HC Deb 18 April 1907 vol 172 cc1211-55

1. Motion made, and Question proposed, "That the Customs duty now charged on tea shall continue to be charged until the first day of July nineteen hundred and eight (that is to say) tea, the pound, 5d."—(Mr. Chancellor of the Exchequer.)


It is almost superfluous on my part to praise the right hon. Gentleman on the merits of his speech, but I am sure I am speaking for the Whole House when I say that we have listened with pleasure to his statement, and with admiration to its form. But I am glad to think that I can go further than that and say that as to a considerable part of it at any rate I find myself in no great disagreement with the right hon. Gentleman cither in his survey of the situation or some of the changes he proposes. I do not propose at this moment to examine in any detail the financial scheme he has unfolded, still less to follow in that way the statement which the right hon. Gentleman has just made, but I should like to make a few observations upon that statement. Let me say at the beginning that I agree with the right hon. Gentleman that the credit of the country has been needlessly disparaged in some quarters, and that it is of course a patent fact that, when you allow for the change of the rate of interest, it not only stands to-day higher than that of any other country in the world, but that it stands higher than it did except on rare occasions in our own history. And, Sir, I agree with the right hon. Gentleman that, having regard to present conditions, it is expedient and desirable that special provision shall be made for the reduction of Debt. I am not one of those who think the permanent provision which we have made, especially when it is strengthened with considerable sums coming from the old Sinking Fund is insufficient as a continuous charge, but I do think that in the circumstances of the present time there are special reasons why we should increase that charge. I rejoice that the right hon. Gentleman has utilised a portion of the surplus which he anticipates in the year now entered upon for the reduction of Debt, but I must say, because it is the first time I have had the pleasure of speaking in the right hon. Gentleman's presence on the matter, though I had a passage-of-arms with his; right hon. friend on the War Estimates —I must say that I regret that the right hon. Gentleman abstracted £500,000 of what would have normally gone to the Sinking Fund for the purpose of carrying out the scheme adumbrated by the Secretary of State for War, for petting the Volunteers free from their liabilities. He intercepted that money which would have otherwise gone to the reduction of Debt, and the country remains burdened with debt from which, except for this extraordinary and unprecedented proceeding it would have been relieved. With another part of the right hon. Gentleman's proposals I am in complete sympathy, and I think I can promise him for myself and my friends, on the lines he has laid down, co-operation in dealing with the subject of local taxation, and his attempts to place the giants from Imperial taxation in favour of local rates, on a sound and substantial footing. Nothing could be more complicated or unsatisfactory than our system as it now stands, and as it has been described to the Committee by the right hon. Gentleman, and provided he takes care to secure that by his treatment the local authorities shall not be the losers either in the present or in the future, by the change that he proposes, I do not think he will meet with any opposition from this side. I hope he will go a little further and see whether it is not in the power of the Exchequer of the Government; to secure some further control over the; expenditure to which they contribute, or at any rate to see that the contributions they make go to the purposes for which they are intended. A grant is given and grants have been given over and over again in relief of local taxation, but have any local rates ever been more than momentarily reduced thereby? Is it not the common experience that within a short time of the contribution having been given to local taxation the rates have risen again to the height at which they were and even beyond that figure? There is no limit to local taxation except the limit put upon it by the patient or impatient ratepayer. It is worth considering whether in any change that is made in local taxation we can secure that the money given in relief of local taxation does go in reduction of taxation, and does not go towards encouraging local authorities in embarking in further unnecessary expenditure. The right hon. Gentleman has, as he said, made a statement covering a wider range than is usual on this occasion, and the Committee is the gainer by it. I thing it is a wise and prudent thing that we should from time to time take stock of our position, not merely as it affects one year but as it affects a series to years, as far forward as a Government or a Chancellor of the Exchequer may be expected to look. It is doubly necessary when the Chancellor of the Exchequer sees before him very heavy calls for new expenditure, and wishes to provide for new expenditure for which he cannot provide in the present year, but which he can only hope to provide for by gradually building up a fund with which to meet it. I do not think the review which the Chancellor of the Exchequer made of our resources is altogether an encouraging one, and it was at this part of his speech, no doubt necessary for purposes of his own, that the right hon. Gentleman quitted that dispassionate and non-partisan air which Chancellors of the Exchequer are apt to adopt in Budget speeches, and indulged in rhetoric and fireworks on the subject of free trade. I say "fireworks" because I do not wish to use a harsher phrase. I might borrow the phrase of the Under-Secretary of State for the Colonies and say that the right hon. Gentleman indulged in terminological inexactitudes. What was the situation he disclosed? That there was an ever-growing demand for social reform; a demand the growth of which was typified by his illustration of what has happened in connection with our expenditure on education, which in a period of about thirty-five years has risen from under £750,000 to £25,000,000. I echo what the right hon. Gentleman said that so far as that money is spent in providing education for the children without extravagance, and without waste, there is not one of us who would wish to cut it down. But there may be there, as some of us think there is in other cases, some expenditure for which we do not get an adequate return. So far as it serves the purpose to which it is devoted there is not one of us who desires to reduce it or who believes it can be reduced if you are to make economy, because as fast as you make an economy other growths will come up. As it is with other social reforms, the inevitable tendency is to grow. They begin with a small figure and inevitably grow. What are the resources out of which we have to meet them? The right hon. Gentleman said the revenues of receipts of last year are in some respects curious. They certainly are. I think he might add that they are to some extent disquieting. The right hon. Gentleman's great increase is in the Death Duties, and as he said himself very fairly, though they tend to average themselves over a series of years they are very uncertain in any year, from the point of view not of the condition of the tax, but of the consideration of the tax as an engine of revenue. The right hon. Gentleman also said that last year was a year of singular prosperity in trade, of increased profits and of growing wages. I do not think the wages have grown very much hither to, I am not quite sure in what sense the right hon. Gentleman used the term. There has been some growth in employment, and therefore some increase of wages paid, but I do not think the Board of Trade Returns show a very marked increase in the wages paid, although there has been some movement in that direction. But the greater the prosperity, the greater the sum paid in wages, the greater you would expect the revenue to be in articles of Customs and Excise. But those Returns are not satisfactory. We do not see in the Customs and Excise the evidence of abundant wealth or widespread prosperity which the Chancellor of the Exchequer finds, I suppose, in a survey of other facts and figures. I think the lack of growth in these items is rather disquieting. It produces this result, that while the Chancellor of the Exchequer is anxious to reduce taxation and to provide funds for social reforms, he is obliged to say the second object kills the first, and he cannot offer any remission of taxation. That is the doctrine I and my friends have been preaching for years; but the right hon. Gentleman denounces his opponents for defending a course he himself continues to pursue. To the consumer it does not matter whether one Chancellor takes a revenue from tea or sugar or another Chancellor takes it from corn. We have admissions as to hopes for social reform—in particular, old-age pensions; but on grounds of statesmanship and fiscal stability, you ought not to attempt to cary out those great measures, principally for the benefit of the poorer amongst us, wholly at the expense of those who are better to do in the world. I think his admissions will be useful, and he will find that the scarecrow, with which he has for a time succeeded in frightening the people, will lose its effect the next time he waves it over the electoral field. As regards the right hon. Gentleman's proposal to graduate the income-tax by means of a super-tax or other taxes, I observe that he did not decline ever to look into the matter again, but he indicated, at any rate, clearly and succinctly, the very great difficulty which would attend the practical application of any proposal of the kind. What he proposes, I think, at first sight appeals to all of us. He takes extreme cases on either side, for the purpose of illustration. He takes the case of a man who has £1,000 a year derived from Consols, and the case of another man who has £1,000 a year derived from his personal exertions. He asks, is it fair that you should tax these two men on exactly the same basis? I think all of us will feel that it is desirable to make a distinction between these two cases, but there is a little doubt whether the Chancellor of the Exchequer will be able to make the tax much fairer by the proposal which he has put forward. He will remove certain anomalies, but I think he will not remove anomalies altogether; I think he will only change the anomalies which are perpetrated instead of removing them from the tax. I was rather surprised in this connection that the Chancellor of the Exchequer made no reference to the evidence given by the Chairman of the Board of Inland Revenue before the Income-Tax Committee—evidence remarkably interesting, full of thought and value, in particular that part of it which dealt not only with the attempt at graduation, but with the question of differentiation, which was carried out by the present combination of Death Duties with income-tax. The right hon. Gentleman said he would not go into the question of the Death Duties, or whether they were deferred income-tax or not. I confess I do not think they are. I think that properly they are anticipated income-tax, collected from the heir at the moment he enters on the inheritance, and he has to make that good during the time he is in enjoyment of the property, always assuming that he is prepared to maintain the profits of the property, and is not prepared to see them gradually wasting away. If that be so, the Death Duties are in fact anticipated income-tax. The income-tax is collected not from the dead man after his death, but from the heir in anticipation of his enjoying the income. The moment you take the Death Duties as well as the income-tax into account, you have already a great difference between the taxing of a man who is receiving £1,000 a year from Consols and the taxing of a man who is earning £1,000 a year from his own exertions. The capital sum represented by £1,000 a year from Consols is taxed for Death Duties, and is taxed when the capital passes again. The capital represented by a man's life and strength, that is to say, what gives effect to and enables him to make his personal exertions, is not taxed, but only such money as he may have laid by at the time. I admit, nevertheless, that it is very tempting to endeavour to make a distinction between earned and unearned income. I am not, however, at all sure that the right hon. Gentleman has succeeded in distinguishing fairly between them. I am not quite clear what he proposes to do with a certain large class of property which he himself did not mention, but which he will perhaps be good enough to refer to when he speaks later in the evening. Under what category does he treat pensions? Will the civil servant's pension, which he has earned by his labours for the State, but for which he has ceased to labour, be treated as earned or unearned income? What about life interests of any kind? What about annuities? Are they to be treated as earned or unearned income? From the point of view of the recipient they are not in the same position as the money received from personal exertions; that is to say, that from the point of view of the receiver the income dies when the person dies. Of course, those incomes are derived probably from permanent investments; it is only the interest of the living person that dies with his death; the permanent investment still exists, and the interest becomes someone else's. How does the right hon. Gentleman propose to deal with that? It is obvious that we are only at the beginning of the subject, and that before we part from it we shall have to go into all those cases.


There will be the definition clause.


There will be a definition clause, but the right hon. Gentleman will have not merely to define, but to justify his definitions; he will not merely have to draw a line by putting it in one particular place rather than another. Again, I wish to refer to a very peculiar class of cases. How does the right hon. Gentleman propose to deal with income derived from land? I assume that he will treat the income of the farmer derived from land as earned income. But suppose the farmer is owner of the land, what will happen then? Is he going to treat as unearned the Sum which you would assume to be the rent of the land if it were let, or is he going to treat the whole income as earned if it be farmed by the owner himself? Take the case of a man who is not farming his own land, but makes it his business to do the management of his estate himself, his income being £1,500 a year. I do not know whether the right hon. Gentleman would wish to answer me at once.


It will be more convenient to answer these questions together.


I put the case of a man deriving an income of £1,500 a year from his estate, which he does not farm, but which he manages himself; that is his business; is that income earned or unearned? There must be an answer. Of course, our attitude towards the right hon. Gentleman's proposals must depend very much on his answer. I put two cases. I say the person having a life interest in certain property bringing in a certain sum ought to be treated in the same category as the person who is earning the same sum by his own exertions, because the income in each case is dependent on the life of the possessor and cannot be bequeathed by him to someone else. Then I take the case of a man who owns land, manages his own estate, and derives an income of £1,500 a year, [...] will say a sum under £2,000 a year. Why not put him beside the man who is making a similar sum by devoting his time to a manufacturing business? I should like to know whether the right hon. Gentleman draws any distinction between them, or whether he is prepared, as I think he should be prepared, to treat both on exactly the same footing. No doubt he is considering these matters, and there are other cases about which we shall have to ask him and which he himself will have to consider. I come to the last of the right hon. Gentleman's proposals, the increase of the Death Duties. I do not at all meet him in an attitude of hostility in regard to increased graduation on great fortunes that we see falling in from time to time. I do not wholly agree with him as to all the effects prophesied or which followed from Sir William Harcourt's reform. I think he is mistaken. I think it has tended to remove a certain amount of capital out of this country, it has tended to shut up a certain number of big houses, at any rate temporarily, with the result of very considerable hardship primarily on their possessors, besides distress and disturbance of the whole country-side. I ask the right hon. Gentleman to consider, when he is still further graduating these Death Duties, whether he cannot make some distinction between the taxation of capital which is readily available and capital which is not readily available for its purposes. Nobody can contend that the owners of great estates with their capital invested in the land are in the same position as those who have their money invested in securities or business. Their obligations are much heavier, and the difficulty of realising any portion of their capital is much greater. I have often felt that Sir William Harcourt, when he introduced the death duties, might with very little sacrifice of revenue have alleviated the cases of great hardship which arose under them if he had been willing to do so; and I now ask the right hon. Gentleman whether he can do something to relieve the worst cases of hardship under the present duties, which may be cases of even greater hardship under his new duties. I ask him to consider whether he cannot do this without sacrificing any substantial portion of the revenue he hopes to obtain. I said at the commencement of my remarks that I did not intend to go fully into the matters raised by the Chancellor of the Exchequer today. A statement of the character and scope of that of the right hon. Gentleman demands much further consideration than can be given to it by the speaker who follows him immediately in debate and the Opposition will have other opportunities of pressing their views upon him, of examining his reforms, and eliciting information as to the changes he has proposed. For the present I know how limited are the resources with which the right hon. Gentleman is able to deal, how little scope be has, bound as he is, quite, unnecessarily, by the declarations of the Party opposite — how little scope he has for enlarging his revenue, and how utterly insufficient is our present basis of taxation to provide the means required for the reforms which we all desired to see undertaken. Even when the right hon. Gentleman is prepared still further to increase the taxation on great fortunes and to increase direct taxation, it is obvious how utterly inadequate our present resources are to meet the needs of the State.


said there was at any rate no difference of opinion upon either side of the House amongst business men as to the manner in which the Chancellor of the Exchequer had dealt with the Sinking Fund and the reduction of the National Debt. Every hon. Member would realise that the late war put the National Debt into a very unfortunate, in fact a calamitous, position, and raised it by £150,000,000. The Sinking Fund was, of course, suspended during the war, but it had now been put upon its full working basis, and by that process the National Debt would be automatically reduced. They were all therefore very grateful to the Chancellor of the Exchequer for restoring the Sinking Fund to a strong position and for carrying to it a further sum of a million and a half sterling from the estimated surplus for the coming year. This year, when the temptation to devote such a surplus to other and more fascinating objects must have been very great, the Chancellor of the Exchequer had sturdily turned his eyes away from such temptation and had added the money to the Sinking Fund. He noticed that there was one exception to the general prosperity, and that was the market for stock and securities. They had only to look round the whole purview of the stock markets to see the enormous shrinkage that had taken place. There had been a shrinkage of at least 25 per cent in the great stocks of the country. Consols in 1899, before the war in South Africa broke out, stood at 106, and now they stood at 86. The blue rib and of railway investment stock, the London and North Western Railway 4 par cent. preference stock, stood at 140 before the war and now they stood at 115. There were many reasons for this fall. Why had Consols suffered this great drop? Partly owing to the late Lord Goschen's conversion scheme, which lowered the interest from 3 per cent. to 2¾ per cent. and later to 2¾ per cent. At the time Lord Goschen's schema was regarded as a great financial achievement, but the present position of Consols showed that it had been very disastrous from the paint of view of the interests of the country. It was quite true that the national Exchequer saved ¼per cent to begin with and was now saving ½ per cent., but it was possible to purchase that kind of economy too dearly. By reducing what was described by Lord Beaconsfield as "the sweet simplicity of the 3 per cents." to 2¾ and 2½ per cent. they had shaken out the small investors who were the backbone of Consols and I who in the past had been relied upon in times of financial stress. The little: men had gone, and who had taken their place? Largely the banks of the country and the Government itself. It was true that those now sitting in Opposition ware responsible for the war, and they were quite willing to bear that responsibility. There was another contributing cause to the fall in all first-class stocks, and that was the immense increase which had taken place in municipal expenditure, which now stood at more than half the amount of the National Debt. Why should they be surprised if Consols and other great preference stocks and securities dropped when they continued to water down the whole of the stocks and securities of the country in this way? Then again there had been an immense fall in the value of mining shares in South Africa. Everybody who knew anything about the question of South African mines knew that the shares were held in small lots all over the world, often by people of little means, although no doubt the mines were initiated by capitalists. In the winter of 1904 the stocks of thirty-six of the chief companies stood at £156,000,000 while to-day they were valued at about one-half.

MR. MARKHAM (Nottinghamshire, Mansfield)

said that half of the companies had watered capital.


said that he knew the hon. Member's views on that topic. They were diametrically opposed to his own. He was pointing out that owing to the agitation against the mines, which had been most ill-advised from the point of view of finance, the value of the shares had fallen. The stocks of railway companies in this country had been immensely depreciated by threats made against them, and legislation apprehended in regard to licensed property had led to an enormous depreciation in the value of such property. He wished to say a few words in regard to a matter which the Chancellor of the Exchequer had not touched upon, namely, the gold supply. There had been a great deal of recent discussion about the scarcity of gold and about the gold reserve. Gold was only a commodity just like corn or meat or other marketable articles. The reason why there had been a great scarcity of gold was that during the past year business had been active all over the world with the result that there had been an exceptional demand for gold, and there had not been enough gold to go round. [Cheers.] He was not surprised to hear the cheers of hon. Members below the gangway. He was afraid that the Budget would not make gold circulate any more freely in the direction hon. Members desired. On account of the activity of trade the supply of gold had not been sufficient. The view he had always taken was that this country being still a creditor country only really required gold as a medium of internal exchange, and owing to her cheque system did not require the amount of gold for the transaction of business that some countries required. There had been a cry in many quarters about increasing the gold reserve, but he ventured to think that no such expedient was required.


I really do not see the relevancy of these remarks even on a subject so wide as that now before the House.


thought that, money being the basis of the Budget, he would not be altogether out of order in making some general remarks on that subject. He had the honour of being a member of the Committee which inquired into the question of the income-tax. They all learned a great deal from the inquiries of the Committee, and he did not think that the Chancellor of the Exchequer's proposal of differentiation would be disagreeable to any Member who sat on the Committee. But he ventured to think that it would not be found anything like so easy as was imagined to work out the scheme of differentiation which the Chancellor of the Exchequer had stated to the House. The right hon. Gentleman had quoted the late Mr. Gladstone's objection to differentiation, but that objection applied with equal force now. The right hon. Gentleman did not meet the case at all. The widow's grievance referred to by Mr. Glads one remained. He instanced the case of a widow with an unearned income of £300 a year, and the case of a grocer with an earned income of the same amount. The widow under the present system of abatements got the benefit of an abatement, but she would not get any differentiation under the new scheme, whereas the grocer got both the abatement and the differentiation. The right hon. Gentleman had not at all got over Mr. Gladstone's objection. Let them look at the matter from another point of view. In the case of a mixed income—partly earned on capital and partly by personal effort—how were they going to differentiate? Cases of that kind could be multiplied, but he would take the case of a doctor who earned £1,000 a year. The doctor had bought the business, and in respect of the capital which he had paid his income would be unearned, while in respect of the personal effort he put into the business his income would be earned. Who was going to differentiate between the two? In the case of any trader who had bought a business with his capital, who was to decide how much of the income was earned and how much was unearned? Was the collector to decide how much of an income was unearned and how much came from personal endeavour? It would give rise to an infinite number of appeals. He was rather sorry to hear the right hon. Gentleman almost laugh at the hardships caused by the higher scale of Death Duties introduced by the late Sir William Harcourt. But apart altogether from millionaires, they all knew that there was a great intermediate class that had been most grievously burdened by those Duties. Let them take the case of a landed estate worth £150,000 on which the Chancellor of the Exchequer proposed to increase the Death Duties. It should be remembered that there might be large charges on that estate for the widow and the younger children and very little ready money with which to pay the Duties, thus necessitating a heavy burden of mortgage upon the estate. He did not think any increase on that class of estate was just. The millionaire was supposed to be fair game. That was true from one point of view; but it must not be forgotten that the millionaire was quite as necessary for the financial stability of this country as any other class. Some millionaires might have made their money by their own exertions. There were more who were made, perhaps, than born. The Chancellor of the Exchequer laughed at the idea that the Death Duties drove capital out of the country; but he maintained that that charge was true. Hitherto capital had found comparative security in this country. Capital was a shy bird, a cosmopolitan bird, having no country, but building its nest where it could best find security. If that security was destroyed, capital would go. He doubted whether it was good policy from the individual or the national point of view to increase the Death Duties. It was pointed out by Sir Henry Primrose in his evidence before the Select Committee that the Death Duties worked out on an average at an equivalent to an extra 1s. in the pound income-tax and on millionaire estates to an extra 2s. in the pound.

MR. HART-DAVIES (Hackney, N.)

asked whether the pensions of Civil servants or of naval and military officers would be regarded as deferred pay or accumulated savings? He thought that the duty should have been taken off sugar, and that the Chancellor of the Exchequer was hardly correct in saying that to take off a small sum from that duty would have had no effect on consumption.


said he was open to argument as to whether for the purposes of the income-tax pensions should be treated as deferred pay or accumulated savings. That was one of the questions which was discussed by economists in both aspects. He himself was disposed to regard pensions in the light of accumulated savings. A farmer who earned his income would be entitled to pay income-tax at the rate of 9d. instead of 1s. in the £1 if his income was under £2,000 a year.


asked what about the landlord who acted as his own agent?


said that in the case of a landlord who farmed his own land or acted as his own agent he had to make out his return; and it was for him to show that he was entitled to the low rate because his income was earned.

MR. SAMUEL ROBERTS (Sheffield, Ecclesall)

said he would like to join with the late Chancellor of the Exchequer in offering his congratulations to the right hon. Gentleman on his Budget statement. He believed that a great part of that Budget would be approved of and give satisfaction in the country. The right hon. Gentleman did nothing for indirect taxation. That was good, because last year indirect taxation had been reduced. Something had been taken off the duties on sugar, tea, and corn, but nothing had been taken off the income-tax, although the right hon. Gentleman had associated himself with the opinion of his predecessor that it was impossible to justify or defend an income-tax of 1s. in the pound in a time of peace. However, his first criticism of the proposal of the Chancellor of the Exchequer was that he ought to have made a. general reduction of the income-tax from 1s. in the pound. He was quite sure that the right hon. Gentleman's proposal to reduce the income-tax to 9d. only in certain cases would not have been approved of by Mr. Gladstone, who always regarded that tax as a temporary and not a permanent tax. On one occasion Mr. Gladstone proposed that the income-tax should be imposed for only seven years, and in 1873 that it should be taken off altogether. He contended that the income-tax payers in the country with incomes below £700 had borne more than their fair share of the burden of the war taxation, and at present direct taxation for war expenditure amounted to £15,000,000, and indirect taxation to only £8,000,000. He knew that the right hon. Gentleman said that he would devote the large sum of £1,500,000 to the Sinking Fund, and they were naturally pleased that the Chancellor of the Exchequer should keep that fund up. The right hon. Gentleman seemed to propose to pay off £13,700,000 odd and in addition this £1,500,000 was to be paid into it, so that £15,200,000 was to be devoted to that purpose. He understood however, that this payment of £1,500,000 into the Sinking Fund would not bind the Government to its allocation to the purpose of reduction of Debt next year, the object of the Chancellor of the Exchequer being to form a nucleus of a fund for old-age pensions. He entirely agreed with the basis the right hon. Gentleman had laid down as to this question, viz., that it must be approached step by step, and that they could not at once launch the country into extravagant expenditure. He also agreed that this benefit should be given to persons who were suffering through no fault of their own. It seemed to him that the only safe way to proceed was for the State to contribute a certain amount which should be met by the contribution of a similar sum by the local authorities. On the whole he thought the statement of the Chancellor of the Exchequer was highly satisfactory.

*MR. REES (Montgomery Boroughs)

regretted that the Chancellor of the Exchequer had not taken another penny off the tea duty this year. No article had a greater claim upon a Chancellor of the Exchequer, because it was to a large extent raised by British capital in British possessions, and the use of it also forwarded the cause of temperance, while it was the comfort, little luxury, and indeed necessity of the poor. He hoped that the right hon. Gentleman would consider that, as they had not had the penny remission this year, it was owing to the tea consumers in Great Britain and planters in India and Ceylon, who were our fellow countrymen, to take off 2d. next year. As the right hon. Gentleman had said, the price went up last year, but that was because of the failure of the crops and the depletion of the stores of retailers in anticipation of the Budget. The price of the cheaper teas ran up, he believed, to as much as 3d. a pound more. Another reason for the increase was the active enterprise of those engaged in the tea industry in India, who had endeavoured to develop the German and Russian markets. He himself had taken part in that movement though he had not a penny piece invested in tea. There were other parts of the world, like Finland, where at present coffee was mainly used, but in which tea had only to be introduced to create a trade. If this additional 1d. had been taken off it would have led to a great development of the industry, and have employed more British capital and labour. Another fact was that owing to the large tax which had prevailed in the last few years planters had been discouraged from extending cultivation, and this coupled with the expansion of the market had led to the high price of tea, to the great disadvantage of the poor people of this country. He had hoped that the Chancellor would have taken these matters into account, because if the penny was of no value to the consumer, and did not reach him, as was argued, and the been which he gave last year was on that account wasted, there was the more reason for a decrease, and what was wanted now was the extra penny to make the been efficacious. He would not go at greater length into the question of tea, because a memorial had been circulated among Members for which he was in part responsible. He wished however to call attention to the pensions of British officers and civil servants, and would strongly urge that they should be regarded as earned income and deferred pay, and not as accumulated savings handed over by the employers on retirement, and thus come under the lower rate as to income-tax. These people had often had very little pay and were often hard put to it to maintain themselves and their wives and to educate their children. They had been accustomed to some comfort and to a certain position, and he put it strongly that their pensions should come under the most favourable rate. As to the man with an income of £2,000 a year, would he enjoy the more favourable rate in respect of any portion of it which he earned?


If his income exceeds £2,000 a year he will not enjoy anything.


said he understood that as to the £1,500,000 which was to be placed in the Sinking Fund and was to be the nucleus of a fund for old-age pensions the Chancellor of the Exchequer intended to take it out next year or to ear-mark it for this specific purpose.


I have no power to take it out. I only propose to devote it to that purpose if the House agrees. If they do it will be for Parliament to take it out.


Yes; but Parliament had power with the Exchequer and the Chancellor had Power with Parliament, and he did not altogether understand how this sum was secured for this purpose. When his hon. friend opposite was speaking he made some remarks which met with considerable disapproval on the Ministerial side. The hon. Gentleman pointed out that the capital of the gold mines in South Africa was was now distributed among a great many small investors of this country and was not the property of capitalists in South Africa. That was true, and he desired to take that opportunity of expressing his concurrence with a statement which any one who would take the trouble to go to the city might verify for himself. There could be no doubt, moreover, that the competition between the Government and the municipalities on the one hand and private traders on the other must lead to dislocation and difficulty in regard to labour and industry in this country. For instance, if it was right for the Government to give employment as a matter of relief rather than as a matter of business in a particular constituency, such as Woolwich, then it was right and proper to give such employment in other constituencies where there were no Royal Arsenals, one of which was the Montgomery district. There was no justice in giving to one constituency what was not given to another, and the public purse was the property of all constituents.

SIR F. BANBURY (City of London)

said he wished first to congratulate the right hon. Gentleman in being able to devote £1,500,000 to the sinking fund, because when the country was in funds as it was at present was the time to do so; it could not be done when we had no money. The right hon. Gentleman had given some reasons for the deplorable state of affairs which he said existed in the stock markets, but there were other reasons which the right hon. Gentleman did not recognise, or at all events did not put before the House. The right hon. Gentleman said the Radicals were pledged to restore the national credit, and referred to wild talk in the newspapers on the price of Consols, and then said that 2½ per cent. stock at 82 was equal to 3 per cent. stock at 100. He quite agreed that there had been about the national credit a lot of wild talk which was not justified, but that was not the argument used by the right hon. Gentleman a year ago. When that argument was used by the Unionist Party the price of Consols was 85, and it was only after the advent of the right hon. Gentleman as Chancellor of the Exchequer that they touched a lower point than they ever touched when the Unionists were in power. Although there was a good deal of point in the contention that the credit of the country had not materially suffered, he did not think the Party of the right hon. Gentleman had redeemed their pledge to restore the national credit. The right hon. Gentleman said that fresh issues had a great deal to do with it; that the trust list had been extended and Colonial securities had been admitted, and that excessive borrowing of municipalities had a great deal to do with it. All that was true, because as they returned a higher interest than Consols, the tendency was to sell Consols and put the money into municipal and Colonial stocks. He did not quite see how the right hon. Gentleman brought in the catastrophe in America, because although it was suggested that a number of stocks were going to be sold by the insurance companies he did not think that ever occurred. The fall in Consols had been going on for some years. The right hon. Gentleman had also alluded to Irish land stock, which certainly affected the price of Consols. And it should not be forgotten that while the right hon. Gentleman had reduced the National Debt by £13,000,000 he had issued large amounts of Irish land stock which was just as much a part of the National Debt as Consols. He admitted that the right hon. Gentleman was not really responsible for the issue of Irish land stock. He himself voted against the issue of stock for the purchase of Irish land, and he believed that if the thing had been done properly no special stock would have been issued but Consols. What was the use of buying up Consols which paid £2 16s. per cent. and issuing Irish land stock at £3 5s. per cent. That represented a loss of 9s. to the taxpayer, and such a proceeding could not be justified by any principle of sound finance. Another reason for the drop in Consols and other securities generally was that at one time people were content to invest in English securities because they thought that though the interest was low the security was undeniable, and they would not invest in foreign securities because they thought the security was not so good. He was sorry to say that owing to the action of the Party opposite there was a strong impression in the minds of people who had money that it was better to invest it out of England. That was another reason for the fall in Consols, as he was able to prove. It was a fact well known to every stockbroker in the City of London. He asked the right hon. Gentleman in all seriousness to investigate that statement, and, if he found it was true, to do something to strengthen stocks in the stock market and do away with that want of confidence which prevailed in the case of English stocks. He regretted that the right hon. Gentleman was going to put employers to the trouble of stating the wages paid to all their employees, because it would put a very great tax upon them, especially on such companies as railway companies, who employed sometimes as many as 20,000 men. It would entail very great labour.


said the idea was not his. he had taken it from Lord Ritchie.


said that everybody was liable to make mistakes, and Lord Ritchie was as liable as anyone else. As this was not the idea of the right hon. Gentleman he hoped he would not persist in it. They must not forget also that the income-tax was instituted as a war tax, and that it was desirable from the Government's point of view to keep it as low as possible in order that they might have a little in reserve for times of emergency. He hoped the right hon. Gentleman would consider the points that had been put to him.


said he wished to draw attention to the statement of the Chancellor of the Excheqer that the decline in the consumption of alcoholic liquors, of which he told them last year, had now suffered a check, and that there had been a slight but distinct set back. The drink Bill had gone up some £2,000,000 in the last year. The effect of his statement last year in which he traced the decline of the drink Bill from the year 1899 onward was to produce in the minds of many Members and of the country as a whole the sense that everything was going on all right, that all was for the best in the best of all possible licensing worlds, and that this very difficult problem might be left to settle itself. However, if they took a retrospect of ten years, this diminution practically disappeared, and if they went back further, it would be found that they were drinking more to-day than they did, say forty years ago. It was impossible to leave this question on one side, and he felt convinced that the Government did not mean to leave it undealt with. Now, some of them had been looking to the Budget statement with eyes of hope, and they were glad that there was going to be the alteration in the licence duties under which they would be recovered for the National Exchequer, and no longer go for the relief of local rates. That was, administratively, a great improvement, and they were glad that the step was going to be taken. At the present time, in some cases, local authorities could get £5,000 or £7,000 on the grant of new licences, in relief of rates, and it was very desirable indeed that that temptation should be taken away from the local authorities, and that these sums, which really were not due so much to local action as to the general policy of the State, should be recovered for the Exchequer. But they could not help wishing that the Chancellor of the Exchequer had seen his way to go further in the matter. The case was overwhelming for a revision of the licence duties. When Mr. Gladstone introduced the revision of the licence duties in 1880, he based it on the principle that Parliament had been engaged for years past in bolstering up monopolies and in adding to the artificial value which attached to public-house property, and which in his opinion were the most deadly and inveterate enemies with which temperance reformers had to deal. The principle referred to by Mr. Gladstone in 1880, after the act of 1904 which for the first time recognised a continuing interest in the licence, would in itself have justified a further revision, and a much more severe graduation of the licence duties. Many temperance reformers had altered their view in reference to that matter. In the past they were suspicious of raising more revenues from this trade; but now that the State, by the Act of 1904, recognised a continuing interest in the licence, it was borne in upon the minds of temperance reformers that the charging of a real licence duty and not the sort of peppercorn rent charged at the present time, would have a substantial effect in reducing the excessive number of licences, and especially that undesirable class of licences, which were merely on the margin of subsistence, and might very properly be put an end to. That was the reason why some of them were anxious for this revision of the duties. But under this Budget, at all events, they could not get the Reforms which might have come out of the revision of the duties. The Chancellor of the Exchequer held out hopes that it might come next year. "Man never is but always to be blessed." Some of them were tired of endless postponement, and he would like to convey to the mind of the Government that there was a growing feeling of impatience and anxiety at the delay in dealing with the question of temperance reform. If nothing could be done in the Budget there was increased urgency for dealing with the question by other means, and he hoped that the Government would, in framing their plans for the coming session, bear in mind that so far nothing had been done to redeem the strong assurance given by the Prime Minister last year that he would grapple with the problem of licensing reform. One further reflection occurred to him. If the duties were not revised this year, they retained at least in their hands a weapon over which the House of Commons had complete control. Licensing reforms were usually bitterly attacked, and, so far as legislation was concerned, they knew that the House of Commons had not complete control as it had over matters of taxation; he did not, however, think that the licensing reforms of the Government, when they were finally proposed, would suffer shipwreck in another place, but if that did happen, he hoped that the Government would not scruple when the time came to use their power over taxation, by which, at all events, they could accomplish some small instalments of temperance reform which had been so long delayed.

*MR. VICTOR CAVENDISH (Derbyshire, W.)

said that though they had heard a clear statement from the right hon. Gentleman, yet he must confess that it was not satisfying, and it left a great deal over to another occasion. So far as he was able to judge, after listening to the statement, they were already confronted with an expenditure of £119,000,000, and there seemed no prospect in the near future of any reduction of that expenditure. On the contrary, the right hon. Gentleman was unable to give them any hope of a reduction of taxation; he had to keep all he had got, and probably there might be further inroads on the taxpayers in future. A considerable amount of legislation had been promised, and only a very small proportion of it had yet been placed before the House. The general experience now was that legislation usually meant money. None but Members of the Government knew anything about the proposed legislation. Two important Bills for Ireland were named in the King's Speech, and they did not know whether they would involve any charge upon the taxpayers or simply mean are allocation of sums already voted. Then there was the proposal of the Secretary for War, whose scheme for a Territorial Army must prove very costly, and he would like to know what provision had been made with regard to that. With reference to the principal point of the Budget, he thought the right hon. Gentleman was to be congratulated on the intention to recover the licences into his own hands. With regard to the new proposals which the right hon. Gentleman had laid before the House making a differentiation in the death duties, he would like him to consider seriously whether something could not be done to give a further reduction in the case of estates, where the greater part of the owner's income might be derived from land. He thought the Chancellor of the Exchequer was a little too sanguine when he ridiculed some of those prophecies which were put forward when Sir William Harcourt introduced his great reform. He believed that the death duties had caused the withdrawal of a certain amount of capital, and undoubtedly there had been a tendency in many places, if not to close estates, to spend less money upon their development than would have been the case but for the heavy burdens which had been placed upon them. He hoped the right hon. Gentleman would consider the various classes of property which had to boar these heavy burdens, and that he would be able to make a differentiation in favour of landed estates. He congratulated the right hon. Gentleman on what he had done with regard to the income-tax, and still more on what he had not done. The Chancellor of the Exchequer, he hoped, would not depart from the lines which he had laid down. With regard to the super-tax he was pleased that the right hon. Gentleman had not finally made up his mind, and that he had left the principle of the graduation of the income-tax to be dealt with upon some other occasion. He hoped that during the interval any consideration he might give to these questions would not induce him to make any departure from the lines he had laid down. The imposition of a super-tax must entail a full declaration in regard to all incomes from whatever source, and that course would not only be resented, but it might prove extremely disastrous to the tax as a whole. He would advise those hon. Members who expected to see a large amount of revenue raised through a graduation of the income-tax to read the admirable memorandum presented to the Committee by the Chairman of the Board of Inland Revenue. The idea of graduation had a certain amount of attraction about it, but when it was examined in detail and thoroughly threshed out it would be found not only that it would prove very irksome to the country, but that it would have a most disastrous effect upon the revenue. To draw distinctions between the various classes of income-tax payers was open to considerable objection. He did not know any distinction which would not be open to some objection, but from the experience which he gathered on that Committee and from the evidence which they heard he thought the line the Chancellor of the Exchequor had taken was the one least open to objection. On the whole it was the fairest, and although there must and would be innumerable hard cases, still he was of opinion that if the House of Commons was determined to adopt any distinctions of that character that which the Chancellor of the Exchequer had drawn was perhaps the best. They would, of course, wait to see his definition clause before offering further criticism, and they would have to discuss further the Budget as a whole. In conclusion he wished to congratulate the right hon. Gentleman upon not having allowed himself in dealing with the income-tax to be led away from really sound principles of finance by any plans however attractive they might seem.


suggested that the Committee should pass the non-conten- tious Resolutions, and that the general, discussion should be taken on Monday, when the Resolutions relating to income-tax, death duties, or local taxation were brought up.


thought that was a fair offer, and he had no objection to that course being taken.

*MR. C. E. PRICE (Edinburgh Central)

asked whether the Chancellor of the Exchequer intended that the notices issued for the collection of the income-tax should be issued in September in Scotland. He thought that course would cause a great deal of difficulty, and if there could be some intimation that the notices would not be issued until after the payment of the November term rent it would prevent a great deal of trouble. These notices in Scotland were different from those issued in England, and, if without giving the exact words, the right hon. Gentleman would assure them that those notices would be issued in precisely the same form in England as in Scotland, they would feel no injustice. With regard to the tea duty, he was glad that there had not been a reduction of one penny per pound, because he thought it was a mistake last year to take off a penny. When the tea duty was reduced only by a penny the consumers did not receive any benefit at all. The primary object of the House of Commons in dealing with such questions ought to be to see that whenever a reduction was made it was done in such a way as to ensure that it did benefit those who were intended to be benefited. With regard to taxes on food, he did not gather that even next year the Chancellor of the Exchequer held out no hope that any changes would be made. He thought the right hon. Gentleman had laid the foundation for a complete alteration in the finances of the country, and he congratulated him upon his proposals. He approved of the alteration suggested in the system of local taxation, but he was not in favour of giving grants in aid.

*COLONEL R. WILLIAMS (Dorsetshire, W.)

said the right hon. Gentleman had spoken a good deal about the solid and growing prosperity of the country. He wished he could feel as optimistic as the right hon. Gentleman. did as to the probability of that prosperity lasting. He thought there was a great deal which was not so solid in our trade as could be wished, and a good many of the symptoms in the country did not portend the continued prosperity for which they all hoped. When talking of his scheme of social reform, the right hon. Gentleman, he was glad to hear, paid due regard to the importance of character as a basis of the prosperity of the country. He welcomed those words as representing the considered opinions of His Majesty's Government, because they would tend to allay a good deal of alarm as to what might be called social reforms, which might possibly alter some of our social conditions, and certainly not improve the prospects of the country, by loading rather to dependence on Government than on one's own force and strength of character. He hoped the right hon. Gentleman would carry out his scheme of old-age pensions. He himself had always been an advocate of old-age pensions. He had watched the driving power in favour of old-age pensions gradually growing, and he was glad to think that it was coming near the time when they would lie able to accomplish something, though he hoped it would not be all that was expected in some quarters. The great difficulty to his mind in regard to old-age pensions was the fear of sapping self-reliance and lessoning the inducement to lay by in younger years. He therefore specially welcomed what the Chancellor of the Exchequer had said about self-reliance in all schemes of social reform. He hoped the right hon. Gentleman would carry out the principle of self-reliance in another matter which he mentioned. He congratulated him on having the boldness to deal with the local taxation account. While that account was well conceived in intention, its use had been so altered that it had been nothing but an incubus to our national finance. He hoped the right hon. Gentleman in granting subventions to local authorities would lay down that the grants would depend on whether it appeared from their management of their affairs that the local authorities deserved them. One of the great merits of the scheme propounded by the Committee on the Reform of Local Taxation, presided over by Lord Balfour of Burleigh, was that the amount of the subventions from the Consolidated Fund to local authorities would be regulated by their deserving them, the subventions being larger with the poverty of a district us proved by the smallness of the amount produced by a penny rate, and with the economy with which the local affairs were administered, as proved by the lowness of the poor rate. The Chancellor of the Exchequer had stated in the course of his speech that war taxes ought to be applied to the paying off of war debt. He was sure all Members of the House agreed in that. The right hon. Gentleman had further stated that the war taxes produced at present about £20,000,000. If that was so, the right hon. Gent Ionian had fallen away from his own dictum, for in this year he had been paying off only £15,000,000. Like the right hon. Gentleman, he was very much in favour of the reduction of Debt, but he was not sure that he agreed with what was proposed to be done this year. One plan which the right hon. Gentleman had proposed for the alteration of the incidence of the income-tax, removed the burden from only a small portion of the number of the taxpayers. It would relieve part of the burden from about 210,000 payers of the tax out of about 850,000, or not quite a quarter. It had been stated that this would absorb some,£600,000; in addition to which £1,500,000 were paid off the Debt. But these two sums together amounted to £2,100,000, or nearly 1d. on the income-tax, and if the Chancellor of the Exchequer had remitted the 1d. from the whole of the payers of the tax, he would have provided a larger reserve in case of need in the ability to reimpose the penny. He would not go into all the difficulties in regard to the Chancellor of the Exchequer's scheme of differentiation. He thought the principle of making a differentiation between earned and unearned income was as sound as any differentiation could be—probably more sound and defensible than most, if not all, the others. Of course it would lead to a great many difficulties. He imagined that the greatest difficulty would be in the framing of the definition clause in the Budget Bill dealing with this question. He thanked the Chancellor of the Exchequer for the tardy act of justice he had done to a long-suffering class, namely, the beneficed clergy, whose incomes were to be included in the category of earned incomes. There was no doubt that they were freeholders; they were so in right of service, and the amount of their freehold was therefore reaily earned income. The freeholds were granted in very many cases to the parishes to provide for their spiritual needs. As to the taking of 3d., in the pound off incomes which were earned, he wanted to know whether that was to be a fixed sum. If the income-tax was reduced to 10d. would the earned incomes be taxed at 7½d.? In other words, was the tax on earned incomes always to be 25 per cent. less than that on unearned incomes? If that was so, there was another difficulty which would have to be met. They never dealt with halfpennies in connection with the income-tax, and if the Chancellor of the Exchequer wanted to increase the tax it would have to be by 4d. at a time. He did not quite know why the differentiation should be 3d., but if that was to be a fixed sum those who were entitled to it would bear a larger proportion of the burden than those who were not entitled to it in the event of the tax being increased to (say) 1s. 3d. in the pound, and a smaller proportion than their share if it was reduced below 1s.

*MR. SCOTT (Ashton-under Lyne)

said he regretted very much that no relief had been given in respect of sugar. In addresses up and down the country, and in answer to deputations, the Chancellor of the Exchequer had expressed himself as freely as any-Member of the House on the iniquity of the sugar tax. In a speech delivered to a deputation the right hon. Gentleman said it could only be a temporary tax, and that it would not be made a permanent impost. In the speech delivered to-day the right hon. Gentleman had outlined a scheme of old-age pensions which would come on twelve months hence. He could only conceive of that, and other beneficial measures, being carried out by making the tax on sugar permanent. If that was so, it meant the breaking of pledges which had been made right and left in the country. The sugar tax was put on as a war tax. He agreed with the Chancellor of the Exchequer that after a war they could not pay off the debt all at once. He contended, however, that sugar was just as deserving of relief as tea. [An HON. MEMBER: More.] He entirely differed from the observations of the Chancellor of the Exchequer in regard to the sugar duty and its reduction. There would not be the slightest difficulty in either the wholesale, retail, or manufacturing trade. Every grocer and storekeeper regulated the quality and price of his sugar to a farthing in the 1b., and if the sugar duty were reduced one half, the price would be reduced in every shop in the country by a farthing in the 1b. Again, the tax on sugar was out of all proportion to its value, amounting to from 35 to 40 per cent., which was a tremendous tax on food and on the raw material of many industries. So much had the tax on sugar been felt that prosperous industrial concerns depending very largely on sugar as the raw material of their manufactures had ceased to pay dividends; and labour employed in these industries, some of them of great magnitude, had suffered very materially. The tax affected not only sugar itself, but a thousand and one articles which were brought to this country. For instance, there was a tax on tins of fruit according to the sugar in them. Then there was the Custom House inspection, which disorganised business. He had seen a gentleman in the lobby that day who told him that the sugar tax put him to an expense of £6,000 a year in a department dealing with the Customs, an expense which he could not possibly get out of his customers. He hoped when the Chancellor of the Exchequer came to reply he would give them to understand that he was not going to look forward to this tax being made permanent. He knew that the directors of great industries in which many millions were locked up, and which were not paying one per cent. on the capital invested, would look at this Budget with great disappointment.

*MR. BRIDGEMAN (Shropshire, Oswestry)

said that he could not recall a previous occasion on which the Chancellor of the Exchequer had asked the House to agree to his Budget Resolutions after only two hours debate. He did not think the right hon. Gentleman was quite fair to the members of the Select Committee on Income-Tax when he said they had practically agreed that it was desirable that they should differentiate the income-tax. He could not think that, because that was not within the terms of their reference which directed them to consider the practicability, not the desirability of it. He would have preferred that the Chancellor of the Exchequer had not gone into the scheme of graduation which he had submitted, not because he objected to graduation, but because the scheme would create a large amount of work for the officials without any certainty of that work's being productive. He would have preferred if the right hon. Gentleman had confined graduation and differentiation to the death duties, especially on large estates. There were one or two regrettable omissions from the Budget speech to which he wished to call attention. Last year the Government were prepared to spend a million on what they described as education, although that million would have been devoted entirely to destroying denominational education in voluntary schools. If the Government were as interested in education as they professed to be, he would have looked to their forwarding the interests of education in the country apart from denominational teaching. He maintained that education required further assistance from the Treasury. He had always held that the Bill of 1902 formed an educational ladder by which the children of the poor could climb from elementary to higher education; and to some extent it had fulfilled that idea. But the reason why it had not been more successful was that the duty of providing scholarships was left far too much to local enterprise rather than to contributions from the Imperial Exchequer. The burden consequently fell more heavily on the poorer counties. To his mind it was a mistake in principle that that ladder should be dependent on the local rates rather than on grants from Parliament, and he would have been very glad if the Chancellor of the Exchequer had given this year £500,000 to found scholarships in the poorer counties for poor children so as to make the Act of 1902 more effective. There was an entire omission from the speech of the Chancellor of the Exchequer of any reference to the important agricultural industry. A year ago, there was a very line sentence in the King's Speech, setting out that His Majesty's Government were considering proposals for attracting people to the land, and retaining them upon it. Those proposals did not amount to very much, and this year it was only in the last item but one in the Kings Speech that reference was made to a small measure for an alteration of the law affecting small holdings. Looking to the fact that it was almost universally admitted that agriculture bore a higher amount of taxation than any other industry, it could not be expected that people would be attracted to the land, until the land received some relief from taxation. They could not be content with vague proposals. There was no proposal to relieve local taxation further than it had been relieved, and there was no proposal to give any money towards the increase of small holdings. There was another question in connection with the land which the Chancellor of the Exchequer had left out of account, and that was the position of the owners of agricultural land with regard to their assessment for the purposes of income-tax. They had for many years suffered from very great injustice in that respect. For some reason or other the Party opposite never felt themselves in a position to see justice done to anyone who called himself a landlord, and it did not appear likely this year at any rate from what they had heard, unless there had been an omission from the Chancellor of the Exchequer's speech, that justice was going to be done. The rural landlord, the man who possessed, say, nothing whatever except agricultural land, and that perhaps of no great value in the way of letting, was paying far more in income-tax than any other kind of income-tax payer in proportion to what he had received. There was an arbitrary deduction from his assessment of one-eighth in respect of agricultural land, and the deduction was one-sixth in regard to houses. The latter for a landlord in a town might be a reasonable deduction, but for a landlord in a country district it was absolutely unreasonable and unfair. He did not believe that they could find one landlord in ten in country districts who did not spend more than one-eighth of his gross income upon his property, and he netted nothing like seven-eighths of his total income. Not one of these country landlords had a desire to escape from paying his fair share of the taxation of the country and paying the same share as other people paid. He did not think that anyone could say that the country squire was less patriotic than any other class in the country. He was ready to to pay his fair share, but because he was willing to do so was no reason why justice should not be done to him in this case. It could be done in this way if the Chancellor of the Exchequer would agree to it. The Chancellor of the Exchequer said he thought it would be an admirable thing if everybody made a declaration of his total income from all sources, and he expressed his keen desire that it should be done by them all, although he said he did not think that it was likely that everybody would do it. At any rate, the owners of agricultural land would have no objection whatever to make that declaration, and he thought it would be only fair to allow them the opportunity of being assessed on the net income which they got out of the land. The best landlords spent most in keeping their property in good order and in doing what they could to help their tenants; and if their property contained a number of small holdings they had to pay more out of their income than other landlords. If the Government were going to say that the man who did most for his land and most for his tenants was to pay more income-tax than anyone else, they would be endorsing a principle which was unjust, and was; becoming more unjust every day. If one-eighth was a fair proportion the Government would got a statement to that effect from those who made a declaration of their income, but a vast proportion of the rural landlords spent a great deal more than that, something more like one-half, not in improving their property, but simply in preventing its deterioration. These people ought to be assessed on the money which they pocketed just as much as other people, and justice which had been too long delayed ought to be done to them in the Budget which had been brought in that day. If the Chancellor of the Exchequer would consider these points he would have his support to his Budget, which in many ways he admired very much, but he thought the right hon. Gentleman had a great opportunity at a time like the present and in a Budget which had received support from all quarters of the House, of redressing these absolutely incontestable grievances which would no doubt have been removed but for the idea that no Liberal Government could do anything in the way of justice for anyone who called himself a landlord.

*MR. MADDISON (Burnley)

said it was necessary to find a justification for a Budget which did nothing to repeal indirect taxation, especially in the case of sugar, which wan both a food and a raw material. The tax on sugar operated in an injurious way in both directions, and he confessed he waited for the declaration of the Chancellor of the Exchequer on that point with considerable interest. He had not, however, the slightest difficulty in finding a justification for the Budget, in spite of the non-remission of any indirect taxation, because the Chancellor of the Exchequer had made it perfectly plain that he was not bringing forward a showy Budget, the chief claim of which would be for the moment to be called popular, but that he was attempting to reorganise our national finance on a sound basis. For many years he had taken a good deal of interest in the promotion of old age pensions on the lines suggested by Mr. Charles Booth, and it was because he was a convinced opponent of State socialism that he had always felt that there was a real case for dealing with the aged poor who, through various causes, found themselves—not by any means all of them helpless, but in such a condition that public money might well be devoted to succouring them in the twilight of their lives. There was a good deal of vague talk indulged in by all classes, including the working classes, who got hold of huge figures and said that with all this wealth surely the Government could bring forward at once an old-age pension scheme. He knew it would be said that the rich had been looked after and the poor had been neglected. Although he had never handled large sums of money, he was sufficiently acquainted with these things to know that national finance had a direct bearing upon the trade of the country, and, after all, the first consideration was to get national finance sound, so that the trade of the country in the operative part of a man's life should also be prosperous. He wished to say he regarded the Budget—much as he would have liked to have seen a remission of the sugar tax or part of it, and much as he would have liked to have seen this year old-age pensions established—as one which would be welcome to the great mass of the people and one which he could support without apology or qualification, because the Chancellor had united two things, namely, sound national finance and social reform. This was the first Budget in which there had ever been a distinct pledge on the part of the Government to introduce during the life of this Parliament and even in the next session, if another House would leave them alone — a measure under which a start would be made with a scheme of old-age pensions. He ventured to say that no reasonable man, and one need not trouble about unreasonable men, could expect more in the second session of a Parliament than that which they had been offered that afternoon. A good many of them felt so strongly about old-age pensions that in order to secure them they would be prepared to assist the Government in resisting every fanciful scheme which might come into hon. Members' heads and which they thought might make the people better. There was no piece of social amelioration which had so solid a backing, not only by the working classes but by tradesmen and others who had realised that there was no more pressing need than old-age pensions, and they would support the Government in pressing forward this scheme. If, however, the Government embarked upon artificial methods of keeping the people unem- ployed in farm colonies which would cost huge sums of money, they would raise a feeling in the country against them, whereas they could carry the opinion of the country with them by putting their finance on sound lines which, while meeting the requirements of the country as a whole, would enable them to carry out great schemes of social reform. He had only one further word to say as one who endorsed the principles — he did not say every word he wrote—of Henry George in respect of land; and it was, that that great uncreated monopoly had never yet yielded to the community what it ought to have done.

*MR. RAWLINSON (Cambridge University)

said he had ventured last year to call attention to the most overtaxed members of the community, namely, professional men such as clergymen, doctors, and lawyers, with, say, an income of only £300 a year and upwards, and he said that these men were bearing an undue proportion of taxation. The Chancellor of the Exchequer had met the claims of those men to a considerable extent, and for that concession he was grateful, because the right hon. Gentleman proposed (rather illogically he thought as to the limit selected) to reduce the income-tax on earned incomes below £2,000 from 1s. to 9d. For that, as he had said, he was grateful, but if it was not ungrateful to look a gift horse in the mouth he might venture to criticise the limitation of the concession; he certainly must say it was not logical, but probably it would be ungracious to make a comment upon that, because those whom he wished to assist did not possess incomes which rose to £2,000 a year. There were two small points which he mentioned last year, referring to people with whom the Chancellor of the Exchequer had not dealt. Assuming that a man was earning from £500 to £700 a year, if he were a bachelor he paid on that sum subject to the deduction allowed in such cases, but a married couple for some extraordinary reason were treated as one person and he thought they ought to be treated as two people. It the wife had £200 a year and the husband £600 a year, making a total of £800, they both ought not to lose the exemption, but such was the case at the present time. The other matter was the case of a man who was trading in the Colonies but living in England. If he traded in South Africa, he had to pay income tax there and also in England, therefore paying it twice. It seemed somewhat hard that those Colonials who lived in the Mother Country and those Englishmen who traded in the Colonies should be penalised in this manner. Passing from these smaller points of criticism, he protested against one important proposal which was a great departure both from the principles of sound finance and from the policy of the right hon. Gentleman's predecessors. He alluded to the suggestion of the Chancellor of the Exchequer to deal with the Is. income-tax as a permanent integral part of national finance and taxation. The right hon. Gentleman had intimated that the income-tax of 1s. on all incomes over £2,000 a year should remain as a permanent tax. That was not only a departure from the policy of his predecessors, but, in his judgment, it was unsound finance. To keep such a tax would be disastrous, as undoubtedly it was a heavy clog on commercial enterprise and business in this country. There were countries which had not got an income-tax, and to have an income-tax at that high rate in this country would undoubtedly act as a clog on our industries and might tempt manufacturers to move their businesses to other countries. Such a policy would, moreover, allow of no elasticity in case of war or other emergency. He would like to know what Mr. Gladstone would have said to a permanent income-tax, because they were all familiar with the remarks he made even on an income-tax at 6d.; but with a permanent income-tax of Is. it was difficult to see where in case of war the reserve of the Chancellor of the Exchequer would be, and where he would get his money from. One other point he wanted to criticise had regard to the capacity of the Chancellor of the Exchequer, and to the stability of his views. The right hon. Gentleman had said to-day that he did not propose a reduction of the tax on tea because he was satisfied that to reduce it by a 1d.a pound would not make any difference to the consumer. He did not propose for the moment to discuss the accuracy or inaccuracy of that view. Last year when the Chancellor of the Exchequer in his. Budget reduced the tea duty by a 1d. he was challenged from both sides of the House on that very point, and on the 29th of May last, sometime after the introduction of the Budget, he made a speech to the effect that he had made most careful inquiries and the net result was diametrically opposed to what he had told them to-day to be his undoubted opinion. The right hon. Gentleman said according to HansardThat the question which he asked his advisers at the Treasury, and which he anxiously considered before making this proposal was whether a reduction of 1d., which was without precedent, would really reach the consumer. No Chancellor of the Exchequer would wish to put money into the pockets of the trade; what he desired was to secure that the benefit of the remission should go to the person by whom the article was consumed. He made inquiries whether or not the effect of the remission of 1d. would reach the consumer, and he was assured by all the information he could gather that in an article like tea, where a duty of 6d. represented something like 100 per cent. on the actual value of the imported raw material, a reduction of 1d., or 15 per cent., where there were no intermediate processes of manipulation, in the course of which the reduction might be either delayed, intercepted, or neutralised, must speedily reach the consumer. What had happened? The hon. Member had quoted from information that had been given to him that the reduction had gone into the pockets of the blenders. He would like to read a few words from The Times Commercial Supplement, which all must agree was a most admirable and very impartial summary of what went on in the commercial world. On 21st May, under the heading of 'Tea,' The Times Commercial Supplement dealt with this matter. Then followed a. quotation of half a column of matter proving that the penny had gone into the pocket of the consumer, which he need not read, and the Chancellor of the Exchequer added— According to this authority, which was not prejudiced in favour of the Government, the effect of the reduction had already been felt and the consumer was receiving it in a reduced price of 2d., or he was paying 10d. now for what lie formerly paid 1s. If last year the 1d. reduction had really saved the consumer 1d., he would like to know from the right hon. Gentleman why this year it should be regarded as axiomatic that the reduction of a further 1d. would not reach the consumer at all. There was one point upon which he wished to give his most unfeigned support to the Chancellor of the Exchequer. He was afraid he was one of those who had taken the view that the national credit had been in jeopardy during the last year not only in consequence of extravagance in the way of money, but also in the way of speech. It was therefore with unfeigned gratification that he recognised that the Chancellor of the Exchequer had set aside a considerable sum for the reduction of the National Debt, and he believed he only expressed the views of most business men when he said that this money so spent would tend to reinstate the financial credit and security of the country, and probably would be repaid in the way of increased investments being made in this country.


said the Labour Party sympathised with the Chancellor of the Exchequer in his attempt to reconstruct the machinery of taxation, and on the whole they welcomed the announcement that he intended to readjust the relations between central and local finance. But the great fault of his speech was the very sparse reference to all practical proposals dealing with social reform. The Labour Party were profoundly disappointed with his attitude to the old-age pension question. They saw no reason why the Chancellor of the Exchequer could not find a sufficient sum of money to start the scheme this year. It was profoundly unsatisfactory that year after year these sympathetic speeches should be made. They were perfectly prepared to admit that the Chancellor of the Echequer had gone further than any other statesman who had spoken on the question, but the gulf still fixed between promise and performance was too large not to be disquieting. They were told the scheme would start next year, but they did not know what the state of the finances would be in a year's time. The Labour Party had no objection to the reduction of the income-tax, but in the minds of some of the Members of that Party it appeared as though the Chancellor of the Exchequer had felt that he could not reduce the income-tax and give old-age pensions at the same time. The right hon. Gentleman did not put it in that way, but some of the Labour Members felt that he had passed through that mental process. There was nobody more sympathetic than he with the oppressed shopkeeper with a small and precarious income, or with the oppressed professional man, whose income, though not exactly small, was precarious and whose cost of living had perforce to be high. But while sympathetic with these people and fully recognising their claims, yet if those claims were to defer an old-age pensions scheme, then they were not in favour of the reduction of income-tax, but they were in favour of old-age pensions. If the Chancellor of the Exchequer had reduced the income-tax because he felt that he could not give them old-age pensions, I then they regretted exceedingly that he had not selected an old-age pension scheme rather than the reduction of the income-tax. Moreover, on the merits of the reduction they were not quite satisfied. They thought £2,000 was far too large a limit, and they rather regarded the scheme of the right hon. Gentleman as one to relieve middle class taxation. The middle classes were the beneficiaries under his Budget scheme. They submitted that if the Chancellor of the Exchequer wanted an income for old-age pensions or social reforms, it would have been perfectly sufficient for him to have fixed the differentiation, not at £2,000, but at £1,200 or £1,500 at the very outside. So far as the readjustment of taxation was concerned, they were on the whole in agreement with the Chancellor of the Exchequer. They stood as he did for free trade. They believed that under free trade the system of taxation was much more equitable than taxation under a system of protection. Under free trade they taxed the people who could bear the tax under protection they taxed the people who could not bear the tax. Under free trade taxation was upon a scientific basis, which consisted in this, that they had got to put their finger upon earned income and tax that lightly. The great problem which the Chancellor of the Exchequer had to face, which be had partially solved, though not completely, was this problem of differentiating between income that came from social sources and income that came from individualistic sources. In this respect, they regretted that he had not gone further than he had done. As a matter of fact, unearned incomes which flowed from social sources ought never to find their way into private pockets at all. The community were the authors of those values, which went to make personal incomes and which ought to be the subject of a series of carefully constructed taxes so that the State could get for itself the whole of those unearned incomes. A shilling upon unearned incomes over £2,000 was too little. He suggested to the Chancellor of the Exchequer that he should increase it to 1s. 6d. as a beginning. In that way he would earn still more the gratitude of the democratically-minded sections of the community. Another point on which they felt was this if the weight of the taxes of a direct character was to be lightened, then it ought to have been done at the same time as indirect taxes were lightened. If the choice was to be between direct and indirect taxation for the purpose of lightening it, then lie thought that the choice ought to have been in favour of indirect taxation. It was not a question of 4d. instead of 5d. on tea. That would not be an appreciable been to the working classes. But take sugar. This was used at the breakfast table, and unless they took the whole of the duty off it would have no appreciable effect on prices for working class consumers. But sugar was a raw material, and if they took the tax off sugar to the extent of one-third, it would have an appreciable effect in stimulating industries which depended on sugar as a raw material. So that it was not merely a question of the working classes, but it was also a question of healthy production; and it would have been much sounder, from the point of view of economics, if the Chancellor of the Exchequer had told the income tax-payers that he could not relieve them this year; that he had got the funds for old-age pensions, such social reforms as the medical inspection of school children, and was going to use them at once. The right hon. Gentleman might have also said, "As a matter of fact, I have got to find a larger income, and I propose to put a heavier tax on large incomes; I cannot relieve the taxpayer this year, but in order to stimulate the industry of this country I am going to take one-third or one-half off the taxation on sugar." If the right hon. Gentleman had constructed his Budget on those lines it would have been more acceptable to the democratic and Liberal opinion which gave him such a magnificent majority at the last election. When the Finance Bill was before the, Souse the Labour Party would have to produce an Amendment which would raise the whole questioned old-age pensions.

*MR. MORTON (Sutherland)

said he felt thankful to the Chancellor of the Exchequer not only for the clear way in which he had brought forward his Budget, but also for his determination that Debt should be paid off, especially when there were still £139,000,000 of the war debt remaining. He could quite understand that the Chancellor of the Exchequer in bringing in his Budget could not hope to please everybody, but he hoped that when they had got rid of the war debt there would be a serious attempt to reduce taxation. He trusted that they would see every economy practised in the spending of public money. Though the working classes did not directly get anything out of this Budget, yet they did get some benefit from the public money which was spent on education. He did not think that they ought to have the sugar tax at all, because it made living more expensive, especially for the industrial classes, while it adversely affected certain industries of the country. It was a double mischief, and the sooner the Government could see their way to get rid of it altogether the better it would be. Of course, he saw the difficulty of reducing the taxes, and was aware that after it was frequently a long time before the consumer got the full benefit of a reduction. The Chancellor of the Exchequer last year mentioned in his speech that in connection with new telegraph lines two-thirds of the annual cost would be guaranteed by the Government. There were exceptional distances in Sutherlandshire, but there had been a refusal to take any share of the guarantee. He would like to ask the Chancellor of the Exchequer why he had not carried out the promise he made last year. If there was a case entitled to the full benefit of the Chancellor's promise it was that of Sutherland. As to the income-tax, he agreed with his hon. friend that it would have been much better if the margin had been fixed at £1,200 or £1,500 instead of £2,000. The Chancellor of the Exchequer might have a further opportunity of considering that matter and of doing what he could to make the rich pay their due share of the taxation of the country. As representing the country, it was their duty to make those pay who were best able to bear the burden. The taxation of the country was at the present time very excessive, and the Budget of to-day provided for an expenditure of nearly £40,000,000 more than was required ten years ago. Heavy taxation interfered seriously with trade. Some members of the Labour Party said that heavy taxation did not matter so much, because the rich would have to pay it, but he did not agree with that argument. Taxes had to be paid out of profits, which were largely made by the exertions of the working classes. If an employer had to pay such a large portion of his profits away in taxation he had no margin left to increase the wages of those who worked for him. Taxation, therefore, did affect all classes of the community.

MR. EVELYN CECIL (Aston Manor)

called attention to the absence of the Chancellor of the Exchequer, and complained that no reply had been made to the speech of the ex-Chancellor of the Exchequer.


stated that it had been agreed across the Table that the formal Resolutions should be taken to-night, and the principal debate on Monday. Under the agreement between the two sides, two or three Resolutions involving contentious matter would be held back.


said he was not aware of that arrangement, but in view of what the hon. Gentleman had said he would defer any further remarks until Monday.


protested against arrangements of this kind being made across the Table. He did not see why the debate should not be continued. He did not object to the Chancellor of the Exchequer taking a rest, but he had left behind a very able Gentleman who could reply for the Government. He regretted the bargain which had been made between the two front benches, because such arrangements always placed them between the devil and the deep blue sea.

Question put, and agreed to.