to the fact that nearly all the Members on the other side, and many of those on his own side of the House, committed the nation to an unjust, unnecessary, and extravagant war, of which the results were now being reaped. Expenditure depended upon policy, and a little cheese-paring here and there in the Estimates was useless as a means for replacing the country in the position it formerly occupied. What was required was a return to the traditional policy of the Liberal Party; there would then be no ground for the constant cries for economy. The remarks of the right hon. Gentleman with reference to the extension of trustee securities to the loans of local authorities appeared to be based on an erroneous view of the duties of the State and of trustees. The investments of trustees ought to be governed, not by the interests of the State, but solely by the question of the security of the trust. Trust funds usually belonged to widows and orphans, and to prevent their being invested in lucrative securities in order that the price of Consols might be kept up was altogether unreasonable. Some further defence was required of the methods adopted by the Chancellor of the Exchequer for dealing with the deficit. The right hon. Gentleman had urged that the Transvaal Loan should not be taken into account at all. It was true that it had nothing to do with the deficit, but it had a great deal to do with the methods adopted for dealing with that deficit. Nobody would deny that it was a bad and vicious system to borrow money in times of peace to pay current expenditure, but that was what the Chancellor of the Exchequer was really doing. This money was first of all borrowed from the public, it found its way into the balances, it was loaned to the Transvaal, when repaid it was returned to the balances, and then, instead of going back to the pockets of the public, it was used for current expenditure. The defence of the use of the £2,288,000 from the balances was equally objectionable. That money was borrowed for the South African War, and if it was not used for that war it ought to have been returned to the lenders. There was no justification for using it in operations against the Mullah or the Dalai Lama without the consent of those from whom it was borrowed. The meaning of these expedients was really that in time of peace, two years after the conclusion of the war, the Chancellor of the Exchequer had borrowed £5,000,000 for the purposes of current expenditure.

The present debate had been remarkable in two or three respects. The late Chancellor of the Exchequer had committed himself to the view that there ought to be a graduation of the income-tax. That was a most significant and hopeful sign for the future. The hon. Member for King's Lynn had held graduation to be impossible. It was doubtless difficult, but there was considerable difference between a difficulty and an impossibility. As to deducting the tax from dividends before they were paid to investors, the practice would doubtless be to deduct the highest limit, leaving it to the investor to claim a return of the overcharge on the production of the necessary vouchers, just as was done in the case of the present abatements. The system would probably be a little complex and difficult, but the complexity and difficulty would not fall on the Legislature or the revenue authorities, and it was no argument against the adoption of the proposal. As to the contention that the principle of graduation was indirectly applied in the death duties, that might have been in the minds of certain Members when the scheme was put forward, but the present Committee were by no means bound by such a consideration; they had to judge of matters on their own merits in the light of the present day. If the principle of graduation which was formerly regarded as revolutionary did not now frighten even a Conservative ex-Chancellor of the Exchequer why should it not be extended to the income-tax? In the matter of the other duties, it was recognised that they were war duties, and that the industries concerned would have a right to expect their removal in time of peace. The only question was as to which class of taxpayer had the prior claim to consideration. The tea and sugar duties, if they had not an equal claim with the income-tax to reduction, at any rate had a right to expect that in time of war they would not be increased, and if the income-tax, which stood at 1s. 3d. during the war, was now to be reduced to 1s., on what principle of justice could the tea duty, which stood at fid during the war, be justified now at 8d.?

He congratulated the Chancellor of the Exchequer on the earlier portion of his speech that afternoon. It was a sound, cogent, and effective free-trade argument. It was not so intended, but it was all the stronger on that account, The right hon. Gentleman had pointed out that, although expenditure had almost doubled since the "sixties." yet so great had been the free-trade benefits enjoyed by the country that the national income had actually increased in greater ratio. That was as strong a free-trade argument as could be adduced. But it was not an equally strong argument for expenditure. The increase in income had been gradual and progressive throughout the whole of the period, whereas the increase in expenditure was confined practically to the last ten years. It did not necessarily follow that a man, because his income had increased, ought to spend more money. The more money a man made the more he ought to put by for the benefit of those dependent upon him. It was the same with the nation. Very little was heard nowadays about leaving money "to fructify in the pockets of the taxpayers." There was nothing to prevent the continuation of the policy which held the field up to 1893. It was because we had departed from the policy of non-interference with other countries, of minding our own business, and keeping our fingers from picking and stealing the territories of other nations, that we were in our present deplorable condition. Nobody could contend that the country was in a safer position than ten years age, notwithstanding the lavish expenditure which had been incurred. As a matter of fact, the position was more precarious than before, because the confidence of the world at large in the honour, integrity, and justice of Great Britain had been shaken, with the result that other nations felt bound to take measures to protect themselves against us.

* MR. MARTIN (Worcestershire, Droitwich)

expressed the belief that if Mr. Goschen, when he had plenty of money in hand, and the credit of the country was rising, instead of reducing the interest on the National Debt from 3 per cent. to 2½ per cent., had increased the interest to 4 per cent., he would have done more to benefit future generations than was now the case. The duration of the loans would have been reduced to such an extent that a serious diminution in the amount would now be apparent. Instead of having a perpetual 2½ per cent. annuity, we should have had an annuity limited in its duration, and the National Debt would have been reduced by possibly £200,000,000 or £300,000,000. A further obvious advantage was that the Sinking Fund would have been removed from the possibility of all interference on the part of the Chancellor of the Exchequer. He hoped the Chancellors of the Exchequer in future years, when they had more propitious Budgets to unfold and more money in hand, would bear these points in mind, and endeavour to reduce the amount of these perpetual annuities. It was ridiculous that the people of the twentieth century should be paying interest on loans incurred for wars and other events of 200 years ago. There ought surely to be some limit on the burdens placed on posterity, and he hoped the right hon. Gentleman would bear in mind the suggestions he had made.

MAJOR JAMESON (Clare, W.)

said he thought the Chancellor of the Exchequer deserved great credit for the manner in which he had placed his proposals before the House. He thought there was one item which might have been avoided, and that was the additional tax upon tea. Taxation upon tea must always come home very heavily to the working classes, and more particularly to the poor peasants in Ireland. The way in which the right hon. Gentleman proposed to levy the tobacco duties, so as to enable the workmen in (his country to be able to compete with the workmen in foreign countries, was a good proposal. He wished to point-out to the right hon. Gentleman a method of taxation which would have taken the bitter sting out of the tax upon tea. He very much regretted that the shilling duty upon corn had not been reimposed. Whether this was owing to the fact that the Government were afraid of the false cries raised against the re-imposition of the duty on corn he did not know, but he defied anybody to show that bread was not cheaper with the shilling duty on corn than it was to-day. They had tried this shilling duty on corn, and it had not made the slightest difference in the price of bread. The Government ought to have had pluck enough to have put on that shilling duty again. Another suggestion he had to make was the imposition of a tax over and above the 4d. that now stood on German and other foreign spirits. He could not but wish that the right hon. Gentleman would do with a little less duty on tea and make up the sum by taxing the German solution of wood-shavings, sawdust, and sulphuric acid which was imported into this country. This stuff was supposed to be made into methylated spirits, but large quantities of it were made up either as Scotch or Irish whisky, which the unfortunate people drank. In this matter he was pleading the cause of the poorest people in a very poor country. He hoped the Chancellor of the Exchequer would give more consideration to what he had said about the great burden he was putting upon the Irish peasantry by this increase in the taxation upon tea. He wished the Committee to remember that 75 per cent. of the taxation of Ireland was indirect taxation and came out of the pockets and the stomachs of the people, and no taxation which was raised in that way could be considered satisfactory. The right hon. Gentleman had shown that as far as he dared he would protect the working-men, and he congratulated him. He believed the greater part of the House shared the right hon. Gentleman's opinions on the fiscal question. An enormous change of opinion had come over the country in the last six months. A few years ago if anyone had dared to say a word against free imports the roof would have been taken off his head in five minutes, yet now surprise was affected because the country had not been carried by storm in six months. He hoped the Chancellor of the Exchequer would do something to stop this nefarious trade in spirits, which was so detrimental to the agriculturists of England, Scotland, and Ireland.

MR. AUSTEN CHAMBERLAIN

The hon. and gallant Member has, as it were, invited me to follow him on to some very controversial ground, and, like some other hon. Gentlemen, has been anxious, I think, to tempt me away from the Budget to the discussion of questions not now before the House. I have laid before the House proposals which ate in perfect harmony with the established fiscal system in this country. I have not concealed my views from the Committee, and I think they are pretty well known. The Committee know also what are the pledges of the Government, and that it is in the spirit of those pledges that I have framed my Budget proposals. I therefore respectfully decline to depart from the subject of the proposals which I have laid before the Committee into an abstract discussion of our fiscal policy, which is out of place in this debate, and would only prolong it, very much to the detriment of the business of the Committee, without usefully serving any of the ends desired on one side or the other. I earnestly appeal to the Committee to conclude the discussion of this Resolution; I shall not attempt to force the judgment of the Committee, but it is generally understood that the general discussion which has been provided by the Income-Tax Resolution shall be finished to-night. The hon. Member for Barnsley has asked me whether I can give any further information as to the issue of the Transvaal war contribution loan. I am not in a position to make any more definite statement on that subject than I have already made. The issue of that loan must be dependent on two circumstances. It must be dependent on the prosperity of the Transvaal and upon the state of the money market. Anybody in my position would, I think, feel that it was absolutely impossible to go to the money market and attempt to raise a loan of this kind under the circumstances which prevailed both in the Transvaal and the money market here during the months which have elapsed this year, or until there was some improvement. How rapid the improvement may be I would not like to prophesy. All I can say is that until things have improved neither my right hon. friend the Colonial Secretary nor myself, for we must act together in the matter, can attempt the issue of that loan.

MR. JOSEPH WALTON

The obligation of the guarantors is not in any way affected by the delay.

MR. AUSTEN CHAMBERLAIN

The obligation of the guarantors to guarantee the first £10,000,000 is no way affected by the delay. Observations have been made on the subject of the large expenditure of the country, and it has been suggested that I am inclined to deal lightly with these heavy burdens, and that I am not as anxious for sound and wise economy as the Committee would desire. That is not so. I recognise that our burdens are heavy, and I do not wish to minimise them. Moreover, I am very anxious to reduce expenditure where reduction can be made with safety, but I do not think, as I have already said, that any admonitions from me would be any more effective than they were from my predecessors of far longer standing in this House and who spoke with greater authority than I can speak. All I have asked the Committee to do this afternoon is to bear in mind the facts of the case and not to exaggerate them. If one wants a cure, the first thing to do is to ascertain exactly what the evil is, and one's case is not strengthened by representing the evil as much greater than it really is. My right hon. friend the Member for East Somerset has complained that the private Member has under the present Supply Rules no adequate opportunity of urging economy. I differ as to that altogether. I know that my experience in the House does not compare with his, but I sat in the House for some years before the new Supply Rules were passed, and I know how we took two or three Votes on Account in the course of a session. We wrangled for a day over each one and then we were closured at the end of the day. A Vote on Account was put down in the ordinary Vote of Supply, and the whole day was often spent discussing such matters as the Royal Palaces and the various works executed under the First Commissioner of Works. A more profitless discussion in Supply it would be impossible to imagine than the discussion in those days, and I do not think what happened upon those occasions produced a favourable impression upon any land of business people who happened to be in the public gallery of the House at the time. Whereas formerly much valuable time was wasted in profitless discussion on unimportant matters, now those Votes are put down which the Government find, after inquiry, the Opposition are most anxious to criticise. I think the discussion of Supply is now far more effective than it was when it was taken in a fagged and tired House in August, when most Members had gone away under the doctor's order or under some more serious necessity.

Some criticisms have been made in regard to the comparative ineffec- tiveness of the present opportunities afforded for criticism in Committee of Supply, but I think criticisms in regard to the extravagance of the House come rather oddly from my right hon. friend the Member for East Somerset. He did succeed in obtaining a private Member's evening before Easter for the discussion of a Motion, and what was the Resolution he chose? After listening to his speech one would have thought that he would have selected the growth of expenditure or the extravagance of some particular Department, or that he would have submitted a He-solution with a view to limiting the outgoings of the Exchequer and controlling our reckless expenditure. But not a bit of it. The Motion which my right hon. friend put down was a Motion calling upon the Government to find more money for the training of elementary school teachers out of Exchequer funds. We already find the largest proportion of the expenditure, and yet the right hon. Gentleman used his opportunity to urge that we should provide more. Such expenditure may or may not have been desirable, but I think it is a little hard that the right hon. Gentleman should come down here and criticise the growth of our expenditure in view of the fact that when he had a whole evening to do what he liked with he utilised it in urging increased expenditure upon the Government. Some hon. Members talk very dolefully about the fall in our credit. But our credit is now better than the credit of any other nation, and it is better than it was twenty years ago. In 1884 the yield of Consols was £2 9s. per cent.; this year on 31st March it was £2 17s. 9d. per cent., and since then it has risen. We have been in office for eighteen years with a very small break, and we have been, according to the hon. Gentleman, extravagant, wasteful of the resources of the nation, and burdening its industry and commerce, and when the hon. Gentleman wants to prove that our credit is depressed, he takes the figure at which Consols stood four years ago, after fourteen years of reckless extravagance by this Government. He took a date when Consols stood higher than ever before. I thank the hon. Gentleman for recalling to me how great had been the rise in the value of Consols, and of the credit which is due to the Party of which I have the honour to belong as a Member.

We have agreed to take the general discussion on this Resolution, which is the Income-Tax Resolution. The hon. Member for West Clare has raised a point of a very important but of a highly technical character, which will be dealt with more appropriately when the spirit duty comes up for consideration. In the course of the discussion a desire has been expressed in various quarters of the House, that both the differentiation and graduation of the income-tax should be referred for consideration to the proposed Committee. In my opinion neither is practicable, and neither is desirable; and, holding these views, the Government would be misleading the country if they referred the questions as open questions to the Committee. In 1853 Mr. Gladstone, in the course of his great speech on the income-tax, declared that the differentiation of the income-tax would mean the destruction of the country's greatest finance instrument. The right hon. Gentleman the Member for West Monmouth also gave the same opinion only a few years ago. A great deal is said about differentiating between fixed incomes and incomes due to personal exertions. But how many prosperous concerns are there which have lost those who managed them and have not merely failed to return any income but have lost the capital of the undertaking? Take the case, however, of a man earning £10,000 a year due to his own exertions. He is to be assessed at a lower rate. But the widow, with a family of young children, with £500 a year is to be taxed at the full rate, subject to the ordinary abatements, because the income comes from investments. I think, on the other hand, that this is the person who is more deserving of further consideration, if possible, than the wealthy professiona man with his large income. It is also suggested that the tax should be graduated. I believe for myself—and I have strong authority for the opinion, which is not confined to this side of the House—that you cannot graduate the income-tax as long as you maintain what is the great safeguard of the income-tax—namely, the assessment of a large portion of the income at its source. If that is given up, the income-tax is ruined as a great engine for procuring revenue, and if you superimpose on an assessment at the source a further assessment in the case of wealthy people for the purpose of graduation, this will enormously increase the cost, will entail wholly new machinery, will become excessively inquisitorial, and will offend powerful interests. I do not think the House could devise a more ingenious way of making the income-tax unpopular, ultimately involving its total repeal. Suppose that there was an income-tax of 1s. in the £. Up to what amount would you graduate? Suppose you graduate up to 2s., and that incomes above £5,000 should be subject to this further graduation. If you take a lower figure you will have to inquire into the incomes of so many persons that the difficulties of collection to which I have alluded would become absolutely insuperable and intolerable. Suppose, however, the maximum to be 2s. I have made some inquiries of the Inland Revenue, and the authorities there think that it is a fair assumption to make, that if you start with incomes of £5,000 and graduate the tax from 1s. up to 2s., the average tax on those higher incomes might be taken at Is. 6d. They put the total amount of income which would be subject to graduation at one-fifth of the total income subject to income-tax. The tax would then yield £3,000,000 in addition. On that they advise me that you must deduct £750,000, not for evasions, but for legitimate avoidance of duty on income which might be removed abroad, but which at present is subject, to income-tax in this country. That is sufficient to show what a very delicate matter you are touching when you attempt to put these exceptional taxes on particular classes of income-tax payers. Therefore, allowing nothing for deliberate evasion, nothing for the greater inducements to understate income, nothing for the general alarm which would certainly be caused by any such proposal, and nothing for the increased cost of collection, which would be heavy, the possible gain is reduced to £1,500,000. That will not allow you to give much relief to other classes. Examined in detail, so great are the practical difficulties of this scheme, and so small are the possible advantages, that the opinion of Mr. Gladstone, reaffirmed by the right hon. Gentleman the Member for West Monmouth and the right hon. Gentleman the Member for West Bristol, must continue to hold the field. I think I have dealt with all the new points that have been raised since I last spoke—I hope not in an unnecessarily controversial spirit and not in a manner which will prolong discussion It has been a business-like discussion, and I would express the hope that it will not be carried beyond twelve o'clock to-night.

* MR. CAWLEY (Lancashire, Prestwich)

asked the right hon. Gentleman if he could give some idea when they were to have the £30,000,000 from the Transvaal. He suggested that the gentlemen who guaranteed the loan should issue it at once and underwrite it. At present we had a large deficit, and if they would guarantee the? per cent. loan as they had promised it would be of enormous benefit to this country to have the money, but if they waited until the country was very prosperous again they would be able to guarantee a 4 per cent. loan and make a large profit themselves, but it would not be of the same service to this country. The late Colonial Secretary spoke of the patriotism of those gentlemen but he did not think that would be very apparent to the ordinary individual. Supposing that Consols were in anything like the position they were in before, those gentlemen who were being extolled for their patriotism would really be putting money into their pockets by guaranteeing this transaction. His hon. friend was dissatisfied with the late Chancellor for taking off the shilling duty on corn. If anybody went to Chicago and bought corn he would pay the same price for it, whether there was a shilling duty here or not. Then who paid the duty? Of course the importer in the first instance, and eventually the consumer. They could not properly compare the price of Consols now with the price eighteen years ago. They must take the time when the late Colonial Secretary was the predominant influence in the Government. It was during those years, and through that influence, that the credit of the country had so seriously fallen.

MR. BOND (Nottingham, E.)

said a question of great importance had been touched upon in the course of the debate, and he wished to refer to it because it had a bearing on the question of the housing of the working classes. The Chancellor of the Exchequer in his admirable speech referred to the increase in the indebtedness of local authorities, and suggested that it was the duty of Parliament to take steps to chock that growing indebtedness. The course which the right hon. Gentleman suggested for adoption was to raise the rate of interest on the money which was advanced by the Public Works Loans Commissioners from 3⅛ per cent. first to 3¼ and then to 3½ per cent. Such an increase would be a serious hindrance to the construction of dwellings for the working classes, whether by local authorities or private companies. He understood the Chancellor of the Exchequer intended to discriminate with regard to the purposes for which loans were asked, and he hoped that discrimination would be exercised in favour of loans for building purposes.

MR. WHITLEY (Halifax)

said he agreed that there were difficulties which made differentiation between earned and unearned incomes for the purpose of income-tax almost impossible, but he suggested that when the income-tax was raised, as it had been in recent years, by 50 percent., there should be a proportionate increase of the death duties. That would put an addition to the burden on direct taxation upon inherited wealth, and to that extent would relieve the man whose income was derived from his own ability and industry. Taking last year and the current year together, the Chancellor of the Exchequer had had to I provide for a deficit of £10,000,000. Of that sum, £4,500,000 had been met by additional taxation, but, unless the right hon. Gentleman could show how he had met the remaining £5,500,000, he thought they must conclude that it had come out of borrowed money taken from the Exchequer balances. If that were the case, the right hon. Gentleman hardly deserved the compliments poured upon him for not touching the Sinking Fund, because he had done practically the same thing. This deficit of £10,000,000 exactly corresponded with the sum which the mine-owners of the Transvaal failed to produce in January last. If that £10,000,000 had been forthcoming, it would not have been necessary for the Chancellor of the Exchequer to call upon the consumers in this country to bear additional taxation.

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

said he wished to appeal to the Committee to allow the general debate to close.

MR. WEIR (Ross and Cromarty)

raised, as a new and novel point, the taxation of deer-stalking in Scotland.

And, it being Midnight, the CHAIRMAN proceeded to interrupt the business,

Whereupon Sir FREDERICK BANBURY rose in his place, and claimed to move "That the Question be now put."

Question put, "That the Question be now put."

The Committee proceeded to a division, and the Chairman stated that he thought the Ayes had it; and, on his decision being challenged, it appeared to him that the division was frivolously claimed, and he accordingly called upon the Members who supported and who challenged his decision successively to rise in their places, and he declared the Ayes had it, six Members only who challenged his decision having stood up.

MR. DALZIEL (Kirkcaldy Burghs)

remaining seated, and with his hat on, said he wished to call attention to the fact that when a division

was taken on a new Question the House should be cleared and the bells rung.

* THE CHAIRMAN

I am putting the Question now.

MR. DALZIEL

said that the previous Question had been put and decided, and a new Question was now being put from the Chair. Some hon. Members might have left in connection with the previous decision, and they would have received no intimation that a new Question was being put.

* THE CHAIRMAN

said he was about to clear the House of strangers, so that the bell might be rung, when the hon. Member interrupted him.

Question put accordingly.

The Committee divided:—Ayes, 214; Noes, 16. (Division List No. 90.)

AYES.
Agg-Gardner, James Tynte Cecil, Evelyn (Aston Manor) Faber, Edmund B. (Hants, W.)
Agnew, Sir Andrew Noel Cecil, Lord Hugh (Greenwich) Faber, George Denison (York)
Anson, Sir William Reynell Chamberlain, Rt. Hon. J. (Birm. Fielden, Edward Brocklehurst
Arkwright, John Stanhope Chamberlain, Rt Hn. J. A. (Worc. Fitzroy, Hon. Edward Algernon
Arnold-Forster, Rt. Hn. Hugh O. Clive, Captain Percy A. Forster, Henry William
Arrol, Sir William Cochrane, Hon, Thos. H. A. E. Fyler, John Arthur
Asher, Alexander Colomb, Rt. Hon. Sir John C. R. Galloway, William Johnson,
Bain, Colonel James Robert Compton, Lord Alwyne Gardner, Ernest
Balcarres, Lord Cook, Sir Frederick Lucas Gladstone, Rt. Hn. Herbert John
Ralfour, Rt. Hon. A.J. (Manrh'r) Corbett, T. L. (Down, North) Godson, Sir Augustus Frederick
Balfour, Rt Hn Gerald W. (Leeds Cox, Irwin Edward Bainbridge Gordon, Hn. J. E. (Elgin & Nairn)
Banbury, Sir Frederick George Crossley, Rt. Hon. Sir Savile Gore, Hn G.R.C. Ormsby-(Salop
Barran, Rowland Hirst Cubitt, Hon. Henry Gore, Hon. S. F. Ormsby-(Linc)
Bhownaggree, Sir M. M. Cust, Henry John C. Graham, Henry Robert
Bignold, Arthur Dalrymple, Sir Charles Greene, Henry D. (Shrewsbury)
Black, Alexander William Davenport, William Bromley- Greene, W. Raymond-(Cambs.)
Blundell, Colonel Henry Davies, Alfred (Carmarthen) Gretton, John
Bond, Edward Davies, Sir Horatio D. (Chatham Groves, James Gamble
Bowles, T. Gibson (King'sLynn Dickson, Charles Scott Hambro, Charles Eric
Brassey, Albert Digby, John K. D. Wingfield- Hamilton, Marq. of, L'nd'nderry
Brigg, John Disraeli, Coningsby Ralph Hardy, L. (Kent, Ashford)
Brodrick, Rt. Hon. St. John Dobbie, Joseph Harmsworth, R. Leicester
Brotherton, Edward Allen Dorington, Rt. Hon. Sir John E. Hay, Hon, Claude George
Caldwell, James Douglas. Rt. Hon. A. Akers Heath, Arthur Howard (Hanley
Campbell, J.H.M. (Dublin Univ. Doxford, Sir William Theodore Heath, Tames (Staffords., N.W)
Carson, Rt. Hon. Sir Edw. H. Durning-Lawrence, Sir Edwin Heaton, John Henniker
Cavendish, V. C.W.(Derbyshire Dyke, Rt. Hon. Sir William Hart Helder, Augustus
Cawley, Frederick Egerton, Hon. A. de Tatton. Helme, Norval Watson
Henderson, Sir A.(Stafford,W.) Milvain, Thomas Saunderson, Rt. Hn. Col. Ldw. J.
Henderson, Arthur (Durham) Montagu, G. (Huntingdon) Seely, Charles Hilton (Lincoln)
Hermon-Hodge, Sir Robert T. Montagu, Hon. J. Scott(Hants.) Seely, Maj. J.E.B. (Isle of Wight
Hickman, Sir Alfred Morgan, David J. (Walthamstow Shackleton, David James
Hoare, Sir Samuel Morpeth, Viscount Smith, Abel H. (Hertford, East)
Hobhouse, Rt. Hn H. Somers't E Morrison, James Archibald Smith, James Parker (Lanarks.)
Hogg, Lindsay Mount, William Arthur Smith, Hon. W. F.D. (Strand)
Hope, J. F (Sheffield, Brightside Murray, Rt Hn. A. Graham (Bute Spear, John Ward
Hope, John Deans (Fife, West) Murray, Charles J. (Coventry) Stanley, Rt. Hon. Lord (Lancs.)
Horniman, Frederick John Nussey, Thomas Wilans Stewart, Sir Mark J.M' Taggart
Hoult, Joseph O'Neill, Hon. Robert Torrens Stirling-Maxwell, Sir John M.
Hozier, Hon. J. Henry Cecil Palmer, Walter (Salisbury) Stone, Sir Benjamin
Jebb, Sir Richard Claverhouse Parkes, Ebenezer Talbot, Lord E. (Chichester)
Jeffreys, Rt. Hon. Arthur Fred. Percy, Earl Talbot, Rt. Hn. J. G. (Oxf'd Univ
Jessel, Captain Herbert Morton Pierpoint, Robert Thomas, David Alfred (Morthyr)
Johnstone, Heywood (Sussex) Pilkington, Colonel Richard Thornton, Percy M.
Kennaway, Rt. Hon. Sir John H. Pirie, Duncan V. Tomlinson, Sir Wm. Edw. M.
Kenyon, Hon. Geo. T. (Denbigh) Platt-Higgins, Frederick Tuff, Charles
Kerr, John Plummer, Walter R. Tuke, Sir John Batty
Kimber, Henry Powell, Sir Francis Sharp Ure, Alexander
Law, Andrew Bonar (Glasgow) Pretyman, Ernest George Valentia, Viscount
Lawrence, Sir Joseph (Monm'th) Pryce-Jones, Lt.-Col. Edward Walker, Col. William Hall
Lawrence, Wm. F. (Liverpool) Pym, C. Guy Walrond, Rt. Hn. Sir William H.
Lawson, Jn. Grant (Yorks., N. R Randles, John S. Walton, Joseph (Barnsley)
Layland-Barratt, Francis Rasch, Sir Frederic Carne Wason, John Cathcart(Orkney)
Lee, Arthur H. (Hants., Fareham Reid, James (Greenock) Welby, Lt.-Col. A.C.E. (Taunton
Lees, Sir Elliott (Birkenhead.) Remnant, James Farquharson Welby, Sir Charles G.E. (Notts)
Legge, Col. Hon. Heneage Renwick, George. Wharton, Rt. Hon. John Lloyd
Leigh Sir Joseph Ridley, Hon. M.W. (Stalybridge White, Luke (York, E. R.)
Leveson-Gower, Frederick N.S Rigg, Richard Williams, Osmond (Merioneth)
Long, Rt. Hn. W. (Bristol, S.) Ritchie, Rt. Hon. C'has. Thomson Willoughby de Eresby, Lord
Lonsdale, John Brownlee Roberts, John Bryn (Eifion) Wilson, A. Stanley (York, E.R.
Loyd, Archie Kirkman Roberts, Samuel (Sheffield) Wodehouse, Rt. Hn. E.R. (Bath)
Lucas, Col. Francis (Lowestoft) Robertson, Herbert (Hackney) Wolff, Gustay Wilhelm
Lucas, Reginald J. (Portsmouth) Rolleston, Sir John F. L. Woodhouse, Sir J T. (Huddersf'd
Lyttelton, Rt. Hon. Alfred Ropner, Colonel Sir Robert Wortley, Rt. Hon. C. B. Stuart-
Macdona, John Gumming Rose, Charles Day Wrightson, Sir Thomas
M'Arthur, Charles (Liverpool) Rothschild, Hon. Lionel Walter Wylie, Alexander
M'Crae, George Round, Rt. Hon. James Wyndham, Rt. Hon. George
M'Iver, Sir Lewis (Edinburgh W. Royds, Clement Molyneux
M'Killop, James (Stirlingshire) Rutherford, John (Lancashire)
Markham, Arthur Basil Rutherford, W. W. (Liverpool) TELLERS FOR THE AYES—Sir Alexander Acland-Hood and Mr. Ailwyn Fellowes.
Martin, Richard Biddulph Sackville, Col. S. G. Stopford-
Meysey-Thompson, Sir H. W. Sadler, Col. Samuel Alexander
Mildmay, Francis Bingham Samuel, Herbert L. (Cleveland)
Milner, Rt. Hn. Sir Frederick G Samuel, S. M. (Whitechapel)
NOES.
Ainsworth, John Stirling Levy, Maurice Wilson, John (Falkirk)
Allen, Charles P. M'Hugh, Patrick A. Young, Samuel
Channing, Francis Allston Shaw, Thomas (Hawick B.)
Edwards, Frank Taylor, Theodore C. (Radcliffe) TELLERS FOR THE NOES—Mr. Weir and Mr. Dalziel
Evans, Samuel T. (Glamorgan) Toulmin, George
Jones, William (Carnarvonshire Trevelyan, Charles Philips
Lawson, Sir Wilfrid (Cornwall) Whitley. J. H. (Halifax)

Whereupon the Chairman left the Chair to make his Report to the House.

Resolution to be reported upon Monday next; Committee to sit again upon Monday next.

Adjourned at twenty minutes after Twelve o'clock