TEA.

HC Deb 01 May 1906 vol 156 cc423-74

Motion made, and Question proposed, "That there shall be charged, on and after the fourteenth day of May, nineteen hundred and six, until the fourteenth day of May, nineteen hundred and seven, in lieu of the duty now payable on tea, the following Customs import duty on tea (that is to say):—; Tea the pound fivepence."—;(Mr. Chancellor of the Exchequer.)

THE CHANCELLOR OF THE EXCHEQUER (Mr. ASQUITH, Fifeshire, E.

) said that when he was dealing with the proposed reduction in the tea duty yesterday in his Budget statement he suggested that it should take effect from July 1st, that being the day from which his predecessor in office dated the corresponding reduction of last year. But representations had come to him from various quarters which he had had the opportunity of considering in concert with his expert advisers, and which satisfied him that in the interest, not only of the consumers, but of the trade, it would be well to accelerate the reduction; and therefore the Resolution which was read from the Chair gave the date of the reduction as from May 14th, which was practically the middle of the quarter. That would give the consumer the benefit of the reduction of the duty at an earlier date, and enable the trade to prepare for the situation by leaving unhampered their operations in the latter part of the quarter, while the loss to the Revenue would, he hoped, be very slight indeed.

SIR A. ACLAND-HOOD (Somerset, Wellington)

asked whether the right hon. Gentleman could say what exactly the loss to the Revenue would be from the acceleration, and whether it would also affect the date of the Budget next year.

MR. ASQUITH

said that, according to the best estimate which could be formed, the maximum loss from the acceleration would be £80,000; but he hoped it would be considerably less. The acceleration would not affect the date of next year's Budget.

* MR. JOHN REDMOND (Waterford)

said he understood that it had been arranged that the general discussion on the Budget and the broad issues raised thereby should be taken on this Resolution. It had been customary for the Irish Members to seize the opportunity afforded by the Budget to raise the question of the over-taxation of Ireland, and of the financial relations between that country and Great Britain. He did not intend on the present occasion to open in detail the whole question, but the Chancellor of the Exchequer would be the first to recognise that in a new House of Commons it was but natural that the Irish Members should seize the opportunity to raise the question, at any rate on broad lines. The financial provisions proposed by Mr. Gladstone in his Home Rule Bills of 1886 and 1893 were considered by those who had studied the question so unsatisfactory, and based upon such loose and inconclusive evidence, that a Royal Commission was appointed to investigate the whole matter. He might recall briefly how the matter stood historically. It was provided by the Act of Union that Ireland was to contribute to Imperial expenditure only in proportion to her resources, or, in the words used by Lord Castlereagh in promoting the Union—; The ratio of Ireland's contribution will never exceed that of her relative wealth and prosperity. The Commission was appointed to see whether Ireland's contributions had been, as promised by Union statesmen and provided by the Union, in direct proportion to her relative taxable capacity. It was a remarkable Commission; the majority were British; it was presided over by an admitted financial authority, the late Mr. Childers, an Ex-Chancellor of the Exchequer, and included amongst its members such men of unquestioned fitness as the late Lord Farrer, Lord Welby, Mr. Bertram Currie, Sir David Barbour, and others; while the evidence submitted came from all the great financial experts of the country. The Commission reported that for the year 1893–4, Ireland had been overtaxed to the extent of £2,750,000. That finding was accepted by the Liberal Party in the main, and on July 5th, 1898, the Chancellor of the Exchequer himself voted in favour of a Resolution, which declared that—; The disproportion between the taxation of Ireland and its taxable capacity as compared with other parts of the Kingdom, disclosed by the evidence of the Royal Commission constitutes a grievance, and demands the early attention of the Government with a view to proposing a remedy. Moreover, the finding was not universally rejected by the Conservative Party. It was supported by some of the ablest Members of that Party, the senior Member for the City of London, (Sir E. Clarke) in particular having made a series of remarkable speeches in support of the view of the Commission. Irish Unionists were unanimous on the matter, and even the Conservative Government did not put forward an absolute contradiction. What they said was that the investigation was not full and complete, that there were other aspects of the question which the Commission did not inquire into, and they suggested the appointment of a further Commission. But though the Conservatives remained in office ten years, that further Commission was never appointed, and hence he was entitled to claim that the finding to which he had referred held the field. In the fifty years prior to that Commission the taxation per head of the population in Great Britain had been reduced by one half. In Ireland it had been more than doubled. The population in Great Britain had increased by many millions, in Ireland it had diminished by 4,000,000, or 50 per cent. Exactly the same process had been going on during the ten years which had since elapsed. The population had further diminished by 250,000, and taxation had increased from £7,500,000 in 1893–4 to £10,500,000. This additional taxation had fallen on all classes of the population, but in a special way upon the poorest of the poor. One of the things that successive Chancellors of the Exchequer had some reason to be proud of was the fact that they had aimed at equalising the direct and indirect taxation of the country, and in Great Britain at present the two classes of taxation were about equal. But in Ireland the indirect taxation was about 75 per cent. of the whole, and an enormous proportion of the additional £3,000,000 of the taxation had been raised from the necessaries of life of the poorest of the poor. Had Ireland benefited in any way by this additional taxation? What was the cause of the increase? The simple fact that Ireland, a poor country, was tied up in a financial partnership with one of the greatest and richest Empires of the world. They were often told that they ought to be proud of the fact that though they were a poor country, at any rate they were in partnership with a rich one. But the direct effect of that partnership upon Ireland was that she was forced against her will to bear an excessive share of the cost of the enormous and bloated armaments of the Empire and of the periodical insane and wicked wars undertaken by the Empire. The Chancellor of the Exchequer on the previous day had drawn an appalling picture of the exorbitant expenditure into which the Empire had been plunged of recent years. But, after all, the representatives of Great Britain had some consolation. In Great Britain there had been a remarkable increase of population, and a growth of prosperity in practically every department of commerce and industry, so that although there had been such an enormous and unjustifiable increase in expenditure the people of Great Britain were more numerous and better able to bear it than they would have been ten years ago. But that was not the case in Ireland. One fact alone would be sufficient to show the cruelty of this additional taxation upon Ireland. During the ten years, the British Parliament had been obliged on three occasions—;in 1894–5, 1897–8, and 1904–5—;owing to acute distress over large portions of the country, to pass relief of distress Acts to save large numbers of the population from starvation. The truth was that Ireland was being taxed to death, and it was small consolation or sympathy they were in the habit of getting from the Chancellor of the Exchequer. Last year the then Chancellor of the Exchequer made an extraordinary defence when he undertook to prove that Ireland's grievance was disappearing or had almost entirely disappeared. The right hon. Gentleman said—; Although you are paying £3,000,000 a year more, still the proportion which you are contributing from Ireland to the general expenses of the Empire is less. The reason of that was perfectly plain. It was because in Ireland they had reached that danger point where taxes produced less and less the more their nominal value was increased. By that argument it only needed another war for Ireland's grievance to disappear entirely. It seemed to him that so long as the amount which Ireland had to pay towards the general expenses of the empire was not a fixed amount, but a fluctuating amount which depended from year to year upon the adventures and enterprises of successive Governments in this country, so long it would be impossible totally to remove this injustice. He remembered that Mr. Gladstone proposed—;he thought it was in one of his Bills—;to make the contribution of Ireland towards the general expenditure a fixed sum. He thought it was to be £2,000,000. The Irish representatives protested against that as an excessive estimate. They thought then, and they thought now, that it was excessive, but supposing it had been fixed, how many millions would it have saved Ireland during the last ten years? They were linked, they were told, with a great and rich empire, and that ought in itself to be of enormous advantage to them. It had not been of advantage to them. It had been the cause of their ruin. They were bound to pay a large share—;more than their fair share according to the Act of Union—;of the expenses of the enormous Army and Navy; they were bound to pay a share of the cost of the punitive expeditions which were constantly cropping up in all parts of the world, and more than their share of the cost of all the mad wars into which this country might be rushed.

What did this Budget do for Ireland? He was one of those who voted against the coal tax when it was proposed, and therefore he was not going to make any complaint that the right hon. Gentleman should take it off. But he could not help remembering that when the Chancellor of the Exchequer was looking round for taxes to take off, the one he first selected was the only tax of which Ireland paid none at all, for they had no coal to export. It was worth noting that the right hon. Gentlemen, instead of removing a tax which would have helped Ireland in some degree, only removed one, no portion of which that country paid. As to the tax on tea, he was very glad that the right hon. Gentleman had dealt with it, but he regretted that it had not been more thoroughly dealt with. He would have preferred that the right hon. Gentleman had spent the whole of the surplus in taking the tax off tea. A penny off tea was very small, almost inappreciable, but as far as it went it would be a boon to the poor, and therefore in Ireland to the poorest of the poor. He made no complaint. But that was the only benefit Ireland got directly or indirectly from this Budget, unless the right hon. Gentleman was serious when he said yesterday that Ireland would get some material benefit from the lowering of the rates for the parcels post. He desired to make an appeal to the Chancellor of the Exchequer. Of course he did not expect, he was not so foolish as to expect, the right hon. Gentleman to give them all they would like to remedy the injustices in Ireland at once, but there was one thing which he could do, and do immediately, which would be of enormous value to Ireland. He could modify and change the traditional attitude of hostility of the Treasury. Anybody who had ever had to do at all with Irish administration—;the Chief Secretary was in his place, and he hoped the right hon. Gentleman would bear out what he was saying—;knew that the Treasury had stood in the way of every Irish reform. His own belief was that the Treasury made money out of every penny it lent to Ireland. The Chancellor of the Exchequer had spoken on the previous evening of the enormous increase in the cost of education in this country; he had said that the total increase in the amount spent on education in the last ten years in the United Kingdom was 60 per cent. That was about seven millions of money, but practically the whole of it had been spent in England and Wales. The amount of the increase of expenditure on education in the last ten years in England and Wales had been about six millions, in Scotland £787,000, and in Ireland £292,000. He had some very Interesting figures, the accuracy of which would not be disputed, showing how the total expenditure on education was divided between England, Wales, Scotland and Ireland. The figures in regard to population he presumed were taken from the last census. The population of England was 34,152,977, and the amount of education grants was £12,652,548, or 7s. 4d. per head of the population. The figures of these grants were taken from the Estimates of 1905–6. The population of Scotland was 4,676,603, and the grants were £1,817,290, or 7s. 7d. per head of the population. The population of Ireland was 4,390,208, and the grants were £1,391,721, or 6s. 5d. per head of the population. That was to say, on these figures of last year's Estimate if Ireland got grants in proportion to the population of the country she would on the Scotch scale get £314,000 per year more and on the English scale £234,000 more than she did. He saw, looking at figures of the Estimates which had just been issued for the year 1906–7, that there was a net increase in education grants, amounting in England to £490,224, in Scotland to £154,838, and in Ireland to £1,502. Why was the basis of population, so dear to the heart of the Leader of the Opposition when he dealt with the question of Irish representation, abandoned in calculating these grants? He would tell the House why. Because of what he called a Treasury device which had operated is this way. In the year 1892 he thought the Treasury devised a rule that these education grants should be divided up in the proportions of eighty for England and Wales, eleven for Scotland, and nine for Ireland. They said that that was based upon the amount of Exchequer contributions received from the three countries during that year. He knew of no reason in justice why this ratio should come into the matter at all. It seemed to him that the fair and honest way of dealing with the matter would be to give equal education grants per head in England, Scotland and Ireland. Let him go a step further. Not content with having made this unfair rule whereby Ireland was robbed of hundreds of thousands of pounds in comparison with what was obtained by England and Scotland, the Treasury did not allow Ireland to get its due even under that ratio. He would give an example of what he meant. In 1902, when the Education Act was passed in that ratio of eighty, eleven, and nine, Ireland was entitled to £185,000 a year as equivalent grant. What became of that? Did it go to education? Was Ireland allowed to obtain the benefit of it, or did the Treasury keep its clutches off? No, it was put into the new fund called the Development Grant Fund, and the first thing that happened was that the Treasury put its clutches upon it and drew out of that fund—;away from education altogether—;large sums to make up the loss on the flotation of stock in connection with land purchase, so that even the money they were entitled to on the false ratio of eighty, eleven, and nine, was not allowed to reach education in Ireland. Let him give another sample of the way in which the Treasury treated Ireland. It was a small matter in itself, but he would like to call the attention of the Chancellor of the Exchequer to it. There was a most admirable system in Scotland of industrial schools. These institutions necessitated a small State subsidy of, he thought, £2,000 or £3,000 a year. But the amount was every year put upon the general Estimates and voted to Scotland. A number of philanthropic people in Ireland endeavoured a year or two ago to establish similar day industrial schools in that country. It was found that a State subsidy of £2,000 a year would be required. Did the Treasury consent to that? No; they would not give a farthing. They turned round and said, "You have got your Development Fund Grant—;take it out of that." That was to say, Scotland got her equivalent grant in full; Ireland got hers, but it was liable to all sorts of claims. Then charges like that for day industrial schools were sought to be shifted from the shoulders of the Treasury and put upon those of the Irish educational fund. In the same way at every hand and turn the Treasury was engaged in trying to rob Ireland. [An HON, MEMBER: "Oh, oh."] He could assure his hon. friend the Member for Bolton that if he were as well acquainted with the Treasury proceedings as regarded Ireland as he was, the hon. Gentleman would admit that his language was exceedingly moderate. He was only stating facts. It had been the habit of the administration of the Treasury to make a special grant for the building of the national school houses in Ireland. That grant amounted to £35,000 a year; but suddenly, two or three years ago, the Treasury stopped paying it. It had been brought within his knowledge from many correspondents that the greatest inconvenience and injury had been caused by the fact that this grant was not forthcoming. In the county of Limerick a number of clergymen had told him that they had had plans of school houses prepared and that they had been waiting for three years, but were unable to go on with the building because of the want of the grant.

THE CHIEF SECRETARY FOR IRELAND (Mr. BRYCE,) Aberdeen, S.

The sum of £35,000 is available.

MR. JOHN REDMOND

Is it on the Estimates this year?

THE FINANCIAL SECRETARY OF THE TREASURY (Mr. MCKENNA,) Monmouthshire, N.

It is on the Development Grant Fund.

* MR. JOHN REDMOND

said he could not contradict the hon. Gentleman, but he had been looking into the matter and he found that the money had not been paid for several years past. This year a sum, not of £35,000 but of £15,000, was put not on the Education Estimates but on the Development Grant Fund. Not one sixpence of that ought to be on the Development Grant Fund. That was money which had formerly always been sanctioned and put on the Education Estimates. The Irish Development Grant Fund was now to be used to save the Treasury from the necessity of putting this money for school buildings on the Education Estimates from year to year. He maintained that that was a swindle. The Development Grant Fund was being used not for the purposes for which it was intended, but to save the Treasury from paying the sum which it had paid for years on the Education Estimates. Then what had been the action of the Treasury with reference to the administration of the Land Purchase Act? Everybody knew that that administration had been cramped and thwarted for many months through the Treasury's refusing to provide office accommodation and a sufficient staff to work the Act. Then nothing had been done in the way of the restoration of the evicted tenants to their holdings. He did not blame the Chief Secretary, but that right hon. Gentleman was omitted by the Chancellor of the Exchequer from the list of his Ministerial colleagues who were insistent in their demands on the Treasury.

MR. ASQUITH

I cannot allow that remark to pass without contradiction. My right hon. friend the Chief Secretary for Ireland is one of the worst of the whole lot.

* MR. JOHN REDMOND

said that that did not satisfy him. The Chief Secretary had been beaten by the Postmaster-General and by the Minister for Education. Even at the best the Chief Secretary could only stand third, and he certainly ought to be first. Why was the evicted tenants question not proceeding more rapidly? It was not the fault of the Chief Secretary or of the Estate Commissioners. It was the fault of the Treasury, who, he was informed, would not give the necessary staff of inspectors to carry on the work.

MR. BRYCE

I may tell the hon. Gentleman that these inspectors are going to be given.

* MR. JOHN REDMOND

said he was glad to hear that the right hon. Gentleman had prevailed with the Treasury and had got the necessary assistance to the Estate Commissioners, but he complained that this demand had been refused for some time. Another thing of which he complained was that the Treasury staff of its own motion and without the request of anybody connected with Irish education, had ordered the National Board of Education to withdraw the £12,000 for fees for teaching the Irish language. The teaching of the Irish language was one of the subjects in which the people were much interested, and to allow the great national literary revival like that going on in Ireland to be hampered and interfered with by the action of a few officials at the Treasury was a proceeding which could not be defended. The period was drawing very near when some decision would have to be come to. There was the keenest anxiety to know whether in this particular the Chief Secretary had been successful with the Treasury. The one piece of legislation promised by the Government for Ireland this year was a Labourers Bill to provide facilities for the erection of decent habitations for the working rural population of Ireland. General Gordon had said that, having travelled all over the world and seen squalor and misery in every land, he had not come across anything so bad as the labourers' homes in Ireland. The success or failure of the Chief Secretary depended absolutely on the Treasury. Unless cheap money could be got for this purpose such as was obtained for the settlement of the land question it would be impossible for the Chief Secretary to bring in a satisfactory Bill. He begged the Chancellor of the Exchequer to take into his serious consideration the hard and unsympathetic attitude which had always been maintained by the permanent officials of the Treasury in reference to every Irish proposal. Although the Chancellor of the Exchequer could not do anything more at present, he could inspire in his Department a sympathetic feeling towards Ireland and afford those financial facilities which the Chief Secretary was asking for to enable his Bill to be a success. Certainly the Chancellor of the Exchequer ought to exert his enormous influence to do what he could for the poorest, and by far the most heavily taxed, portion of the United Kingdom.

MR. ASQUITH

I rise to respond to the appeal which the hon. Gentleman has made with so much force and moderation. He was quite right, though it was unnecessary, to remind me that I voted in favour of the Resolution which he has quoted, and I have not receded one inch in opinion or sympathy from the attitude which I took upon that occasion. I hope it is not necessary for me to assure him that within the limits of my possibilities and opportunities it will be my most earnest desire to give effect to that vote by translating it into concrete action. The hon. Gentleman has framed an indictment against the Treasury which I believe could be framed with equal sincerity and equal warmth by the representatives of England and Scotland; but I can assure him that from my short experience in the Treasury he is wrong if he supposes that that Department is animated with special hostility to Irish claims. The Treasury is a much abused Department, but it is the only watch-dog which this country possesses to guard the revenues of the country against inroads. I do not think that it is possible that a more invidious, unwelcome, and ungrateful task could be cast upon a body of men than that which falls on the officials in the Treasury of refusing demands or curtailing demands with which they themselves are in complete sympathy. For myself, as long as I have the honour to represent that Department in this House, I shall maintain that in this respect they do no more than their duty in the situation in which they are placed. But I am sure hon. Gentlemen will agree that the responsibility in the long run does not rest with the officials, and it is most unfair to put it upon them. It rests with us, and when I say us, I mean the Gentlemen who sit upon the Treasury Bench. The officials do their duty, but the entire and undivided responsibility for the decisions come to rests with those who represent the Department and the Government in Parliament. I am sure that the hon. Member will agree with me that that is the true constitutional principle in this matter. Therefore I take upon my shoulders the responsibility for everything that has been done or left undone since I came into office. As regards the Development Grant, that is not a creature of our creation; it is an incident of legislation for which we are not responsible, and I am not prepared to say that I look either upon its constitution or the regulations with regard to its expenditure as in any sense ideally satisfactory. But I will give hon. Gentlemen from Ireland this assurance that so far as my legal powers allow, I will see in educational matters particularly, where I think that Ireland has a real grievance, Irish funds are not encroached upon and that the Imperial Exchequer shall contribute all that can be expected from it upon any principle of justice having regard to fairness to the parts of the United Kingdom contributing to the Development Grant. The hon. Member knows, and indeed he stated in his speech, that the large automatic growth in the education grant for England and Wales is largely due to a circumstance which unhappily is not paralleled in Ireland, viz., the growth of the school population. The school population in Ireland has, however, been diminishing, while in England and Scotland it has been increasing. No doubt that is one of the circumstances of which hon. Members for Ireland naturally complain.

MR. JOHN REDMOND

And more per head of the population is given.

MR. ASQUITH

I have not the figures in my head, but I will look into the matter. And with regard to education generally I assure the hon. Gentleman that he will not find anyone more sympathetic with the general desire he has expressed for a full and generous settlement than I am myself. With regard to the teaching of Irish, the Chief Secretary and I have come to the conclusion that the discontinuance of the grants was not due to us but to the cessation of the scheme under which it was taught. There have been criticisms, and I admit legitimate criticisms, as to the manner in which money was expended. My right hon. friend has framed a scheme which, I am sorry to say, owing to the pressure of other matters during the last week or two, I have not had time to consider, but I hope it will give satisfaction to everybody concerned. On the more general question I should like to point out, with regard to the figures which the hon. Gentleman quoted in the early part of his speech, what the facts are according to the most recent returns. I am quoting the return of 10th July, 1905—;"Imperial Revenue; collection and expenditure in Great Britain and Ireland.' I find from that return that the revenue contributed by and collected in Ireland in 1899–1900 was £8,664,000. In 1904–5, having risen in the interval during the war to £10,205,000, it had reached £9,753,000, and you must subtract last year at least £200,000 from that, leaving the amount collected in Ireland about £9,500,000.

MR. JOHN REDMOND

It is more than £2,000,000 over that.

MR. ASQUITH

I think the hon.. Gentleman quoted the figure £10,500,000.

MR. JOHN REDMOND

That was during certain years.

MR. ASQUITH

Yes. It is true of 1902–3, but I think the hon. Member mentioned that as the present amount.

MR. JOHN REDMOND

It is only half a million less.

MR. ASQUITH

It is nearly a million less. Then if you come to that amount contributed by Ireland in Part III. of this return, you will find there is a considerable diminution. I am not saying what was the cause of it, I am stating the fact. In 1899–1900 the contribution to Imperial revenue by Ireland was £2,676,000, and in the last year with which the return deals it had fallen to £2,186,000. The hon. Member will of course reply that that is not due to the fact that a smaller amount of revenue has been collected, but that local expenditure has been enormously increased. That is perfectly true, and it is an arguable question how much of that has gone to benefit Ireland.

MR. T. W. RUSSELL (Tyrone, S.)

It is not a question at all.

MR. ASQUITH

At all events the actual amount is not a question.

MR. JOHN O'CONNOR (Kildare, N.)

It is a mere trick of book-keeping.

MR. ASQUITH

Perhaps my hon. friend will substantiate that statement. At all events there has been a large increase of local expenditure, amounting I think to £2,500,000. That is a matter which calls for serious inquiry, and I can give this assurance on behalf of the Chief Secretary and myself, and the Government as a whole, that we intend during the next year—;in the course, I hope, of the next few months—;to go carefully into this matter, and see how far it is possible to deal with it. I hope the hon. Member will not expect any specific pledge as to time and form at this moment, but we intend seriously with the best will in the world to investigate the whole of this expenditure, and see how far it is possible to adjust on a fairer basis what, I admit, is the unsatisfactory and inequitable financial relations between the two portions of the kingdom. I hope that the hon. Gentleman will accept that assurance for the present, which is given with the greatest sincerity and the full intention of redeeming it.

SIR ROBERT ROPNER (Stockton)

said the late war could not have been avoided and the expenditure on it was necessary, but though the National Debt stood at the same figure as in 1871 the wealth of the country had increased, and the Debt was consequently lighter. He agreed that the Chancellor of the Exchequer was right in his wish to reduce it as quickly as possible, though the fact that he was able to do so was mainly due to his predecessor. He (Sir Robert Ropner) was one of those who approved of the coal tax and agreed that the basis of taxation required widening. The tendency lately appeared to be to reduce indirect taxation, while making no effort to reduce direct taxation. The income-tax pressed very hardly upon a great many people. A Committee was being appointed, but in the meantime a great many people would think that instead of taking off the coal tax something ought to have been done for the income-tax payer. The coal tax, after all, affected only a certain class, and the hon. Member for Wansbeck, he thought, was entirely mistaken in presuming that the working collier would gain anything by its removal. He was certain that the tax was mainly paid by the consumer, and what was not paid by him was paid by the shipowner and the coalowner. Even if that were not so he thought, before taking off taxation which would affect only a certain class in the country, the Chancellor of the Exchequer might have tried to take off taxes which affected the whole of the people, and mainly the working classes. Speaking personally, he, as a shipowner, having to buy coal largely in foreign markets, would be a gainer possibly to some extent, but the matter ought to be looked at as affecting the whole country, and from that point of view he thought the Chancellor of the Exchequer, instead of trying to benefit one class only, might have taken taxation off such things as sugar or tea to a larger extent, thereby benefiting a larger number of persons. Of course, the coal industry would be pleased, and the great influence they could bring to bear on the Chancellor of the Exchequer had brought him to see the matter from their point of view. In his constituency the question had not been raised during the recent election, and that had been the case in other Durham constituencies. He shared the view expressed by other hon. Gentlemen that the reduction of the tea duty by one penny would not benefit the consumers. It would no doubt benefit the producers, who had complained of being unfairly and very hardly treated by the imposition of the war tax on tea. They no doubt would be very pleased with the reduction, because they would derive the whole benefit. But in his opinion it would have been much better if instead of taking off this penny the right hon. Gentleman had taken off the whole of the war tax of 2d. If the right hon. Gentleman had ret lined the coal tax and had reduced considerably the taxes on tea and sugar he would have done something for the benefit of the people of the country.

* MR. COWAN (Surrey, Guildford)

said that those who sat on the Liberal side of the House were pledged to economy, but they were also pledged to a number of far-reaching reforms which were inconsistent with any large reduction of the expenditure of the country. The House had committed itself among other things to the principles of old-age pensions, of the supplying of free meals to school children, of a large increase in the cost of education, and the payment of those Members of Parliament who were not in receipt of a salary as members of the Government. These schemes all required money, and it was impossible that they could be carried through concurrently with any large decrease of expenditure. It was true that they had pledged themselves to retrenchment in the great spending departments, but they could not delude themselves into believing that it was possible by those means to obtain sufficient to cover the additional expenditure which the social reforms to which they were pledged would throw upon the country. He therefore desired to ask the Committee to consider the proposals of the Chancellor of the Exchequer in the light of the pledges made by the majority of the Members of the House. They might make considerable economies in the expenditure on the Army without decreasing its efficiency, and some small economies in the Navy, but they could not hope to make such economies as would provide sufficient means for such reforms as those to which he had referred. Therefore it was necessary to consider the proposals of the right hon. Gentleman in the light of the possibility of this increased expenditure. Coming to the proposed remissions of taxation, he considered the abolition of the coal tax a needless throwing away of a valuable source of revenue. The coal tax was not a protective tax except in the special sense that it was designed to protect our coal deposits. The Report of the Royal Commission which considered that question had shown that the coal deposits were larger than had been supposed and would last much longer than had been anticipated. At any rate, they would outlast our time and that of our children, and inasmuch as posterity had done nothing for us he supposed we should do nothing for posterity. However that might be, the fact remained that this was a very special tax, because it was the only tax paid by the foreigner. That was admitted, because if the tax was not paid by the foreigner why should he insert in his contracts a clause that if it was withdrawn he should have the benefit of the 1s., and why should the producer allow such a clause to be put in if he himself paid the tax? In view of the expenditure we had to meet, he thought that the coal tax should have been retained, but the tea duty ought to be reduced by at least 2d., so as to confer a tangible benefit on the poorer classes of the population. Whatever the sugar tax might have been when it was first imposed, everybody must admit that it was now a revenue tax, and therefore, much as he would like to see it reduced, he thought everyone must agree to its continuance, because of the revenue necessitated to meet the extraordinary expenditure which the programme put before the country would entail. But in all these matters, having regard to the fact that they were dealing with an increasing expenditure, the remission of taxation was necessarily very difficult indeed. It was only on those grounds that he approved of the Chancellor of the Exchequer's not reducing the income-tax. An income-tax of anything above 8d. in the £ was a war tax, and it should be reduced as soon as possible, but a reduction from 1s. to 11d. would satisfy nobody. The right hon. Gentleman had agreed to appoint a Committee to consider the question of a graduated income tax. Every one would vote in favour of such a measure, but he thought that the Committee should have larger powers and should consider the whole question of taxation with a view to broadening the basis of taxation consistently with free trade principles. Whether we liked it or not, we should require in times to come not a reduced but an increased revenue, and in his opinion the time had already come to inquire as to the sources from which the revenue should be derived. He thought if the right hon. Gentleman would deal with the larger question when appointing this Committee he would find himself in happier case when in some future year he had to meet this Committee and make another Budget statement. Unless the right hon. Gentleman looked forward and considered the possibility of attacking new sources of revenue, he would have to make a very disappointing statement indeed. He respectfully urged the right hon. Gentleman to take this matter into his consideration.

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

If I intervene in this debate it is in consequence of the statement made by the Chancellor of the Exchequer a few minutes ago in answer to the hon. Gentleman the Leader of the Irish Party, who brought before the House the ancient controversy with regard to the relative burden of taxation thrown upon Great Britain and Ireland respectively. I do not think any question can be more important in connection with the Budget, because on the view which the Government to-day take on that question must depend their financial policy. I confess I should have listened with great interest to the exposition of the views of the Government which the Chancellor of the Exchequer might have been expected to give in answer to the hon. Gentleman who initiated the debate, and I hoped to hear from him what his views were of the general problem of the financial relations between Great Britain and Ireland. I think he will be the first to admit that in connection with that very great issue he really gave no answer at all. He was extremely sympathetic—;rightly sympathetic—;to Irish financial difficulties. He made a declaration of Ministerial responsibility with which everybody will agree; he defended his subordinates at the Treasury in the spirit in which we all expect the Chancellor of the Exchequer to defend them; but on the really crucial issue raised by the hon. Gentleman the Leader of the Nationalist Party he was significantly silent. What is the issue in reality raised by the hon. Gentleman? The Members from Ireland take the view that, under the Act of Union, as interpreted especially by a Commission which sat some years ago, Ireland ought not at that time to have paid more than a twenty-first part of the total Imperial expenditure of the country. The proposition was laid down that to make Ireland pay more than that was to infringe the spirit and even the letter of the Act of Union; and though I do not think the Commission made any specific proposals which found general acceptance they certainly left an impression among a large part of the British community, which was eagerly endorsed by every Irish representative of all Parties, that Ireland was most unjustly treated in her financial relations. I want to know whether the Government do or do no agree with that general proposition, and it they do agree with it how they propose to remedy a grievance the existence of which by hypothesis they grant. I remember when this subject first came up for discussion in the House of Commons there was a great division of opinion among those who agreed that there was a grievance as to how that grievance should be dealt with. Some said it could be adequately dealt with if only a sufficient number of supplementary grants were made from the Imperial Exchequer for Irish purposes; others, including Sir William Harcourt, I think, said the method of grants was a demoralising method; another school thought that, even, if you gave grants to Ireland and however large those grants might be, they were altogether outside the original provisions of the Act of Union, which dealt not with grants, but with taxation, and that the only possible method of remedying the grievance was so to adjust taxation in Ireland as to make it fit with what the Commission called the relative taxable capacity of the people of that country. Those, I think, are the only two solutions possible if you concede that there is a grievance. The Government, as I understand, do concede that there is a grievance. If I understood the right hon. Gentleman the Chancellor of the Exchequer correctly, he adhered to a vote which he gave in 1898 by which he and his friends affirmed the reality of this Irish grievance, although they did not then say how they thought that grievance ought to be dealt with. They had the right to refuse at that time any constructive responsibility for dealing with this subject; they were then in Opposition, and they were justified in maintaining on that aspect of the question an attitude of reserve, and in posing as critics merely, instead of offering any solution of the difficulty. But the circumstances have changed. They are now in a responsible position; they now have control of the finances of the country; they still hold, if I understood the statement of the right hon. Gentleman correctly, that there is a grievance which the Commission found, and which the Irish Members have insisted upon year after year for the last seven or eight years. But we have had no hint from the right hon. Gentleman how that matter is to be dealt with. All he has told us is that, in common with the Secretary to the Lord-Lieutenant, he proposes to look into the manner in which the existing grants to Ireland are used and distributed, and if he finds they are distributed in a manner which is either uneconomical, inexpedient, or contrary to Irish opinion, he will do his best to readjust matters and remedy proved wrong. But that does not even touch the fringe of the question raised by the hon. Gentleman the Member for Waterford. The Member for Waterford restated his old contention with all his old force; he has not abated a hair's breadth of his old demand; and his old demand went, I believe, as far as to say that a different method of taxation or a different degree of taxation should be imposed upon Ireland from that which is imposed on the wealthier portion of the United Kingdom—;England and Scotland. Do the Government agree with that view, or do they not? If they agree with that view, if justice does indeed cry out for that readjustment of taxation, then the Chancellor of the Exchequer has before him in future Budgets a task of unexampled difficulty. He will have to adopt a system which has been repudiated by every Chancellor of the Exchequer since the Union, and when he deals with indirect taxation—;the spirit duties, sugar duties, or tea duties—;he will have in each year to bring forward a Budget not based simply on the necessities of the United Kingdom, but a Budget modified so as to suit the capacity to pay of England and Scotland on one side and Ireland on the other. That will involve, if the Irish contention be correct, indirect taxation levied at different rates in the two portions of the United Kingdom. While tea, for example, is to be at 4d. in one country, it will have to be at 3d. in the other. That is the only method I can imagine by which an inequality of taxation can be remedied when you are dealing, as in the case of Ireland, almost wholly with the burden of indirect taxation. It is the indirect taxation which is the grievance, if there be a grievance; and the grievance can only be remedied by assessing indirect taxation at different rates on the two sides of St. George's Channel—;[AN HON. MEMBER: Abolish it altogether]—;or abolishing it altogether. At all events, you will have profoundly to modify the system of taxation which has been adopted in this country for 100 years and more. You will embark upon an entirely new financial career, and I think will have before you difficulties of the greatest magnitude. I had hoped that when the Chancellor of the Exchequer rose to reply to the reasoned speech of the Member for Waterford he would have given some clear and explicit view, on behalf of himself and his colleagues, as to the policy which they think ought to be pursued in future with regard to the alleged injustice we annually commit towards our Irish fellow-subjects. The late Government, for reasons it was my duty on more than one occasion to explain, held that there was no injustice. The present Government voted when in Opposition that there was an injustice; they have not receded, as I understand, from the views they held in Opposition. How are they going to remedy that injustice? Merely for the right hon. Gentleman to consider with the Secretary for the Lord-Lieutenant how the existing grants in Ireland are distributed is to do nothing whatever to reach the root of this difficulty. If the Government are going to remedy the grievance by blind increases of the grants to Ireland they would, I think, be embarking upon a course which most thinking Irishmen will regard as intrinsically demoralising to their country. If, on the other hand, they are going to deal with it by manipulating the indirect taxation of the country, then I see nothing before us but the great difficulty that will arise from a different rate of indirect taxation in the two countries, which carries with it the inevitable consequence of a customs barrier between England and Ireland. You will require custom house officers in England to see that the tea or sugar, or whatever is taxed in Ireland at the Irish rate, is not smuggled over for the benefit of the English consumer, and you will adopt a machinery so costly, so clumsy, and so embarrassing to trade that I cannot believe any Government would seriously endeavour to deal with the situation by that machinery. As the question has been raised, as you have allowed, I am sure rightly, this debate to be started on the Budget of the year, we ask from the Government a clearer view of their policy than anything which the right hon. Gentleman has thought fit to give on the present occasion; and I trust that when he comes to reply on the general subject he will do something more than he has already done to satisfy the Committee upon a question with regard to which curiosity must be greatly aroused by the short debate which has just occurred.

Whilst I am on my legs may I press the right hon. Gentleman a little more upon a point I raised yesterday, and upon which, I think, he has made no reply? He laid down yesterday, I think for the first time, the principle that no naval or military works shall ever be constructed out of borrowed money. I think that a deplorable position. I should like very much that the right hon. Gentleman should justify, if he can, laying down a view of such wide extent, and which may have such important bearings. I entirely agree with him that a system of loans, like all systems, is open to abuse. I entirely agree with him that a Government may be tempted to embark upon undertakings which have been rendered, as it were, unduly easy by the fact that they are to be carried out by borrowed money, and that the burden of carrying them out will be thereby spread over several years, during some of which years they may, perhaps, no longer be responsible for the conduct of public affairs. I make that admission because I do not wish to overstate the case. Will the House just consider the other side? I think it possible that in the last ten years we have carried out all the great works which are absolutely necessary for naval and military efficiency—;that is, either they have been carried out or are in process of being carried out, and there may be, therefore, in the next few years no necessity for again dealing with millions in the construction of new dockyards, new barracks, and all the rest of it. But the mere fact that the late Government did its duty is really no ground for the present Government's laying down the principle that is to bind themselves and, so far as they can, their successors if great works should have to be constructed. I do not believe these great works can be constructed except on the principle of loan, and if you attempt to construct them upon any other principle I believe you will find the work will be done in the most extravagant manner possible. Just consider what will take place. The First Lord of the Admiralty may come down and say: "It is absolutely necessary that we should have a great harbour at such and such a point." The Chancellor of the Exchequer says: "If that is to be done, the yearly work must be paid for out of the yearly income. Are my colleagues prepared to put an additional penny on the income tax, or add something on to tea and sugar?" His colleagues in the Cabinet are unwilling to incur the unpopularity of such a proceeding, and unwilling to dislocate trade by putting on a tax for a temporary purpose. They say either that the work shall not be carried out at all—;and that is dangerous to military and naval efficiency—;or they say: "We will carry it out by small annual instalments." Instead of spending in each year as much as the works themselves will bear and finishing them in three years, the works will take perhaps from nine to twelve years to finish. Both of these courses are open to grave objection. The first involves danger, but the second is the most extravagant course you could possibly adopt. The method of dribbling out payments year by year to contractors is exceptionally ineffective, and no good business man who knew his business would ever consent to it. It is as extravagant a policy when pursued by the nation as when pursued by an individual or a corporation. Therefore there is no other possible course for executing great works than proceeding by loan; and I do earnestly press upon the Government that they should modify the official declaration of policy laid down yesterday by the Chancellor of the Exchequer. If he chooses to say that in the opinion of the Cabinet the great works which the country requires are, so far as the present Government know, either completed or in process of completion, and that they see no immediate necessity for carrying out further great works, we should all welcome that statement, and for my own part I have no reason to think I should dissent from it. But when we see how naval distribution, the sizes of ships and guns, and the costly and ever varying appliances of naval warfare change from year to year, can any of us look forward with security to a lengthy period of time when some great capital expenditure will not be required by this country? Until such a time comes it would be a most unbusinesslike departure to say that the rapid, and therefore economical, carrying out of great works is to be abandoned because the chiefs of the Treasury are afraid that if you once permit the system of loans to be adopted you have no further control over the spending departments. There are Gibraltar, Portland, Dover, Malta, and Keyham Dockyard, at which works are necessary, and they cannot be carried out except by an expenditure of millions. I hope the right hon. Gentleman will not envelope himself in a cloak of financial virtue because his predecessors in office, unwillingly indeed, but purely on patriotic and public grounds, felt it their duty to bring these great establishments up to the level of our Imperial needs. The late Chancellor of the Exchequer announced last year, and with general approval, that, so far as the works in hand were concerned, he proposed to deal with everything that had to be dealt with out of current taxation. I think he was right. All I complain of is that the principle should be laid down in regard to an unknown future—;a future which may bring with it great unknown contingencies which could only be dealt with by capital expenditure, and which it would be folly for us to attempt to deal with out of the taxation of the year. Therefore, I press upon the Chancellor of the Exchequer these two questions. The first is as to the policy of the Government with regard to bringing to an end what they consider erroneously is an injustice to Ireland in the matter of taxation; and the second, whether they really mean to lay down in the absolute manner the right hon. Gentleman yesterday suggested that never under any circumstances are loans to be made for carrying out great works of public necessity

MR. DILLON (Mayo, E.)

said he would only trouble the House for a few moments to deal with the observations made by the Leader of the Opposition. The right hon. Gentleman had said that the hon. and learned Member for Waterford had put forward to-night the old demand which had been made from the Irish Benches for many years without any alteration. That was absolutely true. The only alteration was that the hon. and learned Member for Waterford was now able to address his criticism and questions to a Chancellor of the Exchequer who had voted for a Resolution in favour of the findings of the Royal Commission. What was the old demand? It was that the grievances of Ireland as advanced in the Resolution passed in 1898 should be taken into consideration by the Government, and that the demands of that Resolution should be complied with. One of the strongest motives he had in rising was to ask the Chancellor of the Exchequer not to accede to the request of the Leader of the Opposition, and not to-night to go into the sea of complications which would arise if he had to face the problem of how he would meet that grievance, and to say what alterations in taxation he contemplated proposing if he intended to deal with the grievance in that way. They at least made no such unreasonable demand. What they demanded was that the right hon. Gentleman should give the matter his fair and honest consideration, and apply his mind to devising a remedy. They were prepared to give him time to consider the problem which they all admitted was a difficult one. The Leader of the Opposition had also said that the Chancellor of the Exchequer had evaded most carefully, and was significantly silent on, the crucial points put by the hon. and learned Member for Waterford. He had sought to confine the Chancellor of the Exchequer to a promise that he would consider how the present grants were allocated, and see how they could be improved. They placed no such interpretation upon what the right hon. Gentleman had said. What the Chancellor of the Exchequer had promised was that he would consider the problem, and that he hoped to propose some remedy for the grievances of Ireland. No attempt to alter the allocation of the local grants in Ireland could possibly supply a remedy for this admitted grievance. He would like to emphasise the warning already given by the hon. and learned Member for Waterford against the policy of so-called economies in Ireland. Some years ago, he supposed partly as a remedy for the financial grievances of Ireland, Lord St. Aldwyn introduced the system of development grant as a remedy for some of their grievances. The idea was that a system of economy could be devised under which the economies would be for the benefit of Ireland. Lord St. Aldwyn, who was an astute financier, thought by this ingenious device to enlist the Irish representatives and people in the cause of economy. He had often complained that he never got any support from the Irish representatives. That was perfectly true, because this device would only be another instrument for relieving the British Exchequer at the expense of Ireland. What had happened? This grand scheme of economy did to a certain extent, as was anticipated, enlist some of the Irish people in support of economy. When the Development Grant was set up they were led to expect great results. It was immediately fastened on by the Treasury, and burden after burden and charge after charge which had been borne in the past by the Treasury was shoved on to the Development Grant, and the Irish people very soon found that their economies were all stolen from them. He therefore warned the Chancellor of the Exchequer that any attempt to develop on these lines would be met by strenuous opposition on the part of Irish Members, because they had already learned the lesson that they had nothing at all to expect from economies of that kind. To his amazement the Secretary of the Treasury had attempted to traverse the statement of the hon. Member for Waterford in one of these matters. For thirty or forty years, in spite of the injustice admittedly done to Irish education, they had had a regular grant of about £35,000 from the Treasury for the building and repairing of the national schools. That was stopped two or three years ago, and the Irish Members had been bombarded with letters from all parts of Ireland where the schools were not fit to be used, and with requests to be informed why these building grants were being stopped. In the year 1902 a Committee was appointed and made a secret report, and for two years before that this question had been under the consideration of the Treasury and of the Board of Education in Dublin, and yet, in reply to a question, he was told last month by the Chief Secretary that the matter was of a very complicated character and that they were not yet able to come to a conclusion with regard to it. Last year when he raised this question the then Chief Secretary said they were going to do something generous, that they would grant a considerable sum in addition to £15,000 for the schools. He then asked him whether that was a substitute for the £35,000 and he could not tell. The right hon. Gentleman first said one thing and then another, but he himself had since discovered that they intended to give Ireland the £120,000 in order to get rid of the permanent charge of £35,000 a year. That to them was the result of this six years consideration. He would like to know was it or was it not true that the Treasury were endeavouring to get rid of this permanent charge, and was the Secretary to the Treasury prepared to get up and justify the way in which education was treated in Ireland, and would he defend the way in which these finances had been dealt with? It was by proceedings of this character that their faith in grants as a remedy for the waste by the Irish Government was destroyed, and in his opinion until there was some authority responsible to the Irish people no economy of expenditure in Ireland could be effective of the good that they looked for What benefit to the country could it be to plan economies, and then give the funds to Dublin Castle to be distributed? Those in touch with the popular mind should have some voice in the distribution of the Development Grant. But there had been none. It was all settled in the Castle behind their backs, and therefore he said to the Chancellor of the Exchequer that it was not in that direction that relief could be found. They were gratified by the tone of the speech of the Chancellor of the Exchequer to-day. They were perfectly content to give him time to consider the whole matter, and they trusted that when he had had time to go into it fully his consideration would bear some substantial fruit to the people of Ireland.

* SIR WILLIAM HOLLAND (Yorkshire, W. R. Rotherham)

said he was glad to have the opportunity of supporting the Budget proposals which the Chancellor of the Exchequer announced yesterday. Considering the resources which were at his disposal it was clear that it would have been impossible for any Chancellor of the Exchequer to propose anything that might be described as heroic finance. He thought the surplus would have been larger if the home trade had been as good as the export trade. The Board of Trade Returns showed that the figures were highly satisfactory last year in regard to exports and imports. Our external trade left absolutely nothing to be desired, but there appeared to have been a shortage in the home trade. He was glad to think that the home trade was now distinctly better than it was a short time ago. He thought the Chancellor of the Exchequer would agree that it was unfortunate that they had not reliable statistics available by which the exact position of our home trade could be ascertained. He was glad that the President of the Board of Trade was now making proposals that there should be taken periodically an industrial census. He hoped the traders of the country would support the right hon. Gentlemen so that the census might be made complete and accurate. If we had an adequate census as other countries had we should have material upon which to form from time to time a reliable opinion as to the condition and growth of the home trade. They were under a debt of gratitude to the Chancellor of the Exchequer for the very full account he had given of the nature and extent of our national indebtedness. The Budget was particularly well balanced, and he had no doubt the Chancellor of the Exchequer would next year make more sweeping proposals to reduce indebtedness and maintain British credit. There was a certain literary family of whom it was said that the mother wrote novels which no one would buy, that the daughter wrote poetry which no one would read, that the son wrote plays which no one would act, and that the father wrote cheques which no one would cash. There was no danger of the Chancellor of the Exchequer being in such a position. He would always be able to cash his cheques, but u less our credit were well maintained he would not be able to cash them on the most favourable terms. In view of the regrets which had been expressed in various quarters of the House that the coal tax had been swept away he wished to say that he strongly approved of the decision of the Chancellor of the Exchequer in that matter. He thought the choice was a wise one. Indeed, sitting as he did for a mining constituency he had pledged himself to support the repeal of the tax. He was quite prepared to argue the case on the merits. If the Chancellor of the Exchequer had not proposed the repeal of the tax he would have undertaken to move an Amendment to get rid of it. He was glad the Chancellor of the Exchequer had saved him the trouble of doing anything of the kind. The removal of the tax would confer substantial benefit on labour, and, in his opinion, the inevitable result would be fuller employment for those engaged in the trade. The tax had been a hindrance to trade, and if the Government could not do anything to help the coal trade, let them leave it alone. An hon. Member opposite had quoted figures to shew that there had been no injury to the coal trade on account of this tax, and had stated that there had been a slight advance in the amount of the exports of coal. But he submitted that the question was, how much greater would have been the increase of those exports had it not been for the existence of the coal tax? Its effect was exactly as if our Government had insisted on every other country in the world putting an import duty on all coal received from the United Kingdom, but allowing it to come in free when it was received from any other country. The idea was ridiculous. It would not bear arguing. Therefore it was high time that the Chancellor of the Exchequer should come forward and sweep away such an unfair tax. They were told that it was a tax which was paid by the consumer, and not by the producer. The consumer would not pay an import or export duty if he could help it, but he could escape paying the export duty by buying from other countries. That was proved by the fact that coal contracts had gone to France and Germany and that employment in our own coal industry had been diminished in consequence. He hoped that the Chancellor of the Exchequer would bring in as speedily as possible the Bill which he had promised to give effect to the recommendations of the Committee on Industrial Alcohol, so that it might have a chance of passing this session. He sat on that Committee and they investigated the whole question with the greatest care and diligence.

MR. J. CHAMBERLAIN (Birmingham, W.)

I should like to have the opportunity of saying a few words on the general aspects of the Budget which has just been presented. At the outset I would like, on behalf of my right hon. friend the late Chancellor of the Exchequer, to express my sincere appreciation of the very kind and courteous way in which the Chancellor of the Exchequer noticed his enforced absence. My right hon. friend, who has suffered very severely from a most painful, if not a dangerous, indisposition, had hoped to be present at our debates. He is much disappointed that he cannot be here, and I am sure he will be grateful to the Chancellor of the Exchequer for the kindly way in which he spoke of him. The Budget itself I am inclined to characterise as a whole in the terms which seem to be common to the appreciations in the Press this morning. It is a humdrum, a commonplace Budget. That by no means necessarily implies any condemnation. On the contrary, in the case of a Radical Government, I am not certain that it is not the highest praise. When I think of all that has been said on the subject of our financial extravagance and of the incidence of our taxation, and when I think of all the promises that were made at the election, and before the election, by the supporters of the right hon. Gentleman, and even, I think, by some of his colleagues, if not by himself, I really think we are very well out of it. The terrible things that we were led to anticipate have, fortunately, not been presented to us; and I for one am extremely grateful to the right hon. Gentleman that, being as he is the master of so many legions, he has been so merciful to his opponents and those who have differed from him, and has in fact produced a Budget which we are unable seriously to oppose, for, indeed, it is our Budget. The surplus is ours. We provided it, it cannot be doubted for a moment, by the extremely conservative Estimates of my right hon. friend the late Chancellor of the Exchequer, who refused to take advantage beforehand of what was apparent even at that time, that we were on the eve of a period of increased prosperity, and framed his Estimates on a very moderate scale, and has allowed his successor to reap the advantage. The surplus is ours, and these Estimates, it appears, are ours. I must call the attention of the Committee to the statement of the right hon. Gentleman. He began by deploring his own incapacity—;I do not mean his personal or intellectual in- capacity, but his own inability—;to deal as he would have liked to do, with a free hand, with the finances of the country. "No," he said, "we found ourselves in fact committed by our predecessors by their Estimates. We have only had four months to consider those Estimates, and in that time we have not been able to alter them." He pays us a great compliment, but he does not do sufficient justice to himself and his own powers. I deny absolutely that he, at any rate, has found himself in this position of enforced inability to alter our Estimates. I have always understood that the preparation, the natural and particular preparation, for the Budget by any Chancellor of the Exchequer is a matter of three or four months. The right hon. Gentleman had three or four months, and in the course of that time there was not an Estimate that was made by the late Government which he had not in his power to alter. I am very glad he did not alter them. I have never had any hesitation in supporting the Estimates and the financial policy of the previous Government in the circumstances in which they found themselves. But the right hon. Gentleman cannot have it both ways. He cannot appeal for credit to those below the gangway both for his reforming instincts and intentions and pretend that he is unable to give effect to them because this wicked Government has disappeared from the scene not more than four months ago. No, sir, the right hon. Gentleman and his supporters, who went up and down the country, had no hesitation while the late Government was in office in criticising our estimates. They did not want time. They knew exactly where to make economies. There were so many millions to come off the Army, so many millions to come off the Navy, and the Civil Service was to be cut down. There was not the slightest profession then of inability. On the contrary, the country was informed that, if only they could take our place at once, without any further inquiry these great changes would be made, and these splendid opportunities would be offered, of which the Government would take advantage, in order to carry out the series of gigantic social reforms for which they professed the country was pining. I observe that even in the course of this debate, languid as it has been, there are some hon. Gentlemen on the other side who are sufficiently consistent, whose memories are long enough to go back three or four months when they wore making these professions, to repeat them in the House of Commons. And we have been told accordingly that there is, naturally, some discontent that a system of old-age pensions, which was to cost only the mere trifle of £30,000,000, has not been at once put before the House of Commons by the present Chancellor of the Exchequer. I say you cannot have it both ways. I do not object in the least to the claims of the right hon. Gentleman that four months is not long enough to make these great changes in the financial arrangements of the country. I do not complain that he should ask for more time to consider what he would do with the increased surplus which he anticipates next year, and with the increased revenue upon which also he appears to be counting; and I am quite prepared to accept his view that the Budget for which we are all waiting, the sensational Budget, we must not expect till next year, when the right hon. Gentleman has had time to make himself acquainted with the simple facts of the case. But, then, from that it follows that he was not acquainted with the simple facts of the case at the time that he and his colleagues professed to know everything about it, at the time when he was offering these tremendous temptations to the country.

MR. ASQUITH

What temptations?

MR. J. CHAMBERLAIN

Old age pensions. Does the right hon. Gentleman say that neither he nor his friends offered the temptation of old age pensions?

MR. ASQUITH

I never did.

MR. J. CHAMBERLAIN

Then the right hon. Gentleman does not share the views of the hon. Members below the gangway?

MR. ASQUITH

If the right hon. Gentleman wants to know my views on the subject, I can refer him to a speech I made in the House about a month ago.

MR. J. CHAMBERLAIN

I am extremely sorry to say I think I could not have been present when that speech was delivered, and in those circumstances I am unable to take advantage of the information the right hon. Gentleman has conveyed. I can only go back to what I said. I gather that whatever that speech was, it did not indicate on the part of the right hon. Gentleman an assent to those views which were put forward during the election by so many of his supporters, which have been put forward during the present debate and which suggest and practically promise a universal old age pension of 5s. a week at the age of sixty, a proposal which would cost £30,000,000. [MINISTERIAL cries of "Oh!"] Hon. Gentlemen opposite think it courteous to interrupt me, and apparently they think it accurate to suggest that at all events if they made these promises they had the excuse that I had made them before. Well, I do not think that is a good excuse because if I, by hypothesis, made such a promise and was not justified in making it, it is no excuse for their falling into the error, the fault or crime which they attach to me. But now I say emphatically, and I defy them to prove to the contrary, that I never have, in the whole course of my political life, made any promise of old-age pensions whatsoever. That is the first thing. And, moreover, I go beyond that when I say that whenever I have had an opportunity of dealing exhaustively with this subject, whether it be in the House of Commons or on the platform at the time of elections, I have warned both Members of the House of Commons and also my friends or opponents in the country that no such promise could be honestly made by any one who was acquainted with the facts of the case. I have been led into a vindication which is apart from criticism of the Budget; but I repeat, all I have done in reference to this matter is to express my own sense of the necessity of enabling the industrious working people to make a better provision for old ago, and to put before the working people of this country one or two circumstances, two plans in particular, which I have said, and which I maintain are perfectly simple and clearly to be understood, which are within the reach of the working classes of this country, and which are practical schemes which could be considered with some chance of giving effect to them by the present House, or even by past Houses of Commons. That is my part in the matter, and I still think that this better provision ought to be and should be made by the House of Commons. But it is not, and never will be so far as I am concerned, a proposal for anything in the nature of a universal old-age pension, which I believe is impracticable from the point of view of its expense, and which I believe is immoral and undesirable from the point of view of its influence upon thrift and industry.

When I was interrupted I was pointing out the conclusion at which I arrive, that if the present Estimates of the Government are extravagant Estimates, then let the Government have the courage to take full responsibility for them. They cannot throw the responsibility for the Estimates which they have presented to the Committee upon the shoulders of a defunct Government which died four months ago, and since whose decease they have had ample time to revise, improve, and amend the Estimates if they thought such amendment and improvement desirable and necessary. If they will take the responsibility of these Estimates on their own shoulders, I rejoice—;I am glad to find that all this flurry and electioneering method is disappearing in the presence of greater responsibility—;that promises which they and those acting on their behalf were so ready to make are found now by confession to be unreasonable or impracticable, and have to be postponed till further inquiry, which is to take the form of personal inquiry by the Chancellor of the Exchequer and further inquiry by committees and commissions, of which you may have any number as long as this Government continues in office.

Now, having admitted that the Estimates are wholly the work of the present Government [MINISTERIAL laughter]—;wholly the work (OPPOSITION cheers)—;what did the country give you a majority of 350 for if it was only to accept without question the proceedings of the late Government which you believed to be wrong? If you believed them to be right then, of course, you are right in accepting them though they come from your opponents; but you cannot in the same breath declare them to be wrong and not take any steps to alter them. I say that not merely is the surplus ours, not merely are the Estimates ours, but practically the policy of the Budget is ours; substantially not entirely. What was the opening of the right hon. Gentleman's speech, a most elaborate opening, which occupied a very considerable period, and filled me with hope? It was to point out the terrible position of this country in regard to its Debt, and the obligations made by the war. To do the right hon. Gentleman justice, he is not one of those who lay the burden, the blame of that war entirely on the late Government. And let me say in passing, though it is not relevant to the argument and it is not necessary for me to deal with it at length, but in view of what has been said, do let our friends on the other side understand that not in the slightest degree, not by one atom, have we changed from the position we took up before the war and during the war. We regret the loss of life in the war and the loss of treasure; but we believe, as many hon. Gentlemen on the other side and the right hon. Gentleman also, believe, that the war was forced upon us, and that it was absolutely necessary if we were to preserve our hold on South Africa and the union, respect, and loyalty of the Empire. The expenditure on the war was enormous, and it enormously increased the Debt of the country, and the right hon. Gentleman dealt with all this. I confess I make one criticism upon his language. I think he is too pessimistic. After all, we are a very rich country; after all, we are very much more powerful than we were; and I think it is a mistake, considering what may be said outside this House and in other countries, to exaggerate the sacrifices we have been called upon to make. I think of the sacrifices that were made by our ancestors in previous war, in the great Napoleonic wars, for instance; and I say that any sacrifice we may be called upon to bear in reference to the South African war is a mere flea-bite compared with what our ancestors were subjected to in order to maintain their position. But what conclusion did I draw from the Chancellor of the Exchequer's rather gloomy disquisition? I remember my right hon. friend the late Chancellor of the Exchequer, on the occasion of the late Budget, also dealt with the subject, perhaps a little more hopefully, but he did lay it down as an essential part of the future financial policy of the country that a serious effort should be made largely to reduce the Debt, and especially to reduce the floating debt; and I say authoritatively that if it had fallen to my right hon. friend to deal with his own surplus he would have made a much larger reduction than the right hon. Gentleman opposite proposes. And after all we have heard about the importance of restoring the finances of the country, to conclude with a miserable, paltry subscription of £500,000 a year towards the Sinking Fund seems to me to be a most inadequate conclusion. It is true the right hon. Gentleman played with the figures in a way that might confuse any House less experienced in fiscal matters than the present. He talked about making up £1,000,000 as additional contribution to the Sinking Fund. A million? £500,000 is all that comes in any sense from taxation. The other £500,000 is the repayment of Debt by the Chinese Government as the indemnity for the massacres and Boxer disturbances which cost us at the time several millions of money. And as my right hon. friend the late Chancellor of the Exchequer said, with the universal consent of the last House, that money, which we anticipated for this year, is ear-marked, and must of necessity go—;no Chancellor of the Exchequer could think of doing otherwise that allowing it to go—;to the reduction of the particular debt against which it is set as an indemnity. I say it is rather playing with terms, therefore, to introduce that as if it was a sacrifice we were making.

MR. ASQUITH

I never said it was a sacrifice we were making.

MR. J. CHAMBERLAIN

It is perfectly clear that the only sacrifice which the Committee is called upon to make on behalf of the taxpayer is to give up £500,000 of the anticipated surplus to the reduction of the Debt. But the condition of affairs is not nearly as bad as the right hon. Gentleman represented it, or else he has not had the courage to follow his convictions and to make the contribution towards the reduction of the Debt which he ought to have made. But we all know perfectly well he wanted money to meet, as far as he could, the claims made upon him, and to distribute, as much as he could amongst these several claims. As to the selection he has made: he has abolished the coal duty. I believe I am right in saying that my right hon. friend the late Chancellor of the Exchequer indicated his opinion that the coal duty was one of the first imposts which ought to go in any redistribution of taxation. [Cries of "When?"] He said it in a speech to a deputation from the coal-owning interests, which waited upon him during his term of office. In the regrettable absence of my right hon. friend I cannot say what were the reasons which brought him to that conclusion. However, as I say, when we come to the details of the policy of the Budget we find that we are engaged in considering a policy which in its main principles is the policy of the late Government. But I should like to know very much, especially after the criticisms of the hon. Member for Rotherham, what is the view of the Chancellor of the Exchequer as to the incidence of the coal tax. Does it fall, in his opinion, upon the consumer in Germany, or does it fall upon the producer in this country? I rather gather from the language which the right hon. Gentleman used that, in his opinion, it falls upon the producer in this country, because he represented that owing to the tax the producer in this country has been put to a disadvantage as compared with the producer in Germany, and accordingly his object in remitting the tax is to benefit at the same time the the producer in this country by increasing the demand for his product and the consumer in foreign countries by giving him his coal at a lower price.

MR. ASQUITH

I do not care about the consumer in foreign countries at all.

MR. J. CHAMBERLAIN

Oh, I am so glad to hear that. Again, may I call the Committee to witness, this is our policy? Nothing could have given me greater pleasure than that statement of the right hon. Gentleman. I am quite sure that my right hon. friend the late Chancellor of the Exchequer, had he been here, would have entirely shared the feeling of the right hon. Gentleman; and if he had attempted to deal with this tax it would also have been in order to benefit the producer in this country. Of course, I hope the abolition of the tax will inure not merely to the benefit of the coal-owners—;who usually are not objects of very great compassion in cases of this kind—;but to the benefit of the working people who are employed in the mines. Then if it is the case that this export tax is paid by the producer, why, in the circumstances, cannot the right hon. Gentleman conceive of a case in which an import tax upon coal or upon corn should not also be paid by the producer? The hon. Member for Rotherham, who has just sat down, feels that this is a very reasonable inquiry to make, and he thinks he has got a very satisfactory and complete answer to it. The hon. Gentleman says that in the case of the export duty on coal it is the producer who pays, because the consumer has a choice in the matter; that is, instead of paying more for his coal by buying from this country, he buys from Germany. Very well. Then why does not the same thing result if you put an import duty on corn? The hon. Gentleman replies, "Oh, in that case the consumer has no choice." But, pardon me, in that case the consumer would have two choices, which, together at any rate, ought to be sufficient to enable him to make a selection. In the first place, he would have the choice of the home-grown article, and, secondly, he would have the choice of the corn coming from those parts of the British Empire which would not be subject to the duty.

* SIR WILLIAM HOLLAND

Both are not nearly sufficient.

MR. J. CHAMBERLAIN

That is a matter of opinion. Then the right hon. Gentleman proposes to reduce the tea duty. I confess that here I part company from him. I agree with him that probably there is no tax which more deserves attention than the tea duty. Indeed, the only exception I would be inclined to make is the tobacco duty. Undoubtedly the tax upon tobacco is a most unfair one in that sense, that the charge upon high priced tobacco bears no proportion at all to the charge upon low priced tobacco. Therefore, it is a choice as between tobacco and tea. But tea, at all events—;first, because of the amount of the duty in proportion to the value of the article, and, secondly, because of the large consumption in this country—;is an article which undoubtedly deserves the consideration of the Chancellor of the Exchequer. Still, I would ask, why does he choose tea? What reason does he give for making a reduction which will go wholly into the pockets of hon. Gentlemen inside and outside the Committee who act as retailers and wholesale dealers in tea? [MINISTERIAL cries of "Oh"] That is my opinion, and I think I have as good a right to express it as any hon. Gentleman here has to argue his case. In my opinion, the reduction of one penny on a pound of tea will not go into the pockets of the working classes. The Chancellor of the Exchequer himself evidently thinks there is some weakness in his position, because he was careful to tell us that, if the reduction did not go into the pockets of the working classes in the shape of a diminution in the price of their tea, they would get the benefit of it in the way of quality. I have heard that argument before from the retailers of tea; but I ask the working classes to recognise that the Committee desires to give them a reduction of a penny in the pound on their tea and to take care that they get it, and not to to be misled by any allegation that the quality of their tea is so much better. But to my mind, however, the smallness of the reduction is an objection to dealing with tea. If you could not take off at least 2d. on the pound, it would have been much better to leave it alone. It is the old story with the right hon. Gentleman. He finds it difficult to keep King Charles' head out of his memorial, and accordingly the fiscal question comes in even in the course of his Budget speech. I did not say that fiscal questions come in. Of course they could not be excluded. What I did say was—;the fiscal question comes in. It comes into the duty on tea in this way. The right hon. Gentleman proceeded to explain that one of the advantages in favour of selecting tea was that it showed the people of this country that a reduction could be made in tea without the imposition of a corresponding tax on something else. But allow me to say this. If we were to go into the details of the question it could be shown that it was not a miserable penny on tea that would be taken off, but 4d. off tea, something like half the duty on sugar, and a large reduction also in the cost of tobacco. Therefore the right hon. Gentleman did not strengthen his case by the use of two incompatible propositions. To take 1d. off tea is a good thing, but it is not to be compared to changes which would involve vast reductions in the cost of articles of consumption besides other benefits of immense importance.

So far I have dealt with the proposals of the right hon. Gentleman. But there is one minor matter upon which I must ask for some further information. The right hon. Gentleman proposes to upset the conclusions of his predecessors in office with regard to the duty on tobacco, or, rather, not so much as to upset those conclusions as to alter and reduce the difference between strip and leaf tobacco from 3d. to ½d. The right hon. Gentleman has given no reason whatever for the change, which he says will make no difference to the revenue, based upon the working of the proposals of his predecessor. My right hon. friend the late Chancellor of the Exchequer gave two reasons for his alteration in the taxation on tobacco as between strip and leaf. He said, in the first place, that the manufactured article ought to be more highly taxed than the raw material, in order to maintain the proportion between raw material and the manufactured article; and secondly, by taxing the manufactured article the manufacture would be kept in this country, and thereby a large number of people would obtain employment who, otherwise, would lose that source of work. The right hon. Gentleman said just now that he did not care about the foreign consumer. I hope he will admit that he does care about the British producer, and especially about the industrial classes who are employed in production. I am assured that the change in the taxation between strip and leaf made by the late Chancellor of the Exchequer has had the two effects which my right hon. friend contemplated. It established an equality as between the manufactured article and raw material, and it added very largely to employment in the trade. In these circumstances I should like to know what is the supreme reason which induced the right hon. Gentleman to make this change in the case of tobacco, for I must assume that he has some good reason which he has not yet disclosed rather than the desire to prove his originality by altering the policy of his predecessor. I hope, therefore, the right hon. Gentleman will tell us why, agreeing as he does that there ought to be some difference between strip and leaf, he has selected a halfpenny as against threepence as the precise sum by which to establish the true proportion.

The effect of all these changes is that the surplus at the disposal of the right hon. Gentleman is gone, and he has nothing to give to income-tax payers except a Commission. There, I think, we come to an important difference between our policy and the policy of the right hon. Gentleman. The right hon. Gentleman says that the income-tax at a shilling in the pound in time of peace is a most unfortunate position. Of course it is. I say that when you talk of the financial credit of this country, to my mind a moderate income-tax which could largely be increased in time of war is of infinitely greater importance to us as a resource in a serious national emergency than oven a considerable reduction in the Debt. I have always agreed with those financiers who called the income-tax the sheet anchor of the Chancellor of the Exchequer in time of war. But in order that we may without hesitation make the greatest demands upon it—;and remember that we have not seen the greatest demands upon it which would be called for in the case of a really great and serious war—;but in order to justify the call which would be made upon it in such an emergency it certainly ought not to exceed a very moderate sum in time of peace, and therefore I do not at all like this proposal to postpone still further the consideration of the demand made by the ordinary income-tax payer for relief. Of course some people when they talk of the income-tax payer have in view only the large capitalist, who is supposed to be able to pay anything. In my opinion, of all classes of income-tax payers there are none so hardly treated by the tax as the small income-tax payers. In my opinion it is very hard upon persons of moderate incomes that they should pay their full proportion of indirect taxation while at the same time they pay their very heavy direct taxation. I think if the right hon. Gentleman was not in a position to give them relief this year, it would have been better if he had held back instead of exciting expectations until he was in a better position, and he should not have given doles to classes, as he has undoubtedly done, with the not unnatural object of gaining more popularity for an otherwise very undistinguished Budget. The right hon. Gentleman tells us that in the current year he expects good trade and an increase of income. I have every hope, if we keep out of war, that the income of the country may automatically increase. But a Chancellor of the Exchequer, prudently dealing with the finances of the country, must not, even if he is the Chancellor of the Exchequer of a Radical Government, rely absolutely and certainly on being able to keep out of war. What has happened? If in any part of the world there was any disturbance during the ten or twenty years the Unionists have been in power, remember it has always been attributed to some deliberate wickedness on our part. Of course there could not have been a war if a Radical Government had been in power! I observe there are still some gentlemen who hug that delusion. How long will you entertain it? How long with your peace at any price Government are you going to keep out of war? What have we seen already? In four months you have had a punitive expedition in Nigeria. In four months you have had a disturbance in Natal [Several HON. MEMBERS: Your fault], the seriousness of which we all feel. While I hope and honestly believe that there is no reason at the present moment for grave anxiety, yet we know that there is no prophet yet born who can say positively that this country may not be led into trouble in connection with the unrest in Natal. Of course I do not impute any blame to the Government. When Lord Lansdowne went out of office there was not a cloud on the horizon. The late wicked Government, therefore, left, in appearance at any rate, the prospect of absolute peace to its successors. But already in four months, besides the two matters to which I have referred, you have this difficulty in Egypt, as to which I will only say that there is no one here who will dare to predict the ultimate outcome. In these circumstances it is not quite safe to rely, even with a Radical Government in power, upon that continued increase of prosperity which alone justifies sanguine expectations for the future. The right hon. Gentleman has been four months at the Treasury, and he has seen nothing to justify him in making any substantial change in the expenditure of the country. It may be that four months more will give him the information which would justify him in making reductions. That also will depend a good deal on the state of Europe and of the world. There is only one thing certain—;and it is quite as certain under a Radical Government as under a Unionist Government—;and that is demands for more expenditure. This new Parliament has been here for only three months, and what has happened already? The vast majority of the House has indicated its willingness to increase the wages of all the industrial portion of the Civil Service of the Crown. More money is wanted for education. There is an item of something like a million—;and this, I expect, will be vastly increased before we are done with it—;for the endowment of a new religion. You have voted in favour of a Resolution to give effect to which would involve an expenditure of £300,000 for the payment of Members of Parliament. It means a great deal more than that, because, whether we intend it or not, the vote carries undoubtedly similar salaries to Members of the other House of Parliament, who stand quite as much in need of it as Members of this House; and, therefore, you must count on a sum to come from the Chancellor of between a half and three - quarters of a million. You have taken, with a great nourish of trumpets, a penny off the tea duty. Oh, yes; but not all this year. You have allowed a great part of that to fall on the Budget of next year. So with the coal duty. The coal duty also is not to come on the Budget of this year, but is to fall on the Budget of next year; and, therefore, while this Budget is undoubtedly a humdrum and commonplace Budget, I believe, looking to the future, it will be found to be a very improvident one.

MR. ASQUITH

I shall not attempt to follow the right hon. Gentleman in that remarkable passage in the concluding part of his speech in which, with such patriotic forethought, he foreshadowed possible, if not probable, disturbances, and even breaches of the peace, which might be expected to result from the advent of a Radical Government to power. He actually blames me for not having made provision in this Budget against contingencies such as that. I shall not follow the right hon. Gentleman's, example by attempting to draw invidious distinctions in this respect between one Government and another. The right hon. Gentleman said—;why, I do not know—;that when Lord Lansdowne left office there was not a cloud on the horizon. Has he forgotten that when Lord Lansdowne left office—;I am not blaming him—

MR. J. CHAMBERLAIN

I was not blaming you.

MR. ASQUITH

Lord Lansdowne was a most admirable Foreign Minister—;there was one most embarrassing European difficulty which was to be confronted—;the difficulty of Morocco, which occupied the Conference at Algeciras for the best part of three months, and the emergence of Europe from which was due, in no small degree, to the tact and ability with which my right hon. friend the Foreign Secretary conducted the negotiations? But what was the object of introducing topics like that into the discussion of the Budget, which certainly does not give any fair occasion for it? The right hon. Gentleman has told the Committee, I think three times, that this was a very commonplace Budget—;so commonplace, he seemed to think, that it might almost have been framed by the late Government. I quite agree. It is a commonplace Budget. It has no pretension to be anything else. For reasons which I thought I explained, in the circumstances in which we found ourselves, it could not be otherwise. The right hon. Gentleman says—;Why do you pretend that you are bound by the Estimates of your predecessors? I have never been more surprised in the course of my experience than at that part of the right hon. Gentleman's speech. He knows perfectly well how and when Estimates are framed. The Estimates for the spending departments are framed in the autumn. When we came into office in the middle of December they were practically all ready. The late Government even took the precaution, in view of the possible advent of a general election, to do a thing which, I believe, has never been done before—;namely, to publish the Navy Estimates as an electioneering tract to show what wonderful economists they were; and by a curious want of consistency and even-handedness they neglected to publish the Army Estimates, which, as the Committee knows, in the form in which my right hon. friend found them, showed a very considerable increase. Now is it not absurd to say that Estimates framed under these conditions, when the members of the Government were occupied during the great part of January in trying to keep or win seats at the general election, and when the Estimates had to be submitted in February—;is it not absurd to say that either the heads of the spending departments or the Chancellor of the Exchequer had any real control in the matter? The Estimates are the Estimates of the late and not of the present Government. And remember we came into office before the general election and not after. I made I do not know how many speeches to my constituents and to electors in other parts of the country, and on behalf of the new Government I disclaimed all responsibility for these Estimates. We were elected, and the electors gave us their mandate on that understanding. The Estimates of this Government will be seen when they are presented to Parliament next year, and not before. I will not go into the somewhat audacious digression of the right hon. Gentleman about old-age pensions. He tells us, not for the first time, that he never promised old-age pensions. The last time that we had a little controversy across the Table about the subject the right hon. Gentleman interrupted me by declaring that he did not promise, but that he only proposed old-age pensions.

MR. J. CHAMBERLAIN

I do not accept that statement.

MR. ASQUITH

I am afraid, however, that it is recorded in Hansard.

MR. J. CHAMBERLAIN

Quote it.

MR. ASQUITH

The right hon. Gentleman said that he did not give a promise, but only made a proposal. I remember the statement because I also remember the answer that I gave to him in return. This view is corroborated by what the right hon. Gentleman said as to his most simple alternative suggestion, and the proposal or the proposals, I think, took the first place in the electioneering programme of the Unionist Government as far back as 1895. But there is not much relevance in that topic to the consideration of the Budget on which we are ostensibly engaged. I come to the right hon. Gentleman's specific criticisms on what I have proposed. First of all as to the debt whose increase in the main, it is alleged, is due to the war. Yes, but not by any means entirely. The capital liabilities, which have risen in ten years from £4,000,000 to £45,000,000, have little or nothing to do with the war. Here I may interpose two or three observations in reply to the late Prime Minister. The right hon. Gentleman appeared to think that I have laid down in the Estimates as a proposition that in no conceivable circumstances would the present Government regard the raising of money by loan for works of a permanent character, of a naval or military character, as justifiable. I did not say so. I guarded myself from saying so. On the contrary, I said that cases must and would occur in the history of all countries which would make it necessary to resort to temporary borrowing for works of a permanent character. But I also said that the system of the late Government was a system so full of abuses that it was time it was brought to a final close, and that we intended to bring it to a final close at the earliest possible moment. The right hon. Gentleman says that these naval and military loans were necessary for great Imperial purposes. I have two observations to make about that. In the first place, a not inconsiderable proportion of the works appearing in the schedule and which have been constructed and erected by borrowed money are works which are now, by the admission of all responsible strategists who are alive to the real military and naval necessities of the Empire, obsolete, worthless, and wasteful. In every direction you will find evidence of that wasteful policy. Not only is that the case, not only were the works properly described, if they had been well conceived, as works of a permanent character erected by borrowing, but, what I conceive to be still worse, works which have no claim whatsoever to be so regarded as belonging to this category, and the cost of which in no circumstances were defrayed out of the Estimates of the year, were so treated. I have here an instructive Return which will illustrate the point. It was presented to Parliament in 1903, and it is a statement showing the allotment of £170,000 provided in the military works loans for the purpose of assisting the Volunteers in connection with the expenditure on rifle ranges. This is what it says—; Grants to Volunteer corps in aid of expenditure on rifle ranges;—;1st Ayr and Galloway, £4; 2nd Volunteer Battalion Royal West Surrey Regiment, £6. And there are other items of the same sort. These sums were borrowed, and the repayment with interest was spread over a period of thirty years, because it was said that there was no other way so economical to discharge your Imperial responsibility.

MR. A. J. BALFOUR

I never suggested that such a use of borrowed money is an economical way of dealing with it. I said that if you wanted to construct great works economically you should construct them rapidly, but the difficulty of producing the large expenditure out of the Votes was such as to make it a better plan to spread the expenditure over a large number of years. I was referring to expenditure on land and permanent works.

MR. ASQUITH

The right hon. Gentleman has laid down a principle in favour of which a good deal might be said. But I here produce a loan raised by the right hon. Gentleman's own Government under the very Act we are now considering, figures presented to Parliament in 1903, which shows that however excellent may be the principles in the mind of the right hon. Gentleman, in point of fact these things will inevitably happen when you resort to this policy of borrowing for works that are to be carried on. I have also a quotation from a speech of the right hon. Gentleman which causes me surprise that he should have uttered the criticism of this afternoon. As late as July 19th, 1905, the late Prime Minister assured an hon. Member and the Committee—; Of the desire and intention of the Government to close up this system at the earliest opportunity, and to bring any additional expenditure which might be necessary either in connexion with the works mentioned in the Bill or works which might be possibly required in future as far as possible in the ordinary Naval Vote, or, in other words, in Vote 10. What more have I said?

MR. A. J. BALFOUR

I thought that the right hon. Gentleman laid down the proposition that he was never going to borrow. My argument is that when you have to deal with great constructive works which may be necessary you cannot follow the policy of carrying them on out of revenue.

MR. ARTHUR LEE (Hampshire, Fareham)

said that the right hon. Gentleman had been quoting from a speech which he delivered.

MR. ASQUITH

I was premature, and I am afraid the hon. Member is right. But I will quote from the late Prime Minister himself. ["Oh, oh!"] I am sorry if I have attributed to the right hon. Gentleman what was said by one of his colleagues. The right hon. Gentleman, in one of his speeches, indicated that it was the intention of the late Government to abandon the loan system for the normal method of placing sums on the Votes, that the situation at the time justified the loan system coming to an end, and therefore the Government proposed to revert to the system of defraying the expenditure from the annual revenue.

MR. A. J. BALFOUR

Hear, hear!

MR. ASQUITH

Then we are in agreement. The late Prime Minister made an appeal to me on the subject of Ireland. The answer that I was about to give to that appeal has been given by the hon. Member for East Mayo. I was careful, rightly careful, not to commit myself to any precise statement as to the method in which the Government proposes to deal with the financial relations between the two countries; and I do not propose to be drawn into doing anything more than to repeat what I said. The matter is receiving, and will continue to receive, on the part of the Chief Secretary and myself, the most careful consideration, and I hope to be in a position to make a more definite statement next year. The right hon. Member for West Birmingham spoke about the war debt, and he sneers at the paltry contribution of half a million towards increasing the Sinking Fund. It may be party, but let us see what we are doing this year in respect of the Sinking Fund. We have inherited a large surplus of £3,500,000. We are able to set aside for the debt £9,000,000 or £12,500,000, and, in addition, I propose to give £500,000 out of the Sinking Fund, taking advantage for the first time of the China indemnity to the extent of another £500,000. The result is that I shall apply this year in reduction of the dead-weight debt £13,500,000, which is largely in excess of any sum hitherto applied to that purpose in the financial history of the country. I do not think that, in the circumstances of the year, I was justified in demanding from the taxpayer a greater sacrifice. At one time I thought of doing so; but in the result, when I added up the sums and looked at the impression they would make on the outstanding debt, I came to the conclusion that £500,000 was as large a sum as I was justified in setting aside. I am perfectly content to stand by it.

Then the right hon. Gentleman's position with reference to the coal tax is one which I do not profess to understand. He seems to think that the tax would have been repealed by my predecessor if he had remained in office. But he took the opportunity of putting a question which I am glad to have the opportunity of answering, as to the incidence of an export duty like that of the coal tax, compared with the incidence of an import duty on, say, foreign corn. He says, "You admit by your argument and action, that the export duty on coal falls upon, the British producer; otherwise you would not say that it was in the interest of the trade to remove it. Why, then, do you not make a corresponding admission with regard to an import duty which may be paid here on corn produced abroad?" The question is not very difficult to answer; but I will answer it if I may in a couple of sentences. An export duty like that on coal is put on at the port of exit, whence the commodity starts on its voyage to the foreign market. It is only, therefore, the supply which is sent out of the country which puts the duty on the price. The rest of the supply is not taxed. Therefore, if a sufficient supply can be got from countries which do not put on that duty, it is evident that the foreign market can so supply itself. Therefore, if the producer of the country which puts on this export duty is to compete in the foreign market, he must sell his coal at his competitors' price and pay the duty himself. Now, an import duty is put on at the entrance to the market, and not at the port of exit. Suppose, as would be the case under the right hon. Gentleman's scheme, the whole supply from foreign countries were to be subject to an import duty. It follows that, unless the untaxed supply—;that is to say, the home-grown supply plus the preferred supply—;is sufficient, as it is not, to satisfy the wants of the market, the foreign corn must come in; and as there is only one price for the same article in the same market, the whole price in that market will he the price of the foreign corn. I apologise to the House for this digression into the elements of economic science, which, as the right hon. Gentleman says, it is difficult to exclude altogether even when discussing the Budget.

One word, and only one word, on the subject of tea. The right hon. Gentleman says that in his opinion this 1d. which I am remitting will go into the pockets of the producers and middlemen. I do not think it will. I can assure the Committee that when I found that my resources were not sufficient to reduce the tax by 2d., as I should have liked to do, the first question I asked of my expert advisers—;and I have access to the advice of the highest possible authorities—;was, will this go to the consumer or not? They said that it would, and for reasons some of which I gave yesterday. First, the tax on tea is so enormous in proportion to the value of the article—;90 per cent.—;that when you reduce it, as you do here, by considerably over 10 per cent. you are making such a substantial reduction in the total cost that the force of competition must compel the producer to give the larger part of the benefit to the consumer. Secondly, while it is perfectly true that a small reduction of duty in the case of many commodities, like tobacco, for instance, maybe intercepted or long delayed in the various intermediate operations between the importation of the raw material and the retailing of the finished commodity, yet in the case of tea there are no such intermediate operations. It comes here in the form in which it is distributed, and nothing but the work of distribution remains to be accomplished; and for that reason I am advised that the whole of this reduction of duty will benefit the consumer, and also, indirectly, the British producers in India and Ceylon, who have been so largely handicapped by this duty in the past.

As to tobacco, the right hon. Gentleman asks me why I change the existing scale. Again, the answer is a simple one. I change the scale first of all because it is cutting off the supply of strips. Next, because it is not going to bring in any revenue to the Exchequer. It is true that the effect of the scale which my predecessor devised led to the growth of a small protected industry in this country—;the industry of stripping. But I have chosen a halfpenny as the difference between strips and leaf because it will bring them on a level, and will make all the allowance that can fairly be made for the manufacture of the leaf, for the small processes of handling, and for the extra weight of the moisture and sand in the leaf. Without desiring in any degree to curtail the discussion, I hope the House will now consent to give us the Resolution.

Question put, and agreed to.

Resolved, that there shall be charged, on and after the fourteenth day of May, nineteen hundred and six, until the fourteenth day of May, nineteen hundred and seven, in lieu of the duty now payable on tea, the following Customs import duty on tea (that is to say):—; Tea the pound Five pence.—;(Mr. Chancellor of the Exchequer.)

Resolution to be reported To-morrow; Committee to sit again To-morrow.