§ Now I come to more thorny ground. I have said that I do not propose in any way to alter indirect taxation; but I do propose to deal with the income-tax. The income-tax, as it is one of the most productive, so it is one of the most delicate parts of our fiscal machinery. There is nothing like it to be found anywhere else in the world. It produced this year something like £32,000,000 to the Exchequer, and The largest part of that sum, no less than two-thirds of the whole, 1199 through the operation of our system of deduction at the source, is collected, without difficulty or friction, without any necessity for the taxpayer to draw a cheque or even open his purse, and almost without his being made conscious that he is being taxed at all—I said almost. As regards the remainder, one-third of the whole, the process of ascertaining and getting in what is due with ease and expedition depends upon a certain amount, at any rate, of co-operation—it is not expected to be very cordial—between the taxing authority and the person assessed, and still more upon the harmonious interaction of the central and localised parts of the machine. Now there is nothing in the world easier, I know it because I have tried the experiment, than to sit down at a table and draw up on a piece of paper an ideally perfect scheme of income-tax, logically graduated from the top to the bottom, safeguarded by an elaborate machinery of inquisition, and detection, and punishment, all administered by the pitiless and impartial hands of a perfectly dispassionate central authority. Nothing is so easy on paper; but when you are brought into contact, as I am almost daily, with the actual administrative problem, you find you have to content yourself with something very much less ambitious. And if the reform I am about to propose falls short, as I am afraid it will, of some people's expectation, it is governed and limited by severely practical considerations. The income-tax is really a twofold tax, it is a tax on property and a tax on earnings. I start with this proposition, and a most important proposition it is, that it must now be regarded as an integral and permanent part of our financial system. If that proposition is once enunciated and admitted, it makes it impossible to justify, if there be any practical way of escape, the present incidence of the income-tax. After you have reached the limit of abatement, which is now £700, the State taxes all incomes at the same rate, whatever may be their character or source. Just compare two cases. You have here A, a man who derives, we will say, a thousand a year from a perfectly safe investment in the funds, perhaps accumulated and left to him by his father; on the other hand you have B, a man making the same nominal sum by personal labour in the pursuit of some arduous and 1200 perhaps precarious profession or some form of business. The one is under no necessity to make provision either for his children or for old age; the income will go on being automatically received as long as the investment remains; the other, if a man of ordinary prudence, is bound, his work being carried on subject to risks to health and all the other vicissitudes of fortune, year by year to deduct from his nominal income and set aside a sufficient sum to make provision for contingencies in the future. To say that those two people are, from the point of view of the State, to be taxed in the same way is, to my mind, flying in the face of justice and common sense. That is the feature of the tax which has never been justified by any of the great men, Mr. Pitt, Sir Robert Peel, Mr. Gladstone, and the others who have been concerned in its introduction and development; it has always been palliated on the ground either that the income tax was a mere temporary expedient, or that it was impossible to make the distinction without destroying its productiveness, which is the same thing as saying that it ought not to be more than a temporary expedient. For a tax whose effective continuance involves the annual perpetration of a gross injustice is a tax which ought to be reserved, at any rate, for great and pressing emergencies.