HC Deb 30 April 1906 vol 156 cc306-66

The Committee will now see how my surplus has been got rid of. I started with £3,074,000. From this has now to be deducted—;Sinking Fund, £500,000; necessitous schools, £135,000; postal and telegraph services, £105,000; repeal of the coal-tax as from November 1st, £1,000,000; and reduction of the tea duty as from July 1st, £920,000—;a total of £2,660,000, leaving a balance for contingencies of £414,000. The final balance-sheet which will appear to-morrow in the blank spaces of the return, will show that, as the result of these changes, the estimated revenue for the year is reduced by £2,025,000, and the estimated expenditure for the year is increased by £635,000. That will be the general result. I have only now to offer my most grateful thanks to the Committee for the patience with which they have listened to a statement of unusual, but I hope of not wholly unwarrantable, length and complexity. I have only one thing more to say. In judging of the merits or demerits of this Budget the House and the country will realise that we only came into office late in last year. As I said at the beginning of my speech, some of the governing factors in the case had already been fixed in advance, and, so far as I am personally concerned, I had little more than four months in which to survey a large tract of rough and tangled ground. I should like to see, I hope to see, more attempted and more done than I can attempt or do this year in the reduction of expenditure, in the repayment of debt, and in the readjustment of the incidence of taxation. But, within the limit of our possibilities, I have tried to do whatever I could to maintain the national credit and to deal out even justice and to preserve the balance of proportion between obligations and claims. If, as I hope will be the case, we are able in one and the same year to make a relatively large step in advance in the repayment of debt, to free a great industry from the hampering load of an unnecessary tax, and to give to the community of consumers an easier command over one of the first necessaries of life, I think we may fairly claim to have contributed a chapter not wholly unworthy to take its place in the annals of our national finance.

Alteration of Duty on Stripped Tobacco and of Drawbacks on Tobacco.

Motion made, and Question proposed, That for the increase of three pence per pound payable on stripped tobacco under section two of The Finance Act, 1904, there shall, as from the first day of May, nineteen hundred and six, be substituted an increase of one halfpenny per pound and that the drawbacks allowed by the same Act on tobacco of the following description shall, as from the twenty-first day of May, nineteen hundred and six, be reduced by the substitution for the ordinary rate set out in the Table of Rates of Drawback in the Schedule to the said Act of the rate following (that is to say):—;

s. d.
In the case of cigars the lb. 3 1
In the case of cigarettes the lb. 3 0
In the case of cut, roll, cake, or other manufactured tobacco the lb. 2 11
In the case of snuff, not being offal snuff the lb. 2 10
—;(Mr. Chancellor of the Exchequer.)

MR. A. J. BALFOUR (City of London)

It is not, as the Committee is aware, usual to enter into any controversy with the Chancellor of the Exchequer immediately after he has made his Budget statement. That statement always requires and deserves careful consideration, and it never required and never deserved more careful consideration than on the present occasion. Time is required in order that the proposals of the Government may receive adequate consideration; and I rise not to discuss in detail the proposals of the right hon. Gentleman, but to ask him for the second time to-day, and in hopes of receiving a more favourable Answer than I received before, what course he proposes to take with regard to our discussion of those proposals. The right hon. Gentleman began his speech by asking for the indulgence of the Committee, as he had to make a statement of exceptional length and exceptional complexity. I have to congratulate the right hon. Gentleman upon the extreme lucidity with which he developed the views which he and his friends entertain. The excellence of the speech, I which he has just delivered is, indeed, no surprise to those who have heard the right hon. Gentleman often before in this House. We expected no less of him; but I am sure it must have given great pleasure and be a subject of congratulation to those Members of the House who have not yet had the opportunity of hearing the right hon. Gentleman on a great and important occasion. But the very importance of that speech makes it quite obvious that the discussion of the subjects with which he dealt cannot be confined to a single night, as he seemed to hint in answer to the Question I addressed to him at Question time. Such a proposal has, as far as I know, never been made by any Chancellor of the Exchequer before. The invariable practice has been to have, on the first night of the Budget Resolutions, a discursive, but not usually a very controversial or a very long debate, it being understood that on one of the later Resolutions which the Chancellor of the Exchequer will have to move on subsequent days, there shall be, with the leave of the Chairman, a general discussion, not confined within the four corners of the Resolution, travelling over the whole field of national finance and over all the topics raised by the right hon. Gentleman. We have only got to consider what those topics were. I do not mean merely the coal-tax or the corn-tax or the various rather controversial points which the right hon. Gentleman made. But consider the earlier part of the speech, and the views he uttered upon the question of national expenditure. He has told the Committee I that, from henceforth, neither he nor his colleagues mean to allow any loan, so I understand him, either for naval or military works.


New works.


New naval or military works. He said, I think with great truth, that there are objections to the system under which we have been working for the last ten years; that it may possibly have rendered too easy the expenditure of money on permanent works by the great spending departments. But does he not see, and does the Committee not see, that there are great and corresponding dangers on the other side; and that to ask the Chancellor of the Exchequer to find some large sum of money for a military or naval work, however necessary that work might be, and to require the whole of the expenditure on that work to be found within the financial year, is to make it so difficult to carry out works, however needful, that we may be perfectly confident that needful works will be neglected? I am certain that anybody who will impartially survey the financial, the military, and the naval history of the last thirty years will see that what happened under such a system is that a Government, like the Government of the right hon. Gentleman and his friends, come in; they promise economy—;a very good thing, economy—;and they carry out their promise by starving absolutely necessary capital expenditure. Their successors come into office, they find that these necessary works have been neglected, and they are driven, not from any love of spending money—;that and its consequences are always unpopular—;but from the sheer necessities of the situation, to make up the deficiencies of their predecessors, and to do by loan what can only be done by loan, unless you are to upset the whole of the system of taxation of the country, and to impose sudden burdens on the commercial community which disturb trade, and which in the long run involve a great deal of most unnecessary expenditure. The mere fact that such a broad declaration of policy has been made by the Government itself requires most careful study; and for my part, while I agree with the right hon. Gentleman that great sacrifices should be made to keep the expenditure of the year within the finances of the year, it is absurd, in the present condition of modern invention, in face of the expenditure made by foreign countries on borrowed money, for us to expect, if we insist on never using borrowed money for these purposes, that we shall not gravely imperil the national well-being under the illusion that we are carrying out a scheme of national economy. I merely touch very lightly on some of the subjects dealt with by the right hon. Gentleman. May I ask him whether he has made any provision in his Budget for the million promised in the Education Bill?


Certainly not; the Bill would not in any case come into operation this year.


Then, leaving that topic, may I express my surprise that to the long and interesting preface which the right hon. Gentleman made to his proposals for increasing the Sinking Fund, there was, as it appeared to me at all events, a somewhat lame and impotent conclusion? He told us, and truly, that the unfunded debt was a great national danger—;he used that word, and I am not disposed to minimise it, I accept the word. He told us that the debt had not only increased, but had reached a magnitude that ought to exite our greatest concern; he told us that the actual amount of money given this year for the reduction of debt was, I think, £12,000,000, or a sum nearly approaching that figure; then he told us he thought that the country ought to make great sacrifices to increase that sum, and when the great sacrifice was announced it turned out to be not more than £500,000. I do not say that the right hon. Gentleman is wrong; but had it been my duty to make a proposal of such a modest character, I do not think I should have prefaced it with such an elaborate glorification of the self-sacrificing proposals which the House and country were asked to accept.

The right hon. Gentleman touched on the tobacco duty, a subject on which I feel myself quite incapable of either criticising the right hon. Gentleman or enlightening the Committee; it is, as he has suggested, one of the most technical in the world, and the most unfortunate absence from our debate of the late Chancellor of the Exchequer will, I am afraid, render us somewhat weak in our capacity to deal with the proposals of the right hon. Gentleman. I, at least, feel myself quite unable to supply the knowledge which we have so unhappily lost by my right hon. friend's absence. There was one point, however, as the right hon. Gentleman is modifying the tobacco duties, which I should, like to ask him—;Does he propose to abolish their protective character? If he had left the tobacco duty alone, perhaps I should not have asked him the question; but as he is modifying it, and as he and his friends have just committed the House of Commons to a very elaborate Resolution on the subject, I should like to know whether he interprets that Resolution as a command of the Administration of which he is a member to remove the protective character from the tobacco duty. I think nobody would deny that that protective element exists; it has long existed; it might well, I think, be left alone since it is there. But as the House has chosen to pass a Resolution on the subject, and as the right hon. Gentleman himself is modifying the duty, I suppose that if he leaves the duty alone in that particular it is, for some reason wholly inexplicable to myself, to be regarded as not being affected or touched by the Resolution which was passed. He will have to give us an explanation on this point when he deals with the question again.

The right hon. Gentleman, following in this particular all his predecessors, I think, has given us a long, elaborate, and interesting, and I would add important, essay upon national expenditure. My right hon. friend the late Chancellor of the Exchequer, I remember, did so in his Budget, Lord Ritchie did so when he was Chancellor of the Exchequer, and Lord St. Aldwyn has done it on many occasions in this House. I, for my part, am the last person to suggest that national expenditure is not one of the most important subjects which can engage the consideration of the House; and if the right hon. Gentleman sees his way through the Estimates of next year to carry out the promise which I understood he made just now—;that is to say, largely to reduce the national expenditure without interfering with the power either of our Navy or of our Army—;if he really sees his way to do that, I assure him I shall be the first to be glad, and certainly no Party consideration shall prevent me from getting up in my place and saying that the right hon. Gentleman has done a great service to his country. But if he fails to do that, if he finds on examination that the enormous expenditure with which we now have to cope is expenditure which is necessary unless we are going to effect great and dangerous reductions in the Army and Navy, then I beg him to consider that the ten years during which the growth of expenditure has occurred are ten years in which the condition of our Navy and Army has been at the very root of our national position in Europe. I do not believe, unless the world forces greatly change, unless the interaction of great military and naval empires takes on a new phase, which we have no right to prophesy and which we have no ground to expect—;I do not believe we can safely diminish the effective power either of our Army or of our Navy. And if that be so, I greatly fear, when the spending departments carry on the annual controversy with the Chancellor of the Exchequer, it will be found that, if the Chancellor of the Exchequer is really to carry out his pledge, it will only be at the cost of national interests which are at least as important as the national interests over which the Chancellor of the Exchequer has to preside. Because, though I quite admit, as everybody admits, that a point may be reached in national expenditure upon national defence which would weaken instead of strengthening national defence, I do not think we have reached that point, or are near it. There was one figure of which the right hon. Gentleman reminded the House which is eloquent in this matter. He was complaining of the burden of our National Debt, and said it had now risen to a point at which it had never stood since the year 1871. Well, but what was the population of this country in 1871, what was its wealth in 1871, as compared with what it is now? And if without murmuring, if without national weakness, if without any serious interference with trade and industry we bore in 1871 the same debt that we bear now, surely it shows that our national finance is not in the absolutely deplorable condition which the right hon. Gentleman almost seems to suggest. I wish him well in his endeavour to reduce expenditure, I welcome every penny in reduction of expenditure which carries with it no diminution of national strength. But he has a difficult task before him. He knows the claims made by Ministers who sit near him. Does he, for instance, imagine that the claim of the Minister for Education—;not the greediest of his colleagues, but still a greedy colleague—;will not increase? It must increase. Then there are all the schemes on which hon. Members have been returned to this House; I will not call them dreams, I hope they may receive embodiment—;but all the hopes of social reform, all the great schemes for amelioration which hon. Members sincerely desire, and which they think this Parliament will carry out. I do not believe that they can be carried out without increasing our expenditure. An hon. friend near me mentions payment of Members, but I am not going to mention that, as I do not wish to strike a controversial note at the present moment. If you look at the source of the growth of national indebtedness and the increase of national expenditure in the last thirty years outside the Army and Navy, you will find that all that increase, the whole of it, is due to the desire of this House to ameliorate the social position and to carry out great reforms in this country; and as that has cost money in the past, it will in the future, I, for my part, am anxious for national economy. Anxious as I am for national economy, I cannot bring myself to believe in any sanguine spirit that any great diminution of national expenditure is possible in the immediate future. All the forces of political life—;not corrupt forces, but honest, honourable, and patriotic forces—;move in the direction of increasing and not of diminishing expenditure, and when the right hon. Gentleman allowed himself more than once to sneer at those who consider that some widening of the basis of taxation has been desirable in the past, may be desirable now and will be desirable in the future—;when he sneers, not in any offensive spirit, but still with a confident disbelief in this prophecy, I venture to say that the time will come, and come soon, when the Chancellor of the Exchequer, probably the right hon. Gentleman himself, will have to face the claims made upon him by hon. gentlemen sitting below the gangway on the Opposition side of the House and hon. Gentlemen sitting behind him; and he will be forced, whether he desires it or not, to ask this House to reconsider the basis of national taxation which is only barely adequate for national expenditure at the present time and which, inadequate as it will be in the future, will render it impossible for the holder of the office which he so ably fills not to resurvey in a somewhat different spirit from that shown to-day the whole question of our national finance. That is all I desire to say at the present moment as to the substance of the right hon. Gentleman's proposals. All I ask him at the present time, is to say what arrangements he proposes to make for the discussion of the speech which he has just delivered, and to make some selection of the Resolutions on which the general discussion may take place. Of course, we shall not resist to-night any proposal or any Resolution which is required on financial grounds. It is absolutely necessary, as we quite well know, that certain classes of proposals made by the Chancellor of the Exchequer should receive the immediate sanction of the Committee, and whatever is necessary for the purpose I am confident that my hon. friends will give the Government without discussion and without dispute, but I hope in exchange that the right hon. Gentleman will not endeavour unduly to curtail our opportunity of debate, or deprive us of the opportunity which every Opposition up to the present has enjoyed, of thoroughly sifting the proposals of the Chancellor of the Exchequer in his Budget speech.


In at once responding to the appeal of the right hon. Gentleman, will say that nothing is further from our desire than to curtail the opportunity for general debate. I quite understand the spirit in which the right hon. Gentleman has made his suggestion, and I think it has been usual to select one of the financial Resolutions as the text upon which to hang the debate, and the Resolution usually selected is, I think, that in regard to the income tax. But it does not very much matter which one it is so long as you have one upon which a general discussion may be relevant. That is all that is really wanted, and I would suggest that if we can carry Resolutions about the taxes—;the tobacco duty, the tea duty, and the continuance of the duty upon beer and foreign spirits—;to-night and reserve the income-tax for to-morrow that may be convenient to all parties.


I do not wish to criticise the right hon. Gentleman too severely, but, if I remember rightly, last year we were allowed three days debate, Monday, Tuesday, and Wednesday, one of which was occupied by the general discussion, and the others by debates upon specific proposals. I do not agree that we should take the tobacco duty to-night.


It is necessary.


Oh, it is necessary; but I hope I shall not be considered as having consented to finish the discussion to-morrow; of course, as far as the necessary proposals and Resolutions are concerned, I quite assent to dealing with them to-right, and that the general discussion should be taken on the income-tax Resolution.

MR. SAMUEL EVANS (Glamorganshire, Mid.)

said that every one who had heard the speech of the Chancellor of the Exchequer would recognise that the finance of the country was in perfectly safe keeping in his hands. Members for South Wales in particular were pleased with the announcement in regard to the complete repeal of the coal tax. He wished to make a reservation, however, in regard to the retention of the tax until the 1st November. It was perfectly true that many of the contracts, and especially the contracts for steam coal, were made at that time for the year following, but there were other coals to which other considerations applied, and without entering into detail now he reserved to himself the right, as representing the western portion of the coalfield of Wales, of bringing before the right hon. Gentleman at a later stage considerations which ought to weigh with him as to the difference between the various classes of coal. So far as the reduction of the tea duty was concerned, they were all very pleased to hear the announcement which the Chancellor of the Exchequer had made. He was personally extremely gratified that the right hon. Gentleman had had the courage to tackle the question of the practicability of the graduation and differentiation of the income-tax. Many people had been preaching that some reform in that direction ought to have been embarked upon long before now, yet no Committee had dealt with the matter from 1861 to the present time. He was pleased not only because the right hon. Gentleman had promised to appoint a Committee to inquire into the matter, but also because he felt that those who desired reforms would have a friend in the Chancellor of the Exchequer. It was the fact that in all our colonies except Canada the principles of graduation and differentiation had been followed, and in almost all the countries of Europe they were in operation and a practical method had been found of giving effect to them. He was glad that they had now a Chancellor of the Exchequer who was willing to put his hand to the plough, and he thought the Select Committee would find that the application of the principles was practicable, and enable the right hon. Gentleman to introduce a system of graduation and differentiation. Such a policy was necessary not merely for the purpose of placing the burden upon the shoulders most able to bear it, but for the purpose of exonerating those who paid income-tax at a very high rate which they could ill afford. The principle of differentiation and graduation was one which he was sure would appeal to everybody, because it was hard that people who had to work very strenuously for their incomes should be brought under the same weight of taxation as those who had incomes prepared for them by generations that had gone, and which they had inherited in the shape of funded property. He was sure the vast majority of Members were glad that the proposal had been made to appoint this Committee immediately. He hoped it would at once proceed with its labours, and that his right hon. friend would have the report and be able to make reforms at no distant date.

* MR. PIKE PEASE (Darlington)

was pleased to hear that an Income-tax Committee was to be appointed, as he believed there was a large number of people in the country at present who paid far more income-tax than they ought, persons who owned shares on whose dividends the income-tax was deducted before the dividends were paid, and who took no action to get back the money which was due to them under the existing law. Another instance of that was in reference to overdrafts at banks. In many instances people placed as security with their bankers large numbers of shares, and they might get as much as 6 per cent on them. The bank charged an interest of 4 per cent, on the money which was lent, and the income-tax was always deducted from the dividends before they were paid. In that way many people paid a considerable amount more income-tax than necessary. He sincerely trusted that some graduated form of income-tax might be arranged in the future. With regard to the coal tax, he had found it not a little difficult, being himself interested in the coal trade to vote for that tax in past years. The right hon. Gentleman the Member for Berwick, some years ago, in an interesting speech upon this question, showed that the incidence of the tax fell upon the miners and said it was a remarkable fact that if there was an import tax put on German coal coming to this country, they would be told on all hands that the tax would be paid by the consumer. He congratulated the right hon. Gentleman upon having been able to cancel this tax, and he believed that the people in the North of England would receive the news with great satisfaction. Many Members wished to see a tax upon goods imported into this country. He sincerely trusted the day would come when we, as a nation, should follow the example of many foreign countries by putting taxes on foreign manufactured goods coming to our shores. He believed that that day would come, though perhaps it was some time ahead. When it did come we should be able to derive a considerable amount of revenue from that source. At the present time we did not take advantage of our opportunities and many of our manufactories were in consequence being set up in foreign countries. He believed if the Government would appoint a Royal Commission to consider the subject it would be of great advantage to the country.

* MR. HELME (Lancashire, Lancaster)

said that, having presented a memorial to the Chancellor of the Exchequer asking for the remission of the duty on "Strips," signed by manufacturers throughout the country, he desired to express the thanks of the tobacco trade to the Government for the alteration made with regard to that duty. He was glad of the change made in the tobacco duty, which, he was sure, would greatly benefit many struggling tradesmen and small manufacturers and avert the ruin with which they would have been threatened if the duty had continued. There was another matter to which he wished to draw attention. It was very hard that people who borrowed money from bankers for the purpose of purchasing property were not allowed to deduct the amount payable as income-tax in respect to the interest paid thereon. In the case of an ordinary mortgage they could withhold the income-tax on the interest, but bankers would not allow it as had been suggested by the authorities, because they made their profits on the difference between the interest at which money was advanced and the rate they charged their customers. He thought that was a grievance to which the Chancellor of the Exchequer might well address himself and thus relieve many borrowers from an impost which they regarded as unjust and unfair, either by departmental action, or if necessary by legislation in the Finance Bill.


congratulated the Chancellor of the Exchequer upon the lucid statement he had made to the Committee, and said that with the greater part of that statement he was in agreement. There were, however, two points upon which he must express an opposite opinion He regretted that the right hon. Gentleman had not seen his way to give a larger grant towards education, which would have been most acceptable to the general body of the ratepayers of the country. The ratepayers had now to bear a much greater burden for education than they had ever had to bear before, and they were distinctly told a little while since that a considerable sum would be given in the Budget in relief of secondary education. As to the coal tax he was entirely opposed to its remission. He thought that what was proposed was a great mistake and a step backwards. He considered that the imposition of the tax by the late Government was a broadening of the basis of taxation which might well be followed by the present Government. The tax was not paid by either those who were engaged in getting or consuming the coal in this country. It was paid entirely by the foreigner, and, notwithstanding the tax, there had been a very considerable increase in the export of coal to various countries abroad. The tax could easily have been continued and would have produced a large amount of revenue. In 1902 the total export of coal from this country was 37,250,000 tons, and that had grown in 1905 to 48,169,000 tons, an increase of some 10,000,000. That was a total increase of some 22 per cent., and it did not look as if the tax pressed hardly or heavily on the industry. The amount produced by the tax was £1,311,000 in 1902 and £2,032,000 in 1905, and he thought it a strange thing on the part of the Government that they should give up an income of over £2,000,000 a year which was paid by the foreigner and place it on the heavily burdened taxpayer of this country.

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

offered his heartiest congratulations to the Chancellor of the Exchequer on having in his first Budget decided on the total abolition of that most unjust tax on coal to which reference had just been made by the hon. Member for Great Grimsby. He was really astonished at the hon. Member's remarks. He could only say that he had recently attended meetings of coal exporters all over the country, and their unanimous opinion was that the tax on coal was one of the greatest hindrances to one of the greatest trades of the country. It had to be remembered that the coal trade was one of the great industries of the country, and that no fewer than 4,000,000 of the people were dependent upon it for a livelihood. There was no question that in the case of Scottish and Durham coal our trade with countries such as France and Holland had had laid upon it for the first time a most serious competition, which, he feared, would never be driven out. The evil that men did lived after them, and though they owed to the Chancellor of the Exchequer their gratitude for having done this act of justice towards the coal trade he feared that they would not for a generation, if ever, recover the ground they had lost in the markets of the world through the fully of a British Government in putting a tax on one of our own industries in a form in which it operated actually as a bounty of 1s. a ton in favour of foreign producers when competing with British producers in certain markets of the world he could only say, on behalf of the coal miners and the colliery owners and exporters, that they recognised that this action on the part of the Government in their first Budget showed that they were a Government who believed in the equal incidence of taxation and that they would not place on the coal trade any longer a burden that was placed on no other great industry in the country. Therefore he had risen simply to express on behalf of those with whom he had been for so long associated their gratitude that at last this measure of justice had been done to this great industry, the future prosperity would be enchanced thereby.

MR SAMUEL ROBERTS (Sheffield, Ecclesall)

desired to add his congratulations to those already offered to the right hon. Gentleman the Chancellor of the Exchequer. He had one regret, and he believed the right hon. Gentleman had expressed it also, that he was not able to give any relief to the income-tax payer. The right hon. Gentleman had said very truly that one shilling was far too high. The income-tax was essentially a war tax, and if it were kept at one shilling in peace time where was their reserve in time of war? They were told by the predecessor of the right hon. Gentleman last year and the year before, he believed, that the income-tax payer should have the first relief of a surplus, but the Chancellor of the Exchequer to-day had said he had not enough money, as it took £2,600,000 to relieve the income-tax payer of a penny in the £. He only hoped that the inquiry which was to be set up would find some means of relieving the income-tax payer even if the right hon. Gentleman had not so much as £2,600,000 to give away. He quite admitted the Chancellor of the Exchequer's difficulty. He was sorry to say that the right hon. Gentleman was giving a good deal away in trifles, and the only substantial amounts he was able to give were in respect of the coal tax and the tea duty. He was not sure that, considering that 2d. came off the tea duty last year, the consumers of tea might not have waited another year before having further relief, although of course they wore all glad to relieve those who depended so largely upon tea. With reference to the coal duty he did not share the view of the hon. Member for Grimsby. He was glad the Chancellor of the Exchequer had repealed that duty. The Report of the Royal Commission on the Supply of Coal showed that they had no need to fear that it would run out before something like 500 years. One of the main reasons why Sir Michael Hicks-Beach put on the tax was the limited character of our coal supply, and that it was good economy to store it up. That reason had entirely gone now, the country having no need to be under any apprehension on that account for many years to come. Moreover, it would be bad policy to try to economise at a time when new inventions were coming in every day. If they stored that which was of good value now, but which might not be in the future, it would not be good policy. With regard to expenditure the Chancellor of the Exchequer had given very valuable advice, but was it really a great expenditure compared with the Income of the country, which had doubled during the last forty or forty-five years, though we were not paying more in taxation per head of the population than was the case one hundred years ago He hoped the Chancellor of the Exchequer would be able to give the direct taxpayer, especially the income-tax payer, some relief next year both on the ground of public policy and as a matter of right.

MR. MCCRAE (Edinburgh, E.)

said he would like to add his congratulations to those already given to the Chancellor of the Exchequer oil his very clear and able speech. He should also like to associate himself with the Leader of the Opposition in regretting the absence of the late Chancellor of the Exchequer. The Chancellor of the Exchequer, although he entered into office under very serious conditions of expenditure and accumulations of debt, had some compensations. He had first of all the falling in of all these terminable annuities; and, secondly, the improved conditions of trade, of which, by the way, he did not think the right hon. Gentleman had taken full advantage in estimating his revenue for the coming year. The right hon. Gentleman had made a very conservative estimate, though, perhaps, if he erred at all it should be on the side of safety. He had had his hands strengthened in that there had been a public demand for economy in expenditure, and it was in that direction more than in any other that they must look for a diminution of that extra burden of taxation which was imposed on the country by the late Government. He would like to make two criticisms on the proposals of the Chancellor of the Exchequer. The first was with reference to his reduction of taxation. So far as the commodities were concerned the right hon. Gentleman could not have done otherwise. The coal tax seemed more than any other opposed to economic principles, and, with reference to the tea duty, seeing that the right hon. Gentleman was unable to reduce the sugar duty, which would have been even more important, being a raw material as well as an article of general consumption, he thought the right hon. Gentleman was confined to tea. He put to him, however, whether it would not have been better to have taken 2d. off instead of a Id. If he had done that and postponed its operation it would have been very much better. It would have given the consumer a better chance of participating in the reduction. The right hon. Gentleman was to be commended for his proposal with reference to restoring the national credit, which, to use a very mild phrase, had been somewhat shattered by the proceedings of the late Government, not only with regard to the growth of ordinary expenditure, but also with regard to the war, and the way in which the late Government had borrowed for ordinary purposes of expenditure. Bankers had been alarmed and business men disturbed, and the Chancellor of the Exchequer was only expressing the feeling prevalent in all business circles when he said that the way in which the State had been borrowing recently had handicapped commerce. With regard to the method which the Chancellor of the Exchequer had adopted in dealing with terminable annuities which fell out, he would beg leave humbly to differ. He at once conceded, so far as the reduction of debt was concerned, that there was no difference at all in the principle which he applied. The money in any case went to the Sinking Fund, and if they wore sure of always having a Liberal Chancellor of the Exchequer in office, he would say that the simplest and, therefore, the best course was that which the right hon. Gentleman had proposed. As it was, the right hon. Gentleman had left a very wide open door to the next Conservative Chancellor of the Exchequer. The history of the terminable annuities gave ample evidence that there was a great danger in that. If the right hon. Gentleman set up other annuities in place of those falling out he would prevent any successor from reducing the Sinking Fund until the termination of the annuities set up for, say, another twenty years. When they looked back they found that the Sinking Fund had in every case been reduced by Conservative Chancellors of the Exchequer, and they had always, with one exception, taken the occasion of the falling in of those annuities to do something. The Chancellor of the Exchequer by his proposal was really giving the next Conservative Chancellor of the Exchequer an opportunity of reducing the contribution to the Sinking Fund. That was no remote contingency, because in 1890, when Sir Michael Hicks-Beach was Chancellor of the Exchequer, he anticipated the falling out of certain annuities by several years and he reduced the contribution to the Sinking Fund by £2,000,000. The reason he gave for adopting that course was that too large a Sinking Fund was a danger to succeeding Chancellors of the Exchequer and he wanted to take away the chance of dipping into that source of revenue. Lord Goschen took advantage, not of the expiry of annuities, but of the system that Mr. Childers set up of postponing the payment, and reduced the fund by £2,000,000, so that altogether the Sinking Fund had been reduced by £4,000,000 by Conservative Chancellors of the Exchequer whenever they had had the opportunity. Therefore there was a real danger in this, and while they were delighted that the Chancellor of the Exchequer should make what he ventured to call adequate provision for the redemption of Debt, which would have its effect in the City and upon Consols, he nevertheless wished to point out that if the right hon. Gentleman had set up other annuities and bought Consols, say, at ninety, he would have been able to make a greater reduction of debt in that way. The Chancellor of the Exchequer when dealing with the amount of our national indebtedness had been exceedingly fair to his predecessors in office. He hid shown how the debt had been increased by £136,000,000 and that the increase really ought to have been more. He had made a simple calculation of what the National Debt ought to have been to-day had the ordinary operation of the Sinking Fund gone on uninterrupted either by the war or those excessive borrowings for military and naval works loans. But for those causes the Debt would have stood a £584,000,000, and, as the Chancellor of the Exchequer had told them, it now stood at £789,000,000, so that the National Debt to-day was nearly £205,000,000 more than it ought to have been but for the war and those borrowings upon military and naval works. Perhaps the most serious charge that they chould bring against the late administration from a financial point of view was that in 1904–5, in a year of peace, and not for war purposes but for ordinary purposes, they increased the National Debt by £2,250,000 sterling. The Chancellor of the Exchequer had made a very adequate provision for the Debt, he was laying aside £13,500,000, and there would be a net reduction of Debt amounting to some £9,000,000. That was the largest contribution that had ever been made to the reduction of the Debt, and the Chancellor of the Exchequer was to be congratulated upon taking this very bold step. He did hope that the right hon. Gentleman would direct his attention to retrenchment. New Members of the House had a restive feeling because they thought that the Government had not used the pruning knife as effectively as they ought to have done. According to last year's expenditure they had saved £940,000 on the Army Estimates alone, and he thought that they ought to have had a proportionate reduction of the Army Estimates for the current year. He realised that the right hon. Gentleman had had to face automatic increases in the expenditure upon the Army and the Navy on account of the policy previously adopted, but if he had looked with a more hopeful eye on the increase of revenue which he was likely to receive next year he might have given a reduction of 2d. in the £ upon tea. The only excuse which he could offer for the Chancellor of the Exchequer's producing such a conservative estimate of revenue was that he was looking to a great Budget next year, and with the increase in the revenue and a reduction in the expenditure the Chancellor of the Exchequer would take the opportunity of doing what he was asked to do by the Leader of the Opposition, namely, to broaden the basis of taxation—;not in the way contemplated by the hon. Member for Gravesend, but by dealing with land and the licence duties and by adopting a progressive scheme for the reform of local taxation. They ought to do away with subventions to local authorities that were so wasteful in their operations. It had been estimated that the revenues which were intercepted for that purpose really meant that the working men put £1 into the Imperial Treasury and drew 5s. out of the local exchequer. He urged the Labour Members to keep a watchful eye upon that aspect of taxation. Next year he believed the Chancellor of the Exchequer would have such an opportunity of relieving industry from some of the shackles with which it was at present burdened, that he would be able to put taxation on a more sound and economic basis, and to relieve the pressure from the shoulders of those least able to bear. If the right hon. Gentleman had such an opportunity as Mr. Gladstone had in 1853 then he would go down to posterity as one of the great Chancellors of the Exchequer who had adorned the pages of history.

* MR. J. F MASON (Windsor)

said that the Chancellor of the Exchequer had left the Committee in considerable doubt as to the incidence of the coal tax. If the contention that the foreigner paid this tax was true, why should they remove it; why not let him go on paying it? If on the contrary the producer paid the tax, on what grounds could it be contended that the producer did not also pay the tax on imported wheat? The conditions as regards competition were similar in the two cases, and the economic laws governing both cases seemed to be identical. If the removal of the coal tax could be justified on the plea that it was paid by the producer, then the whole policy of opposition to the fiscal proposals of the right hon. Gentleman the Member for West Birmingham was entirely without justification.

MR. FENWICK (Northumberland, Wansbeck)

said that as one who had taken part in opposing the coal tax upon every possible occasion, he would not like the debate to close without offering a word of congratulation to the Chancellor of the Exchequer, both upon his own personal account and on account of the thousands of working miners whom he had the honour to represent. He was glad that the right hon. Gentleman had taken the earliest possible opportunity of removing what he had always considered was not merely an unjust, but also an unfair tax, inasmuch as the miners had to pay their full share of all other taxation as well. They paid the duty on sugar, tea, and tobacco, and many of them, he was sorry to say, also paid a fair share of the duty on beer and spirits. Of all other taxation miners paid their share, but in addition to that, the exporting districts, one of which he had the honour to represent, had had a special tax levied upon their particular industry. He would ask hon. Members who represented the industrial constituencies how long they would tolerate a special tax upon any particular industry in their own division. The coal duty was not a tax that was levied upon the coal industry of the country, but it affected selected areas, namely, the exporting areas, which were picked out and penalised by means of this coal tax. The late Mr. Hanbury, in justifying this tax, called special attention to the fact that the miners who would suffer were Radicals, and were opposed to the policy of the Government that imposed the tax. During the General Election the right hon. Gentleman the Member for West Birmingham had said that the coal tax had not realised the expectations of the Government that imposed it, and that the late Chancellor of the Exchequer, if he had remained in office, intended to repeal the tax. The hon. Member congratulated the Chancellor of the Exchequer on the courage he had displayed in tackling this question. The hon. Member for Great Grimsby had called the attention of the Committee to the fact that the export of coal had increased every year since the tax was imposed, and had stated that it was impossible for anyone to say that the tax had proved injurious to the industry. He admitted that the export of coal had increased since the tax was imposed, but the Committee should remember that the rate of development prior to the imposition had not been maintained since the tax was imposed. For the ten years prior to the imposition of the coal tax the average annual rate of increase in our coal exports was 1,500,000 tons, and since the imposition of the tax the rate of development had fallen to practically only 500,000 tons, so that, with even a larger amount of capital employed, and with a larger number of workmen, they had been unable to keep up the average rate of development. He, therefore, contended that in addition to its being an unjust tax it was one of the most ridiculous taxes, from the free trade point of view, it was possible to imagine. While he sincerely congratulated his right hon. friend on having tackled the question, he regretted that the circumstances of the case were such that the tax could not cease forthwith. He was also glad that the Chancellor of the Exchequer had seen his way to reduce the tea duty by one penny, and in the name of the thousands of men whom he had the honour to represent, he thanked the right hon. Gentleman for what he had done. The hon. Member for Great Grimsby had declared that the coal tax was a just tax, but if he had gone a little farther north than Grimsby and stood as a candidate in Durham or Northumberland they would not have had the honour of his presence in that assembly, for not a single candidate in Durham or Northumberland had declared himself in favour of the continuation of the coal tax.


said he wished to join in the general chorus of congratulation to the Chancellor of the Exchequer on the lucidity and ability of his long and complicated statement. He rose for the purpose of asking two or three questions relating to small points in that statement. So far as he could judge the right hon. Gentleman had taken credit to himself and the Government for having introduced the principle that no new military or naval works should be undertaken on borrowed money with the exception of unforeseen expenditure. He understood that that principle had been most clearly and emphatically laid down by the late Chancellor of the Exchequer in recent years. In addition to military and naval works, there were other matters to which allusion might be made in this connection, and particularly works under the Telegraph Acts. He did not know what the policy of the Government would be in future. At no distant date there might be an extension of the buildings required for public offices, and he should like to know whether it was intended to carry out these undertakings with money voted in the Estimates. He did not wish to quarrel in any form with what had fallen from the right hon. Gentleman with reference to the reduction of debt. He thought the present Chancellor of the Exchequer had fully supported the proposals which the late Chancellor of the Exchequer had made with respect to the reduction of debt, and he thought the Committee should be thankful that he had made a considerable step in that direction. The right hon. Gentleman had seemed to imply that there might be some doubt as to whether he could or could not take some of the money coming to the Treasury for the Chinese Indemnity, and whether it could be utilised for the reduction of debt. He himself understood that it had been clearly laid down by the Treasury that the whole of that indemnity was in one form or another to be directed to the repayment of debt. He hoped the money would be devoted to that purpose when it fell into the hands of the Chancellor of the Exchequer. As to the facilities to be placed in the hands of the Postmaster-General, he was quite sure that they would be of extreme benefit to the country. He would remind the Committee that facilities which were sometimes given by the Post Office for the purpose of stimulating business had also other consequences. Members of the Committee might not look at the proposal from the point of view of the Chancellor of the Exchequer, because undoubtedly, a large number of Gentlemen, not only in this House but outside, viewed with very great apprehension anything like an increase in the number of unnecessary advertisements they received by post. He recently received one morning as many as thirty advertisements by post, and although that kind of business might be a fruitful source of revenue to the Chancellor of the Exchequer, it was an intolerable nuisance to the people who were placed under the necessity of going through the advertisements. The right hon. Gentleman had also stated that it was his intention to appoint a strong Committee to consider the graduation of the income-tax. He should not like to take up an absolutely non-possumus position on that matter, but he confessed that he viewed with a very great feeling of alarm any attempt which might be made to reduce the value of that tax. Any recommendations to increase the abatements and reductions at present allowed ought to be viewed with considerable apprehension. This matter had been considered by many of the right hon. Gentlemen's predecessors, and he believed that it would be extremely difficult to introduce a system of graduation. He hoped that the right hon. Gentleman before accepting any recommendation of the Committee would allow the House a full opportunity of discussing the matter. Last year or the year before, after the late Chancellor of the Exchequer had introduced the Budget, the present Prime Minister remarked that he had omitted the warning on the subject of economy which they were accustomed to receive from the Chancellor of the Exchequer, but not even the greatest advocate of economy would complain of the right hon. Gentleman in that respect this afternoon. He had addressed, and most wisely addressed, to the Committee a very strong expression of opinion on the administration of the Estimates in the future. He had reminded the Committee, as he himself had done on previous occasions, that not only Ministers of the Crown but the House of Commons itself were frequently guilty of rushing into the greatest expenditure. Never was a warning from a Chancellor of the Exchequer more necessary than to-day. Within a few weeks of the assembling of Parliament a series of Resolutions were passed which, if carried into effect, would throw a very serious burden on the country. He only hoped the House of Commons as a whole would bear in mind the warning it had received from the Chancellor of the Exchequer, and not attempt to force his hand in the way of increased expenditure. In conclusion, he wished to offer his congratulations to the right hon. Gentleman upon his excellent statement, and to express his sincere regret that the right hon. Gentleman the late Chancellor of the Exchequer was unable to be present during the Budget statement.

* MR. REES (Montgomery Boroughs)

said he would like, as one long familiar with the tea question, as an administrator, legislator, and latterly as an agitator, to express his dissent from the view taken by the hon. Member for the Eccleshall Division of Sheffield. He was sure that those interested in the tea industry would gratefully accept the remission of the 1d. on the tea duty in the hope that the other 1d. would be taken off next year. The tea duty had two aspects: one as it affected their constituents in this country, and the other as it affected their fellow subjects, the tea planters in India and Ceylon. Nearly 2,000,000 of Indian coolies were engaged in cultivating 1,000,000 acres of tea gardens; and when the duty on tea was raised some years ago it affected both the tea producers in the East and tea consumers in this country There was no country in the world, with the exception of Russia, France and Italy, which taxed tea to the same rate as we taxed our own tea in this, country; and he hoped that the Chancellor of the Exchequer would bear that in mind next year and take off the other 1d. He urged this in behalf of the producer in India and Ceylon, who had been very hard hit by the increased tax and also by the Indian currency legislation. The planter paid for his labour in silver and sold his tea for gold, and now he got fifteen rupees instead of eighteen or more for every sovereign. It was said that gold prices would so appreciate as to redress the balance, but they had not done so. He did not oppose the currency legislation of the Government of India, which was inevitable, but he did say the planter was hit all round. He was no agitator and was not well represented in the House. He hoped the 1d. reduction would result in a fall in retail prices; at any rate it was a step in the right direction, and tea had half of the whole amount available for reduction. He could not follow those who asked for 2d. or nothing, and he did not intend to move an Amendment to that effect.

MR. STUART WORTLEY (Sheffield, Hallam)

wished to say a few words as to sugar, with the claims of which he had a good deal more sympathy than with the interests of tea and coal. The proposal to get rid of the coal tax left him far from enthusiastic, because he represented those who were entirely consumers and not producers of coal. He thought that the claim of tea for a remission of taxation stood in an inferior position to that of sugar, because tea had received a remission last year, and the right hon. Gentleman had reminded the Committee that the reduction of the tea duty to the 6d. limit was quite a modern scheme of taxation. There was this differentiation between tea and sugar, inasmuch as the latter was a raw material of many British industries. He hoped that the claim of sugar would be considered by the Chancellor of the Exchequer in the future, as it constituted not only an article of food but was the raw material for many British industries. It had always seemed strange to him that when the duty on sugar was re-imposed a few years ago the duty on manufactured confectionery imported from abroad was at the same rate as on the raw material. Why should not the same principle have been adopted as in the case of tobacco and a higher duty imposed on manufactured confectionery, and so have given some assistance to the manufacturers in this country? It was quite true that the Chancellor of the Exchequer had said that there were arithmetical difficulties in the way of giving relief to sugar. The total duty realised on sugar last year was £6,180,000. If the Chancellor of the Exchequer were to knock off a quarter of that sum, it would take about £1,500,000 of the right hon. Gentleman s surplus. That would make the tax 3s. 0½d. instead of 4s. 2d. It was true that the right hon. Gentleman could not at the same time give a reduction on tea, but for the reasons he had ventured to give, he submitted the claims of sugar were higher than those of tea in the present year, and, regretting as he did that the coal tax had been removed, he considered that the sugar trade and the industries dependent upon it should have received more consideration.

* MR. J. BETHELL (Essex, Romford)

asked the Chancellor of the Exchequer how he proposed to allocate the sum which he had provided for the necessitous school districts.


The principle upon which the Government are proceeding is this. In the case of an education authority whose expenditure to be met by the rate exceeds the produce of a 1s. 6d. rate, a grant will be made out of the Exchequer of three-fourths of the excess. Take, for example, West Ham. There the expenditure to be met by rates in excess of the 1s. 6d. rate is £63,612, and there will be a special grant of £47,709, with the result that the rate which is now 29.9 will be reduced to 21.9. In East Ham the expenditure in excess is £21,916; the special grant of three-quarters will be £16,437, with the result that the present rate of 29.2 will be reduced to 20.8. In Walthamstow the excess is £22,000 odd, and the special grant of £16,000 will reduce the rate from 30.6 to 21.1. At Edmonton the excess is £13,000; the grant will be £9,700, and the reduction from 33 to 21.7.

MR. YOUNGER (Ayr Burghs)

Will this provision apply to Scotland?


No, Sir, it does not apply to Scotland.


May I ask why not?


I was not aware that there was any demand for it from Scotland.

LORD WILLOUGHBY DE ERESBY (Lincolnshire, Horncastle)

said he was glad to hear the speech which the right hon. Gentleman had made, as he considered the proposals which he had placed before the House were exceedingly wise, and well considered. There was one point to which he should like to call special attention, and that was that the right hon. Gentleman had resisted any temptation to make some large and popular reduction of taxation and had recognised that one of the sound principles of finance was to reduce debt as rapidly as possible. He was sorry to say that he remembered that when he was first a Member of this House there were a certain number of people who used to go about the country with long faces saying that it was a disastrous thing that there were so few Consols left upon the market, so that there were none available for the investment of trust funds. He, however, was one of those who considered that it was sound finance for the individual, and also for the State, that they should pay their way as far as they could and refrain from borrowing. He thought the country would be an enormous gainer if there were no Consols at all, and he held that the proposal of the Chancellor of the Exchequer to devote a portion of his surplus to the reduction of debt was one which should receive the support of the Committee. Another portion of the right hon. Gentleman's speech which he was glad to hear was that in which he said that he intended in the future to resist to the uttermost of his power loans for naval and military works, to be repaid after a certain number of years. He thought that was an extremely dangerous form of legislation and an extremely dangerous way of borrowing money. We lived in days when events moved very quickly. Fresh inventions came out every day and science was developing very rapidly. It was perfectly obvious, therefore, in regard to naval and military works that what might be considered extremely necessary in one year might in the course of three or four years be absolutely useless. He thought, however, that there was another object for which money could be borrowed for either short or long periods. It was another of the reasons why the Chancellor of the Exchequer should reduce debt, that the Government of this country should be able to obtain cheap money in connection with a certain class of loan. He meant those loans which had to be contracted either by the State or by local bodies for the purpose of ameliorating the social condition of the people. It was perfectly impossible that any of the schemes for getting the people back to the land or for the housing of the working classes could be carried out unless they obtained cheap money, and it was therefore most important that our finances should be so regulated that money could be obtained at as low a rate of interest as possible in order to provide for those works. Therefore as regarded the question of reducing the debt he viewed the speech of the right hon. Gentleman with the greatest pleasure, and he hoped that the right hon. Gentleman's resolve in this respect would not during the next year or two be in any way weakened. It was a consolation to him that the Government obtained such a large majority at the last election, as he had always considered that a Government which had a large majority at their back were in a much better position to resist any demands which might be made upon them by any section of their following, and to resist demands for large expenditure which would seriously hamper the interests of the country. It frequently happened in debates that hon. Members got up and advocated the reduction of the tea duty, the income-tax, and other taxes. They spoke very much of the value of economy, and what a scandal it was that the country should be spending this large amount of money. Yet it frequently happened that a few days afterwards the same hon. Members would be addressing the House and advocating some useless expenditure. He was glad also that the Chancellor of the Exchequer recognised the fact which must be recognised by all people who had looked into the finances of the country, that any tax which was imposed was certain to be a tax upon our industries here, and would prevent the development of industry and the use of capital. He had always maintained that taxes must have the effect of reducing employment and reducing the amount of capital which could be properly invested to employ men and further the industries of the country. The most important point of the right hon. Gentleman's speech was the proposal to abolish the duty on coal. He, for one, was very pleased that it was the intention of the Chancellor of the Exchequer to take this step, and he was not surprised that he should have done so, because he understood that during the right hon. Gentleman's election campaign this was one of the points on which he had distinctly pledged himself to his constituents. Although he did not think there was a single coal miner in his constituency, he was glad that the tax was to be removed, as he believed that it was a tax upon the producer. What had happened was that the miners and coal owners in this country paid the tax and the foreigners who bought the coal paid exactly the same price for the coal as if the tax had not been imposed. He had always thought the tax fell upon the producers in this country, and therefore he was glad that the right hon. Gentleman proposed to abolish it, because it showed that we had now a Chancellor of the Exchequer who had a clear idea of the incidence of taxation. With regard to the small changes the right hon. Gentleman was going to make in the postal arrangements, he understood that he now proposed to deliver letters at every place in the United Kingdom three times a week. He was afraid the right hon. Gentleman would find some difficulty in carrying out that proposal, but he should vote for it because, although it might entail some loss to the Exchequer, he thought it was only right that people who lived in out of the way places and who only had one delivery a week should be brought into closer touch with civilisation. At the same time he would like the right hon. Gentleman to urge on the Postmaster-General the desirability of inquiring into the question of the service of rural districts where there were two or three posts a day. In his opinion the second post was one of the curses of civilisation. There should be a delivery as early as possible in the morning, and the post should leave as late as possible at night. The majority of the people in the rural districts felt that when they had received their morning's delivery, they should be done and finished with letters for the day and that they should not receive a post at two o'clock or five o'clock in the after- noon. If the right hon. Gentleman would look into this matter and argue it out with the Postmaster-General, he would find that in many rural districts there were two or three deliveries in the day, which must cost money and which the people in the district did not consider of any use. If the right hon. Gentleman could reduce those deliveries to one and spend the money saved in giving more deliveries to those people who received only one post a week, he would be responsible for a very great reform. With regard to the proposed reduction of 1d. per lb. on tea, he believed that the people who got the worst and most unfair treatment in this respect were the poorest of the population—;the people who bought their tea in very small quantities. A man who was able to buy his tea by the chest or in large quantities could usually insist on being treated fairly by the tea dealer. The question he desired to ask the right hon. Gentleman was, would this penny only benefit the seller, or did the right hon. Gentleman think that by this reduction of the duty he was going to reduce the price of tea to those who could only-purchase tea in small quantities?


Or improve the quality.


was doubtful whether the reduction would achieve either of those results, in which case the right hon. Gentleman would have done far better by leaving the duty alone until he could give a reduction which would benefit these poor persons. In conclusion, with these exceptions he could only repeat what he had said before, that he believed the wise and sound policy of steadily reducing the debt of this country and at the same time attempting to reduce the taxes would be the policy of the right hon. Gentleman, who would not allow himself to be made a party to any great expenditure which would lead to heavy taxation being levied which, though it was levied upon the rich alone, must in the long run react on the commerce and the producers of this country.

MR. C. PRICE (Edinburgh, Central)

congratulated the Chancellor of the Exchequer upon his Budget, which he thought was the first honest Budget for many years, and differed in that respect from that introduced by the ex-Chancellor of the Exchequer last year, which was absolutely dishonest and misleading in many respects. He was sorry the right hon. Gentleman had not seen his way to do something to alter the conditions of the floating debt of the country. In his opinion it would have been a good thing if that could have been solidified and added to the National Debt. Owing to there being so much floating debt it was difficult to understand what really was the condition of the debt of the country. He was glad, however, that the amount earmarked for the reduction of debt was to be increased. He was exceedingly sorry that the right hon. Gentleman had not made the reduction on tea 2d. instead of 1d., because that would have benefited the consumer, and he was perfectly certain that the consumers would not get the benefit of the reduction proposed. He strongly urged that before the Budget was carried through this reduction should be made 2d., because everyone who had anything to do with the increase and reduction of the price of eatables knew that these small reductions did not benefit the consumers in any degree.

COLONEL KENYON-SLANEY (Shropshire, Newport)

thought the position most Members on the Unionist side took up was not that the proposals of the Budget were bad but that possibly they might have been better. He regretted to hear the hon. Member for Central Edinburgh say the Budget of the ex-Chancellor of the Exchequer was dishonest. It was not the fact, and he thought it very offensive on the part of the hon. Member to have applied such a term to his right hon. friend the late Chancellor of the Exchequer. What the Committee had now to consider was whether the right hon. Gentleman the Chancellor of the Exchequer had made the best use of his surplus. He should be sorry to think that he had made the worst use of it, but he was not sure he had made the best use of it. Greater experts than he doubted whether the reduction of 1d. on tea would benefit the poorest classes, and that being so he would like to have seen a better test of the good intentions of the right hon. Gentleman. As to the abolition of the tax on exported coal, he was not quite sure that the right hon. Gentleman had made a wise selection. On the right hon. Gentleman's own showing the result of the arrangements made after the imposition of the tax had been that the foreigner who bought the coal had practically paid the extra price necessitated by the tax. He understood the right hon. Gentleman to say, however, that this tax did press rather hardly upon a type of coal that was not of the best; but at the same time he laid it down very clearly that this tax did not in any way interfere with the export of the best coal, of which this country had a monopoly. If it was true that foreign consumers must buy this best type of coal, and if it was allowed that our store of coal, though very large, was to a certain extent the life blood of the mining interest of this country—;if all that was true, would it not have been better to have retained the tax and to have applied the amount of income received from it to the reduction of some other tax which would be better for the well-being of the people of this country, who had a right to look for every remission when there was any money to spare? He remembered many years ago the present Lord Goschen laying down the proposition that the first duty of a Chancellor of the Exchequer ought to be to consider how he could, as far as possible, broaden the basis of taxation and increase the sources of revenue rather than dry up altogether any of the present sources. He argued that although they might reduce a certain tax they should not get rid of it altogether, because by keeping open numerous sources taxation would be fairer. In his Budget statement the right hon. Gentleman appeared to have lost sight of the importance of not drying up any source of taxation, and to that extent he had departed from the wise principle laid down by Lord Goschen. The effect of the abolition of the coal tax would be to take money out of the pockets of the people in this country to relieve their foreign rivals of a slight contribution to our revenue, and it would also narrow instead of broaden the basis of taxation. He should have thought that the Chancellor of the Exchequer would have recognised that the income-tax had a greater claim to a reduction than a proposal to narrow the basis of taxation. He did not think the right hon. Gentleman had made the best use of his surplus, and while hon. Members had spoken with gratitude of the assistance given to the coal-mining industry he had not heard a word of regret that the agricultural industry was not to get the slightest benefit or help. The great blessings which according to the Prime Minister were to accrue to agricultural districts, and which figured so largely in the Prime Minister's election address, were not advanced by a single inch under this Budget. It would have been a far wiser policy if a portion of the surplus had been devoted to carrying out some of the promises made by hon. Gentlemen opposite during the election. He was not quite clear whether the Chancellor of the Exchequer intended to advance loans to local authorities at a lower rate of interest. If so, he agreed that that would be a benefit to certain rural developments which they would all like to see carried out. Had the right hon. Gentleman held out any promise that such would be the case? If so, he would like to know to what extent the rate of interest would be lowered. He would reserve any further criticisms upon details, and in conclusion he desired to say that he did not think that the Chancellor of the Exchequer had made the best use of his opportunities, for he might have made a wiser selection for the remission of taxation. At any rate he could not promise the right hon. Gentleman much gratitude or many expressions of satisfaction on behalf of the large agricultural and rural districts which would be affected by the Budget.

* MR. HOLDEN (Lancashire, Heywood)

said he was not directly interested in tea, sugar, or coal, but he was interested in the general financial position of the country, and he would like to deal with that in his maiden speech. He had followed closely the figures of the Chancellor of the Exchequer, and as he was somewhat of a pessimist with regard to them, he was not very sanguine as to a future revenue. He was also pessimistic about the estimated expenditure which the right hon. Gentleman had estimated at £246,000 less than last year. The question arose whether this decrease was an actual retrenchment or an actual economy. He did not think it was either. In the Navy Estimates in 1904, the stock of Naval stores was £4,188,000, in 1905 £4,600,000 and in 1906 £4,700,000. In the Estimates for 1907 those stores had fallen to £4,000,000, showing clearly that they were working out of stock. That was not real retrenchment, and he urged on the right hon. Gentleman the necessity of watching these stock accounts, because it was on the cordite stock account the last Liberal Government fell. It would be a very good thing if he ordered a general stock-taking for the whole country, not only as to quantity, but as to quality, so that he might commence on solid ground. They had heard that it was absolutely necessary that the unfunded debt should be reduced as quickly as possible. If that was a dangerous debt because it was payable at short dates, then they must also consider that the debts which were incurred by the National Debt Commissioners and the Postmaster-General would also be dangerous debts under certain circumstances. That liability amounted to £150,000,000, against which they were told that this country held £100,000,000 Consols and other stocks, and £50,000,000 annuities. But before accepting this as satisfactory they wanted to know the market price of the stocks held against the Post Office debt. In 1898 the surplus market value of those stocks was £11,000,000, but in 1903 there was a deficiency on this account of £11,000,000. The last Parliament passed an Act that the Postmaster-General should be relieved from the statutory obligation of publishing a balance sheet on the ground that it would be misleading. It would certainly be misleading if the stocks were not entered at their market value. If there was a deficiency in this account, and the nation was responsible for it, they ought to know what it was. He sincerely hoped the Chancellor of the Exchequer would not continue the style of finance adopted by the late Government, and would not take advantage of the Act permitting him to withhold a balance sheet. On the contrary he begged of him to commence his financial career by making provision for this deficiency, and by publishing the balance sheet redeem the character of the House for sound finance. He was pleased that the Chancellor of the Exchequer was keeping liquid a portion of the annuities. If he would take out of these annuities £1,000,000 sterling per annum and create a Sinking Fund until it was equal to the deficiency, he would then place the savings hank business on a sound foundation. He would also render great service to the country if he would invest that Sinking Fund in gold as opportunities presented themselves, so that at the end of ten years there would he a gold reserve to meet liabilities. The transactions which took place at all our commercial exchanges amounted to about £15,000,000,000 per annum, by the exchange of pieces of paper, whether bills or cheques—;all received on the understanding that they were payable in gold. If the Chancellor of the Exchequer would take the opportunity of putting the deficiency right, and of creating a reserve of gold amounting to £10,000,000 sterling to meet the general indebtedness in case of necessity, he would earn the gratitude of the whole of the financial community of this country.

* MR. WARDLE (Stockport)

said he was not, like the last speaker, a pessimist with regard to the progress of this country on its financial side. He was interested, as was every Member of the Committee, in the comparisons drawn by the Chancellor of the Exchequer between population and expenditure, but there were one or two other comparisons which he would have liked the right hon. Gentleman to have given, but which, whether purposely or not he did not know, were certainly withheld from the Committee. There was the question of the income of the country, and the growing wealth of the country. While the expenditure had increased by 39 per cent, and the population by 10 per cent., he thought it would be found that notwithstanding all the money that was wasted during the South African war, the wealth of the country had been increasing by £200,000,000 per year, and that therefore the country was not in the bad position some people would have them believe. Undoubtedly there would come from the benches below the gangway demands for increased expenditure in certain directions on behalf of social reform. One of the demands—;that for old age pensions—;would be pressed most strongly. They had been told time after time that the money for these things could not be raised, and they were invited by the noble Lord who had spoken a short time ago to resist every demand for increased expenditure. The noble Lord had said the country was oppressed by the load under which it staggered, and the Committee were also invited by the right hon. and gallant Member for the Newport Division of Shropshire to look at the question from the point of view of the broadening of the basis of taxation. He would venture to suggest two or three sources of income that were open to the Chancellor of the Exchequer without in any way broadening the basis of taxation. One of those sources was hinted at by the last speaker. He referred to the question of banking, and he ventured to suggest that as municipalities had found it necessary on various occasions to get out of the hands of the financiers and the money-lenders, it would be for the general good of the country if the State took over the business of banking and used the profits on behalf of the whole community. He would like to suggest that if they could get a Chancellor of the Exchequer with imagination enough he would find in the income which might be derived from the nationalisation of the railways of this country an enormous fund which might be used for the purposes of old ago pensions and various other social reforms. In thirty years every penny subscribed by the shareholders of the railways of this country had been paid back, and they still owned the original amount and a large sum of watered capital besides. The income of the shareholders amounted to £40,000,000 a year. In Germany about £22,000,000 was provided by the railways for the relief of taxation, to the general advantage of the State. So that when hon. Members said they must either broaden the basis of taxation or find other sources of income, he told them there were other sources waiting at the moment to be tapped, and it seemed that what was wanted was sufficient imagination in some Chancellor of the Exchequer to convert the great railways in this country to the public use. Of course, there would be other subsidiary advantages, but in the main it would be a nucleus from which a fund could be formed to provide for matters of social reform. A great deal had been heard about another matter, namely, mining rents and royalties. He thought the Chancellor of the Exchequer when looking about for new sources of income might put a tax on these rents and royalties, and the sooner he did so the sooner would the pledges which candidates gave during the general election be fulfilled. It seemed to him that more advantage would have been conferred on the community by taking the tax off sugar instead of by reducing the tax on tea. Sugar was the raw material of certain industries and it was far more important that it should be free from taxation than that a penny should be taken off the tea duty. On the whole he did not think they could have expected more from the Chancellor of the Exchequer who had only been four months in office. He hoped that before this Parliament had finished its course some of the greater questions which he had referred to would be tackled, and that something would be done in the way of social reform.

MR. W. H. LEVER (Cheshire, Wirral)

congratulated the Chancellor of the Exchequer on his proposals, especially in regard to the reduction of the National Debt. In his opinion, the nationalisation of the railways would result in a loss of revenue to the State, though it would certainly benefit the shareholders. He did not believe that money for an old age pension scheme could be obtained by that means. He would rather advocate the nationalisation of canals, and the providing of improved facilities for motor traffic. If that were done the rates for the carriage of goods would fall, and anyone who wished to buy railway stock ten years afterwards would not have to pay the price which the Government would have to pay for the railways if they were bought by the State now. There were other sources from which income might be derived. There was a strong desire that the pledges which had been given with regard to old age pensions should be redeemed. He rejoiced that the Chancellor of the Exchequer had promised an inquiry into the question of the graduation of the income-tax. Reference had been made by the Chancellor of the Exchequer to the difficulties which were said to prevail in regard to the graduation of the income-tax, and one speaker who had taken part in the debate had said that it was perfectly impossible. He himself agreed that discrimination should be made between incomes which were derived from investments and those which came from daily toil, either by the hand or the head. They should differentiate between the incomes from investments which survived the death of the owners, and incomes which ceased with the death of the wage-earner. He ventured to say that if they would combine these two principles they would have a basis of taxation which would be perfectly fair to all classes of the community. By having a graduated income-tax and collecting it at the source and by doing away with the system of rebates that now existed, it would be possible to collect on the highest scale from wealthy companies making the largest profits, and in that way they would make a distinction between the wage-earners and the dividend receivers. It would work out in this way. Supposing a person had an investment in a large corporation, although his income might be below the amount ordinarily assessable, he would pay on that income on the highest scale because he enjoyed all the security which the large corporation gave, and the high rate of dividend which it paid. He did not think there was any other system on which a graduated income-tax would be available for the purpose of producing any considerable increase of revenue. If they had a graduation of the income-tax he thought they should commence with a tax of 2d. on incomes of £1 a week and tax the wealthy on the highest scale. They would then get sufficient money not only for old-age pensions, but also for other social reforms. He was confident that those who contributed on the larger scale would be doing no more than bare justice, and they would be performing an obligation resting upon them.

* MR. CARLILE (Hertfordshire, St. Albans)

said that earlier in the debate reference was made to the fact that some foreign countries had a graduated income-tax. He knew that the effect of a graduated income-tax in Switzerland was that people who possessed incomes approaching large proportions lived out of the country for the whole of the year except eighty-nine days, and their incomes were spent in Italy and elsewhere instead of in their own country. That did not make for the welfare of the country. If a system of graduated income-tax was introduced, legitimate methods of evading payment would be devised which it was not now worth while to adopt. He trusted that if a graduated income-tax were introduced it would be in such a way that capital would not be driven out of the country, and that a premium would not be put on evasion. As to the tea duty he had hoped that if a reduction was to be made, the whole system of levying the duty would be altered. It seemed to him to be an appalling thing that the duty on tea dust which was the luxury of the working man should be equal to 330 per cent, of its value, while those who bought a 3s. tea only paid 14 per cent, on its value. Why should not the right hon. Gentleman impose an ad valorem duty on tea? Of course there were difficulties in introducing an ad valorem duty, but these should be faced rather than continue the present rotten system. He dared say that it would involve the engagement of a staff of experts, but he should say that if the Chancellor of the Exchequer could afford to take off a penny from the tea-tax, he might engage a staff which could provide a better principle of charging the duty than at present. In the main he did not think that the Chancellor of the Exchequer was likely to be hardly dealt with by hon. Members on the Opposition side of the House. It seemed to him that in many ways this was a most excellent Budget. He was sure that on the Opposition side of the House it would not be criticised in the disgraceful manner in which an hon. Gentleman on the Liberal Benches had described the Budget of the late Chancellor of the Exchequer. Members of the Opposition were not in the habit of using the sort of epithets which an hon. Member on the Liberal Benches had employed in the absence of the late Chancellor of the Exchequer in regard to a Budget which was one of the best and most intelligent ever placed before the country, and which was received with admiration by the whole country. He ventured to say that the Budget statement of the right hon. Member for East Fife would receive more considerate treatment at the hands of the Opposition, and he thought that they might consider it as in the main a satisfactory statement. It was a great consolation to them that the handsome surplus placed at the disposal of the right hon. Gentleman was largely the result of the excellent conduct of public affairs by the late Government.

* MR. W. JOHNSON (Warwickshire, Nuneaton)

said that the hon. Member for St. Albans had argued strongly against a graduated income-tax, contending that it would not work out properly. But directly afterwards he had said that the poor man's tea dust should be taxed more lightly than the rich man's tea which cost 3s. or 4s. a pound. That was a graduated tea-tax; and if the poor man was let off on account of his tea, why not on account of his income? The hon. Gentleman could not argue logically for a graduated tax on tea and against a graduated income-tax. He was glad that the coal duty was to be abolished, because he knew that it had reduced the wages of miners throughout the country, and that it was one of the most grievous burdens that trade had had to bear. He would suggest to the hon. Member who objected to the removal of the coal duty to go down to South Wales, to Durham, and to Scotland, where he would be told that the coal-tax had interfered with the trade of the country, and that many contracts for the supply of coal abroad had been lost through it. He believed that the hon. Member opposite was an owner of mining royalties and a very wealthy landowner, and he suggested that a provision might be made for old-ago pensions by a land-tax and a tax on mining royalties. As the son of a father who had to keep a family upon 12s. a week he knew what it was for the small wage-earners to be taxed. They were taxed already sufficiently by indirect taxation, and the sooner it was removed the better. They could only put the sympathy which they professed with the working-classes into practical effect by giving them a larger income which would procure for them better homes and surroundings, better education for their children, more leisure for themselves, and, in their old age, something better than the workhouse.

* MR. RIDSDALE (Brighton)

desired to join in the general tribute paid to the statement of the Chancellor of the Exchequer. He felt sure that the Budget when it became known in the City of London, would have a good effect upon the credit of the country. It had been well thought out, and it was based on broad and sound lines. The Chancellor of the Exchequer had placed his finger on the weak spots of the national balance-sheet, from which the credit of the country had been suffering during the last few years. He had stated that the naval and military expenditure was no longer to be paid for out of borrowed money. The £41,000,000 under this head was to be greatly reduced. He had stated that the Unfunded Debt, a debt which ought never to have been allowed to approach the enormous sum of £71,000,000, was now to receive more careful attention, and he had promised a reduction of £7,000,000 next year. Such reduction could not fail to be attended with good consequences to our credit. If there was one thing which had pressed upon the credit of the country during the past few years it had been the existence of that £71,000,000. It had absorbed the liquid finances of the country which would otherwise have been available for the ordinary purposes of trade. There was another point the right hon. Gentleman had dealt with. Taxpayers were all shareholders in the great company of the British Empire; and everyone had a right to be shown a true statement of debtor and creditor, a statement which should contain each item of expenditure and receipt which the nation incurred or received. He was delighted to hear that the Chancellor of the Exchequer intended to abolish the appropriations in aid and other undisclosed, accounts which had hitherto been omitted from our balance-sheet and thus obscured its whole meaning from any person who endeavoured to understand exactly how the nation stood. Anyone who was versed in the study of finance must have unqualified praise for the general statement of the Chancellor of the Exchequer. He would like to say a few words in impartial criticism as to the method by which he had disposed of the surplus. He could have wished to see the balance of the money given to reduce the taxation on sugar rather than upon tea, or the abolition of the coal-tax. Sugar was food; tea was not, although we put it inside us. Sugar was raw material to many of our industries, but tea was not raw material to anything.;—;unless it was indigestion! Though any tax must be a hindrance to the trade of the product upon which it was imposed, at the same time of all taxation imposed upon commodities probably the last he would be inclined to touch would be the tax upon coal—;for the reason that he did not think it was by any means clear that the people of this country had paid it. He admitted that the tax upon coal must have been a hindrance to the mining industry and had probably caused, to a slight extent, a decrease in wages, but he did not think it made any difference whether the tax was put on here or the other side of the sea, as to whether the producer or the consumer paid the bulk of it. There was a statement made by the Chancellor of the Exchequer which rather bore out that statement. The right hon. Gentleman had declared that in many contracts made for the sale of coal there was a clause to the effect that the foreign buyer should have the benefit of the remission of the tax if, and when, it occurred. But why should the foreign buyer have the benefit of the remission of a tax, if and when it occurred, unless he paid it now? He did not wish to press the point. He wished to see all these indirect taxes taken off sooner or later, but he urged that if there were a tax which in his opinion should be left on until the last, it was the tax upon coal.


complimented the Chancellor of the Exchequer upon his extraordinarily lucid statement. If they were to have a Budget of the conventional and orthodox kind to which the country had been accustomed for a good many years, he could not imagine a Budget that would appeal more to those who sat upon the Ministerial side of the House than the present one. From first to last it was an exposition by a master of exposition. All who sat upon the Opposition side acknowledged the immense ability, the high political character, and the extraordinary command of detail and generalisation possessed by the Chancellor of the Exchequer, but having said that he thought he detected one or two remarkable contradictions in the statement of the right hon. Gentleman. It was, he ventured to say, a Budget which would not cause great astonishment in the country. It was a Budget which, he thought, had been expected. So long as they retained the habit of taxing a very few articles of consumption, and those articles principally food and drink, a Chancellor of the Exchequer had very small room in which to swing his economic cat. He must play see-saw with the few objects of taxation, and they had had that see-saw through a great many years by Conservative Chancellors of the Exchequer, and now they had a similar Budget from a Radical Chancellor. After all, what did this Budget do? There was a certain reduction for which all were grateful, upon tea; but the hon. Member who had just sat down had suggested that there might have been a reduction to greater advantage upon sugar. There was the see-saw. The Chancellor of the Exchequer himself had admitted that a reduction upon sugar would perhaps be of greater advantage to the manufacturer, since sugar was a raw material; but instead of taking the tax off sugar it was to be taken off tea, and he ventured to say that if the late Chancellor of the Exchequer had been in the position of the present Chancellor of the Exchequer to-day, he would have done exactly the same thing, and have see-sawed from one object of taxation to another, with no direct change so far as the general effect was concerned, but a direct change so far as the individual object of taxation was concerned. As to the coal tax he could not understand how hon. Members on the Ministerial side of the House reconciled their views concerning it. Personally he had always been opposed to export taxes of every kind, and there was scarcely a Protectionist community which did not hold practically similar views. The United States in its constitution prohibited any export tax being put upon any product of manufacture or natural product going out of that country. Why? For the simple reason that they considered that a tax put upon goods coming into the country had a certain restrictive effect upon competition. He voted for the coal tax—;and a good many others had been as guilty of inconsistencies in the House—;for the reason that he now voted for a tax upon tea and sugar, because so long as we continued the present method of taxation, those who thought as he did must give their votes in favour of certain forms of taxation to which they were actually opposed. He had supported the coal tax because we needed the money, and so long as we had a system of taxation narrow in form, they were bound to support it until the country changed the system pursued by Governments of both sides of politics. He had supported the coal tax, but they could not have the effect of that tax both ways. Some said it was the producer who paid the tax, and if that was so the contention that it was paid by the consumer fell to the ground. He was, however, opposed to the principle of the coal tax, because it had a certain restrictive effect on the trade. He would put taxes on other articles which were excluded from the purview of the Chancellor of the Exchequer, because they would have a restrictive effect on competitive importations and at the same time would yield revenue. The coal tax was not analagous to the shilling tax which was put upon corn, and which was taken off without any reason whatever. If that tax had been maintained it would have given us £2,500,000 revenue without any appreciable effect on the cost of living in this country. He thought the Chancellor of the Exchequer had been extremely fortunate. Every one had been delighted with the result of last year's operations in taxation. Through the past year's operations there had been an estimated surplus of £3,000,000, and on the Budget of last year there had been a saving of £422,000. Did the right hon. Gentleman and hon. Gentlemen opposite take credit for the whole of that saving on the one hand and all the surplus on the other? The Budget which the right hon. Gentleman had been able to present was the result, as he himself had acknowledged, of operations which began before he became Chancellor of the Exchequer—;the result of a year of savings and careful expenditure, as he himself would admit, largely of operations he had not initiated. The Chancellor of the Exchequer had boasted of the return to thrifty and economical administration. For thrift and economy the right hon. Gentleman's Budget would hardly set the Thames on fire. It was true the right hon. Gentleman held out hopes of future reductions in national expenditure. Though he had not had time to consider large schemes of reform of administration and large and wide methods of economy which would result in substantial reductions in the expenditure of the country, he did not think that would come so speedily as the right hon. Gentleman imagined. The right hon. Gentleman had also hinted at raising money by increasing the taxation on the liquor trade. That trade was already taxed up to the utmost limits. If hon. Gentlemen opposite said abolish the licence trade altogether and be prepared to make up the revenue of £34,000,000 got from it by other reasonable means, he would vote with them if it was believed it could be done legitimately, but because there was a trade which would yield revenue it did not follow that it should be taxed to yield the highest possible revenue. There were some who believed with regard to the liquor trade that the tongue of the buckle had been drawn to the last hole. A land tax had also been suggested as a means of raising revenue. Something might be said for taxing land values, but that was not a problem that could be worked out on principles alone. It would have to be worked out through a series of complicated and conflicting interests and claims, and hon. Gentlemen who represented rural constituencies would have to give very careful consideration to any proposals to tax land which at present did not pay the landlord, the farmer, or the labourer. They must look in other directions for the revenue to meet the constantly growing expenditure of the country. Did hon. Members opposite believe they were going to curb in any great degree the growing expenditure of the country? The right hon. Gentleman had pointed out that despite the 10 per cent, increase of our population in ten years, and the necessary increase in the expenditure in all Civil Service departments consequent on the increase of population, the increase in expenditure had only been £9,000,000. That was an extremely small increase. The largest item of general increase had been in regard to education, a matter of 60 per cent. Hon. Members opposite were now embarking on a scheme of education much larger than any which preceded it, if the Bill now before the House passed. The Chancellor of the Exchequer could not remove expenditure by a magic wand, and turn to the Army and the Navy and the vast expenditure upon those services as an object for reduction. No one would dispute the fact that our Army and our Navy were nominally for the defence of territory, but just as really for the preservation of our trade routes to the other Colonies and the open markets in the East. The Colonies had cost this country nothing save for the operations of the Army and Navy in the acquisition of territory in which those Colonies themselves had no voice. If this country undertook the acquisition of territory in order to build up an empire, that was her business and she must pay for it. Since, however, the country had acquired that territory, these Colonies had paid for their upkeep.

MR. LEA (St. Pancras, E.)

Is the Uganda Railway a Naval or Military operation?


pointed out that Uganda was not a Colony. Uganda, as yet, was worked as a territory under Britishers, who were not Colonists, but who were occupying the country and enlarging their fortunes. When that territory became a Colony it would take care of itself. He did not, however, want to enter upon a wide discussion of the action of the British Empire through the Treasury, nor would he have mentioned the subject had not the Chancellor of the Exchequer himself, with something of an air of disparagement and with something of a suggestion of over expenditure upon our Colonies, alluded to the subject and seemed to want the House to believe that we could reduce the cost of the Empire in this direction through the operations of the Chancellor of the Exchequer or the Cabinet. He did not think it could be done in that way, and he was one of those who believed that as the years went on—;it might be two, three, four or five years—;it would be found by this House and the country that the narrow field in which our taxation operated was a field which had been fully taken up and was exhausted. Moreover, its operation pressed heavily upon the poor man. There was another form of taxation which pressed very heavily upon the poor man and that was the inelastic taxation of food. [MINISTERIAL cheers.] He knew what hon. Members meant by that cheer. They suggested that a, shilling tax on corn pressed heavily upon the poor. But he would remark that while that shilling tax was in operation the food of no one in this country cost more. [MINISTERIAL cries of "Oh."] At any rate hon. Members would admit that there was a doubt. [Cries of "No."] There was no doubt however about the heavy taxes which the poor man paid upon tea, sugar, coffee, cocoa and tobacco. These were, as he had said, inelastic, and afforded no chance that the man who produced these articles in a foreign country should pay any portion of them. Why? Because we did not grow these things in this country, consequently the effect of those taxes was severe, rigid, and inelastic, he believed that the time would come when the majority of the House would think differently from what it did at that moment. It would recognise that to tax foreign manufactured goods for the purpose of revenue was advisable. [MINISTERIAL cries of "Oh."] Well, that was a free trade tax. [Renewed cries of "Oh."] Hon. Members must not fly away from the principles of free trade. To tax manufactured goods for the purpose of revenue, and revenue alone, was pure free trade. It was the Cobdenite free trade, the John Stuart Mill free trade. It was the foundation upon which hon. Members had built up their present system. Prophecy of course was cheap and inexpensive, and was not well paid by results, but he ventured to predict that hon. Members opposite would yet before they had left that Parliament consider the question whether it might not be possible to get a very considerable amount of revenue from other articles than tea, sugar, tobacco, and such things. He would not object to their getting it from land values if they could prove that it was wise and expedient to do so. But if they got it from land they must still go to other sources of revenue and those were to be found in the reasonable taxation of foreign manufactured goods.

* MR. CHIOZZA MONEY (Paddington, N.)

desired to add his congratulations to those which the right hon. Gentleman had already received upon the lucid and luminous manner in which he had unfolded his proposals to the Committee. They on the Ministerial side rocognised that it would be unfair to criticise those proposals since they were based upon expenditure which was not that of a Liberal Government, and were hampered and harassed by Estimates relating to armaments, which Estimates were those of an Administration now happily no longer in power.

They felt that to apply drastic criticism to the details of the present Budget would not be fair to the distinguished holder of the office of Chancellor of the Exchequer. When armaments had boon reduced as they were promised that they should be reduced, then and not before it would be their duty to criticise freely the proposals of the Chancellor of the Exchequer. With the exordium of the Chancellor of the Exchequer with regard to debt he thought everybody on the Ministerial side of the House would agree, though perhaps there might be some traces of disappointment that after that lengthy exordium he did not urge a greater appropriation of the surplus towards the sinking fund. His own view was that the annual proportion of £28,000,000 might well be raised to £29,000,000 or even £30,000,000 with a view to the reduction of the enormous burdens which now pressed upon the industries and activities of the nation. He would point out that our National Debt, which now amounted to nearly £800,000,000, was in many respects to be distinguished from the National Debts of the majority, if not all, of the great countries of the world in this respect, that there were no solid assets to place against that debt. It was absolutely in the truest sense of the word a National Debt, against which we had to place perhaps only the £28,000,000 of the Suez Canal shares, a small matter of Crown lands, and a small matter perhaps of public roads. That debt was an absolute burden upon the people, to sustain the interest upon which was a great burden not only upon the masters and employers, but also upon the wage earners of the country. He thought everybody would agree with the criticisms which the Chancellor of the Exchequer very properly applied to the Local Taxation Account. The Local Taxation Account was an account at the Bank of England which was fed in the most un-business like way, (1) from the Excise Licence Duty; (2) part of the Estates Duties, equal to 80 per cent, of half of the proceeds of the old Probate Duty; (3) the taxes on beer and spirits, and (4) the sums allotted in the Agricultural Rates Act. This system left it uncertain in the minds of those who ruled our local finance what sums they would have to deal with in any one year. The death of a millionaire or two might provide them with a large sum, where as in the succeeding year they might find their funds depleted. He was sure that that was not a kind of finance which would commend itself to the Committee, and that they would all join with the Chancellor of the Exchequer in condemning it root and branch. Coming to the main consideration which underlay British finance, the question of ability in regard to the raising of the taxes of the country, and the classes upon which those taxes should be levied, there cords which had been collected by the Inland Revenue authorities threw a flood of light upon the question of ability, which was always a recognized principle of British finance. Let them take, for instance, the investigations which had been made in the collection of the income-tax and of the estate duties. It was somewhat difficult to decide upon the question of how many people paid income-tax in this country, but if they could arrive at that figure they would have a light thrown upon the incidence of taxation, and guidance would be given them as to how they should frame their Budgets. There was the Inhabited House Duty which was applied only to those people who inhabited houses valued at £20 per annum and upwards. It seemed strange that in a rich and wealthy country like this, containing 9,000,000 houses, there were only 1,300,000 of the annual value of £20 and upwards. That seemed to suggest that the number of income-tax payers could not be much more than 1,000,000, and indeed closer investigation showed that to be the case. They had a most valuable record in that connection in the claims for abatement. In cases where the incomes were between £160 and £700 the income-tax payers were allowed certain abatements of their incomes before they paid income-tax. The number of persons who claimed abatements on the income-tax was shown by the latest Return to be less For the most part people with over 700,000. Even if they assumed that a certain number of people escaped taxation and that a certain number of other people did not take the trouble to claim abatement, they arrived at the conclusion that about 750,000 persons claimed abatement or were entitled to it. For the most part, people with more than £700 a year lived in houses of a high rental. In London he had calculated that a man with £700 a year and upwards would be likely to live in a house at a rental of not less than £60, and in the country he would place it at £50 a year. Taking those two criteria, in the whole of the United Kingdom the number of people with £700 a year and upwards would not be much more than 250,000. In that way they arrived at 1,000,000 income-tax payers, which was what was suggested by the total number of houses at £20 a year and upwards. What a valuable light that threw upon the distribution of incomes and the application of Adam Smith's doctrine of ability to pay, which had been expanded into the doctrine of equality of sacrifice. If there were 1,000,000 income-tax payers, and they represented 5,000,000 people, then it meant that out of 43,000,000, 5,000,000 took the whole of that income which was shown in the income-tax records. This sum amounted in the last year of which they had any record to nearly £900,000,000 sterling. When they had made deduction for repairs to houses, improper abatements, and other allowances, the solid fact remained that an amount of income between £800,000,000 and £900,000,000, or for 1904 about £830,000,000, was enjoyed by a number of people in this country who only amounted to 5,000,000 out of 43,000,000. What a tremendous fact that was, for it meant that one-ninth of the population enjoyed half of the income of the country. But even that was overshadowed by a still greater fact which he would venture to place before the Committee. he had stated already that the possessors of incomes of between £3 per week and £700 per annum were about 750,000, but if they took the 48th report of the Inland Revenue Commissioners they would find that the incomes which they enjoyed could not possibly amount to more than £250,000,000. If that was the case it meant that an income of nearly £600,000,000 sterling, or more than one-third of the entire income of the whole of the people, was enjoyed by 1,250,000 out of 43,000,000. That was an overwhelming fact in relation to taxation, for it meant that one-third of the entire income was taken by one-thirtieth of the people. The possibility of error was so small that he thought it might be taken that the calculation was sufficiently correct to be at any rate the basis which ought to be taken into consideration in regard to any system of taxation imposed in this country. He submitted that these facts were an argument for a graduated income-tax. They also showed that the middle classes were over weighted by taxation, while the upper classes, the rich people who really controlled the activities of the country, because they controlled its land and its capital, were under taxed. Corroboration was to be found in the death duty returns. Every year about 700,000 persons died in this country, and the amount of property they left amounted to nearly £300,000,000. Out of those 700,000 persons 27,000 left £267,000,000—;that was to say, 4 per cent, of the persons who died left nearly the whole of the property which passed at death in any average year. The figures he had given were not for any one particular year, but were the average for the last five years. In each of the last six years less than 4,000 persons had left an average of £195,000,000 per annum. These figures pointed to another means by which they might apply the doctrine of equality of sacrifice. It was agreed by Adam Smith, John Stuart Mill, and other economists of standing that when property passed at death that was a good time for the State to take its toll. What had been the Budget history of the last fifteen years during which period hon. Gentlemen opposite had been in power? It had been a tinkering with taxes; this year something off tea and something on tobacco, the next year something off tobacco and on tea, and so on, year after year until one was inclined to ask whether the ability of British Chancellors of the Exchequer was exhausted when they were obliged to resort to such minor subterfuges. He looked to the time when the Budget would contain more non-tax revenue than at present. We derived more than £4,500,000 of non-tax revenue from the Post Office, which pointed the way to happier methods. He would remind the Committee of what was done by other countries in this very matter. An hon. Member opposite had referred to the question of the nationalisation of the railways, and an hon. Member on the Ministerial side had in reply thrown doubt on the practicability of the proposal. When Prince Bismarck proposed to nationalise the railways of Prussia the same arguments were applied, but he nationalised them. In 1905 the income of the Prussian railways amounted to £79,000,000 and the expenditure to less than £55,000,000, with the result that there was a net profit of nearly £25,000,000. [An HON. MEMBER: What did they cost?] They cost a sum which was largely represented in the national debt of Prussia. The profits of the national Prussian railways were not only sufficient to pay the interest on the whole of the national debt, but to pay £10,000,000 per annum for other matters. The State mines of Prussia yielded a profit of £1,200,000 a year, and the forests and domains a profit £4,000,000. In Japan the non-tax revenue was one-half of the total revenue, and would soon be two-thirds. Japan, like ourselves, had passed through a great war, but because of her national assets and revenue producing administrations the burden of taxation in Japan would diminish as time went on, while ours steadily increased. These things, he urged, must have consideration in the Budgets of the future. It was time to think of the development of the country in all its resources and to the devotion of national wealth to truly national ends.

MR. BRIDGEMAN (Shropshire, Oswestry)

said the exhaustive speech of the hon. Member for North Paddington conclusively proved, if it proved anything at all, that the country was now suffering from the fact that the rich had been getting richer and the poor poorer for some considerable time. That result had been arrived at by the blessed system of free imports which he understood the hon. Gentleman somewhat strongly to support. In regard to the coal tax he was not an expert; but he was glad to note that the Government had practically repudiated the doctrine that a tax upon a commodity must necessarily fall upon the consumer. [MINISTERIAL cries of "Oh, oh!"] Well, if it did not fall upon the consumer he could not see the logic of the argument of hon. Gentlemen on the Ministerial Benches. The argument advanced in favour of the repeal of the coal tax was that it was the producer who paid the duty. [An HON. MEMBER: That is an export duty, not an import duty.] This was a matter of principle, and two different things could not be said in regard to the same principle. What he had risen, however, to draw attention to was the very poor treatment which agriculture had received at the hands of the Government. In the Gracious Speech from the Throne they were told that earnest inquiries were being made into the social and economic conditions of the people of Great Britain, and that measures were to be submitted to the House by which a larger number of people would be retained on and attracted to the soil. Those measures, however, had not yet been brought before the House. The Chancellor of the Exchequer in the course of his speech had said that he intended to go very thoroughly into the question of State subventions towards local purposes. He hoped that the right hon. Gentleman would at the same time consider the incidence of local and Imperial taxation on the various industries of the country, including agriculture. At present, rural, and paid far more than its proper share in rates and taxes. He felt quite certain that a great deal could be done towards lightening in a fair and just manner the taxation on farmers and occupiers of small holdings, on whom the existing rates fell very heavily compared with people who were not on the land. He hoped that when the Chancellor of the Exchequer took this Subject into his serious consideration he would realise that the proper way to bring the people back to the laud was to make it easier and more profitable for them to live upon the land.

* MR. MITCHELL-THOMSON (Lanarkshire, N.W.)

said if it was not presumptions on his part he would express his appreciation of the remarkable way in which the right hon. the Chancellor of the Exchequer had handled a very abstruse and complicated array of figures. It was all very well to hear homilies on retrenchment, but it was one thing to preach such homilies, and another thing to practise them. He believed that when the Chancellor of the Exchequer came to deal with the various departments he would perhaps find his prophecies of retrenchment a little difficult of fulfilment. There was the President of the Board of Education, and the right hon. Gentleman would have to come into conflict with him if a question arose concerning education. Then he would have the Postmaster-General to deal with. It was well known that a conflict was going on between the Post Office and the National Telephone Company, which must inevitably entail the expenditure of a large amount of public money; that was a question upon which retrenchment was quite impossible and impracticable. He should have liked to say something as to the advisability of reducing the taxation on sugar, but he recognised that any remarks that he might make upon that subject might be regarded with a certain amount of suspicion by hon. Members on the Ministerial side. Therefore, he would not presume to urge upon the right hon. Gentleman his regret that he had not been able to do something to relieve the country from the sugar tax; he would only say that not only as a food was sugar worthy of some amount of consideration; it was even more worthy of attention as the raw material for certain industries from which they heard complaints at the present moment. The right hon. Gentleman had said that sugar was taxed within 30 per cent, of its value, but that was the retail selling value. The right hon. Gentleman went on to say that tea was taxed within 90 per cent, of its value, but that was the wholesale selling value, not the retail selling value. That was quite, if he might use the expression, another pair of shoes, and if the anti-tea duty agitation had done nothing else it had directed the attention of the people of this country to the enormous profits made by the middlemen who had dealings in tea. He had always hold strong views against the coal tax, and therefore he was exceedingly glad that the right hon. Gentleman had seen his way to abolish it, but there was a point in regard to it upon which he wanted a certain amount of illumination the question had reference to the incidence of the tax and upon the logical methods by which the right hon. Gentleman had arrived at the conclusion that it ought to be abolished. He thought they might start with the proposition—;he was sure this statement would commend itself to hon. Gentlemen who were followers of Mr. Cobden—;that every tax had an inherent vice, and that all taxes were vicious because they were barriers between nations and were preventatives of free exchange between those nations. Applying that doctrine to the coal tax it was vicious, but taking the case of Hamburg, which, if he remembered rightly, was called more than once the test market, from the point of view of Great Britain in selling coal to Hamburg the tax was a disadvantage upon us, because it was a barrier raised between our market and that of Hamburg. That was the reason which underlay the removal of the tax, and he thought all hon. Members would agree that the barrier was just as much a barrier whether it was raised by the selling nation or whether it was raised by the buying nation, and that the coal tax would have been equally a barrier if, instead of being imposed by this country, it had been imposed by the free city of Hamburg. Therefore, hon. Members would have been equally pleased at its removal, and the reason was that the barrier was erected in regard to an article which could be obtained by the good people of Hamburg in any quantities they liked from other countries. There were two conditions which might justify the retention of such a barrier. The first was that the Exchequer must have money, and the other was the political difficulty. It was said that coal was an article of great national value, and in the interests of the nation ought not to be alienated. That was an argument which he confessed could only apply to one class of coal, and that was the finest steam coal, and with regard to that he could not see why the tax should not be retained, because finest steam coal was an article which would command its price and sell in any market in the world. It was a monopoly, and therefore was an article in regard to which the tax always feel upon the consumer and not upon the producer. He agreed, however, that the coal tax was to be regarded as a barrier between this country and—;for instance—;Hamburg, and that it was desirable for this country to remove it; it was a barrier because it applied to an article of universal consumption and produced by other countries. But let them look at the question from the point of view of Hamburg. It did not matter to Hamburg whether the tax was imposed by this country or by themselves. Ex hypothesi they did not pay the tax, because if our market was closed they could draw their supply from another market. Then they went one stop farther, and here it was that he wanted illumination from the right hon. Gentleman. Let thorn suppose instead of Hamburg they road Great Britain, and instead of a tax on British coal, a tax on foreign wheat, an article eatable of being produced by untaxed countries in unlimited quantities, large enough to supply the requirements of this country, they had substantially the same tax in the main, only in this case it was imposed by the buying countries instead of by the selling countries. Would hon. Gentlemen say that the tax had in one case an incidence on the one side, and in the other an incidence on the other side? They could not have it both ways. More than once in the course of the session they had had indications that hon. Gentlemen opposite were beginning to see light, and to appreciate the fact that it was highly desirable that wherever possible British work should be conserved for British workmen. He could only hope that, in the days to come, the Chancellor of the Exchequer would fulfil this theory, of which he had laid down the foundation that night, and come over and help tariff reformers.

MR. MEYSEY-THOMPSON (Stafford, Handsworth)

craved the indulgence of the Committee in making his maiden speech. He hold that he had a greater right to that indulgence than the right hon. Gentleman the Chancellor of the Exchequer, inasmuch as he claimed to be a real maiden. The Chancellor of the Exchequer had asked indulgence in making his maiden Budget, but he regarded the right hon. Gentleman more in the light of a widow, as he only came before the House in a new capacity. He congratulated the Chancellor of the Exchequer on the excellent speech he had made in introducing what the right hon. Gentleman would excuse him for calling a thoroughly bad Budget. When the right hon. Gentleman spoke he thought he had never heard him speak so well, and when he heard the right hon. Gentleman propose to pay off the National Debt in a comparatively brief space of time he quite expected to hear a speech on the subject of fiscal reform, which would provide the funds to enable us to pay off the Debt while encouraging our native industries. The right hon. Gentleman did not, however, fulfil his early promise. The only result of this magnificent beginning was a proposal to take off the coal duty. "What a falling off was there." He believed the right hon. Gentleman was honest in his wish and his attempt to reduce the National Debt by a large sum, and he had gathered from the right hon. Gentleman's remarks that they were going to get rid of it altogether in the next four or five years. The Committee could imagine his disappointment when he heard they were only going to have a reduction out of the surplus of £500,000. What he wanted to know was this. If the consumer paid the 1s. duty, why did we not have an export duty on coal? If the consumer did not pay the duty, why not have a tax on imported corn? In either of these ways we could realise the right hon. Gentleman's beautiful dream of paying off the National Debt.


heartily congratulated the hon. Member upon having discharged the difficult task of delivering a maiden speech with admirable discretion and much point and humour. The hon. Member had said that he (the Chancellor of the Exchequer) was not a real maiden. If he might use the French tongue he would say he was afraid he was a demivierge. He certainly had not got that sanguine enthusiasm which the hon. Member had displayed, in the full tide and fervour of which he attributed to him the intention of paying off the National debt in three or four years. That was an intention which he was sure he had never expressed. He did not however rise for the purpose of making a controversial speech. His object in rising was merely to ask the Committee to proceed to pass the formal Resolutions necessary to the financial business of the country, with the assurance that upon the tea duty Resolution there should be a general discussion to-morrow on the general policy of the Budget.


offered no resistance to the right hon. Gentleman's proposal. He understood that the right hon. Gentleman had met their wish. Under those circumstances he would not oppose the Resolutions of which the right hon. Gentleman had spoken. Of course, no other business would be taken to-night.

MR. GEORGE WHITELEY (Yorkshire, W. R. Pudsey)

That is understood.