§ Order for Second Reading read.
§ * MR. BRIGHT (Oldham)said the Bill, the Second Reading of which he had the honour to move, had been before the House on many occasions, and had passed this stage no fewer than six times. It was rather a reflection on the business powers of the House that under such circumstances it had not found a place on the Statute Book of the realm. The object of the Bill was not greatly to alter the present law or the general custom relating to rating, but to introduce uniformity and certainty 894 into what had become, owing to some legal decisions, a very uncertain matter. The general practice throughout the country in the past had been for engines, boilers, and shafting, such machinery as passed with the freehold, to be rated, but, except on one or two occasions, textile machinery had never been rated On one or two occasions, where authorities had desired to rate machinery, it had been laid down by the Judges that the actual machinery should not be rated, but "taken into account." That was a very indefinite phrase, and no one knew exactly how it was to be "taken into account." He represented a town which was, he supposed the greatest centre of the cotton spinning industry—;a town in which there was a very large number of enormous factories, containing a vast amount of valuable machinery, and the result of rating that machinery would be almost to double the rates of those factories. He 895 was sure the local authorities had no desire to do that—;the Chamber of Commerce and every one with influence was against any such thing and in favour of this Bill. The same applied to all the manufacturing towns in Lancashire and Yorkshire, and it was the feeling of proprietors of mills and of the directors of mill owning companies, as well as of representative working men, that this Bill should be passed. There was nothing revolutionary in what he proposed, as the Bill was in consonance with the recommendations of the Royal Commission on Local Taxation of 1901, which laid it down that in estimating the rental value of hereditaments occupied for trade, business, or manufacturing purposes there should be excluded from the assessment any increased value arising from machinery, tools, and appliances that were removable from the place. The rating of machinery would be very disastrous in its effects on the industry of such towns as he represented, and it might have the effect of driving manufacturers to remove their factories north of the Tweed as in one case had already been done. If the rating of machinery were to become general, a very enormous burden would be thrown on industry, and, if cotton-spinning machinery were to be rated, why not agricultural machinery, printing presses, mineral water machines, and machines for coffee and chocolate grinding—;in fact, everything which was used in premises for the sake of doing trade in the places in which the machinery was used? The Bill was strictly in accordance with the law in Scotland and Ireland. The whole difficulty was really raised in the first place in a small country town where there was but one factory, and the agricultural community naturally wished to obtain as much rate as possible from that factory. It sought to do so by taxing the machinery, but if that course became a recognised system throughout the country there would be no extension of industry in rural districts. Surely 896 it was a great advantage to have the mills in country places with plenty of fresh air rather than in crowded centres in vast dismal smoky towns as at present? But if the authorities were to be allowed to rate them heavily the industries would never extend into country districts. He hoped the House would again read the Bill a second time. Had it not been for the prolixity of the speeches of hon. Members on previous occasions he felt sure the Bill would have become law ere this, and he earnestly hoped that that afternoon they would not suffer from the same affliction.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—;(Mr. Bright.)
§ MR. J. JOHNSON (Gateshead)said that, in moving that the Bill be read a second time that day six months, he would like to point out that the title was absolutely misleading and that in many instances it had misled hon. Members of the House. It professed to be a Bill for taxation of machinery, but in reality it was a Bill for the exemption of certain machinery from rating. They had been informed by the mover of the Bill that it had been read six times already, and would have passed long since but for the prolixity of hon. Members. But the hon. Gentleman had not added the information that on each occasion there had been a diminishing majority in favour of the Bill, showing that the objection to it was growing. He was bound to say that he thought the arguments advanced in favour of the Bill were very fallacious, and he could not understand why unfixed machinery should be especially exempted from rating. He might refer hon. Members to the Tyne boiler case in the Court of Appeal, in which Lord Esher, the Master of the Rolls, in 1886, dealt with the question of what was fixed machinery. The decision then arrived at had not been since 897 altered. His complaint against the Bill, however, was that it proposed to narrow the basis of taxation rather than enlarge it, and his belief was that the effect of passing the Bill would be to increase the burden on the poorer members of the community. He was perfectly willing to argue the question that the present mode of taxation was fallacious and that taxes should be spread in a different manner. Certainly he would put more on the land, because he believed it was never intended that it should be held as a monopoly by, and for the advantage of, the privileged few. He could not conceive why an employer who by his forethought, patience, industry, and energy had built up a large concern should have his industry per se heavily rated. But they were not dealing with the wider question that afternoon; they were dealing with the narrower view, and he had to point out that the inevitable result of relieving machinery of taxation would be to transfer the burden to the poor householder and small shopkeeper. In the constituency he had the honour to represent, the increased burden which would be created by the Bill would fall upon the poor labouring class. Let them try and understand the effects the exemption of machinery would have in that district. His constituency was largely working-class. Ninety per cent, of the inhabitants belonged to the working classes, and he had been given to understand from inquiries he had made that the effect of the Bill would be to increase the rates by 4d. or 5d. in the £. It was well known that about the present time the rates in Gates-head were very heavy, especially the education rate, and if, in addition to their present burden, exemption of machinery from rating was introduced, their rates would be heavy indeed. He had been given to understand also that in Jarrow, another large industrial centre, the effect of the Bill would be to add another 4d. in the £ to the ratepayers' 898 burdens, and he had also been informed that in Sunderland it would mean a similar increase. Fourpence or fivepence in the £ might seem to be a small matter, but with the already increased burdens of taxation it became a very serious one. There were other instances he could mention, all of which indicated that the passage of the Bill would be a very serious matter indeed especially for northern districts. Before allowing such a Bill to come into operation they should have some general scheme of taxation; it was not fair to exempt the capitalists by the narrow specious process suggested and place their responsibilities upon the shoulders of the workers. The Bill would mean higher rents, and everyone knew that the workman's rent was already sufficiently high—;higher than his means allowed in many cases. Taxation was steadily going up; they could not have any privileges except they were prepared to pay for them. He would be the last man to deprecate an increase in expenditure if they were to get a corresponding amount of advantage from it, but in the present instance they were going to take a burden off the backs of the classes better able to bear it and to place it upon the backs of the working men who were less able to bear it and would not derive any benefit from it. The Bill dealt with a very small portion of a very large question. He knew of no Bill introduced into this House which would call for greater consideration, an expenditure of more time, and keener analysis than that for the re-adjustment of the taxation of the country. The point he wished to make was that, whatever might be their special and peculiar view as to the exact place where the burden of taxation ought to rest, there was no doubt that the discussion of the rating question would take up a great deal of time, and would require keen analysis and careful consideration. Why should they tinker with a small point like this, and why should a matter of this kind be raised in 899 a partial manner and not straight out? He hoped the House was not prepared to pass this Bill. A number of hon. Gentlemen professed to be very anxious for the well being of the community in regard to taxation, but when they came to look into the proposal they found that it was simply one to remove taxation from their own shoulders. This Bill might rightly be called a manufacturers' Bill. Constantly in this House claims were made for certain exemptions in favour of this, that, or the other class, but he did not think that the class who desired this exemption deserved to have their present claim taken into consideration or that they had made out any case. The case which had been brought forward had received diminished support, and as soon as it was understood that the Bill was to reduce the rating of a particular class he thought less support than ever would be given to it. He did not wish the House to pass the Bill under a misapprehension; it must be distinctly understood that it was a Bill by which it was intended to take a burden from the manufacturers and place it upon the small shopkeepers and workers who in a very large number of cases were already overburdened. [Cries of "No."] Hon. Members said "No" and therefore evidently this was a matter of opinion, and he thought his opinion was as good as that of other hon. Members. Why should the capitalists and the machine owner be exempted from this burden, and why should it be placed upon the small shopkeepers and the workers? He entered an emphatic protest against the Bill, and hoped hon. Members would realise its important and far-reaching consequences. Without further wearying the House he had the pleasure of moving that the Bill be read a second time that day six months.
§ LORD WILLOUGHBY DE ERESBY (Lincolnshire, Horncastle)seconded the Motion for the rejection of the Bill, although he confessed that the object 900 of the promoters had his sympathy. He felt obliged, however, to go into the Lobby against the measure. He wsa perfectly prepared to admit that manufacturers had grievances upon the subject, but, like the hon. Member who had moved the rejection, he felt that if machinery were exempted the rates would have to be met out of somebody else's pocket. He did not exactly know, and it was difficult to tell in different parts of the country, upon whose shoulders the burden would fall. The hon. Member for Gateshead seemed to think that the burden would fall upon the small shopkeeper and workers, and he thought that that was likely to be the case. Indeed he did not see how it could be otherwise. On the other hand, he recognised that in the country districts the burden would fall upon the farmers who were cultivating the land. He thought that this debate would bring out a very important point to which the mover had referred in his speech when he quoted cases, within his knowledge, where the manufacturer had had to remove his works and plant, owing to the heavy rates charged upon his machinery in the district in which he carried on business. He had always maintained that the rating of machinery was hard, and therefore the Bill had his sympathy, but he felt that if rates upon machinery were done away with they were bound to fall upon the produce of that machinery. He considered the rating of machinery thoroughly wrong, in the same way as he considered the rating of land thoroughly bad. It was, in his opinion, a question not of who but of what paid the rate. It might be called the rating of machinery, but it did not matter to the manufacturer or to the local authority who paid the rates, or whether the sum was raised by a charge placed upon the article which the manufacturer was producing, or was levied in the way of rates. He held that the rating of machinery was a tax upon the article produced, 901 and therefore he considered it was bad. The same thing might be said about land, and it did not matter whether the money was levied by way of rate upon land or upon a quarter of corn which was grown upon the land. He had always said that the rating of any property in the country fell upon the industry and the people engaged in it. He considered, however, that there should be legislation with regard to the whole of the question of rating, and he did not think the Report of the Commission appointed by the last Conservative Government had in any way solved the problem. He thought it one of the chief mistakes of the last Conservative Government that they did not deal entirely with this rating question and go to the very root of it. This tax made it all the harder for manufacturers in this country to compete with their foreign rivals. But to call upon the tenants of small houses in towns and upon farmers in the country to bear the burden was unjust. He believed that the whole question ought to be thoroughly gone into and radically altered, and he hoped the Government would take the matter into consideration and see whether they could not devise some better scheme for obtaining rates than from this source.
§
Amendment proposed—;
To leave out the word 'now,' and at the end of the Question to add the words 'upon this day six months.'"—;(Mr. J. Johnson.)
§ Question proposed, "That the word 'now' stand part of the Question."
§ * MR. STUART (Sunderland)said he would not have intervened in this debate had it not been for the fact that he was the only Member present who was a Member of the Royal Commission which sat for a number of years upon the subject of local taxation. He recognised that this Bill was founded upon a clause of the Report of the Commission which was unanimously 902 agreed to, or at all events was agreed to by an overwhelming majority. The Commission came to the conclusion that the rating of machinery, as at present carried out, had many disadvantages, and he thought it would be a very great advantage to very many hon. Members if they would look into the historical aspect of the question, which was dealt with in the Report, which threw an immense light upon the whole rating question. One of the reasons which caused them to make the Report they did about the rating of machinery was the difference of practice which prevailed in different parts of the country, and resulted in the hampering of competitive trade. Not only was there a difference of practice throughout the country in regard to rating, but the whole law of rating, and especially that in respect of machinery, was based largely upon decisions given by the courts of law, a piecemeal sort of law, which was in an uncertain and disorganised condition. Another point was that they felt that this rating of machinery was a tax upon trade, and that inasmuch as it fell largely upon some branches of trade and not upon others it was very desirable that the matter should be rectified in the general interests of the manufacturers of the country. But while they took that view and made that Report, the question to which he wished to call the attention of the House was that this particular portion of their Report was to be taken in connection with the other large and important proposals which they made affecting the whole general law of rating. They were put there to consider the law and question of rating as a whole and they did so—;he did not say with all the success that they could have wished. They touched upon the question of how much the Poor Law and the education rates ought to fall upon the local authority or the central authority. Five of them, including Lord Balfour of Burleigh, made 903 a Report in favour of the rating of ground values, and the House would see that when the Commission made their Report they had before them the general reorganisation of the rating conditions of the country. They proposed this change in the rating of machinery as part of the large system of reorganisation which they put forward. Whether it should be taken by itself or not was a very different question, and he thought that the House would do well to deal with the question of local taxation from a general point of view. There was no question in the country which was more important than local taxation except the question of general taxation. Then there was the question in regard to contributions in aid of local rates. These were subjects which were not generally attractive to people, and it was difficult to raise any interest in them, and the ratepayers did not know how the incidence of rating fell. There was, for instance, the compound householder system, which did not relieve rates but cloaked them; but even taking the rates not under the compound system there was a great deal of difficulty on the part of competent authorities in deciding who really paid the rates. He thought he had said enough to show the great vista which was before the House of Commons in regard to these rating questions. If the Government and the House of Commons would wake up and deal with the real essence of the general rating question they would, he thought, be rendering a genuine service to the country. He should be glad to hear from the Government some undertaking that they would deal with his question at no distant date.
§ * MR. R. DUNCAN (Lanarkshire, Govan)heartily supported the Bill. This country had to keep pace with the march of invention and improvement which was going on in the midst of our rivals in Germany and the United States. The 904 Bill removed an obstruction in the resources of competitive trade. Taxation should depend not on the machinery that made a business profitable, but on the general prosperity of the community as a whole. Let them tax prosperity, but not those things by which prosperity was attained.
§ MR. FENWICK (Northumberland, Wansbeck)thought the House was very much indebted to his hon. friend the Member for Sunderland for the explanation he had given the House as to the work of the Royal Commission on Local Taxation. Although he had no decided objection to this Bill, there were many Members of the House who had. He certainly, however, had an objection to its proceeding at the present moment and under present conditions. As the hon. Member for Sunderland had justly said, the principle raised by the Bill was part of a very large scheme of local taxation. He reminded supporters of the Government that when the late Government dealt with agricultural rating and clerical tithes the opposition then offered was due to the selection of special features of taxation for treatment tending particularly to favour the friends of the late Government. That was one of the fundamental grounds of their opposition to the proposals of the late Government. No one could deny, however, that in a measure of this kind the responsibility ought to rest upon the Government and not upon an individual Member. In his own district they rated machinery, including that appertaining to collieries. They had not lowered the basis of taxation; they had only narrowed down the area of taxable property. The expenditure went on just the same, and where were they to find the money to meet the necessary expenditure in the locality? They had to impose additional taxation on the other property of that locality, that was to say upon the houses of the working men; men who had struggled to 905 and had become owners of their own houses. By this Bill they would exempt the property of those who were able to pay in order to throw it upon the shoulders of men who were not able to bear it. The fact that the tax on machinery was reduced would also tend to put up the rents of working men in the locality, The rents in the county of Northumberland, and especially in Newcastle, were probably much higher than the rents in any other industrial centre, and the effect of this Bill would be to increase the rent of those properties and increase the rents of the working men in the rural and urban districts of Northumberland. He objected upon that ground, so far as his district at all events was concerned, to the passing of this measure.
§ * MR. CHARLES ROBERTS (Lincoln)Said that all the opponents of the Bill agreed that unfixed machinery was not a fit subject for rating, but they found various grounds why, in spite of agreeing with the principle of the Bill, they considered it was one that must be rejected. He was inclined to think that the substantial argument was that the whole question of rating should be dealt with together. He did not yield to anyone in asking the Government to deal with the question on the lines of the Rating Commission. He thought he had heard the Chancellor of the Exchequer the other night say that he wanted to adjust the whole question of rating, but he did not see why they should not vote on this Bill today because the Government at some future time proposed to deal with the whole problem of Imperial and local finance Hon. Members would never have urged that the question of the taxation of land values, could not be dealt with separately 906 apart from the general readjustment of rating, and if the House threw out this Bill today, it would be said, when the general settlement came, that the House had changed its mind on the question of the rating of machinery. They should do the just thing, and he thought, for his part, that this Bill was a just one. There was a clear distinction between fixed machinery, which might increase the letting value of the establishment, and the loose machinery lying about which did not. And accepting the main principle of the Bill, he thought it a fair and moderate proposal to exempt that unfixed machinery from taxation. The hon. Member for the Wansbeck division of Northumberland had said that if they exempted this machinery from taxation, the burden would be placed upon the house property in the locality. But if this Bill was just, he did not see that people had a right to perpetuate an injustice by throwing it out One strong argument which induced him to vote in favour of the Bill was that the case decided in the House of Lords last year had increased the anxiety which prevailed in the present state of the law. The whole practice of the law was sufficiently uncertain at the present time with regard to the rating of machinery, and that uncertainty would only be increased by that decision, and while they were waiting for a general readjustment, assessment committees might be doing real injustices in the meantime. That was one ground why he had decided to press for the Bill this afternoon.
§ * MR. MYER (Lambeth, N,)said the framers of this Bill had thought well, but not sufficiently well, on this subject. How were they going to draw a distinction between fixed and unfixed 907 machinery? What was fixed machinery? It was very difficult to define. He presumed that most hon. Members thought it consisted of boilers and engines. What was happening to boilers and engines today? In some particular town they might possibly have 100 works each with an engine and boiler worth £1,000. Today, with the introduction of electric and hydraulic power, the whole of that machinery might disappear in a year or two. Under those circumstances what was the value of it, and what would become of the power to rate that machinery? Instead of having separate engines and boilers, works would be run from some large distributing centre, and were they going to place the rate upon the central distributing station? The whole idea of differentiating between fixed and unfixed machinery was absurd. With regard to the extra rate falling upon workmen's dwellings, the statement would not hold water, because every landlord today was getting as much rent as he possibly could out of his tenants, and no matter what the rates might be, the landlord could not increase the rent. Therefore the argument that the rate would fall heavily upon the working classes was illusive. A large amount of the rateable value created would disappear in a very short time.
§ MR. SUMMERBELL (Sunderland)said that the hon. Member was perfectly accurate in what he said so far as it related to the town which he (Mr. Summerbell) had the honour to represent. The machinery in that town was rated at the present time, and if this Bill was passed into law it would increase the rates of the town 3d. or 4d. in the £. Everybody knew perfectly 908 well that where the rates were increased the rents were also increased. If this Bill was passed today, the rates in his town would go up and the house property in the shape of workmen's rents would go up 6d. a week. He hoped the House would not pass the Bill.
§ MR. LUPTON (Lincolnshire, Sleaford)said that if he thought it was going to raise the rents paid by the working classes he should vote against the Bill, but he did not think it would have any such effect. He thought the landlords had already got all they could out of the workmen, no matter what the rates might be. If they taxed loose working machinery they made it more difficult for the manufacturer to live; they drove him out of the district, lowered wages, and injured the working classes. By taking the tax off machinery they threw the expense on the great owners of property. This was a small step in the right direction. The effect of this Bill was to encourage industry and thereby to raise the condition of the working classes.
§ * MR. J. D. WHITE (Dumbartonshire)said he supported the Bill because it was a small and practical step in the right direction. It was a moderate measure, the fundamental principle of which was to exempt from rating machinery which was not fixed and machinery which was only temporarily fixed. The hon. Member who moved the rejection of the Bill professed to be unable to see the distinction between the machinery which was not fixed and machinery which was. The distinction was an arbitrary distinction, but it was a distinction which had been made by this House, and in the Scottish Rating Act, passed four years 909 ago, that very distinction had been put in. The promoters of the Bill desired to have in England the advantages already possessed in Scotland. It was almost a pity that the Bill did not go further, for he should like to see all the rating and taxing of machinery abolished. Machinery played a more and more important part in modern production, and they should encourage its use in every way, instead of penalising it. The hon. Member for the Wansbeck Division had argued that if machinery was exempted from rating, rates would be put upon the houses of the working classes. He could not agree with the hon. Member in that. He was opposed not only to the rating of machinery, but also to the rating of factory buildings and industrial buildings of every kind, including crofters' cottages in Scotland and the labourers' cottages in Ireland and even to the hut tax in Natal. He quite agreed with the observation made by the noble Lord the Member for the Horncastle Division that if they did this for certain industrial undertakings they should also do it for all. He would like to apply the same principle to agriculture, and to exempt from rating farm-buildings, hay sheds and all other agricultural improvements. He quite agreed that if they exempted all these things from rating they would have to find other things to rate. He was one of those who for many years past had advocated the fundamental reform of our valuation so as to base the whole taxation of landed property on the market value of the land and to leave all buildings and other improvements of every kind tax-free. Though he would continue to advocate that great reform, he was content to take this instalment now, and he would therefore support the Bill.
§ THE PARLIAMENTARY SECRETARY TO THE LOCAL GOVERNMENT BOARD (Mr. RUNCIMAN,) Dewsburysaid he regretted that the promoters of this Bill had not circulated it till today—;at least the Bill had not reached the office which he represented until today, and he should have thought that in an important matter like this they would have taken steps to circulate it as early as possible. He was in complete agreement with much that had been said. It was perfectly clear that the rating of machinery as at present carried on throughout the United Kingdom was a bad system and was not a uniform system. If this lack of uniformity was causing any grievance in any part of the country, they must, sooner or later, clear it up, and the sooner the better; but by this Bill, the House was being asked to proceed in the wrong way and to bring about a reform on a wrong system. They were asked to relieve a certain kind of machinery from further burdens. Those burdens would, naturally, have to be borne by somebody, and it was perfectly clear that in most cases they would fall as an increased burden on house property. The burden which was removed from the industry would fall as an increased burden upon the classes engaged in the industry, and he ventured to suggest that this would be merely a case of jumping out of the frying pan into the fire. Before they transferred the burden from the back of one set of producers on to the back of another set, they should consider how far they could embark on a system of monopoly rating. He thought the House would be well advised in not proceeding to a decision that afternoon, not that he opposed the Bill in principle, but because he thought there was a better way of dealing with the 911 subject. The Government had announced their intention of dealing next year with the rating of land values. It was hoped that they might be able to introduce a Valuation Bill next session, and by that means to approach nearer to a solution of this great problem. He suggested that, if the Government did that, they would do something towards ultimately transferring the burden from the great machinery users on to the shoulders of the great monopoly owners. That, he believed, was the proper way to proceed. Meanwhile, it might be necessary that they should clear up some of the uncertainties which at present existed with regard to the rating of machinery; and if it should be necessary next year after the Government had introduced their measure to again bring this Bill before the House, he thought they might have it in a much amended form. If the House did proceed to a decision on the Bill that afternoon, the Government would have to propose a series of Amendmends which would materially alter its character.
§ And, it being Five of the clock, the Debate stood adjourned.
§ Debate to be resumed upon Monday next.