HC Deb 23 May 1905 vol 146 cc1192-224

Considered in Committee.

(In the Committee.)

[Mr. JEFFREYS (Hampshire, N.) in the Chair.]

Clause 6:—

Amendment proposed— In page 2, line 35, after the word 'charged, to insert the words 'in Great Britain.'"—(Mr. Flynn.)

Question again proposed, 'That those words be there inserted."


said he rose to support the Amendment because overtaxation in Ireland constituted an enormous commercial drain on the country. He called attention to the fact that the exemption that they now claimed was never questioned until half a century after the Act of Union, and even at the present moment there were taxes imposed in England that were not levied in Ireland. With regard to the income-tax, various Chancellors of the Exchequer had always opposed its imposition in Ireland by reason of the fact that Ireland was a poor country. It was, in fact, imposed by Mr. Gladstone, "the wizard of finance," as he was called, in 1853, and then it was only imposed as a temporary tax for the purpose of paying off the Consolidated Loan of £4,500,000 which was required to establish the Poor Law system in Ireland. Never since that time had the income-tax been remitted, although it was then understood, though it was never stated, that it was to be taken off at the end of seven years.

He, himself, was in favour of direct rather than indirect taxation, but the difficulty in this case was that they had no means of judging the amount of indirect taxation that was paid in Ireland; they had no statistics of the duties on exports and imports on which to go, and they had never had a separate vote of credit for Ireland. Therefore they had been unable to judge the amount of indirect taxation. The only way they had of obtaining restitution from the Government in respect to over-taxation was by means of the incometax. The position he took up was that the condition of Ireland at the present time was infinitely worse than it was in 1853. They had less wealth and less population, and therefore, from an economic point of view, were in an infinitely worse position now than then. The point of view he wished to put before the House was that this was not to be considered as a question of money alone: it must be considered from a wider point of view; it must be considered from the point of view of fair play in the administration of financial matters between the two countries. When he imposed this tax Mr. Gladstone made what was practically a declaration of policy when he said in this House that the income-tax was not to be looked upon as a permanent charge upon Ireland, but was to be only regarded as a temporary measure imposed for the purposes of paying off the Consolidated Loan. He put it to the right hon. Gentleman that he had proved his case under the terms of the Union, and under the terms on which this tax was imposed on Ireland, and he appealed to the right hon. Member to say whether they had not at least justice on their side and solid commonsense reasons for claiming that its remission might be considered by the right hon. Gentleman.

He contended that the income-tax paid by Ireland was disproportionate in amount to that paid by England and Scotland because there was a difference in the valuation in England and Scotland. In those countries there was a system whereby local assessment committees assisted the Government Department in assessing the tax, but in Ireland the whole responsibility for the valuation was placed in the hands of a non-elective Commissioner from whom there was hardly any appeal. If the Valuation Bill now before the House was passed into law Ireland would be the poorer by £1,000,000 a year. He did not wish to make this a Party question, because it was a purely economic and financial question. It was upon a question of taxation that England lost America, and it was only by resisting the income-tax that they could bring before the Chancellor of the Exchequer their grievances. Ho trusted before this debate closed some hon. Gentlemen representing Ireland on the opposite side of the House, whose constituents suffered from the same grievance as the rest of Ireland, would join in the protest they were making against the overtaxation of Ireland.


said he had dealt with this question in half-a-dozen speeches already, and he could only say now that even if it was admitted that Ireland was overtaxed, and that a remedy must be found, it was not likely that hon. Members would choose a remedy that would relieve the well-to-do in Ireland while leaving the less well-to-do to suffer from their present burdens.

MR. T. L. CORBETT (Down, N.)

said the Ulster Members had not taken part in this campaign for the exemption of Ireland from taxation because they believed in the Imperial destinies of the United Kingdom, and were prepared to bear their share of its burdens.


said when he advocated the remission of the income-tax he admitted he preferred direct to indirect taxation, but the only way in which they could resist overtaxation in Ireland was by attacking the income-tax, because the statistics did not enable them to judge of the value of the export and import duties. He agreed that

the income-tax payers were the persons who ought to pay most but there was no denying the fact that this was the only way to resist taxation.


said he was not astonished at the remarks which fell from the hon. Member opposite for he and many of those who sat with him, and even two hon. Gentlemen who sat on the Treasury Bench, were the lineal descendants of the traitors who sold the blood of their countrymen as well as their country at the time of the Union.


Order, order!

Question put.

The Committee divided:—Ayes, 64; Noes, 162. (Division List No. 175.)

Austin, Sir John Hayden, John Patrick O'Shaughnessy, P. J.
Barry, E. (Cork, S.) Hope, John Deans (Fife, West) Parrott, William
Boland, John Johnson, John Power, Patrick Joseph
Burke, E. Haviland Jones, William (Carnarvonshire Reddy, M.
Burt, Thomas Joyce, Michael Redmond, John E. (Waterford
Caldwell, James Kilbride, Denis Roberts, John H. (Denbighs.)
Campbell, John (Armagh, S.) Lawson, Sir Wilfrid (Cornwall) Roche, John
Clancy, John Joseph Leigh, Sir Joseph Roe, Sir Thomas
Crean, Eugene Lundon, W. Slack, John Bamford
Cremer, William Randal MacNeill, John Gordon Swift Smith, Samuel (Flint)
Delany, William MacVeagh, Jeremiah Sullivan, Donal
Devlin, Chas. Ramsay (Galway M'Fadden, Edward Thomas, David A. (Merthyr)
Dillon, John M 'Hugh, Patrick A. Walton, Joseph (Barnsley)
Dobbie, Joseph M'Kean, John Wason, Eugene (Clackmannan)
Doogan, P. C. Nolan, Col. John P. (Galway, N.) White, Luke (York, E. R.)
Fenwick, Charles Nolan, Joseph (Louth, South) Wilson, Henry J. (York, W. R.)
Ffrench, Peter O'Brien, K. (Tipperary, Mid.) Wilson, John (Durham, Mid.)
Field, William O'Brien, P. J. (Tipperary, N.) Young, Samuel
Findlay, Alex. (Lanark, N. E.) O'Connor, James (Wicklow, W.
Flavin, Michael Joseph O'Donnell, John (Mayo, S.) TELLERS FOR THE AYES—
Gilhooly, James O'Dowd, John Captain Donelan and Mr.
Goddard, Daniel Ford O'Malley, William Patrick O'Brien.
Griffith, Ellis J. O' Mara, James
Abraham, William (Rhondda) Bell, Richard Cochrane, Hon. Thos. H. A. E.
Agnew, Sir Andrew Noel Bignold, Sir Arthur Collings, Rt. Hon. Jesse
Allhusen, Augustus Hen. Eden Bigwood, James Colston, Chas. Edw. H. Athole
Anson, Sir William Reynell Bond, Edward Corbett, A. Cameron (Glasgow)
Arnold-Forster, Rt. Hn. Hugh O Bousfield, William Robert Corbett, T. L. (Down, North)
Arrol, Sir William Brigg, John Craig, Chas. Curtis (Antrim. S.)
Atkinson, Rt. Hon. John Brodrick, Rt. Hon. St. John Crombie, John William
Bailey, James (Walworth) Brotherton, Edward Allen Dalkeith, Earl of
Baird, John George Alexander Bull, William James Davenport, William Bromley
Balcarres, Lord Cameron, Robert Dewar, Sir T. R (Tower Hamlets)
Balfour, Rt.Hn.A. J.(Manch'r.) Carson, Rt. Hon. Sir Edw. H. Dickson, Charles Scott
Balfour, Rt Hn Gerald W (Leeds) Cavendish, V. C. W. (Derbyshire Doughty, Sir George
Banbury, Sir Frederick George Chamberlain, Rt. Hn. J. A (Worc. Douglas, Rt. Hon. A. Akers-
Banner, John S. Harmood- Chapman, Edward Doxford, Sir William Theodore
Bartley, Sir George C. T. Cheetham, John Frederick Duke, Henry Edward
Dyke, Rt. Hn. Sir William Hart Langley, Batty Royds, Clement Molyneux
Elliot, Hon. A. Ralph Douglas Laurie, Lieut.-General Rutherford, W. W. (Liverpool
Fellowes, Rt. Hn. Ailwyn Edw. Law, Andrew Bonar (Glasgow) Sackville, Col. S. G. Stopford
Fergusson, Rt. Hn. Sir J. (Manc'r Lawson, John G. (Yorks. N. R. Samuel, Herbert L. (Cleveland)
Finch, Rt. Hon. George H. Lee, A. H. (Hants., Fareham) Scott, Sir S. (Marylebone, W.)
Finlay, Sir R. B. (Inv'rn'ss B'ghs Legge, Col. Hon. Heneage Shackleton, David James
Fisher, William Hayes Llewellyn, Evan Henry Sharpe, William Edward T.
Fitzmaurice, Lord Edmond Long, Rt. Hn. W. (Bristol, S.) Shipman, Dr. John G.
Fitzroy, Hn. Edw. Algernon Lyttelton, Rt. Hon. Alfred Skewes-Cox, Thomas
Forster, Henry William Maconochie, A. W. Sloan, Thomas Henry
Foster, P. S. (Warwick, S. W.) M'Arthur, Charles (Liverpool) Smith, H. C (North'mb, Tyneside
Galloway, William Johnson M'Iver, Sir Lewis (Edinburgh, W Soares, Ernest J.
Gardner, Ernest Majendie, James A. H. Spear, John Ward
Gordon, Hn. J. E. (Elgin & Nairn Malcolm, Ian Stanley, Hn. Arthur (Ormskirk
Gordon, Maj Evans (T'r H'mlets Melville, Beresford Valentine Stanley, Rt. Hn. Lord (Lancs.)
Gorst, Rt. Hn. Sir John Eldon Middlemore, John Throgmorton Stock, James Henry
Gray, Ernest (West Ham) Montagu, Hn. J. Scott (Hants.) Strutt, Hon. Charles Hedley
Greene, Sir E W. (B'ry S Edm'nds Morgan, D. J. (Walthamstow) Taylor, Theodore C. (Radcliffe)
Greene, W. Raymond (Cambs.) Morrell, George Herbert Thornton, Percy M.
Grenfell, William Henry Morrison, James Archibald Tillett, Louis John
Gretton, John Morton, Arthur H. Aylmer Tomlinson, Sir Wm. Edw. M.
Gurdon, Sir W Brampton Mowbray, Sir Robert Gray C. Tritton, Charles Ernest
Hamilton, Marq. of (L'nd'nderry Murray, Charles J. (Coventry) Tuff, Charles
Haslam, Sir Alfred S. Myers, William Henry Walker, Col. William Hall
Heath, Sir James (Staffords. N W Nussey, Thomas Willans Walrond, Rt. Hn. Sir William H
Helder, Augustus Palmer, Sir Walter (Salisbury) Welby, Lt.-Col. A. C. E. (Taunton
Henderson, Sir A. (Stafford, W. Parkes, Ebenezer Welby, Sir Chas. G. E. (Notts.)
Henderson, Arthur (Durham) Pease, Herbert P. (Darlington) Whiteley, H. (Ashton und. Lyne
Hermon-Hodge, Sir Robert T. Percy, Earl Whittaker, Thomas Palmer
Hickman, Sir Alfred Philipps, John Wynford Willoughby de Eresby, Lord
Higham, John Sharp Pirie, Duncan V. Wilson, F. W. (Norfolk, Mid.)
Hogg, Lindsay Platt-Higgins, Frederick Wilson, John (Glasgow)
Hope, J. F. (Sheffield, Brightside Plummer, Sir Walter R. Wilson-Todd, Sir W. H. (Yorks.)
Hoult, Joseph Pretyman, Ernest George Worsley-Taylor, Henry Wilson
Hudson, George Bickersteth Pryce-Jones, Lt.-Col. Edward Wylie, Alexander
Hunt, Rowland Purvis, Robert
Jebb, Sir Richard Claverhouse Randles, John S. TELLERS FOR THE NOES—Sir
Kennaway, Rt. Hn. Sir John H. Reid, James (Greenock) Alexander Acland-Hood
Kenyon-Slaney, Rt. Hn. Col. W. Renwick, George and Viscount Valentia.
Kerr, John Richards, Thos. (W. Monmouth)
King, Sir Henry Seymour Robertson, Herbert (Hackney)

rose to move an Amendment to extend the principle of graduated income-tax. His proposal was that the rate in respect of incomes between £1,000 and £2,000 should be 1s., £700 up to £1,000, 10d.; —600 to £700, 9d.; £500 to £600, 8d.; £400 to £500, 6d.; £300 to £400, 4d.; and £200 to £300, 2d. The object he had in view was to have a debate upon the graduation of the income-tax. This was by no means the first time that this question had been raised in the House of Commons. He could assure the Chancellor of the Exchequer that a very large number of the members of his own Party outside the House were keenly interested in this matter, and if he saw the letters he received from Conservatives and Unionists who were in favour of this graduation he would be surprised. The principle had become an integral part of our fiscal policy, and he wished to see it carried further. Mr. Pitt once said that a man who could afford to keep two carriages should be charged on each at a higher rate than the man who could only afford one. That was a sound and equitable principle of taxation, but it was not put into operation until the passing of Sir William Harcourt's Estate Duty Act. The burden of taxation under the present system pressed more heavily upon the poor than upon the rich. When taxes were high the rich man had only to deprive himself of comforts and luxuries, but the poor man under those circumstances would have to deprive himself not only of comforts, but also of necessaries. He held that Customs duties were paid by persons of small means in greater proportion to their incomes than persons of large means. The Government had been asked to levy an ad valorem duty upon tea, tobacco, and the different classes of wines. At the present time they levied exactly the same duty upon the cheapest kind of tea, tobacco, and wines as they did upon the most expensive kinds, notwithstanding the enormous difference in the cost. Some change in this respect was absolutely necessary in order to adjust the pressure of taxation. Sir William Harcourt said— If a tax is to be maintained at a high figure it is necessary that we should make some attempt to adjust its pressure so as to make it less intolerable to those least able to bear it. Everybody must agree that the pressure of the income-tax is most severe upon the class of men of small and moderate incomes. The right hon. Gentleman the Member for West Bristol had declared that if the income-tax was to be maintained at anything like the high rate it was at when he spoke, it would be absolutely necessary to make some further change in the incidence of that taxation. Some hon. Members held that the Estate Duty Act had redressed the inequality between the taxation of the man of small income and the man of large income. But at the time of the passing of the Estate Duty Act the yield of the income-tax was £17,000,000, whereas it was about £30,000,000 now, so that in order to redress the balance a new estate duty must be passed or a graduated system of income-tax established.

They had repeatedly asked that this question should be inquired into by a Committee. He could not see what earthly harm it would do to the Government to have this question of the incidence of taxation inquired into by an impartial Committee. He asked the Prime Minister last year whether he would not appoint such a Committee or make it one of the terms of reference to the Departmental Committee already appointed, and he replied that anybody with ordinary industry could ascertain the facts for himself. So far as his own industry went, he could say that the present system of levying income-tax was outrageous. The hon. Member for Cleveland had made some very industrious investigations, and his conclusion was that what the working man paid was equivalent to an income-tax of 1s. 7d. in the £, and that statement had never been contradicted upon any official authority. He thought it was simply monstrous that men receiving £800, £8,000, or £80,000 should, so far as the income-tax was concerned, be paying exactly at the same rate. He thought the time had come for the extension of a principle which had been admitted on all hands to be sound and equitable. The question was, How was that principle to be extended, how far was the operation to proceed, and what were the difficulties in the way? Sir William Harcourt had occasion to consider the question of a graduated income-tax in 1894, and he said£ I shall be asked the question if you are graduating the income-tax down on the lower scale, why not graduate it up on the larger incomes in proportion. There is nothing to be said against such a system; indeed, there is every argument in its favour. The difficulties which lie in the way are of an administrative and practical nature which, as yet, I have not been able to find means to overcome. What were the difficulties which so far had been raised to a graduated income-tax? First of all, they were told that there was the difficulty of testing the aggregation of a man's income. With regard to the individual himself, he thought there would be no difficulty in aggregating his income. If he did not know what his income was he ought to know. They compelled tens of thousands of people to aggregate their incomes in order to secure remissions. If that could be done in regard to small incomes why could it not be done in regard to larger incomes? The poor people had to do it, and why should there be any difficulty in aggregating larger incomes? As to testing the aggregation of incomes that was a task which did not present any insuperable difficulties. A man, for instance, might present his list of investments and the income he derived from them. How were they to test the correctness of that aggregation? His income would either consist of profits he derived from business or from investments. So far as the profits from business were concerned, the Inland Revenue authorities had just as full information now as they could reasonably expect to possess. It was their business to ascertain what the profits from a man's business amounted to now, and there would be no greater difficulty in testing that in the future than in the past. So far as income derived from banks and companies were concerned, there would be no difficulty whatever on the part of Somerset House in testing the returns, because they had there the lists of shareholders. The Chancellor of the Exchequer shook his head, but he could not see any insuperable difficulty in making an alphabetical list, which would only mean the employment of unskilled clerical labour of the lowest description, and there would be less difficulty about it than in compiling the London Directory. The work was of a purely clerical character, and he hoped the right hon. Gentleman would state in what respect there would be any great difficulty in testing the aggregation of a man's income so far as Somerset House was concerned.

He recognised, however, the force of the objection which was entertained by hon. Members on both sides of the House that the present system of taxing the profits at the source was far more convenient than a system of aggregation of incomes, although he did not say that that objection was insuperable. He had some observations to make upon that. In the first place he thought it was desirable that people should know when they were taxed, and he was afraid that there was a good deal of extravagance due to the fact that people did not realise that they were taxed. In the case of indirect taxation many people did not realise that they were being taxed. He thought it would be a very good thing if the smaller income-tax payers were obliged to aggregate their incomes, and a system of directly graduated taxation would in the end be far more just to the individual taxpayer. He recognised the difficulties in the way of abolishing the collection of the tax at the source, for they were very serious, and very strong objections were entertained to it on both sides of the House. He was not, however, at all sure that those objections were insuperable, but they did exist. He wished to draw attention to the Amendment on the Paper standing in the name of the hon. Member for Elland, which entirely obviated the difficulty of collecting the tax at its source. His hon. friend the Member for Elland had an Amendment on the Paper proposing a different scheme of graduation, and he would not, therefore, press his own Amendment.


asked whether it would not be for the convenience of the Committee to take the whole discussion on one of the Amendments.


said it would, but he had understood the hon. Member was going to move his Amendment, otherwise his speech was out of order.


said that in that case he would move the Amendment of his hon. friend, namely, that the income-tax should be 10d., and that persons with incomes between £5,000 and £10,000 should pay an additional penny, and with incomes of over £10,000 an additional 2d. It was unnecessary for him to add very much to what he had already said with reference to this Amendment. He hoped the Chancellor of the Exchequer would feel that this question, which came up annually, deserved the careful consideration of the Government. It was felt by a large number of persons outside the House that the present incidence of the income-tax was not just, and that a greater share of the national burdens should fall on those who were receiving incomes of £5,000, £10,000, and £20,000 a year than was the case at the present time. That, after all, was the vital question which underlay this Amendment. Would the Government take its courage in both hands and make these great incomes bear a fair share of the national burdens? He did not want to see any class of the community casting off any portion of its fair share of taxation, but he felt that the present incidence of this tax was not equitable as between class and class, or between man and man. He trusted that next year they would see an advance made in the direction he had indicated. He begged to move.

Question proposed, "That the words 'one shilling' stand part of the clause."

MR. TREVELYAN (Yorkshire, W.R., Elland)

said the object which his hon. friend and himself had was very much the same, although the two Amendments proposed different methods. They were constantly told in this connection that the authorities at the Treasury, and all past Chancellors of the Exchequer, were against them. In the last debate on the subject the Chancellor of the Exchequer cited the authority of Mr. Gladstone against the graduation of the income-tax, but it must be remembered that in Mr. Gladstone's time the income-tax held a very different position in national finance to what it did now. Then it was a small and temporary tax, regarded as an emergency war tax; now it was the pillar of our national finance, standing at 1s. in peace time with no apparent prospect of reduction. No doubt the official view of the Treasury was at present against the practicability of the graduation of the income-tax, but that opinion had hitherto been generally based on the impossibility of breaking up the present system of collection at the source. He was glad, therefore, his hon. friend had accepted his Amendment, the proposal of which was to leave the income-tax as it was now, except that it should be considerably reduced, but that, over and above the present tax, there should be an extra tax on large incomes levied on certain individuals who would have to state their incomes and declare them as they were, in some cases, declared at the present time.

He should like to deal with a few of the objections which had been brought forward. The right hon. Gentleman said that to require men with large incomes to declare those incomes was inquisitorial, and that consequently it would lead to considerable irritation. It was worth while considering that part of the income-tax at present was levied on incomes which were arrived at by inquisition. In the case of Schedule D declarations had to be made as to professional incomes. The Chancellor in the speech he made recently quoted an informant who said he was amazed at the evasions that occurred in arriving at the incomes under Schedule D, yet that was not given as a reason for declaring that income-tax should not be imposed on those incomes. It was true that any system of taxation requiring this kind of declaration would cause irritation among the people who had to declare their incomes; but the unpopularity and inconvenience would be less in their case than the present heavy tax was on people of very small incomes, who were suffering very severely under the taxation, and whom they wished to relieve by this proposal.

The Chancellor of the Exchequer relied most on the argument that it was not worth while undertaking the graduation of the income-tax, because as a matter of fact there would be a very small increase of revenue from it. Of course, it was a more or less speculative question how much revenue would be raised, and he did not want to go into the figures with the view of disputing them. They were speculative figures, even although drawn up by Treasury officials. The right hon. Gentleman came to the conclusion that a moderate graduated income-tax would result in an increase of £3,000,000 gross revenue, realising altogether £1,500,000 net revenue, and he asked the House whether it was worth while raising that amount from a tax of this kind. It was worth while mentioning that in so far as the income-tax was an emergency tax in case of war—to take the best concrete instance—it was obvious that we might place a heavy tax on big incomes in time of national necessity, and, therefore, it need not be assumed that for purposes of necessity a great deal more than £1,500,000 could not be got. Taking the calculation of the right hon. Gentleman as showing the ordinary normal advantage which we could get from a graduated income-tax he held that £1,500,000 increase was not so despicable. He believed that that was a very moderate estimate; but, even so, it was an amount worth having if they could get it in this legitimate and desirable way.

The real importance of the proposal lay in the general feeling which was growing up against the high income-tax as it was. The last time the question was debated in the House some very strong things were said about the tax standing at a shilling in time of peace, and it was stated that unless some effort was made to reform the incidence of this tax it would create well-merited resentment in the country. The remedy suggested was indirect taxation, because it would not be felt. To his own mind that threw an interesting light on the action of the present Chancellor of the Exchequer in dealing with the question of a graduated income-tax. The graduation of the income-tax was one of the alternatives to protective taxation, one of the alternatives to the indirect taxation which existed now, and to the indirect taxation proposed by fiscal reformers. The action of the present Chancellor of the Exchequer had been peculiar compared to that of his two predecessors. They had practically on two successive occasions given a promise to the House that when the investigation was made by the Committee appointed to look into various matters connected with the income-tax the question of the practicability of graduation should also be included.


As a matter of fact my predecessor did not promise that. It was alleged the other day in the House that he did promise it.


said he practically promised it. He did not give a definite promise, but the right hon. Member for West Bristol did so.


I thought the hon. Member was referring to my immediate predecessor, the right hon. Gentleman the Member for Croydon.


said the occasion to which he was referring was when the right hon. Member for Croydon was Chancellor of the Exchequer, and when the right hon. Member for West Bristol was going to act as Chairman of the Committee appointed to inquire into questions concerning the income-tax. On that occasion his hon. friend withdrew an Amendment similar to that which he had on the Paper that day because the right hon. Member for West Bristol gave the House to understand that he would raise no objection to the question of graduation being inquired into by that Committee. The right hon. Member for Croydon did not indicate that he would refuse to allow that question to be sent to the Committee. These two right hon. Gentlemen, holding the Treasury view that graduation was practically undesirable, had both admitted that the question ought to be inquired into, but neither of them had banned graduation as a thing which was undesirable in itself if only it could be proved to be practicable. The present Chancellor of the Exchequer had taken abundant opportunity and trouble to prove that graduation was undesirable, not dealing with the question of practicability. He was hostile to the proposal, and probably saw that the more effective was the taxation of luxuries the less chance would there be for taxation of food. He begged to second that Amendment.

Amendment proposed— In page 2, line 30, to leave out the words, 'one shilling,' and insert the words, 'tenpence, and every person whose total income from all sources upon which income-tax is now paid exceeds five thousand pounds shall pay an additional tax upon the following scale:—Incomes over five thousand pounds up to ten thousand pounds at the rate of one penny; incomes over ten thousand pounds at the rate of twopence.'"—(Mr. J. H. Lewis.)


said when the hon. Gentleman took upon himself to explain the thoughts that influenced his actions, he travelled into a region of speculation far removed from the truth and the subject before the Committee. The subject of the graduation of the income-tax was interesting, but not novel. He had often heard it discussed, and if he continued to have the honour of a seat in the House he would probably hear it discussed in future, and in some happy distant time leaders of the Party sitting opposite would be defending the attitude now taken by himself, and pointing out the impracticability of the proposal. To the hon. Member who moved the Amendment he would say that the possibility of evasion and of deliberate fraud was extended with every extension given to the voluntary assessment of individuals for the tax. The smooth working of the gigantic financial engine depended on the tax being collected automatically, and the yield of the tax had steadily increased since the adoption of the practice of collection at its source with less dependence on individual payers. All his predecessors had taken the view that it was undesirable to disturb that practice.

The proposal of the hon. Member for Elland was one to reduce the contribution of the direct taxpayer to the expenditure of the State. This would mean the reduction of the revenue for the present year, and the contribution would have to be made good out of indirect sources of taxation. The suggestion also was that a fresh impost should be placed upon every one who was in possession of an income over £5,000. A proposal of this kind must fulfil at least three conditions—(1) that such a scheme should be possible and feasible; (2) that it should produce a substantial gain to the revenue; (3) that this gain should be purchased at a reasonable cost of inconvenience and trouble, not merely to the revenue authorities, but to the general bodies of taxpayers. He did not believe that this plan would fulfil in practice any one of these conditions. The opinion of his predecessors had been referred to. One hon. Member had stated that his right hon. friend the Member for Croydon had pledged himself to refer this question to a Committee for inquiry. That was not the case. He had the authority of his right hon. friend the Member for Croydon for saying that he was not in favour of graduation, and did not intend to refer the question to the Committee that was to have been appointed by him. He admitted that the right hon. Member for West Bristol did at one point of the session of 1902 contemplate a reference of this question to a Committee, but no opinion of his would be found indicating that the proposal was either practicable or possible. These opinions were not confined to one side of the House. The late Sir William Harcourt said that he had carefully considered the subject, and had arrived at the conclusion that there could not be a graduated income-tax unless the whole sources of income were inquired into, and that would be so unpopular that it could not be maintained. The right hon. Member for West Bristol was equally strong in his opposition to graduation. He concurred with the view of the late Sir William Harcourt that to call on every one to declare his income would be to make just that kind of inquisition into private affairs which had prevented the income-tax from being adopted in many foreign countries, while it would be certain to destroy our power to maintain it in this country.

A calculation which he submitted to the Committee last year showed that a moderate graduation would only produce a very moderate result. The income-tax affected a great deal of movable property; and if the tax were graduated to the amount which had been suggested, there would be an enormous inducement on persons to remove their income outside the area of taxation. There was a great deal of income that could be treated in that way without any fraudulent evasion, but by legitimate measures. [OPPOSITION cries of "How?"] People could remove their property abroad and so escape the tax. It would be quite impossible to aggregate accurately the incomes of these persons, while the hon. Member allowed nothing for the cost of creating a new system of collection and a new procedure by which this additional revenue was to be collected under the new method of assessment. If the tax were doubled, and the maximum raised to 2s., it would result in nothing but infinite disturbance and dislocation to business, in addition to great friction between the revenue officials and the citizens from whom the tax was collected. It would be an inadequate return for all the sacrifices which had to be made in the so-called interest of relief to the taxpayer, while it would afford no consolation for the disturbance that would be created. He admitted that an income-tax of a shilling was too high in a time of peace, and he was anxious to lower it. But it was by lowering, and not by tampering with the methods of its collection that they could remove inequalities and injustices, and so make the tax, as it should be, a great and convenient instrument in our national finance, capable of rapid, almost instantaneous, expansion in any great emergency.


said that his hon. friend did not profess that the particular scheme of graduation he had submitted was ideally perfect. What was wanted was that the House should agree to the principle of graduation. He, himself, had never concealed his opinion that there was very great difficulty in graduating the income-tax beyond a certain figure; but in the last few years opinion on the subject had advanced considerably, and he believed that there was now a general feeling, both in the House and in the country, that there ought to be a practical inquiry into the question whether, assuming the principle of graduation, it could be carried out in detail with due regard to the income-tax as a great engine of finance. The Chancellor of the Exchequer had quoted Mr. Gladstone as being against the principle of a graduated income-tax; but he would point out that the right hon. Member for West Bristol had pledged himself to an inquiry into this matter.


said that his right hon. friend the Member for West Bristol had, he believed, changed his attitude in regard to this question. When he contemplated the reference of the matter to a Committee, the right hon. Gentleman explained that he himself did not believe in the graduation of the income-tax.


said he admitted that the late Chancellor of the Exchequer had always said that he did not see how a graduated income-tax could be carried out practically, but that he did think that it would be of advantage that a Committee should be appointed to make full inquiry into the matter. That was also the position taken up by his right hon. friend the Member for Berwick.


said he always had taken a considerable interest in this subject. Previous to the passing of the Death Duties Act he felt that the poor paid a larger share than the rich of taxation, and that that was inevitable under the present system. The hon. Gentleman who seconded the Amendment had made a somewhat aggressive attack upon rich people. He was not one of them himself, but he did not think this question should be approached with the idea of attacking people who flung away money in luxuries. The real question was, What would be the effect of a graduated income-tax on the Exchequer? That was a point which should be very carefully gone into. He had got a Return which threw a good deal of light on the subject. Under Schedule D there were half a million of people whose incomes ranged from £150 up to £50,000, and there was the startling fact that those who had a gross income of £50,000 and upwards were only fifteen in number.


asked if the hon. Gentleman would tell the Committee how these aggregates were arrived at.


said it was the Return of those who were assessed under Schedule D of the income-tax in 1901. It was quite true that those persons might have other sources of income besides that included under Schedule D. Now the gross income of those persons tabulated in the return amounted to only £1,500,000, and if they were to tax those persons who had over £50,000 another shilling, it would simply yield £70,000 or £80,000 more, so that unless they put on a very high differential tax the Exchequer would only receive a comparatively small sum. If any graduated system were tried the tax on large incomes would have to be made so large to get in any return as to amount practically to confiscation. After all, the men who made large incomes had made the country rich and prosperous and provided employment for the people, and he could not think it would be wise or politic to make it almost a crime for a man to be successful in business. He agreed that it was most desirable that all those who were rich should contribute handsomely and liberally to the taxation of the country, but if they took the whole income of every person over £50,000 referred to in the schedule he had mentioned, they would not receive an amount equal to what a one shilling tax produced upon incomes of £160 to £200 a year. From the standpoint of public policy it was not advisable to discourage men from being successful in trade and commerce.

The whole question of taxation and the burden of the income-tax were subjects which required careful consideration. To his mind the burden was enormous at the bottom of the scale. He felt that the great increase in the expenditure of the country was a matter of very great concern. He was not so much concerned about the burden of the rich as those who were at the bottom of the scale who paid income-tax on incomes of £160 to £200, for these were the men who paid more taxation in proportion to income than any other class. He thought, however, the payment of income-tax was a matter that needed inquiry. In many cases people paid in an unfair proportion. Further, he had always advocated that there should be a separation between spontaneous and industrial income. In his opinion the tax would not be made fairer by the introduction of a graduated system, which would, he believed, be so irritating as to render the collection of the tax almost impossible; but by careful adjustment it might be made simply a tax upon income, which it was not always now, and a different scale might be introduced for persons who earned their income by their labour and for those who received their income from inherited property. He would hail with satisfaction an inquiry into this question, which he had so many times solicited from different Chancellors of the Exchequer.

MR. MCKENNA (Monmouthshire, N.)

said the hon. Member who had just sat down had used certain figures without apparently understanding what their meaning was. He had told the House that in the Returns for income-tax only fifteen persons were given out of nearly half a million as persons who enjoyed incomes of over £50,000 a year. If he looked through the list of Members of the House of Commons he would find a far greater number than he had men- tioned with incomes of more than £50,000 a year, and if he looked through the list of the Members of the other House, he would find a still larger number.


Not in trade.


said that outside the Houses of Parliament there were many more persons with incomes of more than £50,000 a year. The figure which the hon. Member had given was so obviously false that he was surprised——


said that he never said that was the total number of persons with incomes over £50,000 a year. All he said was that that was the number given in the column he had quoted, and that it might be accepted as a fair proportion.


What was the use of taking figures which did not represent the total number of rich persons and saying that if their incomes were taxed under a graduated system they would only get a sum equivalent to a tax of one shilling on the smaller incomes? He was surprised that the hon. Member had brought those figures forward.

Upon one point he thought the Chancellor of the Exchequer's memory was a little at fault. There had been an implied promise by the late Chancellor of the Exchequer that the subject of graduation of income-tax should be submitted to the Committee. He remembered some time ago the hon. Member for Flintshire moving an Amendment in favour of graduating the income-tax, and the right hon. Gentleman the Member for West Bristol on that occasion said he would be willing to act as Chairman of that Committee, and upon that statement his hon. friend withdrew his Amendment. It was understood that the graduation of the income-tax was to form part of the discussion upon that Committee. The right hon. Gentleman the Member for Croydon was then in the House, and although it was perfectly true that that right hon. Gentleman did not get up and say that he agreed that this subject should be included in the discussions of the Committee, he allowed his hon. friend the Member for Flintshire to withdraw his Amendment under the belief that the subject was going to be discussed. Therefore, it was entirely out of the question for the Chancellor of the Exchequer to allege that a promise had not been given that the subject of the graduation of the income-tax should be submitted to the proposed Committee. The principle of graduation had been admitted by the House over and over again. What they complained of was that, while the Chancellor of the Exchequer brought forward reasons to show that the particular form of graduation proposed would not work from the point of view of raising revenue, he was not entitled to refuse to give them the benefit of seeing if a Committee could not find some way in which the principle could be worked. It was obvious that there were various ways. They might tax an income either on its receipt or expenditure. Why not place a heavier duty upon inhabited houses, estimating the amount of every person's income upon the amount he paid in house rent? That system would admit of extension to any degree. As a matter of fact, with rare exceptions, most people spent upon house rent in a reasonable proportion to their incomes. If they put a graduated tax upon house rent they would be putting a very fair tax upon the expenditure of rich men who would be taxed in respect of all their houses, and in this way they might arrive at some form of the graduation suggested. He agreed with the Chancellor of the Exchequer that if they had to assess their own incomes the assessment they would make would probably be very moderate ones, but in the case

of expenditure there was no means of disguising it, and they would only have to hit upon certain items in order to get at the man who spent a great deal. Consequently the men who spent most would be taxed most.

The hon. Member who spoke last argued as if the very rich man should not be taxed more than the poor man. In fact, he seemed to think that the rich ought to be exempt because they were the foundation of the wealth of the country, and the means of providing a good deal of employment for the people. In his opinion, if the rich were taxed more there would be just as much labour employed as at present. The argument of the employment of labour as applied to the rich man was absolutely fallacious. The object of a graduated system was to take more from those who did not feel the burden of taxation in order to relieve those who did feel it most keenly. The Chancellor of the Exchequer had not treated this Amendment in the spirit in which it was moved. Their object was to impress upon the House the need for some alteration in their system of taxation which would enable a larger proportion to be borne by the very rich classes. He thought this was a question which ought to be submitted to a Committee upstairs, and although he agreed that individual assessment was not the best form, nevertheless he should vote for this Amendment because this was the only means by which they could force upon the Chancellor of the Exchequer the need for this great subject being discussed.

Question put.

The Committee divided:—Ayes, 188; Noes, 136. (Division List No. 176.)

Agg-Gardner, James Tynte Bain, Colonel James Robert Bigwood, James
Agnew, Sir Andrew Noel Baird, John George Alexander Bill, Charles
Allhusen, Augustus Henry Eden Balcarres, Lord Bingham, Lord
Anson, Sir William Reynell Balfour, Rt. Hn. A. J. (Manch'r.) Boscawen, Arthur Griffith
Arnold-Forster, Rt. Hn. Hugh O Balfour, Rt. Hn. G. W. (Leeds) Bousfield, William Robert
Arrol, Sir William Balfour, Kenneth R. (Christch. Bowles, Lt.-Col. H. F (Middles'x
Atkinson, Rt. Hon. John Banbury, Sir Frederick George Brodrick, Rt. Hon. St. John
Aubrey-Fletcher, Rt. Hn. Sir H. Banner, John S. Harmood- Brotherton, Edward Allen
Bagot, Capt. Josceline FitzRoy Bartley, Sir George C. T. Brymer, William Ernest
Bailey, James (Walworth) Bignold, Sir Arthur Bull, William James
Campbell, J. H. M. (Dublin Univ. Guthrie, Walter Murray Pease, Herbert P. (Darlington)
Carlile, William Walter Hall, Edward Marshall Percy, Earl
Carson, Rt. Hon. Sir Edw. H. Hamilton, Marq. of (L'nd'nderry Pilkington, Colonel Richard
Cautley, Henry Strother Hardy, Laurence (Kent, Ashf'rd Platt-Higgins, Frederick
Cavendish, V. C. W. (Derbyshire Hare, Thomas Leigh Plummer, Sir Walter R.
Cayzer, Sir Charles William Haslam, Sir Alfred S. Pretyman, Ernest George
Cecil, Lord Hugh (Greenwich) Hay, Hon. Claude George Pryce-Jones, Lt.-Col. Edward
Chamberlain, Rt. Hn. J. (Birm.) Heath, Sir James (Staffords,N. W Purvis, Robert
Chamberlain, Rt Hn. J. A. (Worc. Heaton, John Henniker Randles, John S.
Chapman, Edward Helder, Augustus Rankin, Sir James
Clive, Captain Percy A. Henderson, Sir A. (Stafford, W.) Rasch, Sir Frederic Carne
Cochrane, Hon. Thos. H. A. E Hickman, Sir Alfred Reid, James (Greenock)
Collings, Rt. Hon. Jesse Hope, J. F. (Sheffield, Brightside Remnant, James Farquharson
Colston, Chas. Edw. H. Athole Hoult, Joseph Renwick, George
Corbett, A. Cameron (Glasgow) Hozier, Hn. James Henry Cecil Ridley, S. Forde
Corbett, T. L. (Down, North) Hudson, George Bickersteth Roberts, Samuel (Sheffield)
Craig, Chas. Curtis (Antrim, S.) Hunt, Rowland Robertson, Herbert (Hackney)
Cross, Herb. Shepherd (Bolton) Jebb, Sir Richard Claverhouse Royds, Clement Molyneux)
Dalkeith, Earl of Kennaway, Rt. Hn. Sir John H. Rutherford, W. W. (Liverpool)
Dalrymple, Sir Charles Kenyon-Slaney, Rt. Hon. Col. W. Sackville, Col. S. G. Stopford
Davenport, Wm. Bromley Kerr, John Sadler, Col. Samuel Alexander
Denny, Colonel Keswick, William Sassoon, Sir Edward Albert
Dewar, Sir T. R (Tower Hamlets) Kimber, Sir Henry Scott, Sir S. (Marylebone, W.)
Dickinson, Robert Edmond Lambton, Hon. Frederick Wm. Seely, Chas. Hilton (Lincoln)
Dickson, Charles Scott Laurie, Lieut.-General Sharpe, William Edward T.
Dimsdale, Rt. Hn. Sir Joseph C. Law, Andrew Bonar (Glasgow) Skewes-Cox, Thomas
Doughty, Sir George Lawrence, Sir Joseph (Monm'th Sloan, Thomas Henry
Douglas, Rt. Hn. A. Akers- Lawson, John Grant (Yorks. N R Smith, H C. (North'mb. Tyneside
Duke, Henry Edward Lee, Arthur H. (Hants., Fareham Smith, Rt Hn J. Parker (Lanarks
Dyke, Rt. Hn. Sir William Hart Legge, Col. Hon. Heneage Spear, John Ward
Egerton, Hon. A. de Tatton Leveson-Gower, Frederick N. S. Stanley, Hn. Arthur(Ormskirk
Elliot, Hn. A. Ralph Douglas Long, Rt. Hn. Walter (Bristol, S. Stanley, Rt. Hn. Lord (Lancs.)
Fellowes, Rt Hn. Ailwyn Edward Lyttelton, Rt. Hon. Alfred Stirling-Maxwell, Sir John M.
Fergusson, Rt. Hn. Sir J. (Manc'r) Macdona, John Cumming Strutt, Hon. Charles Hedley
Finch, Rt. Hon. George H. Maconochie, A. W. Taylor, Austin (East Toxteth)
Finlay, Sir R. B. (Inv'rn'ss B'ghs) M'Arthur, Charles (Liverpool) Thornton, Percy M.
Fisher, William Hayes M'Iver, Sir Lewis (Edinburgh, W Tomlinson, Sir Wm. Edw. M.
Fison, Frederick William Majendie, James A. H. Tuff, Charles
FitzGerald, Sir Robert Penrose Manners, Lord Cecil Vincent, Col. Sir C E H (Sheffield)
Fitzroy, Hn. Edw. Algernon Marks, Harry Hananel Walker, Col. William Hall
Forster, Henry William Melville, Beresford Valentine Walrond, Rt. Hn. Sir William H.
Foster, P. S. (Warwick, S. W.) Montagu, Hn. J. Scott (Hants.) Welby, Lt.-Col. A. C. E (Taunton
Galloway, William Johnson Moon, Edward Robert Pacy Welby, Sir Charles G. E. (Notts.)
Gardner, Ernest Moore, William Whiteley, H. (Ashton und. Lyne
Garfit, William Morgan, D. J. (Walthamstow) Wilson, A. Stanley (York, E. R.)
Gibbs, Hon. A. G. H. Morrell, George Herbert Wilson, John (Glasgow)
Gordon, Hn. J. E. (Elgin & Nairn) Morrison, James Archibald Wilson-Todd, Sir W. H. (Yorks.)
Gordon, Maj. Evans (T'r H'mlets Morton, Arthur H. Aylmer Wolff, Gustav Wilhelm
Goulding, Edward Alfred Mount, William Arthur Wortley, Rt. Hn. C. B. Stuart
Graham, Henry Robert Mowbray, Sir Robert Gray C. Wylie, Alexander
Greene, Sir E. W (B'ry S Edm'nds Murray, Charles J. (Coventry)
Greene, W. Raymond (Cambs. O'Neill, Hon. Robert Torrens TELLERS FOR THE AYES—Sir
Grenfell, William Henry Palmer, Sir Walter (Salisbury) Alexander Acland-Hood
Gretton, John Parkes, Ebenezer and Viscount Valentia.
Abraham, William (Rhondda) Caldwell, James Doogan, P. C.
Allen, Charles P. Cameron, Robert Douglas, Charles M. (Lanark)
Barran, Rowland Hirst Campbell, John (Armagh, S.) Duncan, J. Hastings
Barry, E. (Cork, S.) Cawley, Frederick Ellice, Capt E C (S Andrw's B'ghs
Beaumont, Wentworth C. B. Cheetham, John Frederick Emmott, Alfred
Bell, Richard Churchill, Winston Spencer Eve, Harry Trelawney
Benn, John Williams Crean, Eugene Fenwick, Charles
Boland, John Cremer, William Randal Field, William
Bolton, Thomas Dolling Crombie, John William Findlay, Alex. (Lanark, N. E.)
Brigg, John Dalziel, James Henry Flavin, Michael Joseph
Brown, G. M. (Edinburgh) Delany, William Furness, Sir Christopher
Burke, E. Haviland Devlin, Chas. Ramsay (Galway Goddard, Daniel Ford
Burns, John Dillon, John Griffith, Ellis J.
Burt, Thomas Dobbie, Joseph Haldane, Rt. Hon. Richard B.
Harcourt, Lewis Mooney, John J. Samuel, Herb. L. (Cleveland)
Harwood, George Morgan, J. Lloyd (Carmarthen) Shackleton, David James
Hayden, John Patrick Moss, Samuel Shaw, Charles Edw. (Stafford)
Helme, Norval Watson Murphy, John Shipman, Dr. John G.
Hemphill, Rt. Hn. Charles H. Nannetti, Joseph P. Slack, John Bamford
Henderson, Arthur (Durham) Newnes, Sir George Smith, Samuel (Flint)
Higham, John Sharp Nolan, Joseph (Louth, South) Strachey, Sir Edward
Hobhouse, C. E. H. (Bristol, E.) Nussey, Thomas Willans Sullivan, Donal
Holland, Sir William Henry O'Brien, K. (Tipperary, Mid.) Taylor, Theodore C. (Radcliffe)
Hope, John Deans (Fife, West) O'Brien, Patrick (Kilkenny) Thomas, A. (Carmarthen, E.)
Hutchinson, Dr. Charles Fredk. O'Brien, P. J. (Tipperary, N.) Thomas, Sir A. (Glamorgan, E.)
Hutton, Alfred E. (Morley) O'Connor, John (Kildare, N.) Thomas, David A. (Merthyr)
Johnson, John O'Donnell, John (Mayo, S.) Thomas, J A (Glamorgan, Gower
Jones, Leif (Appleby) O' Dowd, John Toulmin, George
Jones, William (Carnarvonshire O'Malley, William Ure, Alexander
Joyce, Michael O'Mara, James Villiers, Ernest Amherst
Kearley, Hudson E. O'Shaughnessy, P. J. Walton, Joseph (Barnsley)
Kilbride, Denis Parrott, William Wason, Eugene (Clackmannan
Lambert, George Partington, Oswald White, George (Norfolk)
Langley, Batty Pearson, Sir Weetman D. White, Luke (York, E. R.)
Lawson, Sir Wilfrid (Cornwall) Philipps, John Wynford Whiteley, George (York, W. R.)
Layland-Barratt, Francis Pirie, Duncan V. Whitley, J. H. (Halifax)
Levy, Maurice Power, Patrick Joseph Whittaker, Thomas Palmer
Lloyd-George, David Priestley, Arthur Wilson, F. W. (Norfolk, Mid.)
Lundon, W. Rea, Russell Wilson, Henry J. (York, W. R.
MacNeill, John Gordon Swift Reddy, M. Wilson, John (Durham, Mid.)
MacVeagh, Jeremiah Redmond, John E. (Waterford) Woodhouse, Sir J T (Hudd'rsfi'd
M'Crae, George Richards, Thos. (W. Monm'uth Young, Samuel
M'Fadden, Edward Roberts, John H. (Denbighs.)
M'Hugh, Patrick A. Robson, William Snowdon TELLERS FOR THE NOES—Mr.
M'Kean, John Roche, John Herbert Lewis and Mr.
M'Kenna, Reginald Roe, Sir Thomas Trevelyan.
M'Laren, Sir Charles Benjamin Runciman, Walter

Question, "That the clause stand part of the Bill," put, and agreed to.


in moving to provide that all incomes under Schedule D, derived from trades and professions and not derived from investments, should be subject to a rebate of fourpence per pound, said there was a growing feeling that the same rate of income-tax might press quite differently upon the individual according to the source from which his income was derived. This was especially shown if they considered the difference between incomes derived from the labour of the individual and incomes derived from realised wealth in the form of investments. Parliament had already given effect to the principle that an income-tax might press unequally on individuals, inasmuch as abatements were made on incomes under £700. He asked the Chancellor of the Exchequer to say whether he objected to the Amendment on principle or only on the ground that there would be difficulties in the way of its operation. John Stuart Mill was in favour of the taxation of temporary and precarious incomes on a lower scale than permanent incomes, and Mr. Gladstone agreed with the principle because he stated that the income-tax as a whole bore too hardly upon intelligence and skill and not hardly enough upon property. In 1853, when that statement was made, the produce under Schedule A was double that under Schedule D, but the proportions were now reversed, so that the grievance was even more pressing. In case of war or trade depression incomes derived from trades or professions were reduced in amount while taxation was increased, so that the holders of such incomes suffered in a double sense as compared with the holders of incomes derived from investments. He submitted that his proposal was an equitable one, and he hoped the Chancellor of the Exchequer would give it favourable consideration.

Amendment proposed— In page 2, line 36, after the words 'one shilling,' to insert the words, 'provided always that all incomes under Schedule D derived from trades and professions and not derived from investments shall be subject to a rebate of fourpence per pound.'"—(Mr. McCrae.)

Question proposed, "That those words be there inserted."


suggested that before the hon. Member claimed the support of Mr. Gladstone for this proposal he should re-read again his speech of 1853.


I did so to-day.


said that if the hon. Member would read it once more he would see that Mr. Gladstone, so far from giving any encouragement and support to a proposal of this kind, devoted himself in the speech referred to to proving that it was unjust, undesirable, and impracticable, and so recently as three years ago he was declared by the late Sir William Harcourt to have disposed of the matter once for all. Did the hon. Gentleman propose to give a rebate on the dividends of the large shareholder in a trading company, who might be said to derive his income from trade? On the other hand, did he propose to tax at the full rate the landlord who was constantly engaged in the management of his estate? Surely the hon. Member must see that his Amendment would not at all realise the object he had in view, which was partially to exempt from the income-tax people whose income was due to their own personal exertions. If the matter were gone into carefully, it would be seen that it was impossible to distinguish between one source of income and another. The extremes in the scale were no doubt far apart, but they in- sensibly approached each other, and it would be impossible to set with accuracy or equity the point at which a dividing line should be drawn. Mr. Gladstone, in the speech referred to, held that the only persons who did not derive their incomes from their own personal exertions were the Fund-holders. It would not be a wise policy for the Chancellor of the Exchequer to single out the Fund-holders as the only people who were to be deprived of any exemptions and abatements given on the income-tax.


said the Chancellor of the Exchequer had not dealt with the principle involved. The wording of the Amendment covered the objection taken in reference to incomes derived from investments.


asked what was to happen to incomes derived partly from trade and partly from investments in that trade.


said that in practice it would be perfectly simple. If a manager of a business had some shares in the company by which he was employed, his salary as manager would be income derived from trade or profession, and the yield of his shares would be income derived from investments. There was, however, this objection in principle to the proposal of his hon. friend. Speaking generally, all accumulated money was the savings of income from the individual exertions of the owner or had been received by inheritance. In the first case income-tax had been paid, and in the latter case the capital sum had been subjected to estate duties. Therefore, in either case the property had already borne taxation, and that was a reason why the Amendment should not be accepted. The object of his hon. friend could be secured only under a system of graduation of income-tax, and he regretted he could not support him on this occasion.

MR. SLACK (Hertfordshire, St. Albans)

said there would be no difficulty in meeting the objection raised by the Chancellor of the Exchequer. If a man had capital invested in his business it was the simplest arithmetical process to charge interest on the capital invested, and deduct it from the total profits of the business in order to ascertain the profit derived therefrom.

Question put, and negatived.


said it might facilitate progress if the Chancellor of the Exchequer stated how far he intended to proceed with the Bill to-night. Would he be content if he got Clause 6?


said he had hoped to make further progress with the clauses, but he thought it would be unreasonable to ask the Committee to embark on Clause 7 at that time of night, and so he would be content with getting Clause 6, provided hon. Members met him in the same spirit and facilitated progress.


said the matter dealt with in his next Amendment was rather technical, but most important. He submitted that the rule referred to should be made compulsory, as in its present form it worked very inequitably as between trade and other forms of property. If a merchant made an extra £1,000 in his business, he had to pay income-tax upon it, and then, if invested, the same £1,000 was liable to income-tax, whereas if a proprietor derived the money from the renewal of a lease, and could show that he was going to invest it, it would be exempted from income-tax. He hoped the right hon. Gentleman would look into this matter with a view to putting both forms of property on the same footing.

Amendment proposed— In page 3, line 1, after the word 'granted,' to insert the words 'Provided that the following words in Rule 5 of No. 2, Schedule A, s. 60, 5 and C Vict., c. 35, "Of all fines received in consideration of any demise of lands or tenements (not being parcel of a manor or royalty demisable by the custom thereof) on the amount so received within the year preceding by or on account of the party, provided that, in case the party chargeable shall prove to the satisfaction of the Commissioners for General Purposes in the district that such fines, or any part thereof, have been applied as productive capital on which a profit has arisen, or will arise, otherwise chargeable under this Act for the year in which the assessment shall be made, it shall be lawful for the said Commissioners to discharge the amount so applied from the profits liable to assessment under this Rule "shall be read as if the words" it shall be lawful for the said Commissioners to" were omitted, and instead thereof the words "the said Commissioners shall" were inserted.'"— (Mr. McCrae.)

Question proposed, "That those words be there inserted."


was understood to say that the hon. Member was mistaken in supposing that the fines referred to were differently treated as compared with other kinds of income. The exemption applied only to owners who treated the fines as capital, and, of course, the income from that capital then became subject to taxation.

Amendment, by leave, withdrawn.

SIR EDWARD STRACHEY (Somersetshire, S.) moved an Amendment providing that the annual value of any property which had been adopted for the purpose of income-tax under Schedule B in the Income Tax Act, 1853, "shall be assessed at one-fourth instead of one-third." He said that he raised the question nine years ago, and the then Chancellor of the Exchequer promised to look into the matter, but nothing practical had resulted. His object was to get the right hon. Gentleman to proceed upon the lines followed by the late Sir W. Harcourt and gradually to lighten the burden under Schedule A upon occupiers of land. It was a very small matter in one sense, as the total amount collected under Schedule B was, he believed, only £200,000. Very few farmers were able to keep such accounts as would satisfy a surveyor of taxes for assessment under Schedule D, as everyone conversant with farming operations knew that, although the valuation might appear to show a handsome profit, the farmer had very likely made no profit at all. The remission, though comparatively small, would, in the present state of agriculture be extremely welcome to those affected by it, and the proposal might also be recommended on the ground that the income in question was income arising from personal exertion.

Amendment proposed— In page 3, line 7, after '1853,' to insert the words' provided that the value under Schedule B shall be assessed at one-fourth instead of one-third.'"—(Sir Edward Strachey.)

Question proposed, "That those words be there inserted."


said that if they gave a reduction to all whose incomes were earned by their personal exertions they would afford that reduction to some of the richest men in this country. He doubted whether the Committee would be prepared to give this reduction in respect of one class of persons whose incomes were earned by their personal exertions without extending it to other classes. If the hon. Member desired to make a case for the Amendment it must be on the ground that at the present time farmers were paying more than their due share of the tax. Having regard to the capital invested by the farmer it could not be said that his profits were over-assessed, and no case had been made out for relieving him at the expense of those to whom the alteration of assessment would not apply.

Question put, and negatived.

Committee report Progress; to sit again to-morrow.