§ Motion made, and Question proposed, "That Income-Tax shall be charged for the year beginning the sixth day of April, nineteen hundred and five, at the rate of one shilling in the pound."—(Mr. Chancellor of the Exchequer.)
MR. Mc KENNA (Monmouthshire, N.)moved a reduction from a 1s. to 11d. in the £. He did not complain because the surplus of revenue over expenditure was to be devoted to the purpose of reducing the duty on tea. Of course, the Motion would enable the Chancellor of the Exchequer to redeem the pledge which he gave last year, but he did not put his Motion forward in regard to that; he should leave hon. Gentlemen opposite, if they-wished to attach importance to it, to take notice of it during the course of the debate. There was the obvious objection to the Motion that, the surplus having been disposed of once, it could not be disposed of again; but there was a way by which the surplus might be increased, and the method he should suggest would, he thought, give the Committee an appropriate opportunity of relieving the payers of the income-tax.
There was a current phrase that the income-tax was a war tax. In its true sense, that phrase could not be supported, in view of the fact that we had been in the grip of the income-tax during fifty years of peace; but there was a sense in which the description was true. In the first place, it was obvious that the income-tax was the first resource of a Chancellor of the Exchequer when, in times of war, he wanted to raise additional taxation; and, secondly, there had been for many years a close relationship between the amount of money raised by the income-tax and the expenditure on the Army. He had taken out figures of our income-tax revenue for the last twenty years, the amount collected and the cost of the Army in times of peace. Taking three 1416 periods of ten years apart, 1885–6, 1895–6, nd the current financial year, 1905–6, he found a very remarkable coincidence between the growth of the expenditure on the Army and the growth of the income-tax. In 1885–6 we collected in income-tax £15,800,000 and our expenditure on the Army was £17,100,000. The next ten years the amount collected on the income-tax rather declined than increased, and during the same period the expense of the Army was practically stationary. In 1895–6 the income-tax had only risen by £400,000 to £16,200,000, and the cost of the Army had risen during the same period from £17,100,000 to £18,400,000. During the last ten years the amount collected on the income-tax and the cost of the Army had gone up by leaps and bounds till this year the income-tax was estimated at £31,000,000 and the cost of the Army at £29,800,000, so that it appeared the extra money raised by the income-tax had been largely devoted to the extra cost of the Army.
The Army Estimates for this year were, he submitted, disastrous; they were Estimates for an Army not in time of peace, but in time of war. Last year the Secretary of State for War said he would not again be responsible for such Estimates, but he had been again responsible, and responsible for Estimates increased since last year by £1,000,000. It was the extravagance in the Army that he wished to aim at by the reduction of the income-tax. It was not as if they had got a good and effective Army. They were still ignorant about the organisation of the Army, and could get neither an explanation from the Secretary of State for War of his Estimates nor any promise of reduction. The extravagance had been rapid; stores were bought at the close of the financial year merely for the purpose of reselling at the beginning of the new financial year. What was to be the resort of the Committee under these circumstances? They must attack the problem from the other side; they must refuse to give the ways and means by means of which this extravagance could alone continue. If they refused 1d. of the income-tax, they could insist upon the Secretary of State for War cutting his coat according to his cloth; they would tell him that, in the opinion of the 1417 Committee, he was spending too much money upon the Army and that he must reduce his expenditure. He particularly connected the expenditure on the Army with the increase in the income-tax, and it was for this reason—on the ground of the enormously swollen expenditure on the Army—that he begged to move the reduction of the Income-tax by Id.
§
Amendment proposed—
In line 3. to leave out the words 'one shilling,' and insert the words 'eleven pence.'" Mr. McKenna)—instead thereof.
§ Question proposed, "That the words; one shilling' stand part of the proposed Resolution."
§ MR. FLYNN (Cork, N.)said the income-tax pressed very hardly upon Ireland, because, when it was first proposed, he believed in 1850, the Chancellor of the Exchequer of the day gave a distinct undertaking that it would only be imposed in Ireland temporarily, and that promise had never been redeemed. For more than half a century there was a differentiation between Ireland and England, and Ireland had no sympathy with England's enormous expenditure which alone necessitated an income-tax of 1s. in the £. He agreed in the selection of tea by the Chancellor of the Exchequer for relief, and he believed the Irish representatives would prefer to see the duty on tea, a necessity of life, reduced. But the hon. Member for North Monmouth had demonstrated the close connection between the income-tax and the war expenditure, and they were perfectly in order in forcing economy and retrenchment upon the Government by this method if no other were open to them. Last year there was a distinctly implied promise of economy given by the Secretary of State for War, but it had not been carried out. If, however, they did not furnish the Chancellor of the Exchequer with the necessary money in the shape of a heavy income-tax and other swollen taxes, the great Departments of the State would have to retrench. He had always been of opinion that the income-tax payer was one to which respective Chancellors of the Exchequer turned with a light heart, because, somehow 1418 or other, though he supported the Tory Party, and though he grumbled, writing long letters to the papers, he was a long-suffering animal, and it was this comparative immunity with which they had been able to keep the tax at such a high rate which accounted for the indifference with which they treated the claims of the income-tax payer to relief. Last year the Chancellor of the Exchequer said the income-tax payer was the first individual entitled to relief, and he could have kept, his promise if he had served notices upon the Army and other Departments that the Treasury would not sanction certain expenditure. He might have told the Secretary of State for War that he wanted him to redeem his promise to effect economies. Expenditure, however, was regulated by policy, and they all knew very well that the Chancellor of the Exchequer had no control over policy. It was inspired from another source. Until the House realised that it was one of its primary duties to scrutinise and control expenditure, the work of the Committee would be waste of time for any practicable purpose. Protests were useless unless the House made up its mind that for the future it would scrutinise the Estimates and insist upon economy and retrenchment.
§ *SIR HENRY FOWLER (Wolverhampton, E.)said he agreed with what the mover had said, and he saw no inconsistency in any Member of the House voting in favour of the Motion on the ground on which it was based. He quite understood the Chancellor's position. He had a certain amount of expenditure to provide for, and he was not going to quarrel with him for the way in which he proposed to provide for it. He had a certain surplus to apply in reduction of taxation, and he (Sir Henry) thought the taxpayer who, had a tax imposed upon him after the war, and totally irrespective of the war— the consumer of tea—had the first claim, The Chancellor of the Exchequer therefore would not understand him as finding fault with the arrangement of his Budget, surplus. But the House of Commons had a duty behind all this. He heard, rather with some surprise, the Chancellor of the Exchequer's definition of the duties of the Chancellor of the Exchequer yesterday. He rather reduced the 1419 Chancellor of the Exchequer to that of a Treasury clerk, whose duty it was to provide what the services required, but that he himself was but one of the Cabinet, whose responsibility, of course, he shared. This, he ventured to say, was not the view which the great Chancellors of the Exchequer of the past had taken. The phrase that Mr. Gladstone used was that the Chancellor of the Exchequer was "the guardian of the public purse." The individual members of the Government, no doubt, in their respective Departments, all desired to make those Departments as efficient, and in one sense as costly, as possible, and the Chancellor of the Exchequer, in the position of watch-dog upon the whole general expenditure of the country, had a responsibility which no other member of the Cabinet had so distinctly; and he was sure the Chancellor of the Exchequer would not forget that one young Chancellor of the Exchequer of the past, who was a Tory Chancellor, a Unionist Chancellor, resigned his position because he would not concur in the military expenditure which had been proposed by his colleagues. He did not suggest that the right hon. Gentleman should take that course, because he gathered from him that he entertained the opinion that whatever was thought necessary for the safety or good government of the country it was his duty to sanction. He did not hold that doctrine himself, because every head of every Department thought his expenditure was necessary. He would take a broader ground.
They were going to raise from the people of the country during the next year between £150,000,000 and £160,000,000 by taxation. He ventured to say this was more than the country could afford to pay. He could understand a Chancellor of the Exchequer in a time of war saying he could not stop to say whether this or that was necessary, and that it was not the time to effect economy. The time to effect economy was the time of peace, when it was a duty to reduce expenditure already sanctioned for war. Let them look at what was done after the Great War. In 1816 or 1817 the Chancellor of the Exchequer expressed an indisposition to interfere with the income-tax, though it 1420 had pressed upon the nation for many years. The Tory House of Commons, because there was practically no effective Liberal Party in the House of Commons then, would not submit to it, and the Government had to withdraw their scale of expenditure by abandoning the income-tax altogether. He was not asking the right hon. Gentleman to do that. He was asking what every Member of the House believed in his inmost heart could be done by a strong Government—that the Army expenditure should be reduced to such an extent as to enable a reduction of the income-tax. The House had never been in such a position before. Twelve months ago they had a pledge from the Secretary of State for War that he would not stand at the Table to propose increased Estimates again, and now they had this enormous, and almost intolerable expenditure after the war had been ended two years. The Chancellor of the Exchequer was really imposing a penny in the £ on the income-tax in order to keep up expenditure, when the House of Commons really did not understand what it was for.
He should certainly vote for the Amendment, on the ground that the country was spending too much, not only on the Army, because it was not confined to that. The right hon. Gentleman said the House of Commons was always asking for, increased expenditure. He knew it did, and it always would. They rarely heard a proposal by a private Member to reduce expenditure. The Chancellor of the Exchequer was in a difficult position. He had to face both his Cabinet colleagues and the House of Commons who wanted expenditure. This was his duty. It was his duty to defend the public purse, as it was the duty of the First Lord of the Admiralty and the Commander-in-Chief of the Army to defend the country in time of war. There was a perpetual war going on; and from something he said yesterday he gathered that the Chancellor of the Exchequer did not look with a very favourable eye on the Estimates he had sanctioned, and he did not think he would have found fault with his colleagues if they had proposed less Estimates. He thought he would have discharged an unpleasant but a necessary duty if he had said: "We 1421 must next year spend so much and no more. I will not be responsible for Estimates which involve a large expenditure, and I will not sanction Estimates which do not enable me to keep my pledge to the House to take a penny off the income-tax." He submitted to him with very great respect that he had failed in his duty in not insisting upon a reduction of expenditure. The Chancellors of the Exchequer came and went, but the House of Commons did not, and he was sure it was the strong opinion of the country that the expenditure was increasing and ought to be diminished. He thought when they came to face their constituents it would be their view that there should be, and must be, a reduction on our national expenditure if we were to maintain our present national credit and position. On that ground he ventured to support the Amendment.
§ MR. PEEL (Manchester, S.)asked if the right hon. Gentleman would make a statement as to the method of the collection of the income-tax.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. AUSTEN CHAMBERLAIN,) Worcestershire, E.In a narrow sense that is almost outside the subject of this discussion. I do not mean to suggest that it is out of order, but I think we had better finish this discussion before we discuss particular methods of collection. Not one of the hon. Gentlemen who have spoken and have expressed their intention of voting for the reduction is opposed to the particular financial measures which, under the circumstances of the year, I have taken. What they challenge is the expenditure, not the manner in which I propose to provide for it. They have indeed alluded, both the mover and the hon. Member for Wolverhampton, to a statement I made in reference to the income-tax last year. That statement was to the effect that, in my opinion, the income-tax of 11d. as it then stood and 1s., as I was going to make it, was too much to exact from the income-tax payer as a permanent contribution in times of peace and left us, from the point of view of national finance, which is even a more important consideration, too small a margin on which to draw in the 1422 emergency of war. And I said that, in my opinion, the increase I proposed in the income-tax at that time—that the income-tax payer would have the first claim to relief whenever relief became possible. I do not change that opinion; I hold it now as strongly as I held it then, but it is an opinion shared by no hon. or right hon. Gentlemen sitting on the opposite side of the House.
§ SIR HENRY FOWLERdissented.
§ MR. AUSTEN CHAMBERLAINI beg the right hon. Gentleman's pardon; he would not support it. If having money for the relief of the direct or indirect taxpayer, I had appropriated the whole sum at my disposal for the relief of the income-tax payer——
§ *SIR HENRY FOWLERsaid that what he said was that he agreed that the consumers had the first claim in respect of taxes put on subsequent to the war.
§ MR. AUSTEN CHAMBERLAINThat is the difference. I do not know that it is of great practical importance at the present moment, because I cannot give effect to my opinion. I have stated distinctly that in my opinion the claim of the income-tax payer came first of all, if I had sufficient money to give effect to it. The first duty, before any relief was given, was, in my opinion, to make greater provision for the paying off of the Debt. I think it essential to the soundness of our national finance that an adequate attempt should be made to pay off the Debt. I therefore adopted measures for that purpose before considering relief at all. Having done that, the amount of surplus I had available was insufficient to carry out my cherished wish of giving relief to the income-tax payer, and, being insufficient for that, I devoted it to the other purpose. I hardly know whether it is necessary for me to make that explanation, but the right hon. Gentleman a little while ago challenged me to reconcile what I was doing with the statement I made last year, and it is for that reason I make it.
But what is of more immediate and practical interest is the criticism which 1423 the right hon. Gentleman passed upon what he conceived to be my idea of the duties of the Chancellor of the Exchequer. He said that the description I gave yesterday was reducing the position of the Chancellor to that of a mere Treasury clerk. I do not know whether he includes under the description "Treasury clerk" those whom I imagine command the highest respect and admiration for their able public service and whose assistance the Chancellor of the Exchequer has.
§ *SIR HENRY FOWLERsaid he should be the, last person to say anything disparaging of the distinguished men who served the Treasury. What he meant by "mere Treasury clerk" was an official who had no discretion, but who was bound to carry out instructions he had received from his superior officers.
§ MR. AUSTEN CHAMBERLAINI so understood. He meant that I was ceasing to regard the position as that of a Minister with high responsibility of his own and a special responsibility for the guardianship of the national finances; and that I was regarding myself as a mere instrument to provide whatever expenditure the heads of each Department might in their discretion think it necessary to demand. Nothing that I have said gives the slightest ground for such a supposition as that. The Chancellor of the Exchequer is and always must be in a very special sense the guardian of the national finances, but I think it would be a great mistake if he so separated his interests from those of the other Departments of the Government as to allow his colleagues to suppose that they were not also guardians of national finance, and that though they had not a responsibility in his direct and immediate manner, and not necessarily all the knowledge at his command, they had not a very real and great responsibility to secure as far as in them lay that no public money should be wasted in the Departments over which they presided. I think we can easily exaggerate the difference between the Chancellor of the Exchequer and his colleagues in this matter. The Chancellor of the Exchequer who looks only to the desirability of lowering taxation or securing reduction in our expenditure, 1424 discharges but one-half of his duty. He as little performs his duty as the Secretary of State for War or the First Lord of the Admiralty who looks only to obtaining everything he can for the Navy or the Army, and has no regard for the demands made upon the national purse. We all have a common responsibility, and we each have a special responsibility to discharge. I have only been a party to Estimates when I thought they were necessary for the safety or the good government of the country. The right hon. Gentleman knows there is a considerable reduction in the Navy this year, and the increase in the Army Estimates was caused by the necessity for re-arming the artillery, and, as long as the Government were not doing this, hon. Gentle men opposite were loud in their condemnation. I think it is a little unreasonable that they should turn round and denounce me for providing money for doing that for which they were willing to denounce the Government when it was not being done.
The three main sources of expenditure are military, naval, and financial; and the interests of the three are sometimes different and conflicting. I might almost say that they are always different and always conflicting. The result is that in any given year there must be something in the nature of a compromise between the exigencies of finance, and military and naval defence. When I was at the Admiralty I used to be told that the design of a battleship was the result of a compromise in respect of defensive power, speed, coal endurance, and other factors. So it is with the problems of finance. In military, naval, or civil expenditure, you must balance the pros and cons against one another; and it is the duty of the Chancellor of the Exchequer for the time being to see that the spending Departments make a good case, as far as he can judge, for the demands put forward, that against those demands there have to be set the disadvantages of high taxation or a heavy debt, and that due weight is given to all the financial considerations which must affect the rate of our expenditure. That is my conception of the duty of the Chancellor of the Exchequer. It is to take account of all 1425 these factors, to secure from his colleagues that they shall take account of them also, and not to separate himself wholly from the interests of military or naval defence or think that his whole duty is discharged if he can come down to the House of Commons and say the Estimates of the year are one or two million less than the year before, having no regard as to the cost at which the reduction is to be obtained.
Of course, our taxation is high, but I do not agree with the hon. Gentlemen who appear to believe that it is much beyond the means of our people. I do not believe we are unable to bear even this high taxation, though I sometimes think we might distribute it in such a way as to cause less friction and to make it less burdensome than it is at present. One thing I will venture to observe to the Committee. It is the repetition of an observation made many years ago by Sir Stafford Northcote. Unless you are prepared to continue, at any rate, a great part of the taxation you impose in war time, you cannot have any reduction in the burden of the debt created by the war. It is only by continuing a proportion, at any rate, of the war taxes that you can hope to reduce the burden of debt incurred during war. That should be our first consideration. It has been my strong contention. It is upon that conviction that I have acted, and it is owing to it that I am obliged to keep the income-tax at the present high rate. No one is more anxious than I am to relieve the payers of it. I am probably more anxious than any of my critics who are supporting this Motion on the other side of the House.
*MR. GIBSON BOWLES (Lynn Regis)said he wished to associate himself with a statement which had proceeded from both sides of the House as to the Treasury officials. In his opinion it was rarely that any country possessed officials so able and high principled as those who were in the Treasury. Indeed he thought he saw some of the best qualities of the Treasury officials in this very Budget, and that was not the case in every Budget. As to the situation which had been brought before the Committee by the Chancellor of the 1426 Exchequer, in his opinion the right hon. Gentleman had exercised sound discretion in the course he had pursued. It was very much better that he should do as he had done in making provision for the reduction of debt, which was the worst burden of all, rather than take off taxation. There was, of course, the other underlying question, whether he had advocated sufficiently, and if he had advocated sufficiently, whether he had been adequately supported by the Prime Minister in his advocacy of that frugality which was our first need. On that point he could not agree that all had been done that could be done. The right hon. Gentleman said that we were committed to an expenditure this year of £150,000,000. It was really £170,000,000, because in addition to the budgeted amount of £141,000,000, there were interceptions of revenue, for local taxation account, £9,700,000; expenditure chargeable against capital, £9,000,000; and appropriations-in-aid, some £10,000,000; all of which were receipts and all expenditure. If these three items were added to the £141,000,000 the expenditure was really and truly close upon £170,000,000. It was well that the House and the country should remember the expenditure was not alone that which was budgeted for by the Chancellor of the Exchequer, but that in addition under the present system there were irregular loans and irregular interceptions for local taxation account or appropriations-in-aid. In short, to the Chancellor of the Exchequer's Exchequer total they had to add £30,000,000.
§ SIR HENRY FOWLERYou must deduct what comes from the Post Office.
*MR. GIBSON BOWLESsaid he thought not, but he would rather not go into that question now. Our national accounts professed to be, should be, and by Act of Parliament were declared to be, accounts of receipts and expenditure, and as soon as they left that system for the present system of leaving out of the account vast and increasing items on both sides, so soon did they get into misrepresentations and into incapacity for comparing one year with another. 1427 But at what was even more important was the urgent and pressing need for retrenchment. This had not been duly recognised. His earnest conviction was that the limits of economy and frugality had not been reached, nay, had been scarcely approached, by this Budget. There were opportunities for effecting reductions in expenditure not by hundreds of thousands but by millions. They might save several millions on the Army and some millions more on the Navy. The Navy expenditure was an extraordinary example this year of what could be done by the exercise of intelligent retrenchment without loss, but rather with gain, of efficiency. He would suggest that the same kind of brain power should be applied to the Army. He would apply it also in some measure to the Civil Service, where instances could be found of three or four men doing one man's work. It was in small economies and strenuous frugalities the Chancellor of the Exchequer would find the most useful engine for effecting reductions in expenditure, and he should have the support of the Prime Minister in that most useful and necessary course of procedure. They had heard from the right hon. Gentleman the Member for West Bristol that he had not that support.
§ MR. AUSTEN CHAMBERLAINI do not wish to interrupt the hon. Gentleman, but at the same time I do not like to sit while he is referring to the relations between the Prime Minister and the Chancellor of the Exchequer without saying, at any rate, that I have from the first day I took office received the fullest and most generous support that anyone could desire.
*MR. GIBSON BOWLESsaid he was exceedingly glad to hear that, but neither his own efforts nor the support of the
§ Prime Minister had so far produced any great or any adequate economics. When the right hon. Gentleman came down to the House and stated that there was to be a reduction of £5,000,000 on the Army and another £1,000,000 on the Navy, and that he had in that the support of the Prime Minister, then he should attach high value to the support given to the right hon. Gentleman. He again impressed on the House and the Chancellor of the Exchequer the absolute necessity for strenuous frugality. He did not believe the country was unable to bear the burden of taxation imposed upon it now. He was one of those who believed the country was very rich and prosperous, and that it would become more rich and prosperous so long as we adhered to our present fiscal system. But certainly the Debt had been rising in a way which was calculated to produce the greatest forebodings on the part of everybody who had paid the slightest attention to the subject. The Chancellor of the Exchequer had recognised that the Debt must be dealt with, and he had dealt with it in a bold manner. But there still remained the bedrock of the whole thing. To pay off debt was good, but the exercise of constant frugality was even better. Although those who had studied the accounts had been alarmed at the career indulged in and were pleased at what had been done to deal with the situation so far as it went, yet they were very far from believing that sufficient economies had been achieved, and they looked forward to economies of a very much larger amount than had been shown in the present year.
§ Question put.
§ The Committee divided:—Ayes, 219; Noes, 166. (Division List No. 135.)
1431| AYES. | ||
| Agnew, Sir Andrew Noel | Balcarres, Lord | Bigwood, James |
| Anson, Sir William Reynell | Balfour, Rt. Hn. A. J. (Manch'r) | Bill, Charles |
| Arkwright, John Stanhope | Balfour, Rt Hn Gerald W. (Leeds | Bingham, Lord |
| Arnold-Forster, Rt. Hn. Hugh O. | Banbury, Sir Frederick George | Blundell, Colonel Henry |
| Arrol, Sir William | Banner, John S .Harmood- | Bond, Edward |
| Atkinson, Rt. Hon. John | Barry, Sir Francis T. (Windsor) | Boscawen, Arthur Griffith |
| Aubrey-Fletcher, Rt. Hn. Sir H. | Bartley, Sir George C. T. | Boulnois, Edmund |
| Bailey, James (Walworth) | Bathurst, Hn. Allen Benjamin | Bowles, T. Gibson (King's Lynn) |
| Bain, Colonel James Robert | Bentinck, Lord Henry C. | Brodrick, Rt. Hon. St. John |
| Baird, John George Alexander | Bignold, Sir Arthur | Brotherton, Edward Allen |
| Brown, Sir Alex. H. (Shropsh.) | Haslett, Sir James Horner | Purvis, Robert |
| Burdett-Coutts, W. | Hay, Hon. Claude George | Pym, C. Guy |
| Campbell, Rt. Hn. J. A. (Glasgow) | Heath, Sir James (Staffords, N. W | Randles, John S. |
| Campbell, J. H. M. (Dublin Univ. | Heaton, John Henniker | Reid, James (Greenock) |
| Carson, Rt. Hon. Sir Edw. H. | Hickman, Sir Alfred | Remnant, James Farquharson |
| Cavendish, V. C. W. (Derbyshire) | Hoare, Sir Samuel | Renshaw, Sir Charles Bine |
| Cayzer, Sir Chas. William | Hobhouse, Rt Hn H (Somerset, E | Renwick, George |
| Chamberlain, Rt. Hn. J. (Birm. | Hope, J. F. (Sheffield, Brightside | Ridley, S. Forde |
| Chamberlain, Rt Hn J. A. (Worc. | Hornby, Sir William Henry | Ritchie, Rt. Hn. Chas. Thomson |
| Chaplin, Rt. Hon. Henry | Hoult, Joseph | Roberts, Samuel (Sheffield) |
| Chapman, Edward | Howard, J. (Midd., Tottenham | Robertson, Herbert (Hackney) |
| Clive, Captain Percy A. | Hozier, Hon. James Henry Cecil | Rolleston, Sir John F. L |
| Cochrane, Hn. Thos. H. A. E. | Hunt, Rowland | Rollit, Sir Albert Kaye |
| Coddington, Sir William | Jeffreys, Rt. Hon. Arthur Fred. | Ropner, Colonel Sir Robert |
| Cohen, Benjamin Louis | Kennaway, Rt. Hon. Sir John H. | Round, Rt. Hon. James |
| Collings, Rt. Hon. Jesse | Kerr, John | Rutherford, John (Lancashire) |
| Colomb, Rt. Hn. Sir John C. R. | Kimber, Sir Henry | Rutherford, W. W. (Liverpool) |
| Colston, Chas. Edw. H. Athole | Knowles, Sir Lees | Sackville, Col. S. G. Stopford |
| Corbett, T. L. (Down, North) | Lambton, Hon. Frederick W. | Samuel, Sir Harry S. (Limehouse |
| Cox, Irwin Edward Bainbridge | Law, Andrew Bonar (Glasgow) | Sandys, Lieut.-Col. T. Myles |
| Cross, Alexander (Glasgow) | Lawson, Hn. H. L. W (MileEnd) | Sassoon, Sir Edward Albert |
| Cross, Herb. Shepherd (Bolton) | Lawson, John Grant (Yorks, N R | Scott, Sir S. (Marylebone, W.) |
| Crossley, Rt. Hon. Sir Savile | Lee, Arthur H. (Hants, Fareham | Sharpe, William Edward T. |
| Cubitt, Hn. Henry | Lees, Sir Elliott (Birkenhead) | Shaw-Stewart, Sir H (Renfrew) |
| Dalkeith, Earl of | Legge, Col. Hon. Heneage | Sloan, Thomas Henry |
| Dalrymple, Sir Charles | Leveson-Gower, Fredk. N. S. | Smith, Abel H. (Hertford, East |
| Davenport, William Bromley | Llewellyn, Evan Henry | Smith, H. C (North'mb. Tyneside |
| Dewar, Sir T.R.(Tower Hamlets | Long, Col. Chas. W. (Evesham) | Smith, Rt. Hn. J Parker(Lanarks |
| Dickinson, Robert Edmond | Lonsdale, John Brownlee | Smith, Hon. W. F. D. (Strand |
| Dickson, Charles Scott | Lowther, C. (Cumb., Eskdale) | Spear, John Ward |
| Douglas, Rt. Hn. A. Akers- | Loyd, Archie Kirkman | Stanley, Rt. Hon. Lord (Lanes |
| Doxford, Sir Wm. Theodore | Lucas, Col. Francis (Lowestoft) | Stewart, Sir Mark J. M 'Taggart |
| Dyke, Rt. Hn. Sir Wm. Hart | Lucas, Reginald J. (Portsmouth) | Stone, Sir Benjamin |
| Faber, Edmund B. (Hants, W.) | Lyttelton, Rt. Hn. Alfred | Stroyan, John |
| Faber, George Denison (York) | Maconochie, A. W. | Talbot, Lord E. (Chichester) |
| Fellowes, Hn. Ailwyn Edward | Majendie, James A. H. | Talbot, Rt, Hn. J. G. (Oxf'rd Univ |
| Ferguson, Rt. Hn. Sir J.(Manc'r | Marks, Harry Hananel | Taylor, Austin (East Toxteth) |
| Finch, Rt. Hn. George H. | Maxwell, W. H. J.(Dumfriessh.) | Thorburn, Sir Walter |
| Finlay, Sir R. B. (Inv'rn'ss B' ghs | Meysey-Thompson, Sir H. M. | Thornton, Percy M. |
| Firbank, Sir Joseph Thomas | Mildmay, Francis Bingham | Tollemache, Henry James |
| Fisher, William Hayes | Montagu, Hon. J. Scott (Hants.) | Tomlinson, Sir Wm. Edw. M. |
| FitzGerald, Sir Robert Penrose | Moon, Edward Robert Pacy | Tuff, Charles |
| Fitzroy, Hn. Edw. Algernon | Moore, William | Tuke, Sir John Batty |
| Flower, Sir Ernest | Morgan, David J. (Walthamstow | Vincent. Col. Sir C. E H. (Sheffield |
| Forster, Henry William | Morpeth, Viscount | Welby, Lt.-Col. A. C. E. (Taunton |
| Foster, Philip S. (Warwick, S. W. | Morrison, James Archibald | Welby, Sir Chas. G. E. (Notts |
| Galloway, William Johnson | Morton, Arthur H. Aylmer | Whiteley, H (Ashton-und.-Lyne |
| Gardner, Ernest | Mount, William Arthur | Whitmore, Charles Algernon |
| Garfit, William | Muntz, Sir Philip A. | Willoughby de Eresby, Lord |
| Godson, Sir Augustus Frederick | Murray, Charles J. (Coventry) | Wilson, A. Stanley (York, E. R. |
| Gordon, Hn. J. E. (Elgin & Nairn | Murray, Col. Wyndham(Bath) | Wilson, John (Glasgow) |
| Gordon, J. (Londonderry, S.) | Nicholson, William Graham | Wilson-Todd, Sir W. H. (Yorks.) |
| Gore, Hn. S. F. Ormsby | Parker, Sir Gilbert | Wodehouse, Rt. Hn. E. R. (Bath |
| Gorst, Rt Hn. Sir John Eldon | Parkes, Ebenezer | Wolff, Gustav Wilhelm |
| Goulding, Edward Alfred | Pease, Herb. Pike (Darlington) | Worsley-Taylor, Henry Wilson |
| Graham, Henry Robert | Peel, Hn. Wm. Robert Wellesley | Wrightson, Sir Thomas |
| Gray, Ernest (West Ham) | Pemberton, John S. G. | Wyndham-Quin, Col. W. H. |
| Green, Walford D. (Wednesbury | Percy, Earl | Yerburgh, Robert Armstrong |
| Greene, Sir E. W (Bury S Edm'nds | Pierpoint, Robert | Younger, William |
| Greene, W. Raymond (Cambs. | Pilkington, Colonel Richard | |
| Gretton, John | Platt-Higgins, Frederick | TELLERS FOR THE AYES— |
| Halsey, Rt. Hn. Thomas F. | Plummer, Sir Walter R. | Sir Alexander Acland-Hood |
| Hamilton, Marq. Of (L'donderry | Powell, Sir Francis Sharp | and Viscount Valentia. |
| Hare, Thomas Leigh | Pretyman, Ernest George | |
| Harris, F. Leverton (Tynem'th | Pryce-Jones, Lt.-Col. Edward | |
| NOES. | ||
| Ainsworth, John Stirling | Bell, Richard | Boland, John |
| Allen, Charles P. | Benn, John Williams | Brigg, John |
| Barran, Rowland Hirst | Black, Alexander William | Bright, Allan Heywood |
| Barry, E. (Cork, S.) | Blake, Edward | Broadhurst, Henry |
| Buchanan, Thomas Ryburn | Hemphill, Rt. Hon. Charles H. | Parrott, William |
| Burke, E. Haviland | Henderson, Arthur (Durham) | Partington, Oswald |
| Burns, John | Higham, John Sharp | Paulton, James Mellor |
| Burt, Thomas | Horniman, Frederick John | Pease, J. A. (Saffron Walden), |
| Buxton, Sydney Charles | Hutchinson, Dr. Charles Fredk. | Perks, Robert William |
| Caldwell, James | Hutton, Alfred E. (Morley) | Pirie, Duncan V. |
| Cameron, Robert | Jacoby, James Alfred | Power, Patrick Joseph |
| Campbell, John (Armagh, S.) | Johnson, John | Price, Robert John |
| Campbell-Bannerman, Sir H. | Jones, David Brynmor (Sw'nsea | Reddy, M. |
| Causton, Richard Knight | Jones, Leif (Appleby) | Redmond, John E. (Waterford) |
| Channing, Francis Allston | Jones, William (Carnarvonshire | Reid, Sir R. Threshie (Dumfries |
| Cheetham, John Frederick | Jordan, Jeremiah | Robertson, Edmund (Dundee) |
| Churchill, Winston Spencer | Joyce, Michael | Roche, John |
| Clancy, John Joseph | Kennedy, P. J. (Westmeath, N.) | Roe, Sir Thomas |
| Cogan, Denis J. | Kennedy, Vincent P. (Cavan, W. | Samuel, Herbert L. (Cleveland |
| Condon, Thomas Joseph | Kilbride, Denis | Shackleton, David James |
| Craig, Robert Hunter (Lanark | Lamont, Norman | Shaw, Thomas (Hawick B.) |
| Crombie, John William | Langley, Batty | Sheehan, Daniel Daniel |
| Cullinan, J. | Law, Hugh Alex. (Donegal, W. | Sheehy, David |
| Davies, M. Vaughan (Cardigan) | Lawson, Sir Wilfrid (Cornwall) | Sinclair, John (Forfarshire) |
| Delany, William | Leese, Sir Joseph F.(Accrington | Soames, Arthur Wellesley |
| Devlin, Chas. R. (Galway) | Leigh, Sir Joseph | Soares, Ernest J. |
| Devlin, Joseph (Kilkenny, N.) | Levy, Maurice | Spencer, Rt Hn C. R. (Northants |
| Dillon, John | Lloyd-George, David | Stanhope, Hon. Philip James |
| Donelan, Captain A. | Lough, Thomas | Strachey, Sir Edward |
| Doogan, P. C. | Lundon, W. | Sullivan, Donal |
| Douglas, Charles M. (Lanark) | MacNeill, John Gordon Swift | Taylor, Theodore C.(Radcliffe |
| Duffy, William J. | MacVeagh, Jeremiah | Tennant, Harold John |
| Duncan, J. Hastings | McCrae, George | Thomas, Sir A. (Glamorgan, E. |
| Edwards, Frank | M'Hugh, Patrick A. | Thomas, David Alfred (Merthyr |
| Elibank, Master of | M'Kenna, Reginald | Thompson, Dr E. G( Monaghan, N |
| Ellice, Capt E. C (S Andrw's Bghs | McKillop, W. (Sligo, North) | Toulmin, George |
| Ellis, John Edward (Notts.) | M'Laren, Sir Charles Benjamin | Trevelyan, Charles Philips |
| Emmott, Alfred | Mitchell, Edw. (Fermanagh, N. | Villiers, Ernest Amherst |
| Esmonde, Sir Thomas | Moss, Samuel | Wallace, Robert |
| Fenwick, Charles | Murnaghan, George | Warner, Thomas Courtenay T. |
| Ferguson, R. C. Munro (Leith) | Murphy, John | Wason, Eugene (Clackmannan |
| Field, William | Nannetti, Joseph P. | Wason, John Cathcart (Orkney) |
| Findlay, Alexander (Lanark N E | Nolan, Joseph (Louth, South) | White, George (Norfolk) |
| Fitzmaurice, Lord Edmond | Nussey, Thomas Willans | White, Luke (York, E. R.) |
| Flavin, Michael Joseph | O'Brien, James F. X. (Cork) | Whiteley, George (York, W. R. |
| Flynn, James Christopher | O'Brien, Kendal (Tipperary Mid) | Whitley, J. H. (Halifax) |
| Fowler, Rt. Hon. Sir Henry | O'Brien, Patrick (Kilkenny) | Williams, Osmond (Merioneth) |
| Gilhooly, James | O'Brien, P. J. (Tipperary, N.) | Wills, Arthur Walters (N. Dorset) |
| Goddard, Daniel Ford | O'Connor, James (Wicklow, W. | Wilson, Fred. W. (Norfolk, Mid. |
| Grant, Corrie | O'Connor, John (Kildare, N.) | Wilson, Henry J. (York, W. R.) |
| Guest, Hon. Ivor Churchill | O' Doherty, William | Wilson, J. W. (Worcestersh. N) |
| Gurdon, Sir W. Brampton | O'Donnell, John (Mayo, S.) | Young, Samuel |
| Hammond, John | O'Donnell, T., (Kerry, W.) | |
| Harcourt, Lewis | O' Dowd, John | TELLERS OF THE NOES—Mr. |
| Harwood, George | O' Kelly, Conor (Mayo, N.) | Herbert Gladstone and Mr. |
| Hayden, John Patrick | O' Kelly, James (Roscommon, N | William M'Arthur. |
| Healy, Timothy Michael | O' Shaughnessy, P. J. |
Motion made, and Question, "That the debate be now adjourned;"—(Mr. T. M. Healy,)—put, and agreed to.
§ Main Question again proposed.
MR. Mc CRAE (Edinburgh, E.)said now they were approaching the general question of the income - tax there were one or two words he wished to say to the Committee both with regard to the incidence of the tax and its effects on the taxpayer. On that side of the House they heartily approved of the remissions of taxation proposed by the Chancellor of the Exchequer and also of his proposals, although they did not think they went far 1432 enough with regard to the reduction of the Debt. But while saying that they felt that the income-tax payer had rather a grievance against the Chancellor of the Exchequer, he did not refer to anything the Chancellor of the Exchequer might have said last year. He took the broader view that an income-tax of Is. in the £ on a peace basis was certainly far too high. If they considered that the income-tax for the year 1900, the year before the war, was £18,750,000, and in the year they had now entered upon was £31,000,000, or an increase of 1433 £12,250,000 over what it was five years ago, it must be agreed that those people who paid income-tax had reason to complain of the burden placed upon their shoulders.
There were two ways in which the income-tax payer could be relieved. The first was by way of reduction in expenditure. That had already been referred to, the other was by the Chancellor of the Exchequer applying himself to new sources of revenue. Expenditure had already been dealt with, but he would just like to point out that apart altogether from loans, as to which there was a difference of opinion whether they should be added to or not, the ordinary revenue expenditure for the year, including local taxation, was £152,000,000 compared with £102,000,000 for 1894. That was an increase of their ordinary expenditure over 1894 of £50,000,000 per annum, which was a very serious charge upon the nation. He was not going to go into new sources of revenue which would take the place of the present and give some relief to the income-tax payer. He would deal with one source only—the licensing duties. It had been conceded that an increase ought to be made in the duties appertaining to licensed houses, and he was quite sure the Chancellor of the Exchequer could have got from that source a sum equal to 1d. on the income-tax.
With regard to the income-tax itself, they had to consider whether it was fairly imposed. He was not going to deal with the question of graduation, but he wished to say a word in favour of the principle of making a rebate on the income-tax on incomes which were derived not from permanent investments but from the labour of the individual. He thought they ought to make a distinction between permanent and what were called precarious or wasting incomes. He was not going to go into that at any length, because last year they had a very interesting discussion, in which the Chancellor of the Exchequer was supported in his view by Mr. Gladstone and he (the speaker) was supported in his view by Lord Beaconsfield; so it was rather an interesting discussion, and although the Chancellor of the Exchequer would not 1434 accept the Amendment which he proposed, because he did not see his way to give effect to it, and because he regarded it as unworkable, still he thought they had the Chancellor's sympathy with regard to the claim that the man who was working and establishing an income had over a man who was deriving his income from realised investments.
With regard to the incidence of the income-tax, there was another point he would like to put before the Chancellor of the Exchequer. There was an exemption in the income-tax, whereby fines paid on the demise of property or on the renewal of leases were exempted from income-tax. That was entirely unfair to the trader, because if the trader made £1,000 extra in his business for the year he had to pay income-tax upon that £1,000 supposing he was going to invest it. But if he speculated in property and incurred a fine in respect to that property, if he went to the income-tax authorities and was enabled to satisfy them that he was going to invest that money he had received in respect of the renewal of a lease he was exempt from income-tax. When he raised that question last year, the Chairman ruled it out of order, because a private Member, of course, could not move an Amendment whereby the produce of any tax was to be increased, and, therefore, he would commend this question to the Chancellor of the Exchequer, because it was only by initiative on his part that anything could be done. With all due respect, he thought it was rather a fine point whether the mere exemption he suggested would decrease the produce of the revenue to such an amount as to interfere with the existing taxation.
There was another point on which there had been some little discussion, and that was with regard to the collection of income-tax. They had heard a good deal about the hustling of the income-tax payers during the last few months, and the Chancellor of the Exchequer estimated that he received from more effective collection an extra sum of £800,000 within the last financial year. He made a calculation and thought the Chancellor had received a larger sum than that. What he wanted to point out, 1435 however, was that even with the accelerated collection, the collection of income-tax in England was very far behind that in Scotland, and there was an injustice to Scotland, generally in this respect. He raised this question on a former occasion, and the Secretary of the Treasury was good enough to grant a Return showing the collection for three years as between England and Scotland. The result was that it was shown that on February 28th, 1901, there had been collected in Scotland 93 per cent. of the income-tax for the year, while in England there had only been collected 53 per cent., the result being that on that date there was outstanding the large sum of pound;14,200,000 of income-tax. The right hon. Gentleman had been good enough to give a Return on similar lines which had just been placed in their hands that morning, and while it showed that the collection of income-tax had somewhat improved in England, the percentage collected up to the end of February was still far from satisfactory, because he found that taking that year the percentage collected in Scotland was 95 per cent. That meant that at the end of February practically the whole of the income-tax had been recovered in Scotland, and there was a very small sum outstanding of only a few hundred thousand pounds. When he came to England, notwithstanding this hustling they had heard so much about, they had only been able to collect 62 per cent, of the income-tax on February 28th. The total charge for income-tax was £29,500,000 and on February 28th they had only collected pound;18,500,000. So that there was a very large margin—£11,000,000—of income-tax outstanding unrecovered at the end of February of this year. What did that mean? It meant that they were losing interest on that sum—taking it as outstanding for a month only and at 2½ per cent.—of about £20,000 a year. Comparing the percentage recovered last year in England with the percentage recovered in 1901, he found there was an increase of practically 9 per cent., and if they took that upon the income-tax which had been charged it would be seen that the Chancellor of the Exchequer had received within the financial year a much larger 1436 sum than the £800,000 which he estimated as having received extra.
On the question of the income-tax there was another very interesting point as to the relation the income-tax ought to bear to the Exchequer balances, because it was on the Exchequer balances that the Treasury had to be financed for the early period of the year. The Exchequer balances were very much better than last year, amounting to a little over £7,000,000, the same figure as in 1866 when Mr. Gladstone said they were a sufficient but not an ample provision. But in that year the total charge for income-tax was only about £9,000,000, and, therefore, the Exchequer balances were only three-quarters of the whole amount of the charge that was to be imposed for income-tax, which of course meant that even supposing the income-tax was not recovered until the last quarter of a year there was money in the Exchequer to finance the Treasury really up to the amount which was to be received in income-tax. But this year the Exchequer balances only amounted to the same amount as in 1866, although the charge for income-tax was £31,000,000, which of course meant that the Chancellor of the Exchequer in the early periods of the year must borrow largely on Ways and Means. He thought the Chancellor of the Exchequer had perhaps rather underestimated the income-tax for the coming year. He estimated to receive, at Is. in the £, income-tax amounting to £31,000,000. He told them 1d. of income-tax would produce £2,600,000, and taking it at that the return ought to be £31,200,000, because he took it the Chancellor would get really a sum equal to the full produce of 1d. in the £ for this year because the arrears that were still outstanding from last year would be collected at 1s. instead of 11d. as lastyear. The right hon. Gentleman, of course, was very much handicapped by his predecessor reducing the income-tax in the previous year by 4d. in the £,which meant a loss of £10,500,000 to the Revenue. But the Chancellor of the Exchequer who made that reduction on account of the vicious system of large arrears only lost within the financial year a sum of £8,500,000, therefore the £2,000,000 had to be provided for by the present Chancellor of the Exchequer. He thought 1437 from the figures he had given the Chancellor of the Exchequer would see that, notwithstanding all the alleged hustling, the collection of income-tax in England only amounted to 62 per cent, as against a collection of 95 per cent, in Scotland at the end of February. He hoped that the right hon. Gentleman or the Inland Revenue authorities would not relax the efforts they had made, but accelerate collection. Otherwise the complaints which had been made by Scotland during the last three years would be accentuated. One gratifying feature of the collection in Scotland was that owing to this disparity having been pointed out a certain amount of latitude had been given to Scotland. But at the end of February not only was collection better than it was before but the percentage had increased, which showed that the system of collection there was far more efficacious for recovering this tax than the system in England. He thought that something should be done to reorganise the system in England in order to make the collection more speedy. It must be remembered that the income-tax payer was bearing a very heavy burden, especially in the case of a man with a small income, and he certainly did feel that some remission ought to be made in this impost both by way of the reduction of expenditure and by the Chancellor of the Exchequer applying himself to new sources of revenue and broadening the basis of taxation.
§ SIR GEORGE BARTLEY (Islington, N.)expressed his opinion that the present time was more than any other in the past the time for enforcing the consideration of this tax. Many years ago, when the tax stood at 3d., 4d., and 6d., it was thought necessary to make the tax a fair one and make it really an. income-tax, but now it had risen to 1s. and when, in spite of all the hopes they had had, the Chancellor of the Exchequer had had to come down and admit that it could not be reduced, and that though it was a time of peace and reasonable prosperity he must still exact the 1s., it was obvious that the time had come when they should consider more than they had done in the past the way in which the tax was levied and its unfair incidence. 1438 This tax was called an income-tax, but it was not really an income-tax, and the persons who suffered most were persons of small means and small traders. Small traders especially were made to pay more than they should, and they were about the most stable of the whole community. They did not agitate or make a fuss, but bore the burden put upon them. He considered that the whole question of income-tax required special attention at the hands of the Committee. The mode of assessment and of appeal from the assessment required very careful rearranging. The mode of assessment appeal was a grotesque anomaly, it was the most absurd system of adjudication that was ever attempted. The appellant went before some person and stated his case, and was then excluded from the room whilst the person interested in maintaining the assessment remained behind, and in the end the assessment remained the same as before the appeal. Now that it was recognised that this tax was to be permanent the Chancellor of the Exchequer should put it upon the best possible basis, and he pressed the right hon. Gentleman to see that the system of appeals on assessment, and the mode of assessment, should be so modified as to be fair to those who wished to appeal.
He further advocated that a distinction should be made between industrial and spontaneous income. He had always felt that that was a question which the House ought to consider. It was obvious that it was politic and desirable in every way that they should not take from the man who had to keep his family and himself out of an industrial income the same amount as they took from the man whose income was received from spontaneous sources, because the man who earned his living by his own energy had to provide a great deal more than the man who obtained his from investments. He had to insure his life, and in other ways provide for his family in the event of his being cut off. There was no doubt that a different scale should be adopted for spontaneous and industrial incomes. He had always opposed the idea of a graduated scale of income-tax because he believed it would be impossible to carry it out, but this was another matter 1439 altogether. It would be a very easy thing indeed to have two different scales.
He did not regard the attempt which had been made this year to collect the revenue earlier than was the case in former years as a regrettable incident. This tax was due on the first of January, and the right hon. Gentleman was right in seeing that it was collected without, delay. Many of our taxes were now paid in May or June, and if the right hon. Gentleman put pressure on those who paid late very little harm was done. It was of course a little hard upon the people that this tax should only be paid once a year. It was only since this system was introduced by Mr. Lowe that that had been the case, and it would be very difficult to alter now, but there could be no doubt that the best mode of paying taxes was at short dates.
The real question of the income-tax turned on the question of expenditure, and he strongly protested against the income-tax remaining as high as it was at present. It was a danger to the finance of the country. At one time 6d. was thought to be too high, and the fact must now be faced that it should not exceed that amount and some means must be found of bringing it down again to 6d. It would not be in order to go into the fiscal policy of the country, but it was obvious that with the income-tax at 1s. it would be difficult in time of war, in a case of sudden, emergency, to find an elastic source of income. He protested against the present rate of the income-tax, but it was of no use to do it without being prepared to reduce expenditure. Hon. Gentlemen opposite were always speaking in favour of a reduction of the expenditure, but did not go into the details beyond suggesting that £5,000,000 or £6,000,000 should be taken off the naval and military expenditure. The burden on the country had been increased in many ways besides that. Those who had studied the Civil Service Estimates would see that they had increased very largely. The amount that was now being spent on primary education was simply fabulous, and large sums were being spent on secondary education, and the burden of taxation was being increased in every way. They must face the fact that this taxation must be decreased, 1440 Expenditure had increased in all directions, and proposals were now being made in favour of Imperial grants for the unemployed, for the feeding of school children, and so on, which, if carried out, would increase the national expenditure to an alarming extent. Assistance was given to the education of all classes, which he thought was quite unnecessary, and he strongly objected to the State paying all fees, but so long as the present course of expenditure continued the income-tax would have to be maintained. The tax was undoubtedly too high, but it could not be reduced until substantial reductions were effected in expenditure. Meanwhile the burden was so heavy that the Government were bound to see that the incidence of the tax was more fairly adjusted, and that the unjust pressure which existed in regard to different classes should be as far as possible removed.
§ MR. MUNRO FERGUSON (Leith Burghs)associated himself with the view expressed by the hon. Member for East Edinburgh with regard to the collection of income-tax. The view that the collection in England had been unduly retarded as compared with Scotland was borne out by the Return issued that morning, from which it appeared that at the end of February there were £11,000,000 outstanding in England, whereas in Scotland the amount outstanding was only £131,000. But the point now before the Committee was whether the right hon. Gentleman had not under-estimated the amount he would receive this year. Personally, he did not see why the "hustling" in England should not be continued, and in that case the amount would probably be found to have been underestimated. While he did not complain of the amount of the tax, he fully agreed with the complaint that it was not properly graded. He suggested that the right hon. Gentleman should give his attention to that subject, with a view to ensuring that those whose; incomes were dependent upon their brains should pay on a lower scale than those who derived their incomes from investments. The rate of 1s. in the £ was not, in his opinion, too high, and he had never been able to understand 1441 why it should be regarded as so intolerable a burden; he would far rather see deduction from the sugar duty than from the income-tax. The great complaint was as to the manner in which it pressed upon some classes of income as compared with others. A man who depended upon his brains might through illness lose the whole of his income, and through having to pay at so high a rate have been precluded from putting by as much as he would otherwise have done, whereas the man who derived his income from Consols would suffer no diminution of means through illness.
§ MR. AUSTEN CHAMBERLAINinstanced a case in which a man inherited a business with a capital of £20,000 which had been accustomed to yield £1,000 annually, and asked whether that £1,000 was derived from brains or was it spontaneous income.
§ MR. MUNRO FERGUSONadmitted the question was not an easy one. All he suggested was that the right hon. Gentleman should look into the matter. Certainly very responsible opinions had been expressed in favour of such a differentiation.
§ MR. AUSTEN CHAMBERLAINBy whom?
MR. MUNRO FURGUSONsaid the question had been gone into, and opinions of some value had been expressed to the effect that the tax should not be the same upon all classes of income. Although he did not object to an income-tax of 1s., he thought it was right to call attention to the large amount that was being levied upon the country in consequence of want of economy. Economies were necessary in various Departments, and in none more than the Army, where he believed the greatest waste occurred, and in connection with which economies of several millions could be effected. If, therefore, he voted against the tax it would be with a view to securing those economies in the public service which were so loudly called for.
§ LORD WILLOUGHBY DE ERESBY (Lincolnshire, Horncastle)said that as 1442 the grievances of other classes in connection with the collection of income-tax had been referred to, he desired to bring forward the grievance under which landlords laboured in the matter. He knew it was not a popular grievance to raise, in fact he feared landlords did not always receive that fair consideration which was extended to other classes of the community. Certainly with regard to taxation they paid far more than their fair share. During the last few years the question had become a very pressing one. As levied upon land in the past, there was not much to be said against the income-tax, but several alterations had since been made. The fact that the tax was much higher than it used to be made it more important that the basis of assessment should be fairly arrived at. As a result of Sir W. Harcourt's death duties, a far heavier burden had been imposed upon land than formerly was the case. Land and personal property had been placed on practically the same footing. The assessment was now made on the gross rental, with an allowance of one-sixth in the case of houses, and a deduction of one-eighth in the case of land. He submitted that those deductions were nothing like adequate. All hon. Members desired that the tax should fall fairly, and that people should pay on the incomes they received and no more; but he was convinced that an income-tax of 1s. would mean for almost every landowner a tax of 14d. or 15d. upon their actual incomes. Those deduction were not nearly enough between the gross income and the net income. He would quote one of the greatest financiers the country ever had—Mr. Gladstone. Speaking upon the question of what deduction ought to be made in the case of agricultural land, Mr. Gladstone said that the deductions that ought to be made from gross income included the charges for repairs, building, fencing, and drainage, as well as insurance, law charges, and arrears and abatements of rent. If anybody went into the question and looked into the working of any estate in the country and deducted from the gross income what Mr. Gladstone said should be deducted to arrive at the net income, he would find that every landowner in the country was paying 2d. 1443 or 3d. in the pound more than other classes.
He knew the case of the landowners was an unpopular cause to plead, but there was a feeling that justice should be done. He would much rather it was plainly stated that the landowners had to pay the extra amount than that it should be done by indirect methods. The professional man and small trader no doubt had their grievances, but they could always under Schedule D show what the profits of their business were. Some years ago a very valuable concession was made to the occupiers of lands when they were allowed to be assessed for income-tax under Schedule D, and he thought some equally fair concession should be made in the assessment of real estate for income-tax. The chief objections of Mr. Gladstone and John Stuart Mill to the income-tax was that it promoted extravagance, and also was a burden on the most conscientious and those who showed their profits fairly, and in the particular case to which he referred it was only just that the Government should do away with the inequalities of the tax, especially when it stood at such a high figure, and thus do justice to all classes of the community.
§ *MR. SOARES (Devonshire, Barnstaple)said that although he voted for the reduction moved that afternoon he was not particularly sorry that the Government had retained the income-tax at 1s., because it would call the attention of the country to the enormous Estimates they were now being asked to pass. The ordinary man in the street was saying: "Here we are in times of peace; we have had no war since 1900, and we know that £3,500,000 have been taken off the Naval Estimates, and yet we have this large income-tax of 1s. in the £." When the taxpayers thought this matter over there was only one answer they could find, and it was that this was all due to the extravagance of the present Government. He thought it was more or less satisfactory that the Government had taken 2d. off the tea duty and had refused to reduce the income-tax, because it showed the power which the working classes had even over the present Administration. This was proof positive that 1444 no Chancellor of the Exchequer would ever venture to tax corn for the benefit of the wealthy landlords of this country. He would much rather see a reduction of indirect taxation than of direct taxation, although he did not think that the income-tax in its present form was a just tax.
One of the fundamental principles of taxation was that they should put the burden on the shoulders of those who were most competent to bear it, but the income-tax under its present conditions did not comply with that principle. The income-tax was wrong and unjust because they refused to graduate it. It was not fair that a man with an income of £1,000 a year should pay an income-tax at the same rate as a man with £100,000 a year. It was a much greater burden for a man with £1,000 a year to pay £50 than it was for a millionaire to pay £500. He might be told that there were great difficulties in the way of a graduated income-tax. He would make a suggestion for the consideration of the Chancellor of the Exchequer. He would suggest that they should commence to graduate all incomes larger than incomes which are now wholly or partially exempted. They should have a minimum income-tax payable on all these incomes, and then everybody would make a return of the amount of his income and pay a second income-tax on a graduated scale. The minimum tax should be paid at the source and the graduated tax would be paid by means of a return. It might be said that that would be too inquisitorial, but all merchants at the present time made returns and they were people to whom the secrecy of the income-tax was most important because they did not want their neighbours to know the amount of their business. He did not see why, by some such process as this, they could not succeed in graduating the income-tax.
He should also like to see a differentiation of the income-tax. He knew that to a large extent the death duties effected that purpose, but still he thought they might very well go a little further in that direction. He thought they were all agreed that 1445 the burden of the income-tax was much harder on the people who earned their incomes than those who derived their incomes from investments. ["No, no! "] Then they were not all agreed upon the point. He admitted that there were considerable difficulties in the way of differentiating the income-tax when they had one man companies and businesses formed into companies for the more convenient sharing of the annual profit. Businesses were frequently turned into companies for family reasons after the death of the owner, and it was certainly unfair that such businesses should pay one rate before the death of the owner and another rate after. He knew that a Committee was now considering this matter, but he thought the Chancellor of the Exchequer should give them his opinion and advice with regard to graduation. They wanted to know whether he thought such a tax was possible, and he sincerely hoped he would be able to give a favourable answer to the question.
*MR. GIBSON BOWLESreminded the hon. Member for Edinburgh that the graduation of the income-tax had been shown to be impracticable by every Chancellor of the Exchequer. At the present time two-thirds of the income-tax was levied at its source by deduction, and unless they abandoned that method they could not have graduation.
§ *MR. SOARESYou can pay the minimum tax and that would be collected at its source, and everybody who has an income above a certain amount makes a return and pays upon it.
*MR. GIBSON BOWLESthought that if the hon. Member reflected he would find that what would have to be paid on all deducted duties would not be the minimum but the maximum duty. That would be the only way of levying a graduated income-tax. This question had been so often considered by successive Chancellors of the Exchequer that he did not think it could be advanced by further examination. They were told that a man who 1446 earned £1,000 a year by the exercise of his brain power was in a different position to the man who got £1,000 a year from invested property. Of course, a man who got £1,000 a year from his invested capital was richer than the man who got the same amount by his brains, for he had the capital as well as the income, but the difference between them was this. The man who earned the money with his brains left, when he died, no capital to tax, while the other man left money which was taxed to a very considerable extent. In regard to the incidence of the income-tax as such, it seemed to him exactly equal in both cases. They taxed the £1,000 a year income by income-tax so long as it lasted, but when it ceased the tax ceased. In the case of the man with £1,000 a year derived from capital his successor went on paying income-tax. Therefore, he did not see that there was any hardship. The income - tax followed the income and when the income ceased the tax ceased. It was perfectly true there was the difference that the one man left capital, and the other man left none. But that was provided for by the graduation in the estate duties. There was a graduation at a man's death which acted as a cumulative income-tax. Surely that was enough graduation for the time being, But whether it was or was not, he should be very much interested to see any feasible plan, either from the hon. Gentleman opposite, or from the body now inquiring into the question of the income-tax, as to the graduating of the tax.
The noble Lord behind him complained that the ownership of land was unduly taxed in respect of income. But the noble Lord had not established that—he had, indeed, left unnoticed certain features of our system which suggested an exactly contrary conclusion. He was waiting to hear a reference to the Agricultural Rates Act which gave a very large exemption of rates to agricultural land as compared with other property, but although himself a prospective landowner the noble Lord left that entirely out of account. He compared the ownership of land with the occupation of land, pointing out that 1447 whereas the owner could not return his profits under Schedule D, the farmer who occupied could. But there were few who did it, for the simple reason that the farmer often knew perfectly well that he was a great deal better off under Schedule B than he would be under Schedule D. The farmer had the advantage of being able to choose whether he would be taxed under Schedule B or D. The noble Lord further said that lands and personalty were on the same footing under the Finance Act of 1894 as to estate duty. The fact was that they were on an absolutely different footing in consequence of an arrangement made between the late Sir William Harcourt and the right hon. Gentleman the Member for West Bristol. Land paid scarcely more than half of what personalty of the same saleable value paid. The reason was that instead of being valued as personalty was, it was valued on a special scale set down in the Act. They first took the gross rental, then made deduction for repairs, insurance, management, and a variety of other items, which reduced the rental of the land to a low figure. The Act prescribed that the capital value for the tax should not exceed twenty-five times the minimum rent thus arrived at and this fictitious capital value of ten did not amount to more than half of the value of the land if sold. If land was valued at its real value it would pay, not what it did now, but about twice as much.
As to the income-tax it was one of the best taxes in its essence, nature, and principle which they could have. It was one of the cheapest to collect. It left no residue behind it in the hands of the tax collector. The Revenue got the maximum amount, and it had the very great advantage that the man who paid the tax knew he was paying it. It could not be concealed from him, and it gave him a direct interest in the amount of taxation he bore, and consequently in the amount of the national expenditure, and, therefore, a direct incentive to resist national extravagance and to support retrenchment, our great present need. These were very great advantages indeed, and entitled the tax to most respectful treatment on the part of the Committee. He wished to point out that of the total revenue of 1448 this country of all classes, only one-half came under review for assessment of income-tax, and only one-third paid income-tax at all. The figures for 1902–3 showed, according to the accredited mode of estimating it, that the total income of all classes amounted to between 1,700 and 1,800 millions, and that the gross income of all classes brought under the review of the income-tax department was 879 millions, which was, broadly speaking, about one-half. Of the 879 millions brought under review only 608 millions had income-tax levied upon it. He was not going to say that that was entirely wrong, but the remarkable result was that the third which paid income-tax paid a great deal more than it would have to pay if the other two-thirds paid as well. If it were possible to tax all the incomes of the country—he was not going to argue that it was possible—the result would be that either the Chancellor of the Exchequer instead of getting £30,000,000 from the tax would get his £90,000.000, or he could reduce the rate of the tax from 1s. to 4d. and still get his £30,000,000. He well understood the propriety, he might almost say the necessity, of exempting from income-tax the smallest incomes. He thought it was right that the man who got £1, £2, or £3 a week should be exempted, but he had never been able to see the necessity or the justice of extending the exemption to the man who got £12, £13, or £14 a week as had been done. That was where a considerable alteration might be and should be made. The exemptions and abatements above £160 should be largely reduced. The effect of that would be that either the rate of the income-tax could be reduced, or, as he would greatly prefer, some of the onerous duties, such as that on sugar, could be taken off. In this way, as the Chancellor of the Exchequer had said in referring to the present reduction of the tea duty, relief would be given to every household. If this could be done there would be an advantage in two ways. They would get rid of the greater cost of collecting Customs duties, and substitute the lesser cost of collecting the income-tax.
Of the five classes of assessment of income-tax there was one which operated in the most outrageous and extraordinary 1449 manner. He referred to the assessment of profits from business under Schedule D. The system only required to be explained in order to show that it was perfectly unsound. The assessment was made on what was called the "three years average." An average was an abstraction dear to the statesman and ridiculous to the practical man. Take the case of the man who in the first of the three years earned £3,000, in the second year £2,000, and in the third year £1,000. On the average he had a profit of £2,000, and on that he was taxed, although his income was only £1,000 and on the declining scale. He paid twice as much as he ought to pay, and he was entitled to their compassion. Take now another man, who in the three years to be averaged earned successively £1,000, £2,000 and £3,000. He also paid income-tax on £2,000, but that was on £1,000 less than he ought to pay—and he a man rising in prosperity! The man whose income was declining, and who perhaps was approaching bankruptcy, paid double what he ought to pay—the man whose income was rising, and who was on the road perhaps to becoming a millionaire, paid less than he ought to pay. That system of averaging was not applied to Government officials or to those who derived their incomes from stocks and shares. Each paid on his year's revenue. There would be no difficulty in applying the same system to the two men he had instanced. In his opinion the Chancellor of the Exchequer ought seriously to consider whether he could not abolish the system of averaging. There was another point from which great encouragement might be derived. The rich had been getting richer, but happily so too had the poor, and in greater degree or at all events in greater numbers. That was a happy result and long might it continue. The great numerical increases of income were not in the number of millionaires, but in the number of men with from £300 to £600 or £700 a year, incomes which made it possible for a man to live in comparative ease and comfort. That was one of the most encouraging things shown in the Report of the Income-Tax Commissioners. It was a very remarkable thing that the little fish were increasing enormously in number, very much 1450 more so than the big fish. He meant to vote for the income-tax proposal, for though he had thought it might be useful to the Committee to suggest the defects in the manner in which it was levied and how these defects might be remedied, the tax itself was a good one.
§ MR. EDMUND ROBERTSON (Dundee)said that they had had a considerable amount of detailed discussion as to the conditions under which this tax ought to be applied. He thought there must be some misapprehension as to the assistance likely to be derived in the settlement of this question from the Committee now sitting on the income-tax. As he remembered, the reference to that Committee dealt entirely with methods of administration, so that they could not look in that direction for any solution of the difficult points that had been dwelt upon that afternoon. But, if this Committee was to report soon and successfully, he thought it would be well worth the attention of the Chancellor of the Exchequer to consider whether a similar Committee should not be appointed to inquire into the facts as a whole, with a view to deliberation on and settlement of the points of difficulty that had been referred to. He had risen mainly for the purpose of saying a word or two in defence of the income-tax payer. What had been said for the income-tax payer that day consisted, for the most part, of complaints about the excessive expenditure which had left the income-tax at 1s. in the £. The Chancellor of the Exchequer had had many compliments paid him on his Budget. He was not going to withdraw one of these. He heartily congratulated the right hon. Gentleman on the candour and courage he had displayed; but if this Budget had been proposed ten years ago every man in the House would have risen up in arms against it. To propose 1s. income-tax in a time of profound peace was an utterly discreditable thing to this Government and the country. He had listened without any emotion to the complaints against the expenditure laid down in the pages of the Budget. He shared the feeling of the Chancellor of the Exchequer on that point. He regarded as worthless the complaints made on both sides of 1451 the House against expenditure which led to this large income-tax at that time of day. Why did hon. Members select this time of all times for rating against expenditure? Why did they not make their complaints earlier this year, last year, and the year before that? If the expenditure was crushing now, it was because of the policy of the Government, which few in the House had the courage to denounce three years ago, when we were under the shadow of the accursed war in South Africa.
§ MR. EDMUND ROBERTSONsaid he acknowledged that hon. Members from Ireland did, and with them he was in perfect agreement. The complaints about excessive expenditure ought to have been made three or four years ago and, therefore, he had listened with complete disregard to them now when the bill came in. But he wanted to suggest to the Committee and to the Chancellor of the Exchequer that the income-tax payer had his grievances, although these were shared by other taxpayers. He was afraid that the income-tax payers were themselves largely responsible for the huge expenditure; but, still, they had a right to protest that every penny of taxation unnecessarily laid upon them was a wrong done to them. The defect of our system of finance was that this and every previous Chancellor of the Exchequer, on both sides, had wilfully, at any rate deliberately, shut their eyes to sources of revenue not dependent on taxation at all. It was not necessary to impose income-tax to meet expenditure if the money could be got from other sources. One of the just grievances of the income-tax payers was that they were being called upon by two or three great Departments of State to pay money for services which were not alone services to them.
Hon. Members knew perfectly well that the Navy was not for the exclusive defence of the people of these islands. It was for the defence as well of the self-governing Colonies. One neglected source of non-tax revenue he referred to was the inadequate contribution of the Colonies towards the 1452 expense of the Navy for their naval defence. He was glad to see there had been some improvement in that respect. The Chancellor of the Exchequer knew that at the next Colonial Conference the Prime Minister had, as he understood, pledged himself that it would be made a matter of primary consideration that the Colonies should pay an adequate share of, or contribute towards, the expense of the Imperial Navy. He was sure that the right hon. Gentleman the Member for Croydon, when he was Chancellor of the Exchequer, spoke strongly in favour of that principle. They knew where they were about the Navy; but what about the Army? The Army was a much more serious thing from that point of view. He was sorry the Secretary for War was not present, but if he understood the principles of the right hon. Gentleman and of the Committee of Defence, the Army was not wanted for the protection of the income-tax payer at all. The Prime Minister had said that the defence of this country might safely be entrusted to the Navy, and that if anything was wanted in the way of superfluous security that to be found in the Volunteers and Militia. What a big Army was wanted for was not the defence of the United Kingdom but of the outlying parts of the Empire, and if a contribution were to be paid by these in respect of the Navy, a much larger contribution should be demanded in respect of the Army.
Another grievance of the income-tax payer was the result of legislation in respect of sugar. If the Sugar Convention were abolished and the sugar tax were increased the consumer would not be indemnified, but the income-tax payer would be relieved. There was another possible source of revenue, the neglect of which was a grievance to the income-tax payer, viz., the taxation of land values. That subject was going to be discussed on a private Bill on Friday, and, therefore, he would only now say that if land values were taxed as they ought to be and the proceeds of that special taxation were handed over to the local authorities, the Imperial subvention now given to the local authorities could be withdrawn. 1453 The State would be directly benefited. and the income-tax payer could be relieved of 2d. or 3d. in the pound on the amount now taxed. He must associate with this question a point bearing on the very energetic speech made by the noble Lord opposite in defence of the landlords. He believed, with the hon. Member for King's Lynn, that under the present system the discrimination was all in favour of landed property as against personal property. He suggested that if the doles to the landlords were withdrawn 1d. in the pound of the income-tax might easily be taken off, even after saving the rights of the tenants by enabling them to deduct their increased contribution from the rent they paid.
But the most serious point of all was one he had again and again impressed upon the Chancellor of the Exchequer without the least effect. It was perfectly ridiculous to contemplate the scandalous condition attaching to licence duties. The law had got into a condition without parallel in the system of this country. Whereas there were three kinds of duty upon some owners of property, the Excise duty had not been touched at all. Neither the present Chancellor nor his predecessor would undertake that matter, and no Liberal Chancellor, he was bound to say, had done so. But he held a settlement of that matter to be incumbent upon the Chancellor of the Exchequer of the future. What were the facts? They had a system under which the smallest house was charged at the highest rate and the largest house at the lowest rate. If they applied the scale of ad valorem duties all round by charging great houses the same as little houses, instead of the £1,750,000 which the duty yielded now, they would have £3,000,000. That had been admitted by the Chancellor of the Exchequer.
§ MR. AUSTEN CHAMBERLAINI beg the hon. Gentleman's pardon. I have not admitted that the yield would give that; I do not think it would.
§ MR. EDMUND ROBERTSONsaid it was a matter of arithmetical calculation. He took the value of public-houses as a whole, large and small, exclusive of Ireland and Scotland. In England and Wales 1454 alone the value was £7,000,000 a year. If they were taxed at the same rate as the smallest village inn the result would be £3,500,000 of taxation, which was nearly £2,000,000 more than the yield at present. The right hon. Gentleman would say, no doubt, that the high tax would probably drive them out of the trade altogether. Some people might say so much the better. But he did not for a moment believe that such would be the case. He did not believe it could be affirmed that 3 per cent ad valorem was a proper duty in the case of a great London gin palace and 50 per cent. ad valorem in the case of a small house in the country. Unless more details were given to him he must stand by the arithmetical result which showed on the face of it that by merely doing justice in England and Wales they would add to the Revenue nearly the equivalent of 1d. in the £ of income-tax. But when they had done that they had only toadied the fringe of tint great question. He believed from the best calculations he had been able to make that an equivalent of 4d. in the £ on the income-tax might even be attained, and he contended that the income-tax payer had all the more right to complain of the burden that was laid upon him in the knowledge that such a burden would not be necessary if the Chancellor of the Exchequer of the day had the courage to look facts in the face and deal with that monopoly.
§ *SIR JOHN ROLLESTON (Leicester)said his duty to his constituents compelled him to make a protest against the continuance of the shilling income-tax so long after the termination of the war. Although he proposed to vote for the tax and for the Resolution he would do so with reluctance, feeling, somewhat like the gamekeeper who was detected attending Divine Service, that he was doing wrong all the time. He was not one of those who favoured a policy of retrenchment except that by not purchasing what we did not want and getting good value for what we did want he thought that no great reduction was possible in our national expenditure. This was an age of progress, and they all knew that what was called progress marched hand in hand with expenditure. 1455 There were upon the programmes of both political Parties, social reforms which would mean the provision of many millions annually. Therefore he thought Chancellors of the Exchequer would in future have to exercise themselves in the direction of getting new sources of revenue rather than turning on the old taps first a little one way then a little the other way. The Chancellor of the Exchequer had explained that he was reluctant to branch out in any way. His Budgets were for the purpose of marking time and not to facilitate that march forward which would doubtless be the policy of the future. In that respect, as marking time, they were admirable Budgets, and he congratulated the right hon. Gentleman on their production. One point he wished to enforce was that, at a time when trade was depressed, when rates and taxes were high, when everyone almost was feeling poor, that was not the time to keep money, that was largely supplied by the income-tax payer, for the purpose of paying off debt. The time to reduce debt was surely times of plenty and prosperity and not times of adversity. It was said that this affected our national credit. What a poor credit the nation must have if a million more or less made any difference. He unhesitatingly said that if that money had been applied to the reduction of the income-tax rather than that of debt, it would have been much more useful and much more satisfactory to the people of this country.
He did not wish to be critical, but he represented a great many poor income tax payers, and although he contended that increased revenue might be needed, yet he could not agree that the income-tax in its present incidence, even in face of that need, should continue to make the contribution it now did. Until some graduation was effected that tax ought not to be submitted to without protest. Incomes of a temporary and permanent character could not be classed under the same head. The equality of sacrifice was not the same. One was earned by an expenditure of the vital force, of energy and brain, and that capital might become exhausted by illness, disease, or death, while the permanent income could be passed on intact after the life of its 1456 possessor to other people. The right hon. Gentleman last year when he was speaking on this subject contrasted the case of a widow with an income of £500 a year with that of a professional man earning £10,000 a year, and he argued that the case of the widow, even with her permanent income, was the more worthy of consideration. He (the speaker) was not disposed to dispute that. He thought that the man who was earning £10,000 thought a great deal less of income-tax than the man with a permanent income of £10,000 a year, but he was thinking of incomes, earned with difficulty, of £500 a year or so and which were in proportion probably of 1,000 to one to the other incomes. These incomes might be lessened by illness or disease or might cease altogether by death, while the permanent income of the widow would be passed on to others after her life. That was the difference between a temporary and a permanent income, which ought not to be classified for taxation under the same head. The incomes of small shopkeepers, traders, professional men, and soldiers and sailors ought not to contribute in the proportion they now did at whatever level the tax stood. Unless some effort was made to reform the incidence of this tax it would create well-merited resentment in this country. In this generation original sources of taxation were urgently needed. They had been found in the past. Sir William Harcourt devised the death duties which he (the speaker) thought would never be erased from the fiscal system of this country, and which posterity would think a great deal more of than we did at present. Posthumous taxation of great fortunes, which were in these days made with great celerity, must be sound equitable finance, and without this tax which produced £17,000,000 the year before last we should probably have had an eighteen-penny income-tax. He could only deplore that when Sir William's colleagues came to consider these difficult and perplexing questions they would not have the benefit of his co-operation and advice. On the other side of the House, when India was in want of money they put on duties all along the line and so filled the Exchequer of India. He thought that for bold finance they 1457 on his side of the House might sometimes take a lesson from hon. Gentlemen opposite.
He did not know of any rule of political economy as to the absolute incidence of direct and indirect taxation. No doubt indirect taxation was the most popular form of taxation. Indirect taxation was like an operation with an anesthetic. It did not hurt because it could not be felt. Direct taxation was like having a tooth out without an anesthetic. It made them squeal. In his opinion any great reduction in our national expenditure was impossible, and he thought the financial thought of this generation should be directed rather to the provision of a larger Revenue than of keeping down that which we had in view of the great present and prospective demands both for social reforms and Imperial purposes, and in order that the people who were heirs of the progress of the past might enjoy some of its legacies and succeed to some of those advantages which were the heritage of democracy, the birthright of our higher civilisation, and which, without waiting for the convenience of political Parties, would doubtless be demanded and probably enforced.
§ *MR. FIELDpointed out that so far as the income-tax was concerned Ireland ought to have been left out altogether. The income-tax was put on by Mr. Gladstone after the famine in order to pay off a certain sum of money lent to Ireland by means of a Consolidated Loan, and it was then understood by this House that when that amount had been paid the tax was to be taken off—previous Chancellors of the Exchequer had refused to levy an income-tax on Ireland because of the poverty of the country—but, instead of the income-tax being taken off, Ireland had now to pay more than her due proportion. That was admitted by the Financial Relations Committee, which acknowledged that Ireland was over-taxed by £2,750,000 a year. He agreed that direct taxation was, perhaps, the most perfect way of levying a tax, but he held they were paying too heavy Imperial taxes in Ireland.
The whole system of this tax required readjustment. He believed in a graduated 1458 income-tax. He also contended that a difference should be made in favour of incomes derived from brain work and industrial pursuits, because those earnings were derived from temporary sources and might be stopped at once through illness or bankruptcy, whilst the income from spontaneous resources was more secure and permanent. These two incomes were entirely different in their nature and in their source, and there ought to be a different application of taxation. He was aware that Chancellors of the Exchequer had for generations refused to consider this matter, but he contended the Committee was not always to take the ipsi dixit of the Chancellor of the Exchequer as to whether a thing was practicable. In the year 1853 some inquiry was made about instituting a system of graduated income-tax. That was a long time ago and we had travelled since then on the fiscal road of reform, and was the Committee to-day to be told that because in 1853 this House was unable to find a process by which a system of graduated income-tax could be carried out it could not be tried at any future time? He was aware that in Ireland even the intermediate teachers were assessed on a miserable fee of £15. Was it a fair proposition that these poor intermediate teachers should pay the same rate of taxation as a millionaire? The hon. Member for North Islington and the hon. Member for King's Lynn both stated that they could not understand how such a scheme could be put into operation, but the House had never endeavoured to do it, and he was perfectly convinced that if a Committee were appointed to consider the question, measures would be found to carry out the ideas which occupied the minds of a great number of income-taxpayers. There could be no doubt that, while some had to pay too much, others paid too little. As a business man he had had some very disagreeable experiences of the income-tax. The Surveyor of Taxes annually assessed, hypothetically, the supposed net profits after a schedule had been sent in, or in many cases not forwarded by the taxpayer. An average of three years was taken as a basis, although this average system was often misleading, for business was subject 1459 to great fluctuations. Further, competition was greater, money scarcer and labour dearer, which should be considered. The schedule was difficult to understand, and it had to be filled up within a certain number of days or the opportunity to appeal was lost. If the schedule was properly filled in in time the appeal was heard by three gentlemen who started, apparently, with the idea that everything they were told should be strongly disputed. It struck him as being a most inquisitorial and extraordinary proceeding, and one calculated to inflict great annoyance to an honest man subjected to the process. He also suggested it would be useful to the Treasury and the officials employed if a little more courtesy was extended to the taxpayers. He had no objection to pay his fair share of the income-tax if legally liable, but he objected to be worried, harassed and disbelieved. He hoped the result of this debate would be to reduce the annoyance caused to business men by the prevailing methods of assessment, appeal and collection of income-tax. If supported, he should like to organise a strike against the payment of income-tax in Ireland. The Imperial over-taxation of Ireland constituted a grievance so great that it ought to be brought forward in the most practical way, and in Ireland the only way in which it could be done was by resisting the imposition to the utmost. He intended to vote against the Resolution, and he hoped the Chancellor of the Exchequer would consider the points he had raised and the immediate reduction of Imperial over-taxation in Ireland.
§ MR. AUSTEN CHAMBERLAINI share the desire of hon. Members that this and every other tax should be collected with as little friction as possible, and with as much consideration for the convenience of the taxpayer as is compatible with the due collection of the tax. But I think the hon. Gentleman opposite underrates the difficulty there is in some cases in securing from taxpayers the fulfilment of their obligations. The hon. Member has complained that when taxpayers appeal to the surveyor or Commissioners against their assessment, those gentlemen seem to distrust the statements that are made. But when there is an appeal it is the duty of those 1460 gentlemen to see that a case is made out before the appeal is acceded to. The hon. Member will not seriously suggest that the Revenue authorities ought to be satisfied with the mere statement of the appellant as to what would be a full discharge of his obligations.
§ MR. FIELDsaid he agreed that the Commissioners should satisfy themselves, but there were two ways of doing it; right and wrong.
§ MR. AUSTEN CHAMBERLAINThere are doubtless two points of view from which you may regard the action necessary. If you are concerned with defending the Revenue you may think something absolutely necessary which if you are a taxpayer you may consider arbitrary, inquisitorial, and annoying. Considering what the tax is, how in its nature it must be to a certain extent inquisitorial, I think it is collected with wonderfully little friction, and that the collection reflects great credit upon those charged with the duty. But the speech of the hon. Member opposite formed a curious commentary upon, and I think was a warning against, those proposals which we have been discussing for the greater part of the afternoon. Some minor points in connection with the tax have been raised by the noble Lord behind me and by others which are clearly included in the reference to the Committee which is still sitting under the Chairmanship of my right hon. friend the Member for Croydon, and I think the Committee will excuse me from anticipating the Report which I shall receive from them, and understand my very natural anxiety to have the benefit of their advice and views before I express any further opinion upon such questions as the nature and extent of the allowances which are made, the system of averages by which a portion of the tax is collected, and other matters of that kind to which allusion has been made.
But the more important question which we have been discussing this afternoon was not referred to the Committee—that is, the question of either differentiating the tax according to the source from which the income is derived, or graduating it according to the amount of the income of the 1461 individual taxpayer. The hon. Member for Leith Burghs said there was high opinion in favour of the differentiation of the tax. I invited him to enlighten me by citing his high authorities, but he did not gratify my curiosity; he merely said he was satisfied that such high authority existed. I think every Chancellor of the Exchequer since the beginning of the last century has rejected the proposal as unworkable. No one has spoken more strongly on the subject than the late Mr. Gladstone, and I confess it is singular to see with what readiness hon. Gentlemen opposite waive his opinions when they do not coincide with their own, whilst denouncing with great severity anybody on this side who ventures to differ from any opinion of Mr. Gladstone with which they agree. I think it would defy human ingenuity to invent a system of differentiation which would be fair or even workable. The object of the hon. Gentleman is to distinguish between income which is spontaneous, which comes to the owner without any exertion on his part, and income which is dependent upon the owner's exertions and which may cease with his life. I asked the hon. Member while he was speaking how he would treat income derived from a business. Suppose the owner of a business desires to part with it, it is saleable for a capital sum, and if it happens to be a prosperous business it has a continuing value known as good-will which is valued at so many years purchase of the profits. Is the income derived from a business like that to be considered as spontaneous income or the reverse? I really do not know how the hon. Gentleman proposes to treat it. The same thing applies to certain professional incomes. Take a medical man and his practice. The hon. Member argued as though the whole property consisted in the man's brain power and the physical activity which enabled him to carry on his practice. The practice has the same value. If he is unable or unwilling to continue he can dispose of it.
§ SIR ROBERT REID (Dumfries Burghs)If he lives.
§ MR. AUSTEN CHAMBERLAINIf he dies the practice can be sold, and 1462 some of these practices are very good properties.
§ MR. SOARESOne year's purchase.
§ MR. AUSTEN CHAMBERLAINSurely the hon. Member does not wish me to believe that more than one year's purchase is never paid for a practice.
§ MR. SOARESNo, but if the man is dead his practice is usually sold for one year's purchase. I can give instances.
§ MR. AUSTEN CHAMBERLAINOf course I have never bought or sold a practice of this kind and I do not know what is the average number of years purchase that is paid, but cases occasionally come before the Courts which would lead one to believe that a great deal more than one year's purchase is sometimes paid. But it really does not much matter whether it is one year or more, the principle remains the same. I say it is almost impossible to differentiate fairly between incomes according to any test of this kind. Mr. Gladstone in a familiar speech examined at considerable length and with great fertility of illustration different classes of income, and arrived at the conclusion that there was no one except the Fund-holder who obtained his income without personal exertion. He said—
The landowner must exert himself with regard to his land, the householder as to his house; the mortgagee must either look out himself or pay a lawyer for looking out to ascertain the safety of the investment proposed for his money. I do not believe there is any income which is perfectly and entirely a lazy income except the income of the Fund-holder.I understand it is what Mr. Gladstone called the "lazy" income that the hon. Members opposite wish to arrive at. All I can say is that if their investments are of such a character that they produce equally good incomes whether they are able to pay attention to them or not, they have been more successful with their investments than I have. One thing is clear, and that is that it would be suicidal for the State to differentiate in any way against the Fund-holder, the man who has invested in the State's own security. That would be one inevitable result of any scheme 1463 of differentiation such as has been proposed. An hon. friend of mine spoke of the illustration which I used last year of a lady of small means who derived her income from a small invested property left to her by her father. I contrasted that with the large incomes drawn by many professional men. Is it really suggested that it would be possible or fair that a small income of such a nature should be taxed at a higher rate than the income of a professional man amounting perhaps to many thousands a year?
§ SIR GEORGE BARTLEYBut what about incomes of the same amount?
§ MR. AUSTEN CHAMBERLAINI do not see why it should be taxed more highly than a professional income of the same amount. Certainly the professional man has far larger opportunities of increasing his income than has the widow or the spinster to whom I alluded.
§ SIR GEORGE BARTLEYHe has to insure his life to provide for the future.
§ MR. AUSTEN CHAMBERLAINAnd he gets an allowance for the insurance. Mr. Gladstone when dealing with this question pointed out two means of compensation. One is a rather delicate matter to treat of, and is for the most part an illegitimate compensation, but it is idle for us to close our eyes to it when discussing the subject. He pointed out that incomes of this class wore in many cases "under returned" and escaped full assessment, and that they got a certain relief in that way. A friend of mine in a certain town, who has had a good deal of experience in these matters, told me that he was amazed and astonished at the number of incomes which were so returned. I think that if there be evasion under the present tax, as we all know there is, it is clearly only under Schedule D. that that evasion does or can take place. The other and thoroughly legitimate compensation to which Mr. Gladstone called attention was the compensation made when property passed at death. Since that time the taxes on property passing at death have been very much increased, and it is through the compensatory process 1464 thus applied by other taxes that the inequalities or injustices of the income-tax are to be remedied.
In considering the justice and equity of a tax of this kind we cannot treat it as if it were the solitary tax existing. We must look at it as part of a financial system, and we must judge of it as part of a whole. You cannot within the four corners of the tax itself make it in every respect fair and reasonable, but some of the injustices which would exist if the tax stood by itself are fully and amply removed by the compensatory effects of other taxes imposed in different ways, and falling due at different times. In my opinion the proposal to differentiate the tax would be fatal to its smooth or easy collection and fatal to it as a means of producing revenue. In 1853 Mr. Gladstone said—
To break up the tax is to encourage the House of Commons to venture upon a scheme which may look well upon paper, but which will end in the destruction of the tax by the absurdities and inequalities which it may involve.Mr. Gladstone went on to say—It is beyond the power of man to conduct such an operation as that proposed with satisfaction.I entirely agree with the opinion there expressed.I suppose I must say a word or two on the subject of graduation as apart from differentiation, although I do not think that I need at the present moment enter into the question at any great length. The hon. Member thinks he is entitled to know my opinions upon this subject. I may say that my opinions upon this subject were fully expressed last year, upon an ocasion when I think the hon. Member himself was present and took part in the debate. Therefore, I think it is really more curiosity than any actual necessity for knowledge that has impelled him to put these Questions. The hon. Member thinks that he has provided a practical scheme. In my opinion the hon. Member for King's Lynn was right when he said the only efficient way of collecting a graduated income-tax was to collect the tax on the higher scale from everybody and then pay back to them according to the rate at which they were properly chargeable. The hon. Gentleman opposite proposed a different proceeding. 1465 He proposed that the whole of the machinery for the present collection of the tax should be retained in force, and that upon the top of that there should be superimposed a new machinery in order to assess an increased tax upon those who became subject to the higher rate. To say that we should double the cost of collecting the income-tax under such a method would be to enormously understate the expense of the proposed machinery, while it would be impossible to exaggerate the irritation and annoyance which would be caused. You would have to go through the whole process which the hon. Member for Dublin has stated has already given rise to irritation, and when you have harried and worried the taxpayer in that way you are to come to him and say—"I think you come under the higher rates. We have now taxed all your income wherever we could at its source, and now we require from you a statement of what all your income is from every source, and we require proof that your statement is true. We shall look into your books and accounts and you must produce your documents." The expense of such machinery and the amount of irritation and annoyance it would cause it would be quite impossible to exaggerate. And for what result?
I presented a calculation last year of which the essential features were that I assumed the income-tax to be 1s., and I assumed also that you were going to graduate it to double that amount. I presume that you would charge a higher rate upon every income over £5,000. It was estimated that probably the number of people who had incomes exceeding £5,000 a year might be put at 10,000 or 15,000. I think you should add to that total something to allow for the people who would be suspected by the Revenue authorities of having that amount, and I place this number at another 15,000. Therefore, you get some 30,000 people into whose incomes you will have to have an inquiry of the most inquisitorial kind and in a form far more distasteful and annoying than anything which goes on at the present time, because you will be not only asking them what is their income from one particular source, 1466 which you desire to assess, but you will be inquiring what is their income from every source, information which they will be very reluctant to disclose. Having provided your machinery to inquire into the circumstances of these 30,000 taxpayers you will probably assess about 15,000 of them upon the higher scale. I know all this is hypothetical, but I will assume that on an average the excess above the ordinary 1s. tax payable by these 15,000 people would be 6d. If that were so, and the whole of those incomes were brought under the charge, it was calculated that perhaps you might get £3,000,000 without allowing anything for the cost of collection. But would you be likely to succeed in bringing the whole of that income within the charge. You would probably lose at once £750,000 by the removal of that revenue outside your jurisdiction. It is calculated by the Inland Revenue authorities that it would be perfectly possible and a legitimate transaction to take revenue income out of our jurisdiction to an extent which would at least cost you £750,000. The Committee should remember that upon any income removed out of the area of your jurisdiction you lose not merely the anticipated increase but the whole of the existing tax. They reckon that probably you would lose another £750,000 through being unable to trace or arrive at a full assessment. You thus get down to the result that under such a system you might get a possible maximum of £1,500,000, from which you would have to deduct the allowance to be made for deliberate evasion and for all the increased cost of collection. To upset the whole system of income-tax collection and to run the risk of the unpopularity which such an inquisitorial examination into the affairs of the taxpayers would certainly arouse, would be to go counter to the experience of the past, which shows that the only safe and sure way of getting the tax is by collection at the source, and to do all this for so small a result would, I venture to say, be to destroy one of their greatest and most potent financial instruments for wholly inadequate reasons and wholly inadequate results.
If it should be the desire of the Committee of the House of Commons 1467 at any time to place a higher tax upon men of large fortune, I hope they will find other ways of doing it than those which would strike at the simplicity and the easy collection of the income-tax. The income-tax, as the right hon. Gentleman the Member for Wolverhampton has reminded the Committee, was at its inception a most unpopular tax, so unpopular that, after the close of the Great War, the Government of the day was forced not only to give up the tax, but by order of the House all the records of the tax collection were burned in order that they might never refer to them again. I do not suppose we shall ever again do without an income-tax, but it is of great importance to the maintenance of this most serviceable financial weapon that its collection shall be made as easy and as little annoying to the taxpayer as possible.
§ SIR ROBERT REIDregretted that the Chancellor of the Exchequer should have taken up an irreconcilable attitude with regard to the demand that the income-tax should be placed on a somewhat more just footing. Everybody knew that it was unfair. Whether it could be altered was another thing. The Chancellor of the Exchequer suggested some compensatory taxes by which they should adjust the inequalities in the present collection of the income-tax, but he did not state what they were.
§ MR. AUSTEN CHAMBERLAINI suggested it had been done by the death duties.
§ SIR ROBERT REIDsaid he should most emphatically dissent from the view that it had been done by the death duties. The right hon. Gentleman had quoted Mr. Gladstone as saying that differentiation was impossible. But Mr. Gladstone had not disputed that the thing as it stood was unjust. The man receiving £5,000 a year from investments had no effort to make and no anxiety about his dependants. His sacrifice was nothing like that of the man who earned an income of £5,000 a year; and yet both paid the same amount of tax. If they could not alter the present system well and good, but if it could be altered it ought to be done. 1468 He did not say that they could make complete equality, but, at any rate, a much greater approximation to fair play was possible. As to graduation, the Chancellor of the Exchequer had not shown that it was impossible, but that one particular scheme was impracticable. The right hon. Gentleman forgot, when he condemned certain methods as inquisitorial, that they were practised already in the tens of thousands of cases in which abatement was claimed.
§ MR. AUSTEN CHAMBERLAINThere is a great difference between asking a man to declare his whole income for purposes of abatement, and asking him to declare it in order to get more tax out of him.
§ SIR ROBERT REIDsaid that he could not see the difference. In one case the taxpayer was exercising a right, and in the other case the State was seeking to exercise a right. There might be other difficulties, but this was a matter for investigation. Two or three years ago, when a Committee to inquire into the possibility of graduation was asked for, the right hon. Member for West Bristol encouraged the idea.
§ *SIR M. HICKS BEACH (Bristol, W.)I said that I thought the proposal impracticable, but that I was ready to consider the propriety of inquiring into it.
§ SIR ROBERT REIDsaid it was unfortunate that, on account of one of those convulsions which took place in political life, the right hon. Gentleman ceased to be Chancellor of the Exchequer. The right hon. Gentleman the Member for Croydon afterwards became Chancellor of the Exchequer, and while he was not quite so favourable to inquiry as the right hon. Gentleman the Member for West Bristol, there was really not much difference between them. It was true that there had been another political convulsion; but the present Chancellor of the Exchequer had absolutely refused to have any inquiry although the right hon. Member for West Bristol thought it worthy of consideration, and the right hon. Member for Croydon spoke of it in a not unsympathetic spirit.
§ SIR GEORGE BARTLEYBut none of them did it.
§ SIR ROBERT REIDsaid they were turned out too fast. He was not quite sure of the absolute fixity of tenure of the present Chancellor of the Exchequer. The real fact was that while his two predecessors took the attitude he had fairly described, the present Chancellor of the Exchequer clenched his fist and said he would not do anything at all. With all due deference to the right hon. Gentleman, he thought it an unjust thing that there should not be graduation of the income-tax, that the man who had £1,000 a year should pay the same rate as the man who had £10,000 a year. He would not go the length of saying that graduation was practicable, but he contended that there should be some inquiry by a competent Committee of the House; and if the tax continued on its present inequitable basis in that respect, the Chancellor of the Exchequer would be held responsible for it.
§ Mr. T. P. O'CONNOR (Liverpool, Scotland)said that the Chancellor of the Exchequer had declared that the income of a medical man from his practice could not be distinguished from the income of a landlord from land, because the practice could be sold. The right hon. Gentleman made two mistakes in connection with that illustration. In the first place the income of a really great medical or surgical expert could not be sold. Take the case of Sir Frederick Treves; he could not have got one shilling for his practice. That practice depended on his extraordinary genius and skill, ant these were not transferable. The only kind of medical practice which could be sold was one which depended rather on the neighbourhood in which a man practised than on the personality of the medical man. In those cases, he was told, one year's purchase was as much as was usually given. But what of other professional men? Could the practice of a great barrister be sold? It could not; the practice of a great barrister, like the income of other professional men, was bounded by the narrow frontiers of man's own personality. He was surprised that the Chancellor of the Exchequer should not be able to see the distinction 1470 between the income derived from land, which could be transmitted from generation to generation, and the income which was dependent entirely upon the health of the individual. The right hon. Gentleman had quoted Mr. Gladstone as an authority against the practicability of making a distinction in the assessment of incomes derived from property and from personal exertions; but it should be remembered that Mr. Gladstone never denied that the professional man had a grievance, he only was doubtful as to the means of removing it. He put it to the Chancellor of the Exchequer; could anybody lay it down that a barrister, a doctor, or a member of his own profession, a journalist, was exactly in the same position as to equality of sacrifice as a man who had £3,000 or £4,000 a year derived from land. A professional man, after he was fifty years of age, had between him and the fortunes of his wife and children, nothing but his health; and they all knew what an uncertain thing health was, especially to a hard-working professional man. But in the case of a man with property in land, whether he lived or died the land was there for his wife and family. It was to be regretted that the Chancellor of the Exchequer held out no hope in this matter and had taken up a far more irreconcilable attitude than that taken up by the right hon. Gentlemen the Members for West Bristol and Croydon.
That the income-tax in its incidence was inequitable was proved by the fact that a race of experts had arisen for the purpose of advising people as to how their income-tax could be reduced. He had been astonished to find that a friend of his own with a large income had been able to get off the payment of income-tax. He discovered the reason. His friend had a friend who was an expert in evading the income-tax, and was so far a professional man in that respect that he got very handsome commissions from his friends on the amount of the tax which they were able to escape on his advice. He did not say that these gentlemen evaded the income-tax unfairly, but they were able to take advantage of the intricacies of the complicated income-tax law. He might say that the expert he referred to was a 1471 countryman of his hon. and learned friend who had just spoken, and that his occupation was not above the keen intelligence of a Scotchman. So complex a question was the income-tax that it needed a trained mind to say how much one ought to pay and how much might justly be evaded. He would urge upon the Committee that the time had come for an inquiry as to whether the principles laid down by the Chancellor of the Exchequer and many others before him were sound—that the difference between professional and landed or funded incomes, which they all agreed caused an inequality, could not be carried out in practice. He thought the right hon. Gentleman might very well appoint a Committee to investigate that matter.
§ MR. WHITLEY (Halifax)said before the Motion was put he would like to reply to Questions put by his hon. friend the Member for Edinburgh with reference to the Return issued that day, giving the percentage of collections up to February 28th last. It contained most interesting figures, and he had no doubt the Chancellor of the Exchequer would be able to supplement those figure by later information. That Return showed that the result of the "hustling," as it had been commonly called, during the early months of the year had not been, up to February 28th, so effective as some of them imagined. He was surprised at the smallness of the figures of the increased collection, and he imagined that a greater result would be shown for the month of March than any other month. The effect of the increased pressure had naturally been greater in England than in Scotland, because there was more leeway to make up, but in Ireland, with the greatest leeway of all to make up, there had been less. In England there had been an advance of 7 per cent., in Scotland of 2 per cent., and in Ireland an advance of 4 per cent. He could only make those figures work out at £350,000 received up to the 28th February, and he presumed that the balance of the increase estimated by the Chancellor of the Exchequer at £800,000 must have come in the month of March. He would be much obliged if the right hon. 1472 Gentleman would indicate to the Committee what the later figures were.
§ MR. AUSTEN CHAMBERLAINThe Return will be pressed forward as rapidly as possible, but there was not time to take out the figures up to March 31st, and I have not got them. I have given the House the best information I could on the subject. Let me just say a word with regard to the earlier payments of the months of January and February in England and Wales this year. It was not the intention of the new regulations to make any change so far as the Inland Revenue is concerned towards the great bulk of the taxpayers, who are always accustomed to pay their taxes within a reasonable time of the date on which they fall due. The principal change was the issuing of the first notice by post instead of by hand. The result of issuing it by post was that everybody should get it, practically, before January 21st. Under the old system, when it was delivered personally, the tax-payer was not often informed of the tax he was to pay until some weeks after, and in some cases actually more than a month after, the date on which the payment became due. That led to great inequality, not only between different parts of the United Kingdom, but between different districts of the country, and even between different individuals of the same district. It was often the case that an individual in one street was served with even the second or third notice before his neighbour in the next street had received the first application. In order to make the process more regular and equal this change in the method of issuing the notice was made. The fact that the first notice was formerly very often unduly delayed caused a large number of the people not to receive their second notice until long after January 21st. Under these circumstances I think the issue of the second notice now is quite unnecessary. It has given rise to a great deal of annoyance, but I hope that in future years the procedure will not occasion any annoyance to regular taxpayers. The people I did wish to expedite were those who without any good reason delayed their payments until an unreasonably 1473 late period. I had cases before me of companies who had deducted from the dividends of their shareholders the amount of the tax and kept it in their own pockets for months before they paid it over to the Revenue. I have had cases of rich men, with incomes of several thousands a year, who thought they were not called upon to discharge a tax payable on January 1st until June, July, or August, for no better reason than that owing to the laxity of the collector, or the imperfections of our machinery, they have managed to evade payment till that date in previous years. If the taxpayers take that attitude, then there is very little to be said against bringing pressure to bear upon them to make them pay in March, in the year when the payment is due. It is in that way that we secured the increase which I have placed at about £800,000. I cannot, of course, be certain whether that is a correct estimate, but perhaps the Committee will accept it as the most accurate information that can be given at the present time.
§ MR. McCRAEsaid he would like to ask the right hon. Gentleman what means he intended to take in order that England, like Scotland, might be able to pay 95 per cent. of the income-tax by the end of Feburary. England, notwithstanding the so-called "hustling," only paid 62 per cent. of the tax by the end of February whilst, owing to more rigorous treatment Scotland had paid 92 per cent. It was only fair that equality of treatment should be meted ut to both coountries.
§ MR. AUSTEN CHAMBERLAINsaid that the different portions of the United Kingdom were as far as possible placed on the same footing. The dates when the process of collection began were the same, but there were differences in the northern part of the United Kingdom which affected the collection of taxes and made absolute equality impossible.
§ Resolved, that Income Tax shall be charged for the year beginning the sixth 1474 day of April, nineteen hundred and five, at the rate of one shilling in the pound.
§ Resolution to be reported To-morrow.
§ Committee to sit again To-morrow.