HC Deb 16 May 1904 vol 134 cc1463-96


Order read, for resuming adjourned debate on Amendment to Question [16th May], "That the Bill be now read a second time."

Which Amendment was— To leave out from the word 'That,' to the end of the Question, in order to add the words 'this House, having regard to the heavy burden of taxation proposed by this Bill in a time of peace, deems it necessary to declare its condemnation of the large and continuous increase of the national expenditure in recent years.'"—(Sir H. Campbell-Bannerman.)

Question again proposed, "That the words proposed to be left out stand part of the Question."

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

said there was no question which could occupy the attention of the House to greater advantage, having regard to the alarming increase of our normal national expenditure, than the question of the retrenchment of that expenditure. The hon. Member for Whitby had informed the House that there had been an increase of £64,500,000 in the normal expenditure of this country in the last ten years, and when we remembered that that expenditure was largely unproductive it must appeal to us that so large an unproductive expenditure derived from the taxation of the whole community must so lessen the purchasing power of the community in regard to everything needed to feed and clothe them, and furnish their homes, as to exercise a detrimental influence on the general commercial prosperity of the whole nation. They were told that the expenditure for Imperial defence for 1904–5, including military and naval works and Supplementary Estimates, amounted to the gigantic sum of no less than £88,000,000, in 1891 the total expenditure was only £33,000,000. Such an alarming increase ought to cause the House to give the closest attention to the question of expenditure for Imperial defence. The Secretary to the Treasury had told the House that hon. Members had neglected their opportunities of criticising increased expenditure in connection with the Estimates, and that was perfectly true. Each Estimate ought to be criticised as it was presented to the House, but, on the other hand, it was the duty of the Government and especially of the Chancellor of the Exchequer to justify to the House and the country the enormous increase that had taken place in the national expenditure in time of peace. The expenditure last year, in time of peace, was £9,000,000 in excess of the previous year, and when the result of the financial year came to be known, it was found that not only had the expenditure been underestimated by £3,000,000 but the revenue had been overestimated by £2,750,000. The £3,000,000 added to the £9,000,000 increase of the previous year made a total of £12,000,000, which had only been reduced by £1,500,000 for next year. So that for next year the Estimates of expenditure amounted to £10,500,000 more than they did two years ago. It was not so much for the Liberal side of the House to show where this expenditure should be curtailed, as it rested upon the Government to justify this enormous increase in a time of peace.

At an earlier stage of the Budget Resolutions he had raised the point as to how much we were to allow the knowledge and experience gained from the war at present being waged in the Far East to be left out of consideration. In that war it had been demonstrated that it was unwise to build huge battleships costing millions of money, which by a well-laid mine or torpedo could be sent to the bottom of the sea in five minutes. In view of the knowledge gained by that war so far as it had gone, the Government might with great advantage direct their attention to the question of whether a larger number of smaller and heavily armed and gunned ships might not be built at considerably less cost and be more effective for Imperial defence. A great deal had been said in the House on the question of Army expenditure. With regard to that the ex-Chancellor of the Exchequer had said— If the War Office laid out the money it Cut to the best possible advantage, which nobody outside the War Office believes it does, the strength of the Army could be reduced with advantage, and yet we might have a better Army. It was not the idea of Liberal Members to reduce the pay of Tommy Atkins, but they believed a small Army better trained and equipped would be more effective than that which existed. It had been condemned as to its organisation root and branch by a Commission appointed by the Government. He repudiated the suggestion that they wanted to give the soldier less or to mete out less liberal treatment and encouragement to the promotion of the efficiency of the Militia, Volunteers, and Imperial Yeomanry, upon which the country must mainly depend in time of war for home defence.

He objected to the inflated national expenditure, because the Government had utterly failed to show any justification for it, in addition to which the taxation was unfair. Would the Chancellor of the Exchequer say if it were right in 1903, when remitting taxation to the extent of £10,500,000, to remit direct taxation in the proportion of four-fifths, and indirect taxation to the extent of one-fifth. Should not the same proportions he observed when it became necessary this year to reimpose a portion of the taxation taken off in 1903.


said he had answered the question in anticipation in his Budget speech.


pointed out that in the taxation imposed this year the proportions were half-and-half. He further asked whether, in view of the enormous national expenditure, the right hon. Gentleman had given attention to the possibility of getting increased grants towards Imperial defence from the great self-governing Colonies of the Empire.


That is a separate question which does not arise on this Bill.


bowed to the ruling of the Chair, and continuing, said the additional taxation imposed ought to have been avoided by cutting down both the Army and Navy Vote so as to prevent especially the further imposition of 2d. on tea. In 1900, when 2d. was put on tea, the right hon. Gentleman the then Chancellor of the Exchequer said that this extra 2d. was an exceptional tax levied for the purpose of the war. Two years later when he had to impose further taxation he said, bearing in mind that tea which was almost a necessity of life was already taxed up to 75 per cent. of its annual value, he should be sorry to increase it and he did not do so; but last year when the right hon. Gentleman had £10,500,000 taxation to remit, surely that 2d. on tea, which was a war tax, ought to have been taken off, instead of which the Chancellor of the Exchequer this year imposed an additional 2d. on tea. There was no justification in this Budget of such an unfair burden being placed on the working classes of the country.

While they deplored the enormous increase in the expenditure for the defensive forces, they rejoiced in the increase of the expenditure for education. When in Massachusetts last autumn, he found that no less than £1 per head of the population there was spent on education, whereas in this country we only spent 8s. per head. In this connection he was reminded of an incident, connected with the educational expenditure, that happened in a Scottish constituency. A candidate was being heckled by a constituent who asked—"Am I to understand, Mr. Wason, that while you are prepared to spend £31,000,000 sterling on the Army and Navy you are only prepared to spend £8,000,000 on education; that while you are prepared to spend £31,000,000 in 'blawing brains oot' you are only prepared to spend £8,000,000 in' pitting brains in? "That question applied with greater force to-day when we were spending£16,000,000 "pitting brains in" and £88,000,000 in "blawing brains oot," or preparing to do so. A great majority on both sides of the House would welcome increased expenditure which would enable us to hold our own in competing commercially with the more highly educated, scientifically, nations of Europe.

There was one especial item which he had hoped to sec dealt with this year in the annual Budget. He had hoped that by the practice of the most rigid economy the Government would have placed themselves in the position of being able to remove the tax upon coal, a tax from which the Treasury derived a revenue of £2,000,000; but a tax which was flagrantly unjust. Those engaged in the coal trade contributed in every respect the same as every other great industry of the country, in addition to which, owing to the mode of assessing, they were paving more heavily in regard to income-tax than perhaps any other great industry in the country. He hoped this point would be brought under the consideration of the Departmental Committee which the right hon. Gentleman the Chancellor of the Exchequer had recently appointed to consider the question of the income-tax. Coal-owners had to return their profits on the basis of the preceding five years, whilst iron and steel works and other industries based their returns on the preceding year only. It was, therefore, obvious that if the coal-owners had to take the basis of five years they had to include the prosperous year of 1900 in their average, and were thus paying more than they should do to fulfil the intentions of the income-tax. The result was they paid a large amount of income-tax out of capital. The case for the removal of this coal tax was a very just one. It was true that the exports of coal last year had somewhat increased largely owing to the strike in America creating a demand for more than 1,000,000 tons, but that did not alter the fact except in regard to Welsh steam coal. The firms in Durham, Northumberland. Yorkshire, and Scotland who exported coal, came into competition with Germany, France, and Belgium, and, by reason of this tax of 1s. a ton, were receiving at the pit's mouth 1s. a ton less than they otherwise would. The result of the trading of the first eight weeks of this year at one colliery in Northumberland, had been a loss of £1,700, and but for the tax that trading would have resulted in a profit of £1,800. In his division in Yorkshire there was a colliery working a thin seam of coal at a great expense, and owing to the coal duty it was at present being worked at a loss. Without the coal duty they would no longer have £12,000 to pay, and there would be no question of whether the colliery should he closed, and 1.000 men be thrown out of employment.

The question was. What was the practical result of this tax? So far as Durham. Yorkshire, Northumberland and, Scotland were concerned it was unjust, inasmuch as they paid all the taxes other industries paid, and this special tax in addition. The right hon. Gentleman did nut give a very encouraging reply, so far ns the removal of the tax was concerned to the deputation which waited upon him. The ex-Colonial Secretary, speaking on the coal trade in a mining district recently, told the miners that they were only waiting to be eaten up. The production of coal in Germany. France, and America was increasing with gigantic speed, and in a comparatively few years those countries would become exporters instead of importers of coal. The coal tax was unprecedented in the fiscal system of the country, and operated as a bounty to the foreign producer at the expense of the home producer. It was the confiscation by the Government of £2,000,000 a year from the earnings of the colliery-owners, coal-miners, and shippers engaged in working and exporting coal. It was levied in a manner that was obviously unfair. It was unfair that coal worth 6s. per ton should pay the same tax as coal worth 12s. and it was somewhat ridiculous that it paid the coal-owner better to sell coal at 5s. 11d. than at 6s. 10d. If he sold at 6s. 10d., he had to pay the duty; if he sold at 5s. 11d. he escaped it. There were further inequalities arising from the rates for carriage to the port of shipment. The coal was sold at f.o.b. prices, and if the colliery had to pay 2s. 7d. for carriage, the net receipt was 3s. 6d. and out of that the duty had of be paid, leaving the colliery-owner only 2s. 6d. Yet there might be another colliery producing coal of precisely the same quality in the case of which the cost of carriage was only 6d., and it could afford to sell at 5s. 11d., it escaped the duty and got a net return of 5s. 5d. If the Chancellor of the Exchequer would not remove the duty, it was to be hoped that he would at least consider its incidence, which was most unequal. It would be much fairer to impose a tax of 2d. a ton on the whole coal output of the country, charging half of it to the colliery-owner and half to the royalty-owner. One reason put forward for the introduction of the tax was that it would enable us to husband the coal resources of the country. As a matter of fact it had operated entirely the other way. The price of coal at the pit's mouth had fallen from 3s. to 1s. per ton, and many colliery-owners hail been compelled to cease working thin and expensive seams, and we were exhausting the most valuable coal resources of the kingdom far more rapidly than was the case before the tax was imposed. Representing as lie did one of the largest coal-mining constituencies in the kingdom, he had felt it his duty to bring this matter under the notice of the Chancellor of the Exchequer. They congratulated him on his early attainment of that mo-t distinguished position, and he could only say that when the deputation waited upon him the other day his experience was that no deputation was ever treated with greater courtesy. He hoped the right lion. Gentleman would take into consideration the representations he had made, to him with regard to the unfairness of this special tax, and that in some form or other in connection with the Budget, he would so adjust the impost as to render it more equitable.

SIR FREDERICK BANBURY (Camberwell, Peckham)

said the last speaker had indulged in a long history of the coal tax, but he could not for the life of him see what that had to do with the Amendment before the House, which was apparently directed to criticising the expenditure incurred by the Government during the last few years. The hon. Gentleman presumably objected to that expenditure, and his objection was particularly to the fact that a certain tax was imposed of an industry in which he was interested. But every industry called upon to bear a tax of course objected to paying it. Still, somebody must pay taxation, and he could not see anything particularly hard in imposing it on the colliery-owner. The hon. Gentleman, too, had said we had learnt a lesson from the war in the East. He seemed to suggest the lesson was that they should not build big battleships, because they might be torpedoed. Well, the Japanese had had no vessels torpedoed, while the Russians had only lost one battleship from that cause.




said the question was, could the Japanese have carried out their operations with torpedo boats had they not had large battleships to cover their movements, and he commended that point to hon. Members' consideration. With regard to the Amendment before the House, the subject had been discussed on public plat-forms for a good many months. Still it seemed to him to be a strange thing that on so important an occasion there should be only eight Gentlemen on the Opposition Benches, and only one on the Front Opposition Bench lie considered the small attendance on both sides of the House only confirmed what had been said by the hon. Member for Fulham, viz., that the constituencies were not in favour of severe economy; and hon. Gentlemen opposite were in favour of it only in the abstract. How could we exercise economy? The answer appeared to be simple—by not spending so much. Vet it was only on the preceding Friday afternoon that hon. Members opposite went into the lobby in order to relieve shipowners of a heavy burden which they had had to pay for centuries and which certainly did not constitute an undue burden on their industry, and they sought to put it on the State. Was not that an extraordinary way of advocating economy? Again, very recently hon. Gentlemen opposite voted for the payment of Members. That would have been an additional burden on the State. If they really wanted economy they must give up these small fads. Let them in no way add to the expenditure if they could not reduce it. But could they reduce it? An hon. Member had suggested that a small Army would be more effective. He disagreed with that, and he believed it was an admitted fact that had we had a stronger Army at the outbreak of the Boer War the campaign would have proved much shorter and consequently less expensive. Then again, the hon. Member told them that the training of the men was bad. He believed it was as good as it would possibly be.


No one else believes it.


was sorry there were no Army reformers in the House at the present moment. Money might be wasted in the civilian department, but the training of the men was as good as it had ever been in our history. Even the right hon. Baronet the Member for the Forest of Dean would admit it could not be better.




was sorry for that. Perhaps the right hon. Gentleman would tell him in what respect he was wrong. He quite agreed that our expenditure now was as high as it ought to be, but it was not wasted expenditure. The outlay on our Army and Navy was a national insurance, and was only sufficient for the proper protection of our Empire in time of need. The House must know we had not yet entered on the millennium, and a weak Army and Navy would only put us in a position to be shot at. The Fashoda incident would not have terminated as it did had our Navy been weak. While we need not be aggressive, we must be prepared to stand up for our own. A question had been asked why the Chancellor of the Exchequer had not increased the burden of indirect taxation in the same proportion as that of the direct taxation, the allusion being presumably to the fact that fourpence had been taken off the income-tax, representing roughly £10,000,000, while indirect taxation had only been reduced £2,500,000. But the hon. Member who asked the question forgot that the income-tax was a war tax.


So was the tea tax.


continuing, said the tea tax was not touched in the Budget he was referring to. The present expenditure was peace expenditure, and was necessary to maintain the increased obligations of the Empire. Was the hon. Member aware that at the present moment direct taxation represented £1 9s. per head and indirect taxation £1 11s. 2d? But of the latter sum £1 3s. 11d. was obtained from the tobacco, beer wine, and spirit duties, so that practically a man who neither smoked nor drank only paid 7s. 3d. Surely that was not an unjust burden. Hon. Members who advocated temperance reform ought not to complain if the taxation were raised upon articles which they so strongly condemned. He would suggest that the Chancellor of the Exchequer should be chary in advancing money by local loans. He thought also that the system of grants in aid was not a good one, for it tended to encourage extravagance on the part of municipalities. While he hoped the Front Bench would do all it could to minimise unnecessary expenditure, he trusted there would be no decrease of the outlay on the Army and Navy, which was necessary for the defence of the country.

MR. BUCHANAN (Perthshire, E.)

said that practically all the speeches from the other side had asserted that the present debate was unreal, that whoever was responsible for the increase of expenditure, the one set of persons who were not responsible was the Government, and that the Motion under discussion was a mere Part move; but they had invariably wound up by deducing the same conclusion as that put forward by the right lion. Gentleman the Leader of the Opposition, viz., that the national expenditure was excessive and ought to be diminished. Sweeping and sudden diminutions of expenditure were generally wasteful and uneconomical, but he thought the Government might at any rate go as far as the hon. Member for Peckham and agree that there should be no further increase in the burdens of the people. He opposed the Bill because it continued war taxation in a time of peace, because of the constantly increasing expenditure of the country, and because there was no provision on the part of the Government, with a view to diminishing the accumulated debt and the increased charges due to the recent war. The Government had forfeited the confidence of the country, and he believed they had forfeited that confidence particularly with regard to their financial policy. The Budget WHS doubtless an "inevitable" Budget, in the Sense that it was the consequence of the policy which had been pursued by the Government during the last few years. As they had sown, so they must reap. But, as one who had opposed the past financial and political policy of the Government, he was entitled to oppose also this "inevitable "Budget.

The Chancellor of the Exchequer had taken credit to himself for not having gone outside the ordinary routine of financial expedients—in fact, for having produced a humdrum Budget. It was indeed a humdrum Budget, but it ought not to have been. It was the first Budget for several years which had not contained any provision for the war expenditure, and if there was a strong claim last year for measures dealing with the serious financial problem caused by the magnitude of the war debt and war expenditure, how much stronger was that claim this year! The Chancellor of the Exchequer ought to have taken a wide survey of the situation and to have laid before the country some general scheme by which, in a reasonable time, the weight of debt might be diminished and some of the burdens of excessive taxation removed. But the right hon. Gentleman had done nothing of the sort. He hid strictly limited his view to one year. If he had in his mind a scheme by which he believed our financial position might be improved, but to which he could not in the present circumstances, owing to political or personal reasons, allow free scope, he occupied a false; position, If he and the Government of which he was a member really held these opinions upon important financial matters with which they were credited, it was their bounden duty to lay proposals before the country at the earliest possible moment, and obtain, if they could, the freedom of action in financial matters which they professed to desire.

Other speakers had dwelt upon the particularly grave fault of the Budget that it retained as permanent peace taxation burdens which were imposed as temporary war taxation. They all remembered the appeals of the right hon. Gentleman the Member for West Bristol that they should take upon their shoulders at least as heavy a portion of the war expenditure as did their ancestors at the time of the Crimean War. Those appeals were cheerfully acceded to on the assurance that the taxation would be removed where the war was over. It was never anticipated that that taxation would become a part of the permanent financial burden of the country. In this connection he would give only one illustration. In the Army Estimates for the year 1900–01 a sum of £0,250,000 was put down for "temporary increases in connection with the war" but five-sixths of those increases had become part of the permanent Army expenditure of the country. There was one kind of increased expenditure for which the present Government was solely responsible. In answer to a Question the First Lord of the Treasury had stated that there were 17,000 troops, costing £2,003,000 a year, under the Colonial Office, and about 5,000 men, costing nearly £250,000, under the Foreign Office. This was expenditure of a military character; it did not appear in the Army Estimates, and it was due to the Imperial colonial policy inaugurated some years ago in Central and West Africa.

With regard to the Debt, the House was entitled to have from the Chancellor of the Exchequer an exact statement of the present position. What was the figure at which the Unfunded Debt now stood? During the last three or four years it had stood at a figure which was absolutely unexampled in the history of the National Debt. According to a recent Return, the Unfunded Debt since 1901 had ranged from £78,000,000 to £73,500,000, an amount three, four, and even six times the ordinary sum. Last year the Chancellor of the Exchequer admitted that the condition of the Unfunded Debt was one of the most serious financial problems, and said that action would be taken in regard to it as soon as possible. The first instalment of the Transvaal Loan had not yet come into their hands. With regard to the Debt, he would like to know what was the exact figure at this moment of the Unfunded Debt, and whether the Chancellor of the Exchequer had any idea as to its possible diminution within the ensuing year or within any fixed period. He believed that £3,000,000 which came from the Transvaal was used for the payment of Exchequer bonds. He understood that since 1st April in the current year by the issue of Treasury bills the Unfunded Debt had been increased by £3,000,000. He believed that that was the case, and so far from reducing debt from the 1st of April they had raised £3,000,000 in Treasury bills and so the actual amount of the Unfunded Debt, if not £3,000,000 larger, at any rate was substantially larger than it was before. That fact had a considerable bearing upon the many proposals and suggestions with regard to the diminution of the Debt which had been suggested by the Chancellor of the Exchequer.

Then there was the question of "other capital liabilities," and these were increasing year by year under various charges. A table appeared in the National Debt Returns from which it appeared that these capital liabilities military and naval works, Uganda Railway, and the rest amounted to £31,861,000; but the House should not imagine that was anything like the total sum expended for these purposes; another £10,000,000 must be added. The Naval Works Act was started with the advantage that the Chancellor of the Exchequer appropriated to that purpose unexpended balances from the years 1898–99, and the amount which in the ordinary course would have gone to the extinction of debt was swept into this whirlpool. This sum of £31,000,000 did not represent the commitments to which this House and the country were bound under the various Acts now in operation, and it seemed almost impossible for anyone to make a reliable estimate upon this subject. The Military Works Acts did not profess to give them any estimate of the total cost of the works, but the Naval Works Acts did give the estimated cost with regard to many of the items, although not in regard to several of the most important items. He thought he was quite within the mark when he said that the total commitments under the various Naval and Military Works Acts amounted to an extra' £25,000,000 or £30,000,000. Therefore, if they did not pass any more Military Works Bills, they had before them the certainty of an increase of capital liabilities on a sum equal to that which the country was already saddled with. For the introduction of that system of expenditure on a large scale the present Government alone was responsible, and these lax methods of finance had been adopted by the present Chancellor of the Exchequer and his predecessors under the present government. This system of borrowing money for public, works and making it part of the annual expenditure was as bad as it could be. Upon this point he was glad to see that the Public Accounts Committee had inserted in their Report a very strong expression of opinion in which they stated that this practice led not only to great expenditure, but to the confusion of the accounts, and the Report stated that in the interests of the control of the House over its finances, it was very desirable that they should return to the former practice of putting the money required for naval and military works in the annual Estimates.

There had been under the present Government an increase in the practice of issuing grants-in-aid upon a large and extravagant scale always accompanied by The proviso that the unexpended balances should not be returned to the Exchequer and also with a proviso that in many cases they should not be subject to audit by the Comptroller and Auditor General. The House did possess considerable control over grants-in-aid as long as the Comptroller and Auditor-General possessed the power to audit. It was true that he could not call for the surrender of the balances, but he had the power of seeing that the money was expended within the limits of the audit itself, and that was a very threat safeguard. Then again, there was the system of throwing additional burdens upon India and the Colonies and the practice of introducing double budgets in the House for the large spending Departments, and very frequently they had not merely Supplementary Estimates, but in regard to the Army and Navy they frequently introduced a new programme for the year, which led to laxity in the framing of the original Estimates and this practice weakened the control of the House over expenditure. Another thing he regretted was the manner in which the present Government appeared to rely solely upon expert and official advice, for their expenditure upon the Army and Navy was regulated not so much by the advice of the Secretary of State for War and the First Lord of the Admiralty, but by the heads of those great Departments who were military or naval officers. He was afraid this practice would undoubtedly increase more than ever under the new Defence Committee, and he could not help thinking that the operations of this Committee would not conduce to anything like economy or retrenchment. Sir George Clarke himself had stated that it passed human belief to anticipate that when the Defence Committee was in full wording order it would not add substantially to our annual expenditure.

Hon. Members opposite said that, after all this increased expenditure was a question of policy. Of course it was a question of policy on the part of His Majesty's Government which had led to this vast expenditure, and it was only by a reversal of that policy that they might expect to obtain retrenchment and prosperity. They wanted a spirit of peace abroad and sympathy with liberty and not with autocracy, and if they got that they would be in the way of making a long stride towards economy. They had to convert the country to their side, and he thought they were in process of doing it. It was a great mistake to assume that the country was not waking up to the necessity of economy. There was no doubt that in the country the people were awakening and realising the enormous increase in our national expenditure; and when the poorer classes felt this increase of taxation they would demand from whichever Party obtained a majority at the next election that there should be retrenchment in expenditure and a reduction in the immediate future. They did not want panic reductions in expenditure, but they wanted both Parties in the State committed to real retrenchment and real reduction. They must cut their coat according to their cloth, abandon the loan and grant-in-aid system, and mike a serious effort to diminish the war debt, without waiting for that £30,000,000 from the Transvaal, which might possibly never come at all. They wanted no more doles, no more Licensing Bills, no more Irish Land Purchase Bills, no more pursuits of Mad Mullahs through the deserts of Africa, and no more "peaceful" Missions to Tibet. They must insist upon a reduction of the Army to a number which was sufficient to meet the necessities of Home defence and the defence of India, and a halt must be called in the permanent and continuous increase in the Navy. In the year 1899–1900, the First Lord of the Admiralty, Lord Goschen, told the House, when he was asking for £27,000,000 for the Navy, that that sum was sufficient to give them the naval force they needed, but now the Government had raised that sum to £43,000,000. The sum of £8,000,000 was then considered sufficient for new construction, and why should they require now nearly £12,000,000 for this purpose, because all the arguments pointed in the opposite direction? At the present time they saw one of their greatest naval rivals being seriously injured in the war which was going on in the Far East. France was now their only naval rival in the Mediterranean, which was packed with British ships. Surely if the recent agreement with France was a real, substantial, and beneficent one it ought to lead both in the spirit, and in regard to the practical results which would follow, not merely to greater amity between the two nations, but also to a substantial alleviation of the burden of armaments both in this country and in France.


said the Chancellor of the Exchequer would not, he thought, be surprised when he rose to support the Amendment which had been moved from the Benches opposite; but he hoped the right hon. Gentleman would not think that he addressed the House that evening in any way hostile, personally or politically, to himself. He had usually got on very well with Chancellors of the Exchequer. They had usually regarded him and others who sat on that Bench as right-minded and industrious Members of Parliament, and he would remind the right hon. Gentleman that his two immediate predecessors were so impressed with the strength, the force, and the cogency of the financial criticisms from the Back Benches and from below the Gangway, that they had resigned their offices and come to help in the supply of that criticism. He was tempted to recollect how strong the influence of the Treasury might be. The most obdurate politicians seemed to have their opinions altered under Treasury influence, I which was almost stronger than that of the Board of Trade, and yet they knew that I twenty years ago the Board of Trade was strong enough to produce a very decided effect upon a political leader who was not usually able to come within outside influence. There seemed to be something about the air of 11, Downing Street peculiarly exhilarating, something which nor only gave to the occupant of that building clear views on financial questions but which very often imparted to him the courage of a martyr and the most unalterable convictions. It was all the more remarkable that the atmosphere should have that effect when they reflected upon the obscurity which prevailed at the residence of the Prime Minister next door, and the very dangerous and poisonous fumes which, until a recent date, issued from the Colonial Office across the road. It would be quite easy to chaff the Chancellor of the Exchequer upon the very odd and anomalous position he occupied in regard to the Budget. He was a convinced tariff reformer as he told them during the holidays at Birmingham, and yet he had introduced a free-trade Budget, and he was defending that with force, fluency, and conviction. His right hon. friend believed it was profitable to raise revenue by taxing the foreigner, and yet the right hon. Gentleman selected as the principal subject of his Budget, tea—that commodity which all politicians, from the right hon. Gentleman the Member for Birmingham to the hon. Member for Islington, were agreed was a vital and indispensable necessity in the household of every working man. That was a subject which the right hon. Gentleman had selected for taxation, although he knew that the greater part came to these shores not as part of an insidious design or treacherous intrigue on the part of a foreign country, but as part of a free and generous Imperial sentiment which animated one of our most deserving colonies. By a strange concatenation of events, the right hon. Gentleman tilled a great position of responsibility. He was surrounded by peculiar public and still more peculiar personal difficulties, and he was bound to say that he seemed to have tried his best to do his duty according to the best traditions of the finance of this country As a sincere though he hoped not a pedantic free-trader, he should certainly not say anything calculated to discourage his right hon. friend from the path of virtue on which he had embarked, or disturb in any way the wholesome process of conversion which was evidently going on.

Whatever opinion might be entertained as to the propriety of the discussion which the Leader of the Opposition had raised, there was no dispute at all as to the actual facts. They might differ as to the cause and their consequences, and they might, argue in regard to the excuses which the Government might offer, but of the sadden, immense, alarming, unprecedented increase and expansion in the national expenditure and of the very serious situation created thereby, there was no difference of opinion on either side of the House, nor even between people who sat on the same side of the House. He was not going to quote the figures. It was quite enough to say that the government of the country cost half as much again as it did when the Unionist Government, in 1895, came into power. Was it governed half as well again? In the same period the armaments, or rather the expenditure for the armaments, was doubled. Had they divided their dangers? Was it not true that the same policy which had doubled the armaments had halved the security, so that we rein lined in relatively the same position, faced by the same dingers as twenty years ago. —26,000,000 of taxation imposed during the war for the purposes of the war, and voted by that House under the emotions of the war, had taken their place in the regular ordinary permanent taxation of the country. The war was over, the taxation went on. But that was not all. Their expenditure was advancing by leaps and bounds and had in fact acquired a momentum of its own. Many important changes were maturing in the Army and Navy, and there was an automatic, steady, progressive increase in expenditure. It was said by one speaker that afternoon that the whole vast business had got out of hand. Like an estate in the hands of a spendthrift, our financial position was steadily deteriorating, and our finances were becoming more and more demoralised.

He had done his best to bring this question of economy forward during the time he had been in the House. He did not know when a general election was to come. The right hon. Gentleman the Member for West Birmingham said it would come within "a reasonable time." and the Prime Minister agreed with him in that as in everything else. The Prime Minister's idea of a reasonable time would, if he expressed his whole meaning, be found to coincide very nearly with the limits of the Septennial Act. Whether he himself would be fortunate enough to hold a seat in this House after the general election he could not tell. It was a matter of considerable uncertainty, he admitted; but, if he should be so fortunate as to be there on the day when the great transference of power took place, he should like to warn the right hon. Gentleman the Leader of the Opposition that he should do his best to pursue the same economic performances he had hitherto devoted himself to, and that, unless the incoming Government made a substantial reduction both in naval and military expenditure, he should do his best to be a plague to the right hon. Gentleman. He supposed his quarrel with the Government was now quite irreparable. The Prime Minister had dismissed him formally from the number of his supporters. [AN HON. Member: No wonder.] Perhaps the hon. Gentleman behind him would be very glad if he and some others who sat near him were to go and sit on the other side of the House? If he consulted his own inclinations he should certainly do so but there were other things to be considered than that. And, besides, the established practice of that House had been that Members had a right to choose where they would sit and it had been assumed that other Members would accept their decision with tolerance and good humour—more than that was not asked of them. Since his quarrel with the Government had become serious, he should like to say that it had been solely and entirely on the question of finance. It was on finance that he was drawn to attack the Army scheme of 1900; it had been mainly on finance that he had been drawn to oppose the fiscal proposals of the right hon. Gentleman. Extravagant finance would in the long run drag this powerful Government to the ground. Extravagant finance was written on the head of their indictment, and it would be written on the head of their tombstone. No doubt the old familiar arguments would be advanced in reply. If expenditure was appalling, it was said, "Never mind, it is popular." If trade and employment fell off, it was said it improved recruiting for the Army, and for the Tariff Reform League also, according to the right hon. Member for Birmingham. If Consols and other gilt edged securities were depreciated, what matter? it was no longer necessary to reduce the interest on savings in the Post Office. Above all, if the domestic situa-proved embarrassing, distraction could be sought for in foreign war. There was brilliancy in decay; the human body preyed on itself and gained a feverish energy in the process of exhaustion. When expenditure increased waste increased. He did not make that as a special charge against this Government. It was true of all Governments. The expenditure of the country had bounded up in a great measure, and it was obvious that the proportion of waste and unprofitable expenditure must be actually and relatively great.

The expenditure of the country required a critical examination periodicals by some one not concerned in it. That examination was usually made by a succeeding Government of a different political Party who surveyed the whole body of expenditure from a point of view entirely different from that of their predecessors. But as this was the second term of office which the present Government was enjoying, the ordinary working of that healthy constitutional check had been prevented, and therefore extravagance and waste had been progressive and cumulative. Two years ago the hon. Member for Exeter and the hon. Member for Lynn Regis asked the Prime Minister to appoint a Committee to inquire into the matter of examining the Estimates. The Committee was appointed; it sat, and examined witnesses, and made some moderate recommendations as to the way in which the Estimates should be examined. What had happened? The Report had fallen somewhere to the ground between the two Front Benches, and he was afraid that it was irretrievably lost. Control of expenditure did not depend upon control of details. Control of expenditure depended upon policy; and the present expenditure would never be checked and curbed until there was a complete change of policy. There was the Army. He hoped there would be an opportunity given for discussing how much the scheme of 1901 had really cost the taxpayers, and he trusted it would never be forgotten how this scheme, though from the first known to be absolutely unsuited to our needs, was cynically carried on, and how the whole system of the Army was altered in the vain attempt to make it work. Then there was Somaliland upon which £2,500,000 had been spent. Then there was the peaceful Mission to Tibet. That subject did not arise on the Finance Bill, because the charge fell upon the Indian taxpayers; but he trusted that an opportunity would be afforded before the Whitsuntide adjournment for discussing not only the immediate security of the forces employed in Tibet, but the moral and political considerations involved in that must unworthy and unprovoked act of aggression and crime. He agreed that now was the time for effecting a reduction in the Navy Such a chance would not recur again. The other day a first-class Russian battleship was sunk, and disappeared as if she had never existed. If our calculations for the strength of the Navy were not exaggerated before, obviously the Government could strike off one first-class battleship from their naval programme to counterbalance the Russian ship which had been destroyed. It was possible that there might be a still greater reduction in the Russian fleet. Surely here was a chance for the Government. Why not go to the Russian Government and say "You have lost your ships of war; but never mind we will make a proportionate reduction in our Fleet in order to counterbalance your losses."

They had no right to say that the House of Commons was responsible for this expenditure; it was the Executive alone that was responsible. He did not deny that a great portion of the expenditure was due to the South African War. He said nothing about that war; he was tarred with responsibility, in his own small way, as much as anyone on this side of the House for acquiescing in that immense public disaster. The effect of the war had been two-fold; it had seriously increased the cost of our administration and disordered our finances, and it had totally changed, in the minds of the public departments, the scale of our armaments and general administration. The Government had taken full advantage of that change; they had found in the spending of money an easy solution for almost every Parliamentary and electoral difficulty, and had indulged in almost every conceivable financial irregularity. It was on a financial situation such as that that the right hon. Member for West Birmingham launched his fiscal proposals. He had no personal feeling whatever against the right hon. Gentleman; like a good many others he objected to his emissaries being sent down to disturb his own constituency while the right hon. Gentleman was a member of the Government, although in favour of a policy of which the Government did not approve. He was sorry the right hon. Gentleman was not present, he would much rather say these things in his presence. Since the right hon. Gentleman had regularised his position by his resignation, no one had any right to prefer a complaint other than of a purely political character against him; he had made a sacrifice, how great ho was perhaps now beginning to realise. If they had received rough treatment from the right hon. Gentleman they had at any rate received fair treatment from him. If they deplored his action, they did not deny his right, or that of any other private Member, to use to the full his influence in bringing to a constitutional decision a great question. But when the right hon. Gentleman returned from South Africa a great opportunity had been presented him. The finance of this country required a period of what Lord Rosebery called "recuperative repose," the public expenditure needed control, and the public departments required reorganisation. The right hon. Gentleman occupied a position of prestige and power unequalled in the country; the Government, on the other hand, were in difficulties, embarrassed by the Army scheme and a want of money, a want that would cling to them as long as they were in office. The part of a prudent statesman, even of a good Party man, would surely have been to try to do something to heal the scars of war and enable the country to recover from the sacrifices which it had been willing to make. No one else had the courage, the influence, or the business capacity, and if the right hon. Gentleman had found it possible to enter on such a campaign, many Members on both sides—certainly on this side —would have been proud to give him all the effective support in their power. The right hon. Gentleman chose a different course; instead of repose he chose agitation, instead of retrenchment, profusion, instead of financial recovery, fiscal reform! When he entered on that course, so full of peril, it carried him further and further from all the great traditions of the British Government and finance. There was another reason why the right hon. Gentleman should have exercised restraint. He was the Minister responsible for Africa. On the faith of his judgment and on the strength of his appeals this country had backed his policy through thick and thin; thousands of soldiers had lost their lives, many millions had been spent. If ever a man was under an obligation to devote the whole of his time and attention to African policy it was the Colonial Secretary. But the right hon. Gentleman cast that grim African obligation away as a child would throw away a costly broken toy, and plunged at once upon another enterprise, another adventure, as vast, as dangerous, as uncalculated, as uncontrollable as the one from which he had barely emerged. No doubt the right hon. Gentleman's emotions were not sordid or selfish, but he thought he would not easily escape at the bar of history a charge, damaging to his reputation, of having abandoned without sufficient pretext or justification, a post which it was his duty to defend.


I must not allow the hon. Member to make an attack upon the late Colonial Secretary for not continuing in his post. It is not relevant to the question either of expenditure or of taxation.


said he was only referring to the financial position of the country owing to the policy of the right hon. Gentleman. Of course, he would not pursue that further. At the cost of some personal friendships, the breaking of Party ties, and the disturbance of the financial position, the right hon. Gentleman's fiscal proposals had been checked and arrested. If the right hon. Gentleman the Member for West Birmingham wished to measure the results of his policy during the past year he had only to contrast the reception given to his speech on 15th May, 1903, with that accorded to his speech on 12th May, 1904. What was the position, in the meanwhile, of His Majesty's Government? The Secretary of State for India, who was nothing if not modest, informed them that—presumably since he left the War Office—the position of the Government had been one of riotous triumph. The Prime Minister was entitled to congratulate himself on a very remarkable achievement. After a year of fiscal and financial discussion no one knew whether the right hon. Gentleman was convinced that a 10 per cent. duty would be a good thing or a bad thing for the country; no one knew what fiscal reform meant, or what retaliation and anti-dumping actually meant.


I think this is not relevant to the Bill. It may be relevant to a Motion that is coming on on Wednesday.


said that, with great respect, he was discussing the position of the Government as a matter relevant to the decision of the House on the Finance Bill.


I differ from the hon. Member. I do not think that he is entitled on the Finance Bill to discuss the whole policy or conduct of the Government.


said he bowed to Mr. Speaker's ruling. After the next election was over, the Prime Minister and the right hon. Gentleman the Member for West Birmingham would be the leaders of a strong and united Party, but they would not be leaders of the same Party but of a new Party. The course of financial events would alter the relations of those who now supported them. It would be a Party which had taken new ideas. It would not be a Party attached to the old traditions of old finance, or the old constitutional ideas which the Conservative Party had so long respected. It would be a Party with a test, and that test would be a tariff.

The Leader of the Opposition, in the course of his speech that day had referred to what he called "claptrap, Imperialism." All Imperialism was not "clap-trap." But there were two kinds of Imperialism. There was the Imperialism of the camp, about which some of them who were leaving the protectionist Party knew something, and there was the Imperialism of the caucus, about which they had known something during the last few months. They ought to distinguish between the amateur Imperialists who gave their lives on the field, and the professional Imperialists who got their living by practising it in politics; they ought to distinguish between the sentiment which united us to our Colonies, and that bastard Imperialism which was ground out by a Party machine and was convenient for placing a particular set of Gentlemen in power. Speaking generally on the question of Imperialism as connected with finance, he cared a great deal more for the old Constitution of our country than for the cheap and flashy doctrine of Imperialism of which they had lately heard so much. But this Budget was the last of its kind. By the time the next Budget was presented, in all probability one of two things would have happened. Either a fundamental change would have taken place, owing to a Liberal free-trade victory at the polls, which would impose a change upon policy and consequently upon expenditure, or we should be listening to proposals of a general protectionist character. He ventured to predict to the right hon. Gentleman that if this vast expenditure continued it would not fail to raise the great labour issue. One would hardly think that finance was the governing factor in the whole political situation. It was not until the heavy burden had to be distributed that the combat of classes really began, and now, behind a perfect array of minor questions, such as graduated income-tax and the financial relations with Ireland, there began to rise up from slumber the two great giants, labour and protection. They might make model speeches in favour of economy, or appoint Committees of supervision or control, but the harm was done, the consequences were upon them. Be they evil or be they good, they would have to be faced, and before these two paramount issues were laid to rest, or carried into effect, the whole face of English politics would be altered, and of the existing Party arrangements, Party grouping, perhaps Party watch-words hardly a vestige would remain.

* MR. RENWICK (Newcastle-on-Tyne)

said that everyone interested in government by Party must acknowledge that the speech to which the House had just listened ought to have been made from the other side. He thought the speech was notable for two things: first, for the fact that they had at last got an inkling of what hon. Members opposite meant by economy, and secondly, it was evidently prepared in the hope that the right hon. Member for West Birmingham would be present, and that it would draw the right hon. Gentleman into a general debate on fiscal policy. One could hardly have recognised in the speech of the hon. Member that he was so lately one of the most enthusiastic supporters of the Government in re-imposing the corn duty. The hon. Member had said that the Chancellor of the Exchequer had brought in a humdrum Budget. The same opinion had been expressed over and over again on the other side of the House. The hon. Gentleman in 1902 heartily supported the corn tax, and if that tax had not been taken off probably they would not have had such a humdrum Budget? The hon. Gentleman said that because a Russian battleship had been sunk, the Government ought to curtail its shipbuilding programme; but he maintained that if ever there was a time when it was absolutely necessary to keep up an efficient Navy, now was the time. Did Japan wait for the outbreak of war before ordering their ships? No; the Government of that country had their ships built in time of peace. Shipbuilders might be patriotic, but their patriotism would not allow them to build ships without a profit. Orders should be given in times of peace. It was too late to do so when war was contemplated, for then shipbuilders would require a larger profit and workmen would demand larger wages, and the expenditure would be correspondingly higher.

There was one point in which he thoroughly agreed with the junior Member for Oldham, and that was the regret with which he regarded the raising of the tea duty from 6d. to 8d. He like the hon. Member represented a large manufacturing constituency, and for many years he had made speeches advocating the reduction of the tea duty on the ground that tea had become an absolute necessity of life. He looked forward to the time when, by a re-arrangement of our fiscal system, we should be able to reduce the taxation on tea. He did not agree with the hon. Member for Oldham that we ought to enter on a period of recuperative repose. That might suit Lord Rosebery and his followers, but it would not suit this country, which was accustomed to an active life and an active policy. He was perfectly aware that his friends opposite would like to get rid of the responsibilities of our Empire, and would like to cut down the Empire. But the nation was bound to protect every part of the Empire, and they on that side of the House were not afraid of taking the responsibility. The Empire had brought this country wealth and greatness, and all means must be adopted which were necessary to maintain it. What the country was suffering from at the present time was a financial policy, which was based on a too narrow basis of taxation. A broader basis of taxation must be adopted. Those who clamoured for economy and the decrease of taxation were the very persons who were always agitating for the increase of wages of Government servants, or the payment of expenses of returning officers at elections, payment of Members, and the like. A few days ago a deputation waited on the First Lord of the Admiralty and pleaded for an increase of the wages of dock labourers, and the First Lord told them that money did not fall like manna from Heaven. While not enthusiastic in regard to the Finance Bill, he thought the Chancellor of the Exchequer's proposals were safe, and he would consider it his duty to support them.

* MR. THEODORE TAYLOR (Lancashire, Radcliffe)

said it had been alleged that the House of Commons was largely responsible for the increase of expenditure. He was aware that the average Member of the House of Commons was not sufficiently impressed with the necessity for national economy. He, for one, would vote against every extravagance, even if it were proposed by a Liberal Government. When hon. Members talked to each other privately, all admitted that the present expenditure was too large. The Chancellor of the Exchequer and others had said that there was not much demand for economy, but he thought the right hon. Gentleman would see, when he came to meet his constituents, that there was a considerable demand for economy. The great bulk of the population were not men of considerable means; and many had very great difficulties in making ends meet. That was a class who were sufficiently large to claim the attention of this House, and that was the class who were very often on the verge of hunger. He made no apology for speaking for that class. Not only from this country but from Ireland they were emigrating every year in large numbers. There must be something wrong when, as a friend wrote him the other day, by one steamer a thousand young people left their native country, because they could not get their living in it. The condition of the very poor was so serious that it really needed their sympathy. He was sure that every hon. Member was a humane man; and that if it depended on individuals they would not vote for taxation which pressed on the very poor. National extravagance was bad for the nation because it begot self-indulgence; self-indulgence begot luxury; and luxury begot decay and ruin. To fight for economy was the duty not only of the Chancellor of the Exchequer but of every hon. Member, just as much as it would be his duty to fight for his country in time of war, and if they did not do their duty they were poor patriots and defaulting trustees. In no spirit of sordid meanness but as a matter of duty they should see that the nation's money was wisely spent. The expenditure of the country had increased enormously in proportion to their real requirements. Justice and humanity demanded that they should relieve the very poor of their burdens. Heavy taxation of the poor was that form of taxation least profitable to the State. It was not only unfair to the poor but it made the trade of the country worse. The very poor were the class that spent all they got, and that meant that if taxes took anything from them by raising the price of tea and sugar they must spend less on articles of consumption. If they lessened the people's income so much less would be spent on commodities produced by the rest of the community, and in that way the war taxation was producing bad trade in the country. Sir Robert Giffen had estimated that about 72 per cent, of the expenditure of the whole community was on food, dress, and housing—the absolute essentials of life—and if that were the proportion for the whole community, it was probable that the working classes spent 90 percent, of their income on such essentials.

Of new taxes imposed since the war began, there yet remained £25,250,000 a year. Their total expenditure was too large. If they wanted to test that, they could compare their expenditure with other countries. He knew that it would be said that such a comparison was hardly fair, because of the burden of Imperial defence, but surely the time was not far distant when some of their statesmen would endeavour to devise some scheme by which the Colonies would bear a fair share in the defence of the Empire and at the same time have some share in its government. India the poorest part of the Empire paid for its own defence, but there were other parts of the Empire which did not pay anything like their fair share as compared with the United Kingdom, and until they had some such scheme as he suggested, and until other parts of the Empire contributed a share to its defence, they could not hope for much improvement. He agreed with the Leader of the Opposition that the country hid got into its present position through a policy of drift, and by allowing men in charge on the limits of the Empire to have too much of their own way. Only the other day he heard the Prime Minister state that this country was going to withdraw from Tibet; but now they were told that the expedition would advance. He thought, however, that this country ought to contribute to the cost of that expedition and that India should not be saddled with it all. It seemed to him that until they abandoned this policy of drift and altered the tone of their policy not only would the country have to provide for all rightful defence, but would also have to meet the cost of a continuance of little wars that kept developing into big wars. Surely one way to avoid such expenditure was that their public men should adopt a modest and not a boastful tone. Certainly the country would have to pay for boastful talk such as references to "the long spoon" and to "the sands running out" by men of great international fame. No man could boast in private life without losing by it; and if they boasted as a nation they would have to pay for it sooner or later. The right hon. Gentleman the Member for West Bristol said in his constituency the other day that this country should attract the sympathy of its great Colonies by respecting both them and herself, and in regard to foreign nations that it should carry out the golden rule of doing to others as they would wish others to do unto it. It was by that policy, he added, and that policy alone, that the welfare and greatness of the country would be maintained. That exactly described the policy they ought to follow. The one great reason for the expenditure they now had to incur was that this country had excited to an unnecessary extent the jealousy and hostility of foreign nations, and also, perhaps, to a certain extent because of the attitude of their own countrymen who thought that unless they were cock-a-hoop they could not be properly alive.

Let them compare the expenditure now with what it was ten or twenty years ago. Including the licence duties which wore paid to the local taxation account and also the Military and Naval Works Loans, the expenditure in 1883–4 was nearly £80,000,000 and in 1893–4 £99,344,000, or an increase of over 15 per cent. In 1903–4 the expenditure was £164,000,000, or an increase over the expenditure of 1893–4 of 65 per cent, and an increase of 90 per cent, as compared with the expenditure twenty years ago, That was really an astounding increase; and even if they allowed for the increase in population, which was 20 per cent., it meant an increase in expenditure of 60 per cent. In his young days he had heard of "bloated armaments" but if the man who used that expression twenty or twenty-five years ago were still alive, what phrase would he use now? It was no point at all to say that the municipal expenditure of the country had also greatly increased. If the municipalities were extravagant it was all the more reason why the State should be economical; not why the State should attempt to rival the municipalities in extravagance. He had heard extravagance advocated on the ground that it would put money into the pockets of the working classes, and set the wheels of trade going. That was a perfectly rotten argument, and was absolutely contrary to political economy. There could be no better illustration of the difference between sensible and extravagant expenditure than a comparison between, for instance, £100,000 spent on a warship and £100,000 spent on a merchant ship. The warship was unproductive—not only unproductive but continuously costly; but after a year or two the merchant ship yielded a return in the form of a dividend to its owners. That was an illustration of the difference between the continuous effect of extravagant expenditure and the continuous effect of wasteful expenditure. It also explained why trade was so much worse after a great war. Money spent on war was wasteful expenditure which might be spent on reproductive works, which after a year or two would be earning money for the country. It was because of the money spent on the war that trade was as it was, and that employment was decreasing. Another illustration of the difference between extravagant and reasonable national expenditure was the case of Egypt. Lord Cromer in his marvellous consular report last year on Egypt taught a lesson to every financier of every country and every time. He stated that he know perfectly well that he was keeping the country short as regarded expenditure on judiciary and police, but that he did that purposely in order that money might fructify in the pockets of the people. It did fructify, and the result was that the condition of Egypt had greatly improved. If they in this country also allowed money to fructify in the pockets of the people they would reap the benefit of it in time. Extravagant expenditure was bad for a country. They saw Consols falling in this country while Egyptian government securities were rising in value; and it would actually have been better for the finances of this country if they had been controlled by a benevolent despot such as Lord Cromer than to have been as they were under the control of this Government.

Motion made, and Question, "That the debate be now adjourned"—(Lord Alwyne Compton)—put, and agreed to.

Debate to be resumed to-morrow.

Adjourned at nine minutes after Twelve o'clock.