FINANCE BILL.

HC Deb 14 May 1907 vol 174 cc805-71

Order read, for resuming Adjourned Debate on Amendment to Question [13th May] ''That the Bill be now read a second time:"

Which Amendment was— To leave out from the word 'That' to the end of the Question, and add the words 'in the opinion of this House, the financial needs of the country, as disclosed in the Budget statement of Mr. Chancellor of the Exchequer, require that the basis of taxation should be broadened, in order that the anomalies and hardships inseparable from the present high; rate of particular taxes may be diminished, the revenue necessary for the public service and for social reform raised with fairness to all classes of the community, and our fiscal system adapted to the present condition of national and imperial trade,' "—(Mr. Austen Chamberlain,)—instead thereof.

Question again proposed, "That the words proposed to be left out stand part of the Question."

* MR. CHIOZZA MONEY (Paddington, N.)

said he was one of those who viewed with very great regret the introduction into the debate of the question of colonial preference, though he confessed his sorrow was considerably mitigated by the admirably wide terms in which the Amendment was conceived. Since the issue had unfortunately been raised, he craved the indulgence of the House to make one or two observations upon it, before proceeding to what he conceived to be the more important part of the discussion. He listened very carefully to the speeches from the Front Bench opposite the previous day, and he had been at the trouble of reading them over again that morning. He confessed they suggested to his mind a sense of vagueness and want of definiteness which was entirely the impression he received when he heard them. It seemed to him that the ghost of the old mercantile system was still stalking on the benches opposite. What was that system? It was founded upon the idea that the Colonies should remain, by nature appointed, producers of raw materials, and that the Home country should be the sole market for those raw materials, whilst, on the other hand, the Colonies were to be the monopolised market for the British producers. That, combined with the notion that it was the whole duty of the nation to export as much as possible of its production without any regard to the imports it received in exchange, might be said to be the beginning and the end of the old mercantile system. How much of it had been modernised and how much of it remained in the proposals put forward by the right hon. Gentleman the Member for West Birmingham? He gladly admitted that some measure of enlightenment had come to those who were the inheritors of the old mercantile theory; as the right hon. Member for St. George's said the previous day, they at any rate fully recognised that any arrangement now made between ourselves and the Colonies must be on a voluntary basis. But still enlightenment vainly contended with mercantilism. They found them one moment appealing to the British people to make sacrifices to consolidate the Empire, and the next they found them holding out visions to the people of better employment and higher wages; one moment they were portraying Canada as Britain's Granary and the next they were presenting to the agricultural industry here a system that would protect them. The right hon. Member for St. George's the previous day, as he understood him, asked them what business man would give his rival an order even if he profited himself. They found right hon. Gentlemen opposite at one moment expressing lofty conception of Empire, and at the next going to the British manufacturer and asking him what sort of duty he would like to assist him in his business. Even were the most worthy part of the argument true, of whom was the sacrifice on behalf of the Empire demanded? The right hon. Gentleman the Member for West Birmingham, whose absence they all deplored on this occasion, talked to the nation of sacrifice. What nation? Lord Beaconsfield said there were two nations—the nation of the rich, and the nation of the poor. Of which of these was the sacrifice demanded? It mattered little or nothing to him (Mr. Money) or to those above him in the social scale whether they taxed tea, sugar, corn, meat, cheese or butter; but it mattered a great deal, it mattered everything, to the other nation—to the great mass of the poor in our towns. It mattered a great deal to them whether or not they proceeded, as the right hon. Gentleman opposite put it, to broaden the basis of our taxation. It remained true, as the author of the modern form of this policy had said, that if they wanted to give a preference to the Colonies, they must put a tax on food. When right hon. Gentlemen opposite appealed to them in the cause of Imperial unity, he thought he might say, on behalf of himself and every hon. friend on that side of the House, and on the benches below the gangway on the other side of the House, that they were not deaf to that appeal. He was not, at any rate; but if he was to cherish this lofty conception of a united and consolidated Empire, which might be, as he thought, a tremendous idea for good in the world in the future, was he to put aside the even loftier idea, as he conceived it, of the re-union of the British-speaking peoples of the world? This policy of preference did nothing of a very material character for the Colonies; it established a tie which at the very best and highest could only be regarded, as the right hon. Gentleman the Member for West Birmingham put it to the Colonial Conference of 1902, as a matter of sentiment—as a sentimental tie. Even regarded from that aspect, at its very highest, what was it in relation to the United States of America, the great race of English-speaking people? It had another aspect to them, and it seemed to him that it was a blow chiefly directed against the United States of America, who were one of our chief suppliers of food, raw material, and partly manufactured articles, which right hon. Gentlemen opposite desired to tax at an average of 10 per cent. It was against that nation, far more than Germany, that this policy was directed, and it was to be deprecated on that ground, because it was something to prevent the union of the British-speaking peoples of the world, which, in his opinion, was fraught with the most tremendous consequences for good, not only to ourselves but to the world at large. There was very much to be said for a policy of free trade within the Empire with or without an Imperial tariff against the nations outside the Empire; but what was it that stood between ourselves and free trade within the Empire? Let them take the case of the trade of 1906. We did about £260,000,000 worth of trade with British Possessions as a whole. Only £82,000,000 worth of that trade represented imports from the self-governing Colonies, and only as to a part of that £82,000,000 did the self-governing Colonies apply customs duties. Even in regard to those duties a certain portion of them were necessarily duties which new countries like our self-governing Colonies must need apply to imported goods in order to get a revenue at all. If that part were subtracted, it would be seen that only a small part of the trade within the Empire was not done on free trade conditions. As to that small part we were not to blame. It was the self-governing Colonies themselves that had erected any barrier that existed in the way of free trade within the Empire. The right hon. Gentleman the Member for St. George's had said that the President of the Board of Trade had elsewhere welcomed the forging of fetters between the several parts of the British Empire. Was that quite the proper way to represent what was said? They, as free traders, had not the slightest objection either to a self-governing Colony reducing these barriers, which were the only barriers which stood in the way of the realisation of the conception of free trade within the Empire, or of reducing the barriers which stood in the way of free trade with each other. The Cobden Club, which guarded the pure milk of the Cobdenite gospel, begged Sir Wilfred Laurier, whose Government had given a preference to the United Kingdom, to accept their silver medal, and he believed he accepted it. That entirely represented the position of free traders with regard to any expansion of the preferential principle of the self-governing Colonies either toward each other or toward this country. They welcomed it as something towards free trade within the Empire. Unfortunately, it had been pointed out that the self-governing Colonies did not intend to lower their tariffs to the revenue point. Their doctrine was well expressed by the Resolution passed by the Canadian Manufacturers' Association in 1902— Whilst the Canadian tariff should be primarily framed for Canadian interests, it should give substantial preference to the Mother Country, recognising always that the minimum tariff must afford adequate protection to all Canadian producers. That, of course, was a most important Resolution. He wished it had remained a pious Resolution; unfortunately, it was carried into very practical effect. Our chief competitor in the Colonies was not the foreign but the Colonial manufacturer; and it was equally true that the Colonial manufacturer's chief competitor was not the foreign but the British manufacturer. Of course, the anxiety of the Colonial manufacturers that a minimum tariff high enough to protect them should apply to British goods was the best possible compliment that could be paid to the exporting strength of the United Kingdom. The Canadian preferential tariff reached its highest point in 1900, when it was increased to 33⅓ per cent. reduction in all duties which were applied to imports, but unfortunately it had since been amended. Wherever it had since been shown, either by statistics or by the experience of Canadian manufacturers, that this gave any particular advantage to British manufacturers, the Canadian manufacturers were soon heard from by the Canadian Government. When Mr. Fielding, the Canadian Minister of Finance, rose in the Canadian House of Commons in June, 1904, to make his Budget statement, he found himself compelled to take serious notice of the complaints made by Canadian manufacturers. The chief complaints were made by the woollen manufacturers. They Deere saying in every place where they could raise their voices that they were being ruined by British competitors. Mr. Fielding began by reproaching them— I am afraid they are not all equipped with the most modern machinery, and have not put themselves in a condition to fully enjoy the benefits the tariff holds out to them. But he was sorry to say Mr. Fielding continued by giving way. He went on to say that the complaint was made very largely by their woollen manufacturers that, although in the better grade of goods they could fairly compete with all persons, a very large proportion of imports of British woollen goods were really shoddy goods of inferior character, against which they ought to legislate. Then he said that they did not propose to increase the general tariff, but to put a limit on the preference which should apply to these goods. It was hoped it would prove enough to keep out British goods, and, ex hypothesi, all other goods which were not so strongly competitive as British goods. That policy was not confined to woollen goods, but was applied to other goods in which it was alleged that British competition was severely felt. He thought therefore that he was entitled to say that the Canadian preferential tariff was whittled away in those respects in which it was shown it was any decisive advantage to the British manufacturer. It had never been with any enjoyment that he had looked the Canadian gift-horse in the mouth, nor had he analysed the preference with any desire to belittle it. His desire to do that only arose when the preference passed from the sphere in which it was admitted that no reciprocal obligation was imposed upon this country to another sphere in which we were told it was our duty to set up food taxes in order to pay for this Colonial preference. When that point arose, but not till then, they had a right to analyse the Colonial preference and cast doubts upon the advantages of it to the manufacturers in this country. If he might sum up their objections to the preference, he would say that it weakened the heart of the Empire, struck a blow at the trade of the United Kingdom, accentuated the local interests of the Colonies themselves, and produced feelings of division and feelings relating to sordid interests which would never arise if the policy of preference were not discussed. Even in regard to Canada itself, it could not truly be said that the Colony collectively had ever had any advantage by the preference. Indeed, while on the one hand the policy was designed to benefit Canada as a British Colony, it actually caused discussion among the native manufacturers themselves. That was not a feeling the creation of which had done anything towards the consolidation of the British Empire. Colonial preference would strike not only at the United States, but at Argentina, where, he would remind the junior Member for the City of London, the railways and various undertakings were very largely owned by British capital. That was a consideration which appealed not so forcibly to him as it would to the junior Member for the City of London; but he was perfectly sure he could appeal to him to remember those widows and orphans dependent upon a small investment, say in Argentine railways, whom, only the other day, when discussing the question of old age pensions, the hon. Member used so touchingly and so effectively as an argument in connection with railway stock. There was another Imperial point which he thought ought to be seriously regarded by hon. Gentlemen opposite, and that was the question of India. He did not know whether hon. Gentlemen opposite had heard of the Swadeshi movement. He was informed that the meaning of the word "Swadeshi" was "own country," but he thought it might be translated as protection in excelsis. They refused to buy foreign goods at all. That serious movement surely demanded the attention of hon. Members. Was it wise on our part, the great and prosperous head of the British Empire to confess that we needed import duties, and at the same time to deny these import duties to India? The Indian imports of manufactures were derived almost entirely from this country. He forgot the proportion, but he thought it was something like eighty or ninety per cent. The Indian protectionist rightly regarded this country as his strongest competitor, and, if we taught these British subjects of ours that we ourselves regarded protection as necessary for the welfare of this country, how could we deny that same remedy to Indian manufactures? He did not know whether any answer would be afforded by hon. Gentlemen opposite. John Stuart Mill, and many other quite academic free traders, had held that if protection was anywhere excusable, it was in connection with new countries, or countries new in the sense that India was new to modern industry. He now passed to the question of revenue, which was touched upon in the Amendment, They assured people that they were going to protect their employment and give them more work, while they raised revenue by admitting foreign goods. That sounded like a paradox, and yet it was not so much a paradox as it seemed. Hon. Gentlemen opposite had failed to realise how exceedingly difficult it was to keep manufactured goods out of any country. An average 10 per cent. duty would probably not keep out more than 5 or 2½ per cent of the manufactures which now came in. [Hear, hear.] Hon. Gentlemen opposite said "Hear, hear,'' and he was glad to hear it. If they really cheered that, would they be good enough to remind their constituents that they did not expect an average 10 per cent. duty, which was propounded at Glasgow, to keep manufactured goods out of the country? Their constituents would know then what to expect. What would it do? They knew very well it would raise prices. He did not assert for a single moment that it would raise them by precisely 10 per cent., but that it would raise them all round there was no manner of doubt whatever. On the point of the difficulty of keeping manufactured goods out of a country, he would direct the attention of hon. Gentlemen to the fact that the Dingley tariff of America failed to keep out of the United States of America a quantity of manufactured goods which was as large as that imported into the United Kingdom; as a matter of fact the imports of manufactured goods into the United States of America for the first three months of this year were almost of the same value as the imports of manufactured goods into the United Kingdom. That showed that the greater part of the manufactured goods imported into any country under any fiscal system was absolutely necessary to its industries and must be imported, whatever tariff they liked to impose, or whatever fiscal system they enjoyed or did not enjoy. Hon. Gentlemen opposite, although they had not asserted it in that House, had, wherever they could get a hearing, told the people in the country that it was the foreigner who paid the import duties; and he believed that the introduction of the words "broaden the basis of taxation" into the Amendment would be interpreted in the country to mean that the basis was to be broadened until the foreigner was included. That part of the Amendment which related to revenue was only worth serious consideration at all if it could be shown in the long run and on the average that the foreigner paid the import duties. How could hon. Gentlemen opposite reconcile that theory with the fact that in every protectionist country, practically without exception, manufacturers who re-exported any article containing either raw material or partly manufactured or wholly manufactured material which had previously paid duty on importation, had the duty returned to them by the country which was supposed not to pay it? Was that not conclusive as to the ordinary view which was taken of import duties by business men? He might point out that the right hon. Gentleman the Member for West Birmingham, when he introduced his proposals, said he had no intention of ruining the industries of this country by taxing raw materials. We produced a not inconsiderable amount of raw materials ourselves. If the importation into any country of any considerable quantity of raw material caused the foreigner to lower his price to an extent which might be represented as paying an import duty, it would be our duty not only to tax food but to tax raw materials in order to give preference to the Colonies. He might give another practical illustration of the incidence of import duties. The United States under their scientific system of tariffs had to set up courts and assessors to deal with the question of duties in detail. For instance, the United States produced 25,000,000 dollars worth of zinc ore a year, but it also had to import a large quantity, and they found a firm of importers anxiously fighting before the court whether zinc sulphide was a raw material or a manufacture and whether it should pay no duty or 20 per cent. Why was this firm fighting the question if the foreigner paid the import duty? What did it matter in such a case whether the duty was 20 or 50 per cent.? The truth was that the business man looked upon an import duty just as he did upon any other element in the cost of production. It must be an element in price. It was perfectly true that when an import duty was placed on an article, just as much as when a raw material rose in price, the change might not make itself at once apparent in the price of the article as it reached the consumer. Last year, roughly speaking, raw materials went up 10 per cent.; did the price to the consumer go up? Not at once, but the prices of manufactured articles rose gradually, were rising now, and would continue to rise. At first the increased cost of manufacture and of materials could not be passed on to the consumer. The same might be said of an import duty, and he was sure that hon. Members who would consider the matter from purely business considerations would not argue in their constituencies that it was possible to tax the foreigner. He took great exception, as he had explained before, to the use of the words, "the broadening of the basis of taxation." There was only one basis of taxation, and that basis was the national dividend which consisted of the whole product of the work of the nation. That was the true basis, and one could neither widen nor narrow it. If it wasnot possible to tax the foreigner the Chancellor of the Exchequer had to tax the people of his own country, and the only election open to the right hon. Gentleman was as to what class of goods or people he should levy his tax, and as to the means which they had to pay the tax. What he considered to be the chief consideration which he had to put before the House in connection with this Budget was this—that while it had been demonstrated that this country was increasingly prosperous and wealthy, the greater proportion of the people were property less people who had no tangible assets, and the sole factors between them and destitution were the health and strength which they possessed. He did not want to weary the House with figures, which were always tedious, but if he were to take a page of the Order Paper of the House and tear off a small corner, what was left would represent the property of 5,000,000 people, while the piece he had torn off would represent that of 39,000,000 people. That and similar facts were what the Chancellor of the Exchequer had to face. When he looked at the Finance Bill and at the Amendment which had been proposed, his mind was not so much fixed upon the fiscal question which it had been his misfortune to discuss so often, but upon the considerations which must be in the mind of the Chancellor of the Exchequer when he proposed to apply taxation to the people under the circumstances he had indicated. This brought him to the savings of the poor, in regard to which a statement of the hon. Member for Woolwich had been challenged by the hon. Member for the City of London, who assured the House that the rich were very poor and the poor were very rich. The hon. Gentleman pointed to the millions of money which were possessed by trade unions or lodged with friendly societies. Did the House really know what these millions were? What did they really mean? The few shillings, the few pounds that were stored up in the trade unions and friendly societies and such-like bodies, merely represented the premiums which had been paid to save the man from destitution when he got out of work, to keep him going in a small way when he got ill, and to pay his burial expenses when he entered into the possession of that bit of soil which was the only piece he was ever likely to have the privilege of possessing. That was the real meaning of the savings of the poor, and when they came to building societies it was a fact that a great part of the savings were not those of manual labourers, but those of the middle classes and even of professional men. Max O'Rell had said that the average Englishwoman's method of making an apple pie was to take "some" flour, "some" water, "some" fat, "some" apples, and so on, without any precise regard for quantities. As a result, sometimes one got apple pie and sometimes an indigestible conglomeration. So Chancellors of the Exchequer took "some" individuals and "some" duties, such as those on tea, sugar, and so forth, without the slightest idea of what individuals were to pay the duties. Surely it was time we dropped rule of thumb and had regard to the means of taxpayers. This Finance Bill recognised, perhaps more fully than any previous Budget, that there was a common sense difference between income which was earned by the individual worker by the work of his own hand or brain, and the income derived from property. That was a tremendous principle to have recognised, although it was not recognised sufficiently. The differentiation which was proposed did not really touch the great mass of incomes which were derived from property, and did not sufficiently recognise the distinction between money derived from exertions and income derived from such sources as land or capital. The only commonsense way to differentiate the income tax was to graduate it. The great mass of unearned incomes was at the top of the scale and they did not touch it by specific differentiation of small incomes. It was not worth while to pursue little incomes derived from property. As incomes grew in size more and more of them was derived from property; therefore graduation was the true differentiation. He thought it was high time that regard, should be had to the fact that in spite of the wealth of the country there was an enormous number of the people who were not taxable subjects at all. The principle of no representation without taxation could be pressed too far. After the scientific investigations that had taken place everyone would be convinced that with all our wealth there was probably one-third of our population on or near or under a poverty line arrived at on the basis of the workhouse dietary. His constituency contained a spot of fifteen acres loaded with about 7,500 human beings the average income of each of whom was well under 25s. a week when they could get it, and they did not always get it. Were they taxable subjects? No. Why? Because they did not receive sufficient to enable them to sustain physical efficiency to say nothing of being able to obtain luxuries and enjoyment. He submitted that they should be regarded as subjects who were not taxable unless they cared to tax themselves. He did not suggest that the tax should be taken off drink and tobacco. On the contrary those taxes should be left on. The principle should be adopted that these people were not taxable unless they taxed themselves by buying these things. To carry that out would necessitate the removal of the tea duty and the sugar duty and other indirect taxes now levied. The tea duty must go because tea was one of the most innocent luxuries of the poor and helped a woman to get through her work, and because in taking it off they would assist temperance. The sugar duty must go because it was not only an article of large consumption among the poor, but a raw material in many of our industries. He passed to the question of old age pensions. The Chancellor of the Exchequer had laid it down as a principle that they should be non-contributory, and he agreed; but if they paid pensions through food duties they would in a real sense be contributory. If people had to buy taxed sugar was it not the same thing as if they had to pay no duty on sugar but 4d. a week for a pension? The sugar tax amounted to 16s. a head per annum, and so long as that was maintained old age pensions would be contributory. The hon. Member for Preston had laid down the principle that the employer ought to contribute, the employer who had the use of the man during his working hours and who could discharge him at a moment's notice. He agreed to that also, but if they had a properly graduated income-tax they would make the contribution of the employing classes so that that end of the hon. Gentleman would be served. In all these matters they must have regard to the practical limits of taxation. They must not begin to trench on the amount of capital saved in the country every year, and which was devoted to the establishment of new or the expansion of old businesses, and to the general welfare of the community. That was obvious, but they need not fear that the grant of old age pensions would diminish capital saving. It was years ago said by Professor Marshall that probably £100,000,000 a year was wasted by the working classes, and £400,000,000 a year by the rich, in a manner which contributed nothing to the welfare of the country. Were those estimates extravagant? Certainly not. He stated with confidence that Professor Marshall had full warrant for what he said. Let them take the wealth of the rich people of this country at the present time. It was so large as to be extraordinary. The extraordinary luxury of the country had even attracted the attention of Bishops. A graduated income-tax, rising to Is. 6d. or 2s.,would by no means trench on capital savings, or cause any risk to the trade and the credit of the country. The financial strength of the nation was imperfectly realised. It was only a few years since that we entered into a war which cost £220,000,000, which, from an economic point of view, he thought might have been better employed in some other way. Only a few years had passed since then, and never had the trade of this country, its total production, and the income of its employers of labour been greater. They knew that the trade of the country at the present time was, in spite of the war, in a most flourishing condition. The financial position of the country had thus been demonstrated in a very remarkable way, and he did not think that that strength was sufficiently appreciated. He submitted that if the needs of the time and the conscience of the nation demanded it we could safely increase our national expenditure for social purposes. He thanked the House for the great kindness with which it had listened to him.

MR. LANE-FOX (Yorkshire, W.R., Barkston Ash)

said the hon. Gentleman who had just sat down was full of information, and though they did not all agree with him, they listened to his observations with interest. But the hon. Member had posed, as was often done on the opposite side of the House, as one of the exclusive friends of the working classes; but he repudiated the implied suggestion that they who were on the Opposition side of the House were not equally anxious and willing to safeguard the interests of the poorer classes in connection with taxation. They might differ from hon. Gentlemen opposite as to the methods to be adopted, but he did not think that any hon. Gentleman would insinuate that there was less inclination on that side of the House to safeguard the interests of the poorer classes than there was among supporters of the Government. The hon. Member had dwelt very eloquently on the luxury and great expenditure of the richer classes of the country. Were such references as that to be used as arguments, seeing that the great mass of taxation under the present Budget was upon commodities mainly used by the poorer classes? The right hon. Gentleman the Member for East Worcestershire had been accused of not giving any definite details of what his scheme would be. But he thought the Opposition were entitled to ask hon. and right hon. Gentlemen on the Government Bench what was the remedy for the very large and growing expenditure which must inevitably come in respect of the promises made not only in that House but in the country. The hon. Member had admitted that 10 per cent. or a less duty on manufactured goods could not keep them out. That was a very considerable admission from so consistent and vigorous an advocate of free trade, and perhaps would not be lost sight of by those who took part in the debate. As regarded the question of colonial preference, he wished, if possible, to ascertain from the Government what their attitude was towards that subject, and what they intended to do in the matter of future taxation to meet the great expenditure which had been foreshadowed. The Post-master-General had said that the right hon. Gentleman the Member for East Worcestershire was like a conjuror with a hat, from which he was to bring a rabbit, but the rabbit was not forthcoming. But hon. Gentlemen opposite seemed to him to be like a conjuror who violently waved a hat in the air and showed that there was nothing in it. They could not expect the audience to be very much impressed by that. What they wanted to know was where the sources of revenue were to be found, when, as was perfectly evident from his Budget, the Chancellor of the Exchequer was pretty well at the end of his tether. The President of the Board of Education had drawn a touching picture of the condition of the poor of the country, and had said that the object of Members of the Opposition was to tax the poorer classes, and even the imported boots and shoes of the wives and children. He did not see why they held it to be a greater hardship to tax boots and shoes when they taxed tea and sugar, which were just as much used, and the tax on which pressed just as heavily on the poor as a tax on boots and shoes. Taxation in the end fell on the poorer classes of the community, and what they all wanted was to see adumbrated some system by which they would levy taxation more on articles of luxury used by the richer classes who were better able to afford it, than, as seemed to be the proposal of the Government, on those commodities which were used mainly by the poorest classes of the community. The President of the Board of Education had pointed to the great increase of wages in 1906, and had remarked that the revenue of the country was so elastic, and the prospects of trade were so good, that we should not be in any financial difficulty in the near future. But the right hon. Gentleman had not pointed out that that was a mere boom in trade which was being experienced in other countries besides our own; it was a temporary phase of trade, which fluctuated, as the Returns showed, in every country of the world. It was very rash to draw from that boom in trade any definite rule as to what might happen in the near future, or to establish upon it any definite basis for a permanent system of taxation. What struck him particularly about the debate was the breezy hopefulness with which hon. Gentlemen opposite attacked this question. It reminded one of the spirit of the early Christian martyrs who faced all the possibilities of their fate; similarly, hon. Gentlemen opposite said that they had no fear, and that whatever the expenditure before them might be, they put their trust in a good providence with no apprehension as to what would happen. He would like the House to consider what the expenditure was in regard to which they were asking for fresh sources of taxation. Partly by recent legislation, and partly by recent speeches and by utterances during the general election, they were promised an increase in the bureaucracy of the country. They had been promised an increase in the number of inspectors; and anybody who had discussed the possible schemes of hon. Members opposite connected with such subjects as small holdings and the better housing of the working classes must recognise at a glance that an increase of expenditure was inevitable in the rural districts. Unless a heavy increase was to be put on the rates—and he did not think that any hon. Gentlemen who knew the rural districts would wish to see that—considerable assistance would have to be given from the Imperial Exchequer to carry out those projects. Then they had schemes for the payment of Members, payment of railway fares, and other expenses for matters which would conduce to the comfort of their existence in that House. They would also have the rush of extra shipbuilding, which must come if hon. Gentlemen opposite were prepared to cut down the shipbuilding programme now. The history of the country showed that whenever there had been a lull in shipbuilding for the Navy, the time shortly afterwards arrived when there was a panic, and the shipbuilding was increased to an undue extent. In addition there was the expenditure of £650,000 needed for the new Irish Council. They were face to face with the grant to Jamaica, which must certainly diminish the surplus which the Chancellor of the Exchequer was relying on for next year. In addition to that, they had the proposal for old age pensions, which, it seemed to him, the Chancellor of the Exchequer had entered upon so lightly. The ordinary man in the street regarded the old age pension as 5s. a week at the age of sixty-five, and it was not for a moment to be supposed that they could have any final or speedy solution of the question with the sum the Chancellor of the Exchequer had at his disposal. Everybody knew, as was admitted by the President of the Local Government Board, that the full cost of a scheme of the kind would cost £29,000,000; even making the deductions proposed by the Hamilton Committee, the cost would be more than £12,000,000. Those deductions, however, must be difficult to carry out, and in any case an enormous sum of money would be involved. The Chancellor of the Exchequer had earmarked £2,250,000, and he expected to get another £600,000 out of the death duties. That seemed to him to be a sanguine estimate as regarded the death duties, because they must take into account that generation after generation there would be more evasions of the tax. Already they had instances of arrangements by which the burden of the death duty was evaded, and the yield was more likely to become smaller than greater. But supposing the whole of that sum from the death duties was realised, the Chancellor of the Exchequer would have about £3,000,000 a year. It was clear that that sum would be perfectly inadequate to meet the demand for old age pensions. What was the fresh taxation to which they were to look to help the Government out of their difficulty? They had heard from various quarters that they were to be taxed more. It was impossible to raise £20,000,000 out of taxation alone. The Front Government Bench had not given them a really serious idea of what their suggestions would be, but they had heard certain suggestions from hon. Gentlemen below the gangway or elsewhere. The hon. Member for South Hackney had suggested various measures for broadening the basis of taxation; whether the Government would adopt them he did not know, but the hon. Gentleman had suggested, among other things, taxes upon theatre tickets, advertisements, etc., as a fruitful source of revenue. The right hon. Gentleman the Member for West Birmingham had been accused of endeavouring to tax the food of the poor. By maintaining the present taxes upon tea and sugar the Chancellor of the Exchequer was doing the very thing which had been advanced as the worst accusation against the policy advocated by the right hon. Gentleman the Member for West Birmingham. Unless the Government could tell them where they proposed to look to for their necessary revenue in the future they would be providing the strongest possible argument by this Budget in favour of tariff reform. If that was the result, the Government would only have themselves to thank.

* MR. J. RAMSAY MACDONALD (Leicester)

said that no man would envy the Chancellor of the Exchequer who had to make up his mind what classes were to be beneficiaries under his Budget. The Labour Party were profoundly dissatisfied with the choice he had made, because they considered that one class had an unanswerable claim, and that class was the old people of sixty-five years of age who had not enough property to keep them out of the workhouse, or to enable them to live without charitable assistance. The right hon. Gentleman had told them that perhaps next year he would consider the claims of those old people, and that he had, in fact, set aside £2,250,000 as a nucleus or a sort of reservoir from which he could draw, provided everything went well. He did not desire to discount the promises made by the Chancellor of the Exchequer he believed they were genuinely made; but his difficulty was that many other right hon. Gentlemen equally honest had made the same promise. It looked as though upon this subject they were going to get promises until time had sounded its last knell. They were told that if the Chancellor of the Exchequer's estimate came out as he anticipated, if trade remained as good as it was at the present time, next year they might find themselves discussing a practical scheme of old age pensions. They were tired of promises and were going to accept no more. Moreover, they were anxious to find out what the scheme of old age pensions was going to be. The President of the Local Government Board the other day gave them certain very interesting figures on the subject, and he classified the poor into independent and dependent poor. He presumed they would not be doing the right hon. Gentleman any injustice if they assumed that that classification indicated the direction in which the Government's mind was running. Did they imagine that the working classes would accept a scheme of old age pensions which was not going to relieve the old people who were now living upon the Poor Law? That at any rate was what was suggested by the speech of the President of the Local Government Board. The sooner the Government dispossessed their mind of that idea the better, because the Labour Party were not willing to accept or even to associate themselves in any way with a scheme which differentiated between the poor at sixty-five who had been compelled to resort to the Poor Law and those who had not. They would never regard a proposal of that kind as in any sense satisfactory. When the pledge was given in an old-fashioned general sort of way that they were going to have old age pensions next year they were just as interested in being told what the scheme was as hearing the oft repeated promise once more. Whilst the class which they thought ought to be the first beneficiaries under a Liberal Budget was waiting to be dealt with, a much more well-to-do class was going to receive substantial benefit under the provisions of this Finance Bill. The people with incomes of from 3 guineas to £40 a week were going to receive substantial relief to the extent of from 3d. to £25 per annum. If the Chancellor of the Exchequer meant to redeem some of the pledges given at the election he ought not to have chosen for those benefits the people receiving from 3 guineas to £40 per week, but should have devoted his attention to the old people of sixty-five years of age who were struggling to keep themselves outside the workhouse. Surely they ought to have been chosen instead of the-middle classes who were being benefited by this Budget. It was very extraordinary that a Liberal Chancellor of the Exchequer had selected for relief a class whose incomes had been going up by leaps and bounds during recent industrial developments. The people who had been suffering reductions of income and wages were the very people who had to wait for another period of twelve months before any relief was promised. It was quite true there were certain good beginnings in the Budget, but he thought it was an exceedingly feeble attempt to do the right thing. With regard to the Amendment he thought it really meant nothing whatever. The right hon. Gentleman the Member for East Worcestershire, in his speech, gave voice to all sorts of notions of taxation. One moment he had advocated protection in order that British industry might increase in bulk, and at another moment he had advocated a tariff which would contribute substantially to the revenue of the country and supply funds for old age pensions. Then the right hon. Gentleman had invited their attention to colonial preference, telling them that they ought to invent some tariff which would give the Colonies a substantial preference in our Home market. Then he had passed on to retaliation and reciprocity, and after that he seemed to have mixed up all his schemes together. It was quite possible that all those schemes could be mixed up together, but if they tried to devise a system which would be protective to industries, which would increase the revenue and increase the demand for home labour, and at the same time offer preference to the Colonies and retaliation, and enable this country to bargain with foreign countries, then they would get a minimum of each and not a maximum. From the point of view of protection and revenue that sort of hybrid system of tariff reform yielded so little benefit that they might discount it altogether in the Budgets brought up year after year. He felt certain that they could not decrease their expenditure. He did not think any section of the House hoped to reduce the present scale of national expenditure to any material extent. They might save upon the Army and Navy and in other directions, but every 6d. which they managed to save would be spent in other directions. The total expenditure of the country was not going to be reduced to any appreciable extent. He thought it rather a pity that the Leader of the Opposition did not take alarm at the increase in expenditure before that £220,000,000 was spent on the South African war, which debt was now lying like a millstone round the necks of the people. But it did not matter how large the expenditure was, they ought to levy the taxes in a scientific way. The Amendment proposed that the basis of taxation should be broadened, but in his opinion that basis was now as broad as it possibly could be. There was not a single family in the country that did not pay taxes. There was not a single man or woman who consumed tea or sugar, however insignificant their income, whether a pauper or independent worker, who did not contribute something towards the revenue of the country. It was a melancholy and lamentable fact that the poorer they were the heavier taxation pressed upon them. There were people whose incomes were so small that they could not keep themselves in an adequate state of physical efficiency, and yet those people had to pay taxes on tea, sugar, and tobacco, equivalent to the taxes paid by the richest consumer. What they complained of was that the basis of taxation was too broad at the present time, for they taxed people who ought not to be taxed, and they taxed incomes every farthing of which ought to be spent in keeping their possessors in a state of physical efficiency. They were taxing family incomes which ought to be spent to the very last farthing upon feeding and clothing the children and bringing proper facilites within their scope and command. At the present time the working classes, whose incomes averaged £70, were paying something like £48,000,000 to the National Exchequer. There was not a sensible man in the House who would not say that that basis ought to be narrowed. The pyramid ought to be based not on its broad basis but on its apex. The time had come when the Chancellor of the Exchequer in national finance had to work out a pyramid of taxation, raised not upon its broad basis, which was oppressive and crushing, but upon its apex, which would enable the pyramid to lie on that small section of the community who held property which was social in its origin and which ought to be spent on social purposes. If they took the figure he had just quoted, namely, the £48,000,000 contributed by the working classes to the national income, it worked out at 2s. in the pound income-tax. If they considered the final utility of 2s. in the pound to a man whose income was anything between 15s. and £1 a week, and worked that out, they got an equivalent in final utility to a man whose income was £5,000 of probably something like £2,000. It was not a question of amount of money; it was a question of final utility—the question of discovering the equivalent to people who had enormous incomes to the tax of 2s. income-tax in the pound which the working classes had to pay. At the present time the income-tax upon the working classes was a tax upon life, not upon property; and he submitted that what the Chancellor had to discover was how to remove all taxes upon life and place them upon property. The question one would like to see answered was how right hon. Gentlemen on the Opposition side of the House would readjust the incidence of taxation. The proposal was that something should be taken off tea and tobacco, and that something should be put on cheese, meat, flour, and bread. The proposal was not that the volume of taxation should be reduced, but that what was now imposed should be split up into small particles and that those particles on the whole should be equivalent to what was now being paid. He ventured to say that that was rather a futile result. If they were going to relieve people of taxes, let that be done, but let them not merely split the taxes up and then in the aggregate take away as much from them as before. Broadening the basis of taxation as defined by the right hon. Gentleman the Member for St. George's, Hanover Square, was that more commodities should be brought within the net of the Chancellor of the Exchequer; but that simply meant that they were taxing trade, and there was nothing more objectionable than a tax upon trade. That limited industry. Moreover, though they might appear to be taxing things consumed, ultimately the incomes of the people had to bear the tax, and that in the most objectionable way, because they had to bear it not in relation to the ability to bear, but in relation to the use which the holders of the incomes made of the various commodities they had to use. No more objectionable system of taxation could be devised than that method of broadening the basis of taxation, because it meant that an increasing number of articles would have to bear taxation than at present, and from the point of view of the working classes that was infinitely worse even than the present bad system. The right hon. Gentleman the Member for West Birmingham promulgated this scheme for breaking up taxation and levying it in small homeopathic doses on many commodities; but even on the platform he confessed the working classes would only be helped to the tune of nine or ten farthings. That was no relief of taxation. If the proposal made in the Amendment did not reduce taxation, what about its Imperial aspect? The right hon. Gentleman in his speech yesterday had laid special emphasis upon the Imperial aspect of his proposal; he had told the House that we ought to reciprocate the commercial offers of the Colonies, and the right hon. Gentleman the Member for St. George's, Hanover Square, later on had described those offers as being important. As there was to be an opportunity of discussing those proposals later on, it would not be necessary to go into details now, but he was bound to take that opportunity of saying that he thought those offers and proposals would be much more important than they were if they had been a little more detailed and a little more definite, and if they had been conveyed in pounds, shillings, and pence—if they had been conveyed in schedules rather than in grandiloquent periods and general language which might or might not be capable of application to our commercial conditions. But he took this objection. Why should we, simply because the Colonies asked us, change our fiscal system? Why should they not change their fiscal system upon our invitation? Was it going to be a one-sided bargain altogether? Was that how right hon. Gentlemen did business? If the Colonies offered something, were right hon. Gentlemen going to accept that offer without consideration as to whether it was valuable in itself or not? Was His Majesty's Government going to be accused of pursuing a wrong policy because it insisted on discussing the value of the proposals made to it by business men and apparently for business ends? He read a leading article in the Melbourne Age the other day, which wound up with a statement to the effect— We are offering preference, not only because we want to show our love for the Mother Country, but because we are convinced that the Mother Country requires it for business purposes, and we are also convinced that if the Mother Country does not adopt a new fiscal policy the Mother Country's business will disappear as it is rapidly disappearing. He thought that must have been written some years ago. Certainly it must have been written by somebody who had not the most recent trade returns published. If those things were true, if there was any foundation for these statements, they were statements which could be discussed from two sides. Surely they ought to be the subject of discussion on the part of the preferentialists and protectionists on the one hand, and the free traders on the other. It was simply absurd for anybody to say that, because the Colonies, acting upon ideas of protection, offered us certain preferences, and because we turned to them and said, "We believe that free trade suits our purpose better; we believe that free trade is a better economic foundation for the Empire than preference or protection," we were not Imperialists, that we were not taking an interest in the Empire, and that we were aiding and abetting dismemberment and dissolution. If they were going to allow the people of the Empire to decide, then the majority of the people were in this country. The most important business centre of the Empire was still in this country, and if there was going to be a public appeal in regard to the economic interests of the Empire the matter was not going to be settled by people outside the Mother Country but by people inside. The people who voted in the recent elections were not going to be called anti-imperial and told that they were indifferent to imperial interests because they had decided, and he thought decided well, that free trade was to be the basis of the fiscal policy of the mother land. They were told that they did not even go the length of taking off in favour of the Colonies some duties which were now imposed on imports. If the Colonies would be satisfied with that he was not sure but that the suggestion might at any rate be considered on its merits. There was no general formula of fiscal policy or a tariff creed that was from the beginning and was going to remain true until the end of things. Everyone of the elements of our fiscal dogmas had to be decided generation after generation as circumstances changed. Hon. Members above the gangway did not monopolise the free mind. Hon. Members who were on the other side measured the success of their policy year after year and generation after generation, and they stood by free trade not because Cobden preached it, but because it was beneficial to us at the present time, and because it was going to be beneficial to the country for a considerable time to come. He did not believe that preference would encourage the Colonies to trade with us, or that our trade with the Colonies would thereby be affected to any considerable extent. Had the Premier of Australia given us any pledge that if we lowered duties on Colonial imports upon our present tariff schedules he would be satisfied? Had the Premier of Canada given us any assurance that that would satisfy him? It was quite true that South Africa would be rather pleased with it, but South Africa was in a peculiar position. South Africa was mainly interested in wines and tobacco, and a change in the present tariff would suit South Africa in a special degree. But what would it mean to this country? It would be the beginning of the principle of protection. Our tariff policy was not to be dictated by the opinion of a majority of the Colonies. At least he hoped it had not come to that yet. There were three views of taxation; they might either tax articles of general consumption, which was the protectionist theory; or they might tax property, or combine a tax on consumption and property. The Labour Party held that all taxation on articles of consumption should be removed because they bore oppressively upon the poorer classes of the community, and that taxes should be levied upon wealth that had not been earned by individual service. The values created not by individuals but by the community should be transferred to the community and not allowed to be enjoyed by individuals who had not earned them by service. Industrial capital and wages ought to be free altogether from taxation. The State should claim as its property the value of that which it had created. If after that revenue was still required, incomes and other property should be taxed. The Labour Party would not support the Amendment because they believed not in broadening but in narrowing the basis of taxation. The Amendment had really been framed in alight-hearted, sympathetic, and lightsome moment by men who wanted to meet the demands of Colonies who do not understand our tariff policies, whose economic conditions differed from ours, whose markets were not our markets, and whose competition was totally different from that which we had to meet.

MR. MALLET (Plymouth)

said that everyone admitted that the Imperial aspect of this great business question was the most attractive, and perhaps the only attractive, aspect which it had; but that there was nothing in the speeches of hon. Gentlemen opposite to show how Imperial feeling could be strengthened by increasing the taxation on articles of large consumption, or, in other words, on the necessaries of life. It was perfectly clear that there was one ground on which tariff reform was advocated which could not be properly maintained. Speeches had been made from the Opposition side which advanced the theory that we owed it to our Colonies to make them some further return for the preference they offered us, but he thought that that view was neither tenable nor fair When they remembered that the preference offered by the Colonies was still very limited in extent—Sir William Lyne said that the Australian proposals only applied to 8 per cent. of Australian imports, and that even then British goods going to the Australian Colonies must be carried in British ships manned by white labour, a condition which millions of our fellow subjects had a strong right to resent when they remembered that the Colonies still imposed high protective tariffs on most of our goods, whilst we in return offered them, on everything they sent us, a liberality of treatment which no other nation in the world offered them, and which they never dreamt of offering us; and when they remembered that we, unaided, bore the whole burden of Imperial defence; surely it was not fair to urge that we were required to make any further return to our Colonies. After all, in any bargain between ourselves and our Colonies, we were and must remain their creditors, offering them far more than we could ever look for in return. That was the nature of all bargains between parents and children, and he thought that in all such bargains this policy of haggling was a grave mistake. As long as the Empire held together, the Colonies would always owe a debt to the generosity of the English people, but that was no reason why they should impose on that generosity, as Gentlemen opposite would have them do, an intolerable strain. Mr. Lowe once said in a passage of illuminating pessimism that we lost half our Colonies by trying to tax them, and that we should lose the other half by their trying to tax us; and he suggested to hon. Gentleman opposite, who loved the extremities of the Empire, but who minimised, he thought, the claims of the heart of the Empire, that, if they laid down the principle that we could only keep our Colonies by submitting to impositions on our food, and interference with our freedom, they ran the risk of making the Empire not the pride, but the bugbear, of the English people. He wished tariff reformers would tell them in more detail how they could possibly reconcile their proposals with what they believed to be the needs of our own people. Free traders had always insisted that they could not give any colonial preference worth having without taxation of corn, but that was a point on which they had never been able to ascertain definitely the views of the Leader of the Opposition. They had always insisted also that it involved a tax on raw materials, but they had never yet been able to get a definite pronouncement on that point from the Protectionist Leader. Gentlemen opposite had shirked these definite paints, on which the whole meaning of their policy depended, and instead of facing them had urged the House to try to do something for the Colonies on the basis of existing taxation, so that they might drift imperceptibly into abandoning free trade. The right hon. Gentleman the Member for St. George's, Hanover Square, had complained that the Government had refused to take our existing duties and to try to offer a little preference upon them. The right hon. Gentleman had said it was ridiculous to go into details and he quite agreed it was so, because when one began to go into details one saw how ridiculous that proposal was. He did not know whether anyone had noticed the recent arrangements in Australia for giving a preference to South Africa in regard to the trade between the two Colonies, but there were one or two points in them which were significant. There had been a great increase in the use of agricultural machinery in Australia, and they had been buying their harvesters principally from Canada, which were imported at a duty of £5. Last year the duty was raised to £12, and at the same time a handsome preference was offered to South Africa in regard to harvesters imported from that country to Australia. How did the protectionist party in Australia justify that preference to South Africa? They justified it on the ground that South Africa did not send any harvesters to Australia at all. A preference was also given by Australia to South African wines, and that was justified on the ground that the people in Australia did not like and did not drink South African wines. The fact was, when one looked into the details of these preferences, it very often happened that the preference was little more than a pretence. Let them take the case of Canada and consider for an instant what we could have done for Canada on the basis of existing duties. It was said we might have made a beginning and gone into the Conference and offered something. What did that mean? On the basis of existing duties we could offer nothing to Canada on her great exports, timber, corn, bacon and cheese; we could only offer her a preference on certain dutiable articles such as tobacco, sugar, tea, coffee, cocoa, wines arid spirits, and dried fruits. If the House looked at the details it would be seen how absurd such suggestions were. As to tea Canada only sent us £999 worth in 1905; and that could not be Canadian, because Canada did not grow it; a preference on tea could not therefore benefit her. Again our imports of sugar from Canada were only of the value of a few thousand pounds, and there again it could not be said that that import offered much scope for preference. The import of tobacco from Canada was worth only £9,000, while wine and spirits only amounted, to £10,000. Coffee she sent none; cocoa only £1,100 worth, and dried fruits practically none. From these figures it was obvious that, on the basis of existing duties, the opportunity of giving a preference to Canada, the margin for "broadening the basis of taxation," was comparatively small. This great Dominion came to us and offered us in a friendly and generous spirit concessions on our manufactures which hon. Gentlemen opposite rated very high. Did they seriously mean to answer: "We will give you a preference on nothing of any importance which you sell, but only on a few trumpery articles which are not really Canadian at all." The same thing might be said with equal truth in regard to the other Colonies. They had had references to South Africa, and they were told that they might do something by giving a preference on South African tobacco and South African wine. The amount of tobacco which we got from South Africa was infinitesimal, and did not amount to £1,900 a year, and the amount of wine imported last year was very little more. The hon. Member for Gravesend always spoke with authority on Colonial matters, but he must always be regarded even when he spoke of Imperial economics as first and foremost a master of romance. The hon. Member had told them that if Mr. Gladstone and Mr. Cobden had loft the wine of South Africa alone, and if it had not been for the Treaty of 1859, the trade in the wine of that country might have grown to large dimensions. Of course it was all the fault of that wicked Mr. Cobden, who was responsible for so much evil, and also for such wonderful prosperity in this country. But in 1905 the importation of South African wine was only worth £8,500; in 1906 it had shrunk to some £2,000; and here they got no opportunity of broadening the basis of taxation. In regard to Australian wines, there was some better scope for a preference, but would any preference ever make those wines a competitor with the products of Portugal or France. Australia sent us hardly any tea or tobacco, but she did send us a certain amount of wine. In 1905, it amounted to as much as £136,000, but last year it fell to £100,000; and there there was perhaps a limited opportunity of showing good-will to Australia, if we were willing to shut our eyes to the principle of free trade. But the fact was, we did not buy Australian wines because we did not drink them, and he doubted whether they were drunk even at the banquets of tariff reformers. Erasmus once said that he could not fast on Fridays, because while his heart was Catholic, his stomach was Protestant, and in the same way he suspected that while the appetites of tariff reformers were Imperial, their palates owned the heresies of Cobden still. Moreover, Australia was of all our Colonies the most rigidly protectionist, the most determined, by tariffs or bounties, to keep her own market for herself. Would that resolution be changed by a trumpery preference on Australian wines? To have gone into the Colonial Conference expressing a willingness to grant preference on the basis of existing duties without intending to go on would have been to play a dishonest game. Imperial unity would never be built up on any scheme of pooling Parliaments or pooling trade, or on a fiscal system which added intolerably to the burdens of the people. It was because by relying on those specifics, the Party opposite had turned the strong current of Imperial feeling into mistaken channels that he resisted these preference proposals whatever shape or form they took.

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

The hon. Member for Plymouth concluded his speech by accusing the party to which I belong of having directed the stream of patriotic emotion, which might have been directed into better channels, into the channel of preference, which in his view can produce, in the long run, no good consequences either to this country or to our Colonies. The hon. Gentleman does us more than justice. It is not we, it is the Colonies, those great self-governing communities in which the hon. Gentleman professes, and I doubt not with perfect truth, an interest as great as that felt by any of my hon. friends, who turned the stream of patriotic emotion into that channel. And the complaint we make against His Maiesty's Government, and against their supporters in and out of the House, is that they have ignored through all these years the offers made to us by those communities, that they have sheltered themselves behind self-made rules of finance which have, to my mind, no solid basis either in scientific or in applied economics, and that they have, in consequence of these limitations, put it absolutely out of their power, when they met the Colonial Prime Ministers in conference only a few days ago, to do anything in the direction which the Colonies desire. There is, I believe, one exception. There is, or has been, a suggestion made that there should be a preference in shipping, or that there should be a shipping subsidy, or some expedient of that kind. I do not know whether the hon. Gentleman who has just sat down, and who is an ardent economist of a certain school, regards that as consistent with free trade as he understands free trade; and, if he does not, I wonder whether he is going to make the same eloquent speech in denouncing it, if it should ever come before the House, as he has just made in denouncing other schemes which are certainly no more inconsistent with free trade than this. I suppose the Chancellor of the Exchequer will tell us, or indicate, when he comes to deal with this branch of the question, what it is the Government really do propose with regard to shipping subsidies, and will give us the opportunity of practically testing exactly what it is that they mean when they talk of supporting "the theory of free trade." We have often tried to find out, but we have not always succeeded; and I remember that when a Motion was moved on the subject last session they very wisely closured the debate after two days discussion, because they found themselves wholly unable to explain the meaning of the phrase. The discussion has very naturally, and I think very rightly, ranged over a wide surface. We have not only dealt with the question placed before us by my right hon. friend's Amendment, but some speakers have also discussed various outlying portions of the same great theme, and discussed them in many cases with great clearness and ability. We have had a sketch Budget of one character from the hon. Member for North Paddington. The hon. Member for Leicester gave us a sketch of another Budget on somewhat different lines, and we have departed, more or less, no doubt, from the perfectly narrow limits laid down by the Amendment, strictly interpreted. I think I shall probably best consult the convenience of the House if I confine the few observations I have to make to a survey of the condition of things with which that Amendment is intended specifically to deal. If we were merely discussing the question of colonial preference and the question of the propriety of possessing some power of bargaining with foreign countries, I should really have nothing to add to what I have often said to this audience and to other audiences. The reason I think it worth while to speak at all on this subject is not that I have anything to modify in any statement of principle I have ever laid down. It is not that I think those statements were ever lacking in clearness or precision or lucidity. [Ironical cheers.] It is not that I have changed them even by a hair's breadth. [Ironical cheers.] But it is that I think the Budget of the Chancellor of the Exchequer, taken in combination with what we know to have passed at the meeting with the Colonial Premiers, gives new opportuneness, new force, and new applicability to the principles which I have ventured often to lay down as representing my own views and those of many of my friends. I heard ironical cheers just now when I said that I have never changed my opinions. Those ironical cheers came from Gentlemen who have never taken the trouble—I do not know whether it was worth their while—to master the views I have from time to time put forward; and among the people who have not taken that trouble I may count the Prime Minister, who spoke the other day at Manchester, and repeated, with his usual force, the oft-repeated charge that I had, as a matter of fact, modified my views from time to time, that I had, in accordance, as he suggested, with political exigencies and political pressure, changed opinions to which I have given expression and modified principles which I believe to be sound politically and economically. No man can say that who has read or listened to what I have at various times spoken on this subject, and who is at the same time gifted with ordinary powers of comprehension. The Prime Minister has powers of comprehension far above the ordinary, and I conclude, therefore, that he has, very wisely from many points of view, never taken the trouble to acquaint himself with the opinions which I and others hold on this subject. We have had the old battle-cry of protection and free trade raised again to-day. I am not going into that subject. If by protection is meant—and it is probably the most accurate, scientific meaning of that much-abused term—a policy which has for its object the diverting of the trade and commerce of a nation or of the world from its natural channels by artificial legislative means, that has never been, and is not now, any part of the policy which Ire commend. I do not want to see grow up in this country industries which under natural and free conditions would have no chance of flourishing. I do not desire to see that policy carried out; and, that being my view, I think it perfectly absurd, from a scientific point of view, to describe my policy as a policy of protection. But let it be remembered that we are now dealing with a world which has evidently set itself determinedly to divert commerce and industry from its natural channels and to our disadvantage. When we hear the authority of Sir Robert Pool quoted, as we often do on these occasions, let us remember that Sir Robert Peel never contemplated anything distantly approaching the condition of things that we have got to deal with. I do not for a moment believe that he would have tolerated leaving this country absolutely without weapons for the purpose of negotiations when every other country, or almost every other country—every country, I believe, but Turkey—does as a matter of fact, endeavour artificially to divert the stream of manufactures and commerce in a direction hostile to our interests. And if you tell me that that is all a vain and useless endeavour, that these efforts made by foreign countries are doomed to lead to nothing, then I say, what is the value of your talk about the evils of protection and the evils of tariffs? The only reason that protective tariffs are bad is that they divert commerce. If you put on protective tariffs and they do not divert commerce, they do not have any of the evil consequences which hon. Gentlemen opposite assume. Therefore, I think we may say without paradox, what every sound economist admits, that we have to deal with a world in which the natural course of events is artificially perverted by every nation of the world, and it is folly not to arm ourselves, as far as we can be armed, with a weapon which will enable us to deal with that state of things. I have expressed clearly now, as I have always expressed clearly—I have often said it before, and it is perfectly clear to anybody acquainted with even the elements of economics—the view that I am a free-trader, and I am in favour of a weapon by which we can deal with hostile tariffs. Those are my first two propositions. The next proposition I would lay down is that colonial preference is a most valuable means of binding the Colonies together. That is one thing we ought to aim at. Doubtless there have been, and still are, after all that has happened, difficulties in the way; but those difficulties are difficulties which we should set ourselves to surmount, and not approach in the spirit of the hon. Gentleman who has just sat down, and who, following His Majesty's Government, prejudged the whole question and issue by saying that the scheme is eminently so absurd that closer examination is not required and we will reject any possible policy which is based upon preference.

* MR. MALLET

I did not suggest that the entire policy of preference was ridiculous, though I should not be averse to arguing that. What I did say was that preference based on existing duties was, if you came to examine it, hopelessly ridiculous.

MR. A. J. BALFOUR

I accept the hon. Gentleman's correction. But even with that limitation I should wholly, dispute his doctrine. Nothing, in my judgment, can be regarded as ridiculous in the way of a modification of our tariffs which commends itself to our great self-governing Colonies. The hon. Gentleman's view is that no, preference based upon our existing duties, or any duties which the country would tolerate, could be of any use to the Colonies. Well, the Colonies are the best judge of that. When you have the Colonies coming, not once nor twice, not in one year only, but in a succession of years, and reiterating the same story and indulging in the same feelings, I think that a concession to those feelings ought not to be described, even in the most amiable spirit, as ridiculous On the larger question, I have gone much further—and have always gone much further—than expressing my desire to see preference based upon existing tariffs. Before the controversy arose—I believe it was on the very day on which my right hon. friend the Member for West Birmingham made the speech which is usually, and, I think, very properly, regarded as the date when this great cause first came into evidence before the public eye—on that very day I expressed my views in favour of Colonial preference in the strongest and clearest language; and from that date, now four years ago, I have never varied, even by a fraction of an inch, on one side or the other. There is another proposition I have laid down, which is that, if you are to carry out this great national object of giving us a weapon to deal with foreign countries, and of giving us the means of preference, it is no reason for rejecting the plan that it may involve small Customs duties for which there is no counter-balancing excise. Such duties, of course, have a fractional protective effect, but I never suggested that they were put on for protection; I do not value them because they have a protective effect, I do not believe that the protective effect is material; and I appeal to the whole experience of the civilised world whether that is not a rational contention in matters of this kind. We do not call Turkey protective because it puts on a revenue duty, we do not call India protective because it puts on a revenue duty; and, if there is a sufficient reason for putting on duties for great national or Imperial objects, the mere fact that they may have the corresponding disadvantage of some slight protective effect is no reason why a sane and rational financier should reject them. And I do not believe there is a scientific economist in the world who would think that the statement that I have just made to the House has any element of paradox whatever in it. That is my fourth proposition. My fifth proposition, which I venture to press earnestly upon the House, is that, if you could obtain some preferential arrangement with the Colonies, which the Colonies thought worth giving something for in the way of advantage to our manufactures, you do make a clear and distinct step in the direction of free trade within the Empire. It is perfectly true that the full idea of free trade within the Empire may be an ideal which we never shall realise. The general tendency of civilised mankind seems to be going so strongly in favour of protection that I think probably it never may be reached, at any rate in our lifetime. But, if yon are to have any approach to it, that approach can be obtained, and obtained only, as I think, by some arrangement of preferential duties within the Empire, by which our great manufacturing industries may obtain that market which, in spite of what optimists say, is going tobe—probably within the experience of many whom I am now addressing—one of the great difficulties of a manufacturing country like ourselves, which must import largely from abroad, and must have large exports to pay for those imports. And observe that the advantage to be gained ought never to be measured by the immediate and present statistics of the moment. I think it was the hon. Member for North Paddington, following in the steps of many predecessors, who explained how our commerce with the Colonies was relatively so small that it was not worth our while, as it were, to make any important sacrifices to obtain a preferential footing in them. You have not to consider merely what a trade is now, and you have not to consider merely what the Colonies are now; you have to consider what the trade is going to be and what the Colonies are going to be. And when hon. Gentlemen dilate, as they often do, on the evils resulting from building up artificially great interests in any community on the basis of protection—I agree with their general theory—do they not see that, if we could in any respect prevent the building up of those great interests in certain departments of industry, and if there was the smallest prospect that we should be allowed in the future in these great and growing communities to introduce our manufactures on something like equality, on terms which would enable them, at all events, to compete in the Colonial market, we should be doing an enormous service to the manufacturing industry of this country, and we should be doing it on the strictest free trade lines and for free trade reasons? Well, that is the fifth of the propositions that I have laid down—all, I venture to say, perfectly clear and perfectly precise. I believe they are all absolutely consistent with sound economic theory; and I should not have taken the trouble to repeat them again to the House if it had not been that, in my judgment, two events have occurred since I last spoke in this House upon the subject which have a very great bearing, not upon the theory of the case, but upon the practical grounds on which statesmen modify their policy. Well, what are those two circumstances? One is the view given by the Chancellor of the Exchequer in his Budget speech—endorsed by almost every speaker on the other side of the House—namely, the relation of our expenditure to our present means of taxation. Everybody admits that the expenditure of the country is very large. Some people think—I believe it is the old Radical orthodox view—that it is more than the country can stand. That is not the new view. The new view, expressed with great force by the Member for Leicester, and, I think, also by the Member for North Paddington, was that the expenditure of the country was very much less than the country could bear, and that it would undoubtedly require to be greatly increased. That is the new view. We have got a long way from the days of Joseph Hume. When we examine the Budget of the Chancellor of the Exchequer what do we find? Do we find that there is great latitude for future expenditure, even at the present rate of taxation? As I understand, the Chancellor of the Exchequer's position is this. He expects a surplus of £2,250,000 for the next year. This is to be a kind of nucleus for a scheme of old age pensions, which, we are told by another member of the Government, will require about.£25,000,000 a year to satisfy. Just think of how precarious a tenure the right hon. Gentleman has of this £2,250,000. If the Education Bill had been carried last year he would have had to diminish the £2,250,000 by a £1,000,000. If the Irish Council Bill is carried this year he will have to diminish that diminished sum by £650,000. In other words, if the right hon. Gentleman's colleagues succeed in their projects of legislation, his £2,250,000 will be reduced to something a good deal less than a £1,000,000—a very small nucleus indeed for a scheme of old age pensions which is to cost £25,000,000 a year. And observe, the right hon. Gentleman filled a great deal of his speech by discussions as to the need of raising the national credit. But if by raising the national credit he means making permanent provision for paying off debt, that further permanent provision will have to be made at the cost of what remains of the £2,250,000. It will have to be made at the cost of the £600,000 or £700,000 which, if his projects of legislation are going to be successful, is all that he will have to pay either for the purpose of old age pensions or for the purpose of raising the national credit. And this leaves out of account altogether all the big schemes of social reform. It leaves out of account altogether the natural growth of expenditure, which no Chancellor of the Exchequer, with the best will in the world, has ever been able to resist, and which certainly the right hon. Gentleman shows no greater power of dealing with than any of his predecessors. That is the position on the present basis of taxation. And what is that basis of taxation? The basis of taxation is 1s. in the pound on income-tax, a very heavy duty on sugar, a very heavy duty on tea, and other taxes which I need not now dwell upon. Does anybody think that satisfactory? The Chancellor of the Exchequer does not. Does the hon. Member for Leicester, who spoke for the Labour Party? Does the hon. Member for North Paddington think it satisfactory? The hon. Member for Leicester got up, and, while he occasionally threw a faint compliment to the good intentions of the Chancellor of the Exchequer, he filled all the earlier part of his speech with the most vigorous denunciations of the selfish character, or the anti-social character of the Budget, for which the Chancellor of the Exchequer was responsible. And what is the Member for North Paddington's view? He objects altogether to putting any tax upon a new article. That is his first proposition. His second proposition is that the expenditure of the country must be greatly increased. His third proposition is that you must take all the duty off tea; his fourth proposition is that you must take all the duty off sugar; and his fifth proposition is that you must get the enormous deficit by graduating the income-tax. That is practically the suggestion of the hon. Member for North Paddington for our future guidance; he acknowledges the accuracy of my summary of his very interesting speech. Does he suggest that that is practical politics? Does he really think that any Chancellor of the Exchequer can come down and modify the Budget in that fashion? I doubt it. I believe that even in the serried ranks among which he is now sitting he would find no support for such a proposal, and everybody would recognise that his scheme, at all events, is one wholly impracticable. I do not know that the hon. Member for Leicester's scheme is much more easily carried out. His plan is, not to throw everything in a differentiated income-tax, but to try to get out of ground values, I think he said by simply appropriating them without compensation, all the money now required for carrying on the public service and initiating those great schemes of social reform with which, no doubt, all sympathise in every quarter of the House. Is that a practical system? Is that the kind of Budget the House is going to accept? We have three suggestions before us. We have that of the Member for North Paddington, that of the Member for Leicester, and the actual plan of the Chancellor of the Exchequer. The Chancellor of the Exchequer does not defend his own plan. He does not say that 1s. income-tax is a good thing. He says it is a very bad thing. He does not say that the tax on sugar is good, nor does he wish to keep the tea duty at its present level. Yet he knows better than anybody that the claims which will be made upon him, and which he will not be able to answer on the present basis of taxation, are claims which are certain to come in and which it will not be possible for any Chancellor of the Exchequer now or hereafter to resist. When you survey the actual balance sheet of the country and the way of meeting expenditure, surely you must be driven to the conclusion that, in the words of the Amendment, the basis of taxation ought to be widened. There have been very curious misconceptions as to the meaning of the phrase "widening the basis of taxation." The present Minister for Education seems to think that, by widening the basis of taxation is meant the increasing of the number of people taxed; and precisely the same meaning was put upon it by the Member for Leicester. That is not the meaning which the framers of the Amendment attach to the phrase, and it is not the ordinary meaning which attaches to it. When you speak of widening the basis of taxation, you mean, not drawing more people into the net of the Chancellor of the Exchequer, but drawing more articles for taxation into his net. Those are two quite different propositions. There seem to be some hon. Gentlemen opposite who do not appreciate that. I confess it seems to me rather elementary. But it is quite evident that you attack the same person either by extracting £10 from him in the way of income-tax, or £10 by a tax on sugar, or £10 by a tax on motor-cars. In each of these cases you put the same tax on the same person; but if you put a part of the income-tax, or a part of the sugar tax, or a part of the motor-car tax on him, you then have a more extended system of taxation, so far as it goes. Now I hope even the most anxious of my audience are clear as to the moaning of "widening the basis of taxation." That is the meaning in which it is used in the Amendment, that is the sense in which it has always been used, until this debate, in economic discussions. Now, Sir, we do not raise, nobody desires to raise, by this Amendment any question as to the incidence of taxation as between the different classes of the community. That may be just, as the Chancellor of the Exchequer supposes it, or it may be unjust, as the hon. Member for Leicester and the hon. Member for Paddington suppose it. We do not raise that question, though it is, no doubt, a most important question. We assume that the incidence of taxation is not in question. We only say that the taxation on the same people may be better raised than it is now. It is admitted that there are great and obvious evils in attempting to keep the income-tax at 1s. or in attempting to maintain a high rate of duty on tea, sugar, and tobacco; and if you can extend the subjects which you tax and not the individuals you tax we believe you will probably find a better system than you have now. But I believe you will be forced to extend them whether you like it or not, unless you are driven to some of those methods of dealing with a graduated income-tax and so forth which, in my judgment, would give you very little money and would enormously disturb the country's industries. If you are not going to do it by a graduated income-tax, this increased expenditure, which all admit will occur and may desire to occur, must be taken from other taxable articles. You cannot add materially to the income-tax or to the tea or sugar duties or to the spirit duties, and even if you could you would leave your system open to many objections, and certainly most inelastic in times of national stress and emergency. What we say is that the situation displayed by the Budget statement has the peculiarity of casting the view forward, far beyond the year in which the statement is made. We deduce from that that for our own purposes, without having any regard to the Colonies or foreign nations, without touching on the question of retaliation or preference, we ought to modify the existing system. That is the first conclusion I draw, and it is drawn from the Chancellor of the Exchequer's statement. My second conclusion is drawn from the views expressed by the Colonial Prime Ministers. I say that any taxation you put on for your own purposes should be used, us far as it can be, to meet the views of the Colonies, and I believe this system of taxation, to which you will be forced, whatever your views about preference, will prove to be useful, and can be used for the purpose of Colonial preference Now, it will be seen that my suggested policy depends on the House accepting three propositions—one, that the present system is not sufficient for our needs; secondly, that any change in the system must be in the direction of extending the not of the Chancellor of the Exchequer and taxing fresh articles; and, thirdly, that when you have extended your system of taxable articles, you will be in possession of a fiscal system which can be used, to the immense advantage of the commerce and manufactures of the country and for the benefit and unity of the Empire, for the purpose of establishing Colonial preference. I have been attacked by the Prime Minister for enunciating these views while the Colonial Premiers were in this country. I have been told that this is turning the visit of the Prime Ministers to a political object. It is nothing of the kind. So far as my poor powers go, I have most sedulously avoided, in the presence of the Prime Ministers, saying one single word which would be capable of a Party interpretation. But is my mouth to be shut on these questions simply because the eminent statesmen who are now our guests happen to be in the country? Are we to draw no moral and no conclusions from what they say? Are we to be blind and deaf to all their utterances? That seems to me to be a counsel, not only not of perfection, but of the utmost imperfection; and having to address my fellow-countrymen, I certainly think I should have been wanting in my duty if I had not at once pointed out what I considered is the new practical situation brought upon us in reference to this great question by the double fact of the Chancellor of the Exchequer's Budget and the reiterated and re-expressed wishes of the Colonial Prime Ministers. Some hon. Gentlemen have told us that this attempt to make arrangements with our Colonies will be in the nature of bargains which turn friends into enemies, and which do not bind closer the bonds which already unite friends. I cannot understand that reasoning. I notice that yesterday.Mr. Deakin himself said that unity was his great object. The methods by which that unity is to be arrived at are relatively unimportant. Unity ought to be our great object. Are we seriously to be told that unity is not enhanced because you happen to come to arrangements about which it is possible to have controversy? I do not know whore any human relations would be if these principles were to be accepted. Matrimony would vanish at once. Of course all close relations give possible material for controversy. Nobody doubts it; but without close relationship you cannot have unity. The ideal of hon. Gentlemen opposite is to have our interests so separate that it is impossible to conceive of any difficulty arising between us because there is nothing about which we can conceivably quarrel. That is not an ideal of the relationship which ought to exist between human beings, between the Mother Country and the Colonies, or I would even say, between separate States. Dangers there are, dangers there must be, in any course which we decide to pursue; but surely we feel our fate too much, or our deserts are small, if we cannot trust ourselves to meet wishes expressed, not once, not twice, not casually, but officially; not by this man or that man, but by the authorised representatives of these great self-governing communities—if we cannot trust ourselves to try to come to some arrangement with them which will be so enormously for the benefit, as I think, of the commerce of both the Mother Country and the Colonies, and which would make us feel from day to day that we were something more than citizens even, living under the same flag and owning allegiance to the same Sovereign, but that we were people with common interests present to our minds from day to day. I do think that we have now a situation in this country which we should be criminal if we neglected. I perfectly understand that. I never agreed with those of my friends who have thought that our existing system of taxation is so satisfactory that even for these great objects it would be folly to disturb it. I have never agreed to that. But now that it is admitted that our existing system is not satisfactory, and that even those who are going to support the Government are telling the Government that their Budget is based on intolerable principles; now that the Government themselves admit that they have to keep all these duties at an inexpedient level to meet the expenditure which they foresee, and have nothing whatever in hand to meet expenditure which they do not foresee; now that we have the Government committing themselves, as they say, to a scheme of old age pensions and making no provision for it except the beggarly residue which is to remain of this £2,250,000—in that situation surely we have the right to say that an adhesion to the system of the past is really an outworn policy, that adhesion to the past is a thing that cannot go on, that something new must be devised, some new plan invented. When that plan is devised and invented, the least we can do, the smallest tribute we can pay to the warmhearted wishes of those who only desire closer union with us, will be to give some consideration to their reiterated demands for closer commercial union.

THE CHANCELLOR OF THE EXCHEQUES (Mr. ASQUITH, Fifeshire, E.)

I trust I shall not be thought wanting in respect to the many admirable speeches which have been made on both sides of the House in the course of this debate if I venture to say that its practical interest, in the stage which this controversy has now reached, is narrowed down to a single point—namely, whether or not the Party who sit opposite are at last definitely, and as a Party, committed to protection. The Amendment which we are ostensibly discussing is drawn like so many of its predecessors—and it is quite worthy to take a place in the long series of official, or quasi-official, declarations of fiscal policy which have proceeded from those right hon Gentlemen during the last four years—it is so drawn that, according to the mind or the taste of the person who reads it, it can be construed to mean anything in the world, or nothing at all. The views of the right hon. Gentleman who moved it yesterday, although they were not ostentatiously obtruded in the speech which he delivered, are perfectly well known, and to do him justice they have never been concealed. But, though I am afraid the right hon. Gentleman who has just sat down will accuse me either of a deficiency in common intelligence or of a want of care and attention in reading his public utterances, and I would plead guilty to the first much sooner than to the second, I say that the state of his opinions was, until he rose just now, and I venture to say remains now that he has sat down, one of the most interesting and at the same time one of the most baffling psychological problems that have ever been known. The right hon. Gentleman tells us to-day, not for the first time, that he is not a protectionist. [An HON. MEMBER: "Hear, hear."] That was very faint applause. He is not protectionist; yet let me console those Gentlemen who were silent just now; although not protectionist, no one has ever shown himself more sensitive, or I think I may say more copiously alive, to the infinite imperfections of what we call free trade. The right hon. Gentleman, in fact, has succeeded in a feat which to any one of less intellectual dexterity than himself I should have thought impossible, the feat at one and the same time, without apparently any sense either of logical or dialectical incongruity, of repudiating protection and denouncing free trade. I, like so many of my friends, may not be endowed with those special interpretative faculties which are necessary for the purpose of piercing the true and inner meaning of the right hon. Gentleman's declarations, but I am as much in the dark at this moment as I have ever been as to what is the definite and specific policy he proposes to this House. The right hon. Gentleman tells us he has not changed his opinions; well, I daresay he has not. He tells us that he has long thought and often said that matters have changed so much in the tariff system of the world since the days of Sir Robert Peel that the argument for free trade which was then, or might have been, presented as a thoroughly sound argument is no longer valid. [An HON. MEMBER: "Free imports."] Well, what I call free trade and shall continue to call free trade. The right hon. Gentleman must forgive me for saying that he is entirely wrong. In the first place, in point of fact—I am speaking now from memory, but I am pretty sure I am accurate—the tariff walls which British trade had to surmount in the time of Sir Robert Peel were higher than any corresponding walls they have to surmount to-day. And in the second place, so far from Sir Robert Peel, or any intelligent supporter of Sir Robert Peel, thinking that his advocacy of free trade was in any way dependent upon the breaking down of those tariff walls, he expressly, in advance, repudiated more than once any such view. This is a false view of history which is so current that I will not apologise to the House for troubling them with two or three quotations from Sir Robert Peel himself, short and very much to the point. In 1846 he said— In making this great reduction on the import of articles from foreign countries, I have no guarantee to give you that other countries will immediately follow our example. [Interruption.] Yes, but let the hon. Member wait. Late in the same year, on resigning office, Sir Robert Peel said— I trust that the new Government will not resume the policy which they and we found so inconvenient—namely, haggling with foreign countries instead of taking that independent course which we believe to be conducive to our own interests. Three years later, when experience had already shown that foreign countries were I not going, to any considerable extent at any rate, to relax their tariff system, speaking in this House on 6th July, 1849, he used these memorable words— I maintain that the best way to compete with hostile tariffs is to encourage free imports. That was the doctrine of Sir Robert Peel, and it has been the doctrine of every free-trader who understood the meaning of free trade.

MR. A. J. BALFOUR

dissented, and mentioned the French Treaty.

MR. ASQUITH

I think I can demonstrate to the right hon. Gentleman that the French Treaty and everything connected with it was a policy perfectly consistent with that. So much for that point. The right hon. Gentleman has also told us that he is in favour now, as he always has been, of Colonial preference; but what does he mean by Colonial preference? That is what he has never told us. Colonial preference clearly does one thing which, in his view of free trade, in his comparatively modest view of free trade, it ought not to do, it diverts the natural course of trade.

MR. A. J. BALFOUR

dissented.

MR. ASQUITH

What good, then, is it going to do?

MR. A. J. BALFOUR

was understood to say that the course of trade was not natural, that it was diverted by duties, and that he wished to get it nearer the natural channel.

MR. ASQUITH

That explanation, I think, may be left to speak for itself. If hon. Gentlemen like, I will pursue the subject. I said that unquestionably it would divert the course of trade, and the whole object of it is that it should. In other words, instead of getting, as we do now, our supply from every available source in the world, the foreigner would be penalised as compared with the Colonial producer, and therefore the natural course of trade would be turned into another channel. I do not know any other meaning that can be attached to it. But the right hon. Gentleman added that we ought not to be too pedantic, that oven if there was a small protective element in these preferential duties we might regard it as the first step, at any rate, towards free trade within the Empire. That brings mo to an argument used, I think, by my right hon. friend the Member for St. George's last night, quoting the Under-Secretary for the Colonies, who had expressed pleasure at the conclusion of preferential arrangements as between the different Colonies themselves. When two Colonies which are protective countries enter into a preferential arrangement the one with the other, that undoubtedly is a step, slight, may be, but still a step, in the direction of freer trade. Of course, a free trade country like this would not withhold its pleasure from such an arrangement. But when you ask us to come in, exactly the contrary takes place; instead of taking down a stone or two from the walls which already exist, if we enter into this preferential arrangement with them we are to build up for the first time as against the foreigner a wall which has no existence at all. The right hon. Gentleman tells us that two now factors have recently come into view which have had a great influence, at any rate in his mind—the Budget and the Colonial Conference. As regards the Budget, I wish I could think that it was so startling in its originality that it could have produced the same effect on the mind of the right hon. Gentleman as I think the reading of Hume produced on the mind of Kant, and have awakened him from what I would call his undogmatic slumber. But I cannot claim for it any such title, anxious as I am in my parental solicitude to magnify its importance in every possible way. I commended the proposals of the Budget to the House, and still commend them, not merely on their own merits, but because I believe they open and clear the way to larger and better things in the near future. But the Budget involves no departure in point of principle from preceding Budgets, and yet I observe it is treated by the right hon. Gentleman and his colleagues as though it were in some way or other a practical confession for the first time that our fiscal system—free trade—has broken down, or is on the point of breaking down. I cannot understand that argument at all. I said the exact contrary. In my Budget speech I never said that we had reached, and I do not believe that we have reached, the limit, or anything like the limit, of our possible taxation. And when I spoke of setting aside a modest nucleus of some £2,250,000 or £2,500,000, I never said that that was the whole sum we hoped to have available. I am not to be tempted into giving a forecast of what next year's Budget will be; but I said that we should start with so much to the good, and that is something gained. It is said that we can only produce this revenue by a system of bad taxes; but all taxes are bad—it is only a question of degree. The exact effect of the income-tax at 1s. in the pound will be this. If you take into account the number of persons who benefit by the existing scales of abatement, and those who will benefit by the 3d. differential rate of computation, you will find that out of an estimated total of 1,025,000 income-tax payers some 920,000 will pay less than the 1s. in the pound. If you aggregate the amount of income assessed to income-tax before deductions and abatements at £770,000,000, and the estimated yield at £31,250,000, the average rate per pound that will be paid on the yield will not be more than 9d¾d.in the pound. So that I am giving relief to 920,000 income-tax payers, and the average rate will not be more than 9¾d. in the pound. I now come to the proposition that we should broaden our basis of taxation. I assert that, in any intelligible sense of the word, the basis of taxation in this country is as broad as, and I believe it to be broader than that of any other country in the world. It consists, first of all, of taxes upon necessaries, next, of taxes upon the simpler luxuries and alcoholic drinks and tobacco, and finally, of taxes upon income and property. You cannot make a system of taxation very much broader than that, and the confusion of thought consists in confounding the number of persons and interests over whom taxation is spread with the multiplicity in the number aud variety of things in regard to which taxes are levied. We have had practical experience of what the right hon. Gentleman calls broadening the basis of taxation in the past in this country. Sir Robert Peel found a tariff covering a very large number of commodities. What was the result of practical experience upon that broad basis? The result was it hampered all trade, it encouraged evasion, produced incalculable friction and constant intriguing on the part of competitive interests, and a large and unnecessary rise of price to the consumer, and, finally, an inelastic revenue to the State. It was abandoned, not in deference to any dogma or theory of free trade, but because in practical experience it was found to be injurious to the country. Then we had the experiment made a few years ago by Sir Michael Hicks Beach. What has become of that? Sir Michael Hicks Beach was a free-trader, and I doubt whether he would have tried that experiment at all if he had not been in urgent need of revenue for the purpose of the war. Finding himself in need of war capital, he divided his war taxes into two categories—temporary and permanent. The permanent taxes were the corn tax, the coal tax, and the sugar tax. What has been their history? The corn tax lived precisely twelve months, when it was repealed by the very Cabinet who had levied it. The coal duty suffered its death blow at my hands last year; but whatever Government had been in powor—Liberal or Conservative, free trade or protectionist—that coal tax could not possibly have survived for more than another year. I remember very well that in the stress, or I might say the agony, of the general election the right hon. Gentleman the Member for West Birmingham made a declaration of great interest to the mining industry, that if the late Government had remained in power this tax would have been abolished. The only tax that remains then is the sugar duty, and there is a consensus of opinion in all quarters of the House that it should be diminished, or, as I think, when the time arrives, entirely removed. So that I venture to say, whether in the remote past or in the recent past, attempts to broaden the basis of taxation have not had a happy experience and should not be repeated. Then as to the statement that new light had been thrown on the matter by the Colonial Conference, I fail to see where the novelty comes in. Everybody knew before the Colonial Premiers came here that the self-governing Colonies had either put into operation, or else offered to do so, preferential tariffs in favour of British trade. These tariffs vary very much in their nature and value. The Canadian and the South African tariffs are relatively wide in their scope and substantial in the preferences they give. The New Zealand tariff affects only 20 per cent. of our imports into that Colony. The Australian tariff has never yet come into operation, because the Bill had to be reserved. Let me say here that I quite agree with what Mr. Deakin said at the Conference that it was intended to be but a forerunner, and therefore it would not be fair to take it as representing the final form the Australian offer may ultimately take. But this Australian tariff will apply to only 8 per cent. of the total importation of the United Kingdom produce into Australia, and it will only apply then if we accept a condition, which I do not believe the people of this country will ever accept, namely, that these goods shall be carried only in British ships manned only by white labour. Everybody knew that these tariffs existed, and everybody knew also that all these tariffs are so contrived that under them British manufacturers have no chance of any sort of competing on level terms in the Colonial markets with native producers. I do not complain of that; I said so at the Conference. On the contrary, I said— We have given you fiscal autonomy, and we should be madmen if we attempted to interfere with your full exercise of it. You are just as much entitled as we are to freedom in fiscal ideas. We have no right to complain, and they would be acting like fools—flying in the teeth of the very economic system they have adopted—if they let us, the most enterprising manufacturing nation in the world, undermine their native industries. Everybody knew all that before the Premiers arrived. Everybody know, too, that the electors of the United Kingdom had by an unexampled majority, after a controversy prolonged for three years, in which every aspect of the matter had been exhaustively reviewed in every town and in every hamlet—[OPPOSITION cries of "Oh, oh," and MINISTERIAL cheers]—the electors of this country had by that unexampled majority declared that they were not going to change our fiscal system or abandon froe trade. [OPPOSITION cries of "Oh," and renewed MINISTERIAL cheers.] Therefore, I do not understand what is the new fact which has been brought home to the right hon. Gentleman by the Colonial Conference, and which was not common knowledge before any Premier left his own shore. But we sat for five days discussing these matters in the frankest and fullest fashion. They spoke very plainly to us and we spoke very plainly to them. I am quite certain that, notwithstanding the mischievous and unscrupulous activity of the baser section of the protectionist Press, who have shrunk from no kind of imagination and of innuendo for the purpose of creating bad blood between the Mother Country and the Colonies in the hope that, peradventure, they might in that way manufacture a little dirty political capital—I say again what is absolutely free from doubt, and I am sure every one of my friends, for so I will call the Colonial Premiers, will agree with me, that after this full and frank and candid, but at the same time most cordial, interchange of opinion, although we agreed to differ, we rose from that table better friends than when we sat down. That is the only new fact, so far as I know, that has come into view. I come now to the practical conclusion of the whole matter. What is it that you want us to do? What is it you want the House of Commons to affirm? Surely not the principle that was put forward by the right hon. Gentleman the Member for St. George's last night, which I think was given only some faint countenance by the right hon. Gentleman who has just sat down, that we should give the Colonies a preference on our existing duties. What possible good would that do to the Colonies? To some of them it would make no difference of any sort or kind; to none of them would it be any appreciable material advantage. We hear about Cape wine. I am speaking from memory, but I think the exports of Cape wine to this country are valued at £8,000 a year. I hope it will grow very much; it was once much larger than it is now. But it is now only £8,000. This proposal would only affect a little part of South Africa. What about the sheep farmers and other persons engaged in agricultural pursuits chroughout South Africa, who would obtain no advantage of any sort or kind from our tampering with the wine duty? It is a very good object lesson as to the way these things are apt to work out. For the sake of giving a preference to this small industry we are to revise our wine scale and impose differential duties against France and Germany, and possibly—I am not sufficiently informed as to the alcholic strength of the wines of Spain—against Spain and Portugal also. The thing is not worth thinking about; everybody knows it is not. It is all very well to say it cannot do very much harm even if it does not do very much good. At any rate, it concedes the whole principle. When you have once granted preference in regard to existing duties, you have no longer an answer to the demand for that other from of preference which consists of the imposition of new duties. I venture to say that you are asking for something which is of no value to yon but which to us would involve the sacrifice of the whole of those principles in which we believe Only one thing remains. As I have said over and over again, I am sorry to have to repeat it, it may be for the thousandth time—and this is where I complain of the right hon. Gentleman, for he will not bring his mind to the concrete facts of the case—you cannot give an effective or even an approximately just preference to the Colonies unless you impose discriminating duties against foreign food and foreign raw material. There is no way under Heaven by which the thing can be done except by adopting one, and I will say both, of those two expedients. And this Amendment to the Bill which has been moved from that Bench, although we have not heard a single right hon. Gentleman who has ventured to adopt that construction of it, is open to no other construction in the mind of any intelligent man. If this Amendment were carried the Colonial Premiers could go home and say, "The House of Commons has in effect conceded everything we went to England to ask for." Therefore the sum and substances of the whole matter is that under the guise of this Amendment—although the right hon. Gentleman who supported it was very gingerly in coming to close quarters with its practical application—the House is being asked to-night to reverse the verdict that was given by the country at the last general election, to be false to the pledges which the vast majority of us gave to our constituents, and to take steps towards undermining the free trade system of this country.

* MR. BRIDGEMAN (Shropshire, Oswestry)

wished to know whether the right hon. Gentleman, when he accused a section of the Press of attempting to create bad blood between the Mother Country and the Colonies, had forgotten the action of his own Party at the time of the general election in regard to Chinese labour and the alleged slavery in regard to it. He thought it was a pity that he did not address to his own friends the little lecture he had given to the Opposition that evening. The right hon. Gentleman had said that there was nothing new about this question of Colonial favour or preference, and that everybody knew that the Colonies had either given us a preference or had made us the offer to do so. If everybody knew that why had every speaker on the other side gone about the country saying that there had been no offer? In this debate, moreover, nearly every speaker on the other side and certainly the official speakers had tried to shift the onus of drawing up an alternative Budget on to the Opposition, but he thought the justification for the Amendment lay in the fact that the Chancellor of the Exchequer had introduced into his Budget this year a new principle. This was a Budget, they were told, not for one year but for several years, and in order to buy off opposition to it the Chancellor of the Exchequer had made a very vague and indefinite offer about old age pensions. That promise, if it was to be fulfilled, could only be fulfilled by some increase of taxation, and if the Chancellor of the Exchequer was going to redeem his promises in regard to future years he should provide the means of carrying them out, and when he made such promises he should say how he intended to carry them out on our present basis of taxation. He challenged the right hon. Gentleman to say how he intended to carry out his promise with regard to old age pensions. The Chancellor of the Exchequer had stated that next year there would be two and a half or two and three-quarter millions for old age pensions, but it had been pointed out to him that some £650,000 would be due to Ireland and £150,000 to Jamaica. They were also told that there were going to be subsidies given to the shipping lines to the Colonies, and the right hon. Gentleman seemed to have entirely left out of account the automatic increase of the Civil Service, an increase which this year had amounted to £650,000. That left very little indeed for a nucleus for a scheme of old age pensions next year, and it all depended upon the right hon. Gentleman having as prosperous a year as he expected whether he would be able to carry out his promise. That, however, was a matter of some question. He hoped the right hon. Gentleman would be right in his forecast. If hon. Members opposite came down like the President of the Board of Education had done and said that the one idea of himself and his Party was to relieve the poor and to take off taxation from the shoulders of those who felt it most, he would like to know why neither in this year's Budget nor in last year's Budget any effort had been made in the direction of relieving those who felt most the burden of taxation. True it was that last year a 1d. was taken off the tea duty, but they were told this year that that was no use, and that unless they reduced the tea duty by 2d. the money wont into the pocket of the tea dealer. If that was so, the 1d. remission of last year was useless and nothing had been done this year. Therefore he did not think it lay in the mouths of hon. Members opposite to talk about relieving those who were the most heavily taxed portion of the community. Several strong speeches had been made in which was repeated the old maxim that if they were going to make a reduction in direct taxation it ought to be accompanied by some concurrent reduction in indirect taxation. The indirect taxpayers had not, however, had any relief, and he did not see the slightest chance of their getting it unless they had from those who were responsible for the finance of the country some new form of Budget. They had had suggestions from various parts of the House as to objects for which additional funds were required, but there had not been from any responsible person a single suggestion as to how those objects were to be carried out. The Chancellor of the Exchequer had said that some day he was going to take off the sugar duty if it was possible to do so, but had not said how it was to be done. There were a good many Members of the House who would like to see more money spent on education, especially in regard to providing for secondary education out of the taxation of the country. Last year the zeal of His Majesty's Government was so great that they said that this year they were prepared to spend £1,000,000 under what they called an Education Bill. Now that education was separated from the process of destroying religious teaching in the schools, not one penny could be found for education. What was proposed in this Budget would stand for all time in front of any chance education might have in the future. Again, people could only be brought back to the land, and those who were now there kept there, with the assistance of public money. By the suggestion that local taxation grants would not increase but probably diminish, the £3,000,000, which, according to the report of the Local Taxation Committee, ought to come out of the public purse in order to adjust the unfair burden of local taxation, would be prevented from reaching the pockets of those who ought to be relieved. Therefore he failed to see what possible opportunity they would have of carrying out a feasible scheme of bringing the people back to the land if they were to be constantly told there was no money to be had from the Exchequer and that everything had been promised for old age pensions. Whether the right hon. Gentleman was going to adopt the suggestion of the hon. Member for Leicester, who said that our system of taxation ought to be that of a pyramid standing on its apex, or that of the hon. Member for North Paddington, who proposed to get over the whole difficulty by a largely graduated income-tax, or whether he inclined to the idea that the only method of securing reforms that all required was by dropping a battleship, or so many regiments, each year off the estimates, the country ought to be told how he proposed to carry out his scheme. If the right hon. Gentleman proposed to budget in advance he surely ought to say what he intended to do to find the money.

* MR. MOND (Chester)

said he desired at the outset to apologise to the right hon. Gentleman the Member for St. George's division. When he interrupted the right hon. Gentleman, as he thought at the right hon. Gentleman's desire, and said he thought it was fortunate that the right hon. Gentleman was not in business, he did not wish in any way to reflect upon his mental capacity, but only to imply, when the right hon. Gentleman challenged business men to deny a proposition that he made, that though the right hon. Gentleman might be an eminent statesman, he would be a very poor man of business. The House had listened to a most eloquent, inspiring, and oratorical speech from the right hon. Gentleman the Leader of the Opposition. He had listened to that speech with great interest and delight and had sympathised very much with the right hon. Gentleman in one way. He had been unfortunately misunderstood with regard to fiscal policy not only on the Government, but on the Opposition side of the House. He had never soon himself that the right hon. Gentleman had changed his views from the moment he began to explain them. The right hon. Gentleman was a philosopher and an economist. He saw the evils or the wants of free trade and the heresies of protection, and walked gingerly between the two in a manner which satisfied neither his friends nor his opponents. That was a characteristic of the right hon. Gentleman. He remembered speaking to one of the electors of Manchester shortly after the last election and that gentleman said of their late representative that if he had been a good free trader they might have got him in, and if he had been a good protectionist they might have got him in; but the people of Manchester would not vote for a metaphysical abstraction. He felt for the right hon. Gentleman, because he himself had taken an interest in metaphysics, but he hoped that in time the right hon. Gentleman would convince and convert his right hon. friend the Member for East Worcestershire, who was now leading the tariff reform party, that there was no occasion for the valentine letters, which, according to the right hon. Gentleman, need never have been written; that the Party opposite were quite a happy family if he would only give up repeating economic views which nobody could follow. He was grateful not to hear from him that the foreigner was going to pay the tax, and that the policy of the Tariff Reform League, with all its speeches, pamphlets, letters, and machinery, was never adopted by the right hon. Gentleman; that he was a good free trader at heart to-day; and that it was only with the soft hand that he inflicted wounds on her he loved to assuage the anger of the ravening wolf of tariff reform. He, however, quarrelled very seriously with the right hon. Gentleman's definition of free trade. A free trader believed that it was not the function of the State, by means of tariffs or duties on imports, to interfere with the industries of the country. A protectionist believed that it was the function of the State to do so, and to develop the interests of some industries at the expense of others. That was a good definition of the two principles, though he did not deny that much might be said in favour of both policies. He had read a most interesting book by a German protectionist who however, did not say the foreigner was going to pay the tax. That gentleman said Germany must protect her agriculture because they wanted to keep the people on the soil and wanted soldiers; that they must decrease the imports of manufactured goods because they were parasites on the industry of the country. That was a logical argument which they could follow; but here there was the same kind of argument used again and again about the foreigner paying the tax, providing revenue while excluding foreign goods, and it was all to be done by the same duty. So long as they went on one duty they could not do it. If they really believed in stopping the imports of manufactured goods, why did not they advocate the passing of a short Act prohibiting their importation? Why should they follow the hideous traditions of other countries? Let them look at what happened in America. The right hon. Gentleman was not a protectionist, and never was, nor was America protectionist. The first American tariff was put on for revenue purposes simply at the time of the American war. But when the war came to an end the manufacturers who had grown rich under the tariff remained and the tariff was revised; all the protectionist portions of it were extended and the revenue parts of it were diminished. Ever since then there had been a continual see-saw, sometimes there was a high tax on pig iron and a low tax on wool, some times a high tax on wool and a low tax on pig iron. £30,000,000 the American steel trust drew from the American people every year because of the American tariff. He made a serious appeal to hon. Members opposite. He asked them to read the history of the American, or any other tariff, and to read of "Pig Iron Kelly" and others who had built up those tariffs, and then say whether they wanted to repeat that sort of thing in the House of Commons; whether they wished to come there to represent the interests of the British nation, or that of pig iron or some other industry. Hon. Members opposite said that such things would not occur in this country; but that had been said by every one of these people, all of whom had been dragged down into the pit. And as those people had been dragged down, so should they all, if protection once came into that House. It was irresistible. They should come to that House session after session, and discuss high and low tariffs and duties, or no duty, on wool, and matters of that kind. Let them go to Germany, and see how the agricultural party raised the price of agricultural produce, with the result that the people were starved because of the bargains made in the lobbies—"Votefor a higher duty on iron and we will vote for a higher duty on corn." We were pure in our politics in this country in a way they were not pure in any other country in the world, but if protection was once again introduced the same jobbery would go on here that went on in America. One of the leading statesmen of Australia, Senator Edward Pulsford, said— If supporters of preference in the United Kingdom could but know how they have strengthened the barriers that exclude British goods in Australia, and probably throughout the world they would feel both sorry and ashamed. That was from one of the leading and responsible statesmen of Australia. All that the tariff reformers were doing, in advocating preference with the best motives, was to encourage the protectionists of Australia to help to exclude those goods which they wished to see admitted. In that House they might discuss this subject in a more or less statesmanlike way. But let them go out to the public platforms, during any by-election, and what did the issue come to? There was only one issue that the people would listen to, and that was free trade or protection. Before that issue all the beautiful shades of meaning of the Leader of the Opposition disappeared. For the people there was only the brutal and naked fact which they fought against years ago, and which they would fight and defeat again. He had taken the trouble to get together some figures with regard to this matter in reply to the argument of hon. Gentlemen opposite that the exports to our Colonies had increased much more largely than to foreign countries. That statement was a mistake. The export of manufactured goods to agricultural and non-agricultural countries had increased more rapidly than the exports of manufactured goods to self-manufacturing countries. That was pretty obvious. He had taken 1898 and 1905; there was no trick about the years he had chosen. In the period from 1898 to 1905, the exports to the Argentine Republic had grown by £7,571,065; to Canada by £6,592,259; to Australia by £530,218; to New Zealand, by £2,529,180; and to India by £13,998,219. Those were our total exports. He never made fancy distinctions between manufactured articles and other things; our business was to sell what people wanted to buy and to receive the money for them. The man who worked in the mine, who produced iron ore, or coal, did not pause to consider whether the article was highly finished; he was content if he got his money on the Saturday. The figures which he had quoted showed an increase of our exports of 120 per cent. in the case of the Argentine; 90 per cent. Canada; 3 per cent. Australia; 50 per cent. New Zealand and 80 per cent. India. We had £300,000,000 worth of capital in the Argentine which was really an English Colony in all except nationality. Were the tariff reformers going to interfere with that? Let them take Germany. To that country from 1898 to 1905, we had increased our exports by over £9,410,599—as much as the whole of the self-governing Colonies put together; to Italy by £3,502,341; and to Japan by £4,734,750. Where did they find the confirmation of the wonderful statement that our exports to foreign countries were diminishing year by year? He wished some of the gentlemen who made such statements would look into the figures, or go to the big houses in Manchester, Liverpool, and London, and ask the merchants whether they found their statements to be the fact. Our exports to Germany had increased in the period stated by 25 per cent.; to Italy by 50 per cent.; and to Japan by 90 per cent. We were not only holding our own, but were gaining every day. To enable us to continue gaining, he would say to hon. Gentlemen opposite, "For goodness' sake leave us untouched.'' As a man responsible to many thousands of shareholders, for many million pounds' worth of capital, and for the welfare of many thousands of English workmen, he bogged hon. Members opposite not to shackle their hands and feet by trying to assist them in their industry. If they tried to assist them they would make a complete and hopeless mess of it. Let them settle this as business men. If they interfered with commerce they would do much more harm than good. He wished to quote a few words about Colonial preference or Imperial reciprocity— This proposal requires that we should abandon our system in favour of theirs, and it is in effect that while the Colonies should be left absolutely free to impose what protective duties they please, both upon foreign imports and upon British commerce, they should be required to make a small discrimination in favour of British trade, in return for which we are expected to change our whole system, and impose duties on food and raw material. Well, I express again my own opinion, when I say that there is not the slightest chance that in any reasonable time this country, or the Parliament of this country, would adopt so one-sided an agreement. The foreign trade of this country is so large and the Colonial trade so small, that a small preference given to us upon that foreign trade by the Colonies would make so trilling a difference. Those were the words of the right hon. Gentleman the Member for West Birmingham, speaking at the Canada Club m 1896. On many other occasions the right hon. Gentleman had spoken with great force and vigour and truth, and he regretted that the right hon. Gentleman had not maintained the sound opinion which he then expressed. Again, speaking at Manchester in 1897, the right hon. Gentleman the Member for West Birmingham said— Anything in the direction of an Imperial Commercial League would weaken the Empire internally and excite the permanent hostility of the whole world. It would check the free import of the food of the people. It is impracticable, but if it were practicable and done in the name of Empire, it would make the Empire odious to the working people, it would combine the world against us, us, we would be a cause of imitation. He asked the House to realise what those words meant. Somebody would tell the millions outside that Empire meant dear bread and dear meat, and did they think that would endear the Empire to the masses? As one who loved the Empire, he wanted to see it democratically upheld; and he protested, and would continue to protest, against the odious idea of putting into the minds of the democracy the idea that the Empire must necessarily mean dear food. A celebrated British statesman said— It may be that I shall leave a name sometimes remembered with expressions of good-will in those places which are the abode of men whose lot it is to labour and to earn their daily bread by the sweat of their brow—a name remembered with expressions of good will when they shall re-create their exhausted strength with abundant and untaxed food, the sweeter because it is no longer leavened with a sense of injustice. Those were the words of Sir Robert Peel in the last speech he delivered in 1846. Statues of Sir Robert Peel stood in the country with the inscription, "He gave us free bread." Did the right hon. Gentleman the Member for East Worcestershire wish to be remembered by statues with the inscription, "He taxed the children's bread?" If ever the Opposition were returned to power as tariff reformers he assured them that they would be fought by the free trader; like Cobden and Bright, fought them in the most gloomy days, and they would go on fighting until this corpse of protection was buried again. It was no use dressing up the old skeleton in preference clothes, or hanging on it the totems of the right hon. Gentleman the Leader of the Opposition, because it was still the old corpse of the corn tax which had been dug up again, the stench of which made the people of this country ill, and which, if the hon. Gentleman opposite ever wished to return to power, they had best reinter at the earliest possible opportunity.

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

said he gathered that the hon. Member for Chester, who had just spoken, was opposed to the Amendment, and he wished to examine for a moment or two the reasons which had been put forward why the Amendment should not be accepted. The reason put forward by the Chancellor of the Exchequer and the hon. Member for Leicester was that this was a chose, jugée. The answer to that contention was in the speech of the hon. Member for Chester. Fiscal reform was, he said, the one question which interested the people and upon which they still had an open mind. It was, he said, a question upon which they wanted to have their minds made up. In the second place tariff reformers were told that the people of this country would never buy social reform or old age pensions at the price of a tax upon food. [MINISTERIAL cries of "Hear, hear."] He wished to point out that the Government now proposed to sell it at the price of taxation on food. [MINISTERIAL cries of "Oh, oh."] Was sugar not a food? Upon that point the Chancellor of the Exchequer was much wiser than some of his followers, because with his great dialectical skill he foresaw that objection and said that his reason for the retention of the sugar tax was that it was a war tax and no war tax ought to be abolished until the war indebtedness had been discharged. That was an ingenious, but unsound argument. Was the House aware that at that moment they were paying for the war indebtedness of the Crimean War and the French Wars? He did not suppose the right hon. Gentleman's enthusiasm as a financial purist would carry him so far as to propose to return to the war taxation of those periods. Had hon. Members opposite ever thought how duties on sugar and corn were felt in practice? A duty of 2s. per quarter on corn had been suggested. If such a duty were imposed it would be placed upon foreign corn, and Colonial corn would still continue to come in on the same terms. That would be a duty which would be not universal but only partial in its application. However, he would concede for argument's sake that the whole of such a tax would be paid by the consumers in this country. What would it amount to? A duty of 2s. upon corn represented something like 7 per cont. upon the value of the article, whilst the duty upon sugar represented 35 per cent. He would for a moment consider the figures, in regard to consumption. Roughly speaking, for the last ten years the people of this country consumed on an average six bushels of corn per head of the population. A 2s. tax on corn upon six bushels amounted to 1s. 6d. per head per annum. The average consumption of sugar in this country was something like 85 lbs. per head of the population. Last year the average was over 87 lbs., but he would for the purposes of his argument place it at 80 lbs. That would amount at a halfpenny per pound not to 1s. 6d. but to 3s. 4d. per head. There was a further question which arose out of this. If the Chancellor of the Exchequer could not reduce the duty on sugar by half because the consumer would not get the benefit, and if the sugar duty meant a burden of 3s. 4d. per head of the population, how was it if they were going to take off half of the sugar duty, which was 1s. 8d. per head of the population, that that was going to be of no use to the consumer, while in the view of hon. Gentlemen opposite the consumer would be so vitally affected by a duty on corn when the taxation would only amount to about 1s. 6d. per head of the population? The second contention he wished to deal with was the statement of the old doctrine that taxation ought to be levied only for revenue purposes. That article of the free trade creed was now renounced by the Free Trade Party. They had heard a good deal about the taxation of ground values, and everybody knew that a scheme of that kind was in the air, somewhere between heaven and earth. Personally he had had some experience upon a Committee of inquiry into the question of ground values during the last year. The Committee of which he was a member, and also a previous Royal Commission, had reported that taxation of ground values could not be recommended because it would provide any very large hitherto untaxed source of revenue, but it was recommended because the majority of the Committee considered that it was likely to make some change in existing social conditions. That was imposing taxation not for revenue purposes, but for social purposes, and that was also the result of the suggestion made by the hon. Member for Leicester. Therefore the doctrine of taxation for revenue purposes only had gone by the board, and it was very doubtful whether it was ever seriously entertained by the Free Trade Party. The Chancellor of the Exchequer had spoken about Mr. Pitt as the father of income-tax, but exactly between Mr. Pitt's first speech on the income-tax and the time the right hon. Gentleman spoke, Lord Beaconsfield in the autumn of 1852 proposed a scheme of differentiation between earned and unearned incomes, which was almost precisely the same as that now proposed by the Chancellor of the Exchequer. That proposal was denounced by Mr. Gladstone and his Party, and the Government was thrown out of office on the introduction of that very scheme. When the President of the Board of Education said that differentiation of the income-tax was not likely to cripple its expansive power, he was going contrary not only to the belief of Mr. Gladstone, but to opinions which Mr. Gladstone succeeded in inculcating into a Cabinet. The doctrine of taxation for revenue purposes was not necessarily one which was adhered to by the Free Trade Party. Mr. Gladstone upon one celebrated occasion, in a Memo- randum, alluded to in that life of Mr. Gladstone which was written by the Secretary of State for India,† recalled the fact that in 1843 he made strong speeches in favour of the extension of the system of colonial preference from Canada to the other Colonies of the Empire. He had one of Mr. Gladstone's speeches on that question in which he referred to the question of the extension of a preferential duty on corn between Canada and this country, and he said— he believed that the exportation from Canada to England would give a great stimulus to the agriculture of the Colonies and be beneficial to the male of both countries. At the same time it could not exert any injurious effect upon the productive industry of the English agriculturists. That was the kind of trade, independent of foreign countries, and mutually beneficial to two parts of the same Empire which could not be affected by hostile tariffs, which it was the duty of Parliament to encourage more than any other trade. He commended that quotation to some hon. Members who admired Mr. Gladstone's principles so much but did not always follow in his footsteps. For that was the argument which was stated now by fiscal reformers. If they were going to raise the necessary revenue, they could not do it by confiscation pure and simple, and if they adhered to the present limited basis of taxation, then every day our system of taxation approximated more and more nearly to confiscation. If they were going to raise the necessary taxation fairly, it could be done only by broadening the basis of taxation. He did not ask the House to take that from himself. The Undersecretary for the Colonies in 1902, speaking on the problem of unemployment in this country, said that— The only chance for the struggling millions of whom they read in Mr. Rowntree's book, if ever they were to enjoy the bounties of nature, lay not in any socialistic system of taxation, not in any charitable enterprise, or charitable immunity from taxation, but solely and simply in effective scientific commercial development. He commended that opinion to hon. Members opposite. If they really believed that in the name of free trade they could resist the object which this Amendment put forward, and if they really held that taxation was never to be laid on with the view, or indeed with the possibility, of benefiting British industry and furthering British commerce—if that † Morley's "Life of Gladstone," vol. i., p. 255. was their conception of free trade, and if, as the Chancellor of the Exchequer said, free trade was to them the breath of life, all he could say was that the sooner they gave up the ghost the better.

MR. RENDALL (Gloucestershire, Thornbury)

said the last speaker had quoted the opinions of certain well-known men. He and his friends were not concerned to defend the opinions which were held and expressed at a time when the speakers had not advanced to that position of intellectual development which they afterwards achieved. The scientific arid commercial development to which the Under-Secretary for the Colonies referred in the passage quoted by the hon. Member had nothing to do with protection. The business people who wanted scientific and commercial development were the last people in the world to want any sort of tariff interference with their business. The only result of that debate was to show once more to an astonished country that the Opposition were hopelessly divided as to what they meant and wanted,and that the only Party that had the faintest idea of what they meant were the Liberal Party. If that end had been served once more he thought there would be some advantage to the country from the debate. During the last Parliament the members of the then Opposition tried unsuccessfully to ascertain what were the opinions of the right hon. Gentleman the Member for the City of London in regard to free trade and protection, but now apparently the members of the present Opposition were anxious to know what his opinions were. Whether they were satisfied or not with the speech the right hon. Gentleman had that day delivered, it was not for him to say. He hoped that the hon. Member for Ludlow would have an opportunity of addressing the House and stating what he thought about his leader's opinions. From a speech delivered by the hon. Member some time ago they gathered that he was unable to fathom what the opinion of his leader was. It would be interesting to know his opinion now. He himself claimed no particular capacity to interpret what the Leader of the Opposition had said on the question, but having read his speeches and his pamphlet, and having listened to his speech that day, he was bound to say that he was quite unable to fathom what the right hon. Gentleman meant, or what his views were in regard to tariff reform. What were the right hon. Gentleman's views in regard to duties on manufactured articles imported into this country, on raw materials, and on articles of food? The right hon. Gentleman had gone out of his way to avoid the mention of the word food. These were points on which the House ought to have some information before voting on the Amendment, which seemed to be capable of an enormous number of different constructions. The Budget of this year was not a Budget of despair; it made a perfectly clear pronouncement that the first duty of this country was to lessen its debt. They knew also that it provided for the nucleus of a fund for old age pensions. It was not an electioneering Budget, it did not try to provide social reforms on credit and not for cash, and it tried to meet obligations fairly and squarely. The important principle was acknowledged that there was to be a differentiation of the taxation of earned and unearned incomes. Some Colonials with whom he had recently been conversing told him that they had been struck with the extraordinary conditions in connection with our factories and workshops. A lady said to him that she was surprised at the enormous number of hours shops were open in this country. He thought he might say without disrespect to those members of the Party opposite who represented capitalists and landowners that those conditions represented their profits in some measure, and that they had very strong reasons for trying to draw something across the path of progress in that direction. They were anxious to prevent changes in the law which would interfere with the profits which they derived under present conditions. Therefore, when social reforms were proposed, they were always told by the Opposition that the Empire was in danger. The present Government had come into power with an enormous majority after a direct fight mainly on the question of free trade. That battle having been fought and won, it ought to be regarded as completely settled during the present Parliament. He had during the last few weeks received from tariff reform organisations communications asking him to support various proposals of colonial preference. These were practically requests that he should break the pledges which he gave to his constituents at the time of the election.

And, it being a quarter-past Eight of the clock, and there being Private Business set down by direction of the Chairman of Ways and Means under-Standing Order No. 8, further Proceeding was postponed without Question put.