FINANCE BILL.

HC Deb 28 July 1904 vol 138 cc1485-534

[THIRD READING.]

Order for Third Reading read.

Motion made, and Question "That the Bill be now read time."

MR. THOMAS SHAW (Hawick Burghs)

I beg to move as an Amend- ment that the Bill be read a third time this day three months. The circumstances certainly justify the course we are now adopting. We have a very good precedent in this course in 1894, when Sir J. Lubbock moved the rejection of the Finance Bill of that year and the Unionist Party voted solid in the attempt to destroy a scheme which subsequent experience has proved to be fraught with great benefit to the community. If circumstances then were strongly in favour of that course, I hold that they are ten times stronger now. For instance, in the present case force has been applied to the passing of the Bill. Therefore I say the circumstances are much graver now than they were in 1894, especially in view of the contrast between the situation in which we find ourselves now with regard to national finance and the situation which obtained at the beginning of the decade. But my primary objection to the Bill is that it lays an undue strain on the resources of the taxpayers. It fails in what I consider is the primary duty of statesmanship at this moment—the duty of retrenchment and circumspection in our finance.

In the ten years of uninterrupted Unionist domination the finance of the country has reached breaking point. Every lover of his country must view the situation with alarm. We are aware that for a while retrenchment was not a popular idea; it had become a by-word fit only to be used by those who held antiquated notions of our Imperial destinies. Now, however, there has arisen a change for the better. Retrenchment, economy, and circumspection in finance are again viewed with favour as cardinal elements of national and Imperial statesmanship. But it would be as well for one moment to see how our finances stand now as compared to those of 1894–5. In the latter year the total expenditure chargeable against revenue was £93,918,000, a sum which the greatest statesman of that generation declared to almost represent finality in our expenditure. This year it is £142,380,000. The expenditure has been increased by £50,000,000, equal to 24s. per head of the entire population, or an increase upon each family of five persons of no less than £6. Some of the taxation provided for in this Bill was put on while the war was in progress. The war is over, but the taxes still remain. The increase of taxation, too, has gone on all round. The expenditure on the Army ten years ago was £17,900,000, this year it is £29,450,000, an increase of £11,550,000. The net cost of the Navy ten years ago was £17,545,000. It has now reached the stupendous total of £36,889,000, or an increase of £19,344,000 in ten years. The military services of the Crown cost, ten years ago, £35,445,000,; now they have reached the appalling figure out of revenue alone to be provided this year of £66,289,000, or an increase of £30,844,000. It is well that the country should be reminded of these figures. We often hear high-sounding phrases with regard to our Imperial destinies, and we are apt to have great financial issues clouded by what are called Imperial methods. Let us be Imperial on both sides of the account.

I have said that the figures I have quoted are sufficiently astounding. But they make no allowance for Supplementary Estimates. The whole truth is not revealed by these figures. There is a system going on, insidious, silent, constant, automatic, of increasing the cost of the armed services of the Crown, and it does not appear in the Estimates. The system can only be found out by examining the various columns of figures affecting the National Debt. There is, for example, the automatic increase under the Naval Works Act, so that instead of the Navy costing £37,000,000 a year, it will in a few years time by the system of automatic increase amount to no less a sum than £54,000,000 a year. The time has clearly come for the House to record its protest in favour of retrenchment. I find also that in respect of the garrison in South Africa and its equipment for huts and other accessories, an expenditure of £5,500,000 is being incurred for a new area which has been acquired amid much waving of flags. It is not a new area for British expansion; it is only an area for British expenditure. How is it all to end? Is this peaceful little island to be turned into, as is apparently the opinion of some Members opposite, an arsenal or an armed camp? If this is part of the Imperial scheme, how does it look in figures? In order to defend the population of these shores and our Colonies, how much does the Empire contribute. Roughly, the outlay is £43,000,000 a year for naval defence; and the Colonies, including India, contributed, according to the Naval Estimates for this year, £431,000. The contribution from the Colonies is equal to 1 per cent. I say, in view of these figures, that you are standing upon an apex from which you are bound to totter and fall. In these circumstances, can any one doubt that there is need for economy, watchfulness, prudence—prudence in our walk and conversation among the nations of the world—an avoidance of bluster, and the maintenance of a quiet demeanour? It is only by practising these humble virtues that the country will be able to tread the road of Imperial safety.

I say that the true need of the day is I not for armament, but for a better educational equipment of the citizen. We spend £14,606,000 on education and £66,289,000 on the military forces. When I contrast these figures I cannot help thinking of the saying of Carlyle— Alas! so will it be till communities and individuals discover, not without surprise, that fashioning the souls of the generation by knowledge can rank on a level with blowing their bodies to pieces with gunpowder. What is the proposal of this Bill? Instead of finding a reduction of expenditure, demanded of a prudent Government, I discover in the financial arrangements of the year, set and determined devices to avoid a deficit. I do not desire to deal in detail with these matters, but I would like to call attention to the way in which the unclaimed dividends have been seized by the Chancellor of the Exchequer to stop a hole in his finance. The right hon. Gentleman has taken money that should have been a credit to capital and turned it into a credit to revenue. He has unquestionably allocated too small a fixed amount for the Debt charge of the year. He has fixed it at £27,000,000. That is not enough. Then there is the question of the Transvaal and the ware contribution. The right hon. Member for Croydon said last year— We confidently hope to obtain from the Transvaal this year—and it will be obtained immediately—a sum of £4,000,000 out of the guaranteed loan, and in the course of the three following years a further sum of £30,000,000 by way of contribution towards the expenses of the country. Where is the £10,000,000? It was underwritten, but there is money from neither the Transvaal nor the underwriters. The Transvaal has its financial Budget, and in that Budget for the year ending June, 1905, no provision is made for paying to this country even the debt of £10,000,000 which was due in January, 1904. My contention is that in these circumstances it is utterly improper finance to treat that contribution as if it were paid. But it is a way the Government have of doing things whenever the Transvaal comes in. You are to treat the opinion of a country which is not self-governing as if it were self-governing, and you are to treat a debt which is not paid as if it were paid, and finance accordingly.

The National Debt itself is an illustration of the very argument which I have been using as to the need for a large allowance being annually made for the automatic reduction of the Debt. The war added £159,000,000 to the National Debt, and not a penny of that has yet been covered. According to the last published figures the Debt stands at £794,000,000, and it is a serious consideration that it is necessary to go back thirty years to find a parallel to such a scale of debt. Not since 1870 have we had a Debt of more than £793,000,000. Prior to the war the Debt stood at £638,000,000; it now stands at £794,000,000, and we have lost thirty years of sound finance. What was it that gave us our endurance—and this is the Imperial side of the question—in the wearisome conflict with that little Power in South Africa? It was not our preparedness for the conflict, or our wisdom under arms, but the strength of our finance which had been buttressed by the wisdom of successive Chancellors of the Exchequer for a long period of years. There were two sources to which we owed the strengthening of our hands in that conflict. The first was the splendid line of Chancellors of the Exchequer. beginning with Sir Stafford Northcote, who established the new Sinking Fund, and who loyally adhered to it year after year, thereby reducing the indebtedness of the country and enabling it to undertake the sudden spasm of a necessary increase. The second was my right hon. friend the Member for West Monmouth, who had the resource and skill to tap a new and splendid source of revenue. These were the two strengtheners of Empire, who, without using or appropriating to themselves high-sounding names, silently worked; the first lightening the overwhelming burdens of the country, and the other broadening and deepening the foundations of the great fabric of our national credit. These are the men who ought to be honoured.

Sir, my complaint against this Budget is in both directions: first, that it is not adequately loyal to the principles of the reduction of the National Debt in the sense which I have described and, secondly, and more important, that it totally fails to tap any fresh source of revenue. Many such sources of revenue have been referred to. Three have been mentioned in these discussions. The first is a graduated income-tax. What has the Chancellor of the Exchequer done with regard to that? He has appointed a Select Committee to inquire into the questions of evasion and over-payment, but the question of graduation is excluded from the sphere of its operations. I never heard of such a proposal. It is touching the merest fringe of the subject. Everything connected with a graduated income-tax would becognate with the questions of evasion and over-payment, and yet that question is expressly excluded. "It is impossible," says the Chancellor of the Exchequer. Very well. That was the word which Napoleon called a beast of a word. It was the word used with regard to the death duties. The whole scheme was impossible it would never work. Estimable men in this House predicted that less revenue would be derived from the death duties in consequence of the Bill than before. Consequently, I am not alarmed when a Chancellor of the Exchequer deals with a question by whisking it out of the way and saying "Impossible." It has also been urged in these discussions that there is a constant leakage from the finances of the country through subventions to local authorities. How can it be stopped? You cannot suddenly withdraw these subventions, but you can provide local authorities with a power of tapping, in lieu of Imperial institutions, a new source of revenue within the ambit of their own jurisdiction. The third point which has been mentioned in these discussions is the question of high licence duties. I suppose the Chancellor of the Exchequer would say to me, "I will not have these things, because I do not believe in them." I put this point to him. We are familiar with the ideas of urgency, Imperial safety, and commercial stability, which have been strongly pressed upon us from important quarters. If the right hon. Gentleman will not tap new sources of revenue in which he does not believe, why in the name of common honesty does he not tap new sources of revenue in which he does believe? I can understand plain men in the ranks of his own Party, or part of that Party, saying, "We are feeling these burdens; we believe in the danger to the Empire; we think that that danger is most urgent; we believe that £15,000,000 could be got by a 10 per cent. duty upon imported manufactured articles, and we agree that we ought to surround and protect the pioneer if he is attacked." Holding those views, they would not, I think, consider that this is an honest Budget. It appears to me not to be a Budget in accordance with profession or with the faith that you have in financial affairs. Why this avoidance of resort? Why the minimum of courage in this Budget? It is because the ship is sailing as a free-trade merchantman in a very narrow strait, but it will emerge soon into the open waters, and hoist the black flag of protection, and provoke the hostility of every nation on earth. In this respect the Budget is unique. It has been the fine tradition of this country that in financial affairs when your opinions or faith change your policy must be altered. The Budget is unique not because it represents the failure of the Government in the matter of retrenchment, or to draw upon new sources of revenue, nor even in the fact that it strains to breaking point the resources of the people, but because it is not in accordance with the faith of those who introduce it. My last word upon the subject, compelled by a sense of duty, is this: I believe there is no national danger greater than that of a Government charged with the revenue and expenditure of the Empire, which fails in the first and highest duty of statesmanship, viz., to be true to its own financial faith. I beg to move.

MR. WHITLEY (Halifax)

, in seconding the Motion, said that all who took an interest in the financial affairs of the country were entitled in the present condition of affairs carefully to examine the Bill to which the House were asked to give a Third Reading. The Chancellor of the Exchequer could not complain if his attitude was closely scrutinised. It was at any rate to the credit of the right hon. Gentleman that he had had the courage to avow his principles; he had sailed under no false flag, and knowing what his principles were the House were bound to ask what manner of Budget he had produced as his first attempt. The hon. and learned Member for Hawick Burghs had called attention to the manner in which the right hon. Gentleman had met his deficit by drawing upon funds which properly belonged to capital account. To meet a deficit of £10 000,000 the right hon. Gentleman had only found £4,500,000 from revenue sources, and he had covered the balance by abstracting money which properly belonged to the capital side of the account. They could not look upon that as satisfactory finance. The country should be taught that it would have to find this money, and to meet a deficit by taking money which ought to go to the reduction of debt was not straightforward. He could not congratulate the Chancellor of the Exchequer upon the soundness of his balance-sheet.

They were forced to look at the nature of the taxes proposed. The right hon. Gentleman was raising rather less than half his revenue by new taxes, and upon this question he thought he was justified in taking for comparison two years, the current year and the preceding year. Taking the two years which had elapsed since the war, what did they find? That when taxes were put on they were imposed upon direct and indirect taxation in equal proportions; but when they had to be taken off, the proportion taken off was four to one in favour of the rich. Last year it was the income tax-payer who was first relieved, and the amount taken off direct taxation was four times the amount taken off the shoulders of the indirect taxpayer. That was one of the reasons why they had so stoutly fought the proposals of this Bill. They should leave money when they could in the pockets of those who most needed it, where it would fructify in the trade of the country and lead to increased employment in factories and workshops and greater comfort in the homes of the people. There was one new tax upon which the Chancellor prided himself to no small extent in the early stages of his Budget — he alluded to the tax upon stripped tobacco. That was not now so I great a matter of pride, because there never was a tax which had been so hopelessly riddled by argument and left without a leg to stand upon as that unfortunate tax. The right hon. Gentleman had admitted, by withdrawing one-half of the tax, the unsoundness of his proposal, and he was sorry that the Chancellor of the Exchequer had not had the courage to "go the whole hog" and remove the other half as well after he had found out his mistake. He had no personal interest in the tobacco trade, and his constituency was not interested, but he thought this tax illustrated the fallacy which existed in the protectionist mind. He was not surprised that the right hon. Gentleman had made this mistake, because it was an error which was common in countries with high tariffs and drawbacks. In the tin-plate trade there was more money paid in drawbacks than for tin-plate goods, and that, would happen in any country that adopted the policy of the right hon. Gentleman the Member for West Birmingham. By this tax on tobacco they were enabling certain persons to make profits at the public expense, and they introduced all the attendant evils to such a system.

The next point he wished to refer to was how this Budget had affected what he might call our heritage in South Africa. They had had many promises and prophecies. It was scarcely more than twelve months ago since the distinguished relative of the Chancellor of the Exchequer gave the House a glowing account of how much money they were going to receive from that land of promise in South Africa. He confessed that he had read with no little indignation a recent speech made by Lord Milner in which he spoke of the crocodile tears which some persons had shed over the finances of the Transvaal. In introducing the Estimates for the current year in the Transvaal Legislative Council, Lord Milner pointed the finger of scorn at the Budget of this country, and asked, "What right have you in the mother country, when you have an assured deficit yourselves of £5,500,000, to shed crocodile tears over our finances when we have no deficit at all?" But how was it that there was no deficit in the Transvaal? Because of the laxness of the Chancellor of the Exchequer and his colleagues, who had permitted Lord Milner to place burden after burden on this country which ought properly to be paid by the taxpayers of the Transvaal. He had endeavoured to make out a little account upon this subject. In the first place there was this £30,000,000, the first instalment of which was due last January. The Chancellor of the Exchequer had just stated that not only had he not received that instalment, but no provision had been made for the next twelve months, and yet the right hon. Gentleman had made no protest whatever to Lord Milner. He did not know how long he proposed to remain quiescent in this matter. Then there was £1,250,000 on account of railways which remained unpaid, and, as far as he could ascertain by Questions, no attempt had been made to get that claim settled. There was also spent on capital account £3,500,000 on barracks in South Africa. That was spent out of money borrowed for a term of thirty years under the Military Works Act. How were they going to stand with relation to the Transvaal when it got self-government, in respect to the millions we had sunk there? We were piling up debt while they were I using the property. It was a curious thing to spend out of capital account, on a thirty years term, money of this kind, in a country to which we had the avowed intention of speedily giving self-government. Under capital account, we had I placed on the shoulders of the people of this country £35,600,000, which ought, according not only to prophecies but promises, to fall on the Colony. In addition to that we were paying £3,100,000 for the military force in that country.

The only plea put forward in defence of this kind of finance was that it was no good pressing for these payments, because they could not be paid. Was that really the case? He did not believe that the Chancellor could even attempt to prove it was the case. The so-called 10 per cent. profit tax on the Transvaal mines was one of the promises of the right hon. Gentleman the Member for West Birmingham. It was really working out at something less than 3½ per cent. on the profit—something less than half the amount the gold mines had gained from the reduction in the cost of dynamite through the change of Government after the war. The owners of the gold mines were actually saving money on the taxation paid under Mr. Kruger's Government, and at the same time they were pleading that they could not pay their debts. If this 10 per cent. had been fully paid last year the amount obtained would have been £350,000, but the Treasury only received £117,000. He found the gold mines had been permitted—and he supposed the Chancellor of the Exchequer must have given his approval—to value their lives at only fourteen and a half years. He noticed that when the chairmen of the companies were speaking to the shareholders they talked about thirty years as the life of the gold mines; but when it came to paying taxes to the Treasury, fourteen and a half years had been permitted on the part of the Government to be the calculated term. Presumably the mining companies in their own accounts made proper provision for depreciation, yet they were not taxed on the profits appearing in the balance-sheets, but on considerably less than half those sums, so that the plea of the poverty of the Transvaal was one which was no answer. It was, after all, a comparative question. Were they less able than the taxpayers of this country to meet the payment of these large sums of money? Those who knew the condition of trade in this country during the last few years would agree that a burden of £35,000,000 of capital and £3,000,000 of annual expenditure was one which the people of this country could not bear without great distress. He sincerely hoped that we should not see another Budget like the present in this generation. The last ten years had seen some strange finance in financial circles, but he did not think there had been anything more strange or more unsound than the present Budget. It was a kind of warning flag to the people of this country as to what they might expect if they gave credence to what were called the new theories of finance.

Amendment proposed— To leave out the word 'now,' and at the end of the Question to add the words 'upon this day three months.'"—(Mr. Thomas Shaw.)

Question proposed, "That the word 'now' stand part of the Question."

* MR. SPEAR (Devonshire, Tavistock)

said although he should certainly vote against the Motion for the rejection of the Bill, he readily admitted that the greatly increased expenditure of this country must give rise to anxiety in the minds of men, or, at any rate, of business men. Therefore he thought it very desirable that the discussion should arise. The hon. Member for the Border Burghs emphasised the necessity for economy, but he himself could not help remembering that if the many projects which had been brought forward on the Opposition side, including payment of Members, had been carried into effect, they would have entailed upon the taxpayers a very considerable additional burden. Believing that the maintenance of the Army and Navy in a state of efficiency would contribute to peace, he strongly felt that money spent wisely and well on those forces was a necessary and desirable national insurance. Much of the increased expenditure had arisen in providing better pay, clothing, and food for the soldiers, and with that expenditure he was in hearty accord. As an opponent of conscription, he had always said that unless this country treated soldiers better in the future than in the past, it could not expect to maintain the Army in a state of efficiency. He believed the increased cost of the Navy had Leen money wisely spent, because it was absolutely necessary that the Navy should be sufficiently strong to protect our food supply in time of war. In connection with the unpleasant incidents that had just occurred between this country and Russia, and hoping as he did that not a stone would be left unturned in aiming at a just and peaceable settlement, he recognised in what an unfortunate position this country would be if it had not an Army and Navy sufficiently strong to protect the dignity and just rights of the country. He quite agreed with the hon. Member for the Border Burghs that there had been considerable dislocation of expenditure consequent on the South African War, and that that had been one of the chief causes of the increase in expenditure; but he ventured to say that the war was rendered inevitable by the Majuba settlement, which though made in the best interests, proved disastrous. It could not be urged that all the responsibility for that expenditure rested upon the Ministerial side of the House. Turning to the Navy, he said it was perfectly monstrous that the Colonies, which depended upon the throughly efficient Navy of this country, should not contribute towards it more than £431,000 per annum. He could not help thinking that if the matter were represented to the Colonies they would readily see the reasonableness of making a larger contribution.

He admitted all the arguments that had been brought forward in favour of economy, and he thought the suggestion of the hon. Member for Exeter that there should be a Committee to review the expenditure a capital one. He hoped the Government would take good care that the expenditure on large salaries did not increase. He thought it was wrong that the Law Officers of the Crown, notwithstanding their great ability, should be paid partly by salary and partly by fees. It was not a businesslike way of proceeding.

* MR. SPEAKER

This would be more material on the Votes for the salaries of these hon. Gentlemen when it comes before the House.

MR. SPEAR

said he had no desire to go further into that matter. Connected as he was with many public bodies, he must say that he never heard more unbusiness like discussions in his life. First, there was the discussion on the coal tax, and even though the Board of Trade Returns showed that that industry had derived more benefit from the war than any other, the proposals of the Government received the strongest opposition from all the Members on the other side of the House. Again, hon. Members opposite were opposed to the imposition of additional taxes on spirits and cigarettes, and a considerable amount of time was wasted over the income-tax. He did not want to increase the income-tax or any other tax, but he held that when national responsibilities had to be met, all classes of the people should bear their fair share. Hon. Members opposite were very anxious to save the rich coal-owners from their legitimate contributions to the revenue of the country, to save cigarette smokers and spirit drinkers, and at the same time proposed to increase taxation on the industrial industry by moving an Amendment to the Bill under discussion discontinuing the Agricultural Rating Act. Hon. Members opposite had not shown a discriminating sense of justice in appropriating the taxation of the country on different classes of the people. It had been said that the contributions to the national burdens should be made according to the paying powers of different classes of the people. With that he agreed; but when hon. Members opposite proposed to increase the burdens on the agricultural community, he confessed he was very much surprised. Recent Returns showed that the income of agriculturists had, during the last thirty years, declined £70,000,000, and that the agriculturists of the country had not received a penny of interest on their capital during the last twenty years. [OPPOSITION ironical laughter.] Oh, yes. He had had experience as an agriculturist, both as a landlord and tenant, and he did not hesitate to say that the average British agriculturists had not received a penny of interest on their capital. They had, perhaps, been able to make bread and cheese for themselves from their labour, but no more. He wished to protest against the efforts of hon. Members opposite to impose fresh taxation on the agricultural community through the Budget. He insisted that the repeal of the Agricultural Rating Act would be to place additional taxation on the agricultural community, because so considerable had been the natural increase of the rates that the farmers were paying to-day as much in rates as they were paying before the Agricultural Rating Act was passed.

* SIR WILLIAM HOLLAND (Yorkshire, W.R., Rotherham)

said he would like to express his obligation, and that of a great many Members of the House and of people outside the House, to his hon. and learned friend the Member for the Hawick Burghs for his powerful indictment of the unwarrantable extravagance which unfortunately at present prevailed in high places. The debates on the Budget had been very interesting, but in some respects very humiliating. It had been a humiliating spectacle that so many Members of the House had had, day after day, to defend various businesses from attack, not by foreign competitors or foreign Governments, but by our own Government. Certain sections of the tobacco trade, the coal trade, and, of industries employing sugar as a raw material, had been thus attacked. In the case of the coal tax, he held that the export duty on coal had just the same effect as if every foreign country had discriminated against us, and against us alone, to the extent of that duty. And the measure of their indignation at such treatment ought to be the measure of their condemnation of the continuance of the coal tax. Then, there were the new tobacco duties. In the course of the debate on that subject it was stated again and again that the extra duty of 3d. a pound on strips would in effect very likely involve some firms in absolute ruin; and he presumed that half the amount, which had been substituted for the original 3d., would be likely to half ruin some firms. They prided themselves in that House on being fair. At least they tried to be, although they might not always succeed. But he could not bring himself to consider a tax a fair one which could be shown to be likely to have as its effect the half ruining of some individuals connected with a particular trade. At any rate, the new tobacco tax had demonstrated very effectually the utter futility of any Chancellor of the Exchequer attempting to hold the balance with absolute fairness between different branches of a great trade. That was the main reason why he objected to the complicated and delicate machinery of some of our industries being upset and interfered with by Chancellors of the Exchequer. He was sorry the arguments against the continuance of the war taxes on tea and sugar had been of no avail. The taxes on coal and on sugar had had the effect in their respective trades of diminishing employment. The increased duties on sugar and tea had also had the undoubted effect of increasing the cost of living. So that they found themselves face to face with these unhappy circumstances, that many of the workers were earning less at the same time that they were made to spend more. It was not easy to exaggerate the importance of the proposal to have all duties removed from alcohol used for manufacturing purposes, especially from the point of view of the employment of our people. By the continuance of those taxes it was quite clear that we were playing into the hands of foreigners, and not only admitting foreign goods into our market on equal terms with our own, but by placing embargoes on our own goods we were virtually giving a preference in our own markets to foreign goods. He maintained that it was high time to put a stop to such folly. This was a case of preference turned topsy-turvy, and he was strongly opposed to it.

* MR. FENWICK (Northumberland, Wansbeck)

said that the hon. Member for Tavistock stated, very truly, that they complained very bitterly of the coal tax; but the hon. Gentleman approved of it as a fair tax, because he said it was levied on those who made a large amount of profit during the war. It was pretty evident, however, that the hon. Gentleman had not followed the course of the debates on that tax, and that he had thoroughly failed to appreciate the argument which those of them who represented constituencies affected by the tax had attempted to bring to the notice of the House. There was no doubt that coal-owners who produced for the home market during a time of inflated prices made a very considerable profit. But the Government, in proposing the tax, did not touch the man who produced for the home market. It was the producer for the foreign market who was affected. He was the man who made the least profit in the coal trade, because he had to regulate his price in competition with foreign producers. No coal was imported into this country; and the producer for the home market had a monopoly, and was able to charge what prices he pleased, and he got them too. But men who produced for the foreign market—and 80 per cent. of the coal produced in Northumberland was sent abroad—made the least profit of all engaged in the coal trade during the three years 1900, 1901, and 1902. Yet it was on that branch of the industry that the tax was imposed. He could not help feeling amused at the observations of the hon. Member for Tavistock. The hon. Member said that the best way to maintain peace was to be prepared for war. He himself had often heard that statement; but it seemed to him that it rested on a fallacy. He believed, with the late Lord Randolph Churchill, that the possession of a very sharp sword produced an irresistible temptation to test its efficiency in a practical way. When a nation or a trades union felt that it was in a state of warlike efficiency, there was a tendency to become arrogant and arbitrary in dealing with its opponents, and to desire to provoke hostilities.

He only desired to eater his protest against this Budget because he believed that it dealt very unfairly with the working classes. The working classes of this country were not indisposed to bear their fair share of the burden required to maintain this vast Empire; but he did not believe that the Government had distributed that burden anything like fairly or equally over the citizens of the whole Kingdom. The right hon. Gentleman the Member for Croydon, in a speech delivered to his constituents in November last, said that the total amount of taxation, direct and indirect, imposed for the purposes of the war was £38,250,000. When the first remission was possible last year, how was taxation remitted? Four-fifths of the remission was on direct taxation and one-fifth on indirect taxation. Further, in the present Budget indirect taxation was increased to the tune of £2,550,000; and those who were given the least remission had now to bear the greater burden of the war. His hon. friend who moved the rejection of the Bill said that it, was two years ago since the war was over; but on the authority of the Government it was four years; yet the working classes were still called upon to pay this enormous taxation on the food on which they supported themselves and their families. He often wondered whether hon. and right hon. Gentlemen ever endeavoured to ascertain what this huge expenditure meant to the working classes. It had been computed on very high authority that the national expenditure, including the interest on the National Debt, and the expenditure on the Army, Navy, and Civil Service, was equal to a charge on the wage-earners of the country of no less than two hours per day; or twelve hours per week of six working days. That was a very serious matter; and if it were not that the Government managed to conceal it by the method in which it was levied, they would not be able to continue to draw this huge burden from the working classes. This burden was very unequally distributed; and it was because of that that he wished to enter his protest against the exorbitant figure at which the national expenditure stood. He did not believe that they would ever be able to economise so long as the present Government remained in office. The Government appealed in 1895, and not unsuccessfully, to the working classes of this country for support for a programme which they themselves declared to be one of wholesale social reform. They got a second verdict in 1900 under false pretences; they exploited the patriotism of the country for the maintenance of their own Party; and he, therefore, as representing a large industrial community, protested against the extravagance which had been shown by the Government in all their public affairs. They had subsidised special classes and special interests; and the working classes, to whom they were indebted for their majority on two occasions, were left absolutely unprovided for. Only this year they were promised in the King's Speech a measure to extend the Workmen's Compensation Act to other industries; but not one single step had been taken in that direction. Even the Bill was not introduced. Therefore, on behalf of those whom the Government had plundered, whose interests they had raided, he entered his most emphatic protest against this Budget.

* SIR EDGAR VINCENT (Exeter)

said he was glad to hear the vigorous protest against extravagance which had just been made by the hon. Member. Whatever the tendency of the Government might be, he did not think that extravagance would have reached its present pitch if speeches such as that to which the House had just listened had been delivered earlier and more frequently. He hoped the new leaf which had now been turned over would remain open for a long time; and that hon. Gentlemen opposite would continue to resist the absurd extravagance which prevailed. He believed that if the working classes felt the burden of taxation to be excessive there was only one remedy, namely, the reduction of expenditure. He did not see how any readjustment of taxation as between direct and indirect taxation could be made with any general advantage to the financial position in such a way as to give relief to indirect taxation. It was admitted, on all sides, that the income-tax payer, who was the first to be called upon to contribute to war expenditure, should have that tax reduced during peace time to a level which would allow of the increase that would be necessary in time of war. He believed no authority would hold that an income-tax of 1s. in the £ was a proper level for a peace tax. Therefore, ingenuity must be exercised, and an effort must be made to get the income-tax down to a level which would allow for a reserve in time of war. With reference to expenditure, he had observed with regret that the Government had not taken any steps pursuant on the Report of the Select Committee appointed to examine what method could be devised to increase the control over expenditure by this House. No one would contend that the present system was satisfactory. The Committee went into the matter very thoroughly. Their Report might be on sound lines or it might not. Personally, he believed they were the most practical lines that could be devised; but even if the Government did not accept the recommendations of the Committee, that was no reason or excuse for neglecting the whole subject. The Committee dealt with an admitted grievance; and if the Government could not accept what the Committee proposed they should put forward counter-proposals. At any rate, the question should not be left in its present unsatisfactory and dangerous position. The Government should not be satisfied with the present level of our financial achievements. Too much attention was directed to getting Estimates through the House, to preparing taxation that would just pass through the House; without really examining whether the financial position so established was sound in the interest of the nation.

He submitted that the present financial condition was totally unsatisfactory. He would not refer again to the laxity of control over expenditure: that was said to be a detail of administration; he regarded it as a matter of the gravest importance to the nation. One result of the state of affairs was that the credit of the country had fallen to a very undesirable level. Not only had Consols fallen in greater ratio than foreign securities, but the whole character of the market had changed. On all sides in the City he heard that the amount of our floating debt was excessive and that our gold reserve, if not short, was in such a condition as to deserve the careful attention of the Chancellor of the Exchequer. Not only had Consols fallen, but the position in the market had greatly altered. Consols, which were once a high-class investment, had now come to be a kind of financial barometer; they were the favourite medium of speculators and foreign brokers. That was a most unsatisfactory position. The most sensitive market in the whole list was the Consol market, and if a great crisis arose in what condition should we find our finances? Would our financial strength survive a severe strain such as would occur in case of war? He appealed to the right hon. Gentleman to put an end to this policy of financial expedients. These expedients were not worthy of the best traditions of this nation. They heard from the right hon. Gentleman that the old borrowing resource of the Treasury, namely, the resource of the Post Office Savings Bank, had run dry, and a new appeal would have to be made to credit. To have to make an appeal to credit in a time of profound peace was altogether wrong. We ought to pay our way, and the net balance of indebtedness at the end of the year in times of peace ought to be less than it was at the beginning by £5,000,000. This was a low figure for the reduction of our indebtedness in a normal year. He appealed to the right hon. Gentleman to take his courage in both hands; there were only two systems of finance, the lax system and the severe, and he urged the right hon. Gentleman to adopt the severe course, and put the finances of the country on a sound basis.

MR. LOUGH (Islington, W.)

said at no time had the Budget been brought in at so late a period of the session. The right hon. Gentleman the Chancellor of the Exchequer had had a very trying time throughout the long debates that had ensued upon it, and he would like to congratulate him on the good temper he had displayed in the conduct of those debates. Those discussions had been spread over three and a half months, and if the House looked back to the first of them, they would recollect the right hon. Gentleman received many congratulations upon his plans. On that occasion he was the only faithful friend the right hon. Gentleman had. He warned the right hon. Gentleman that his proposals contained principles which the House would be loth to sanction, and that if the House should sanction them, a storm of indignation would arise in the country. Those evil forebodings had been fulfilled. There had been trouble in the House, and the proposals had gone through, but the right hon. Gentleman had had to throw half his cargo overboard. But though the proposals had passed in the House, in the country there was a very strong feeling against the Budget. The reason of the long discussions was that the financial state of the country was most uncertain, and the people were unwilling to tolerate this large expenditure; they had expected some relief, instead of which they had the same Budget as that of last year with additions of a very worrying character made to some of the taxes. He did not agree that the right hon. Gentleman's Budget was a free-trade Budget; he held it was very far from being a free-trade Budget. One would have expected some expression of regret at such a Budget having to be brought in, for it provided for a high and inflated expenditure. There was not a word of regret that the expenditure should be so high, but rather a prophecy that it would be higher next year, and not only that, but the Budget contained a heavy tax on the food of the people, which the free-fooders opposite ought to have opposed. Then there was the tobacco tax, which was generally admitted to be an objectionable tax, but was justified by the statement that all the tobacco taxes were protectionist. The right hon. Gentleman ought to have provided for this high expenditure without any tax on food. It was that which so far removed this Budget from the ideal of a free-trade Budget.

But the really important matter to be dealt with was the broad issue raised by the hon. Member for the Hawick Burghs. The country was face to face with a serious financial crisis. Every day brought forth some fresh illustration of its severity. The Bill of which the Chancellor of the Exchequer had that day given notice arose directly out of the financial situation and the bad provision the Treasury had been able to make for the requirements of the nation. Money for Works Bills could no longer be borrowed upon the same easy terms as formerly was the case, and no doubt the House would be forced to assent to whatever new principles the Government might suggest at so late a period of the session. The general financial situation had not been at all too seriously regarded. With the Supplementary Estimate to be introduced on Tuesday next, and the capital loan expenditure, the total for the year would be not £143,000,000, but £154,000,000 or £155,000,000, while if to that were added the contributions from Imperial funds to local taxation, the expenditure for the year would be £162,000,000 or £163,000,000. That was a most serious situation demanding strict and immediate attention. In 1859 Disraeli declared that no country could go on raising £70,000,000 a year in time of peace with impunity—that England could not, and if England could not, no country could. The nation at large was not able now to bear heavier burdens than then, because new demands of an extraordinary character had arisen. Thirty-five years ago the total rates amounted to £35,000,000, in 1902 the amount was £105,000,000. That, added to the figures he had already given, brought the total up to £270,000,000 roughly, and the effect of such a huge expenditure was being felt in every part of our financial system. No relief was to be expected in the direction of the restriction of municipal borrowing. New borrowing forces were being set up under the Licensing Bill, and new duties involving expenditure and borrowing were constantly being thrown upon municipal bodies. If the people were brought face to face with the alternatives of not providing themselves with the necessaries for healthful existence, such as water supply and so forth, or of cutting down Imperial expenditure, he firmly believed that an overwhelming mandate would be given in favour of the latter alternative.

The Liberal Party were not yet sufficiently strongly pledged to the policy of cutting down expenditure. They would probably get all right before serious responsibilities were cast upon them, but he thought they might have made a more emphatic protest against the growth of expenditure than they had done. It was true that on the Second Reading of the Finance Bill the Leader of the Opposition moved an Amendment in favour of restricting the growth of expenditure, but that was not enough. Not only must the growth be stopped, but the expenditure must be reduced. After every other great war there had been a reduction of expenditure. Since the South African War not only had the expenditure not been reduced, but it had been actually increased. He thought the recommendations of the recent Select Committee ought to have received more attention at the hands of the Prime Minister and the Leader of the Opposition. The situation was so serious that Parliament ought to catch at any straw that promised a reduction of expenditure. In the Report of the Committee there appeared an interesting table with regard to the growth of expenditure. Deducting expenditure under the Consolidated Fund and for debt, which could not be reduced, it showed that in the years 1884, 1894, 1904, the expenditure increased from £50,500,000 to £63,000,000 and £118,000,000 respectively. Of the £13,000,000 increase in the first decennial period £8,500,000 was for education, while of the £55,000,000 increase in the second period no less than £47,000,000 was for Army and Navy expenditure. That contrast revealed very graphically the course which the nation had been taking. A further striking contrast was afforded by the fact that in 1884 only £40,000 of borrowed money was spent, whereas in 1904 the amount was no less than £9,500,000. He thought the Chancellor of the Exchequer might well promise that some attempt would be made to restrict these borrowings for the service of the year. This system of borrowing was spreading from the Army and Navy into the Civil Service. It was no use the Chancellor of the Exchequer lecturing municipalities upon this subject. In India they paid for these things out of the tax of the year, and all Indian military works were paid for out of the taxation of the year. He wished the Government to set up a pure and sound system of national expenditure, and then they could call upon local bodies to imitate them.

His right hon. friend had said a great deal about a reduction of military expenditure, and he had also hinted that the naval expenditure must be restricted, but he did not refer to the Civil Service Estimates, and he hinted that there might be a great increase in the Education Vote. He was not in favour of increasing expenditure upon education, because he was not satisfied that they were getting value for their money, and there was a good deal of extravagance in this system of equivalent grants. The Civil Service expenditure required close examination, but the greatest scandal was in the expenditure upon the Army and Navy. The whole treatment of Army and military matters by the Government was a reproach not only to the Government but also to the House of Commons. About a week before the session commenced the Secretary for War delivered a speech in Liverpool in which he said that the man would be crazy who expected to see a reduction in military expenditure. Only a week ago they were told that the result of the new military scheme would be to considerably reduce the Army Estimates. They had heard something about an additional charge of £3,500,000 for barrack accommodation, and therefore he could not see the least prospect of any economy in military expenditure. This country could not continue to find the large sums which were being demanded by the Government. The naval expenditure should be largely decreased. When the right hon. Gentleman the Member for Croydon was Chancellor of the Exchequer he declined to purchase the Chilian battleships, but the present Chancellor of the Exchequer agreed to purchase them, and thus added £2,000,000 to the Navy Estimates. That was an absolute reversal of the policy of his immediate predecessor. The situation was getting very serious, for the people could not continue bearing these heavy burdens. Everyone could see the check which had been given to commercial enterprises, and surely it would be better to decrease expenditure. The constituencies were beginning to realise the situation. The successful candidate at the Oswestry election, after the declaration of the poll, said that the people had risen up against the Government because they objected entirely to the way in which the interests of the people had been sacrificed to the selfish interests of the few.

MR. GIBSON BOWLES (Lynn Regis)

said he wished to repeat the serious warnings he had given from time to time as to the present financial situation of the country. Similar warnings had recently been made from so many quarters of the House that he had begun to think that hon. Members were taking financial reform seriously. The hon. Member opposite had drawn a dismal picture of the financial state of the country, but his statement upon that point was entirely unfounded. He believed this country never was in such a condition of prosperity, and never so well able to bear heavy taxation with so little effort, as it was at the present time. He disagreed with the contention of the hon. Member for Exeter, who suggested that our financial credit was low. This country at the present moment could borrow at a lower rate than any other country in the world. Our credit was not only as good but relatively better than ever it was. [Cries of "No, no!"] He contended that it was. He had gone carefully into the matter, and he considered that British credit was better than that of any other country. He agreed that extravagances had been indulged in and mistakes committed, but he hoped that with the new feeling towards economy and the better management of accounts, some effect would be produced upon those who sat upon the Treasury Bench.

There was one important matter he desired to allude to. The Chancellor of the Exchequer had stated that the Savings Bank would no longer enable him to obtain money for his Naval and Military Works Bill although he wished to draw another £10,000,000 for that purpose. The Savings Bank had been the great reserve of successive Governments during the last twenty or thirty years, and it was looked upon as a sort of family arrangement under which borrowings could be carried on with the greatest facility. The condition of the Savings Bank really suggested something far more serious as to the credit of this country than the price of Consols or anything else. For three years the Savings Bank had been shown to be insolvent, and it had not sufficient money to meet its liabilities. That did not concern the depositors because they had the Consolidated Fund behind them. At the present time the amount of money available in the Savings Bank was not such as to enable the Chancellor of the Exchequer to carry on the financing of the Government. Although he regretted the diminution in the balances of the Savings Bank from the point of view of a financial economist, perhaps he ought to rejoice that one of the temptations to extravagance had been cut off and in the future borrowing would be more difficult. His advice was that it would be much better to postpone, if not the whole, at any rate a considerable portion of this £10,000,000 loan until better times.

MR. LOUGH

But the money has been spent.

MR. GIBSON BOWLES

said he did not think the money had been spent, but that was another matter. This was an extra £10,000,000 and it had not been provided yet, and therefore it had not and could not have been spent. The financial condition of the country was still sound. That was true. There had been much that was unsound in the management of our finance. Our accounts had been systematically falsified. Nobody could tell front the most intimate study, unless he had personal knowledge, what even the finance accounts, admirable as they were, meant. The whole of our system wanted overhauling. We should recur to that financial Magna Charta — the Exchequer and Audit Act of 1866—which regulated the whole of our financial proceedings, but which, from 1866 to the present day, had been departed from by successive Governments who were all equally guilty, and this House with them, he was bound to say. There were now left scarcely any of the securities which that Act provided. He hoped we were approaching the term of financial extravagance and irregularities. But it would require, in order to inaugurate a better system, a combination of circumstances and statesmen, which, perhaps, even now we might not have. We should have a determined Chancellor of the Exchequer, who would rather resign than put on an unnecessary tax. We should want a determined Prime Minister, who would stand by the Chancellor of the Exchequer in the struggle for economy. We should want, above all, a House of Commons, determined to do its duty, and not afraid to vote, as he intended to vote now, against this £10,000,000 of irregular debt when it was brought before the House. A determined House of Commons would be enough. He hoped they would inaugurate a system of reform which would put our financial system where it should be, and where the credit, the capacities, and the resources of the country demanded that it should be.

MR. SYDNEY BUXTON (Tower Hamlets, Poplar)

said he recognised that by supporting the proposal for the rejection of the Finance Bill he was taking a serious responsibility. His hon. and learned friend who moved the rejection of the Bill quoted a precedent in the case of the Budget brought in by the right hon. Gentleman the Member for West Monmouthshire. An interesting point in connection with that precedent was that in the discussion on the Bill one of the foremost opponents was the hon. Member for South Islington who was now not only in favour of the death duties, but actually desired that they should be increased. That at all events would not be a precedent for the action of the Opposition in this case, for he did not think they would ever be converted to the opinion that this was a good Budget, and that it ought to be allowed to pass. He felt also that they had been justified in the action they had taken in regard to this Bill at every stage. They were justified on two grounds. In the first place the only way in which they could reduce the expenditure of the country was, in his opinion, by reducing Supply. The present Government did not enjoy the confidence of the country, and therefore he was not prepared to vote supplies to them to keep them in office.

The hon. Gentleman who had just sat down said he thought the financial position of the country was good and its credit high. Whatever might be the credit of this country as compared with that of other nations it was unfortunately clear that we were in a worse position than we were a few years ago. If we had to go to war at the present moment we should not be in so good a position as we were some years ago. Our credit, tested by the price if Consols, had fallen from 110 to 88; we had a Debt of £760,000,000 to provide for; and we had a Sinking Fund totally inadequate for the purpose. We had also £30,000,000 of addditional ordinary expenditure as compared with what we had at that time, so that while our position might not relatively to that of other countries be very bad, as a matter of fact, as compared with the period before the war, it was very bad indeed. It was perfectly true that other Governments before the present one had been extravagant. For some years past there had not been a really economical Government in office, but what distinguished this Government from others was that they had increased expenditure at a higher rate than any of their predecessors. He looked to the influence of public opinion as the only chance we had of reducing it. The taxes put on during the last few years were mostly talked about as war taxation. But a, very small proportion of the £33,000,000 put on at the time of the war had been remitted. The amount of the remission was something like £8,000,000, so that £25,000,000 was still being imposed for the purposes of peace expenditure. The present Government came into office with a surplus of of £4,500,000. They had imposed £21,000,000 additional taxation. Owing to the financial policy of the last few years the country was now groaning under additional taxation for peace purposes of £10,000,000 direct and £14,500,000 indirect taxation, an amount which represented £6 per family par annum in this country. Surely it was enough to injure the trade of the country and to prejudice the position of the consumer when that enormous amount of taxation had to be maintained from year to year. It was far easier to increase expenditure than to reduce it—to add millions to the expenditure than to economise. He was bound to say that there did not really seem to be any express desire on the part of the present Government to go to the root of the matter, and to frame their Estimates of expenditure in such a way as to lead to some genuine economy.

The two great items of expenditure were the Army and the Navy. The Chancellor of the Exchequer had held out no hope that there would be any reduction in Navy expenditure. He himself, for one, was not afraid to say that he believed there was an opening for economy in the Navy Estimates as well as in those of the Army. The standard of our Navy was a matter of proportion, and the purchase of the Chilian war vessels and the serious diminution which had taken place in Russian naval strength during the war with Japan affected that proportion in a manner which ought to be favourable to economy. As to the Army, we had the hope held out in April of a reduction in our military expenditure. What had happened? The Secretary for War in his speech the other day pointed out twenty-five evils and plague spots in our Army system. The chief plague spot of the Army system was the great expenditure connected with it. The upshot of his speech was that there would be a comparatively small amount of diminution of expenditure unless the particular scheme which the right hon. Gentle man urged, and which aprarently the Government had not assented to, for the abolition of the Militia was carried through. But even if that were set aside, the whole economy would amount to £500,000 a year on this enormously swollen Army expenditure. His hon. and learned friend who moved the Amendment pointed to the very significant fact that the comparatively small saving would be more than swallowed up by the Army Votes. The Secretary for War had himself admitted that for armaments, clothing, stores, etc., in the following two years there would be required £1,800,000 and £2,300,000 respectively, making in all an addition to the Army Estimates of no less than £4,000,000 a year. The speech of the right hon. Gentleman was a great disappointment to the House and the country, because the general opinion, both inside and outside the House, was that we were spending far more on the Army than we ought to do, and that the expenditure should be reduced and greater efficiency at the same time obtained. The result, of course, of all this expenditure was the present Budget, with its various items of taxation—the extra 2d. on tea and the extra 1d. on income-tax. The proportion between direct and indirect taxation before and since the war had been discussed; but his complaint was that when it came to a question of remission of taxation direct taxation was much more largely reduced than indirect. One of the chief objections felt to this particular Bill was that the Chancellor of the Exchequer was not raising revenue by revenue taxes, but by taxes producing little revenue and introducing something in the nature of protection to particular industries.

He wished to say a word as to the financial position in which the Chancellor of the Exchequer would be placed with regard to the tobacco duty. The right hon. Gentleman proposed to get £550,000 from these extra duties, £50,000 of which would come from cigars and cigarettes. It was quite obvious in regard to the price of these articles that the onsumer would have to pay a larger sum both for home and foreign cigarettes. When it came to the question of stripped tobacco, there again the position was a somewhat unfortunate one. The right hon. Gentleman expected to get £500,000 from the extra tax on strips, but he had already given up the half of his proposed tax for the benefit of the importers. It was quite evident from the tobacco Returns showing the proportion between stripped and unstripped tobacco that the right hon. Gentleman would be fortunate if he received half the sum that he had originally estimated to secure front the duty. The last Returns showed that the proportion between unstripped and stripped tobacco was as thirty to seventy, but with the imposition of the duty the proportion would be entirely reversed: and it did not seem to him that the right hon. Gentleman could get £300,000 out of the duty this year, of which he had already given back £200,000. Not only was the tobacco tax tending to disturb the trade of the country but it was an object-lesson in regard to some familiar proposals having a flavour of protection about them. Here was a tax put on primarily as a revenue tax, but the result was that the revenue would disappear. That was always the way with these protective duties; the more successful they were the less revenue they yielded. It was not, he confessed, easy to understand the fiscal and financial position of the Chancellor of the Exchequer in regard to this matter. The right hon. Gentleman said that the character of his proposals were in the nature of a free-trade Budget. He did not think it was altogether so; but, supposing it was a free-trade Budget, he contended that it was a duty of the right hon. Gentleman, having regard to the position of the country, to produce a Budget which would press less hardly on the consumer while conferring the greatest benefit on the trade of the country. The right hon. Gentleman had said— That it was not beyond the possibilities of civilisation to raise fresh revenues without injury to any class, without undue friction or undue disturbance to trade or of commerce. The right hon. Gentleman for West Birmingham went further and said— It was still possible that a scientific taxation might be developed which would secure all the money the country required without anybody being the worse or the wiser for it. That might be so; he did not dispute that the Chancellor of the Exchequer might have some scheme in his mind by which the industries of the country would be fairly increased; but it was the duty of the right hon. Gentleman and the Prime Minister not to postpone the revelation of their new fiscal scheme indefinitely, but to produce it at once, if they believed that they were going to do good to the trading interest and to the taxpayer, and have it discussed across the floor of the House. If they would not adopt that obvious course, then the Government should go to the country, and ask for the mandate that they said they needed before the new fiscal scheme was submitted. A free-trade Budget ought to be introduced by a free-trade Minister.

* THE SECRETARY OF STATE FOR INDIA (Mr. BRODRICK,) Surrey, Guildford

said that he could hardly think that anyone who looked at the condition of the House would imagine that hon. Members were engaged in a discussion whose object was to defeat the chief Government Bill of the session. He could not say that the speeches delivered by the Opposition that afternoon were cheerful, and still less did he admit that they had any connection, exclusively, with the subject of the Motion. Everyone knew that the financial condition of the country must cause serious consideration not only to the critics of the Government but to the Chancellor of the Exchequer. The situation which his right hon. friend had to deal with was a serious one, and no one would grudge his right hon. friend the tribute which had been paid to him by the hon. Member for West Islington in congratulating him on the way in which he had fulfilled his task. There was every reason for a lack of cheerfulness being shown by those who attacked the Government. This despairing Motion came at the end of one of the most unsuccessful Parliamentary sessions that the Opposition had ever enjoyed. [OPPOSITION cries of "Oswestry."] During the last recess no prophecy was more consistently put forward in the speeches delivered by Opposition speakers in November, December, and January than that the Government would be forced to flounder in a financial morass in consequence of the late war; that they would have to extricate themselves by plunging into the new fiscal policy which had been so much deprecated; that there would be great fear that the Government would "rush" a decision by the country. Now, however, the Government was blamed for not submitting their fiscal policy at once to the decision of the constituencies. He thought the concluding words of the hon. Member for Poplar rather reflected that view. In the opinion of the Opposition the time had now come when the constituencies might be trusted to give a proper verdict on the fiscal question. He submitted that his right hon. friend the Chancellor of the Exchequer throughout the discussions on the Bill had preserved entirely the position which the Government originally took up. It might be urged, as had been urged by his right hon. friend the Member for West Birmingham, that another solution for the financial necessities of the country might be found, but the position of the Government was that until they obtained a verdict from the country in that direction they would proceed on the old recognised lines.

MR. SYDNEY BUXTON

said he understood the Government to say that they had this great remedy for the trade and finance of the country. If they had, they ought to go to the country at once.

* MR. BRODRICK

said the hon. Gentleman would hardly have said that a few months ago. The Government were not bound to consult the constituencies at the psychological moment chosen by the Opposition. A short time ago, if the Government had proposed to go to the country they would have been accused of rushing the constituencies. He wished to ask the House to consider whether the extremely lugubrious tones of hon. Members opposite as to the financial position and credit of the country were justified by the facts? It had been pointed out by his hon. friend that although the credit of the country had stood higher, it had never been as low as the highest point reached by the credit of other countries. The hon. Member for Poplar said that was a serious matter that Consols should have fallen from 110 to 88. It was a serious matter; but Consols were never at 110 since the interest was decreased.

MR. TOMKINSON (Cheshire, Crewe)

said that 2¾ per cent. Consols were at 114 and 2½ per cent. Consols at 110.

* MR. BRODRICK

said that there was, of course, no doubt that Consols had seriously fallen. As to the increase of the National Debt, with a national income and wealth at least double those of 1870, the Debt to-day only stood at the same figure as in 1870. That surely was not a very damaging fact. What affected the price of Consols was the enormous increase of local expenditure and borrowings. Between 1880 and 1902 the increase in local borrowings had been £206,000,000 or 130 per cent. Undoubtedly that had a very serious effect in depreciating certain classes of gilt-edged securities. He should, however, be the last person in the House to deny that the great increase in Army and Navy expenditure was a serious factor. He even put that factor higher than many hon. Members opposite, because they believed that this expenditure could be reduced at a stroke of a magician's wand. He had no such belief. He thought more seriously of the matter, because he saw more difficulties than hon. Gentlemen. The increase in the Navy expenditure had been enormous, but it had been approved by three successive Chancellors of the Exchequer. The Government had adopted the standard and policy of maintaining a Navy slightly superior to any two foreign navies. That was the standard, and that was the policy; and if there were to be a reduction, that standard would have to be given up. If he would point the moral, he would say, "Look at what had recently occurred in the Far East." One thing the war in the Far East had made clear—that a very slight preponderance of force on the part of the Japanese had enabled them practically to clear the sea. The slight preponderance of force which had been thought necessary for the British Navy had, therefore, received additional justification.

As to the Army, he had said more frequently than any one else that the demands which had been made on behalf of the Army would lead to a reaction when the war in South Africa was over. But while that was going on, there was no Minister who had to resist so many demands for increased expenditure as the Minister for War. They had since the outbreak of the war increased the charge for the Army by £10,000,000, and they had raised 60,000 additional troops. One of the chief critics of expenditure during the earlier years of the Government was now responsible for the War Office, and the speeches which that Minister now made showed that in his hope an efficient result might be attained with a considerable decrease in expenditure. Hon. Members would excuse him discussing that point until the full figures were before the House, but he thought it would be found that, speaking generally, a decrease of expenditure in the War Department must be carried out in connection with a decreased force. Whether that decrease was to be effected by reducing the number of troops for service abroad—a plan which he hoped would not be carried out—or by reducing the troops for the defence of these shores he would not discuss; but though many critics had urged reduced Army expenditure, no one had yet supplied a scheme by which that reduction could be effected.

There was one point on which the Government had a right to claim consideration from the House of Commons in regard to this naval and military expenditure. He had himself felt very strongly the absolute necessity of co-ordinating the work of the War Office and the Admiralty. Their Estimates up to very recent years had been to a large extent separate. The old Defence Committee established in 1895 did great service in co-ordinating some of the work of those two Departments and in examining closely the Estimates which were to be submitted; but that was not sufficient; and immediately at the close of the war, in concert with the First Lord of the Admiralty, he brought before the new Prime Minister the absolute necessity of forming some body under his own presidency which would succeed in bringing those Estimates side by side and in considering them in relation to the schemes which had to be framed for the protection of our possessions in all parts of the world. This was not the time for him to enter further into the matter, but he did not look to the labours of the Defence Committee beyond anything else to secure the end they all had in view of obtaining national defence at a cost considerably below the present. Far better than any loud professions by hon. Members who had not themselves been responsible for recommending expenditure or for administering these services would be a consensus on the part of the House to make the most of an organisation which, containing all the best expert advisers under the immediate supervision of responsible members of the Government, could be held accountable for the schemes submitted and the Estimates submitted in support of them. He was by no means certain that when right hon. Gentlemen opposite replaced them they would not hold that the institution of the Defence Committee had been not merely from the Imperial but from the economical standpoint one of the best titles the present Government had to the confidence of the country.

He was afraid that he must call attention to the fact that the greatest Treasury economists had often proved to be the least trustworthy curators of national finance. No man in the recollection of hon. Members had tried harder to reduce the Naval and Military Estimates than the late Mr. Gladstone, and he thought no man in the last century found himself ultimately responsible for heavier charges in consequence. Mr. Gladstone was Chancellor of the Exchequer at the time of the Crimean War, and the appalling losses and the appalling want of preparedness which characterised that war, a great deal of which had grown up when he was a member of the Cabinet, caused the prodigious expenditure which took place in that war. When they remembered that in the late war they had at times to maintain nearly 250,000 men in the field and that in the Crimea there were never more than 52,000, and when they considered the relative cost of the two campaigns, he thought they would realise how far things had advanced since those days. Mr. Gladstone was Prime Minister from 1880 to 1885 and Chancellor of the Exchequer for part of the time, and everybody knew that that Government came in with a determination to reduce expenditure, especially on the Navy and the Army. There were not many in the House now who were Members in 1880, but those who were would recollect that from that moment, beginning with the withdrawal of our troops from South Africa at a very critical moment, every step which the Government could take was taken to reduce expenditure. The result was that we gradually floundered into spending an enormous sum. £9,000,000 was spent in a campaign in Egypt in order to lose that province in the Sudan which the present Government in 1898 spent £1,000,000 to regain; and there was a vote of credit for £11,000,000 in consequence of complications with Russia in 1885 which it was the strong belief of most who were then present in the House would never have been required if our forces had been kept in a more efficient condition. He trusted that, whatever were the results of this debate and of the next general election, Members opposite would have regard to the history of the past before they hastily established an economy which might cost very much more in the future.

There was one part of the speech of the hon. Member for Hawick which he regretted to hear. He called attention to the insufficient share which the Colonies took in the upkeep of the Navy. He regretted these calculations, which were not only irritating to the Colonies, but—[Cries of "Oh," and "Hear, hear!"] Well, we had the control of the Fleet, and a good many Colonies might not need the Fleet. Those who did—he would not say all of them—had subscribed something to the Fleet, and other Colonies subscribed very largely for their own defence. A speech like that of the hon. and learned Member remained on record, and he was afraid that, if there were any idea of his holding high administrative office in the next Government, that might cause, and would cause, some apprehension on the part of the Colonies. Hon. Members opposite could not have it both ways. The Government were as anxious as they were that all parts of the Empire should share in the burden; it must be recollected, however, that those who paid the piper as a rule called the tune, and they could not expect that the Colonies, whose foreign affairs were administered for them by that House, would contribute in equal shares with those who had the control of the administration.

MR. EDMUND ROBERTSON (Dundee)

Why did you ask them to?

* MR. BRODRICK

said that at the Colonial Conference a great deal passed between the responsible Ministers of the Colonies and the right hon. Gentlemen who was then Colonial Secretary, and there never had been any indisposition, so far as he knew, on the part of the Colonies to bear a fair share of the expenditure. He did not think that this was the moment, after the exertions made in the war, for us to call the Colonies to account on a matter on which he believed they had every desire fairly to meet us.

MR. THOMAS SHAW

said that he never used the term "sufficient" or "insufficient." He merely referred to the way in which the relative facts stood, and the moral he drew from them was that there should be greater circumspection in our finance. He could not subscribe to the doctrine that the mention of facts absolutely germane to the subject under debate could be injurious either to this country or to the Colonies.

* MR. BRODRICK

said that he accepted the hon. Gentleman's explanation, but he thought that some expressions he had used and the way in which they were taken might have been received in the Sense he had indicated. Was there not something hollow about the whole of these attempts to reduce Supply to the Government by rejecting the Finance Bill? The debates had shown the most extraordinary tendency on the part of the Opposition to attack not only the taxes to which they objected, but those on which they would themselves rely if they came into power. They had voted, or some of them had voted, against the coal tax, the tax on cigarettes, and the tax on spirits; and his hon. friend the Member for Tavistock was justified in observing that their operations with regard to this taxation did not show a discriminating sense of justice. There was no part of the conduct of the Opposition on which he congratulated them so little as on their taking a division, not against the items of which they disapproved, but against the whole of the finance of the year. His right hon. friend had made the best of the resources at his disposal. It undoubtedly was the proper work of that House to review not only our naval and military but our Civil Service expenditure. But in voting against the whole finance of the year, in refusing supplies to the Government, he ventured to think that hon. Gentlemen opposite, if they should be placed at an early period on the Government Benches, would find they had given a vote which would be most embarrassing to them in their future policy, and that they had practically given pledges which they would find it very difficult to carry out.

* MR. TOMKINSON

said the right hon. Gentleman the Secretary of State for India had twitted the Opposition upon the want of success which had attended their attacks upon the present Administration, but he thought that when it was remembered that the Government had an almost automatic majority of 100. the Members of which were drawn more closely together as each successive by-election showed how completely they had lost the confidence of the country, and what an overwhelming defeat awaited them when they ventured to take the plunge, the fact required, very little further explanation. That was the obvious reason for their action, though whether that action was altogether consonant with consistency and self-respect he would leave the House to judge. The statement of the hon. Member for the Tavistock Division that for many years past no agriculturist had received a penny interest upon his capital was an amazing assertion. Farming, if properly conducted, under fair conditions of security and rent, and with sufficient capital, was never on a more satisfactory basis, and agriculture, although it did not like being further taxed for education and other purposes, was, nevertheless, in as good a position to bear its fair share of taxation as any other industry.

MR. SPEAR

pointed out that according to reliable statistics the income of the agricultural community to-day was £7,000,000 a year less than it was thirty years ago. How in the face of that it could be contended that the industry was prosperous he was at a loss to understand.

* MR. TOMKINSON

asked how it was that farmers in many parts of the country were willing to pay rents of £2 per acre? They knew their business, and they would not take farms at such a rental unless it paid them to do so. He knew that in various parts of the country agriculture was decidedly prosperous, and had never been on a better basis. The hon. Member had placed the whole burden of responsibility for the increased taxation upon the war. But the war was over, and their complaint was that the war taxation continued. The present rate of expenditure was most disquieting. From the figures given by the hon. Member for West Islington it appeared that eliminating the item of Service of Debt in the decennial period 1883–93 the increase of expenditure was 5 per cent., the real expenditure being in 1883, £60,000,000; in 1893, £63,000,000; in 1903 it was £113,000,000, or an increase of nearly 90 per cent. But if Post Office expenditure—which was not out-of-pocket expenditure—was also eliminated, the expenditure would be seen to have increased from £50,000,000 in 1883 to £98,000,000 in 1903, or an increase in out-of-pocket expenditure of practically 100 per cent. The hon. Member for King's Lynn had taken a roseate view of the condition of the credit of the country. No doubt the country had been, and was, extraordinarily prosperous, but the fact could not be gainsaid that whereas in 1897 2½ per cent. Consols stood at 110, they were now at 88½.

MR. GIBSON BOWLES

said the hon. Member was doubtless aware that at the time he mentioned the price was largely fictitious in consequence of large purchases by the Government.

* MR. TOMKINSON

said he did not admit it to be fictitious because the Government were investing in the sinking fund, for that was, and ought to be, the normal state of things. This constant exploitation of the credit of the country was a very serious thing, as he had ventured to point out in the debates on the recent Irish Land Purchase Bill. They could not always be making raids upon the credit of the country without seriously injuring our national credit. When they so loaded the market that Government securities dropped from 110 to 88 it was not pleasant to contemplate at what rate they would have to issue fresh stock in case they had to find £100,000,000 for another war. He believed that this extra tax on tea was wholly unjustifiable, and it was injurious to British interests from first to last. If there was one article to which a remission of taxation was due it was tea. A tax was increased 50 per cent, for the purpose of the war, and therefore tea was entitled to a remission as soon as any other tax instead of being further raised to 100 per cent. Everyone would sympathise with the Chancellor of the Exchequer in regard to the conditions under which he took office, but in his opinion this Budget would be remembered as one of the most unfortunate in its conception and unsuccessful in its results of the long line of balance sheets that had been laid before the House of Commons.

MR. COGHILL

(Stoke-upon-Trent, expressed entire disagreement with the observation of the hon. Member for Islington as to the expenditure on the Navy being too great. Probably there were items of that expenditure which had not been made as wisely as they might have been, but as to the sum total, he did not think a penny too much had been spent. With reference to the Army Votes, he was still waiting to see the Army Corps proposed by the present Secretary of State for India. The House voted for them last year, and he was still waiting to see them. The Civil Service Estimates showed wholesale extravagance all round. He was surprised to hear what the right hon. Baronet the Member for Berwick said about the income-tax. He remembered that in the autumn the Chancellor of the Exchequer told them there would be a reduction of 3d. in the amount of that tax; but now an addition of 1d. had been made. He was not surprised, however, because when the Government made a free gift of £12,000,000 sterling to one portion of the United Kingdom they must impose a considerable strain upon the resources of the country. He protested against the wasteful way in which £5,000,000 of Irish Land Stock was raised by its issue in the month of March at 86. The Government should have waited until a month or two later before making the issue, for the stock had stood at a premium of £5 or £6 pounds ever since March. The Government issued £5,000,000 of Irish Land Stock at 86 in March and lost £250,000 on the transaction. Why did they not wait until May, when a higher price could have been obtained? If money were wasted in that way there seemed to be no limit to the expenditure of the Government. He thought the Secretary of State for India was a little hard in his criticism of the Opposition that afternoon. The right hon. Gentleman appeared to have forgotten entirely that, on the income-tax, if they had not received the support of the Opposition, the Government would have been turned out of office. If more Irish Land Stock were issued he hoped that the issue would be made at a price nearer to the present market rate. Until he saw a more resolute and determined attempt on the part of the Government to check extravagance and promote economy he certainly would not vote for the Third Reading of the Finance Bill.

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

said that under the present arrangement the House had not opportunities of making a sufficiently close examination into the national expenditure in every department. In order that the House might obtain proper control over the national expenditure, it was obviously desirable that the recommendations of the Committee on National Expenditure of 1902 should be given effect to without delay. That Committee reported that it was desirable to appoint a Committee of the House to make each year a close examination into one class of Estimates, so that every four years each class of Estimates would receive an infinitely more careful examination than they had hitherto received, and a Report thereon was to be submitted to the House. The same Committee also recommended that one day should be devoted to the consideration of the accounts of the Public Accounts Committee. It was obviously most desirable that that recommendation should be given effect to without further delay. He sympathised with the present Chancellor of the Exchequer inasmuch as the right hon. Gentleman came into office in the course of a year for which he was not responsible —a year in which the expenditure was under-estimated by £3,000,000, and the revenue over-estimated by £2,750,000. That left him with a very considerable deficit. The House had never had a satisfactory explanation from the Chancellor of the Exchequer as to why he had appropriated the £3,000,000 repaid by the Transvaal, and taken £1,000,000 of unclaimed dividends These sums were not revenue in any sense of the word, and they should not have been so regarded.

In considering the finances of the country they had to take into account local as well as Imperial expenditure. Imperial and local expenditure amounted to the enormous total of £274,000,000. Was it any wonder that our trade and commerce were languishing under this ever-increasing burden of taxation and expenditure? His hon. friend who moved the rejection of the Bill told the House that our ordinary normal expenditure had gone up £50,000,000 in ten years. That alone had a detrimental effect on the trade of the country. Of that sum £40,000,000 had gone on national armaments. If that money had been spent on better food and clothing for the people it would have made an enormous difference in many of the standard trades of the country. The Chancellor of the Exchequer had succeeded to a very difficult position. At the beginning of 1903–4 he had a working capital in the shape of Exchequer balances of nearly £10,000,000, while at the beginning of 1904–5 he had only a little over £4,000,000. The condition of our finances was unsound. We ought to have more working capital, and we ought to have greater Exchequer balances so that if there was a sudden demand for £2,000,000 or £3,000,000 we should not have to go into the money market to borrow. The House was at present considering a Budget in a time of peace. The right hon. Gentleman the Member for West Bristol had uttered weighty words of warning, to the House and the country, on the question of the increasing national expenditure. Speaking on 19th April last, the right hon. Gentleman said— I have looked back to the year 1881–2, twenty-three years ago, and I find that, in that year the total 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 or the nine years ending this year it has increased at the rate of £4,250,000. 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 £4,000,000. What they had to complain of was that there was no evidence before them that the Government had realised the seriousness of this enormous growth of national expenditure. The Government had failed to take into consideration the fact that while last year's Budget was £9,000,000 greater in time of peace than the preceding Year's Budget, this Year, owing to there having been a deficit that £9,000,000 was increased to £12,000,000. Yet this year, another year in time of peace, a Budget was introduced giving only a reduction of £1,500,000, leaving an increase of £10,500,000 as compared with two years ago and exclusive of the £4,500,000 last year for war purposes.

The Chancellor of the Exchequer was face to face with this deficit. How had he chosen to raise it? When taxes were put on they were added equally in the matter of direct and indirect taxes. Indeed, in 1902 the right hon. Gentleman the Member for West Bristol, who was then Chancellor of the Exchequer, told them with regard to the income-tax that he made it 1s. 3d. in order to balance direct and indirect taxation. Last year, when the Chancellor of the Exchequer was in a position to remit £10,500,000 of taxation, he took four-fifths off the direct taxpayer and only one-fifth off the indirect taxpayer. He had asked before and he now repeated the question—If justice was done last year when taxation was remitted by taking four-fifths off the direct and one - fifth off the indirect taxpayer, did it not follow that justice could only be done this year by putting only one-fifth on the indirect and four-fifths on the direct taxpayer. If that was not so, then an injustice was done last year. Surely the same proportion between direct and indirect taxation ought to have been imposed this year. The Chancellor of the Exchequer himself admitted that £27,500,000 of extra taxation imposed during the last four or five years, primarily for war purposes, were continued in time of peace. And now the duty on tea was to be increased to 8d. per lb., which, it was admitted, would press very heavily on poor people, as did also the sugar duty. There was no question that at the present moment, having regard to the statements made by the Chancellor of the Exchequer, the right hon. Gentleman had failed to properly relieve the working classes from the burden of taxation imposed on them during the continuance of the war, out of the enormous surplus which he had last year. Some people contended that the working classes were not heavily taxed. But the ordinary working man who paid 7s. 6d. a week for house rent had included 2s. 6d. per week Local Rates or £6 10s. a Year; that was 10 per cent. on his wage of 25s. per week. If, in addition to that, he had to pay 10 per cent. in Imperial taxation, that made 20 per cent. on the whole of the wages he earned; that was an income tax of 4s. on the £. These figures could not be questioned, and could any one say that that was a fair burden to put on the working man as compared with other members of the community?

The recent growth of expenditure had been chiefly on the Naval and Military Departments. He was amazed at the speech of the right hon. Gentleman the Secretary of State for India, having regard to the speech the other day of the right hon. Gentleman the Secretary for War. The present Secretary for War said that a huge amount of expenditure on the Army was absolutely wasted, and that we got no benefit from it. He could only say that the speech of the present Secretary of War was an absolute reply to the speech of the Secretary of State for India in regard to Army expenditure and Army efficiency. The country had a very strong view as to the condition of the Army; and there was a very uneasy feeling that the ex-Secretary of State for War was not giving the loyal co-operation to the present Secretary of State for War which the latter ought to receive. They were always told that a man was killed by worry and not by work; and the present Secretary of State for War was evidently being killed politically more by worry than by work. The Secretary of State for India ought to put patriotism before personal reputation and give the present Secretary for War his loyal cooperation. This was a serious matter. He believed it was absolutely true that the reorganisation and reforming of the Army was being hindered; and that the expenditure on the Army could not be reduced because of the conflict of opinion between one school of military reform and another. The country had a right to expect that if the ex-Secretary of State for War had made mistakes he should willingly admit the fact, so that the nation should not lose so heavily by the expenditure which he had incurred.

Then, as regarded the Navy expenditure, they had never been able to draw from the Government any reply to the contention repeatedly put forward that they ought to learn lessons from what was taking place in the Far East. They could see that battleships, costing £1,000,000 or £1,500,000, could be sent to the bottom in a few minutes. Had not the Admiralty seriously considered whether it would not be better to put their money, instead of into battleships, into smaller vessels heavily armed? The expenditure on the naval and military forces, including naval and military works, was perfectly appalling. It was £76,250,000, which was more more than double what it was ten years ago. The increase in the last, ten years was 120 per cent., whereas the increase in Germany was only 30 per cent., in France 25 per cent., and in Italy 6 per cent. That was surely greater than it need be, even if we got value for our money. The right hon. Gentleman the Member for West Bristol had said that nobody outside the War Office believed that we got value for our money.

The Secretary of State for India took exception to the remarks of his hon. friend the Member for the Hawick Burghs on the question of colonial contribution to Imperial defence. Why should not the matter be fairly considered? Why should not the facts in regard to it be fully stated? What were the facts in regard to Canada? Whereas, every man, woman, and child in this country had a burden of £1 12s. 6d. for naval and military defence, the 5,000,000 of people in Canada enjoyed the benefit of that expenditure equally with the people of this country, and made no contribution at all to this huge revenue beyond bearing the cost of their local Militia. Further, they taxed the £10,000,000 sterling worth of goods imported from this country to the extent of £2,000,000 sterling; whereas this country admitted £23,000,000 sterling worth of goods absolutely free. Talk about fiscal preference! What about Canada? Canada got a fiscal grant in the matter of Imperial defence of between £7,000,000 and £8,000,000 sterling per annum. Australia, New Zealand, and the other great Colonies only made an aggregate contribution of £400,000 to Imperial defence. He hoped that those who went in for preferential tariffs would adjust a relative contribution towards Imperial defence as between the Colonies and the mother country, giving the Colonies a voice in the spending of the money by representation on some general council of Imperial Defence.

Again, the House had a right to hear a definite statement from the Chancellor of the Exchequer as to the time when this country was to get the first instalment of £10,000,000 sterling from the Transvaal. A bargain was made by the ex-Colonial Secretary in South Africa, under which the Transvaal was to get £35,000,000 for the development of the country, this country getting £30,000,000, which was an infinitesimal contribution towards the £230,000,000 which the war cost. They were told £10,000,000 had been underwritten; but, up to the present moment, not a single penny had been paid, although the £35,000,000 for the development of the Transvaal had been contributed on the guarantee of this country. At the present moment there was an enormous expenditure in providing, barracks in South Africa; and the taxpayers of this country were being bled to the tune of £3,000,000 sterling for the cost of garrisons in South Africa. Yet no contribution was received from the Transvaal, the Orange River Colony, or Cape Colony. Did the Government from first to last make any serious attempt to obtain a contribution towards the cost of the war from Natal or Cape Colony? The war was undertaken to repel the invasion of these colonies; and they benefited through the war. Many towns and several classes of the community made enormous fortunes during the war; the invasion of the colonies was repelled at a cost of £230,000,000; and he ventured to submit that there were sections of the community in those colonies who were better able to bear a share of the cost of the war than the overburdened taxpayers of this country. They had never yet had any definite statement as to whether the Government ever thought of asking Natal and Cape Colony to contribute to the war.

They were anxious that the national credit should not be reduced; and, therefore, it was absolutely essential that national expenditure should be reduced. The funded and unfunded debt amounted to £794,000,000; the local debt to £412,000,000; the Transvaal loan to £35,000,000; and there was a possible financial responsibility in connection with the Irish Land Act of £100,000,000—a total financial responsibility of £1,350,000,000. Was it any wonder that the development and prosperity of trade was hindered with such a huge incubus upon it? They ought to have a proper financial balance-sheet, dealing not only with Imperial expenditure but also with local expenditure. They ought to know where they were. By all means let the revenue-producing assets be valued also. They had valuable assets in the Post Office and the Suez Canal shares; and one-half of the local debt had been expended in revenue producing works. The nation would not tolerate the huge expenditure now going on if the working classes only realised how much they were paying. How many working men knew that out of every 1s. they paid for tobacoo, 10d, went to the Government, and that 8d. out of the price of every 1b. of tea went to the Government. After all, this question ought not to be a Party question. It was a question in which both sides of the House were equally interested. He only hoped that the advice of the Committee which reported in 1902 would be speedily given effect to by the Government if they remained in power, and that next year they might have a closer scrutiny of the expenditure of every Department of the State with a view to securing a substantial reduction.

* SIR JOHN COLOMB (Great Yarmouth)

said the hon. Member who had just sat down had made a most interesting speech, but he was only concerned to say a few words on the last part of it, in which the hon. Gentleman called attention to the growth of the expenditure for the defence of the Empire. He himself did not think we heard nearly enough of this matter. It should become a matter of calm and deliberate consideration and should be brought forward in a manner that should not repel but attract the attention of all the citizens of the Empire at home and in the self-governing Colonies. So far as the Navy was concerned, we could not look forward to any reduction of expense, unless we could stop other nations building, or stop the progress of our sea trade. We must keep up a standard which would prevent war by discouraging the idea that our power on the seas could be contested, or, if we could not prevent war, such a standard as would enable us to give a good account of ourselves to our enemies. He admitted some reduction could be made on military expenditure, but he doubted whether it would be as great as some people supposed, because the moment the question of the Army was touched innumerable local anal professional interests were affected, which in that House blocked and thwarted reforms, At the same time he quite agreed that full value was not obtained for the money spent; that, however, was another question.

This expenditure, he reminded the House, was to maintain an Empire which was really a triple Empire, the home Empire consisting of these islands; the Empire of dependencies, including India; and the Colonial Empire—an Empire of practically independent States self-governing like ourselves. We were trying to run this great Empire, excepting India, with the resources of these Islands, but that could not go on. In the past we had been a great deal too hesitating in not going to the Colonies and telling them they must face the fact of this expenditure if they wished the Empire to be preserved. No Minister had spoken so openly and so distinctly upon this question as the right hon. Member for West Birmingham had done at the Colonial Conference, but he (Sir John) desired more Ministers to speak out in that way. When he remembered that Australia looked at Japan's great successes and then looked and saw shelter and the hope of peace for herself in Japanese help to our powerful Navy, he was also driven to recollect that the revenue of Australasia was greater than that of Japan, and yet she paid nothing. The whole of the Empire should combine for this purpose. It was the business of every responsible Minister of the Crown, from whatever Party he came, to bring this fact before our fellow-citizens across the seas. He believed in their common sense, but no man ever lived, young or middle-aged, who liked to be asked to pay for that which he had always had for nothing. When we remembered the great resources of our Own self-governing Colonies, their territories, their mineral wealth, their timber, and all their great potentialities of future greatness which was the heritage of the British people, made over freely to our kinsmen, and then regarded the events now taking place in the Pacific, and the sea trade of Australia on the one side and of Canada on the other, we were well entitled to say to these two self-governing colonies, "How are you going to face the future? Do you expect the mother country to discharge all your obligations anti to bear all your burdens? Do you think she can do it, and if she cannot what is going to happen to you?" That was the pacific and friendly spirit in which this question ought to be looked at, and he hoped it would be raised in that way. It was one of the greatest questions of the day, it had been neglected in the past and it ought to be faced now in a plain, friendly and businesslike spirit.

And, it being half-past Seven of the clock, the debate stood adjourned till this Evening's Sitting.