FINANCE BILL.

HC Deb 16 May 1905 vol 146 cc501-60

[SECOND READING.]

Question again proposed.

Order read, for resuming adjourned debate on Question [15th May], "That the Bill be now read a second time."

*MR. MCCRAE (Edinburgh, E.)

said he did not think it too much to suggest that the proposals embodied in the Finance Bill as placed before the House came as a welcome relief, not on account of their intrinsic merits, but rather on account of the fears which they had had as to what the Chancellor of the Exchequer might have proposed. They all knew that he was hankering after protection, but he had a hope that the right hon. Gentleman's experience at the Treasury would give him that education which his predecessors had enjoyed, and would cure him of the old-time, foolish, and exploded theory that it was possible to make people more comfortable by increasing the cost of living. If what they saw in the newspapers was correct, the fiscal proposals of the Government were now to be dropped in view of the meeting of June 2nd, and therefore they might take it that by that time the education of the right hon. Gentleman in a sound fiscal policy would be complete.

They should first look very briefly at the burden of taxation to be imposed in the Finance Bill. That was a very serious problem, especially in view of the fact that when they considered the outcome of the last year's revenue they found that taking taxation on the basis of the previous year the produce displayed a diminution of £1,300,000, which proved that they had come to a stop in the productive power of their taxation on its present basis. He did not intend to go back to the last Liberal year of Administration in order to compare it with the financial position as it stood to-day, but he would ask the Chancellor of the Exchequer to glance for a moment at the year 1899 under the present Administration—the last year before the outbreak of the war. The expenditure had increased during the previous four years by about £14,000,000, but he started from 1899, and he found that the taxation—and he was going to exclude Post Office and all untaxed revenue, and to deal only with taxation which was placed on the people—he found that the product of the taxed revenue in that year was £89,450,000. The taxation as proposed in the present year in this Bill would produce £119,000,000, an increase in that short period of £29,500,000, on the taxed revenue of the country. If they looked at the total revenue the comparison was even worse, because they were going to impose taxation for the current year amounting to £142,000,000, while the produce in 1899 was £108,000,000, or an increase of £34,000,000 sterling. They had the war taxes still—the taxes on tea, sugar, tobacco, beer and spirits, which were imposed on account of the war, and he thought they were entitled to ask the Chancellor of the Exchequer when they were going to get remission of those war taxes. Now, in the present year he had given them a relief to the extent of 2d. per pound on tea, but that only bore a very small proportion to the extra taxes which were placed on the people for war purposes, and which were now being continued for ordinary expenditure.

It was no doubt easier to preach economy than to practice it, but he did think that the Chancellor of the Exchequer did not really recognise the gavity of our present financial position—the disturbance of the money market, the prejudicial effect on trade, and the dislocation of commerce which had been caused by the increasing burden of taxation they now had to bear, and he thought the time had come when a protest should be made against excessive expenditure. No one denied in the abstract that it was excessive, and the Chancellor of the Exchequer ought to be the first to uphold economy. Not the least injurious effect of the South African War was the fact that it occasioned an utter disregard for economy. It gave full vent to the natural Departmental craving for expenditure, and while they were taught to think in millions the Departments thought that if they only spent in thousands they were making a real saving, whereas before they had only been spending in hundreds.

The estimated expenditure for the present year was £142,000,000, a ghastly total, and if they added to that the local taxation expenditure and the expenditure on the naval and military works, they got a total for their annual Budget of £160,000,000. If that total was compared with the total in 1895, namely, £102,000,000, they got an increase of £58,000,000 a year. If they looked only at the ordinary expenditure there was an increase in that period of £48,000,000 a year. The expenditure in the present Budget was slightly less than that estimated for last year, and he supposed they ought to be thankful for small mercies, but he was convinced that the House would agree that the time had come when that excessive expenditure should be diminished, and he should like to see the Chancellor of the Exchequer take a bold stand for economy. He, however, hardly ever mentioned it; he rather seemed to think that his duty was to justify the existing expenditure of the Departments instead of putting the brake on, and making some reductions. He would concede this, that on last year's expenditure there was a reduction of nearly £1,000,000 sterling. That was to the good. If they looked at the expenditure of the current year they found that on the Navy Estimates they had a reduction of £3,500,000, and considering that this was Nelson's year, he thought that it showed considerable courage on the part of the Department to make that reduction—it showed some return to sanity. He would like to point out that in the year which he had chosen for comparison, namely, 1899, the year before the war, the Navy Estimates were £24,000,000. This year, however, they were £33,250,000, even giving effect to the reduction which had been made. If they turned to the Army they found an increase in Army expenditure of £1,000,000 over last year's Estimates. He thought that in these times of peace that was entirely indefensible. They had a statement from the Prime Minister on the preceding Thursday showing that in the view of the Committee of Defence there was no risk of invasion, and surely in justice they were entitled to believe that the Army expenditure ought to decrease. But again, if they took the same year for comparison they found that in 1899 the military expenditure was £20,000,000, whereas they were budgeting this year for an expenditure of £30,000,000, or an increase of £10,000,000 on the Army. This was in addition to an increase of £9,000,000 on the Navy, and if they put the Army and Navy expenditure together for 1899 they got a total of £44,000,000, whereas the total for the present year was £63,000,000. That was entirely exclusive of the expenditure on naval and military works. Really, the ways of the Government were past finding out. They had the statement of the Prime Minister——

THE CHANCELLOR OF THE EXCHEQUER (Mr. AUSTEN CHAMBEELAIN, Worcestershire, E.)

The total includes annuities, whereas you said that it was irrespective of the expenditure on works.

*MR. MCCRAE

said that it was irrespective of the loan expenditure on naval and military works, a point with which he proposed to deal later on. It was, of course, inclusive of the sum budgeted this year as annual contribution in respect of naval and military works. They had three Army schemes. They had that of the Committee of Defence; they had that of the Army Council; and they had, in the third place, that of the Secretary for War, who evidently differed from both the others. If they looked at the military position at the present time any fair-minded man would say there ought to be a large diminution in our Army expenditure. No doubt there was a great deal of extra expenditure occasioned by the war, but he would give the Chancellor of the Exchequer a precedent which he hoped he would follow. The same thing happened after the Crimean War. When Mr. Gladstone became Chancellor of the Exchequer in 1859 the Army and Navy expenditure amounted to £26,000,000, and in the intervening period between 1859 and 1866 it rose to £28,000,000. Mr. Gladstone set himself to reduce expenditure largely occasioned on account of the war, and the consequence was that when he quitted the office of Chancellor of the Exchequer in 1866 he had brought back the naval and military expenditure to what it was in 1857. That was what the present Chancellor of the Exchequer ought to put before himself to-day; he ought to attempt to bring back the naval and military expenditure to the point, not at which it stood when the present Government took office, but at which it was in the year before the war—in 1899. He had hoped the Chancellor of the Exchequer would follow Mr. Gladstone and say that economy was the first and greatest article in his financial creed.

But that did not sum up all the financial shortcomings of the present Government. They borrowed too largely for war expenditure, and as a consequence we had added to the National Debt a sum of £160,000,000. Might he point out to the Chancellor of the Exchequer what had been done previously by this country in relation to expenditure of the same kind? Take what was done during the Crimean War. In 1854, before that war broke out, the National Debt amounted to £802,000,000. By 1857, on account of the war expenditure, it had gone up to £837,000,000, an increase of £35,000,000. The country set itself to get rid of that debt at the earliest possible opportunity, and the result was that within ten years—by 1867—they had wiped off a sum equivalent to what was spent on the Crimean War, and which had been added to the Debt. Would the Chancellor of the Exchequer undertake to wipe out in ten years or even in twenty years, the addition which had been made to the National Debt on account of the South African War?

He had a still more serious charge to make against the present financial arrangements, a charge altogether apart from expenditure on the war. For the first time, he believed in the history of this country, the National Debt had been added to in times of peace. He did not know whether the House really realised the true significance of that. Did they realise that in a year of peace the National Debt had been added to? Last year we increased our national indebtedness by £2,250,000. That was unprecedented, unjustifiable, and indefensible, and it really brought them to the German method of finance, whereby they were borrowing for ordinary current expenditure. To put it in another manner, the Government was not paying its way. Now the gross liabilities on March 31st last amounted to £796,700,000 sterling, a sum almost equivalent to the National Debt away back in 1854. That was a comparison which should cause them to pause. He noticed that the Chancellor of the Exchequer in his Budget speech gave no comparison between the gross debt as at March 31st, 1904, and debt as at March 31st, 1905. He gave a direct comparison in regard to the Funded Debt which had been reduced, but for the first time he did not place before the House in parallel columns the gross liabilities of the State in 1904 and 1905. The consequence was that no one reading the Budget speech, or listening to it, could have realised that in that year the National Debt had been increased by the sum he had mentioned. No doubt he spoke of the Sinking Fund, but then most people were rather disinclined to consider the question of the Sinking Fund, and they appeared to think that there was some mystery about it. He did not know that there was any mystery at all about it. It was merely an annual contribution to wipe off debt, and if the Debt, instead of being reduced, was increased, anyone would see that the Sinking Fund was inoperative, and, therefore, that something was wrong. It was clear that there was no adequate provision for the reduction of the Debt. The man in the street could understand that; it did not require a financier to point out that if there was no reduction being made the Sinking Fund was insufficient. Now the Sinking Fund as regarded the Funded Debt was meant to reduce the Debt by about £7,500,000 a year. From 1893 to 1898 they did reduce their gross liabilities year by year by about £7,000,000 sterling, notwithstanding the capital expenditure on naval and military works. Now they were borrowing more than they were paying off and the naval and military works were mainly responsible for that.

Might he point out to the Chancellor of the Exchequer that they had had really no opportunity before the Budget of discussing the amount that these works would cost during the coming financial year? In regard to the other estimates of expenditure they were discussed before the close of the preceding financial year, but the Naval and Military Works Bills were not, and even the one for the current year had not yet been produced. All that, he thought, tended to extravagance, because it really obscured the issue from the House. They had gone on spending year after year without realising how the expenditure on account of the naval and military works had increased. The Chancellor of the Exchequer the other day, in reply to some observations he had made, said they had a sinking fund carried on the Votes which he described as abnormally high. But he would like just to draw the attention of the House to the figures to show how vain the boast was. He was taking the figures for the last seven years. In 1899 the outstanding debt on account of naval and military works was £7,000,000; two years later, in 1901, it was £14,000,000. In 1902 it was £20,000,000; in 1903, £27,500,000; in 1904, nearly £32,000,000; and in 1905, £41,500,000, while the estimated expenditure for the current financial year brought it up to £47,500,000. When the Chancellor of the Exchequer talked about an abnormally high sinking fund he begged him to remember that while he was laying aside under this head of expenditure a sum of £1,500,000 a year he had been borrowing since the first date at the rate of over £8,000,000 a year. How long would that increase of £7,000,000 go on? In his opinion this expenditure ought to be added to the ordinary taxation of the year. It was not capital expenditure in the real sense. It was bad finance to treat it as such, and he would ask the Chancellor of the Exchequer, could he really defend it?

Now, in the present Finance Bill the Chancellor of the Exchequer proposed to increase the Sinking Fund contribution by £1,000,000 a year, and here let him say that he thought it was very unfortunate that the Chancellor of the Exchequer had hit upon the lottery method of dealing with these Exchequer bonds. The lottery system was entirely foreign to our finance; there had been no advantage reaped from it. The interest to be paid was very high, and he begged to suggest to the Chancellor of the Exchequer that it would have been better if he had simply added the £1,000,000 a year to the ordinary Sinking Fund, and he would then have given to any future Chancellor of the Exchequer a free hand in dealing with it. He did not know whether the right hon. Gentleman expected to be in his place next year, but if he were his criticism as to a large Debt conversion scheme would not apply. The right hon. Gentleman ought to have dealt this year with the floating debt, which amounted to £71,633,000, according to the National Debt Returns issued yesterday morning. He would like to ask the Chancellor of the Exchequer why he did not propose to deal in a comprehensive way with this floating debt. He had before pointed out a way in which he might have dealt with it by means of terminable annuities. Of course, he quite realised that the right hon. Gentleman could not have dealt with the floating debt without facing up to the question of the Transvaal contribution. That was an essential part of any comprehensive scheme to deal with the Unfunded Debt. Although £30,000,000 seemed to be a large sum to ask from the Transvaal, this country was laying aside for the payment of principal and interest for the reduction of debt over £30,000,000 per annum. He would like the Chancellor of the Exchequer to consider that in 1885—twenty years ago—we laid aside a sum of £29,649,784 when the National Debt was less by £60,000,000 than it was to-day, and when there was no Naval and Military Works expenditure. Would the Chancellor of the Exchequer frankly tell the House, first of all, what sum he intended to spend this year on Naval and Military Works; and secondly, what was the amount of all the Sinking Fund which was to go during the current year to redeem the Debt? There was an estimate on the first head of £8,000,000, and on the second head of £10,100,000. Was that so?

THE FINANCIAL SECRETARY OF THE TREASURY (Mr. VICTOR CAVENDISH, Derbyshire, W.)

Yes.

*MR. MCCRAE

That meant that the Chancellor of the Exchequer was going to reduce the National Debt by £2,000,000, so that there would only be an effective Sinking Fund of £2,000,000 to go to reduce the gross liabilities of the State, instead of £7,000,000 a year which we were paying off before 1899. He thought he had shown that whether they consider the burdens on the people—the ordinary expenditure, the capital expenditure, or the state of the National Debt, they had to face a grave financial position. He hoped that they were at the end of this period of lavish expenditure, unprecedented borrowing, and no adequate provision for the extinction of debt. It was a position which required great courage and ability to deal with. This Finance Bill, although it avoided any gross defiance of the principles of sound finance unhappily experienced in the past, did not meet the requirements of the very grave financial position in which the nation found itself after ten long weary years of incompetence and gross extravagance under the present Government.

MR. GIBSON BOWLES (Lynn Regis)

said that undoubtedly this matter of the Debt could not be too often brought before the House of Commons and the nation. The Debt had increased, was increasing, and was not going to be diminished. The Debt would be greater next year than it was now. The Chancellor of the Exchequer could not deny that. If the right hon. Gentleman could show that he was wrong in that assertion, he should welcome the demonstration. He thought he could prove to the House that not only was the Debt greater this year than last, but that it would be greater, as a whole, next year than this. Exception must be taken to the Treasury terminology. The Treasury treated one part alone of the Debt as Funded Debt, but, in fact, all debt that was not Funded Debt was Unfunded Debt. Instead of putting all these debts together and calling the total Unfunded Debt, the Treasury made a selection from them, called that Unfunded Debt, and set up a capital account which did not exist. As showing that it did not exist the Treasury put down the assets of the British Empire at £40,000,000—less than one-third of the total annual revenue.

He earnestly begged the attention of the House to some very simple figures. A Chancellor of the Exchequer, when he brought in his Budget, was mainly occupied in omitting from his Budget statement large sums that ought to be in it. When he talked of the Debt he talked of deadweight debt. All debt was dead-weight debt, even if it had a sinking fund attached to it. The right hon. Gentleman talked of the Funded Debt and told the House it was being reduced. But the right hon. Gentleman left out of account a far more important, far more obnoxious debt which was not funded, regularised, or duly provided with its own sinking fund as a permanent charge—and which was consequently the most dangerous form of debt—the unfunded debt of various kinds. The form of debt which he would first desire to see decreased was not the Funded, but the Unfunded Debt; but the contrary was the case. The Funded Debt was decreased by £2,000,000, on which interest at the rate of 2¾ per cent. was paid, while the other debts on which a higher rate of interest was paid were being increased. The Funded Debt had been decreased by £2,000,000; that part of the Unfunded Debt which the Treasury chose to call Unfunded Debt by £2,000,000, and the terminable annuity liability had been reduced by £3,600,000, or a total reduction of £7,600,000 this year. But what was called capital liability debt, which he held was an unfunded debt, and the most serious form of it—incurred for works—had been increased by £9,800,000. So that although the former kinds of debt had been decreased by £7,600,000, the nett result for the year was that our total absolute debt had not been decreased, but had been increased by £2,200,000. The final result was that the total absolute debt of the country was £796,700,000 at the end of the year.

Now, he had spoken of the capital liability debt incurred for works as being the most important and dangerous part of the whole debt; and it was so in this respect. It was the most dangerous because the Government could, within large limits, add to it at its will, and when it pleased. There were still £14,500,000 of that debt, which the Government had power to borrow, still unborrowed. And consequently without any assent of the House, without the knowledge of the House, the Government could borrow up to £14,500,000 in addition to this most obnoxious form of debt used for works. That was a very serious state of things. The House had, no doubt, given the Government authority to do this very dangerous thing, but he earnestly hoped that these discussions would have the effect—he believed that they had had already some effect—of making the Government far more wary in exercising their borrowing powers than they had been hitherto. There was another abuse connected with capital liability debt. The Government last year took £2,000,000 from the Treasury balances and applied that sum to the reduction of debt; but they borrowed £2,830,000 more than they required to issue for the works for which it was borrowed. There was really no necessity for borrowing that extra sum. The right hon. Gentleman would find in his own financial statement, page 5, that there was borrowed to meet capital expenditure £10,912,000, and that there was issued to meet capital expenditure £8,069,000. The difference was £2,843,000, which the Government borrowed for the purpose of issuing for these works, but did not issue.

MR. AUSTEN CHAMBERLAIN

I would point out that the hon. Gentleman has omitted to notice the fact that we had temporarily drawn on the Exchequer balances to the extent of £2,000,000 in the previous year on account of these works, and therefore we had to borrow in 1904–5 the £2,000,000 to repay the amount drawn from the Exchequer balances. The amount of money we over-borrowed last year was somewhat short of £1,000,000 of the amount required, which was a miscalculation on the part of the Department.

MR. GIBSON BOWLES

said that the right hon. Gentleman explained the discrepancy by explaining that there was not one error, but two. The Government under-borrowed the previous year and over-borrowed this year to make up the deficiency, and even then there was at least £2,830,000 which went to swell the Treasury balances. There was a gravely dangerous power of borrowing under these Capital Expenditure Acts. Let the House observe that the Treasury balances were in this way repleted by nearly £3,000,000 which really did not belong to them.

MR. AUSTEN CHAMBERLAIN

This is a matter which I explained in my statement. It was taken out of the Treasury balances the year before last. It was taken from the Treasury balances for the purpose of these capital accounts. The National Debt Commissioners were unable to supply this amount, and the first thing that had to be done when we had new borrowing powers, or when fresh money came into the hands of the Debt Commissioners, was to relieve ourselves from what we had paid. The hon. Member will find the whole transaction set out in my Budget speech.

MR. GIBSON BOWLES

said he thought the National Debt account suggested, if it did not actually state it, that this £2,000,000 was taken from the Treasury balances this year. But, however that might be, it was an undoubted fact that the Government had this dangerous power of borrowing, and although they might exercise it with great skill and prudence, it was perfectly possible for them to borrow either less money or more than they required, and when they borrowed more it went to swell the balances, and this would make them look greater than they really were at the moment.

He had shown that the absolute debt at this moment was £2,200,000 more than it amounted to last year, but the House must not forget that there were other very serious liabilities this year. There were the guaranteed loans of £152,700,000, though, of course, the liability for those was not to the same extent or of the same completeness as that for the £796,000,000. Still, there was the liability, and they would perhaps never know how much of that they would have to bear. The guaranteed loans, he might point out, included this year another £10,000,000 for Irish land purchase. In addition to the guaranteed loans there were the contingent liabilities, including that to the Post Office Savings Bank. The particulars of the contingent liabilities were not set forth this year, but they could not amount to less than they did last year, which was £19,000,000. So that if they added the contingent liabilities to the guaranteed loans they had a total of £171,700,000 to add to the £796,000,000. If to those two added together was added £500,000 the House would see the total liabilities of the State amounted to no less than £968,200,000, although he admitted that all the liabilities were not of the same quality, some being more and others less absolute. There was, in addition to those liabilities, the awful local debt of near £500,000,000, which was also a liability of the subjects of the State, but which he did not add to the other because it had yet another quality. How had the right hon. Gentleman dealt with that?

He admitted that the right hon. Gentleman had shown considerable courage, but he had not dealt adequately with the matter. Let the House take what were called the lottery bonds. He asserted on a previous occasion that in effect by the issue of these lottery bonds the existing Unfunded Debt was extended for five years to the extent of £5,000,000. Section 7 of the Act showed that that was so. If the right hon. Gentleman could explain Section 7 taken in conjunction with the Supplementary War Loans Act of 1900 in another way he would be glad to hear the explanation, but otherwise it was impossible to read Section 7 without coming to the conclusion at which he had arrived, that in respect to £5,000,000 the right hon. Gentleman had assented to an extension of five years longer than it would have otherwise taken to extinguish.

He did not wish to raise again the ghost of the £30,000,000 war contribution, except to say that unless we got the £30,000,000 from the Transvaal he did not know how we were to provide for the repayment of the war loan, when its repayment became due. He did not envy the right hon. Gentleman who might be in office when that time came. He contended that they were entitled to recover that £30,000,000 at the hands of the Government; it was promised by a former Secretary for the Colonies, the right hon. Gentleman the Member for West Birmingham, as an inducement to the House to guarantee the loan of £35,000,000. It was stated to be a payment in commutation of a sum of £100,000,000 which the right hon. Gentleman thought was due, and to the extent of £10,000,000 was to be underwritten by competent persons in the Transvaal. As to the conditions, which were three, they had all been fulfilled. There was a bargain. We were to take £30,000,000 instead of £100,000,000, or at least £70,000,000, and that £30,000,000 was all to be paid in three years. Two and a - half years had gone by and we had not received a penny of that sum. So complete a bargain had never been presented to this House as that presented by the late Colonial Secretary, the right hon. Gentleman the Member for West Birmingham, speaking on behalf of the Government, under which the House guaranteed the loan of £35,000,000, and if that obligation was now to be thrown to the winds and explained away the Chancellor of the Exchequer who had to pay off the war loan would be put in a desperate position, while the greatest reproach would rest on the Government for the abandonment of that engagement. It was a most solemn engagement; none of the conditions had been violated; it was a freely accepted burden by the gentlemen who undertook the obligation to underwrite it, and a very serious damage would be done not only to the Government itself but to the cause of public faith in England if it were now abandoned. It did not behove the House to condemn the conduct of the right hon. Gentleman in the production of this Bill. He had risen more to emphasise that great concern he felt at the increased and still increasing debt of this country, and the insufficient means taken to provide funds to wipe it off.

MR. SYDNEY BUXTON (Tower Hamlets, Poplar)

said he desired to emphasise what had been already said on both sides of the House in reference to the reduction of debt. It was a question of the utmost importance to the country, and it was one upon which the Chancellor of the Exchequer would welcome the expression of the views of the House in favour of the more rapid reduction of debt. Ten years ago the net reduction of the debt was £7,000,000 a year. Since then we had had a war which cost us £260,000,000, and last year there was not only no reduction of debt, but an increase in the National Debt of £2,000,000. During the last six years the total debt of the country had increased by £160,000,000, and we had not up to the present moment reduced the war debt by a single penny. This was not the only instance in modern times of the National Debt being added to in time of peace. At the present time, in the fourth year of peace, we had no less than £23,000,000 of additional taxation, and the amount the right hon. Gentleman had promised by way of the utmost reduction would only be some £2,000,000, though there was all this enormous amount of additional taxation. This increase of taxation was attributed to what was called capital expenditure, the amount of which in naval and military works and things of that sort was really greater than really appeared on the face of the Financial Statement. The Chancellor of the Exchequer in his speech had referred to it as being about £40,000,000, but it was in reality much larger, because during the period from 1894 to 1898 there was each year a large sinking fund which used to go to the reduction of debt which had now been utilised for this purpose, in addition to which through the Sinking Fund something like £5,000,000 had been paid for capital expenditure. This expenditure was really £57,000,000; that was to say, one-third more than appeared in the accounts. In two years the country had borrowed £60,000,000 for the purpose of capital expenditure, which was a matter to which he thought consideration should be given.

The right hon. Gentleman, when dealing with debt, put it into two categories; one he called dead-weight debt and the other capital expenditure, against which he held assets in ships and works. But he (Mr. Buxton) denied that these naval and military works could in any sense of the word be regarded as assets. Assets were things which could be valued and at a favourable time sold out and the borrowed money repaid in that way. That was not the case here, and therefore the capital expenditure was as much a dead-weight debt on the country as the other expenditure which the right hon. Gentleman placed in that category. One of the worst tendencies of this borrowing on the one hand and paying off on the other and thus increasing the capital expenditure was that it resulted in an increase of the National Debt. As he understood, the Unfunded Debt had increased in the last six years by no less than £100,000,000, but during the same period the Funded Debt had been diminished by £40,000,000. Under these circumstances he asked, Would it not be better to apply the whole of the Sinking Fund to the purposes of diminishing not the Funded Debt but the Unfunded Debt, which at the present moment was far too large? The right hon. Gentleman had declared his strong desire to diminish the amount of capital expenditure, under certain conditions. That was necessary, and no doubt the right hon. Gentleman would admit that a considerable amount of money borrowed for these purposes would be much more usefully met out of the expenditure of the year. He had not much hope at the moment that the right hon. Gentleman, unless he took very strong action, would be able to reduce that expenditure on the naval and military programme to any extent. The expenditure, he supposed, must take its course, but they would warmly support the right hon. Gentleman in any proposals he made to reduce that expenditure and to bring it, as it ought to be brought, into the ordinary Budget of the year, instead of its being had by means of Supplemental Estimates.

Having said so much with regard to the debt itself, he would now say a few words as to the proposals of the right hon. Gentleman for the reduction of the debt. The amount to be applied to the Sinking Fund this year was £10,000,000, but the real significance of that was not the amount to be utilised in one year for that purpose, but the specific amount the right hon. Gentleman intended to apply to it out of the taxation of the year. The Chancellor of the Exchequer surely admitted that the Unfunded Debt was too great, and it would, therefore, seem to be better policy to apply the money solely to the reduction of that debt, and not to the purchase of Consols in the market. He did not share the Chancellor of the Exchequer's sanguine hopes that he would be able to reduce capital expenditure. While he congratulated the right hon. Gentleman on having added £1,000,000 to the Sinking Fund, he did not think he could have done anything else, looking at the position of the Debt and the Sinking Fund. The figures of national expenditure were certainly very disheartening to the economists in the House, whose numbers, he was afraid, were few; and still more disheartening was the expenditure on certain branches in regard to which they could not feel that the nation got value for its money.

For a good deal of the expenditure the country did not get full value. This was particularly the case in regard to education and the Army. In connection with the Army there had been brought forward several schemes, each extremely costly, and the last of which, while showing no diminution in expenditure, had practically disorganised the Regulars, disheartened the Militia, and disgusted the Volunteers. This was a very unfortunate result for any Army scheme to have upon a service founded not upon conscription but upon popular favour and support. One matter upon which the Government might be congratulated was the fact that at last there was some hope of the cessation of expenditure in the wilds of Somaliland. The apparent result of a wise arrangement made by the Italians with the Mullah was that that so-called mad person had been given a large slice of territory, turned into a Potentate, and granted a port. He did not know that this House had ever gone so far as to suggest that the Mullah should be given territory and a port, but they had, at any rate, always contended that terms should be come to and a check put upon these costly and bloody expeditions into Africa. His chief desire in speaking, however, was to emphasise what he regarded as two really serious matters in connection with our national finance at the present moment. The first was the fact that we were not reducing the debt anything like so rapidly as we ought to do, and the other was that our annual expenditure was of such a type and taxation was so heavy that it could not fail very seriously to affect the consuming power and the comforts of the working classes, and also to injure and jeopardise our commercial position in competition with other nations.

MR. VICTOR CAVENDISH

said that the Second Reading of the Finance Bill was usually not so much a discussion of the contents of the Bill itself as a part of a general discussion of the financial position of the country. Not unnaturally a considerable amount of attention to-day had been directed to the question of taxation, and so far as he could gather, the general feeling seemed to be that the Chancellor of the Exchequer had acted rightly, so far as he had gone, but that it was desirable that he should go still further in the direction he had taken. In his Budget speech his right hon. friend clearly and distinctly intimated that he would discourage the idea of adding to our Rational Debt by naval, military, or public works, and the House might rest assured that any assistance they could give in that direction would be welcomed by the Chancellor of the Exchequer. So far as the question of debt was concerned it would probably be advisable that he should leave many of the technical and complicated points to the Chancellor of the Exchequer to deal with later on, but he might be permitted to deal with certain matters which came more immediately under his own personal observation.

So far as the Army and Navy were concerned, the important speech of the Prime Minister on Thursday last had doubtless had the effect of bringing more clearly before the country what our obligations were, and if while bearing those obligations in mind it were found possible to reduce the expenditure on the Army and Navy, it would be a result which the Chancellor of the Exchequer would welcome with acclamation. He would remind the House, however, that when such reductions were made they frequently caused considerable inconvenience, and in some cases distress. That being so, he hoped that when the reductions took place and the inevitable dislocation followed—which the Departments concerned would endeavour to make as little onerous as possible—Members would assist by not raising questions concerning this or that district, or this or that particular class of Government servants. In the debate of a year ago he was accused of having lectured the House. It was said that every Financial Secretary had lectured the House and always would do so. Possibly his speech was somewhat open to that charge, but he certainly had no intention of lecturing the House, and it was not his wish to do so to-day. At the same time, with all due respect, he would venture to call attention to two occurrences in the present session. Possibly of all the Estimates, Class I. was the section most capable of being considered in its minutest details. There were many matters dealt with in that class to which it would have been the wish of the House to devote careful and minute inquiry. But the Government were pressed to put down the House of Commons Vote first. Two hours of the afternoon were occupied in a discussion mainly concerned with the comforts and conveniences of Members, and if it had not been for the timely intervention of one of the Members for Islington the whole of the afternoon might have been devoted to that topic. He was not at all sure that he ought not to congratulate the noble Lord who was in charge of the Vote upon the fact that the net result of the debate was a promise to look into the question of telephonic communication between the House of Commons and Westminster Hospital, and into the advisability of providing a swing door in some portion of the House. Speaking as the representative of the Treasury, he thought they got off very cheaply on that occasion. The second debate to which he wished to refer took place on Wednesday last, when he was absolutely alone in endeavouring to press upon the House that what they were doing might create a fresh charge upon the Exchequer. A fair case for inquiry was made out by hon. Members from Ireland in reference to art accommodation in Dublin, but he was certainly surprised at the somewhat vigorous assistance—whether altogether in favour of art or in anticipation of favours to come be could not say—rendered to Irish representatives by hon. Members for Scotch constituencies, and he looked in vain for support from those quarters in which were generally found certain critics of the national expenditure. Whatever the result of the promised inquiry might be, he hoped Irish and Scottish representatives would not be altogether unmindful of the possible dangers arising from extra expenditure.

He wished to put before the House some figures connected with expenditure, and although they would probably fail to satisfy the House, he hoped they might do some good. He would go back ten years, not only because it was convenient, but because it also coincided with that moment which possibly hon. Gentlemen opposite regarded as the inauguration of everything that was bad in expenditure and administration. Omitting the Army and Navy and comparing the total Estimates of the Budget Services for 1895–6 with the Estimates presented this year, there had been an increase during that period of £21,500,000. That increase was made up roughly as follows:—Service of the Debt, £3,000,000; Civil Services, £9,000,000; Postal and Revenue Services, £6,000,000; and Local Taxation Relief, £3,500,000. He would not go at any great length into the details of the figures he had referred to. There were, however, two or three items of interest. For instance, there was an increase on works and buildings of £850,000, and of this total £235,000 was in respect of Revenue Buildings and £210,000 for rates. He thought it only right to point out to the House that much of the increased expenditure for the Revenue Services included the Postal and Telegraph Services, and much of that had been incurred for the convenience of the public. They nevertheless continued to derive considerable income from the Postal Services as a whole. During the last two or three years the expenditure upon public buildings had shown a considerable rise. The reason for this was that in this respect much economy was practised during the war, and it was felt most undesirable that they should continue to diminish this expenditure after the war was over. Obviously they should endeavour to make up those arrears as much as possible, and consequently they had for the last two or three years had to place on the Estimates heavier sums for this purpose. He scarcely liked to venture to hold out any hopes of economy, but he believed that his right hon. friend the Postmaster-General would be able, when the arrears had been caught up, to discontinue this heavy expenditure, or at any rate would not continue it at such a rate. There was another item which had shown an alarming increase during the last ten years, and that was in regard to the rates paid upon Government property, which showed an increase of £210,000. A Question had been asked which implied that there was a chance of still further demands being placed upon the Imperial Exchequer in this respect, but he would advise the House not to make any departure from their present system.

There had been an increase in Class II. of the Estimates of £600,000; it was perfectly well known and admitted that with the continual growth of population they must expect to see the cost of civil administration increased. He was afraid it was not possible to deny that that would always be the case, but the greater part of this increase was due to carrying out those obligations which had been placed upon the various Departments of the State by the action of the House. He did not complain of this, and he had no right to complain. Great improvement had been made in regard to the supervision of dangerous occupations under the Local Government Board, the Board of Trade, and the Home Office, but they had had to appoint a number of additional inspectors to deal with very important matters concerning the lives of the people, conditions of labour, and the actual conditions of employment of almost every class of the community. If there was that continuous and continual desire expressed on the floor of the House and constant pressure put upon the heads of Departments that still more should be done in those directions, then it was almost impossible to venture to hope for any reduction in expenditure upon those heads. He did not complain of the action of the House in those matters, because he believed that such expenditure was justified; but when they insisted that there should be more inspection, and that more protection should be given in those various directions, then they were not justified in complaining when they had to pay for those services.

With regard to the total increase in the cost of the Civil Services, during the ten years under review more than two-thirds of the total increase was due to education. The expenditure upon Class IV. during the year 1895–6 was £10,250,000. In the year 1905–6 this expenditure had been estimated at over £16,250,000, and of the whole of that increase the Education Vote was responsible for £5,963,000, or practically the whole of the increase. He was aware that he was now raising questions which had been bitterly fought out upon the floor of this House, but he had never yet heard that there was any likelihood of suggestions being made to diminish the contribution which they were now making towards education. The tendency was rather in the direction that the State should bear still further expenditure in regard to education. He did not know whether the House fully realised the burden which education was now placing upon the taxpayers of this country, but at the present moment, as he had already stated, the direct tendency was in the direction of attempting to place a still bigger share of the burden of education upon the Imperial Exchequer rather than upon the local authorities. He wished to remind the House that in consequence of the generally expressed feeling both inside and outside of the House of Commons the Chancellor of the Exchequer had increased the grants to the University colleges to £100,000. That was a Vote which would probably come up for discussion, for there were several hon. and right hon. Gentlemen anxious to have that Vote put down for consideration, as they desired to discuss it on broad principles.

He thought it would perhaps be a source of satisfaction to the House if he stated that he thought they were beginning to see signs of the various protectorates demanding less assistance from the Imperial Exchequer than they had in the past, and he hoped that the day was not very far distant when they would be self-supporting. In the statement he had made he had not taken into account the benefits which those Protectorates abroad might confer upon British trade and commerce as a whole; the great interest which had lately been developed in Lancashire with reference to certain of those protectorates was well known and admitted by all, and although they had in times past incurred very heavy expenditure in many of these directions, he thought they were now able to show some justification for their policy in that respect.

Referring to the Revenue Departments, he said that the cost of the Customs and the Inland Revenue had increased in ten years by £468,000, but in the meantime the revenue had increased by more than £36,000,000. He thought, therefore, he was justified in saying that the additional cost was most minute. He knew that in many quarters of the House, and also outside, there had been a strong feeling that the conditions in the Departments of Customs and Inland Revenue were not fair and that they required consideration. He knew how much depended on the smooth working of those Departments in connection with the collection of the very large amounts which passed through their hands. Any representations made to him would, of course, receive at his hand, as they had always received at the hands of his predecessors, the most careful and the most thorough investigation. He wished with all respect to place before the House a consideration which he thought they were sometimes inclined to overlook. The country was fortunate in these services in possessing men who desired to do their work, and who did it admirably. At the same time the matter must be regarded as one of business, and the remuneration paid to the staff must be regarded not so much in respect of what was due to the individuals themselves, but as to what ought properly to be paid for the work which had to be done. He should not like to state absolutely, but he could not help feeling that in certain of the Departments the conditions which had hitherto prevailed had been the means of attracting to those services individuals who possibly in many respects were rather too good for the work which they had to do. While they were fortunate in having the services of those men, he thought he could at the same time without fear of contradiction lay down as a principle that in that House they must have the scale of remuneration on the actual class of the work that had to be done. He appealed to hon. Gentlemen who had interested and were interesting themselves in these matters that they should bear this consideration in view. No doubt there would be further opportunities during the session for the discussion of these matters more in detail. He should like to take this opportunity of thanking many hon. Members for their courtesy in bringing these matters before him without raising them in a controversial way in the House. He thought these matters were far better settled outside the House.

The only other matter to which he wished to call attention was the Post Office. In the period of review the Post Office Votes had increased by £5,787,000, while the postal and telegraph revenue had increased by £6,330,000. There was thus still a net slight additional revenue derived from the Post Office. But there again the expenditure had been considerably increased by concessions which had recently been made to Post Office employees and which he understood were still likely to be the subject of further consideration when brought before the House. In the course of the past ten years the larger portion of the increase of £21,000,000 in the Civil Service expenditure had been due to the Postal and Telegraph Services, which had at the same time been the means of increasing the revenue of the country by a still larger proportion. That increased expenditure had been incurred to carry out the policy which had been adopted by the House.

There were two considerations which they ought to bear in mind in judging whether this expenditure was necessary or not. It was very easy to look at totals and make comparisons with the figures of five, ten, or twenty years ago, and then say that the expenditure had gone up, but the two questions which he should ask were, first: Is the country able and willing to bear the burden? and, second: Are we getting value for our money? On hardly any occasion had the debates in the House tended to show that the country had been unable to bear the burden, or that the people had been unwilling to make the sacrifices they had been called upon to make. He did not suppose the present House of Commons would determine, but if any future House of Commons should determine that economy was the sole object of its existence, and should be content with what might be called the barest necessities of government, it would be perfectly possible and easy for any Cabinet or Chancellor of the Exchequer to make very serious reductions in expenditure. Nothing was easier than by a stroke of the pen to take off grants of one kind and another. He had seen opportunities of making very drastic and considerable reductions in the amounts given to societies which came under the head of scientific investigation. He was bound to say that at the present moment there was nothing filled the Treasury with greater alarm than the approach of men of science and men of art. If necessary very serious and far-reaching reductions, almost with the stroke of the pen, could be made, but he should be very much surprised if for a long time to come the House of Commons were to adopt a policy of that nature. If the Government attempted to do so he was bound to say that he should not be envious of those who were responsible for such a policy. He thought he could with justification claim that although the expenditure was heavy—he did not deny that the expenditure was heavy—there was nothing to prove that the country was not able to bear the burden, or that we were not getting value for our money.

MR. LOUGH (Islington, W.)

congratulated the hon. Gentleman on the review he had given of certain branches of expenditure which might otherwise have been overlooked. Having had some little experience in meeting the heads of the Customs during the past few years he could heartily second the remarks of the hon. Gentleman in regard to the excellent services rendered by them. He did not think the House really appreciated the great efforts made at the Custom House, and also by the Inland Revenue Department to make the duties of these offices work smoothly with the traders of the country, who were in a great measure dependent on the facilities they gave. The testimony borne by the hon. Gentleman to the excellent manner in which their duties were discharged were fully deserved.

The hon. Gentleman had told those who had been grumbling at the national expenditure that so far as the Civil Service was concerned there had only been an increase in ten years of £21,500,000. Of that sum £9,000,000 might be traced to questions over which the Revenue Departments had no control whatever, and £3,000,000 were for the service of the Debt. The Debt had been increased by the Imperial statesmen who had adopted such a high-flying policy in recent years. The £6,000,000 at the Post Office was really not an increase of expenditure at all. It had proved to be profitable outlay. If they took off these £9,000,000 they found that there had only been an increase of about £12,000,000 on the Civil Service expenditure. Of the £12,000,000 there might be traced to education £6,000,000. The hon. Gentleman had said that no one had dared to object to the expenditure on education. He supposed the hon. Gentleman did not take notice of the remarks which a humble individual like himself made from time to time. He did not think there was anything sacred in the expenditure on education. There was no connection between a good and effective system of education and the huge expenditure which had been made upon education in the extravagant period they were passing through. The expenditure on education required to be surveyed as closely as any other branch of expenditure. There were six Education Acts and it was not at all certain that our system of national education was improved according to the increased expenditure upon it.

The hon. Member opposite had said that the nation was quite satisfied with the present condition of affairs, but that if expenditure was to be reduced that might be done by striking off some of the grants to Universities. That would not be at all easy to do without causing great inconvenience. It was when the grants were being given that care should be exercised, because the cruelty arose from setting up expenditure in the first instance which the country really did not want. He quite agreed with reducing expenditure which would cause as little suffering as possible. That might be accomplished not by reducing the Government establishments but by reducing the amount of work done in outside yards. The Government itself was to a large extent responsible for the men whom it employed, and there should not be the amount of fluctuation of employment that had sometimes been the case and which had caused much suffering. The hon. Gentleman had asked whether the country was satisfied that for this expenditure good value was got for the money, and had answered that the country was satisfied. He had been all over the country at elections, and found the greatest dissatisfaction with the current extravagant expenditure; and he ventured to say that no Government ever made a greater mistake than in imagining the country was satisfied. The country was thoroughly dissatisfied, and was resolved on the reduction of expenditure. Then, as to the country getting value for its money, look at the Return just issued, which showed that £248,000 worth of stores were destroyed in South Africa, and at all the revelations made connected with the war. Again, millions had been wasted on the fortifications of London. The Prime Minister himself had admitted that the other day; and his only excuse was that men were human, and liable to err. What value were we getting for the stones in the forts which were rotting on the Surrey Hills?

As to the extraordinary growth of the public debt, he joined with those who protested against the distinction which the Chancellor of the Exchequer had drawn between the various kinds of debt. What was the use of speaking of dead-weight debt, and unfunded debt and capital liability debt? All these accounts were kept open to bamboozle the House and puzzle the country. If hon. Members would only look at the black figures in the Annual Return of debt there would be much less confusion. He was glad that there had been no attempt to introduce a Party bias into this debate so far, unless it might have been by the hon. Gentleman who had just sat down, who gave credit to the Liberals for what they had done to reduce the national indebtedness in former times. The Return showed that the total amount of the Unfunded Debt when the Liberals were in power was £10,000,000, while to-day it was £72,000,000. That was what had been done by a Tory Government in ten years. The capital liability debt was only £4,000,000 ten years ago; now it amounted to £42,000,000. That was a bad record for those responsible for the finances of the country in the meantime. For the past six years the Debt had been steadily increasing with the exception of last year, when there was a reduction of £3,000,000; but that was accounted for by the money received from the Transvaal. No attempt had been made to see that the country paid its way. The Chancellor of the Exchequer had made a statement in which there was an adumbration as to what would take place next year. He believed that both this year and next the indebtedness of the nation would continue to rise. That was a most serious condition of affaire which no Government had ever neglected until the present; and unless the Government grappled with the difficulties of finance they ought to make way for another which would do so. Of course this was a matter which reflected more on previous Chancellors of the Exchequer than the hon. Gentleman now on the Treasury Bench.

He wished to call attention to the way in which the growth of the Debt had been excused in debate in recent years. He held in his hand the last three Budget speeches made by the respective Chancellors of the Exchequer. The first was by the right hon. Member for Croydon. In dealing with the Debt the right hon. Gentleman made out a splendid case for reduction of debt and for economy of expenditure. He said that the Sinking Fund would be nearly £7,000,000 more, and went on to show that the Sinking Fund presented a larger proportion to the whole debt of the country than in any previous year; and he calculated that by March, 1008, it would amount to nearly £9,000,000 more. And the right hon. Gentleman wound up by saying that if the Debt was not added to, the whole charge for this gigantic debt would be swept away in fifty years. Now, not a penny of that debt had been reduced. It was larger now than when the right hon. Gentleman spoke. Then the present Chancellor of the Exchequer a year ago in his financial statement said that the Debt would be reduced in the course of the year by £5,600,000, but the Debt had not been reduced at all, as was shown by the black figures in the Return issued the day before. This year the Chancellor of the Exchequer said that there had been a total reduction of the dead-weight debt in the course of twelve months to the amount of £7,500,000. There would, however, not be a penny of reduction, but £2,000,000 would be added. All this language about reduction of debt ought to be excluded from Budget speeches if there was to be no reduction at all.

He wanted to explain to the House how the nation was puzzled, if not disgusted. At the beginning of the session speeches were made by the Chancellor of the Exchequer, but they had great difficulty in finding out what the borrowings would amount to on the capital account. All they now knew was that there would be no real reduction of debt this year. The matter was becoming very serious and he thought it was time some step was taken. What was the reason that better control could not be obtained by the House over the finances of the nation? He thought that in the first place the responsibility rested with the Treasury and mainly with the Chancellor of the Exchequer himself. He must say, however, that the position of the Treasury among the Departments of the State was not what it used to be a few years ago. He would venture to remind the Chancellor of the Exchequer that he was not a mere cashier to find the money for his colleagues' extravagant projects. It was not his duty to go round the Departments, cap in hand, as it were, and say, "What do you want?" It was his business to keep down the expenditure of the country. The Treasury had been in years gone by the most autocratic controller of every Department, and it had been given this control in order that the Chancellor of the Exchequer might exercise it. He should not invite claims, but should inform the Departments that there was the necessity for rigid economy, and enforce it by preparing the Estimates in a way which the nation could afford. In the past they had had Chancellors of the Exchequer who recognised that that was the reason for the peculiar constitution of the Treasury. That was why it could go into all the other Departments, do what it liked, and exercise a firm control. Therefore he thought the Treasury ought to make itself the mouthpiece of the sentiment of economy so as to check extravagant Votes. He was willing to admit that the country had had an extravagant fit; at the time of the war he had protested against the expenditure, but at that time those who did so were in a minority. Now, however, they were in a majority and everybody thought with them. Every improvement in the price of the Funds seemed now to pass away rapidly. At the time the right hon. Gentleman introduced his Budget things looked better in the City and Consols went up two or three points. He did not know whether it was the consequence of the Chancellor of the Exchequer's loan, but now things had got gloomy again. Consols were down, high-class securities had declined in value, and a spirit of fear and caution prevailed, the same as they had had to deal with in former times. The reason was that the nation was not satisfied that we were meeting our obligations.

The question was, How were we to get back into a better state of affairs? There was only one answer that he could give to that question, and that was that expenditure must be reduced to a degree of which he recognised no sign on the part of the Chancellor of the Exchequer or the other members of the Government up to the present time. He was glad that there had been some reduction in the Navy, but it was not, in his opinion, sufficient. He thought the naval expenditure should be reduced down to £25,000,000, and that there should be a corresponding reduction in the Army Estimates. There was one aspect in Army expenditure which the Chancellor of the Exchequer might deal with. That was the huge expenditure upon our Colonies and upon foreign countries. In Egypt quite unnecessarily large amounts were paid. It was true that Egypt paid us £100,000 for military services. Why, then, should not the expenditure be restricted to that amount? The military cost in regard to Malta was £800,000, and he did not see why that should not be reduced to £250,000. The garrisons abroad in other places might, he considered, be reduced by half the amount which they at present cost? There were £6,000,000 spent in this way, and in his judgment the sum could be reduced to £2,500,000 or £3,000,000. He also thought they ought to listen to the appeals which the Secretary of the Treasury had made to them, and that they ought to endeavour, without causing any suffering to anyone, to assist the reduction of the national expenditure by declining to force new enterprises upon the Government. The moral of this story lay in the fact that the Debt was not being reduced. How could the Government say that the nation was going on well if it was not paying its debts? He observed that the Prime Minister, when he spoke about national defence, never spoke about our greatest national defence, that was the feeling of the capacity we had for, and our ability to incur, large expenditure if necessary. The Government by their policy had driven this country out of the position that it had occupied in those respects, and he trusted that if the Administration meant to remain in office much longer it would try to pick up some of the good traditions of its predecessors.

SIR JOHN GORST (Cambridge University)

said he confessed that as he listened to the most interesting speech of the Prime Minister he was quite unable to reconcile his statement with the demands which the Chancellor of the Exchequer had made upon the taxpayer, and ever since in thinking of this subject he had been continually saying to himself: What is the necessity for the British taxpayer to bear the great burden which is put upon his back. He wanted to address the House upon that speech of the Prime Minister in the hope of getting from the Chancellor of the Exchequer some explanation of the apparent discrepancy between the statement of the First Lord of the Treasury and the clauses of the Finance Bill. The statement made by the Prime Minister was not a mere speech upon a large national position. It was a statement arrived at after taking the advice of the greatest and best naval and military experts which the country possessed, and it represented the deliberate policy of the British Government upon the subject of national defence, a policy known to and adopted by every member of the present Cabinet, and announced to the nation and to the world at large as the fixed determination of the British Government. One of the most striking parts of that declaration dealt with the impossibility of the invasion of this country. That subject was not new to the House of Commons because it had been dwelt upon by the Secretary of State for War in proposing the Army Estimates, but it was stated, of course, by the Prime Minister with much greater authority and much greater weight. And he supposed that they might take it as the deliberate opinion of the British Government, with access to all the expert advice and all the knowledge which was possessed by the Members of the House or by the nation at large, that they might be satisfied that the country could not be invaded. The view which was put before the country by the Government twenty years ago in the Army Estimates was that it was supposed to be necessary to make provision some possibility at least of the invasion of this country, and therefore the discovery and the determination that such an invasion was impossible ought to lead to a reduction of Army expenditure from that expenditure which they all thought and which the Government told them was essential twenty years ago.

The second remarkable statement made by the Prime Minister was one made in direct contradiction to what had previously been stated to Parliament by the Secretary of State for War when that right hon. Gentleman was defending the increase of Army expenditure notwithstanding the opinion which he and the Government had formed as to the impossibility of invasion. The Secretary of State for War based his statement upon the necessity of being ready immediately to defend the frontiers of India against possible incursions by some other Power. He mentioned Russia, which, of course, was the only Power which could attack us in that part of the world. He had listened to the statement of the Secretary of State for War with very great astonishment because twenty years ago he had the honour of holding the office of Under-Secretary for India, and he was quite familiar with the military opinion on the defence of the frontiers of India which then prevailed. He did not like to intervene in the debate because he thought he might make a fool of himself, and that matters might have been discovered in recent years which changed the situation, or that military opinion had altered, and that if he were to attack the Secretary of State for War on the subject he ran the risk of placing himself in the position of an ignorant Member of Parliament who was not qualified to speak on the subject. But what was his amazement when the Prime Minister not only contradicted the statement of the Minister for War, but actually announced as the fixed, the stable policy of the British Government the opinion held by military authorities twenty years ago, namely, that it was impossible for Russia or any other Power to make an attack upon the Indian frontier until they had constructed railways through Afghanistan. Between the two Empires there was the wild and inhospitable country of Afghanistan, and no force could cross to attack the Indian frontier unless railways were first made in that country. The Ameer in former days was very reluctant to allow railways to be made. At one time there was a proposal to construct a railway to Kandahar, but it was abandoned because Abdurrahman, a very wise ruler, objected to it. On the other hand there was no reason to suppose that Afghanistan would be more complaisant to Russia. Russia could not make the railway to Herat without incurring the deadly hostility of Afghanistan. The moral which the Prime Minister drew was that there was no hurry at the present moment about the advance on the Indian frontier, and that there was no need this year to get up a great force in order to reinforce the troops on the frontier of India.

MR. AUSTEN CHAMBERLAIN

Does the right hon. Gentleman remember the Prime Minister's statement as to the reinforcements which would be required in the first year of a war?

SIR JOHN GORST

said he quite remembered the Prime Minister's words, but he did not think that Russia for many years to come would think of making an attack upon India. They did not know how long the present war might go on, but no attack on the part of Russia, to whom he did not impute any intention to make one, could be made until the present struggle was over and until Russia had somewhat recovered its finances and its strength after the terrible conflict in which she was at present engaged. Under those circumstances there was no hurry to make preparations for a struggle on the North-West Frontier of India, and he asked whether, if that was so, there really was any necessity for this increased military expenditure? Just contrast the condition of things twenty years ago and the condition of things now. Twenty years ago we thought that we were liable to invasion and had to make some provision against it. We also held the same views upon the protection of the Indian frontier that occurred in the Prime Minister's statement. Now, therefore, when we were in consequence of those views relieved from the necessity of keeping an Army at home in order to protect our country, our military expenditure was enormously greater than it was twenty years ago. We had the largest military expenditure of any nation in the world, except Russia. If any steps were to be taken against our great dependency of India they could not be initiated until preliminary works had been completed which it would take years to construct. In view of these facts what he wanted the Chancellor of the Exchequer to tell them was on what ground, after the Defence Committee had come to the conclusions which were announced last week, the expenditure on the Army had been increased. He quite agreed that it was necessary for us to keep a great and powerful Fleet, but if it was possible to diminish the expenditure on that Fleet during the current year by a sum of not less than £3,500,000, when they turned to the Army he should have thought that there would have been a still greater reduction there because there economy would appear to be more easy than in the Navy. But they found that so far from there being a decrease there was actually an increase in Army expenditure, and as a humble ratepayer he could not conceive why after the statement made by the Government, after consultation with the Imperial Committee of Defence, there should be an increase on the Army, which was defended by the War Minister on grounds which were diametrically opposed to the statement of the Prime Minister.

SIR ROBERT REID (Dumfries Burghs)

said he was glad that the right hon. Gentleman had, as a conspicuous Member on the Ministerial side of the House, together with the hon. Member for King's Lynn, drawn attention to the necessity for a great reduction of expenditure, especially as regarded the Army. This debate, as he had said on other occasions during the last year or two, was rather conspicuous for the absence of financial experts. Of course Sir William Harcourt was no longer with them, but they had the right hon. Member for Croydon, who had just left the House, and his predecessor the right hon. Gentleman the Member for Bristol, who year in and year out constantly complained of the growing weight of expenditure. The latter right hon. Gentleman had, however, never insisted upon his wishes being carried into effect but he was very sorry the right hon. Gentleman had not contributed to this debate, any more than the other experts had, any suggestion of how the enormous burdens of of this country might be diminished. As to the speech of the Secretary for the Treasury, although it was perfectly true that he suggested one or two comparatively small economies, and although he urged with great propriety how wrong it was for Members of Parliament to put pressure on behalf of their constitutents against any reduction of public works or expenditure, yet he did not suggest any way by which that expenditure might be diminished and he did not express any wish that it should be diminished. The hon. Gentleman said that the country was perfectly able to bear the weight of the expenditure and perfectly willing to do so, and if they were to look upon the hon. Gentleman as an exponent of the policy of the Government it was manifest that there was no desire on their part to reduce this burden, and that there was no necessity either for themselves or any other Government to undertake that task. If that was their opinion all he could say was that they were living in a fool's paradise; he believed that there was a very strong feeling amongst people of all shades of political opinion that it was impossible with safety to go on at the present rate of expenditure, and that some method of reduction would have to be found or else the country would get into serious difficulty. If the experts did not assist them he supposed that men of business and common-sense might be allowed to offer a, few remarks as to the way in which expenditure might be reduced.

The hon. Member for King's Lynn had pointed out, and his observations had been endorsed more than once by the findings of the Committee, that a good deal might be done by a more adequate control by the House of Commons over the expenditure of the country. It was impossible to pretend that they had any control now; they had accounts put before them in a form which no business firm would tolerate for a moment. When discussions arose with reference to finance ho distrusted the use of expressions such as "dead-weight debt," which really Concealed the facts of the case, although he did not accuse the Chancellor of the Exchequer of wishing to do so. Whatever their meaning they only had the effect of concealing from the House and the public the real extent of the burdens of the country. As a matter of fact the Chancellor of the Exchequer in his Budget speech had never explained that last year the total liabilities of the country had been increased instead of diminished, notwithstanding the fact that so many millions a year out of the Sinking Fund was paid for the service of the National Debt. There ought to be clearer accounts, and he thought there ought also to be an examination In Committee of the particulars of the Estimates as was recommended by the hon. Member for King's Lynn. Such a Committee, however, should not merely sit and take one class of Estimate each year, but there should be a constant and regular service of Members all through the year for the purpose of examining the Estimates and of calling persons before them to explain them. He believed that a great deal might be done in that way. But the House should never lose sight of the fact that, after all, policy governed expenditure, and unless there was a change of policy there would never be any substantial diminution of expenditure.

There were three great heads of expenditure. According to the Annual Return of Revenue and Expenditure issued in July last, during the ten years preceding that Return, Civil Service Estimates increased by about 45 per cent., a great part of which was for education. He was not at all satisfied that considerable reductions might not be made in the Civil Service Estimates, to which alone the Secretary to the Treasury referred that afternoon. Then came the service of the National Debt, which had increased from £25,000,000 to £28,750,000, an increase of 15 per cent. due to the enormous increase in the National Debt itself. The third head was naval and military expenditure, which had gone up from £35,000,000 to £71,000,000, an increase of more than 100 per cent. That £71,000,000 did not at all represent the present naval and military expenditure, as was shown in the admirable pamphlet of the hon. Member for King's Lynn, but he was content to take the figure given in the Treasury Return, from which it appeared that there had been an increase of over 100 per cent. in ten years. That was the cause of the expenditure, and until they were prepared to cut down those Estimates courageously and thoroughly there would never be any great improvement in the finances of the country. In 1895 the home Army consisted of 116,000 men; this year 156,000 had been voted. The force in India remained substantially the same, but the colonial forces had increased from 37,000 to 61,000. As the right hon. Gentleman the Member for Cambridge University had pointed out with unanswerable force, this increase in expenditure was wholly inconsistent with the Prime Minister's recent speech on Imperial Defence. Personally, he was not sure that the Prime Minister did not take too sanguine a view as to the actual number of men necessary to resist invasion, but if his estimate was anything like accurate it was obvious that we were maintaining a large force at home not for our own protection, but exclusively for parts of the Empire which, with the exception of India, provided very little for themselves.

So, too, in regard to the Navy. The Navy was required in its present strength not for our own defence, but mainly for the defence of outlying parts of the British dominions, and also for the defence of the commerce common to us and to them, and of which one-fourth had no direct relation with the United Kingdom at all, but was simply either inter-colonial or between the Colonies and foreign countries. And yet, although this was the case, the whole of the burden was being placed upon the shoulders of the British taxpayer. He desired to see that burden removed, first, in the interest and for the protection of our own people, and, secondly, because he was satisfied, as the right hon. Gentleman the Member for West Birmingham stated at the Colonial Conference, that the people of this country would not be content indefinitely to continue to bear the whole of that burden. It would disgust them with the great Inheritance into which they had come, and the more they were caused to suffer real privation and sacrifice in the matter of health and in other respects, the zeal for Imperial greatness would wane instead of wax. He submitted that the policy of the country ought to be altered, and that the self-governing Colonies and other dependencies should do more than at present to provide for their own protection. There were places such as Malta, Gibraltar, Hong-Kong, and Egypt from which the garrison could not be wholly withdrawn, but he felt that it was incumbent upon the Government to reduce the number of British garrisons maintained in Colonies and dependencies of the Crown to the scale which obtained ten years ago. It was more difficult to suggest reductions in the Navy than in the Army. A reduction, however, had been this year undertaken, and he thought that that policy ought to be still further continued. He held it to be the duty of the Government to place itself in communication with other Powers with a view to securing some contemporaneous reduction or cessation in new building by common consent. There was one argument which might be used very effectively. The United States of America had always advocated that private property at sea should be exempt from capture, and if that proposal were agreed to one of the greatest inducements to foreign nations to maintain large navies would disappear. To this country, owing to its position, a large Navy was indispensable, but for them the necessity was not so great except for the purpose of protecting their commerce. It would not be in order to discuss that matter more fully, but the United States had always advocated that policy, and at different times it had received the support of Russia, Austria, Prussia, Italy, and practically every considerable Power in the world except France and Great Britain. The suggestion was now being urged with great force by President Roosevelt. In any case the proposal deserved full consideration, and might lead to a large simultaneous reduction of armaments among the nations of Europe. It was the duty of the House constantly to urge the necessity for reductions in expenditure, and he was confident that although proposals now put forward might not meet with general acceptance, yet in any new Parliament, no matter what its political complexion might be, nothing would be more strongly insisted upon than a reduction of the burdens borne by the people of this country.

*LORD GEORGE HAMILTON (Middlesex, Baling)

said the hon. and learned Member opposite had suggested that Members of experience should contribute their views as to the best method for checking the ever-increasing national, expenditure, which everybody in the House regarded with apprehension. In response to that invitation he would venture to make a suggestion to the Chancellor of the Exchequer. After long experience of the modern system of finance in India, and of the working of our own financial system as a member of the Cabinet, he unhesitatingly said that the machinery which the Secretary of State and the Viceroy of India had at their command was far more effectual in supervising and checking expenditure than the machinery at the disposal of the financial authorities in this country. He remembered the time when the most gloomy anticipations were indulged in as to the future of Indian finance; reference was made to the absence of representative people from the Government of India, and to the fact that military men were strongly represented, and it was confidently prophesied that expenditure would rapidly increase beyond the capacity of the Indian Exchequer to bear it. It was a curious thing that during the past ten years India, notwithstanding all its difficulties, had been able continuously to reduce its taxation, while in this country, the home of representative institutions, taxation had been continuously increased. In India the Secretary of State and the Viceroy had two very efficient instruments for supervising and checking expenditure. The first was the Finance Council, which was always in session, and had to do with all parts of expenditure, and was therefore able to give an opinion upon any fresh proposals for expenditure; the second was the fact that in the Government of India itself practically all the members were throughly acquainted with their work, and the Viceroy had at his disposal a Committee which was always able thoroughly to investigate proposals for fresh, expenditure and to knock off any existing expenditure which might be unnecessary. There was no machinery of that kind in this country.

The hon. and learned Member opposite had said that policy regulated expenditure. But the curious feature of the Estimates of this year was that in the admirable expositions of naval and military policy which had been given by the Prime Minister the views put forward, which were excellent in themselves, were not new. The views with regard to the possibility of invasion were those which had been held by the Admiralty for several years, while the views as to the possible invasion of India were those which for many years past the Government of India had held. Therefore, the real importance of his right hon. friend's speech was that it clearly laid down that in the opinion of the Government the antagonistic views of the War Office, the Admiralty, and the India Office had come up for consideration, and that a decision had been given by the Government in favour of the views of the Admiralty and the India Office. If it were so he agreed that it was the duty of the Government£he did not say at once£to regulate their Estimates according to that policy. It might fairly be said that the Army Estimates of the present year were not in accordance with the policy laid down by the Prime Minister.

What were the checks on expenditure? The first was the House of Commons, the second the Cabinet, and the third the Treasury. Everybody must admit that the House of Commons could not effectively control expenditure. He believed there was not an occasion on which the House had investigated questions affecting expenditure when their recommendations had not tended rather to increase than decrease expenditure. It was also the fact that the more time given to the discussion of Supply the more proposals emanated from both sides for further expenditure. He thought, therefore, the House of Commons could not be looked upon as being likely to afford effective machinery for checking expenditure in future. As to the Cabinet, it had largely increased in numbers and the individual work of its members had enormously increased. This had been recognised by the Prime Minister in the constitution of the Committee of Defence, which had practically taken away from the Cabinet the whole control of naval and military questions. Therefore, in future, there would be this compact body of members of the Cabinet and of persons interested in pressing on naval and military expenditure to be dealt with. With regard to the Treasury, he did not think the old methods by which they checked expenditure were for the public benefit. For so many years the head of the Government had been either Chancellor of the Exchequer or Prime Minister that the Treasury came to regard themselves, not as a Department of the Government but as the Government itself, and they addressed other Departments in that tone. They exercised their authority well but not wisely. Twenty years ago we were in a deplorable condition, when a large number of forts were built and there were no guns to put in them, when we had ships that had guns but no ammunition, mainly due to the Treasury being all-powerful. Since then the Treasury had been deposed from this position. The Chancellor of the Exchequer, of course, still had a certain power of checking expenditure, but if he objected to a certain item, and was overruled, it was hardly reasonable to expect him to resign on some small detail if he was interested in the other portions of the policy of the Government. The Chancellor of the Exchequer ought to have behind him, inside the Cabinet, someone who would look impartially at the question from a financial point of view, and use his influence against the pressure brought to bear for the increase of Army and Navy expenditure.

What he suggested was that the possibility should be considered of forming out of the Cabinet something like a permanent Finance Committee with a permanent secretary on the same lines as the Defence Committee. Let the House consider what an advantage that would be. Supposing there were a change of Government. Right hon. Gentlemen opposite had been out of office for practically twenty years. How could they possibly control expenditure when they had really had no previous experience? But if there were a Committee of Finance such as he had described, with a permanent secretary, they would have all the information relative to past expenditure at hand, and he believed that future Chancellors of the Exchequer would find in such a Committee an effective instrument for supervising and overhauling expenditure. What really was wanted was not so much to stop new expenditure as to cut off old expenditure which fresh expenditure had rendered really unnecessary. He had read with much interest the Budget speech of the Chancellor of the Exchequer; his right hon. friend's Budget appeared to give general satisfaction; he evidently earnestly hoped for economies, and, whilst wishing to maintain the efficiency of the fighting services, he was evidently desirous that fresh burdens should not be added to the existing taxation. He sympathised with his right hon. friend in those aspirations, and he had ventured to put forward these suggestions knowing that such a Committee had been of immense benefit to the Indian Government, and in the belief that the establishment of some such similar institution associated with the Cabinet might yield equal advantages to our own system of finance.

MR. MCKENNA (Monmouthshire, N.)

said the noble Lord opposite and the Member for Cambridge University had made it abundantly clear that the speech of the Prime Minister was inconsistent with the proposals contained in the Army Estimates for the year, and he could only hope that those right hon. Gentlemen would repeat their speeches when the salary of the Secretary of State for War came up for consideration. As to the desirability of establishing a Finance Committee, that was probably a point upon which only an ex-Cabinet Minister could speak with advantage, but it certainly seemed most desirable that if the Cabinet was to be oppressed by the Defence Committee there should be support given to it by the co-existence of a Finance Committee. He thought that some of the criticisms of Treasury terminology were a little unreasonable. The National Debt was primarily divided into two parts, the first of which fell within the fixed debt-charge and the second of which was outside the fixed debt-charge, and it was only reasonable that there should be two separate names for those two portions of the Debt. The first part was divided into three heads. First there was the Funded Debt in regard to which the State was not under obligation to repay the capital sum at any particular date. Next there was the Unfunded Debt as to which the State was under obligation to repay the capital sum at a particular date. Thirdly, there was the debt which was neither funded nor unfunded in respect of terminable annuities. These were the names given to them by the Treasury. The names given to them by the present Chancellor of the Exchequer were the dead-weight debt and capital liabilities. He would suggest that the customary names for these two classes should be the Consolidated Debt, that was the debt provided for under the consolidated services; and secondly the Supply Debt, that debt which was met out of the Supply services. The use of these names would, he thought, very much simplify matters, and would do away with the undoubted slight misrepresentation which was maintained in the use of the term capital liabilities, which was applied to the debt outside the fixed debt-charge.

It seemed perhaps a little unreasonable to criticise the present Chancellor of the Exchequer on this Finance Bill on the ground of the inadequate provision for the Sinking Fund. The right hon. Gentleman had, after all, given £1,000,000 more than was given by his predecessor. Of the two the right hon. Gentleman the Member for Croydon was the much worse offender. When the right hon. Gentleman the Member for Croydon came to settle the fixed debt-charge he actually reduced the provision for the Debt by £500,000. The ordinary liability was £23,000,000, and the liability in respect of the war debt was £4,500,000, making together £27,500,000. The right hon. Gentleman fixed the charge at £27,000,000, and he justified that on the ground that he was getting £30,000,000 from the Transvaal. Hon. Members warned him that that hope might not be realised. The present Chancellor of the Exchequer had increased the amount of the fixed debt-charge by £1,000,000, but that amount was not nearly sufficient. In the first place we had not received the Transvaal money, and in the second place we had increased our liabilities in the course of the last two years. We had nominally increased the amount by £2,000,000, and we had added to our assets by increaing the balances to the extent of £800,000. In order to get that total we had used up assets of £7,000,000 in two sums of £3,000,000 each, and £1,000,000 from the unclaimed dividend fund, so that while we had on the one hand improved our position to the extent of £2,800,000, on the other hand we had gone back to the extent of £7,000,000. On balance, therefore, we had not paid our way during the last two years by over £4,000,000. Was it reasonable that with this huge debt we should not make more ample provision for the Sinking Fund so that we should at least pay our way?

What was the principle on which we ought to proceed in settling the amount of the fixed debt-charge? Speaking in Committee last month the Chancellor of the Exchequer laid down two guiding factors which ought to determine the amount of the fixed debt-charge—What was the total amount we set by for the Sinking Fund? and did that amount bear as good a proportion to the total Debt as it bore in preceding years? He did not think the right hon. Gentleman had set down a satisfactory principle upon which we should be guided. Historically his principle was inaccurate. Previous Chancellors of the Exchequer until the latter days of the right hon. Gentleman the Member for West Bristol had not been guided by that principle at all. Previous Chancellors of the Exchequer had always looked to the ability of the taxpayer to bear the burden. In 1875, when Sir Stafford Northcote proposed the original fixed debt-charge, he settled it at £28,000,000, in spite of our having only at that date a revenue of £77,000,000. It was true that the Sinking Fund bore the proportion to the total debt of .53 per cent., but year by year as the ability of the taxpayer became greater the proportion of the Sinking Fund to the total debt increased up to the time of the right hon. Gentleman the Member for West Bristol, when the figure of .53 had actually doubled. The proportion of the Sinking Fund to the total debt stood then at over 1 per cent. Why should the Sinking Fund increase suddenly have been stopped? As the nation had got richer we had year by year paid off a larger proportion of our existing debt. The right hon. Gentleman the Member for West Bristol stopped this increase, because, among other reasons, we were paying off debt by the purchase of Consols in the market at £110, £112, and £114 for every £100 extinguished. The right hon. Gentleman showed the Committee at that time that £20,000,000 of Consols had been repurchased at a cost to the nation of £2,000,000 above the par value, and he said with a certain amount of reason that the taxpayers would not go on increasing the Sinking Fund if they had to repurchase Consols at an exaggerated premium. On that basis he reduced the total amount of the fixed debt-charge at the time. How did the position stand now? Consols were at about 90, and now was the moment for a return to the old days when year by year the proportion of the Sinking Fund to the total debt was an increasing figure. When Sir Stafford Northcote put the fixed debt-charge at £28,000,000 the total revenue was £77,000,000, and the total debt was £766,000,000. Now, when the debt was about equal, and the revenue £152,000,000, it appeared to him that the Sinking Fund was not so large as it ought to be.

Referring to the increasing amount which was raised by loans, and which increased what were called our capital liabilities, the hon. Gentleman said that the additional loans for this year were to be £8,000,000, and in future years the additional loans which were already authorised would amount to £14,000,000. How was that going to tell upon the taxpayers in future years? They would have to meet on the Estimates no less than £3,000,000 to cover the interest and Sinking Fund on these capital liabilities. Was the future taxpayer to go on borrowing, or was he to discontinue that policy and meet capital expenditure out of the capital of the year. The future taxpayer would have to find an additional £7,000,000 or £8,000,000 to cover the capital expenditure of our borrowing in addition to the £3,000,000 for interest and Sinking Fund. Was it reasonable to the future taxpayer that that burden should be put upon him without our making a strong effort to take advantage of the favourable opportunity we had now to reduce the total amount of the dead-weight debt.

He asked the House to consider the costliness of the present system. The Chancellor of the Exchequer would have to go to the market during the current year to borrow no less than £40,000,000. Part of this would be necessary for the renewal of Treasury bills and Exchequer bonds, and part of it on account of the Irish Land Loan. The right hon. Gentleman borrowed last year at an average of £3 4s. 4d. per cent., so that for the £40,000,000 which he was going to borrow in the course of the year he would have to pay interest presumably at the same rate. If we could get Consols back again to par our credit would stand at 2½ per cent., and we should save 14s. per cent. on the £40,000,000 we had to borrow. That was to say, by the mere restoration of our credit we should save £280,000 a year on the additional amount which we now had to pay for the sums we had to borrow. It was surely very unwise finance for us not to make the most strenuous effort to restore Consols to par. He admitted that when Consols were at par in the open market we should not buy them on as advantageous terms as we could now, but the buying of Consols cheap did not repay us for the additional amount which we had to pay in interest. He would point out to the Secretary to the Treasury that last year Consols were bought to the amount of £1,116,000 at the price of 88.86. That was to say, we bought Consols in the market at the price which gave a return on the investment of £2 16s. 3d. per cent. We were at the same time borrowing money on which we were paying £3 4s. 4d. per cent. He suggested to the Treasury that that was not a particularly good transaction. The Chancellor of the Exchequer had said in defence of the fixed debt-charge that he was making a larger provision for the Debt than had ever been made before. That was true. Owing to the reduction of the interest to 2½ per cent., the £28,000,000 of fixed debt-charge did give the right hon. Gentleman a larger sum for the dead-weight debt than ever they had had before; but what provision had the right hon. Gentleman made for the £160,000,000 of the war debt? Before the war the fixed debt-charge stood at £23,000,000. The actual interest on the war debt was £4,500,000, while the total interest was £27,500,000, so that the whole provision which the right hon. Gentleman was making for the war debt was only one-third of 1 per cent. of the amount of the war debt. He submitted that that was not a sufficient buttress of our credit. As his hon. friend the Member for Islington had said, our ability to borrow at a low rate of interest was one of our best national defences, and he submitted to the Chancellor of the Exchequer that it was unwise parsimony on the part of any Government which did not put the fixed debt-charge at a sufficiently high rate to restore our credit.

SIR GEORGE HARTLEY (Islington, N.)

said he always liked on these occasions to say a word in favour of greater economy in the public expenditure. He thought that we were in greater danger from extravagant expenditure at the present time than from invasion. The debates which so often took place on this subject of greater economy did not seem to have the practical effect which all desired, and there seemed to be no real check on the expenditure of the country. He regarded the House of Commons as practically no check at all. Everyone seemed to desire some great work to be done to improve the condition of the people, but all these matters led to a very great expenditure. Only last week, when discussing the expenditure on their own comfort and luxuries, he had shown that that had increased in twenty years something like 30 per cent. Some drastic power was required at the head of the Government—whether by a Committee of the Cabinet he would not say—to see that each Department kept down expenditure. When he was in the public service Mr. Gladstone laid down a law that a certain sum could only be set aside for each Department. He knew that that was an exceedingly difficult thing to do, but on the other hand the growth of expenditure, both Imperial and local, each acting and reacting on the other, was becoming a very alarming and serious matter.

He had read the other day with great concern the last statement of the National Debt. The Chancellor of the Exchequer in his Budget speech did not state, although he wished that the right hon. Gentleman had done so, that the Debt last year had really increased. That was a very serious question. It was all very well to say that the Debt was being repaid by £10,000,000 a year, but it was not enough if they paid off £10,000,000 in one way and increased the debt in another way by more than £10,000,000. Last year the absolute debt of the country was increased although we were at peace. That was a very unsatisfactory state of affairs. There was a spirit abroad of great extravagance, and one of the most efficient ways of meeting that would be largely to increase the repayment of their debt. He had always advocated that all debt, municipal and Imperial, should be made for shorter periods. He knew that it was always more popular to advocate expenditure, rather than the payment of debt. A short time ago it was urged that the cost of lighthouses amounting to £500,000 should be made a public charge, and there was a large vote in favour of it. It was astonishing that on a Friday afternoon a Bill should be passed throwing an additional £500,00 on the public expenditure. Then there was something like £503,000 for public buildings, and now they were proposing to feed the children at public schools. Those who advocated that measure were afraid to put the cost of it on local taxation and wanted to make it an Imperial charge. If this charge were to be put on the Imperial Exchequer, before many years had passed it would amount to many millions. Then the Government had brought in a Bill to provide employment for the people at the cost of the State or of municipalities. When once this principle was introduced they could readily understand that the cost would ultimately be thrown upon the Imperial Exchequer, and that would be a large addition to the expenditure of the country.

The hon. Member for Cambridge University had referred to the statement made by the Prime Minister on the subject of Imperial defence, and he must say that upon him that speech had had a somewhat sobering effect, because the only possible logic of it seemed to him to be extremely useful. Surely if it had any meaning at all it meant that they should insist upon the reduction of the Army and the Navy. Indeed, he was so led away by the speech that he thought it meant that we wanted very little Army at all. He thought, however, that it was unreasonable to complain that it had not had any effect upon the present Estimates, but it must have a result upon the finances of the next year or two in a decrease in the expenditure upon the Army and Navy. No doubt good came out of ill, and surely the result of this great war which was going on would be to tend to decrease the enormous armaments which were being created throughout the world. The two nations engaged, and certainly Russia, would not for many years be in a position to be a source of danger, and he hoped that this meant a considerable reduction on our war expenditure.

He was glad that the Chancellor of the Exchequer had devoted £1,000,000 to the reduction of the National Debt. He regretted that it was not more, and if the right hon. Gentleman had put his whole surplus to the reduction of debt it would have been wiser. He regarded the increase of this habit of spending and the gigantic growth of our expenditure with great alarm. It was an extraordinary thing that when the matter was looked at over a period of years, and when by some unforeseen circumstance or by war the Estimates became swollen, it was extremely difficult to get them down again. He said, however, that they should put their shoulders to the wheel in order to reduce this great expenditure. It was no use to attempt to do it by theory or abstract principles, they must put their finger upon every point and every detail. Above all things they must pay their debts. Thirty or forty years ago, when the nation was far less wealthy, larger sums were applied to the reduction of the National Debt. It was really, however, illusory to say that they were paying off their debt when, while on the one hand they were paying it off, on the other they were increasing it. The last Return showed that they had not reduced the amount of the Debt, and this was a very serious consideration. He hoped the House would give up these panics in regard to war, and that they should learn to defend themselves in the best possible way by reducing their expenditure, paying off their debts, and by being in a position to meet their enemies by the best possible weapon, viz., a large and substantial balance at the bank.

MR. BLAKE (Longford, S.)

said it was with a feeling of intense interest, tempered with some feeling of despair, that he had listened to the arguments which had been addressed from various quarters of the House in favour of a serious and radical change in the direction of economy. It had been said that the primary function of the House of Commons was to be the protector of the revenue, and to prevent improper expenditure, but the very principle of constitutional rule which laid down the method by which expenditure could be effectively brought before the House of Commons showed the danger of leaving the question, to that Assembly. No Vote could be propounded except upon the recommendation of the responsible Ministers of the Crown, and the very reason that it could not be brought forward, except in that way, showed the danger of trusting the initiative in such cases to a large body of men. It might, of course, lead to log-rolling, and one set of Members might support another set of Members in regard to increased expenditure in exchange for support for another item of increased charge. The primary check was, of course, with the Cabinet, which was responsible for all the expenditure. He did not say but that the influence of an extravagant House of Commons, or of an extravagant Party behind the Ministry, were not evil factors in producing increased expenditure, and that the House of Commons did not share the responsibility of producing increased expenditure, but undoubtedly the first responsibility was with the Cabinet of the day.

Another consideration they had to take into view was that as expenditure increased the Estimates increased. They became accustomed to deal with tens and twenties of millions, and they did not regard hundreds of thousands of pounds as they did before. When there was a large and extravagant expenditure occasioned by war there was always a general swelling of Estimates, and it had always been impossible to reduce them. He said that as guardians of the public weal they ought to recognise these difficulties in order to overcome them, and although there had been, owing to this vicious principle, a general rise of expenditure in all Departments it was their duty to check it. There was no use in saving by the spigot if they wasted by the bunghole. They knew where the big elements were. They were in the expenditure, unproductive in one sense, on defence, expenditure on the Army and Navy. Another mischievous element in English finance was the short loans for purposes which ought to be met year after year out of the revenue of the year. They saw the folly of the system. They saw small amounts first proposed and how they had grown. It was so much easier to create a little debt than to raise by taxation what ought to be met each year out of the expenditure of the year. They knew what the result of such a policy was in private life, and although he did not say that ruin would ensue in these islands, he did say that the system of raising loans for unproductive expenditure during the past few years was a pernicious system, and that when the House saw this system going on they ought to set their faces against a continuance of it.

He sympathised with the views which, had been expressed in this debate as to the effect which ought to be produced in this class of expenditure if defence were the policy which was propounded by the First Minister the other day. The right hon. Gentleman divided his subject into three heads. He spoke of the defence of these islands, and of India, and as a middle head he alluded to colonial defence. As to the first he put the very worst case that could be put and proved to his own satisfaction that under the worst conditions possible to conceive, these islands were inpregnable from the assault of a foreign foe, and upon that the right hon. Gentle man laid down views which tended very largely to the reduction of the Army expenditure of the country, in so far as it might be supposed to be justified by the necessity of not having a large force at hand to repel an invasion which he said it was proposterous to suppose would ever be attempted, or if attempted would never result in an effective landing. With regard to the Indian problem the right hon. Gentleman set up a casus belli in the case of a strategic railway being built into Afghanistan. The Indian problem was different to the French problem, because in the Indian problem the great country which was to be the aggressor and build the strategic railways was now engaged in deadly conflict with an Eastern nation, and whether she won or lost she would be left the severe task of restoring her finances to a sound basis and the severer task of restoring her domestic relations to their normal condition before she could set out on the grave task referred to by the Prime Minister. For the Prime Minister, therefore, to say that that necessitated the keeping up of a great Army outside the Indian Army in order to meet Russian aggression was as far-fetched a suggestion as it was possible to conceive.

The middle head of the problem, that of colonial defence, divided itself into two parts: the defence of the numerous naval bases or possessions, like Malta, Gibraltar, Hong-Kong, and others of that character, the consideration of which was a naval matter; and the defence of the North American, the South African, and the Australian self-governing Colonies of this country. He did not propose to touch on the question of the Australian or the South African Colonies, but he would just say a word as to the North American possessions of this country and ask the House to consider the problem as it really existed with regard to those possessions. Two entirely different sets of considerations arose with reference to the quarter from which any possible attack might be made. He himself believed that the danger in, regard to the North American possessions of the Crown, in so far as an attack with a view of obtaining and retaining them as a prize of war by any enemy of the United Kingdom outside of America, was very trifling indeed. The difficulty to which any other nation—take France, Germany, or any other country, for example—would be exposed in fighting the North American possessions of the Crown would be extremely serious, owing to the distance of its base from the scene of operations, the difficulty of guarding a fleet of transports to the scene of action, and the difficulty of dealing with a country of that vast extent. Those difficulties would be aggravated by the circumstances of the doctrine which the United States of America had adopted, called the Monroe Doctrine, and that itself would be an indication to the other nations of the world that they could not expect to retain it as a prize of war even if they obtained military possession of that country. From all points of view there was but a slight danger of a successful attack upon, those possessions, except from the United States of America. He did not see that that was a reason, considering the impregnable condition of this country, for making the suggestion that the commerce and the outlying possessions of the Crown did not demand some Fleet, but the danger of a successful attack from such quarters as he had referred to should not be regarded as very great. There might be some attempt to harass us, but the danger of that country being conquered did not exist.

Dealing with the attack from the land side, he had heard a good deal of the military forces now being maintained for the defence of the Colonies. Arrangements had been made by which the Dominion of Canada had undertaken to supply the troops necessary on the sea-board of the Atlantic at Halifax and Victoria, which up to the present time had been supplied by this country. Arrangements were also being made for fortifying the city of Quebec. He could imagine an attack by the United States upon Canada, but the conditions of such an attack, if regarded as possible, were such that no lover of this country would for an instant suggest that the defence of the colony, so far as it was conducted from this side of the Empire, should be otherwise than defence on the ocean. No one would suggest that this nation, with its vast obligations and population of 40,000,000, should seriously propose to engage in a land war with the United States, with its 80,000,000 of population, when they reflected upon the conditions of former conflicts between these two countries under entirely different conditions, and when they reflected upon the enormous difference in favour of defence which had been produced by the altered conditions of modern warfare. The course which would be taken in such a calamitous juncture as that which he had contemplated would no doubt be a war upon the sea. If any troops of this country were to be used in such a contest, they would have to be troops accompanied by the Fleet, using the Fleet for their base for those operations on the seaboard. Therefore the people of these islands did not need to consider seriously the question of the military forces of this country being required in reference to any conflict in connection with the North American possessions of the Crown. Canada had 4,000 miles of land frontier, and it was in a large part level and fertile and gridironed with railways. It contained many fertile fields and thriving towns, and was admirably adapted for marching into. No doubt it would be defended with all the gallantry which his countrymen could exercise, and they would be prepared to die in the last ditch, but 5,000,000 of people under these conditions could not successfully resist the persistent attack of 80,000,000 of their enemies, and the military position of Canada would in the end be taken by the United States; but the question of who should hold Canada afterwards would be decided upon the sea and not upon the land. That was the state of the case.

The Canadians believed that they had the best Constitution in the world, and they believed that there ought to be a unification of the continent. This country did not think so. But he thought it would be a shortsighted policy and a public calamity, calculated to dash the realisation of their hopes, to attempt to keep these 5,000,000 people in apprehension of such a war. He was only pointing out the limitations which should exist in case there was this calamity—whether from beyond the seas or from the North American Continent—of a war which involved the fate and fortunes of the North American possessions of the Crown. These conditions ought to be considered with reference to the naval and military expenditure of this country. They did not involve the suggestion that there was no regard to be paid to the possibility of an attack from the shores of North America, but they should be attended to when the suggestion was made that these outlying possessions ought to contribute very large sums in the same proportion as Ireland, which had a population not so large as them, towards military and naval expenditure. Their conditions and relations were such that they had effective control over the policy of this country upon which depended the issues of peace or war, and willing as they were to run the risk, and anxious as they were to obtain the advantages of their present connection with the Crown, it was absurd to suggest that they should be called upon to pay for a policy which the people of this country controlled. What effective control did Ireland exercise over the policy of the present Government? What were the feelings of Irish representatives in regard to the last great and calamitous war? How much did their protests affect the circumstances which led to that war? With that lesson before them how could it be suggested that our colonial possessions would have any effective voice in the circumstances which decided the issue between peace and war. He believed they were perfectly prepared to do what they ought to do in a liberal and just spirit, to bear that portion of their responsibility in the anomalous condition in which the Empire stood. If they could co-ordinate the Empire in some such way as would give a common interest to all concerned it was one thing, but until they succeeded in that task they would find it necessary and just to face the great bulk of their naval and military expenditure from the resources of the islands which, initiated and controlled the policy upon which depended the chances of the issue of peace and war.

He and his friends were prepared to give the utmost support to all those who objected to the bloated military and naval expenditure which was the great and prime cause of the change in the financial condition of this country in the last few years. They objected to the continuance of the system of borrowing for what ought to be paid for out of the yearly revenue in respect of these matters. They objected to it being put forward that these were assets when the only sense in which they were assets was that they were a double liability upon which they not only paid interest on the debt incurred, but had also to provide more money, more guns for the forts, and more men to occupy the forts and work the guns. So far from this expenditure being merely unproductive, it consisted actually of assets which caused expenditure. They were liabilities and not assets. They would assist in every way possible the adoption of a saner system in reference to the naval and military expenditure of this country, in the full belief that that saner system would enable them to reduce taxation, relieve the springs of industry, and enable the process of accumulation of wealth not merely amongst the millionaires, but also amongst the daily toilers in the land. Such a policy would produce contentment and prosperity all through the country, and so render it strong with a real and greater strength than any free nation could obtain in the issue of war.

*MR. CHANNING (Northamptonshire, E.)

said this debate had turned upon issues of profound importance ever since the right hon. Gentleman the Member for Cambridge University and the hon. and learned Member for Dumfries raised it to the higher level of the general policy of the State which must determine the course of expenditure. In what he wished to say he rather desired to protest against the whole policy underlying this Budget. He thought they had a right to protest against the present unsatisfactory financial position of the country as an intolerable wrong. In face of the speech made by the Prime Minister the other day, and when many suggestions had been made which pointed in the direction of economy in regard to expenditure upon armaments, and when measures had already been taken with regard to the Navy, it seemed to him a very monstrous thing that they should have this great increase in the debt of the United Kingdom. Setting aside the repayment by the Transvaal of the sums advanced for resettlement there had been a distinct increase in the total indebtedness of the United Kingdom. Further, this total indebtedness had been allowed to go on accumulating with perfect knowledge of the tremendous problems of local taxation and local indebtedness with which the country had been almost over whelmed in the last few years. Most earnest appeals had been made by the local taxpayer in every possible form for relief, while at the same time this policy of accumulating, rather than decreasing, debt had been continued. He had had the curiosity during the past few days to look up the facts with regard to the debt of the country, and he found that not only was it true that the debt of the country was going on increasing year by year, but that if they looked back twenty-two or twenty-three years ago, Mr. Childers initiated then his wise policy for a sweeping and general reduction of the National Debt by the introduction of a new form of annuities, and a new scheme for superseding the annuities falling due in 1885, the new scheme to effect in the course of twenty years a reduction in the Debt of £176,000,000. That was the situation, the heyday of Liberal finance—a time not only of great social happiness and freedom from oppressive taxes, but also a time when this country had great strength in the councils of Europe and was in a position of far less peril than it was at the present time. In a speech made twenty-two years ago Lord James, then Sir Henry James, dealing with the financial scheme of Mr. Childers, stated that— They (the Liberal Government) have anticipated the filling in of the terminable annuities in 1885, and in advance have created others. The result is, that in twenty years £176,000,000 of debt will be paid off, and if at the end of that time a Finance Minister shall be found courageous enough to maintain the same amount of payment on account of debt, and if we are wise enough to avoid war, and not to add to the debt, not only some who are now living, but even men old enough now to the enjoying the franchise, may live to see the day when the country shall be entirely free of its National Debt. Under this scheme the Debt had been gradually reduced till in 1900 it stood at £628,000,000. Now we saw staring in our faces, in the appalling Return issued a few days ago, this tremendous debt of £800,000,000, in addition to the vast indebtedness of the local authorities, amounting to nearly £500,000,000, which formed an equal, if not a severer burden on the taxpayers of the country. The Chancellor of the Exchequer always laid his case before the House with a lucidity and a consideration for his opponents which was deserving of all praise, but it seemed to him to be an absolute duty in the interest of the classes whose special taxable capacity had been so conspicuously neglected in the finance of the last ten years to enter an emphatic protest against the financial position in which we found ourselves to-day. The raising of such a sum as over £140,000,000 in time of peace was, to his mind, a wrong which the House should not hesitate to denounce and condemn whether as regards just incidence on the several classes who had to bear the pressure of the taxes or as a burden on industry, or as draining national resources which should be husbanded for great emergencies. This taxation had been a dead weight on our industries, and though there had been in the last two years a tremendous expansion in our foreign trade, home trade had been suffering. The Secretary of the Treasury had said to-day that the country was rich enough and willing enough to bear the burden of taxation. He himself completely traversed that proposition. The right hon. Member for West Bristol in his Budget speech in 1896, proved that while the produce of taxes had increased 15 to 16 per cent. in twenty years to that time, expenditure had grown 68 per cent. or four times faster. He had himself calculated the figures for the past ten years to 1904, and found that in ten years the present Government expenditure had grs own 65 per cent. and had gone up from six to eight times as fast as the increase in the produce of taxes.

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