HC Deb 17 May 1904 vol 135 cc57-113


Order read for re-suming 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."

LORD ALWYNE COMPTON (Bedfordshire, Biggleswade)

wished to congratulate the Chancellor of the Exchequer on having brought in a Budget based on the sound principles that direct and indirect taxation should go hand in hand. Personally he had only one criticism to make. He and his constituents objected to the tax on tea, believing there were oth r and better means of obtaining money for the Exchequer. He would never forget the speech made by the right hon. Gentleman the Member for West Bristol in which he spoke of the desirability of broadening the incidence of taxation. All he would say on that subject was that it was because the Government were bound by the cast-iron rules of an old heresy that they were not permitted to broaden the basis of taxation, if there was the slightest possibility of benefiting any producer or manufacturer in this country in the process. But the part of the Motion that was of real importance was that in which it asked the House— To declare its condemnation of the large and continuous increase of the national expenditure in recent year. If there was any meaning at all in those words it was that the expenditure of the last few years was unnecessary and unremunerative. Had that been proved in the debate? Different views were held as to the justice of the South African War, but, having visited that country, he doubted whether anyone with knowledge of the subject would deny that there were enormous potentialities in South Africa, and that when the country was developed it would prove to be a most remunerative investment for the money that had been spent. All through the debate there had been elaborate and detailed criticism of past expenditure, but except in the speeches of the hon. Members for Whitby and Oldham, there had been no suggestion whatever with regard to the future. Those two hon. Members who had left the Unionist Party in spirit but not in the flesh, had suggested that in consequence of the destruction of the Russian Navy by the Japanese a reduction should be made in the British Fleet. Personally, he would strongly protest against any reduction in the Army or in the Navy. As far as the Army was concerned, he sometimes had an uncomfortable feeling with regard to the amount of money that was being spent and the value obtained, but it should be remembered that a voluntary Army was an expensive luxury, and as long as it was the desire of the people of this country to have a voluntary Army they would have to pay for it. As to the Navy, it was true that events in the East had altered the balance of power, but at the same time the advance made by Germany in the construction of her navy might well give the Government pause before they consented to any reduction in the British Fleet. He challenged the right hon. Gentleman the Leader of the Opposition and his followers to state boldly whether, when the time came for them to cross the floor of the House, they would reduce the British Army and Navy, and, if so, the extent to which they would carry that policy.

Much had been heard on the question of economy, and many Members had expressed a desire to retrench and cut down expenditure. Surely hon. Members must be aware how illogical it was to express such views, and then on al most every other occasion to urge further expenditure. The absurdity of the position reached its height when, in a recent discussion on harbours of refuge, Member after Member who represented constituencies bordering on the sea asked for a harbour to be built in his district. Included in the number was the hon. Member for Argyllshire, although anybody with any knowledge on the subject knew that the West Coast of Scotland was the portion of the British Isles which least required harbours of refuge because of the natural conformation of the coast. Many references had been made in the course of the debate to Imperialism. All were Imperialists now, but different views were held as to the manner in which the policy should be applied. The Unionist Party had refused, and always would refuse, to run the Empire on the cheap. If hon. Members opposite held a different view on that point, he invited them to attempt to convince the electorate that a cheese-paring policy was the right one to apply to the Government of the Empire, and he would be very much surprised if the British people paid any attention to them.

*SIR WILLIAM HARCOURT (Monmouthshire, W.)

Though I have not been able lately to take part in the debates of this House, I have felt that upon this question, so far as my powers go, I ought to contribute what I can. I take the earliest opportunity which I have enjoyed of conveying to the Chancellor of the Exchequer my congratulations, in addition to those which he has already received from all quarters, on the manner in which he has discharged his responsible duties and the ability and the frankness with which he has placed before the House the condition of the finances of the country. The Tight hon. Gentleman is a skilful artist; I should almost call him a financial cordon bleu. He is able to serve up disagreeable facts in a manner which is almost agreeable and to give a pleasant flavour to unsavoury viands. I admire the way in which the right hon. Gentleman has dressed up two successive deficits by an increase of £4,500,000 in taxation in times of peace, and made it appear as if it were almost a dainty dish to set before the king. However that may be, he must excuse us if we feel that, after all, the repast is neither appetising nor nourishing. I would like also to offer my congratulations to a younger Member of the House, the Secretary to the Treasury. He is an old friend of mine, but I assure him it is in a public and not in a private capacity that I tender to him this acknowledgment.

Before I proceed to any criticism on the Budget, I would record my entire agreement with many of the sentiments of the Chancellor of the Exchequer upon financial matters. In the first place, I have nothing but applause to render for the sturdy language which he held on the subject of the Sinking Fund. No man's practice always entirely accords to his principles, and I am hopeful that in the future the benefit of the Sinking Fund will not be drawn upon by diverting from it certain funds that ought to have gone to the liquidation of the Debt. Again, I can only approve of his adhesion to the doctrine of maintaining, I do not say pedantically, but substantially, an equality between direct and indirect taxation. That is a matter which, after a generation, has been achieved by the operation of successive Chancellors of the Exchequer. They have destroyed that cruel system which, under the reign of protection, before the days of Sir Robert Peel and the Administration of Mr. Gladstone, imposed certainly two-thirds of the burden of taxation upon the poorer classes, who are the least able to bear it. I recognise completely what was stated the other night by the hon. and learned Member for Waterford—that Ireland being the poorest part of the Kingdom, is the country which most suffers from the aggravation of indirect taxation. I have always said so myself, and I have always endeavoured to act upon it. Therefore, in my opinion, any attempt to alter to the disadvantage of the people the relation between direct and indirect taxation is one which ought to be opposed by all who have regard to the poorer classes of the community, and especially to the Irish people. Therefore I am not, as the Chancellor of the Exchequer will perceive, an adherent to the principle of a universal system of scientific tariffs. I prefer the unscientific but less unjust system of taxation which has a due regard to the interests of the different classes of the community.

Then the right hon. Gentleman informed us—and here again I am able to agree with him entirely—that we have enjoyed a great wave of prosperity for many years. To what has that been due? It is a miracle, surely, under a system which we are told has suffered so long under the curse of free imports. How comes it that this wave of prosperity for many years has unfortunately last year failed the Exchequer? The right hon. Gentleman frankly explained to us that that was not due to any errors in our fiscal system, but to occasional circumstances, which he explained in great detail and with complete accuracy. Then there was another sentiment with which I entirely concur. The right hon. Gentleman stated that there were many people who recommended to him methods of taxation which commended themselves to "people who were more concerned to tax out of existence somebody or something they dislike than to provide revenue for the Exchequer." That is an admirable sentiment, and it is impossible to express more accurately the fundamental principle of taxation—namely, that it should be for revenue, and for revenue only. It is not to be a spiteful system, intended to retaliate on the detested foreigner, who may be our best customer; but it should be for revenue alone. That is a very true doctrine, and I am glad the right hon. Gentleman has so well expressed it. It is the doctrine of purely unscientific tariffs and of the days before the advent of un-Royal Commissions. I only trust that the right hon. Gentleman may impress that doctrine on the hon. and gallant Member for Sheffield, and that he may convert to it possibly even the Prime Minister.

I am afraid that here I must diverge from my agreement with the right hon. Gentleman. We have to consider what is the financial position of the country to-day; and I can honestly and sincerely say, without regarding financial subjects from a Party point of view, that I view the financial situation with great regret and with great apprehension. Never within my recollection has it been—I do not like to use alarmist language—in a more thoroughly unsatisfactory condition than we find it to-day. What is the position? My right hon. friend the Leader of the Opposition the other day said that in former times, after a great and costly war, you had a diminution of taxation. Yes, you had not only relief from war taxes, but retrenchment to repair the damage that had been done. In 1815 the House of Commons, in a wave of enthusiasm, swept away a 2s. income-tax in an afternoon. I do not ask the House now to proceed to such heroic measures as that; but the Crimean War was followed by the great reforms of Mr. Gladstone in 1860, in which I do not know how many tariffs, scientific or otherwise, were swept from the Statute-book, and the era of free trade, which brought that prosperity to which the Chancellor of the Exchequer alluded, may be said to have been completed. But what is our position to-day? We have had a war entailing four times over the cost of the Crimean War. What is our position with reference to that? I prophesied last year, on the Budget of the late Chancellor of the Exchequer, that the relief then given was the last the country would receive, I am sorry to say that the event has proved worse than my prediction, because it has been followed not by relief but by an aggravation of taxation. The right hon. Gentleman was good enough to compliment the right hon. Gentleman the Member for Bristol and myself upon the taxes by which we should be remembered. He said they would keep our memory green. I am happy to reciprocate his solicitude for our good fame and to promise for the memory of the present Chancellor of the Exchequer that it will be kept green by the fact that he is the first Chancellor of the Exchequer who has followed up peace by two deficits and an aggravation of taxation. That is a record which is not to be found in the whole history of British finance.

I have sometimes thought that our financial system is rather absurd in this—that we proceed to determine what we will spend before we examine what we have got or are likely to get to meet our expenditure. I have sometimes thought that, if the financial year ended with the calendar year, you might have the financial statement laid before the House at the same time as the Estimates. In these circumstances you would consider both together, as we are, perhaps rather irregularly, now considering both together, and determining whether or not we can afford to spend all the Government asks for—whether the country is in a position to accept that taxation, which is the necessary consequence of the sums you are voting. But as it is we do not know when we are voting them whether they mean addition to taxation or the extent of that addition. There have been instances when the Budget has been brought in before or at the time of voting Estimates, and certainly to go blindly into unlimited expenditure without considering the effect in the sacrifices this may entail upon the people is not a business like method of dealing with the finances of a great country. I will not trouble the House with elaborate figures; they have been repeated, they ought to be and I hope will be repeated throughout the country, for the people do not sufficiently consider these matters. In my recollection we used to consider the expenditure of a few hundred thousand pounds as a serious matter deserving examination, but now we toss about millions as if they were half-crowns. That in great part is the reason for our present position, the neglect of the House of Commons, which ought to be the guardian of the finances of the country and the taxation of the people. I will just take one figure. In 1895–96 the money levied by taxation—(and I take that rather than the gross figures because I think it is the fairest way in dealing with taxation, and I do not include non-tax revenue), as I find them in the Return of the Member for Wolverhampton—amounted to £85,000,000 and in 1904 the amount estimated is £121,000,000, a difference of £36,000,000 as the increment of taxation. We ought to ask ourselves, and the country ought to ask, What is the justification for this increase in the second year of peace? That is the whole point of this discussion. We know that expenditure does and must normally increase with the growth of population and of wealth, but the question is whether it is increasing in a moderate and justifiable degree or not. We all know that under what we believe to be a sound fiscal system each year there should be an increase of population and trade with an increase of revenue which we are entitled to use for the purpose of meeting the growing demands of the country, and even affording some relief of taxation. But, as the right hon. Gentleman the Member for West Bristol has pointed out, you began with very modestincrements of £500,000, £1,000,006, £2,000,000; but our expenditure has gone on like a falling stone with accelerated velocity, and you come now to £4,500,000 a year on the average of these latter years I have spoken of, and the worst of all is that each year in succession grows worse, and if you take the last six years you will find it is at the rate of £5,000,000. That is the situation which, in my opinion, is so grave and alarming. The right hon. Gentleman thought the increase was only proportionate to the increase in the revenue of the country, and he went back for forty years; but I go back five years and say that it is perfectly certain that your increment of expenditure is in far greater ratio than the growth of your wealth. Your wealth is not increasing in the ratio of the increase of your expenditure, and while, when the increase in revenue was between half a million and two millions, there was relief of taxation, here it is accompanied by increase in taxation, and that marks the whole difference in the position.

Everybody knows that the great increase of cost has been in the naval and military expenditure of the country. The noble Lord who has just sat down pledges himself, and his friends I suppose, that never under any circumstances will he agree to cheap Imperialism; but I should like to know what is the upper limit of Imperialism if the councils of the noble Lord are to be followed in this matter. You have added £10,000,000 to Army expenditure, and I say nothing upon that, for I am not an expert in military affairs. But I know that those who are say that it has been muddled through, and that is not a satisfactory increase of expenditure, and with such an expenditure there is no advance in efficiency. You have had various schemes of Army reform, and never yet have I known a scheme of Army reform that was not accompanied by increased expenditure. Then, again, it is admitted this country must have a strong Navy; but there are people who are so nervous on the subject that they are not satisfied unless there is an extraordinary increase in naval expenditure every year, and the more you increase the more it is necessary to increase further. Now I should like to quiet the nerves of those gentlemen who are alarmed about the condition of the British Navy. There is a very instructive answer given to the hon. Member for Chester on this subject. These are the figures in relation to the great navies of Europe. In 1900 Great Britain spent on her Navy £32,000,000, and in the year ending 1904 £41,000,000 is to be spent. France in 1900 spent £12,500,000, and is to spend exactly the same in 1904. Russia in 1900 spent £11,000,000, and in 1904 is to spend £12,000,000 or £1,000,000 more Germany in 1900 spent £7,500,000 and in 1904 £11,000,000 ro £3,500,000 more. You have, therefore, with these three great European Powers last mentioned an increase of £4,500,000 on naval expenditure in four years, while in the same period the increase by Great Britain was double that amount, or £9,000,000. That should quiet alarm with reference to the British Navy. The whole naval expenditure of Great Britain this year is £41,500,000; but add the expenditure of the three other great Powers and the amount is £35,500,000; so that England is spending £6,000,000 this year more than the three other Powers combined. It may be added, the circumstance is perfectly admitted, that Great Britain can build ships more quickly when required and 20 or 30 per cent, cheaper than any other nation. That is all I desire to say about the Navy.

Now what is the situation of the country with reference to taxation imposed for the war? We thought we were very fairly taxed even before the war, it was consistent with that great wave of prosperity of which the Chancellor of the Exchequer spoke; but we have had an interesting Paper put before us, also in answer to a Question, which represents the taxes remaining after the war. The war taxes which still remain amount to £16,000,000 of indirect and £10,000,000 of direct taxation, so that the principle of equality between the two has not come about. I will not deal wish the coal tax. I go to indirect taxation on articles of common comsuption. You are raising £6,000,000 of war taxes from sugar, £4,000,000 from tea, £2,000,000 from tobacco, and £2,700,000 from spirits and beer, a total of £14,700,000 taxation, largely paid by the poorest classes in the country. That cannot be denied, and it is a very serious matter. The income-tax remains at £10,000,000, and that brings the war taxation remaining to £24,700,000. In one of his speeches dealing with the tea duty the Chancellor of the Exchequer either said himself or quoted somebody else to the effect that people were apt to over-saturate themselves with tea. I do not know whether it will be said any people are oversaturated with income, but in any case £10,000,000 for income-tax is a serious thing. There is a significant and instructive passage in Carlyle's "French Revolution," in which, speaking of the consequences of the extravagance which had accumulated to deficits which it was found impossible to meet and led to that revolt of an exhausted people suffering from the crushing burden of taxes, he writes—"they always ultimately fall on the dumb ranks of those who, with spade and empty wallet, daily come into contact with the realities." That is the evil of taxes of this description; they always fall ultimately upon the dumb ranks of those who, with spade and empty wallet, daily come into contact with the realities. That is the case especially with the poorer communities of this country and the greatest of the poor communities is Ireland. These are considerations which, I believe, far more than scientific tariffs, that suit the intent of capitalists, ought to occupy the consideration of the House of Commons.

If I am not wearying the House, I should like to say something upon what is a drier, but not less important topic, and that is the condition of the Debt charge. There is nothing so important to the commerce of this country as the manner in which you deal with the National Debt. Those who know anything of the situation of England as the great money market of the world know that its credit depends on the treatment of the National Debt, and all trade depends upon credit. You have not abstracted £159,000,000 of money borrowed and spent on unproductive expenditure which would have gone to the maintenance of the industry of this country without inflicting upon it very serious mischief. Let us see how the Debt stands. The aggregate gross liabilities of this country (deducting assets) were this year £763,000,000, that is to say, they are £155,000,000 more than they were in 1899, the year before the war. In order to find a similar figure for the Debt you have to go back a whole generation to the year 1873. In spite of all the efforts you have continuously made to reduce the Debt, you have gone back thirty years. In these thirty years there had been most careful attention to reducing the burden of debt in this country. That has been swept away by the war. The character of the Debt also has altered for the worse. It has always been the object of every financier, the right hon. Member for West Bristol as well as myself, to endeavour to reduce as far as possible the Unfunded Debt, and the right hon. Gentleman did succeed in bringing it down to £8,000,000. What does the House suppose the Unfunded Debt is today? —£71,000,000. We know if you have an emergency, the renewal of the Unfunded Debt becomes a very serious matter, with reference to the interest you have to pay upon it and the disturbance which is usual to the money market. Now there has been a great deal said of the evil system of what is called "the extraordinary debt" —capital outside the regular Debt. It used to be a million or two, now it is £31,000,000. This extraordinary debt is like the extraordinary budgets of foreign countries, which are one of the greatest curses of finance. After you have passed the Statute authorising the borrowing for these special funds you hear no more of it, and it is done really without the cognisance of the House of Commons or of the country. It has been said that each of these borrowings has a little sinking fund of its own; but that is no answer, because that sinking fund is paid by the taxpayer in the Vote for the money for that sinking fund, so that anything more injurious to sound finance than this large external extraordinary debt cannot be conceived. So much for the capital of the Debt. When you come to what is called the cash account (that is the annuity payable for the Debt, is an annuity and not a capital sum), you find that this year the interest on the Debt is £21,000,000. In 1899 it was £17,000,000, so that there is an increase of £4,000,000. It has swept away the whole advantage of the conversion of the Debt, which amounted to about £3,000,000, and you have to go back to the year 1884 to find a year in which you paid in interest on the Debt the same sum as you are paying this year. You have swept away, consequently, the whole of the economy and the whole of the advantages which you obtained by the prudent and sound finance which has hitherto existed. How long will it be, with regard to the Debt, before you get back to the status quo ante bellum? I doubt very much whether there is any man listening to me to-day who will see that time. These are most serious considerations. They are not very much "understanded of the people," but they have a very serious bearing on the credit of the country, on the trade of the country, and on the taxation of the people. They justify my statement that the financial condition of this country is in a worse position than it has been for many long years. The position is this: the taxation of the country has increased and is increasing, and its expenditure is increasing, I venture to affirm, beyond what you are entitled to attribute to the increase in the wealth of the country. I admit that the wealth of the country is increasing, but not in the ratio of the expenditure of the last five years.

There was one sentence in the speech of the Chancellor of the Exchequer in which I cordially concur. I know what Chancellors of the Exchequer have to suffer in the House of Commons and from people outside the House of Commons too. An Austrian Prime Minister once said, "Wars are not made by Governments, they are made by newspapers. "Expenditure is made by newspapers, and I think also by a great many people in the House of Commons. But the Chancellor of the Exchequer said that "if there is to be economy there must be a change in, this House. "I agree. Nothing could be more desirable than that there should be a change in this House. I was glad to; see it announced, not upon official; authority, but upon great authority, that there was to be a change in this House within "a reasonable period. "When that reasonable period comes there will be a great competition among the issues which are to be put before the country. I venture to; hope that one of the most prominent of these issues will be the expenditure of; the Government. In my opinion the country will be, and ought to be, more interested in diminishing expenditure than in increasing scientific taxation. What the nation wants is not more taxes, I but less taxes, and fewer of them.' Therefore I hope the issue will be determined in that sense. It has been by a long series of diminutions of taxation, and by moderate and sober I increases of expenditure, that we have seen this country in the state of I prosperity which it has unquestionably enjoyed for the last half century. It is that which has built up that great' financial resources which we were all! glad and proud to see, and which even under the stress of this costly war, sustained the arms and the strength of this country. The Chancellor of the Exchequer seeks to console us by saying that the country can well afford it. I do not believe it can afford it. We have overdrawn upon and exhausted these resources. You have increased your Debt; you have brought your taxation up to a point when it is oppressive to the people; you cannot borrow another £159,000,000 on the same terms that you have borrowed the last £159,000,000. You cannot go on increasing the income-tax above 1s. as you were able to increase it above 8d; I you cannot goon augmenting indirect taxation without causing great discontent in the country. In another emergency you will lack the resources I which stood by you before you began the last extravagant war. During the former period it was very different. Under successive Chancellors of the Exchequer belonging to different Parties you diminished debt and reduced taxation, but in later years you have piled up debt and increased; the taxes. Now, if I may use the phrase, you are beginning to over tax the resources of the country. Your ate of; expenditure is increasing at a ratio; greater than the increase of your resources, and in my opinion—I may have no other opportunity of offering it in this ' House—the House of Commons and the 'country should cry "Halt! "in this; reckless expenditure.

It has been well said that expenditure depends upon policy. If your policy is to be judged by your expenditure: your policy must be condemned. What is expensive, what is extravagant, what leads to great expenditure, is the spirit of inflation, of annexation, of raids in every quarter of the world, of retaliation, tall talk, appeals to international; jealousy, the false doctrine that every good which comes to others is an injury and an evil to ourselves. Those are arts which delude ignorant people. They are an expensive luxury; they are things by which the people may be deluded, but which in the end they will have to pay dearly for. The fruits of such a policy may be read, I think, in the contents of this Bill. They are ruinous expenditure, aggravated debt, and in tolerable taxation.

MR. CHAPLIN (Lincolnshire, Sleaford)

said that the right hon. Gentleman began his speech by telling the House that he had been unable recently to take part in their debates. He was sure they all rejoiced at the right hon. Gentleman's intervention, and, if he might say so without presumption, he would offer his congratulations to the light hon. Gentleman on what he would call the "good old form" he had displayed, which reminded the House of so many of those speeches to which hon. Members had listened with pleasure and admiration on both sides of the House. They had learned with regret from public statements that the time had come when the right hon. Gentleman had decided that he would not seek re-election in a future Parliament in this House. The right hon. Gentleman and himself came into the House together. In their time across the floor and sometimes across the Table of the House they had had many bouts, but he was sure the right hon. Gentleman would believe him when he told him that there was no one in the House who would regret his absence more thoroughly, or deplore it more than he would himself, because the right hon. Gentleman would be another old link gone in connection with the past, and he would be another great ornament of the old school of debate removed from the House.

The right hon. Gentleman was of opinion that the financial position of the country at the present moment was very bad, and he seemed to argue that hon. Members on the Ministerial Benches did not appear to consider the position sufficiently seriously. He had heard between thirty and thirty-five Budgets discussed, but he could not recall an occasion when a formal Resolution was moved by the Leader of the Opposition in condemnation of the Budget of the day, on which the state of the Benches could be taken as an index of the interest displayed in the debate than on the present occasion. The Leader of the Opposition had to speak to Benches which were partly empty, and during the remainder of the debate the House was practically a desert, and it was even necessary to move a count in order to procure the necessary degree of attendance. The right hon. Gentleman said that the present condition of the finance of the country was unsatisfactory, and that he viewed with the greatest apprehension the large increase in expenditure. He himself admitted there was a large increase; he deplored the necessity for it, and no one would wish to see it reduced more than he would. But there was another side to the question, and that was that if expenditure had increased, so also had the responsibilities and duties of Empire increased. It might be true that the expenditure of the country was increasing, I and continuing to increase; but so also was the increment of the national wealth. It was impossible to avoid some, at all events, of the increased items of national expenditure; and the answer to the speech of the right hon. Gentleman, and the reason why the House of Commons did not take the Resolution as seriously as was intended was that right hon. Gentlemen and hon. Gentlemen opposite, while complaining of increased expenditure, did not give the shadow of an indication as to how that expenditure could be reduced, and if they were serious and intended to carry the country with them they should be prepared to show how the national expenditure could be reduced. He was not at all surprised that right hon. Gentlemen opposite had not attempted to do that. It was very easy for them to say that they condemned large expenditure, and very easy to put it in the form of a Resolution; but it was exceedingly difficult to put any such Resolution into practice. By all means let expenditure be cut down, but right hon. Gentlemen should be sure that they were right before they began. If they were not, they would, as had happened hundreds of times before, have to replace the expenditure, often times in a great hurry, sometime even in times of panic and at a cost greater than before.

The right hon. Gentleman had a cut and dried plan of his own. He said that the country required not only a change of policy but a change of Government. That being so, he would no doubt be gratified to learn that the Leader of the Opposition and, even a more important personage, the chief Whip of the Liberal Party, had made up their minds that the present Government was doomed. On Saturday the chief Whip was reported to have said that although they would be none the worse for another year or so in order to make sure of the 150 seats they required, yet he predicted with confidence that the Liberal Party would achieve a record victory, such as had not been seen for 100 years. He himself had his doubts. Personally, he hoped the Liberals would win; but whether they would make a record was another question. When they did achieve their desire; they would be met with a Nemesis in the long list of promises and pledges all unredeemed, on which they would have floated themselves into power, and for which they would have to pay immediately afterwards. On the very threshold of office they would have to meet the questions of Home Rule and the financial relations between Great Britain and Ireland, and he was sure the hon. Member for Waterford would keep the nose of the Leader of the Opposition very closely to the grindstone regarding them. He doubted whether either of those policies would have the effect of facilitating very greatly the reduction of expenditure which they desired to make. Another thing which would have to be dealt with was the Resolution which had been moved and which hon. and right hon. Gentlemen opposite would do their best to carry. A Resolution of this kind passed by the leaders of the Opposition pledged them, it must be remembered, to a corresponding reduction of these burdens the moment they had the opportunity to attempt it.

Where was this reduction to be made? A part of the large increase had been due to education. In his view, far too large a charge had been placed on the rates for education now. Was it on education that the Party opposite were going to make a reduction. The right hon. Member for the Forest of Dean had spoken of "doles" That was an ominous expression which he did not like. He remembered that one of the surpluses of earlier years was devoted to the relief of agricultural land; that, he believed, was called a dole, and he felt some alarm under the circumstances as to what the attitude of hon. Gentlemen opposite would be when the Act came to be renewed. It would have to be renewed in 1906, at which date, according to the Chief Liberal Whip, the Party opposite would be in power. Were they going to continue the Act? If so, one of the sources from which they might get something in reduction of expenditure would be gone for ever. If they were not going to continue it, then one of the first effects of their succeeding to office would be the doubling of the rates upon land. That might be a right and proper policy, but it would not help very materially with the record majority of which the House had heard; the immense number of seats the Liberal Party hoped to gain. If there was one thing the rural voter had a more holy horror of than of anything else it was anything in the nature of the increase of rates. He offered these few remarks in order that hon. and right hon. Gentlemen opposite might not come to any hurried decision when the good time came. After all, there were only two items to fall back upon, the Navy and the Army, called by the Leader of the Opposition "the bottomless gulf of unprofitable expenditure into which this money has been Hung." Our Navy, and the prepared state it was in, had probably in his (Mr. Chaplin's) opinion saved this country a great war with a great European Power which would have cost hundreds of millions at the time of the Fashoda incident. They might even try their policy of reduction on either or both the Navy and Army, and he was not at all sure that the Party which, when they were last in office, depleted our stores and left this country without the necessary amount of requisite taxation, would not be capable of reducing the Navy to what in his opinion might be a perilous extent.


I beg the right Gentleman's pardon, the hon. Member says we left the country without the requisite amount of taxation. Why. Sir, we left three years of great surpluses.


apologised for having used the wrong word—he was alluding to the cordite incident and should have used the word "ammunition" He recommended the Party opposite, before dealing in too stringent a manner with the Navy, to remember the fate which befel a former Chancellor of the Exchequer who brought his political career to an untimely close by suggesting that very considerable reductions must be made, and suggesting our coaling stations for the purpose of the experiment. He was not one of those who thought there was any reason for hysterics because of the Estimates presented to-day. Our Budget, after a prolonged and costly war, was very little larger than that of our neighbour, France, after a long period of profound peace-Even if they desired to see reductions made as far as possible, there was no reason to lose their heads.

A few days previously he had been challenged to say whether or not he was not greatly disappointed with the present Budget. He could relieve all apprehension on that score. He was not in the least disappointed. It had been suggested that he would be disappointed, because instead of the increase of the tea duty there had not been a re-imposition of the shilling duty on corn. But he was fully aware that that was impossible, because, owing to the passion and prejudice displayed on the other side, and to a certain amount of weakness exhibited on the Government side, an honourable pledge had been given that no duty of that kind should be imposed during the present Parliament. The result had been a chorus of lamentations, because of the increase of the duty on tea The right hon. Gentleman the Leader of the Opposition started the complaint, the right hon. Gentleman the Member for Wolver hampton pointed out that the price of tea had already been raised to the full extent of the increase of duty, and that the burden fell with excessive severity on the poorest of the poor; the hon. Member for West Islington declared that tea had become as important as bread to the poor; the hon. and learned Member for Waterford dilated upon the cruel infliction involved upon the poorest of the Irish people; and the same complaint of hardship was made by the hon. Members for Dumfries, Crewe, Poplar, South Tyrone, Donegal, and Woolwich. He agreed that the duty on tea would undoubtedly be felt by the poorest of the poor; but why? Because of the clamour made by the right hon. Gentleman opposite and his followers against the shilling duty on corn. He himself last session raised the question of the relative merits of the shilling duty on corn and a 2d, increase in the duty on tea, and argued strongly against the latter, but in the division on that occasion, those who now complained so bitterly of the tea duty, deserted him to a man. He submitted, therefore, that it did not lie with hon. Members opposite to complain of the tea duty, seeing that they deserted him last year, when he was doing his utmost to procure the very thing they now professed to desire. The Government, however, were now helpless, unless they could be released from the pledge which he thought they had somewhat foolishly given. But if right hon. and hon. Gentleman opposite were really sincere in their professions, there was a chance for them yet. If the right hon. Gentleman the Member for Wolverhampton and his friends would acknowledge that, judging by the light of subsequent experience, their views as to the mischievous nature of the shilling duty on corn were mistaken, and would constitute the Member for Sleaford their ambassador to support their changed views before the Chancellor of the Exchequer, he believed there was yet a possibility of the poorest of the poor being relieved of a tax which they would undoubtedly feel by the substitution of a tax which they would not feel in the slightest degree. If, however, the Party opposite declined to take that course-as he fancied they would, so obstinate was human nature—it would give Members of the Unionist Party the opportunity of explaining to their constituents, that, however loud hon. Members opposite might be in their professions of anxiety for the interests of the poorer classes, when it came to the test those professions were absolutely worthless.

SIR HENRY FOWLER (Wolverhampton, E.)

I need scarcely say that I shall not accept the invitation of the right hon. Gentleman the Member for Sleaford to make a public recantation of opinions I have already expressed, but I sympathise with his anxiety that the time should be hastened when he might proclaim in countless cottage homes the desirability of a tax upon corn.


I do it now.


Then I have no doubt we shall see the result of the seed he is sowing when the harvest is reaped. The speech of the right hon. Gentleman has been characterised, as are all his utterances, by uniform good feeling towards his opponents, and a fair and courageous statement of his own views; but it has not touched the Resolution. In that respect he has but followed the example of all other supporters of the Government who have spoken. This debate has been distinguished by a masterly speech from my right hon. friend, whose memory, according to the Chancellor of the Exchequer, will always be kept green in the recollection of the people of this country by the admirable manner in which he discharged the duties of Finance Minister when he held that responsible post; never was my right hon. friend heard with greater pleasure on either side of the House, and never, even in his most powerful days, did he make a more able speech in defence of those principles, those canons of fiscal policy, which he has advocated so uniformly through a long series of years.

Last night we had from the Financial Secretary to the Treasury a very interesting speech, which deserved the eulogium passed upon it by my right hon. friend the Member for West Monmouth; but beyond a repetition of the oft exploded delusion as to the state in which the late Government left the defences of the country in 1895, he merely read Members of the House of Commons a lecture—I do not say an unnecessary one—for uniformly desiring to increase the expenditure of the country. But there is nothing new in that experience. Every Secretary to the Treasury and every Chancellor of the Exchequer knows that the greatest enemies to reduction of expenditure are Members of the House of Commons. I remember the late Mr. Childers once told me that during the time he was in office he kept a record of the proposals made in this House for reducing and those for increasing expenditure, and he found that, in round figures, about twenty proposals were made for reducing expenditure, while over 500 were made for increasing it. I shall have something to say presently about the exact functions of Committee of Supply, but I do not think that the general inclination of Members who have no special responsibility for the taxation or the expenditure of the country, and who are naturally inclined to take a local point of view, is a satisfactory answer to urge in a great crisis in the financial position of the nation. The hon. Member for Fulham, however, used a singular expression towards the close of his speech. He said that it was necessary that the Prime Minister and the Chancellor of the Exchequer should develop a high moral and political courage "in order to refuse demands made upon them by their colleagues and the House for expenditure. "A further justification of the attitude taken up by the Secretary to the Treasury with regard to the House advocating expenditure one day and economy the next, was made, amongst others, by the hon. Member for Newcastle, who declared his sympathy with the protectionist views of the right hon. Gentleman the Member for Sleaford, and contended that what we were suffering from was a financial policy which had too narrow a basis. I was, however, surprised, on examining the Division List, to find that on Friday last that hon. Member voted in favour of a large dole being given from the general Exchequer for the benefit of one particular trade.


I opposed the Bill to which the light hon. Gentleman refers.


I am not charging the right hon. Gentleman with that, but the hon. Member for Newcastle. Personally I regret that that"- measure did pass a Second Reading. I wish, however, to ask the House to deal with the Motion before us. It is a Motion: which calls attention to the heavy burden of taxation proposed by this Bill in a time of peace, and asks the House to declare its condemnation of the large and continuous increase of the national expenditure in recent years. Let us get a clear idea in our own minds of that heavy burden before we go to the methods to be taken in order to reduce it. We have had many figures quoted in this debate, and I have no doubt we shall have many more before the discussion closes, and therefore I am very reluctant to add even the smallest contribution to those figures. I think that the Chancellor of the Exchequer is following the bad example of his predecessor in the mode in which he presented our financial position to the House in his Budget speech. We have a mystified state of the finances in which there is exaggeration on the one side and concealment on the other. The figures given to us in the official statement represent the country as having an increased burden of taxation up to an amount which it has not had, and an expenditure and a taxation much less than that which the correct figures disclose. I will tell the House where I think the first error arises. My right hon. friend alluded to this when he referred to my Return and dealt with the non-tax revenue, but there is also an additional revenue which is non-tax, but which also involves a burden upon the people. Take the Post Office. There you have on the one side an enormously increasing expenditure which is greater this year than it has ever been before, and on the other side you have the Post Office revenue. Let us take a period of three years. In 1882 the Post Office cost £5,500,000; in 1892, £9,250,000; in 1902 it cost £15,250,000, and it is costing more now. But that is no burden upon the people. Of course the net revenue from the Post Office increases only by a small amount, and in the last ten years it has not increased more than a quarter of a million. There is a large sum spent every year upon the development of facilities for the public, and this outlay in our accounts appears as taxation in one sense, but it is really outlay by the Government in carrying on a business but all we have to consider is the net profit. I give the Chancellor of the Exchequer the benefit of that on the one side, but on the other side I come back to an old grievance, viz., the non-accuracy of the statement of the revenue for the past year, and the estimated revenue for the coming year. The Chancellor of the Exchequer in his Budget speech last year said the death duties produced £13,000,000. That was the truth, but not the whole truth, because the revenue from the death duties last year was £17,000,000. The right hon. Gentleman said the Excise produced £31,500,000, but the real revenue from that source was £37,000,000 and therefore we are misled in looking at the result of the death duties to which we are indebted to the right hon. Gentleman the Member for West Monmouthshire. This mistake arises from the ridiculous plan of having a local taxation account and allocating certain portions of certain taxes to certain purposes. You might as well deduct from the income-tax £10,000,000 a year, hand it over to the Navy, and call it local taxation, and then state the Navy charge at £10,000,000 less. I did appeal to the right hon. Gentleman the Member for Croydon last year, and he promised to take this into his consideration this year to see if he could not make a more intelligent and intelligible statement of the position on this subject. This system was introduced like a good many other unfortunate blunders in finance, at a time when there was a good reason politically for it, and a good Party reason. It might be correct to say that if this had not been done great reforms in local government would not have been carried out, and that it was necessary to have a make-believe in order to assure those who undertook certain burdens that they would have a commensurate advantage from them. That was the beginning of the evil. The right hon. Gentleman the Member for Sleaford has referred to what he calls the great reform of the Rating Bill and he has threatened that any attempt to interfere with that will sweep the Liberal Party out of existence. But when he introduced his relief of agricultural rates instead of saying boldly, "I propose to put on the Votes so much money to be paid to the agricultural interest in relief of rates," he deducted the sum from the death duties, carried it to the local taxation account, and therefore it has been concealed in that way.

These allocations of certain proportions of general taxation convey a seriously inaccurate statement of what is really raised by Custom, Excise, and Estate Duties. I will now give to the House what I conceive to be the true amount of receipts on the one hand and the true amount of payments on the other. I am going to take the ten years from 1893 as what I will call my datum line. In that year our expenditure met by taxation was in round figures £86,000,000. In this I ask the House to follow me carefully. How was it spent? The Debt cost £25,000,000; the Army and Navy £33,250,000; the whole of the Civil Service £25,000,000; and the collection of taxes £2,750,000. That is roughly how the £86,000,000 was spent. That is an expenditure which we on this side of the House have no right to complain of, and which had the approval of both Liberal and 'Conservative Administrations. We start from that datum line in 1893–4 with an expenditure of £86,000,000 chargeable upon the taxation of this country. In 1902–3, which is the last year for which we have the Return, the accounts of which have been analysed by the Treasury, we find that the net expenditure has gone up to £127,250,000. This was made up as follows:—Debt £28,750,000; the Army and Navy £00,000,000; Civil Service, including education, £350.750,000, and the collection of taxes £2,750,000; making a total of £127,250,000. I have tried to make the same apportionment of the right hon. Gentleman's estimate for next year. He may not agree exactly with my figures but I take it that the expenditure from taxation for which he has estimated next year is £137,000,000, and therefore there is an increase of the difference between £86,000,000 and £137,000,000 which is practically an increase of £51,000 000 between the year 1893 and the present time. I will tell the right hon. Gentleman how I distinguish that expenditure. I place the Debt at £27,000,000, the Army and Navy at £66,250,000, the Civil Service £40,500,000, and collection £3,000,000. which amounts to £137,000,000. That is how I make up this increase of £51,000,000, which includes £33,000,000 of an increase for the Army and Navy and £15,000,000 for the Civil Service, there has been a large increase in the Civil Service, and it is not fully explained by the statement of the increase upon education. I think there is a great deal of extravagance in the Civil Service as well as in other items of expenditure. If my figures are correct we have put upon the people of this country, and are putting on them by this present Budget, an increase of taxation which represents virtually £51,000,000. This increase is accounted for as follows: — Debt £2,000,000; Army and Navy £33,750,000: Civil Service £15,250.000. But is this increase of Imperial taxation all? When we are talking about the burdens of the people in this country we must remember local taxation. I think I am well within the mark if I put the local taxation at £50,000,000 for England and Wales. I am taking the actual rates for poor relief, police, highways, and education, excluding gas water, and similar rates, and I am leaving out Ireland and Scotland. I do not think you can put the local and Imperial taxation of the United Kingdom at a penny less than £200,000,000.

The first question which the House and the country has to ask is, Can we afford to tax the people in a time of peace to the extent of £200,000,000 for the purpose of Government? The population of the United Kingdom is 41,000,000. and a taxation of £200,000,000 means an average taxation of £5 a head, man, woman, and child. Well, that is a very large figure, but I distrust averages. You cannot average burdens, at least if you want to average them fairly, without averaging the breadth and strength of the backs which have to bear them, I have been trying to bring home to my own mind and to the minds of others an idea of what the present taxation means and by whom it is borne. My right hon. friend has said that a large and overwhelming portion of the increased taxation is borne by the class who are least able to bear it. Let us take as a test the houses in Great Britain where house duty is levied. I cannot extend this calculation to Ireland because they have no house duty there. In round figures there are 8,000.000 houses in Great Britain. Of these 5,750,000 are under £20 rent and of the 5,750,000 there are 3,250,000 under £10 rent. If hon. Members will consider these figures they will see where the people live. Of the 8,000,000 houses you may say that four-sixths are under £20 rent. If you take for each house an average of five persons you will see that there must be at least between 25,000,000 and 26,000,000 people who are living in these small houses, and these are the people with respect to whom we have to determine how taxation has to be borne. You have to ask how the taxation affects them, especially when imposed on their daily food and upon everything essential to their comfort. I have been asked at what I estimate the income of the country. It is stated in a recent work that you can put the income of the people of this country at £2,000,000,000. I cannot accept that figure. I do not believe it is £2,000,000,000. I know that the Inland Revenue say that the total amount of income under all the schedules that comes under then notice is £867,000,000. The only other addition is the aggregate of weekly wages, and it is a very difficult calculation as to the total of that. There are different tests. The Board of Trade in the fiscal memoranda attempted—I am speaking from recollection—to solve that, and I think they put the wage income of this country at about £700,000,000 to £720,000,000. That would give us something like an income from the whole of about £1,600,000,000. If that be the income of the country what an enormous sum £200,000,000 is to raise and spend in taxation, in time of peace. We must stick to that point. There is no use mixing up this with time of war. The nation, if it chooses to go to war, must be prepared to make great sacrifices, but this is a peace expenditure and a peace Budget. That is the reason why this Amendment is now submitted to the House. The Government are asking us to retain in time of peace upwards of £25,000,000 of war taxes. What did the Member for West Bristol say after he had retired from office. I am quoting from his speech made at the end of 1902 after he had ceased to be Chancellor of the Exchequer— I venture to say that the present national indifference to the growth of out expenditure is one of the most dangerous symptoms of the present time. Now, what are the circumstances? Here we are at the close of a great and most costly war, which has cost this country millions, tens of millions, hundreds of millions, not merely in increased taxation, but in increased debt. One would suppose in private life that a man who had outrun the constable in that sort of way would first turn his thoughts to retrenchment. Does anybody nowadays think of retrenchment at all? In the last seven years the ordinary expenditure of the country has increased at the rate of no less than five millions and a half a year. We cannot go on in that way. We must stop that rate of increase. If you do not, what will happen? I will tell you what will happen. A shilling income-tax will be utterly insufficient for the needs of the country even in time of peace; and all the people who complain now of the little, the small taxation that has been imposed upon sugar and corn, will be face to face with heavy taxes, not only, perhaps, on those articles, but on many other great articles of popular consumption. You will have changed your fiscal system from a system of light taxation which has prevailed during the last 40 years, and under which the industries of the country have been enormously developed, to a system of heavy taxation, which will keep those industries down. And the result will be that whereas thanks largely to the light taxation of the past, we have accumulated wealth in this country that has enabled us to bear the strain of this three years war with hardly any difficulty I at all, you may, in a future day of adversity, perhaps in some time of conflict, not with two Boer Republics, but with a great European Power, find yourselves at the commencement of a great struggle burdened with an enormous weight of taxation in time of peace which will make you absolutely incapable to deal with the cost of the war. That is the warning I venture to give. There is another reason why I think the people cannot afford this taxation. Where is the margin? Taxation in time of peace must allow a margin for extra taxation in time of war. You have absorbed your margin. It is gone. If the £25,000,000 or £26,000,000 of taxation which was put on for the war had been taken off you would have had that margin in your hand to protect your interests in the future. My right hon. friend alluded to the House of Commons having on one afternoon in 1816 swept away £16,000,000 of income tax. The Government of that day had to adapt their Budget to the decision I of the House. I also believe that the payment of this large sum of money, this £25,250,000, is taken from the ' reproductive forces of the country. It has been fashionable of late to decry what Mr. Cobden said as very short-sighted and very unsound. Mr. Cobden said, with reference to this question of heavy taxation, that he preferred to leave the money to fructify in the pockets of the people of the country instead of its being paid into the Exchequer. You are destroying the wage-earning power of the country by extracting these sums for the purpose of national expenditure.

The right hon. Gentleman the Member for Sleaford said, Where are you going to reduce? That is the easiest question to put, but it is most difficult to answer. It is a question, I venture to say, not to be answered by those who object to the burdens. I think it is a question to be answered by the Government which proposes enormous increased expenditure. I think it is for them to prove that such an expenditure is necessary. But it has already been truly said that this question of expenditure is a question of policy. The question of expenditure under our system is not to be touched by Votes in Committee of Supply. We had once a Return showing how much money in fifty years had been taken off the Estimates by Votes in this House. It came to £20,000. It is no excuse to blame the House of Commons for the expenditure. I do not think Committee of Supply can effect economies. Committee of Supply is meant to prevent extravagance. There is no Department of the State, which at some time or other does not think of what may be said by the House of Commons with reference to such and such a Vote. It is the fear of criticism which is ten times more valuable than criticism itself. The expenditure of the country must be regulated by the Executive Government of the country and no one else. They are responsible to Parliament, and Parliament is responsible to the country.

There has been a good deal said in the course of this debate about the question of our expenditure and the rate at which it has gone. We have been challenged by everyone who has already spoken on the other side of the House to state whether we are prepared to reduce expenditure on the Navy. Well, I do not know that there is anybody in this House who wishes to leave the country without a strong and powerful Navy. The portion of our expenditure which relates to the Navy is a matter with respect to which I entertain a very strong opinion. The maintenance of our sea power is absolutely necessary to our existence as a nation. Our supremacy in sea power is vital to our existence. My right hon. friend said just now that there must be some top limit to the standard of naval expenditure. Where are you going to stop? That depends on colleagues to some extent and the pressure they put on the Prime Minister and the Chancellor of the Exchequer. I should have thought that Lord Goschen was a very reliable and cautious First Lord of the Admiralty, and one of the last men against whom anybody would bring the charge of being a Little Englander, or the charge of wishing to reduce expenditure unnecessarily. My right hon. friend the biographer of Mr. Gladstone informs us that Lord Goschen differed from Mr. Gladstone so far back as 1874 on the question of defensive expenditure. How did Mr. Goschen act when First Lord of the Admiralty? He was not afraid of saying to foreign Powers what he meant. He said to Russia if you increase, we shall increase; if you reduce, we shall reduce, I and he carried out his policy which, as I understand, was what has been called the two-Power standard. It appears to I me that Lord Goschen's views in regard to naval expenditure are different from those of the present First Lord of the Admiralty. I have great respect for Lord Selborne, but it seems to me, judging from his public utterances, that if he had his way there would be a boundless increase in the expenditure on the Navy. The right hon. Gentleman the Member for West Bristol, who was inside the Cabinet circle, and who was a responsible Minister said! with respect to the Estimates of last I year, 1903–4— He hoped he should not be charged with a desire improperly to curtail the expenditure of the Navy. During the years that he was Chancellor of the Exchequer he had made himself responsible for Navy Estimates, which were raised from £19,000,000 in 1895–96 to over £31,000,000 in 1902–03. He accepted the two; Power standard; lie accepted the proposals of the Admiralty in order to keep up to that standard, and lie believed that in so doing he was but carrying out his duty to the House and to the country. But since the Estimates of 1902–03—the last for which he was responsible."—the House was asked to sanction an addition of something like £5,500,000 He would take what, after all, was the real test in this matter—new construction. He had made a calculation when he was Chancellor of the Exchequer, taking the best information lie could obtain; during the five years ended March, 1901, this country expended £35,000,000 in new construction, whereas France and Russia, the two countries with which we had been generally comparing ourselves, expended something less than £31,000,000 during the same period. There was an excess of £4,000,000. In 1901–02 our estimate for new construction was £9,000,009, and so far as lie was able to ascertain the new construction of Finance and Russia cost something under £7,000,000. He had no figures with regard to France and Russia for 1902–03, but our own new construction in that year was estimated also at about £9,000,000. The estimate for new construction in this year's Estimates was £11,000,000, an increase of two and a half million. What was the reason for that increase Had there been an increase in the programme of other countries with which we wore obliged to compete such as would justify it? That had never been stated. The Estimates for 1904–05 showed another large increase of naval expenditure. My right hon. friend the Member for West Monmouthshire has repeated to the House the statement which shows that we have now an expenditure on our Navy which is more than that of France, Germany, and Russia combined. We are not content with the two-Power standard; we have gone beyond the three-Power standard. I ask the most enthusiastic Imperialist in the House, Is there not to be some border line? Who is to draw that line?

If it is alleged that we have reached the limit for the Navy, I am sure that we have long passed the limit for the Army. What can the Executive do to reduce expenditure? That can be done by their policy. Mr. Disraeli once asked in a discussion of this —it was the occasion when he used the expression "bloated armaments"—" What need is there for this enormous, this extravagant, expenditure, when there is nothing in the state of Europe to justify it?" That is a question that might be put to the Government when they has rightly described the state of things were receiving the encouragement of an overwhelming section of the people of this country to endeavour to extend a system of friendly negotiation, already so successful towards France, in reference to Russia. A friendly understanding between England and Russia on Asiatic questions is absolutely essential in the interest of our Indian Empire. Let there be co-ordination in the administration of the expenditure of the two great spending Departments. I put it to the Prime Minister as representing the Cabinet that it is for the Cabinet, not the Departments, to decide what the expenditure ought to be, and to defend it in the House of Commons. Very careful control should be exercised over all other Departments. In all of them there is a tendency to increase expenditure. The non-effective charges should receive special attention. We are spending £6,000,000 in pensions the amount is growing. How will the Government meet the present Motion? When, some twenty years ago, a similar Motion was moved, though not by the Leader of the Opposition, Mr. Gladstone himself at once replied and dealt with the whole question of expenditure from beginning to end, and the financial position of this country, and he accepted the Motion; he saw no censure of this Government in so doing.


Was it an Amendment to the Budget Bill?


It was not but it was after the Budget had been brought in. I do not ask the Prime Minister to accept the Motion as it stands, but I ask for an expression of his views, which have not been given and there has been no expression of Sympathy from his side of the House with reference to a reduction of expenditure. I join in praising the speech of the Chancellor of the Exchequer on introducing the Budget but there was an omission from it; the right hon. Gentleman did not say a word expressing approval of reduction of expenditure, but held before the House the dreariest prospect for the future. My right hon. friend has rightly described the state of things as alarming, unhealthy, and dangerous, and he warned Members on the other side of the House who attached so much importance to the defences of country that there was danger of reaction Taxation may reach such a point that an impulse of indignation and sense of injustice may sweep away expenditure deemed necessary for protection of the interests of the country. Increase of taxation, aggravated by unequal pressure on homes least able to bear it, may sooner or later raise a feeling that will cast to the winds all Party ties, all Party loyalty, and declare in an unmistakable manner that there must be, under any circumstances, a reduction of expenditure.


There have been many interesting features in the debate, which has now gone on for two days, and especially interesting was the speech of the right hon. Gentleman the Member for the West Monmouth, to which every Member will have listened with deep interest and renewed regret at the thought that another House of Commons will not see him in this place My personal respect is due to the right hon. Gentleman. I acknowledge the kindness of his reference to myself, and I may say that not the least of my difficulties in the office I hold is that it brings me face to face with such a great figure in Parliamentary life, such a master of finance, so powerful in debate. But, after all, I think the most interesting feature during these discussions has been the condition of the benches opposite. [Laughter and OPPOSITION Cries of: "We're all right," and "What of your side?"] Yes; there is not more belief in the reality of the discussion on one side than on the other, though a profession of the great need for such a discussion found prominent place in every speech from Members opposite. The right hon. Gentleman: who has just spoken said we are in the midst of a grave financial crisis. That is the view of hon. Gentlemen opposite; but at no period of the debate did they show their sense of the gravity of the situation by an attendance of more than fifty.

MR. J. A. PEASE (Essex, Saffron Walden)

Many more.


I accept the correction. There was one moment when the hon. Member for Oldham did violence to his feelings by making a speech against the Government from this side of the House when the attendance was something under 100; but for the serious discussion of the great issue raised by the Leader of the Opposition, there were not more than fifty Members on his side of the House. That is the first feature of the debate to which I call attention, and there is another of some interest. This Motion is a repetition in different language of an effort made three years ago from the same Bench when the Amendment was in charge of the right hon. Gentleman the Member for Wolverhampton. The Motion then referred to the alarming growth of expenditure and the necessity for economy, but there was a special proviso that the right hon. Gentleman and those for whom he spoke were ready to make adequate provision for naval and military requirements. This was given first place three years ago in the first effort of a "rejuvenated and reunited Opposition." Any one who has listened to the present debate will know that while the Leader of the Opposition and the right hon. Gentleman who has just spoken have declined any indication of where economy was possible, or where reduction should be insisted upon, other Gentlemen from that side have not been so reticent; they have not hesitated to express their opinion that not one only, but both of the services for the protection of the Empire must be subjected to the ruthless operation of the pruning-knife. I do not think that any attempt was made to show that in any other direction reduction was possible.

What, after all, has been the dangerous increase of expenditure that has taken place? There is an increase in the charge for the Debt in the last ten years of something like £4,000,000, partly due to a great war and partly to new charges created for interest and sinking fund for naval and military works in course of construction. There has been an increase in the same period of nearly £2,750,000 on civil administration. I am comparing the Estimates of the current year with those of 1894–5, a period for which the Conservative Party has been responsible, and I say there has been an increase. About £800,000 of that is caused by increased expenditure on Colonial and Foreign Office services in protectorates and dependencies in Africa. There have been some reflections on that expenditure. Is the House prepared to condemn it? We are told, and told rightly, that in regard to many of these matters yon cannot have a reduction in expenditure unless you have a reversal of the policy which is being pursued. Do right hon. Gentlemen opposite mean that, if they changed sides to-morrow, they would attempt to reverse the policy which is being pursued? I should be interested to know what; Lancashire would say if they attempted to clear out of these great possessions which we have marked out for the future occupation of the British race in Africa.[An HON. MEMBER: Chinese.] I am not speaking of South Africa now, but of; West Africa and East Africa, especially West Africa. What will Lancashire say to them if they reverse the policy which has been pursued, if they give up the effort to develop these countries to which Lancashire is looking to provide I in the future a remedy for the distress which is now existing and to guard them against the danger of being unable to obtain the raw material which is an absolute necessity of their industry? An hon. Gentleman interrupted me with a reference to South Africa. I am not here to apologise for the policy pursued by the Government in regard to South Africa. There are Gentlemen—the Leader of the Opposition among them— who thought that policy wrong from the beginning, who did their best to prevent its coming to a successful conclusion, and who, though they failed to prevent the Government from carrying their policy through, undoubtedly aggravated the difficulties with which they were confronted. But for those of us who approved the policy, who thought it necessary, and who, great as the evils of war are, thought that in that case the evils of surrender would be greater still—we shall never reject a policy which we thought Tight on its merits merely because it has involved us in a considerable burden of taxation. If, when the country has made up its mind that a certain policy is necessary to the defence of its interests and the defence of its honour, we have come to the point when the country will refuse to find the expenditure necessary to carry it through, the day of our greatness would indeed be past. That is not the view I take of our countrymen. I have never hesitated to justify the expenditure we have incurred, and I am not afraid of the verdict of my countrymen upon it.

The next great increase of expenditure has been upon elementary education. I am well aware that some hon. Members think that the whole of that money is tno spent to the best advantage. I am tno quite certain that any hon. Member thinks that the whole of it is spent to the best advantage, although there is very great difference of opinion in different quarters of the House as to which part of the expenditure might properly be dispensed with. But there is not a Gentleman sitting on that side, or indeed upon this, who believes that the amount we are spending upon national education can be reduced in the future. Then there is an increase of £500,000 in the Revenue Departments, a very small percentage on the greatly increased revenue which they collect. There is a large increase in the amount which we contribute in aid of local taxation. The right hon. Member for Wolverhampton has made an appeal to me, as to both of my predecessors, to recast the form of the national accounts. He said, and I agree, that our accounts are very apt to be misleading to those who do not study them carefully as to the amount of taxation levied on the people. He "complained that they did not show the amount levied and paid over in relief of local taxation. There is a great deal to be said for presenting the accounts in the form which the right hon. Gentleman framed, and the Return which bears his name is certainly the best Return for reference, if any one wishes to see the state of affairs, of any laid before the House. But, even if there would be some improvement in recasting them, it must be borne in mind that one object you have in having these accounts from year to year is to enable a comparison to be made, and to see how we compare with other years. If you alter the form of the accounts you destroy the possibility of comparison, and that is, I think, the main objection which has been felt by my predecessors.


I do not want to recast the accounts at all. What I want is that in the items of expenditure—Army, Navy, and education, and so on—you should put local taxation,. I and that you should, then put on the other side the true amount received from the death duties and Excise.


I think that would still leave the account misleading, but I will consider the right hon. Gentleman's suggestion. I believe it has the support of the right hon. Member for West Monmouthshire, and anything which comes from them in such a matter as this is well worthy of consideration. But, putting that on one side, I return to the increase which we have made in the grants in aid of local taxation, an increase of about £4,250,000 in ten years. You may vary the method by which you provide the money; but one thing I will venture pretty confidently to assert is that, in spite of the opposition which has often come from the benches opposite to the proposal to give this relief, hon. Gentlemen will not venture to withdraw it when they become responsible for the national finances. If they had any intention of withdrawing this relief to local taxation they would not, being anxious that their position should be perfectly clear to the country, allow any doubt to remain as to their intention but would give full notice of what they mean to do.

I have run hastily over all the items of increase in the last ten years except the Army and the Navy. They are, of course, the heaviest burden in the whole of our national account, and it is upon them that the increase has been greatest. General statements are made by hon. Gentlemen opposite to which no one on this side would take any exception. The right hon. Gentleman who preceeded me says he does not wish our Army to vie with the great armies of the Continent. It is not a question whether you wish it or not; the thing; is impossible, it is out of the question; it never entered into the mind of man to conceive of this country with an Army capable of vying with the great armies of the Continent as they are organised to-day. What we have to do is to provide ourselves with an Army capable of de-fending the British Empire. I have I regretted very much in the course of this debate to hear from the Leader of the Opposition and several other Gentlemen repeated sneers at the Committee of Imperial Defence which is presided over by the Prime Minister. That is the most effective means that has yet been contrived for perfecting the organisation of our military and naval; forces, for co-ordinating the one with the other, for measuring the demands of both against the financial needs of the country, and for developing from the whole a policy which gives us the requisite security at a minimum of expenditure, I say at once no one on this side desires I to construct an Army of the character to which the right hon. Gentleman alludes. But when the Leader of the Opposition points to the Army of ten years ago, and inquires what has happened to call for the increase which has since taken place, I am tempted to ask, has he been blind to the changes which have been going on? He speaks of the Central Asian terror, and says we have been accustomed to it for many years past. I think I remember the time when a witty statesman said that the country was afflicted with "Mervousness." But who was right? Those who thought that Merv would pass under the dominion of a great Power or those who bade us turn to large scale maps and see how far Merv was from their frontier? [An HON. MEMBER: It was Lord Salisbury who said that.] Does the right hon. Gentleman suggest that the march of events in recent years does not give cause for re-considering the basis of our military; policy and has not altered the requirements which our Indian Empire makes for its defence? It is only a year or I two ago that we were being denounced by right hon. Gentlemen opposite for the imperfection of our preparation for war and for the insufficiency of the resources that this country had at its command. To-day we are bidden to use the pruning-knife ruthlessly the moment peace has been restored.

The right hon. Gentleman recalled to our minds what the great reductions were which were made on the conclusion of the French war in 1816. But what I wanted to direct attention to was the effect that these sudden and drastic reductions are apt to have on our security in future years. In 1801, when peace was concluded, there was an immediate great reduction in the Navy, and the country nearly paid dearly for that premature and unwise economy when war broke out a couple of years later. Did the economists of 1816 leave us with an Army well prepared, well found, and well equipped when the further great emergency burst upon us in the Crimean War? No. An hon. Member asked whether we have profited by the experience gained in the war now going on and from our own war in South Africa. Yes, we are trying to do so. But as to the lessons of those wars, you cannot make good in haste what you have neglected to provide at your leisure; and if you try to secure a reduction of your burdens at the expense of your security, in times of peace, you have to pay manifold for your neglect when war breaks out, and it may be that you will find that neglect irrevocable. The House also knows that the Government have been giving their most anxious and careful consideration to the question of Army expenditure. It is our desire to reduce the burdens which the military forces now make upon us, and the Prime Minister indicated the change which he thought the new conditions had brought into the problem with which we are confronted. We no longer think it necessary to maintain H great Regular Army for home defence. If that be so, what is it that relieves us of that necessity? It is one thing only; it is the supremacy of our Navy on the seas. The hon. Members for Oldham and Whitby have indicated that the Navy is a proper subject for reduction. Does any hon. Member intend to depart from the standard laid down, I think with the common consent of the House and accepted by both sides, that in future we are to be content with less than the two-Power standard? The right hon. Member for East Wolverhampton did not pretend that we should do anything of the kind, for on a previous occasion he said that "the Navy must at all risks and at all costs be kept up to the point which experts deem to be necessary." Then, again, the Defence Committee has been denounced, and the hon. Member for Oldham said that where an expert was admitted to discuss a question, all sense of reason departed from the deliberations.


I did not say so, but I adopt it.


In that case it is one of the suggestive methods by which the hon. Member arrives at his conclusions on many subjects, and it may perhaps account for some of our difficulties. I will assume for the purposes of discussion that the bulk of the House is determined that the two-Power standard shall be maintained in regard to battleships and a greater superiority with reference to cruisers. The contention of the right hon. Gentleman is that we have exceeded and departed from that two-Power standard, that it is now a three-Power standard. I join issue with the right hon. Gentleman. If he acts on the standard laid down he will find that large reductions are not possible in our Navy Estimates. I will take first and second-class battleships. Of battleships Great Britain has built and is building sixty-three, France thirty-five, Russia twenty-eight, after allowing for the loss of the Petropavlovsk. Germany has twenty-eight battleships, and she is able to concentrate in two of her home ports within a few hours steaming of the Channel. Some hon. Members have spoken as if the results of the war had been to wipe out one of the great navies of the world. I entirely differ from that view. When the present war is over we must, of course, consider the new situation created by it. We must revise our Estimates in the light of the then existing conditions; but, with the exception of one battleship I have struck off, no battleship has been so damaged that with proper docking facilities it cannot be repaired within a short time. We have not, therefore, exceeded the two-Power standard. We are proposing to lay down two further ships in the present year, which will give us a margin of two battleships over the combined fleets of the next two greatest naval Powers. That, however, is not the whole which goes to make up naval strength. It is easy to deceive the country, and not difficult to deceive the House, as to the actual naval preparations if you dwell exclusively on the construction programme and take no account of other items. It has happened before now. The other preparations have been allowed to lag behind, and, indeed, the defence of the right hon. Gentleman opposite when they brought in the first Naval Works Bill, which they are now so ready to condemn, was that the execution of naval works had not kept pace with the increase in the Fleet and it was impossible to overtake arrears out of current taxation. How important dockyard facilities are every student of these questions is aware. Then there is the accommodation for the sailors, and hospital accommodation as well. Nothing so disturbed the country in the late war as the conviction that enough had not been done for the sick and the wounded in the campaign. The hon. Member for Dundee is aware that the condition of the naval hospitals when he left office in 1895 was one that would not bear inspection by any competent person. Great expense has been incurred in providing proper hospital accommodation according to the later scientific ideas for the men of the Fleet. It is to the credit of Lord Goschen and the Board of Admiralty which succeeded his that they have surveyed the whole field of naval expenditure and that they have carried out their preparations in all its different lines—not in building ships without guns, nor in providing guns without men to work them, nor without reserves of stores necessary for their efficiency or the accommodation required for the men in sickness and health. The inference of the right hon. Member for East Wolverhampton is that our expenditure has exceeded that of the next two Powers by a considerable sum in the last four or five years, and he infers that we have set up a three-Power standard. My inference is quite different. When I find that our programme gives us only: a margin in battleships of two over the: combined two Powers, my inference is that we had a great leeway to make up, and that we have been making it up.


Do you count cruisers?


No, Sir; I do not count armoured cruisers as I battleships. If I did I should have to make a large addition to the other side. Of course, there has been a considerable margin of strength in cruisers. But why is that? We have 9,000,000 tons of shipping spread over the whole world to defend in case of war. We know that foreign Powers have built specially in order to be able to strike at that shipping in time of war; and what cannot be said by any other Power of its shipping is that; upon our shipping depends the continued existence of our people, for we alone of the nations are dependent for sustenance upon sea-borne food. What is the amount of the shipping of the next two naval Powers? It is 1,500,000 tons as against; our 9,000,000 tons. Does the right hon. Gentleman think that the same insurance which covers the smaller interest of other nations should be reasonably expected to cover our far greater and world-wide interest—an interest which involves the life or death of our people, while the interest of other nations involves but the issue of a greater or less pecuniary loss? We have not only to protect our sea-borne supply of food and raw material. We have to protect ourselves against invasion. Is there any other great Power which has reason to fear invasion from over sea? It is only because of our cruiser fleet and our torpedo fleet that we are able to regard invasion by great and crushing armies as a practical impossibility. The real error into which right hon. and hon. Gentlemen opposite have fallen is that of confining their comparison in the growth of expenditure on the Navy to a small number of years. Let them take a wider survey. During the twenty-four years ended 31st December, 1893, which practically coincides with the time in which our modern Fleet has been created, we have spent on new construction £116,000,000, as against an expenditure by France and Russia of £111,000,000. That is to say, we spent £5,000,000 more than France and Russia, or about £200,000 more per annum, and it is by that small margin of excess that we have secured that predominance in cruisers and torpedoes to which I have referred. The right hon. Gentleman said that Lord Goschen was not afraid to come down to the House and say that if foreign Powers made a reduction in their fleets we should be willing to make a corresponding reduction in our Fleet. It is not Lord Goschen alone who has made that statement on behalf of the Government. We have never been unwilling to make good that pledge. The offer has been repeated many a time on the floor of this House. But I do not think the right hon. Gentleman will suggest that the present is a favourable moment for pressing for a reduction in the naval forces of other Powers. It is true that measured in millions the cost involved in our naval and military preparations comes to an enormous sum. But we have also to consider our capacity to bear it. In 1864 the proportion which our defensive expenditure bore to our national income was 3'4 per cent. Now, notwithstanding the enormous burden which we are said to have since placed upon the country, the proportion is only 3.7 per cent. Considering how vital are the interests at stake, and how irreparable the injury which might be inflicted, I do not think that is an undue proportion to spend on the greatest of all insurances.

After all the question which concerns me most in my official capacity is—Is the burden of this expenditure intolerable? I think the right hon. Gentleman the Member for Wolverhampton was the first speaker to call attention to the fact that the burdens of the people are not only those imposed by the central Government. There are also the burdens of local taxation, and if the total burden were intolerable it might still remain the fact that reductions should be made elsewhere than in our insurance for national defence. I think there has been great exaggeration in this matter. It has been said that were we unhappily to be engaged in another great war, our financial resources would be unable to meet the strain, I think that is too pessimistic a view to take. God forbid that we should have to undergo another great war in our time. But if such an evil should arise, I, for one, refuse to assent to the statement that we should be either unwilling or unable to make fresh sacrifices to defend our honour or our interest. But is the burden intolerable? Consider how the expenditure has been met. 215 of the expenditure comes out of taxes upon transactions, and payments for services rendered, like stamps and the postal revenue; 34.5 comes from alcohol and tobacco. That is to say, it is raised from taxes which no one need pay if lie does not wish, and which a great many people do not pay. 33.6 is levied from the direct taxpayer. So that of the whole sum only 10.4 per cent., or £15,500,000, is levied compulsorily from indirect taxpayers; £15,500,000— levied, of course, from those who pay direct taxation as well as from those who pay only indirect taxation—spread over a national income of something like £1,750,000.000, is the whole contribution that payers of indirect taxation need pay to the National Exchequer. Let me put it in another way. Our indirect taxation amounts to £1 11s. 2d. per head of the population. Of that £1 3s. 11d. per head is raised from alcohol and tobacco, which the poor man can escape if he wishes. What remains, that from which the poor man cannot escape, is only 7s. 3d. per head of the population; or less than 1¾d. per week. Is that an undue or intolerable burden in a country where practically every man has a vote and can take an active part in directing the policy of the nation? What is more—although I do not accept it as a principle of indefeasible right that the amount raised by direct taxation should exactly equal that raised from indirect taxation—by this Budget I have brought the relative proportions of indirect and direct taxation to what they were before the war, and the comparison is more favourable to indirect taxation than it was at the conclusion of the three year's term of office of the right hon. Gentleman opposite. I do not believe that the burden is as intolerable as hon. Members opposite try to make out, and I certainly do not agree that the charge of general extravagance against the Government can be sustained.

Then it has been said that I have not uttered one word in favour of economy, and my silence on the point has been contrasted unfavourably with the utterances of my two predecessors in office. After all, I have not been very long responsible for the national finances. I do not know whether I may not be able to propose further economies in the future. But this I do know, that those who have spoken most of economy have probably been responsible for the largest increases, and from the time the right hon. Member for West Monmouth assumed office as Chancellor of the Exchequer on the last occasion down to the present day, inclusive, my Budget for the present year shows the least increase of taxation. I am excluding war expenditure. When the right hon. Gentleman was responsible in 1886–7 he added £2,500,000. In 1893–4 and onwards, during the three years in which he was then responsible, he added an average of £2,500,000 a year. My right hon. friend the Member for West Bristol, whose example I am bidden to imitate, added an average of nearly £5,000,000. My right hon. friend the Member for Croydon, whose appeal for economy contrasts so favourably with mine, added an even larger sum. I have succeeded in bringing the increase down to £2,000,000. [An HON. MEMBER: By not paying the deficit.] What is the use of the hon. Member saying that? The deficit of last year ought to have been provided for last year. It is not by what I have ventured to call lectures and admonitions to this House in general terms that any good result is achieved. My right hon. friend the Member for West Bristol said frankly that he did not believe any great reduction of expenditure was possible; what he warned the House against was the continued increase at the same rate that has been going on in recent years. Whether that increase has been bigger or less I am at any rate in accord with the right hon. Gentleman on this point—that if any of it is avoidable or wasteful, it should be condemned, and it is the business of a Chancellor of the Exchequer to prevent it. My quarrel with them is that I think they underrate the importance of the demands which are made upon us, that they have too little considered the methods by which the economies they expect can be made, and that they are carried away by hopes of economy which they themselves, unless they be false to the principles they have laid down, will be unable to realise.

The Leader of the Opposition has invented an ingenious theory which he has broached on two occasions to account for the size of the Estimates for which I am responsible this year. He says that on this side of the House there is no real desire for economy, because out of this great expenditure we, or I in particular, are anxious to build a platform for tariff reform. I think the right ion. Gentleman really attributes too great a degree of simplicity to my predecessors, who have been responsible for so much of this increase, if he thinks that the right hon. Member for West Bristol and the right hon. Member for Croydon have for the last six years been recklessly and wastefully spending money in order that my right hon. friend the Member for West Birmingham might have a greater expenditure on which to found his policy. The expenditure is large, it has increased, and it is not easy to reduce it. What I can say to the House, for myself and my colleagues, is that we are as keenly alive as any to the desirability that there should be not merely strict economy in the administration of the finances, but that there should be some relief for the taxpayer from his burden. But as long as we are responsible for the safety and security of the Empire, we cannot afford to buy present popularity by neglecting its defence or by leaving it unprepared for emergencies which may arise.

MR. ROBSON (South Shields)

said the conditions of the benches during the debate emphasised the responsibility of the Executive. It indicated that the House left the responsibility for our great expenditure where it must always lie — with the Executive Government. Undoubtedly the House of Commons was responsible in that it maintained in power a Government, capable of defending so great expenditure, but the primary responsibility lay with the Government that prepared the Estimates, that pledged itself and its responsibility and existence upon the efficiency and economy of those Estimates. What was the answer, either expressed or implied which every Minister gave when an hon. Member criticised an item with a view to its reduction? That the responsible Minister adopting the advice of his officials pledged his responsibility that the item was one which was not in excess of the requirements of the Department. That was the view put before the House of Commons upon which it was invited to act. That was the principle it acted upon, and it could scarcely act upon any other. That was the principle upon which hon. Members opposite entered the division lobby, without having heard the debate, to support the Government. Now an effort was being made to shift the responsibility of the Government on to the shoulders of the House. He thought that Parliament could do a great deal more than it had done or than it had been permitted to do in the way of reducing expenditure. Parliamentary criticism had been controlled in recent years to a very marked and ominous extent. In the old days when a Minister proposed an increase in the expenditure of his Department he had always to run the risk of justifying that increase. It was not too much to say that now that risk was very greatly diminished by the new Rules of procedure. In the old days a Minister had to surmount a double barrier—the barrier of the Treasury and the barrier interposed in his way by the criticism of the House. The barrier of the Treasury to increased expenditure had in recent years ceased to be of adequate effect. The Chancellor of the Exchequer in old times was anxious to encourage economy so as to remit taxes, but the Chancellor in times to come, if the country adopted the views of the present occupant of that office, might be relieved of the wish to avoid unpopularity by imposing new taxes. They had got a Chancellor now who did not conceal his opinion that by the imposition of new taxes we could add wealth and prosperity to many sections of the community and he could not understand the right hon. Gentlemen's avowal of a desire in the concluding portion of his speech to avoid increased expenditure. Why was he anxious to avoid increased expenditure unless it was to avoid increased taxation? What, then, became of the theory of scientific taxation which was to add to the wealth of the community? The Chancellor of the future, whatever he might have been in the past, would only be an efficient barrier to high expenditure if he entertained opinions very different from those of the present Chancellor.

There was no stronger indication of the lack of Treasury control than the growth of Supplementary Estimates which had become almost the rule. The right hon. Gentleman the Member for West Bristol seemed to think that an economical Chancellor of the Exchequer would be preserved from most of those misfortunes if he had the support of the Prime Minister. That was indeed a most significant observation. He did not think anything had been said in the course of this debate to throw more light upon the great growth in recent expenditure than that remark. Undoubtedly the Treasury would be more efficient as an instrument for controlling expenditure in the Prime Minister gave the Chancellor of the Exchequer his support. But at the same time if there was the slightest fear that departmental extravagance would imperil Party unity, the Prime Minister would give the Chancellor of the Exchequer his support. There were economists on the opposite side of the House, but their enthusiasm for economy was not keen enough to give; the Prime Minister uneasiness with regard to the unity of his Party. Until they were courageous enough they would never have the Prime Minister I as an economist. Hon. Members opposite did not choose to make the Prime Minister an economist, but they were; trying to make him a protectionist, which was quite a different thing. They had already seen in that debate the way in which Parliamentary control was hampered by the new Rules, but he could not believe it to be a mere coincidence that this enormous growth in expenditure should have taken place at an accelerated pace since the new Rules of procedure were adopted. He knew that those Rules were adopted for the convenience of the House. He was not going to suggest that they were absolutely necessary for the conduct of the business, but it was quite clear that they had diminished and impeded Parliamentary control. They had all observed the increasing habit of drawing into Supply nights questions of policy for which the House had no other opportunity of debate, and this had the inevitable effect of diminishing criticism on the point of economy. However, the House was still responsible, and the question was how it was to exercise its responsibility.

Let them just see how they were to judge the condition of things for which they were responsible. He would not follow the Chancellor of the Exchequer into detailed criticism of the various Estimates accounting for the increase of the expenditure. They must look at the total, and ask whether under any circumstances in times of peace they could afford such a total. The ordinary householder desirous of effecting retrenchment would come very badly out of an argument with his Prime Minister on an item of expenditure, especially if he were controversially inclined. He would say, "Look at the total; I am spending so much and I only get so much, and though your arguments, gathered from the cook and the butler and the coachman are unanswerable, I must choose between bankruptcy and retrenchment. "As to the question whether they could afford their present expenditure, the Chancellor of the Exchequer; had chosen a fallacious way of judging. He had told them they were only spending little more than 3 per cent, on their income, but no Chancellor of the Exchequer could tell them what their income was. He suggested that the question could be answered by considering the point which they had reached in their taxation. Could they in times of peace afford 1s. income-tax? He would go further and say that even in time of peace, if the 1s. were applied for the removal of some of the hardships existing in the present social system he should not grumble at the burden which might light on the propertied classes. But putting aside that reason, could England, or any other country, afford a 5 per cent, income-tax on the gross income of the people in time of peace? He said it could not. Passing from the income-tax there was another tax, scarcely less conclusive, showing how they had gone too far. When any country found it necessary to put taxes on trade then he said it had reached a point of expenditure at which it was necessary to stop. He instanced the tax on coal as a tax on an export. A tax on exports was the worst. It contracted the area of our trade, and helped to lessen employment. It was a tax for which there was no excuse in time of peace. It was worse than living on then capital. It destroyed their capital. Taxes on trade were hampering and impeding to the effectiveness of trade and labour. Taxes on income and taxes on trade having reached a certain point were a sure sign they had reached the limit of expenditure. What was to be said of taxes on food? He ventured to think that when to meet expenditure it was necessary to put additional taxes on tea and sugar, a point had been reached at which they ought to stop at any cost. He knew there were Members on the other side who, if they did not want to increase the income-tax, wanted to increase the coal tax and the taxes on food.

It was idle for the Chancellor of the Exchequer himself to urge that he was as anxious as most in his position to avoid high expenditure. In fact, high expenditure was not only justified by the Chancellor of the Exchequer, but there were indications that the point at which Members of the Opposition desired to stop was the point at which some on the Ministerial side of the House desired to start. They wanted fresh fields to conquer. They wanted to add to taxation of tea and sugar, taxation of bread. In fact, high expenditure was an essential of a protective system, which was the system with which they were threatened in the future. Everybody knew that protection nearly broke down in America, because the expenditure was not sufficient, and the manufacturers of that country, calling patriotism to their aid, just as the manufacturers of this country called Imperialism to their aid, devised a gigantic and corrupt system of pension expenditure reaching no less than £37,000,000 a year. They raised their expenditure because they wanted an excuse for more taxes. Nothing was more perplexing to a protectionist Chancellor of the Exchequer than a surplus. The American manufacturers did not care about retrenchment, or call themselves progressive free-traders. They robbed their fellow-citizens with zest. The real danger to the country was that taxation might lose its unpleasantness. There was a great Party going about telling people that out of these great burdens private profit might be made. If hon. Members opposite got their way and a protective system was established, high expenditure, with its correlative of high taxation, would be looked on as beneficial, and retrenchment as not only superfluous, but absolutely mischievous.

However there was one subject on which the Chancellor of the Exchequer advocated economy. He spoke of the municipal bodies, and drew attention, in melancholy tones, to their increased indebtedness. The right hon. Gentleman said that the time had come when they should call a halt to municipal indebtedness. There was certainly a consistency in his attitude about that, because municipal bodies could not raise their money by those methods of scientific taxation which were so much approved of on the other side of the House, unless they should have a reintroduction of the octroi system into England. And, as things were going, he did not see why they should not have a reintroduction of that system which prevailed in those countries from which they were invited to take their fiscal policy. That was a very legitimate object of ambition for progressive free-traders. When that had been brought about there would be no longer any occasion to rebuke municipalities for excessive expenditure. Although in one week, when the Budget was introduced, we had the Chancellor of the Exchequer reproving the municipalities for increasing their liabilities, and although these liabilites had been incurred in respect of matters which might bring in a certain amount of profit to the community which incurred that expenditure, the very next week we had the Prime Minister coming along and pointing out that, as regarded another Bill, if the fund for compensation for licences was not adequate, the municipalities were at liberty to borrow immense sums. But as long as it was a question of spending money for light railways, education, or tramways, we must call a halt. There was one department in which perhaps the municipalities might be called upon to exercise economy. They on that side of the House had been challenged to say whether the grant in aid from the central to the local exchequer should be abolished. He was not entitled to speak with authority, but, so far as he was personally concerned, he should wish that that should be a primary object of our policy. These grants in aid were originally introduced to relieve property at the expense of industry, and now they had got to such a feature that they represented nearly 4d. on the income-tax; and that had been a great source of reckless economic administration. There was another system that might be applied which would avoid the difficulties with regard to the farmers. In Scotland half the rates were borne by the landlords. He did not know what the right hon. Gentleman would say in regard to that; but he hoped the House would not be debarred from referring strongly and severely to that very wasteful source of public expenditure. The Liberal Party, he dared say, would not be able to do much in that regard. In matters of legislation they were not their own masters. Even the country was not its own master in regard to ordinary legislation. But in the matter of finance the House of Commons were their own masters, and he hoped the Liberal Party would take up the work of restoring the finances of the country, which had been demoralised by nine years of profligacy and incompetence on the part of the Unionist Government.

MR. ELLIOT (Durham)

said he wished to put before the House one or two considerations as to the serious position in which the country found itself at the present moment. First of all he directed attention to the fact that throughout the debate, very little interest seemed to have been shown in it. The absence of Members on the other side of the House had been conspicuous. At one point there were only two Members on the; Front Opposition Bench and one Member behind them; while below the Gangway there were not more than half-a-dozen Members present. It could not be denied, however, that this question of increasing expenditure was of the greatest importance, and hon. Members were right: in making a protest against it. The Amendment of the right hon. Gentleman the Leader of the Opposition might be regarded either as a denunciation of the Budget as being bad, or as a protest against what Liberals alleged was the extravagance of the Government. At the same time it did the Chancellor of the Exchequer great credit that so little fault had been found with his Budget from: beginning to end. He was afraid that that; being so some little disappointment would have been caused to the right hon. Member for Sleaford; but that right hon. Gentleman had professed no disappointment on that account, because he seemed to think that though the Government were pledged against the corn: tax up to the next general election, there was a general understanding that after the next general election; the Party led by the Prime Minister would declare themselves in favour of his policy. The hon. Gentleman who had just sat down had found it easy to criticise, the proposals of the Government. He need not remind his hon. and learned friend that the income-tax and the war were wedded together. We had to pay our way, and the moment our guns had ceased firing we could not knock off expenditure. Looking at the truth and the substance of the matter the great increase in our national expenditure during the last few years had been directly or indirectly due to the South African war. But it should be remembered that they could not, immediately peace was declared, reduce expenditure which had been increased directly and indirectly by the South African War. He could not see any prospect of Civil Service expenditure being diminished, because every Department, year by year, had more business to transact. Take the Aliens Bill, there would be more salaries to pay, more printing, more paper to be used. Hon. Members seemed to forget that they could not take out of the Treasury more than they put into it. He was not going into the question of the necessity of the South African War—he still had his own opinion on that matter—but that war entailed a gigantic expenditure, and that war had led to a great public misconception of what it would produce. They had learnt that it was not a short cut to the establishment of happy relations between the two races. Until they had restored by wise statesmanship and patient consideration happy relations between the two races they would have a large military expenditure, and it would be many years before they would be able to reduce military expenditure to anything like what it was before that unfortunate war began.

It was all very well to say that their burdens were heavy, but they should think of the incalculable risks the nation would run if their defensive means were not adequate to those risks. Even if hon. Gentlemen opposite were in office they might find it incumbent on them to send another 50,000 troops to South Africa. Preparation should be made in advance, and a long view should be taken of such matters if anything like adequate safety and security for the country was to be assured. The whole position had been changed since the South African War. Good sentiments and good feeling between this country and neighbouring Powers ought to be restored; but they should not take an immediate view of the situation only. Not since 1815 had an European war lasted for more than two years. This country could not build a great Fleet in six months and send it to sea. The country must depend on preparations made beforehand, much more than in other days; and any Government, Liberal or Conservative, would deserve the utmost censure if, in order to secure popularity by reducing taxation, they were to leave the country open to a disaster which many generations might not see the end of. Therefore he associated himself with the efforts that the Chancellor of the Exchequer had been making not to diminish the strength of the Army and Navy. It could not be denied that for years the Navy had been the protector of the peace of Europe. What was to be avoided above all things was an oscillation between exaggerated alarms and a state of mind in which war was supposed to be impossible. He had heard, with considerable dissatisfaction, censure passed on the Government for having at a critical moment purchased two Chilian warships; but that purchase was only evidence of the determination of the Government to use its strength—and money was part of its strength—to make preparations which might be necessary. He should be sorry if any remarks he had addressed to the House should suggest that he had any doubt as to the necessity of supporting the Government when it produced a well thought-out scheme. He would indeed be loth to take on himself the responsibility of declaring hostility, for instance, to the purchase of the Chilian warships. It was probable that the time might come when the taxation of bread and butter and imported manufactures—the policy of making things dear in the interests of a class—might be taken up by a Unionist Government, and until that was disproved by a half-dozan words from the Prime Minister he would not feel full confidence in his right hon. friend. That battle might have to be fought out, but it could not be fought out on the present Amendment. The Chancellor of the Exchequer had to provide for gigantic expenditure; he had to raise gigantic revenue to meet it; and did it in a simple fashion. It was always disagreeable to have to pay; but there was no sense in looking at one side of the problem only. The hon. and learned Member had denounced protectionism. But there was none in this Budget, and that battle had not to be fought now. It was a Budget which he could heartily support, as having been proved to be adequate to the difficulties of the situation.

*MR. KEARLEY (Devonport)

said that during the debate a quantity of figures had been used to show how expenditure had grown during various periods; and comparison between various periods to prove that expenditure had been enormously increased. No hon. Member, however, had referred to the question as to how the present burden of taxation had affected the trade of the country, and he proposed to confine himself to that argument. The increased burden of taxation affected the trade of the country in two ways. In the first place the conduct of trade was affected by these repeated alterations of the duties on commodities. The tobacco tax was reduced in 1889 and increased in the following year. In 1900 the tea duty was increased twopence a pound. In the next year the sugar duty of a halfpenny a pound was imposed, carrying in its train eighty other duties on eighty other commodities of which it formed part, and in the next year there was the corn tax, which involved duties on seventy-five other articles. Now the tea duty was raised again. The effect on the conduct of business was most serious. It upset the whole machinery, involved the locking up of an increased amount of capital, and led to general disorganisation. But what was of far more importance was that it affected the volume of trade. Since the sugar tax was imposed there had been a falling off of 310,000 tons of imported sugar, instead of an annual increase of 40,000 tons. Every industry in the country had been affected. The 430,000 tons by which the imports had fallen off would have been fetched by British ships, landed in British docks, carried over British railways, and handled by British brokers and merchants, and all these people would have been so much the better off. This made perfectly clear the fact that the country had reached a point at which it could not continue to bear increased taxation. If it could, there would have been no diminution of consumption. It was obvious that there had been husbanding of means on the part of consumers who could not indulge so freely in the necessaries of life as they otherwise would do. The falling off, moreover, was in quality as well as quantity and extended to tea as well as to sugar, and the tea duties had affected seriously the importation of British-grown tea and increased undesirable imports from other countries. The decrease for Ceylon tea in the last four years amounted to 20,000,000 lbs., which had been partially supplemented by the importation of 10,000,000 of cheap and nasty tea from China and countries other than British. That was not beneficial to the interests of our dependencies abroad. It was not very much to be wondered at that these taxes brought about a diminution of consumption. The nation's trade was not made by the purchases of the well-to-do. It was the daily and weekly purchases of the wage-earning classes, conprising three-fourths of the population, which made up the trade of a nation and enabled it to keep up large armies and navies, and bear the burden of this ever-increasing expenditure.

The outcome of his own practical business experience was that any increase of price was instantly followed by a diminution of consumption. If Chancellors of the Exchequer who of late had been so free in increasing taxes on commodities would bear that in mind, they would be more disposed than they appeared to be to devise some other means of raising taxes than by imposing them on food products. The amount they yielded to the Exchequer did not represent half the effect that the wage-earner felt. The consumer not only paid the tax but also every profit and expense incidental to it and the extra burden was at least 50 per cent. in excess of the Exchequer receipts. The course of a nation ought to be identical with that which they as individuals pursued themselves. They had to cut their coats according to their cloth, and there must be a limit to this increase of expenditure. There had not been a single word of encouragement from anyone speaking in an official capacity to lead them to expect that they might look forward for a diminution in this huge expenditure. We were tauntingly asked what we wished to cut down. His reply was that better administration would save millions; for example we were still feeling the burden of the reckless purchase of remounts at £50 a head which were worth perhaps £17 and of the wild cat Somaliland and other filibustering expeditions. If the Government did not want to see the trade of the country seriously crippled they would have to recognise that we had really reached our limit and that there must be a stop somewhere. The Chancellor had tried to wave the flag, and he called his critics Little Englanders, and said they wanted to reduce the Navy, but he thought the country apprehended the real truth of the matter and realised that this Government had outlived its usefulness. They pretended they still enjoyed the confidence of the people. As a matter of fact the country was waiting for it outside. They only wanted the opportunity. If right hon. Gentlemen opposite were patriotic, and had the interests of the country really at heart, the sooner they gave it the opportunity of dismissing them the better it would be for the welfare of the nation.

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