FINANCE BILL.

HC Deb 02 June 1908 vol 189 cc1731-95

Order read, for resuming adjourned debate on Amendment to Question [1st June], "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, in order to add the words 'in view of the growing liabilities of the nation for naval and military defence, old-age pensions, and education, and of the necessity for giving additional relief to ratepayers from the increasing charge for national services now thrown upon the rates, this House regrets that no attempt is made to increase the resources of the Exchequer by broadening the basis of taxation,"—(Mr. Laurence Hardy,)—instead thereof.

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

MR. BONAR LAW (Camberwell, Dulwich)

said the Chancellor of the Exchequer at the beginning of his speech last night complained that his hon. friends on that side of the House had dealt with everything except the Finance Bill, but it seemed to him that the rebuke he had directed might with some force be applied to the right hon. Gentleman himself, and what he (Mr. Law) proposed to do was to follow the precept and not the example of the right hon. Gentleman. He remembered hearing a statement by some member of the Government that they were blessed with a new kind of Parliament, and they were therefore entitled to make precedents. They were doing so, and among these precedents there was none that marked more distinctly an entirely new departure than the Budget which they were discussing. The Postmaster-General had told them quite truly on the previous day that this Budget was remarkable for three things. It was remarkable for the scheme of old-age pensions; it was remarkable also, though in a lesser degree, for the diminution of the sugar duty; but it was remarkable most of all for the fact, to which the right hon. Gentleman did not refer, that for the first time, he ventured to say, in their history the Government of the day by means of the Budget had imposed upon the country obligations, undefined but very definite, without having the courage at the same time to face the problem as to the means by which those obligations were to be met. The Chancellor of the Exchequer had challenged them to oppose old-age pensions or the reduction of the sugar duty. Both of these things were popular, he admitted, but he did not see how it was possible for anyone to defend the great increase of obligations involved in the one and the great loss of revenue involved in the other, and certainly so far no serious attempt had been made to make that defence. He asked the House to consider exactly what the financial position of the country was. The Chancellor of the Exchequer at this time next year, whoever he might be, would be faced in consequence of the proposals of this Budget by a deficit due to old age pensions alone which was estimated by the Prime Minister at about five millions, which had already grown in the speech of the Chancellor of the Exchequer to six millions, and which he expected would reach a much larger sum before they had done. But that deficit was based upon the assumption that the existing duties would yield at least the same revenue which they were expected to yield this year, and they could not do so. This year they obtained for a small portion of the year a part of the full sugar duty; that represented something like £400,000, and obviously it must disappear next year. In making his estimate this year the Prime Minister anticipated an increase in the income-tax for the reason that last year was a prosperous year, and that there would therefore be more income-tax yielded. That could not apply next year, because everyone admitted that next year they would have to deal with a year which had not been prosperous from that point of view. He thought he was not exaggerating when he said that the diminution of revenue from those two causes alone would amount to about a million sterling. For old-age pensions alone the Chancellor of the Exchequer would have to find a sum of seven millions sterling, and it seemed to him that to impose those obligations upon the country without at the same time facing the liability involved was a kind of finance which it was absolutely impossible to defend. The Chancellor of the Exchequer had made an attempt to defend it. He had told them that it would be quite unprecedented and improper for the Chancellor of the Exchequer to budget beyond the year with which he was dealing. It was obvious that that was purely a technical defence, and that it did not touch the real problem, but even as a technical defence it broke down absolutely in the light of the action of the Government. Last year the Prime Minister, who was then Chancellor of the Exchequer, actually provided in advance for a problematical charge on account of old-age pensions, and now the curious argument used by the Chancellor of the Exchequer was that it was quite right and proper to provide for a charge which was not certain and only problematical, but the moment that obligation became irrevocable then it was improper for the Chancellor of the Exchequer to make provision for it. It would be quite impossible to find any words which would condemn the whole Budget so strongly as those used in condemnation of it in advance by the Prime Minister last year. He told them then that it was his duty to budget for the future. The exact words used by the Prime Minister were important, not merely because of the unequivocal condemnation which they gave to this Budget but for the soundness of the principles they contained. He said— The country has reached a stage in which, whether we look merely at its fiscal or its social exigencies, we cannot afford to drift along the stream and treat each year's finance as if it were self-contained. Well, he was not content with drifting along the stream, for now he plunged over the cataract, and the only defence which the Chancellor of the Exchequer could give was to deny the principle laid down by the Prime Minister last year and to say that it was his duty to treat each year's finance as if it were self-contained. But the Prime Minister went even farther in direct condemnation of the course which he had taken this year. Speaking, he thought, in regard to the sugar duty, the right hon. Gentleman said— I cannot deal with the surplus in such a way as to involve any permanent diminution of revenue. But even that was not enough. Some hon. friend taunted the right hon. Gentleman that in that case they could look for no remission of any kind of taxation, but the right hon. Gentleman would not have that, and this was how he explained it— I am budgeting"— he said— for the next two or three years, and it is in face of that situation that what I said applies. He told them therefore last year that for the next two or three years, i.e., the time for which he expected to be responsible for the finances, he could look forward to no diminution in revenue. What was the explanation? It was a curious change of front, and no explanation had been given so far. He hoped the Prime Minister would give some explanation, but if he did not, he did not think they would have much difficulty in guessing at the real cause. There was a great change in the political situation. Last year the tenure of office of the Government seemed still secure. The Prime Minister then could employ his whole energy in trying to produce a sound Budget. The position was not now quite so secure, and the Prime Minister seemed to be much more exercised in producing not a sound but a popular Budget. That change was one which he thought was a characteristic of the Government and of the Liberal Party all along the line. When they came into office three years ago they were very ambitious, and they spoke really as if their accession to power meant the dawn of a better day. They were not so ambitious now; they were still not without ambition, but it was a more modest ambition. It hardly extended beyond the intention expressed by the Chancellor of the Exchequer and the President of the, Board of Trade, the intention to remain two or three more years in office. That was a modest ambition. He saw no reason why it should not be realised. Indeed, he thought the position outside had strengthened the Leader of the House within the House itself. He noticed two or three weeks ago a picture which represented the Prime Minister as a lion tamer, a picture very flattering to him but not so flattering to the lion. In that picture the right hon. Gentleman held a whip. It would have been complete if it had been labelled "Bye-election," for that was the scourge by which he kept his unruly followers in order. The obligation imposed by old-age pensions, great as it was, was not the only nor perhaps the greatest obligation which would have to be faced immediately by the Chancellor of the Exchequer. His hon. friends who moved and seconded the Amendment had pointed out the obligation in connection with the relief of local taxation; and that was admitted by the Chancellor of the Exchequer himself. It must be faced some time, though it was not an immediate obligation. There was also a demand, not for education, but in the name of education, for some money to be supplied by the Treasury. How much that would be, he did not profess to know. If they could judge the intentions of the Government by their Bill they would know, but in this instance the Bill was no guide to the intentions of the Government. But apart from these indefinite obligations there was an obligation which was quite as definite in his opinion as that of old-age pensions itself. The Prime Minister had quite recently given the House a clear and unequivocal pledge that if the German naval programme which started this year looked next year like being continued we should have a building programme as well. Not one of the German naval programmes in recent years had been abandoned or postponed; several of them had been anticipated, and therefore it was practically certain that that was an obligation which this country would have to face next year. And yet the Chancellor of the Exchequer chose this time to make a speech in which he actually held out to the country the hope of a reduction in our naval expenditure—a time, moreover, when it had been admitted by the Prime Minister and some other members of the Government that if the German naval programme was carried out, and if we had no shipbuilding programme in consequence of it, the German navy, in the biggest size of battleships, would in only three years be actually stronger than ours. The right hon. Gentleman had chosen that time to represent to the House and to the country that it was we who were responsible for the growth of armaments. If that speech really represented the view of the Government, then the security of the country was in the gravest danger. If, on the other hand, the Prime Minister's views represented the feeling of the Government, then for the Chancellor of the Exchequer to court the applause of his followers below the gangway by holding out hopes of reduction which were impossible of fulfilment was a course not worthy of the right hon. Gentleman. With all these obligations in front of them, the Government elected to take off the sugar duty. He was not going to say anything in detail in regard to that duty, but he was bound to point out that its evil effects had been greatly exaggerated. It had been suggested, for instance, that because sugar was the raw material of some industries the duty was therefore specially obnoxious. Why was it obnoxious on that account? Our manufacturers were not handicapped in any way by the duty as against their foreign rivals in the home market, and foreign manufacturers had to pay the full equivalent on the goods they sent in. Since the Government came into office the price of sugar had not been high, and therefore no one could pretend that that duty was an intolerable burden or one which it was necessary, in all the circumstances, to remove. But whether or not it ought to be removed depended really on what was the substitute which was proposed for it. The Chancellor of the Exchequer had not given them any substitute, but the Prime Minister had indicated two. The first was the raiding of the Sinking Fund, and that recommendation was supported by the Prime Minister by a serious error of fact and by a false analogy which was condemned in every quarter of the House except the Treasury Bench. The Prime Minister indicated another source of revenue which was much more alarming. It was contained in the closing sentences of the Budget statement. He did not think that those sentences had yet attracted in the country the attention which they deserved. The Prime Minister pointed his successor to two sources of direct taxation—death duties and income-tax—as a fruitful field whose surface he had only scratched. That source of revenue must be taken in conjunction with old-age pensions, or any other scheme for social reform. As regarded that, he thought that the contributory scheme was ruled out without sufficient examination. He thought that that was proved even by the speech of the Prime Minister himself. The right hon. Gentleman gave a description of the system in Germany which was recognised in every quarter of the House as a caricature. It was a misrepresentation. [MINISTERIAL cries of "No."] It was a misrepresentation so gross that it would not have been excusable in any Member of the House, but it was almost incredible in the case of the Minister responsible for this Bill. The contributory scheme was ruled out with too much haste. Until a few weeks ago everyone, on both sides of the House, including the Prime Minister, considered that no scheme of old-age pensions could be justly brought forward which was not contributed to by the class who would benefit by that scheme. The real and vital distinction at this moment between legitimate social reform and practical Socialism was the method by which those reforms were to be paid for. If they were to be paid for by all classes of the community in proportion to their ability, then it was just and fair social reform. If, on the other hand, they were to be paid for entirely by one class exclusively for the benefit of another class, then it was practical Socialism. That was a perfectly clear issue. The Government had at last taken their line on that question and had selected the solution of the hon. Gentlemen below the gangway. The hon. Member for Blackburn the other day gave them an outline of the Budget that he would present. It was to raise the £20,000,000 necessary for old-age pensions by taxes levied upon the richer 10,000. That was very simple. But the proposal of the Prime Minister in principle did not differ in the least from the proposal of the hon. Gentleman below the gangway. The two proposals had this in common, that they both intended to tax exclusively one class for benefits to be enjoyed exclusively by another class. That was the exact position in which they were left by the unexhausted sources of civilisation as shown in the free trade finance of the Government. He was quite sure that from a practical point of view that method of raising revenue would fail. The rock upon which it would split had been pointed out clearly by the Prime Minister himself. He had shown them that last year, owing to the reduction of the income-tax to a level which was recognised as fair, there was a great increase in the sum assessed for the tax. The converse of that must be equally true. If the class to be taxed in that way regarded the tax as confiscatory when it was stretched to a point where it was considered absolutely unjust, then the source of that revenue would inevitably dry up. The hon. Member for Blackburn said that the big fortunes were precisely those which could not escape. That was wrong in fact. There was one kind of big fortune which could not escape, viz., that derived from landed property. But what about another and more important class of big fortune in this country which was derived from trade? That kind of capital was fluid, and did anyone suppose that if they began to attack it in that sort of way it would not leave this country and get beyond our reach? [An HON. MEMBER: That is old.] It was old, he admitted. He considered that it was a commonplace on which all sections in the House were agreed. They saw now what the proposals of the Government really were. What would happen under those circumstances was shown by the hon. Member for South Hackney yesterday in a very interesting speech. He suggested that a special tax should be put on capital abroad. If that was intended to keep capital from going abroad and if he himself believed it would have that effect, he would be in favour of it. But almost in the same breath the hon. Gentleman told the House of a conversation he had had with a friend who was a Member of the Upper House—no doubt one of the newly created Members—who said that he did not pay taxation now on foreign investments. Did the hon. Gentleman think that taxation, which those who had foreign investments now evaded, would not be entirely evaded if there was an attempt to do something which would be practical confiscation of those great fortunes? But this Budget had at least this advantage—that it placed before the country a clear issue as to the way in which revenue was to be raised. The proposal of the Government was that all additional needs should be financed by direct taxation, which, in his opinion, would have precisely the opposite effect, as far as the working classes were concerned, to that which hon. Gentlemen opposite seemed to imagine. On the other hand, the proposal of the Opposition was embodied in the Amendment before the House, viz., to broaden the basis of taxation. He noticed that when that phrase was used hon. Gentlemen opposite always laughed as if they thought that sneers would get rid of the argument; but it was an argument which they could not evade so easily, and which sooner or later they would have to face. They sneered at it when it was under discussion, but when it came to practical proposals they adopted it themselves. The Government had just introduced and the Chancellor of the Exchequer had obtained the Second Reading of the Port of London Bill, and if that Bill was to be carried into effect it would involve important changes in the method of raising revenue. It would have been, much simpler to raise more revenue by merely increasing the old dues on ships. But the Government did not intend to do that, because they believed that the taxation would be felt more if entirely based on ships than if divided between ships and cargo. He thought the Government were quite right. The Chancellor of the Exchequer next said that duties on goods would not produce sufficient to meet all the needs of this Budget. That was admitted. It was not proposed as a substitute for all other taxation; but the Opposition said that the great and pressing needs made it incumbent upon any Government to look about for some new method of raising revenue which would not impose an intolerable burden upon somebody or other. The Chancellor of the Exchequer said— You cannot get additional revenue from taxation on manufactured goods. When asked why not, the Chancellor of the Exchequer said because the revenue was so uncertain. Did he really regard that as a serious argument? When the death duties were imposed, they were regarded as a very uncertain source of revenue. If to-morrow the Chancellor of the Exchequer imposed a scale of duties on manufactured goods coming into this country, the officials at the Treasury would tell him, as accurately as they could tell him, the need of any other form of taxation, what the yield would be in any given year. The right hon. Gentleman next said— If you carry out your proposals, you will have all these goods made at home and then you will have no revenue. The right hon. Gentleman must know that in other countries, which had imposed duties far higher than were suggested here, the effect had been so to increase the whole trade of those countries that the imports even of manufactured goods, instead of diminishing, had actually increased. If we put on prohibitive duties, of course the revenue would dry up, but nobody proposed to do that. The right hon. Gentleman had on the previous day described him as "a thoroughgoing protectionist." Well, he did not know that he took much exception to the word protectionist if the Chancellor of the Exchequer understood what it meant. But he must deny that he was a protectionist in the sense in which the Chancellor of the Exchequer used the word in his platform speeches. He had no desire to make any change in our fiscal system which would have the effect of causing everything to be made in this country, whether this country was suited to its manufacture or not. He was not a protectionist in the crude sense of the Chancellor of the Exchequer's own Patents Act. That seemed to be the crudest and most absurd protection. Under that Act, for the sake of getting additional employment in this country, the right hon. Gentleman was going to compel all the articles protected by it to be made in this country, whether this country was suitable or not. [MINISTERIAL cries of "No, no."] Yes, that was the object of the Act. [MINISTERIAL cries of "No."]

THE CHANCELLOR OF THE EXCHEQUER (Mr. LLOYD-GEORGE,) Carnarvon Boroughs

I am sorry to interrupt the hon. Gentleman, but it is just as well that he should understand what the Patents Act is. The Patents Act does not compel anybody to manufacture anything here. It simply says that the monopoly will be withdrawn if it is abused.

MR. BONAR LAW

thought he understood the Patents Act. He certainly understood it better than its author. Even by the right hon. Gentleman's explanation the effect of the Patents Act was that, unless the articles were made here, the patent would be withdrawn. He maintained that that had the effect of causing things to be made here for which this country was not suitable. It had another effect. The right hon. Gentleman said the previous day that the Opposition were very fond of making speeches in the country where they could not be contradicted; but that remark applied equally to himself. He told an audience in Lanacashire that the difference between the Patents Act and protection was that the Patents Act would make things cheaper. He would ask the House to consider what the effect of the Patents Act would be in the light of a particular instance. A friend of his in Germany had for a long time been selling in this country a number of patented articles. In his factory in Germany he was able to make these things, not only for England, but for Germany as well. Under the Act of the Chancellor of the Exchequer, however, this gentleman had to have two factories instead of one, and the result was that the consumer here in England had to pay the increased cost resulting from the right hon. Gentleman's Patents Act. The only way to get the present House of Commons to pass an Act of protection like that was not to let hon. Members understand that it was at all contrary to the principles of free trade. So far as he was concerned, he had no desire to put on any duties in this country which would cause goods to be made here on which we were not able to compete with our rivals on equal terms. All that those who advocated this change wanted was to give our own manufacturers and our own workmen a preference in our own market which would enable them to compete better with their foreign rivals in that market. The real point of the Amendment was its financial side. Every country had found it a means of raising revenue even before they used it for protection. Even in India the Party represented by the present Government themselves used it for obtaining revenue, giving no countervailing duties, except in the case of cotton. The Secretary for War condemned these proposals, because, as he said— The burden would be noticed so little that people would not exercise proper scrutiny. The right hon. Gentleman condemned this method of raising taxation because we should not feel it. That was a disadvantage which certainly did not apply to the alternate method of the Government. Surely it was the greatest recommendation one could possibly give to any system of taxation. The extent of any burden was the extent to which we felt it. As Hamlet said— For there is nothing either good or bad, but thinking makes it so. If it did not seem to be a burden, then for all practical purposes it was no burden whatever.

MR. LLOYD-GEORGE

What about wheat? [OPPOSITION cries of "Order."] I ask the right hon. Gentleman a question and he refuses to answer it. [Renewed cries of "Order."]

MR. SPEAKER

The right hon. Gentleman is entitled to make his speech in his own way.

MR. BONAR LAW

said he must follow the Chancellor of the Exchequer's example rather than his precept. He would now criticise some of the right hon. Gentleman's references to the conditions prevailing in Germany. He was amazed to hear the speech of the Prime Minister in which he contrasted so complacently the position of our finances with that of the German Empire. He was more amazed to hear the Chancellor of the Exchequer last night repeat those remarks. Last week he told the Chancellor of the Exchequer exactly what the position of German finances was. As the right hon. Gentleman had ignored those figures, he would repeat them. The price of German funds, compared with our own, was relatively much higher now than twenty years ago. To take another index—the total debt of Germany was only something like £170,000,000. In addition there were the debts of the German States, but the German State debts might fairly be compared to the debts of local authorities in this country. Then the German nation owned the German railways, and a large part of the debt was for building these railways. They were remunerative, and more than paid the interest on the debt. From the point of view of debt, Germany was now infinitely stronger than this country. There was another test which was more important still, and that was the test of the burden of taxation upon the people of the country, for upon that depended the elasticity in time of necessity. The right hon. Gentleman following the Prime Minister spoke as if the people of Germany were suffering under an intolerable burden. The total debt per head of the German people, State and Imperial, was only something like half per head that under which the people of this country were groaning. Why, then, it was asked, did Germany borrow? He gave the explanation last week. The unification of the German system was not yet complete. A particular kind of tax could only be imposed with the consent of the different states, and such a thing as that could only be realised in this country if the proposals of some hon. Gentlemen opposite of Home Rule for England, Scotland, Wales and Ireland were an accomplished fact. If ever the stress of national emergency arose, the funds were available and would be obtained, and there was no excuse whatever for saying that Germany was in a critical fiscal condition. The facts and figures which he had given were taken from a book lately published by that distinguished writer Dr. Zahnt, who, discussing the question of armaments, had pointed out that, if the result of economy was to render a nation liable to be beaten in war, it was the worst possible kind of economy. He further pointed out that moneys spent upon armaments could be made reproductive, that in the event of war the nation which had the armament that would win would not suffer financially, but would gain. ["Oh."] And it was on the German navy that the borrowed money was now being spent. The right hon. Gentleman made another excursion into German finance. He gave figures to show that the cost of living in Germany was 6s. or 7s., as compared with 5s. in this country. The right hon. Gentleman did not say where he obtained those figures. Where did he get his figures? He expected out of his own imagination.

THE PRIME MINISTER AND FIRST LORD OF THE TREASURY (Mr. ASQUITH,) Fifeshire, E.

I am prepared to produce the document.

MR. BONAR LAW

was glad to hear it. In regard to the whole comparison between Germany and this country, the point ought to be not whether the German people now were in as good a position as the English people, but what the comparison had been since the change in the fiscal system of Germany was made. He hoped the Chancellor of the Exchequer had not forgotten the statistics with which he used to be familiar when President of the Board of Trade. The fiscal Blue-book pointed out that in the twenty years from 1880 to 1900 the rise in wages had been greater in Germany than in other countries, and that there had been a great fall in the cost of living in Germany. The right hon. Gentleman had pointed out that there had been a great increase in the last few years in Germany. Yes, but did he realise the increase in the cost of living in this country? Everything had risen, and to an extreme extent. For the comparative cheapness of sugar the late Government were responsible. The right hon. Gentleman read a resolution passed by a number of members of the German Parliament, a resolution that was contrary to everything German. The group in question happened to be the smallest of all the groups in the German Parliament, and, like all small groups, it was the most divided of all the groups.

AN HON. MEMBER

It was carried unanimously.

MR. BONAR LAW

said that any hon. Member could get up a meeting of two men and a boy to sign a resolution against our rule in India or Egypt, or anything else. The resolution, though of course of no value, was perhaps of some little use in adding to the ignorance of foreign observers. If the observation of the right hon. Gentleman was intended to represent that there was a large body of opinion in the German Parliament and in Germany in favour of the fiscal system which prevails in this country, it was a statement made in ignorance, and appalling ignorance, of the whole political condition in Germany. There were, of course, parties in the German Parliament and among the German people who were opposed to the present volume of taxation, and who desired to see the tariff reduced; but there was no political party of any kind which would recommend that their market should he left open without restriction to the competition of Britsh goods. If any proof of that were necessary it was to be found in the fact that the leader of the very little group to which the right hon. Gentleman referred last night recently stated in public that the idea of a free trade Parliament was rooted out in Germany.

THE PRESIDENT OF THE BOARD OF TRADE (Mr. CHURCHILL,) Dundee

I had not intended to intervene in this discussion, but some statements of the hon. Gentleman who has just sat down I think require some rejoinder from this bench. Really I do not remember ever to have heard before such a succession of remarkable observations of various kinds, covering such a wide range of policy and economics, in the course of so brief and closely-reasoned a speech. Perhaps the most striking, or, at any rate, one of the most striking, of his assertions was the protest of the hon. Gentleman that he was not a protectionist, and he showed that he had his own interpretation of protection. He said that the Patents Act was a measure of protection—crude protection. A patent is in itself a protection. It is a restriction upon free trade—a very proper and prudent restriction given by the State. It is a protection of monopoly and privilege given to an inventor in order to stimulate invention. We say that that privilege should not be extended except in so far as it conduces to the public advantage. That is what my right hon. friend has done in regard to the privilege of patents. He has taken care that the monopoly shall not be extended beyond those limits in which it can be shown that it will develop industrial enterprise. Before that measure was passed it was open to a foreigner to obtain a patent in this country, and, in virtue of that piece of parchment, to employ a British policeman to stop British manufacturers from embarking upon that industry at all, no matter how desirable and suitable it was that such an industry should be created in this country. What a shocking and absurd state of things that we should artificially, and by a law of our own, in virtue of no other power than our own self-denying ordinance, fetter the free activity of our own people in regard to some manufacture for which our country was peculiarly suited! But where was the hon. Gentleman when all this was going on? He stands out as the protector of British trade, the sole friend of the manufacturers of this country. What was he doing during the two years his influence was active at the Board of Trade? What were he and his friends doing but enforcing day by day the law which forbade British manufacturers, at the behest of foreign subjects, from embarking on industries for which this country was economically suited? What we have done is not to establish protection. We have said that in certain circumstances where the privilege does not conduce to the public interest here, the privilege should be withdrawn, and the patent no longer operate. Does that mean protection? No, it means we revert to free trade. [OPPOSITION cheers.] it is of no use for hon. Gentlemen to laugh. We revert to free trade in that particular article. From the moment the patent lapses the article can be made by everybody, whether in England, Germany, or France, and sent into this country without adverse discrimination of any kind. That is what the hon. Gentleman calls protection. We should be quite content if that were the only protection we were advised to give. We ask no more than that there shall be a fair field and no favour, and where a patent is withdrawn absolute free trade in it will be the consequence of such withdrawal. The hon. Gentleman made a great many statements in regard to Germany which will, I think, have to be examined a little more critically and carefully in the course of the next few days. He challenged the Chancellor of the Exchequer in regard to certain figures which he quoted, and I understood from my right hon. friend that he will take steps to place those figures at the disposal of the hon. Gentleman and leave the House to judge. He also asked for the production of a particular document, and there is no objection to giving him entire satisfaction. I ask the House to notice particularly in regard to Germany one remark of the hon. Member, because it is really an illuminating remark; it shows the political inwardness of the protectionist mind. The hon. Gentleman quoted an opinion of Dr. Zahnt—and indicated that he shared it—that armaments may be made reproductive.

MR. BONAR LAW

I only said it was something which we in this country ought to take to heart.

MR. CHURCHILL

I notice that whenever we get to an important point in this controversy the hon. Gentleman and his friends decline to give a plain answer. Here in the course of an argument designed to show the goodness of the position of Germany financially and in credit he says that armaments are no doubt a heavy burden, but he quotes, to show that that burden is not so heavy as it appears, the observation of Dr. Zahnt that armaments may be made reproductive. I am in the recollection of the House when I say that the natural consequence of that argument is that he quoted the statement of Dr. Zahnt with a measure of approval.

MR. BONAR LAW

was understood to dissent.

MR. CHURCHILL

At any rate, he thought the statement was one pregnant with truth. This is not a very new policy. The idea that if you murder a man you may subsequently steal his money is a very primitive one. The great Napoleon for many years insisted on maintaining the whole fabric of his Empire on contributions levied by force on foreign States, but I am not of opinion that the ultimate historical conclusion of that great experiment could be said to be profitable either for Napoleon or the country over which he presided. When we are told that firmaments may be made reproductive, what about the South African War? Great gold mines were at stake, great armaments were employed, vast sums of money were spent, but there is no result at present of a financial character, and no dividend of a satisfactory or remunerative character has yet been achieved by this country. For myself I welcome this opportunity of repudiating altogether on the part of the great majority in this House the idea that we should be animated in our expenditure on armaments by any hope of making a profit out of such shocking means of human destruction. Then the hon. Gentleman proceeded to speak of the German financial position. With a great deal of what he said I should not be disposed to quarrel. He spoke of the small debt of Imperial Germany; I think he said it was £200,000,000. He showed how much of that debt was remunerative. It was invested in State railways and produced a valuable return. It was more comparable to the debts of our local authorities than to our National Debt, which, as everybody knows, represents only one thing—gunpowder. He proceeded to show how the debt, local and national, in Germany was only half the National Debt which exists in this country per head of the population. I have heard an expression "money talks." Let us see what the markets of the world have to say to the imposing catalogue of German financial assets. In spite of all these advantages which Germany possesses over us—a smaller debt, the reproductive character of that debt, the valuable possessions of the State in forests, railways, and minerals—what is the rate at which Germany has to borrow in the markets of the world? We can borrow at something under 3 per cent., whereas the German Empire, enjoying all the advantages of scientific taxation, has to pay 4 per cent. for money secured on all these assets. There can be no other test of the credit of a country than the price at which it can borrow. I am content to be guided in my conclusion by the ordinary market price at which the country can borrow. Judged by that prosaic and simple test, the hon. Gentlemen's arguments only serve to establish it on more unshaken foundations. The hon. Gentleman then proceeded to reproach us with our finance. Each party in the State admires its own record, and I can quite understand that in a speech in a controversial debate a speaker on the opposite side should be glad to contrast our record with the record of his friends. But of all subjects, I should have thought finance was the one which he would most carefully and prudently have avoided. I should have thought when the hon. Gentleman was considering on what subject to criticise the Government the one word of warning which he would have kept before his eyes was never to refer to the financial policy of the Opposition in his speech. The record of hon. Gentlemen opposite was to impose taxation. The record of His Majesty's Government has been to take off taxation. The record of the Party opposite was to pile up expenditure year by year beyond all expectation or precedent. The course of this Government has been thriftily, with care and pain and with the suffering and affliction which necessarily attend upon a policy of retrenchment, to reduce expenditure steadily year by year, so far as our opportunities have admitted.

MR. AUSTEN CHAMBERLAIN (Worcestershire, E.)

You have increased it.

MR. CHURCHILL

We have reduced the unproductive expenditure of the State. Armaments are the unproductive element of expenditure; it is in that branch particularly that the finance of the hon. and right hon. Gentlemen opposite deserved criticism and censure, and it is in that very matter that we have succeeded in making notable and substantial reductions. Lastly, I come to the question of Debt. The hon. Gentleman used the expression that we propose to raid the Sinking Fund. When a Party leaves office, having piled on the Debt £120,000,000 or £130,000,000, having left the borrowing practices of every department in a wholly unsound and unsatisfactory condition, having in years of peace increased the aggregate capital liabilities of the State, and having in the last two years of their responsible authority only reduced the capital liabilities of the State by, I think, £3,000,000 or £4,000,000, then, when that Party has been succeeded by an administration which in three years has been able to reduce those liabilities by between £40,000,000 and £50,000,000—a provision utterly unequalled in the experience of this country—silence, I should have thought, would have been the best policy. The hon. Gentleman's omissions were as remarkable as his assertions. We are confronted with an Amendment which urges the broadening of the basis of taxation. When the Government make a proposal, they are bound to make their proposal in all detail; and if an effective debate is to be conducted when the Opposition move an Amendment embodying a considered statement of policy, they ought to support that statement of policy by facts without which it is only meaningless jargon. What then, is your policy of broadening the basis of taxation? The hon. Gentleman spoke of a duty on manufactured articles. Is that the only duty he had in his mind? We are not afraid as free traders to discuss the merits of a duty on manufactured articles. We believe that on careful investigation it will be found just as susceptible to effective criticism as the duties on food, bread, and meat, which the hon. Gentleman omitted to notice. I am informed that a duty on manufactured articles, which is spoken of commonly as if it were a single duty, involves duties on at least 250 or 260 substantial and main categories of imports. Each of these articles is susceptible of much further classification. I make no doubt, from what I am credibly informed, that many hundreds of articles would be placed on the schedule of what is called a duty on manufactured articles. The hon. Gentleman must also remember that any enhancement of prices which might occur in this country owing to a duty being placed on manufactured articles, would inflict a hardship not only on the manufacturing population, who, it might be argued, would obtain some return, but also on the agricultural population, who would be forced to pay more for all the commodities they use, and would not get any returning measure of protection to compensate for their losses, if such compensation could be effective. It is well-known that no scheme of fiscal reform will ever be tolerated or put forward by the Party opposite which does not provide for protection of the farming and landlord classes in regard to agricultural products at least equal to the measure of protection afforded to manufacturers for manufactured articles. And, Sir, I say that the two things, the taxation of food and the taxation of manufactured articles, are inseparably interwoven, and must stand or fall together. For my part, I have always believed we shall be able to smash the taxation of manufactured articles in this House, and I am quite sure we shall be able to smash the taxation of food. The hon. Gentleman opposite, in spite of the intimate association between these two questions, contented himself by referring solely to the taxation of manufactured articles. I ask him now, specifically across the Table, does he include within the scope of this Amendment the taxation of bread and meat?

MR. BONAR LAW

Make me Chancellor of the Exchequer, and I will answer you.

MR. CHURCHILL

An Amendment has been put on the Paper specifically urging the broadening of the basis of taxation, and many Gentlemen of distinction and eloquence on that side of the House have risen in support of it. They have risen to explain it, and they owe an explanation to the House and the country; they owe it to themselves, and they owe it, if they wish to do justice, to those Members of their own Party who are, perhaps, prepared to support a general tariff on manufactured goods, but are pledged against the taxation of food. Therefore I think it is a fair question, and I think it will be thought so outside. On this Amendment this evening, when it comes to voting upon it, are those who vote for it voting for the taxation of bread and meat as well as of manufactured articles, or are they voting only for the taxation of manufactured articles? Surely that is a question which should have an answer. But no answer will be given, not because the hon. Gentleman opposite could not rise in his place at once and say: "Of course I mean to support the right hon. gentleman the Member for Birmingham in his policy of the taxation of bread and meat"—he could do that in a moment—but because it would interrupt the harmony. It would mar the sweet concord between the right hon. Gentleman the Member for East Worcester- shire and the right hon. Gentleman the Member for the City of London, sitting there side by side. Could the hon. Gentleman the Member for Dulwich take the responsibility of introducing such an explosive topic? It is tact that has led him to withhold this important explanation from the House. It is tact, and it is tact only. But we know perfectly well the proposals the hon. Gentleman had in mind, and the House is perfectly well able to estimate the reasons and the motives of the hon. Gentleman's silence. I have one word to say of a more general character before I sit down. It is, I venture to submit to the House, when discussions on broadening the basis of taxation are raised, a mistake to suppose that the Chancellor of the Exchequer will be able to get more money for the public service by putting on many taxes than by putting on a few. There are some people who think the Chancellor of the Exchequer would get all he wants by putting on only one. But, at any rate, the wealth which is laboriously accumulated by our people in the course of the year is contained in a central reservoir of national wealth, and the Chancellor of the Exchequer may draw off for the services of the year so much as Parliament gives him leave to take. It makes no difference to the total amount of our accumulated wealth whether it is taxed through one or twenty or even 500 outlets—except this, that every outlet which is made from the reservoir has its own leakages. Multiply your outlets and you multiply the leakages; and we believe that our old established and carefully-considered fiscal system has resulted in the collection of the maximum possible revenue with the least possible waste in the course of collection. When we are told to broaden the basis of taxation by the imposition of duties on the imports of the country, not to be corrected by a countering Excise, upon the face of it it is absurd to contend and to suggest that more money can be raised for the service of the State by unorthodox and, I would say, dishonest methods than can be raised by those simple methods which secure the whole yield of the taxes to the Exchequer. Why, Sir, the great principle which this House ought to guard and cherish is that, when the tax collector comes to the private citizen and takes from him of his wealth for the service of the public, the whole of that money taken shall go for the purposes for which it is intended, and that no private interests, however powerfully they may be organised and however eloquently advocated, shall thrust their dirty fingers into the pie and take the profit for themselves. There is but one other point I wish to make before I it down, and it is the last argument I would submit to the House with respect to the Amendment which has been proposed. We are asked to broaden the basis of taxation. That means we are asked to increase the ratio of indirect taxation and to diminish the ratio of direct taxation. That means in other words, that we are to make the poor pay more. It means nothing else. Very remarkable figures have several times been quoted in this House with regard to the ratio of taxation. In 1841–2 the ratio was 73 per cent. indirect and 27 per cent. direct. Ever since that period with every extension of the franchise, with every development of what we call democratic Government, with every improvement in the general, social, and political conditions of the country, the ratio of the two classes of taxation has steadily and ceaselessly altered. Indirect taxation as a whole has always become less and less in proportion, and direct taxation has always become more and more, until so strong has the remorseless pressure of events become that even under a Conservative administration actual parity and equipoise were established in 1903, and in the present year the scale was markedly turned on the side of the direct taxpayer who actually contributes a larger proportion of the total revenue of the State than the indirect taxpayer. That is a great evolution; not only a financial evolution but a social evolution. It marks the steady march and progress of democratic finance in this country, and, for my part, I suggest to the House that no efforts should be neglected which will continue that movement and that tendency until, in the end, indirect taxation which presses on the shoulders of the masses of the people, is reduced only to that class of indulgences which, perhaps, a wise and prudent Government would seek to check and discourage, and the burden of maintaining the cost of administration is in every respect exclusively borne by those who derive rents from land and interest from capital. That movement of taxation to which I have alluded is directly countered and challenged by the Amendment now before the House. We are asked by those who propose the Amendment to set the tide back. We are asked, not merely to maintain the existing social balance in our land, and the existing balance of fortune as between rich and poor, and that is hard enough in all conscience for many of them. We are asked deliberately to turn the scale in the opposite direction. We are asked deliberately to carry the war into their country and to make, in the name of broadening the basis of taxation, an effective attempt to alter the social balance to the detriment of those who live by weekly wages, and to the advantage of those who live by interest on accumulated capital. Against that movement I have no doubt this House, at any rate, will stand firm. If the hon. Gentleman opposite with his power of reasoning and argumentative skill were to ask us to consider other proposals for broadening the basis we might be glad to go with him. If he asked us to broaden the basis of society, to broaden the basis of education, to raise the general basis of culture and comfort throughout our land, there, indeed, is a work in which we could co-operate with the Party opposite; but we shall embrace this opportunity, we shall welcome this opportunity of once again recording an absolute opposition, unqualified and emphatic, against a policy which seeks to broaden the basis of taxation by making it press more heavily on the threadbare shoulders of the poor.

MR. HILLS (Durham)

said that by all the axioms of taxation it could not be right that all the revenue of the country should come from one tax. Of course, the argument for indirect taxation was a far broader one than that. He wanted to answer a few points that the President of the Board of Trade had made. He had made a very severe attack on his hon. friend, and had taunted Mm with quoting with approval a statement of a German author. It was surely well known that that view was widely held on the Continent, and whether right or wrong it was a view of which the House ought to take account. It would be a dangerous state of mind if this House and the party opposite were to imagine that the whole world was animated by the idealism which inspired some of them. It was not so. Surely all those facts were extremely important, and they could not afford to disregard them. They had been told that German finance was very unsound; that Germany was borrowing money to build her fleet. That might be right or wrong, but it was a consistent policy which the German people supported and one in which they meant to persevere. They were building their Fleet out of capital because their financial system was too cramped and restricted and they could not at the present time tap all the resources of their country. No doubt the time would come under the stress of war or some great danger when the whole country would be forced into some sort of real unity' and until that time came, although the money was there and the country was very rich, it could not be reached, and the German nation was tiding over that time by the use of capital instead of income. The right hon. Gentleman made some play upon the word "protection" and denied that the recent Patents Act was a protectionist measure. He listened with amazement to that statement. The right hon. Gentleman said that all patents were monopolies, and that if they further restricted a monopoly that was a free trade measure. Under the old law before the recent Act the owner of a British patent could manufacture in any part of the world he chose, but now he had to manufacture in this country. He entirely supported that Act, and he regarded it as a form of protection. It was really amusing to see the straits to which hon. Gentlemen opposite were put in trying to defend the Patents Act upon free trade lines, and until the right hon. Gentleman rose he did not think anybody had defended it upon those grounds. The object of that measure was perfectly obvious and clear, for it was the means of bringing employment to this country on the part of people who sought the protection of our laws. When a person got the advantage of our patent system it was only right that he should be obliged to work the patent in this country, and give employment to our own people. From the point of view of free trade and the consumer it did not matter where an article was made so long as it was sold cheaply, but surely this Act from that point of view was quite indefensible. The Opposition had been attacked on the ground that they had not shown the exact meaning of the Amendment, and because they would not explain the meaning of the phrase "broaden the basis of taxation." He should have thought very little explanation was necessary. If the President of the Board of Trade would look round Europe he would see plenty of examples of a broader basis of taxation than existed in this country. At the present time we imposed certain taxes and import duties on certain articles, and his point was that it would suit us as a nation to change the incidence of some of those taxes and impose them on manufactured articles produced in this country. A large amount of Customs duties we paid now—in fact we paid more than any other country in the world, and they were all paid on things which were not produced in this country. There were cases in which it would pay us better to shift those duties on to things which we did produce, and that would give employment to the people of this country. They were met with the argument that if a tax was protective, and kept out the foreign article no revenue would be derived, whilst, if it did not keep out the foreign article, there would be no advantage to home employment. As a matter of fact under the system he suggested they would get the advantage both ways. When foreign goods came in they had to pay the Customs duties. They would have to meet strong competition and come in at the home price. If that was so, then the foreign importer could not sell at a higher price and he would have to pay the duty, and, in that way, the revenue would benefit. If the goods were kept out, home production was stimulated, and so they benefited in both cases. He agreed that this would not happen in a simple ease. Certain articles would be kept out to a certain extent and some would not. In so far as they came in they would contribute to the revenue and in so far as they were kept out they would benefit the trade of this country. He could not see any answer to that. Surely all parties in this House were interested in home production and industries and, if by a tax they could effect an increase of industry, surely it was worth trying. A tax could do a great deal of good. They had been told that if the taxpayer knew what he was paying, it would stir in him the divine spirit of economy and he would look more to the expenses. He would far rather collect the taxes without any friction, or hardship, or burden on the person paying the tax. A tax could be made to keep out certain foreign articles and turn the course of trade, and it was for that reason that he argued in favour of a revenue tax. They had to find out the way a tax would affect them in all the varieties of their daily life. It was not enough to say they had simply to get revenue for the State; besides that, they had to see the exact effect of a tax on the national life, and that was why they ought not to regard it merely for the purpose of collecting revenue. They had carefully to consider its effect on the industries of the country and see how far it would stimulate them or the reverse. They had to look at the country as a whole and adopt that system which would stimulate most their industries. A few weeks ago a proposal was made from that side of the House that the duty on home-grown sugar should be suspended in order to encourage the production of beetroot sugar in England. It would have been a very small industry and would have employed very few people. Still, it would have employed some, and might have been the starting of a large industry, but the Chancellor of the Exchequer at once refused to accept the proposal, and it was extremely hard to find any reason for that refusal. The price could not have been raised by growing beetroot sugar in England, and so the consumer would not have been affected. It was a very small thing; the Chancellor of the Exchequer could have licensed a few acres and afterwards might have extended the project if successful. He could have limited the production to a very small area and it was quite clear the revenue would not have been appreciably affected. It could not have done very much harm, because, for many years to come, the production would have been so small that the loss of revenue would have been insignificant. It had always been to him very extraordinary why the free trade party would not stir a single finger to help British industries. He should like to know if that was the doctrine of all free traders, because it was surely a reductio ad absurdum. There was a chance here of increasing employment, and yet they refused to avail themselves of that chance for no reason that had been stated. Surely statesmen were not there to carry out any preconceived notions of their own, and, if that was so, why should they sit still and allow their hands to be tied when by a very simple act, by which the State would not lose at all, they might confer very great benefit? It seemed to him that the free trade party opposite insisted on regarding the whole nation as though they were consumers. He would have thought that in a strong industrial country the most important person was the producer. Why should the person who consumed be more important to the State than the producer? If there was one person in the State whom they should look after it was the producer. Everybody was a producer. If a man invested his money somewhere, that money would be used for the purposes of production, and, therefore, the investor was a producer. He could not conceive the case of a man who was not a producer, except, indeed, the case where a man hoarded his money and did not allow it to be used in industrial concerns. He could not imagine the case of a man who was a consumer only. That brought him to the question of the income-tax. The same people who talked about this as a nation of consumers only were all strong supporters of the proposal to put higher taxes on incomes. If they could tax the idle rich, and if all their incomes were unearned, as some hon. Members still seemed to think they were, he would not object to increase the income-tax. But income-tax was not paid half so much by individuals as by industry, and it really was the very worst tax to increase from the national point of view. He was afraid that the income-tax at a certain figure was now a permanent part of our financial system. Still he regarded with great suspicion all the talk about a graduated tax and a super tax. It was simply means of piling up the tax on productive wealth. They could not distinguish between productive and nonproductive wealth; it passed the wit of man to do so. If a man had special wealth which he employed in increasing the wealth of the community, he could not see any reason why that man should bear any special form of taxation. Some hon. Members who did not want to increase indirect taxation found refuge in proposals for the taxation of land values. That was a sort of happy land of which they knew nothing, but they regarded it as a place where all evils could be redressed. He quite agreed that any wealth which the community created was a fair subject of taxation. It was just as fair a subject of taxation as railway stock. If a man bought railway stock which went up in price the increase in the value was not caused by anything done by the holder of the stock; it was the community that gave the increased value. He failed to distinguish the increase in the value of an investment of that kind from the increase in the value of land. They had often been told that if they taxed the land they would diminish the price of it. He wished he could believe that the argument was sound; if it were sound, he could see some very valuable extensions of the argument. What he and his friends on that side of the House said was that industry and employment were not promoted by extending the income-tax so much as by imposing small duties on a large number of articles. The argument as to convenience of collection was all, he believed, on the side of hon. Gentlemen opposite. It was far easier to collect the sugar tax than separate taxes on a number of manufactured articles. But they had to look at the effect of these duties upon the country. It was because the income-tax was almost all a tax on industry and production that he regarded with apprehension the tendency to raise it. He had not heard a single speaker in this debate who had really argued- for a practical scheme: of retrenchment, except the Chancellor of the Exchequer, who spoke about the reduction of expenditure on armaments. Surely it was perfectly well known that no real reduction was possible in that direction in the immediate future. It was a delusive hope to hold out. It could not be done. All branches of the public service wanted more money. No one had got up and argued in favour of the old Liberal doctrine of retrenchment. Now under a Liberal Government the country was spending more money than it had done under the most expensive Conservative Government. He was not in the least blaming hon. and right hon. Gentlemen on the Treasury Bench. Retrenchment was impossible, and now they had to look for fresh sources of revenue. He submitted that it was extremely important to collect the money from the taxpayers in the way that they would feel the payment least, and in the way that would most stimulate the industries of the country.

MR. SUMMERBELL (Sunderland)

said that he was just as ignorant now of the specific articles which the Members of the Opposition wished to tax as when the debate commenced. He and many of his colleagues regretted that the Chancellor of the Exchequer was not able to take the extra duty off tea this session. They were all pleased, however, that a ¼d. per pound had been taken off sugar, and they hoped that next session there would be a reduction of the tea duty and a repeal of what remained of the sugar duty. One of the most remarkable declarations he had heard during the debate was made by the Chancellor of the Exchequer last night when he stated that it was the desire of the Government to abolish all taxes upon food, and to place the taxes upon people who were well able to bear them. He was pleased to hear that declaration, because it was altogether in the direction which the Labour Party and some Members on the Liberal side of the House had advocated for a long time. They had advocated that, instead of taxing the food of the people, the revenue should be got from a graduated income-tax, so that every man and woman in the land should pay according to their ability. What opposition could there be to the raising of taxation in that manner? He was delighted that the Chancellor of the Exchequer was prepared to steer his ship in the next session of Parliament in that particular direction. He had heard a great deal about the broadening of the basis of taxation from Members of the Opposition. He had been wondering where they were going to commence. This debate was near the finish, and the House had not been told where they were going to start. It was not a broadening, but a narrowing of the basis of taxation that was wanted. It was too broad already for the working classes, and they wanted to put it in a narrower compass; to impose a graduated income-tax which would give to the Chancellor of the Exchequer the best value and which he hoped would be ultimately adopted. They had been told the usual story about protection and duties on imported goods, manufactured timber, and other articles. He had a right to say that they were bound to judge hon. Members' speeches in the House according to their remarks outside. He represented a town which had passed through a very severe trade depression and where a great deal of unemployment prevailed. Certain Gentlemen said to the workless workers that what they ought to do was to adopt the method of protection, and then the problem of unemployment would be solved. The right hon. Gentleman the Member for East Worcestershire went to Sunderland a short time ago and told the working men that protection would be a remedy for unemployment.

MR. AUSTEN CHAMBERLAIN

said that, if the hon. Gentleman referred specially to him, he had never suggested that there would be no unemployment if our fiscal system were reformed. What he advocated was a reform of our fiscal system as a means of increasing employment in this country.

MR. SUMMERBELL

said he understood that the right hon. Gentleman and his friends brought forward protection as a remedy for unemployment. Germany had been much talked about in the House. That very day he had received a letter from a friend in Germany in which he said— I have just received my first demand-note for taxes. The German Army will receive from me about thirty marks a year, the Church about twenty, and the remaining seventy marks will be employed for municipal purposes. So I am in for a little over £7 a year, all told! The Vaterland is really a very dear country to live in. The wages of the working-man are lower than in England, and he works longer hours too. Excepting cigars and beer, everything costs him more than the English worker. Rents are oppressively high. Three rooms in Essen cannot be had for under thirty-five marks per month. Five rooms on a flat cannot be had for less than sixty marks. A suit that costs £3 in England, cannot be bought for under £4 here. In fact, clothes of any kind are at least 25 per cent. dearer than in England, and the material is not so good. It looks well, and here its recommendation ends. That was a letter dated 24th May, and, therefore, was not written for the purposes of this debate. The writer was a young man, an English clerk in a German house, who had been in various parts of the world; and yet hon. and right hon. Gentlemen got up in the House and said that all was well in Germany on account of their adoption of protection. He was astounded at their audacity in quoting Germany to working men, for anyone who knew the facts was aware that in Germany the working men worked longer hours and for lower wages in any calling than in this country. At the last general election in Germany 3,250,000 votes were cast for the Party to which he and his friends belonged in this country; and a manifesto was issued by all the Socialist and Labour men which stated— Down with protection, which has been a curse to the poor and a benefit to the rich in Germany. He also knew that the Socialists and labour men in that country stated that if they had a proper system of proportional representation in Germany they would soon have free trade. If protection was going to be the solution for unemployment in this country, how was it that there were 60,000 unemployed in Berlin demanding work and a reduction of the taxes on food? And how was it that there there were 5,000,000 of men unemployed in America and many thousands in France? No, protection would be no remedy for unemployment. He appealed to hon. and right hon. Gentlemen on the Opposition Benches not to play with the unemployed and fool them by telling them that protection was a remedy for unemployment. If they did, they might rest assured that the unemployed working men in this country would take things into their own hands and act in their own particular way before long. What was wanted was to discuss this question in a serious mood with the view of finding a solution for unemployment. When comparisons were made between France and Germany and this country, it should be remembered that for every ton of steel rails or ship plates produced in this country we had to pay to the idle landed aristocracy a royalty of something like 5s. 6d. per ton, whereas in Germany the royalty amounted to from 8d. to 1s. 6d. per ton, and that went to the State and not to private individuals. Hon. Gentlemen above the gangway on the Opposition side did not tell these things to the working men of this country. If they told that side of the story working men would realise how industry was handicapped in that direction compared with the iron and steel industry in Germany. It had been said that ratepayers were paying a heavier burden year by year and that some relief should be given to them. He had been a member of a borough council for fifteen years, and had always taken the greatest interest in the ratepayers in both town and rural districts. Hon. Gentlemen above the gangway on the Opposition side had in their mind's eye the increased rates on the people in the rural districts—upon land as against rates on property in large industrial centres. He remembered well the Agricultural Landowners' Relief Bill, as it was called, which was passed by the Tory Government some years ago, and which placed £7,000 additional taxation on the ratepayers in the town which he represented in order to give the £2,000,000 a year to the landowners of the country. But when those people were crying out about the undue rates imposed on them as landowners, he hoped the Chancellor of the Exchequer would pay no heed to them. Slowly but surely the incidence of taxation had been shifted off the shoulders of those interested in land on to the shoulders of those who occupied houses and other property in the towns. In 1871 the rates borne by land amounted to £6,730,000, and on house and other property to £3,370,000. In 1868 land gave £5,500,000 and other property £11,000,000. In 1891 land gave £4,260,000 and other property £23,560,000. Or to put it another way, in 1817 the percentage was land 66.66 per cent. and other property 33.33 per cent.; whereas in 1891 the taxation had been shifted round and house and other property in towns was bearing 84.69 per cent. of the whole of the rates. Therefore, in his opinion instead of any further relief being given to landowners the Agricultural Landlords' Relief Act ought to be abolished. The representatives of the landowners in the House had cried year in and year out for relief in regard to taxation, local and Imperial. In spite of all the relief given what was the position to-day? Compared with 1860 land paid £1,000,000 less in rates, and instead of imposing a tax on imported food he urged the Chancellor of the Exchequer to tax land more and other property less in order to get revenue for social reforms. More land would by that means be cultivated than at present. With regard to old-age pensions, as one who had been a member of a trade society for twenty-seven years and of a friendly society for twenty years, he hoped the Chancellor of the Exchequer would not stick to the 10s. maximum which he intended to put in the Bill. After he had been a member of his trade society for forty years he would be entitled to a superannuation allowance of 10s. a week, and if after being a member of his friendly society for, say thirty years, he should get a shilling or two of an allowance he would be debarred from receiving an old-age pension. He appealed to the Chancellor of the Exchequer as one directly interested in trade and friendly societies to alter the proposed maximum from 10s. to 15s. or even £1 a week.

MR. HICKS BEACH (Gloucestershire, Tewkesbury)

said that hon. Gentlemen opposite were returned to Parliament pledged to economy, and during the month preceding the general election every one of them went about the country declaring to the electors that when the Liberal Party returned to power they would largely decrease the national expenditure. He was afraid that the electors had found out that those sanguine anticipations had been completely falsified. If hon. Members would refer to the total expenditure budgeted for this year they would find that provision was made by the Chancellor of the Exchequer for an expenditure of £152,869,000, and that that sum was in excess of the provision in the last Budget of the Tory Government which allowed for an expenditure of £151,788,000. Whatever might be the desires and wishes of hon. Gentlemen opposite, it was obviously quite impossible for them to reduce the general expenditure of the country next year without decreasing the strength of the Navy or Army, and that would be absolutely inconsistent with the declaration made by the Prime Minister, who Lad stated that if Germany carried out a large shipbuilding programme this country would not be behind in strengthening her Navy. They also had to recognise this fact—that under the present Budget the Government not only did nothing satisfy the claims made upon them for many years past in the shape of grants for the alleviation of the burden of local taxation, but they had increased the claims on the Exchequer enormously by giving old -age pensions. The President of the Board of Trade had declared that it had been the policy of the Liberal Party since they had come into power to pay off the liabilities of their predecessors and to reduce taxation. They had reduced taxation certainly, but nobody could believe that the liability they had undertaken in regard to old-age pensions would enable them to relieve taxation in the years to come. As a result of the Old-age Pensions Bill taxation would have to be increased. The Prime Minister and the Government took credit to themselves for the fact that by the next year the Government would have in three years paid off no less than £47,000,000 of Debt. That was a matter of which the Government might be proud, but the Chancellor of the Exchequer ignored one important point, which was that of £47,000,000 of Debt paid by him no less than £13,500,000 was provided by surpluses from the Budgets, which, as everybody knew, had by law to be appropriated to the reduction of Debt. The Chancellor of the Exchequer ought not to take too much credit for that £13,500,000, because it was obvious that one of two things must have occurred. Either the right hon. Gentleman or his advisers must have unwittingly under-estimated the revenue, or else, having accurately estimated the revenue, they had deceived the public by imposing unnecessary taxation on the country. But whilst the Debt had been reduced in that way the Government at the same time had announced to the country that they were bringing in a scheme of old-age pensions on a non-contributory basis. He had listened in vain for some valid arguments from hon. Members opposite as to why old-age pensions should be given on such a basis, but although hon. Members might have good arguments at the bottom of their hearts they had been careful during the debate not to bring them to the surface. He could not help thinking that the scheme of old-age pensions on a non-contributory basis was not one that this House ought to support. Such a Bill was not a direct incentive to thrift, but on the contrary a direct incentive to every person in the country to be as unthrifty as possible. If a scheme of old-age pensions was about to be brought forward he thought the people who were to benefit by such a scheme should pay something directly or indirectly to the scheme by which they were to benefit and on that ground he objected to the Government proposal to halve the sugar tax. The right hon. Gentleman next year would have strong appeals made to him to remit the half of the sugar duty that now remained. As to that the Prime Minister had told the House this year that by remitting half the duty he would relieve the general consumers of this country. The same thing was said about the tea duty when he took half off the year before last, but when the same question was raised on last year's Budget the right hon. Gentleman said he found he was mistaken, and that it was no use taking off another penny. He did not know whether the Chancellor of the Exchequer would come to the same conclusion when the sugar duty came up for discussion next year, but he hoped the right hon. Gentleman would not listen to the appeals that would be made to him to repeal this duty altogether. It brought in £6,700,000, and there was no duty which could be put on that would yield so much with such ease and without doing any serious harm to the consumer. Various proposals had been put forward by hon. Members opposite and below the gangway for providing the sums required for old-age pensions in the future. The sum, which started with the Prime Minister's estimate of £6,000,000, was quickly increased by the Chancellor of the Exchequer to £7,000,000, and, judging from the remarks which came from all sides of the House, it would in a very few years be increased to £16,000,000. Hon. Members below the gangway opposite thought that all this might be secured by an increased income-tax on large incomes. The hon. Member for North Paddington pleaded very hard for such a scheme. He did not call it a super-tax, but a graduated income-tax. A super-tax or a tax of a larger sum on incomes over a certain amount could only be collected by one of two methods, the method of degression, namely, by putting a 2s. tax upon all incomes, and leaving those whose incomes were below £5,000 to claim for an abatement of a portion of the tax, or by requiring those whose incomes were over £5,000 a year to make a declaration of their income. It was pointed out by the Select Committee that it would be a great inconvenience to adopt the first method, and with regard to the second, which was the one advocated by the hon. Member for Paddington, he would refer the hon. Member to, the remarks made by the Prime Minister last year, which gave very good reasons why it would be almost impossible to force a general declaration from persons whose income was more than £5,000 a year. A further objection to a high tax on large incomes was that it tended to destroy or at any rate contract the most readily available reserve on which the State could draw in the case of an emergency. That was the most serious danger of a high income-tax. It appeared to be the policy of hon. Members opposite not to keep the income-tax for use in the case of an emergency, but to impose a high tax for the purposes of defraying the general expenditure of the country and the old-age pension scheme in particular. He strongly objected to national finance of that nature. Reference had been made in the debate to one reform most urgently needed throughout the country, a question that had been before the Government for a good many years. He referred to the reform of local taxation, and he had hoped that the Government would have done something in the present Budget to remove a grievance that had existed for so many years. The Government accepted earlier in the session a Resolution dealing with the subject, and assented to a Motion that the present system of local taxation needed the immediate attention of the Government. It was perfectly clear to anybody conversant with the work of county councils and county borough councils that they were now in a very serious situation. The rates had increased from 3s. 8d. in the £ in 1889–90 to 5s. 11d. in 1904–5, notwithstanding that during that period the rateable value had increased 38.4 per cent. He believed that the agricultural ratepayer had a very serious grievance at the present moment, in spite of the Agricultural Rating Act of the last Government, which had not benefited the landlord as an hon. Member below the gang-way had said just now. [Cries of "Oh."] Hon. Members opposite seemed to object to that statement, but he had observed that all the Liberal candidates who went to the agricultural districts had said that they would vote for a renewal of the Act. That was in very marked contrast to the action of the Liberal Party when the matter was brought before the House. The Prime Minister, a few weeks ago, had admitted in the House that the agricultural community still had a serious grievance. The farmer who was rated on his land and buildings, that was to say the raw material of his industry, had a very real grievance as compared with the man who had a fixed income, lived in one house, and owned no other property subject to rates, and also as compared with the tradesman in the town, who was rated only on his house and shop premises. But what he wished particularly to put before the House was the fact of the general increase of expenditure that had been incurred by local authorities for what were really national services. The expenditure of the local authorities in 1888–9 was £48,000,000, and it had increased in 1904–5 to £107,000,000. These figures showed that the local authorities were now incurring an enormous expenditure on national services which ought to be paid for more largely out of the National Exchequer. The tendency also was not to take duties away from local authorities, but to increase the obligations put upon them. One party came into power and passed a Small Holdings Bill which had increased very largely the work of local authorities. In the present session the Government had brought forward the Housing Bill, which, if carried, would largely increase the work of the local authorities. It seemed to him that if the House went on as it had done in the past twenty years, passing over fifty Acts which had thrown additional work and liabilities on the local authorities instead of relieving them, it would lead to a very serious condition of administration. Both sides would admit that the local authorities in the past had carried out the duties entrusted to them with great industry and ability; but if they continued to force them to carry out what were really national services as well as local services, they would bring about a serious state of things. Those people who had an aptitude for county business would find themselves unable to devote to it the time required, and the result would be that they would have the whole work run by a body of paid officials, or a class of county administrators would spring up who would not possess the confidence of the electors, and who would apply their powers for their own ends and not for the general welfare. That he believed to be a real danger, and he thought the way to avoid it, and also to relieve what was a very serious burden and grievance, was for the Government to take over some of these national services which were now rendered by local authorities. He believed it to be possible for the Government to take into their hands the administration of the police, and also the entire administration of the lunatics of the country. He believed, too, it would be a good thing if they eventually took over the entire administration of the workhouses, leaving the local authorities to administer outdoor relief. He believed that on those lines they could afford important and real relief to the local ratepayers of the counties, without waiting for that very vague thing, a really honest and true Valuation Bill—which was always thrown in their teeth when they approached this subject—and at the same time do useful service to local government throughout the country.

MR. TOMKINSON (Cheshire, Crewe)

said the hon. Gentleman the Member for Dulwich had appeared as a critic of Liberal legislation and in the familiar character of a prophet of woe. For three or four years he had been engaged in that character and he really wondered that the hon. Gentleman had not by this time tired of the role. He could remember that in the early days of the tariff reform movement the hon. Member prophesied such an influx of cheap steel and iron to be dumped into this country at something like £2 a ton, that our industries would be almost wiped out. In various ways the hon. Gentleman had been constantly engaged in prophesying woes, "carrying panic to our friends and comfort to our foes," belittling our own country and extolling Germany and other protectionist countries in comparison with it. The hon. Member had said that the Government by its Budget, was placing enormous future burdens on the country without any attempt to provide for them, but for his own part he would submit in answer that there could be no better way of budgeting for the future and providing for liabilities than in paying off debt, and thereby reducing interest; and that had been done in the last three years to a far greater extent than at any previous time in the history of the country. The hon. Gentleman had gone on to touch upon the subject of a tax on manufactured articles, and he had skilfully avoided the challenge to deal with the question of a tax upon wheat, meat, and articles of dairy produce. It was very easy to talk about a tax upon manufactured articles, which was something like the vague phrase "broadening the basis of taxation." When they came to deal with the question of a tax on manufactured articles, the man did not live who could define what a manufactured article was. Where was the so purely manufactured article that it was not useful in some of our industries? He would take a simple illustration. In the town of Nantwich in his own constituency, there was the tannery industry, and boot and shoe factories. The first question was "What is leather? Is it a manufactured article or not?" The tanner said it was manufactured, and wanted protection. The boot and shoemaker said that would be the death blow to his industry. The South Wales tin, plate trade, which had been attended with such prosperity, depended on the importation of cheap German material. That most exquisitely manufactured article, the American sewing machine, was imported for the purpose of stitching boots or to sew on uppers, and it formed an absolutely essential part of the boot-making industry. In regard to Germany, the fact of the protection which existed there was a proof of our manufacturing superiority. They could not compete with us. Other countries, in some cases, were obliged to protect themselves, or thought they were, in order to keep out our manufactured goods, because in spite of the cost of carriage and other things they knew that we could compete with them in their own markets. All this was a confession of their inferiority. The right hon. Gentleman the Member for East Worcestershire demanded that the Ministerialists should state their policy. Well, here was the Budget, which provided for the present year, and if it were true, as the hon. Member for Dulwich had said, that they had plunged into the vortex or gone over the cataract, then next year they would see how they stood. [Ironical OPPOSITION cheers.] That was another prophecy of woe. Hon. Gentlemen opposite would not have to provide for the Budget; the Liberal Government would have to provide for it; but if the prophecy came true, then from the party point of view it would be a great advantage to hon. Gentlemen opposite, and they would have no reason to complain. But he thought the Government and their supporters could take care of themselves, and they had sufficient confidence in the resources of the country to believe that if they maintained peace, if they were more sober and temperate, and if they maintained free trade, the natural increase of the country and of its revenue would be sufficient not only to provide for old-age pensions, but to increase and improve upon them, and it was in that belief that he heartily supported this Budget. There was one matter he wished to mention, and that was with reference to the statement of the hon. Member for South Hackney as to the enormous unclaimed balances lying in the banks. He was a director of one of the largest banks in England, and had some experience of the banking world, but he must confess his utter ignorance of any such balances. It was enormously exaggerated. He hardly thought they existed at all, and anyone who depended upon finding £100,000,000 of unclaimed deposits of which the country could lay hold, would find nothing but a. mare's nest.

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

The hon. Gentleman who has just sat down has informed us that the Arabian Nights estimate of the unclaimed balances lying at our banks is not going to prove any great national asset in times of financial difficulty. But I am not sure that the hon. Gentleman, who was so able, though so brief, a critic of the hon. Member for Hackney, does not show the same happy optimism as that which characterised the speech of the hon. Member for Hackney. What does he tell us He tells us that, if we only adhere to oar present fiscal policy, he had not the smallest doubt that the natural growth of the revenue will enable us to pay for old-age pensions in the course of next year without recourse to any new taxation. The hon. Member may, and doubtless does, know a great deal about the unclaimed assets which are lying at the banks; but I do not think he can have studied very much the growth or decline of public revenue if he entertains so sanguine an estimate of what is going to happen next year on the present basis of taxation. Nor do I for one moment believe that the Prime Minister will express the same roseate view of next year's Budget as the hon. Gentleman looks forward to. I must confess, as far as I am concerned, to a considerable disappointment in the speeches which, so far, have come from the Treasury bench upon a financial position which every thinking man, whatever his view of the fiscal problem may be, must regard as a serious one. We have had three speeches from the front bench opposite. The speech of the Postmaster-General, which was delivered, first, seemed to be more appropriate to a discussion such as we have often had, and doubtless are often to have again, on the fiscal question, than to the Amendment before the House. The right hon. Gentleman dealt at length with the questions of Colonial preference and dumping. I do not think either of those questions is before the House on the present occasion. I hold strong views on both those questions, but they are not views which come into or ought to come into the present debate; for even if I did not believe in the great advantage of establishing some commercial bond with our Colonies, even if I did not think it necessary to safeguard the interests of this country against certain kinds of illegitimate competition, I should still believe that, in the present financial position of the country, a widening of the present basis of taxation was eminently desirable and necessary. Therefore, it is a wholly irrelevant issue to raise as to whether we on this side of the House think that, if the present basis of taxation were extended, we should be enabled to have, in addition to new sources of revenue, an opportunity to establish, on terms favourable to the free trade of this country, arrangements with our Colonies, or that we should be able to deal with illegitimate competition. If those facts are true, they are not raised by this Amendment. We are discussing a different but a not much less important issue—how you are going to deal with the enormous liabilities which we see immediately facing us, and whether you are going to deal with them on the basis of taxation which alone is the basis that the present Government apparently are prepared to accept. That issue was certainly not dealt with by the Postmaster-General. He delivered a speech which was either belated or prophetical and anticipatory, which might have been in order and appropriate last year or may be so next year, but is not in order or appropriate on the present occasion. He was followed from that bench by the Chancellor of the Exchequer. I have a very high opinion of the Chancellor of the Exchequer's abilities. He has been an acute and ardent critic of mine for many years. I have had to meet him across the floor of this House on all sorts of questions and on all sorts of occasions, and no man could have the opportunities which I have had of forming an opinion of the right hon. Gentleman's capacity without forming a very high opinion. But, frankly, I do not think the right hon. Gentleman since he has been Chancellor of the Exchequer has quite done himself justice. Partly, no doubt, that is due to the fact that he is in a somewhat difficult position. He is. responsible for the Budget as every Member of the Cabinet is responsible; but he is not responsible for it in the ordinary way, or to the full extent to which ordinarily a Chancellor of the Exchequer is responsible. He did not frame it. Doubtless he approved it with the other Members of the Cabinet, but he was not engaged in the laborious work of thinking out all the details of it. Consequently, he comes to the House as the defender of another man's work rather than of his own. We ought to make full allowances for that position; but, even after doing so, I am bound to say that the right hon. Gentleman, considering the great and responsible position he now holds, has rather too clinging reminiscences of his happy time as a guerilla chief below the gangway, and he deals with these great national issues in the happy tone of humorous irresponsibility which amused, if it did not edify, us when he was an important Member of the Opposition below the gangway. Further, if I wanted to establish that criticism, I could do no better than to point to the sort of misrepresentation—I do not say it was very blamable, but I am not sure it was very worthy—in which the right hon. Gentleman indulged in regard to the speakers who preceded him. My hon. friend the Member for Windsor last night advanced a perfectly sound economic statement that in certain conditions of supply and demand the foreigner paid not only part, but the whole of the import tax, and he gave as an illustration a tax supposed to be put upon the small quantity of coal imported into this country. That was a perfectly sound economic doctrine illustrated by a perfectly apposite hypothesis. The Chancellor of the Exchequer jumps up and thanks my hon. friend for having made the only suggestion offered from this side of the House, and says he understands that the method by which the Opposition would raise the necessary funds for our great expenditure is by imposing a tax on coal imports from foreign countries. That is all very well as a passing joke, but it is not of much use in a serious discussion. If I may, with all respect, continue the same line of criticism, I thought the right hon. Gentleman, perhaps by ancient habit, dragged in too much discussion about the Education Act of 1902. I made so many speeches upon that Bill that I never, unless I am forced by the Parliamentary situation, go back upon that well-beaten track. Not so the Chancellor of the Exchequer. Next to myself, I think he made more speeches upon that Bill than any other Member. He could not resist going back upon it, and he made the extraordinary statement that that Act was the main cause of the growth of local rates in this country. It was nothing of the kind.

MR. LLOYD-GEORGE

In the last ten years.

MR. A. J. BALFOUR

I entirely dissent from that. It is perfectly true that the improved education given under that Act at the will of the local authorities has increased the cost of education, but the giving of rate assistance to voluntary schools has not added to the burden on local authorities—it has diminished it. If the voluntary schools had been allowed slowly to starve out, which was the policy of hon. Gentlemen opposite, and had been replaced one by one as they disappeared by board schools, the burden on the ratepayers would then, indeed, have been augmented, and it would have been augmented, not because the Act of 1902 had been brought in, but because it had not been brought in. It is a widespread and complete delusion to suppose that the fact that voluntary schools were allowed to participate for certain educational purposes in a part of the rates was in itself, and apart from the general im- provement in education, otherwise than an economy. The last speech delivered from the Treasury Bench was from the President of the Board of Trade. I will not say he dealt with the closely-reasoned and able speech of my hon. friend who sits near me. On the main issue raised by my hon. friend he made no reply at all. What he dealt with in a speech which certainly was not deficient in ability, but, naturally enough, under the circumstances, had rather a platform flavour about it, was not the main substance of my hon. friend's argument, but certain casual and side issues; and I have frankly to admit that I do not think he dealt with them either very fairly or very successfully. My hon. friend told the House that, in a very serious and, to use the Chancellor of the Exchequer's word, scientific book upon economic matters, a German author had pointed out that armaments, in the case of a successful war, might be made to pay, or more than to pay, their cost. The President of the Board of Trade thereupon informed the House that my hon. friend's opinion was that we ought to increase our armaments because they might be made a reproductive source of expenditure. That was not the point of my hon. friend's remark. My hon. friend neither felt nor expressed approval of this German view. The importance of the German view was this: If a scientific German, dealing with this question in absolutely cold-blooded fashion as a scientific doctor might deal with a disease, comes to the conclusion that expenditure on armaments cannot be put wholly to the debit side of the national account but must be regarded in part as a reproductive source of revenue, if that be a common and widespread view in Germany, the position of this country, which has to keep a position at sea and on land which makes it free from all danger of attack, is more than ever a difficult one, seeing that one of the greatest naval and military nations of the world takes quite a different view of naval and military expenditure from that which we take in this House and this country. But a greater and more extraordinary misrepresentation and misapprehension of my hon. friend's argument is to be found in the manner in which the Patent Laws have been dealt with. My hon. friend had pointed out with unanswerable force that while the present Government are perpetually lecturing us about the doctrines of what they call free trade, when they come to practical legislation those doctrines are thrown to the winds: and he took as an illustration of his thesis the legislation of the late President of the Board of Trade in regard to patents. His argument was that by the legislation of the present Government the foreign owner of a patent may keep his monopoly in this country if he manufactures in this country. The President of the Board of Trade seemed to think that he lost his monopoly in this country and that part of that monopoly was handed over to the British manufacturer. It is not handed over to the British manufacturer. It remains where it is now, in the hands of the foreign manufacturer. It is quite true that the English, or British, workman may gain by the fact that the foreign manufacturer has got to bring his work over to this country if he means to keep his monopoly. That is a kind of argument more favoured among hon. Gentlemen on this side than on the opposite side of the House. They always talk as if the very last thing you ever have to consider in your legislation is whether you give, or do not give, employment to the working classes of this country. But, Sir, that is not all. It is manifest, as my hon. friend pointed out, though the President of the Board of Trade could not, or would not, see it, that cases may and do arise in which it is more costly for the foreign monopolist to manufacture in two places than in one place. If he desires to obtain the same profit for himself and the same consumption for his goods, he ought not to be obliged to transfer part of his works to a country in which he does not reside, and the result of compelling him to transfer is that the cost to the consumer will be augmented. I thought that the one thing that hon. Gentlemen opposite never tired of telling us was that the only thing you ever had to consider in making your legislative and fiscal arrangements was, not the employment of the working classes, but the cost to the consumer. And yet, as my hon. friend proved conclusively, both in theory and, by the illustration he gave, in practice there is not the smallest doubt that this compulsory transfer of a part of a foreign capitalist's capital from the foreign country to this country must end in an. increase in the cost of production. [Cries of "No."] Must or may. Now, as I hear a hon. Gentleman below the gangway cheer with undisguised irony at the substitution of "may" for the word "must," I must withdraw the word "must." It is a word very seldom used in these economical discussions without having some exceptional case thrown in your teeth; and I prefer, therefore, to say that, while it cannot possibly diminish the cost to the consumer, in some cases it will increase it. [Cries of "May.]

MR. JOHN WARD (Stoke-on-Trent)

In certain cases it may decrease the cost.

MR. A. J. BALFOUR

No. There the hon. Gentleman is, I think, in error; and for this reason, that if it suited the German manufacturer, or the foreign manufacturer, to manufacture in this country rather than in his own, the Patents Act of the right hon. Gentleman was wholly unnecessary. He would come here without any of that gentle compulsion which the free trade principles of the right hon. Gentleman permitted him to extend to this particular form of enterprise. After all, these arguments, which I have culled from the three Front Bench speeches opposite, and which touched some of the most important points raised by the respective speakers, are far and remotely removed from the very serious issues in question at the present time. These issues have been treated, and I do not complain of it, as merely party issues. It is perfectly fair for hon. Gentlemen, if they think it worth while, to discuss their own wonderful claims to national gratitude for the diminution of the National Debt. It is quite true that they usually grossly overstate them, and that under analysis they do not amount to very much. Nor do I quarrel with the various other partisan statements made on the other side. Plenty of partisan statements are made on this side—I do not say unfair or incorrect, but intended to throw discredit on those who now hold power and throw credit on those who held power a few years ago, or vice versa. I do not want to press that aspect of the question as it affects either side upon the to tention of the House. I will, therefore, content myself with pointing out that we are now face to face in a very novel and exceptional manner with the immediate future of the financial necessities of the country. The Chancellor of the Exchequer told us yesterday that the difference between the two parties was that one wanted armaments and the other wanted social reform. Sir, that is a deplorable way of stating things. I believe that every party in this House wants social reform, and I am certain that no party in this House is so foolish as to desire to spend an unnecessary shilling on armaments. I have had practical experience of Cabinet Government for many years, and if hon. Gentlemen could overhear the discussions either in the present Cabinet, of which I know nothing—though I could guess a great deal—or of the Cabinets of which I was a Member, and of which I do know something, they would really know that this illusion that there is any party in this House who has a kind of abstract desire to throw a burden on the taxpayers of this country in respect of armaments to which they are not driven, by what they rightly or wrongly regard as irresistible logic, to think necessary for the safety of the country, is wholly groundless. They may be wrong. These questions of defence are very difficult. The questions of Army reform are of extraordinary difficulty. Even with regard to the Navy, which has never presented the same immense difficulties, there are constantly arising problems not easy of solution, in which sensible and impartial men may well come to different conclusions. But it will only mislead hon. Gentlemen in their own speculations and comments if they seriously think that any Chancellor of the Exchequer or responsible Government readily admits the expenditure of a single shilling on armaments, with all the necessary incidence of increased taxation, unpopularity, criticism in this House directed against successive Governments in turn, until they are driven by irresistible argument to the painful necessity of sanctioning that expenditure. The President of the Board of Trade told us that the present Government have produced great economies in the Army and Navy. I am sure that they have done their best in both, and have not spent a single shilling that they did not think necessary, and by their own admission there are a great many shillings they have not spent that they do think necessary, and that are going to be spent next year and the year after. I would earnestly ask the House not to be misled by the antithesis of the Chancellor of the Exchequer between the two sides when he said that the desire of one was in the direction of national well-being, while the other preferred the barren production of death-giving machines. We all want economy in military matters, and desire such expenditure as we can afford on matters of social reform. Therefore there is no difference on that point. The anxiety of the present situation arises from this—that, so far as I know, never in the history of the country until the present moment have we been face to face, not merely with remote possibilities, but with the actual and immediate necessities for a vast expenditure for which no provision is made or foreshadowed by the Government. We have said that, if this situation is to be faced, you will not be able to rely on your old sources of revenue; you must find new sources, or, in the technical phrase, broaden the basis of taxation. Hon. Gentlemen, not anxious to pursue this discussion on the issue which we are trying to put forward, but to place it on a footing more favourable to themselves, have put a series of questions as to the exact Budget that we should bring in if we were responsible for public finances, and they claim to have secured a triumph when they put the question whether we should be prepared to tax this or that article of food. Any men who looks at the position seriously knows that it is folly to ask what Budget a party would bring in that can have nothing to do with the national finances for the next three or four years, according to Gentlemen opposite, while they will not tell us what is to be their Budget next year. A Government which will not tell us the Budget of next year can hardly complain of us if we do not tell them a Budget which cannot be for three or four years and may be indefinitely postponed. Hon. Gentlemen may entertain the agreeable view that their tenure of power is going to be indefinitely prolonged, and in that case I at all events have no call to answer the question, for it is quite clear that I shall be in my grave before an answer is required. But I will answer a question which was put in tones of electoral triumph by the President of the Board of Trade. I will not refer to the past, either to his triumphs or his failures. He and I are fellow-sufferers, and have each other's reciprocal sympathy. He told us in his speech this afternoon that my hon. friend near me did not dare to touch the question of a tax on corn, because it would immediately produce a collision of opinion between the late Chancellor of the Exchequer and myself. That really is extremely absurd. It seems to be forgotten that I was a member of the Government which put a tax on corn, when the financial necessities of the country required it. And certainly, if I thought that the financial necessities of the country required it again, I should do again what I did in 1901, before, I may incidentally remark, the fiscal question arose at all. And, therefore, upon this subject of broadening the basis of taxation in connection with the taxation of foodstuffs, certainly, if the financial necessities of the country required it—which is the only thing we are discussing at this moment—I should no more shrink from doing it again than I shrank from doing it before. But, when the Pesident of the Board of Trade deduces as a corollary from that, that my friends and I are prepared to put a fresh burden upon the threadbare shoulders of the poor, let me remind him that I have over and over again stated that whatever be the new financial needs of the country which we see in front of us, at all events I shall not be a party, if I have anything to do with providing the new resources, to increasing the burden upon the working classes of this country. And when the right hon. Gentleman declares that our policy is one that is going to increase the burden upon the working classes of this country, he is bound, if he wishes to be fair, to say that it is no part of our policy and intentions that any additional proportionate burden shall be thrown on those on whose shoulders taxation may in certain circumstances be extremely heavy. Then what a curious thing it is that, while Members on that bench have been occupied in making these wholly unfounded charges against the alternative we propose, they have not attempted the smallest defence or explanation of what is the policy they themselves propose. The person who came nearest to saying what that policy was was the Postmaster-General. He said—"If we want more money, we shall reimpose the old taxes." What finance is this? You know you will want more money. The Prime Minister is not, I believe, going to deny to-night, certainly the Chancellor of the Exchequer never denied, that the additional money required next year cannot be short of £10,000,000. If the obligations of the country with regard to the Fleet and old-age pensions are carried out, how are you going to get your £10,000,000? You have taken a farthing off the sugar tax. I suppose you are going to put it on again. I am asking the Government to tell us their alternative. What is their alternative? Some Gentlemen on that Bench say: "Don't ask us about alternatives. You cannot ask that. We shall do more than meet the obligations that fall duo this year. Leave next year and us to take care of itself and ourselves." I am sure the Prime Minister will not say that. I am not going to quote the views which he expressed last year. They are familiar to the House. He told us last year when we were not committed to an immediate old-age pensions scheme, that we must look at finance not by the year, but by some longer period. He cannot get up now and tell us that, now that we have got immediately before us the necessity of providing old-age pensions, we should restrict our gaze to the eight or nine months which separate us from the end of the financial year, having plunged into obligations which next year will amount to £10,000,000 more than all the obligations of this year, and in the year after most assuredly exceeding £10,000,000. He cannot deny that he has not contemplated the general outline of his new proposals, and that in dealing with the finances of the present year, we ought not to take some stock of the resources which are to meet these new obligations. I think the mistake the Government and the majority of the House are making is to regard our present position as normal. It is quite true that in ordinary times, when a Government has not got to face much more than the automatic growth of the Estimates, the Chancellor of the Exchequer may well be excused from dealing with any but the finance of the year for which he is budgeting. But when you are bringing forward Bills which are going immediately to cost you £6,000,000 He far as old-age pensions are concerned and which are certainly going to cost in the near future more than £6,000,000—a Gentleman below the gangway estimated the cost at £20,000,000, and this does not seem excessive in the light of the investigations of the Commissions who have examined it—and when the Government, for a reason they have never explained, have postponed the naval requirements of this year to the years that are to follow, this House is not face to face with a normal situation. The situation is absolutely abnormal. That is the situation which the Chancellor of the Exchequer has got to face. If he is not going to reimpose the tea duty and the sugar duty, and if he is going to remain, as the Postmaster-General stated, within the limits of our accustomed finance of the last few years, it can only be by an enormous increase of our direct taxation, which would horrify all those great masters of finance to whom hon. Gentlemen in other connections are always making appeal. What Mr. Gladstone and Sir Robert Peel would have thought of piling up the income-tax as they propose to pile it up, those acquainted with the financial history of the country may be able to explain to the House. I say that these proposals would have been regarded with horror by those gentlemen; and it is surely the irony of fate that those who profess to represent in this House the old financial traditions of the country, those who profess to carry out the teaching of Sir Robert Peel and Mr. Gladstone, should base their whole financial policy on principles which those great financial authorities would surely have regarded as nothing short of national disaster. I have not dwelt upon one great source of expenditure referred to in very able speeches on both sides of the House—local taxation. You have got your old-age pensions—you are pledged to it. I do not know how the Government stand with regard to local taxation. I understand that it is some day to be scientifically dealt with. The Chancellor of the Exchequer told us so I suppose he is going to lay siege to that particular problem just as some general of the old school laid scientific siege to some place with elaborate caution and great expenditure of time, drawing parallels closer and closer to the attacked walls, and deferring the final assault until perhaps it could no longer be delivered. It is agreed on all hands that we have these new commitments with regard to old-age pensions and naval construction. It is more or less agreed that money must be found for local taxation. We say that in those circumstances you must look out for new sources of taxation. Hon. Gentlemen opposite say that the old sources are sufficient, to which we reply that the old sources are not sufficient unless you are going to use the income-tax and the death duties in a way which the authors of those taxes never contemplated, and in a way in which, in my opinion, they cannot be used, not merely without gross injustice to the few, but—what is far more important—serious detriment to the industrial interests of the many.

MR. ASQUITH

I have listened, as I always do, with attention and respect to the right hon. Gentleman's speech. But I must profess myself to be in precisely the same state of mental bewilderment at the end of this debate as I was at the beginning in regard to the purpose or even the meaning of the Amendment which has been the nominal and ostensible subject of discussion. We are upon the Second Reading of the Finance Bill which is the proper and natural occasion for the Opposition to challenge, and, if they are so minded, to impeach the Budget of the year. Now, the Budget of the present year, whatever else may be said about it, has two main and dominating features. In the first place it proposes to set up, for the first time in this country, upon a modest scale, and subject to carefully guarded conditions, a system of old-age pensions. In the second place, after fully providing for the whole estimated cost which will fall upon the current financial year of that new system, it proposes to devote the remainder of the estimated surplus to the reduction by ¼d. of a duty which is admitted on all hands to be unique in this respect, that it is at one and the same time a tax upon one of the first necessities of life and upon the raw material of many most important industries. Those are the two main proposals of the Budget. The question I ask at the end of this debate, and which has never been answered from beginning to end by any Member of the Opposition, is this—Is either or are both of them attacked? If—and that is quite a conceivable position—if hon. Gentlemen and right hon. Gentlemen opposite think that the financial condition of the country is such that, however desirable in the abstract, the institution of old-age pensions might be itself at present premature and improvident—rand some of them do think so, though they do not say so—then the proper course, the only manly and courageous step, is to vote against the Second Reading of the Old-Age Pensions Bill. If, on the other hand, no longer relegating old-age pensions to that dim and distant future in which they have been for the last fifteen years—a phantom and will-o'-the-wisp at election times but never attempted to be translated into a concrete form—if they think that that era is over and that the time has come for some honest and serious and practical attempt to deal with the matter, but that in those circumstances you ought not to part with any portion of the sugar duty, then they ought to vote against the Second Beading of this Bill, or, at all events, to move the omission of the clause which proposes the reduction of duty. But they have taken neither the one course nor the other. This Amendment expressly admits that old-age pensions are now or ought to be an item in the normal expenditure of the country. The Amendment, on the other hand, is absolutely silent as to the desirability of retaining the sugar duty, and it is one of those occasions when silence is as eloquent as speech. And let me here incidentally remark that the right hon. Gentleman the late Chancellor of the Exchequer was very eloquent yesterday upon the wickedness of reducing indirect taxation at a moment when you are going to confer upon the poorer class of the population a new boon in the shape of old-age pensions. He even made it out to be inconsistent with some declaration of mine, to which I entirely adhere, that all classes of the community ought to contribute in the form of taxation to expenditure of this kind. But the right hon. Gentleman who has just sat down has told us—and I take note of the admission; and I contrast it with what was said by his colleague last night—that in any rearrangement of taxation on a broadened basis care will be taken that the proportionate burden to be laid on the shoulders of the working classes will not be increased. Well, you cannot have it both ways, and we shall note with interest, in the future development of a hypothetical character which is some day or other to see the light, how the ardent desire of one of these right hon. Gentlemen to see that the working classes in the shape of indirect taxation shall pay their share of all forms of national expenditure will harmonise with the promise of his Leader that in no case shall the burden upon the working classes be increased. This Amendment contents itself with a hollow and sounding generality about broadening the basis of taxation. If we could only agree—it is a very large "if"—as to the meaning of that term, I suppose there is no man on either side or in any quarter of this House who is not prepared to give at least an academic assent to the proposition that taxation ought to be broadened. Of course it ought. The broader taxation is, the more solid and secure is the edifice you build upon it. Yes, but what do you mean by broadening the basis of taxation? Not one ray of light has been shed upon the vexed and complicated question. And, for my part, I find it difficult to avoid a contrast between the mild and studied language of this Amendment and the coyness with which speaker after speaker has avoided developing any intelligible meaning in it—a contrast between the attitude of to-day and the fervid demonstrations which only a year ago we witnessed from those very same quarters on the subject of Colonial preference. What has become of Colonial preference? The Colonial Premiers are gone, it is true, but are they so soon forgotten? [OPPOSITION cries of "Oh."] The right hon. Gentleman who has just sat down, speaking ostensibly in support of an Amendment for Broadening the basis of taxation, occupied ten minutes or a quarter of an hour in a charming dialectical disquisition on the theory of monopoly as applied to patents—a very interesting topic in its proper time and place—and yet he did not give us one hint as to what he and his followers meant by the proposition they are putting forward—namely, how you are going to broaden the basis of taxation. We do not know to this day what are the new taxes to be imposed. We have not even got an answer to the question which I have put before, and which my right hon. friends have put in the course of this debate—Does it, or does it not, mean taxation of wheat, meat, dairy produce, and the necessaries of life? I repeat, by this Amendment the Budget is not attacked, old-age pensions are not repudiated, and nothing is said as to the manner or direction in which taxation is to be broadened. Now I will come to the one relevant point which, so far as I have been able to follow the arguments of right hon. Gentlemen opposite, has been made in the course of this discussion. It is said by implication if not expressly, "We do not attack the Budget of the year so far as it seeks to make provision for the necessities of the year; what we are attacking is your reckless improvidence in not taking stock of the future, in not facing the ultimate liabilities which your present policy will entail, and, above all, in not taking us into your confidence as to the manner in which you are going to meet them." Now, a phrase of mine has been quoted which I used last year, when I said that the Chancellor of the Exchequer in this House ought to budget, not for one year, but for years in advance. I entirely adhere to that phrase. What does it mean? What impression was it intended to convey, and did convey? Did anybody out of a madhouse ever suppose that a Chancellor of the Exchequer was going to get up here and twelve months in advance tell you how he was going to levy the taxation in his Budget of the next year—what he was going to put on the income-tax or take of it, what he was going to put on beer or sugar, or what not, or even how he was going to deal with the Sinking Fund? Anyone who has any acquaintance with public finance knows that that would be to court disaster, because all the acute intellects who are engaged in finance in this country would set themselves to work to defeat in advance the scheme you were about to put forward, and to secure that you should get no revenue from it of any sort or kind. But that is the imputation that is attributed to us, and which is considered a high crime and misdemeanour. Now, when J. said that you must budget for the future, what I meant was this, that you must have before you a clear forecast of what are the lines and directions which your expenditure is going to take—expenditure upon national services and expenditure upon social reform; and before you make any experiment in the way of increasing that expenditure, such as we are making this year in the case of old-age pensions, you must have satisfied yourselves that the resources of the national finance would be equal to meeting in the future the new obligations that you are about to create. It is in that sense that you must budget for the future, and it is in that sense, and with the most complete recognition of the binding force of the obligation, that this Budget and the proposals it contains, have been introduced. But what have we done? I am amused to see the source from which the accusation comes, and in a moment I will ask one or two questions as to the antecedents of the Gentlemen who have constituted themselves my censors. I am accused of reckless and improvident finance, and an hon. Gentleman yesterday from the benches below the gangway asked me what I meant when I said last year that I was trying to lay the foundation for old-age pensions. I can answer both the charge and the question in the same breath. We have deliberately postponed dealing with this matter until we had laid what we conceived to be a solid financial foundation for the future. How have we laid it? In the first place, we have effected, I am glad to say, large economies during the last three years in the spending services of the country—but not economies so large as either my right hon. friend the Chancellor of the Exchequer or myself would like to see. But they were economies, and very substantial economies, and they are to be judged not merely by the actual cash diminution in the expenditure on the national services of the country, but by comparing them with the rate at which the increase of expenditure was going on in the years which immediately preceded our advent to office. That is the way in which we have sought to lay the foundation for the necessary expenditure on social reform. In the next place, during the time when I was Chancellor of the Exchequer, I had curtailed year by year until I had brought practically to an end the system of borrowing for what is called capital liability. In the third place, after all deductions, we have made an effort, unprecedented in the financial history of this or any other European country, to reduce the burden of the National Debt. The right hon. Gentleman the late Chancellor of the Exchequer said the other night, and I think the right hon. Gentleman who has just sat down repeated it, that our success in some respects was due to a series of accidents. Sir, those accidents are accidents which occur only when a Liberal Government is in power. The accidents are these, that in each of these years the surpluses of revenue over expenditure have been much larger than was expected, and have gone to the reduction of the Debt. Now what have those surpluses been due to?

MR. HICKS BEACH

To bad budgeting.

MR. ASQUITH

They were due to the fact that, by rigorous economy, my colleagues in charge of the great spending departments have in those years found themselves able to do with less money than was estimated by a reasonable forecast. The trade and prosperity of the country, of course, had their share in increasing the revenue. But it was also due, and particularly last year, to a readjustment of the income-tax upon elastic lines which led to a far larger yield than anyone had foreseen. Do you call that an accident? I do not call it an accident. When once you have put your taxation upon a sound foundation you are entitled to whatever extra revenue it brings yon in. Let us see what the history of this old Sinking Fund has been in days gone by. The right hon. Gentle- men opposite came into office in 1895. The first complete financial year for which they were fully responsible was the year ending 31st March, 1897. There was then for the old Sinking Fund a realised surplus of £4,200,000. That ought automatically to have gone to the reduction of the National Debt. What became of that? Every penny of it was diverted from reduction of the Debt and went to pay for naval works. The very next year they had a realised surplus of £2,470,000, and again that was diverted from the reduction of the Debt, and applied to military expenditure. In 1899, £2,055,000 was diverted from the reduction of the National Debt, and went towards the needs of the Public Buildings Expenses Act. And this was done at a time when the Government were largely increasing the sums devoted out of taxation to Army and Navy purposes and were borrowing on the market for extra capital liabilities. What possible title have Gentlemen with such a record as that to taunt me with my exceptional good fortune, because I have left the old Sinking Fund alone, and allowed it to go to its proper purpose? These censors and critics of ours, who think they can taunt us effectively with reckless and improvident finance, finished up their pre-war taxation by reducing the permanent annual charge for the Debt from £25,000,000 to £23,000,000. The fixed charge for the reduction of the Debt for the last year we were in office was £29,500,000. Therefore £6,500,000 was spent out of the taxation—that is, the whole sum estimated as the cost of my right hon. friend's old-age pension scheme.

MR. AUSTEN CHAMBERLAIN

Can the right hon. Gentleman complete his statement by saying what is the fixed Debt charge this year and the year we went out of office?

MR. ASQUITH

The last year the right hon. Gentlemen opposite were in office it was £28,000,000. I raised it in my first year of office to £28,500,000; in my second year I raised it to £29,500,000; while this year I took the amount I said I would for old-age pensions and I left the Debt charge at £28,000,000, having in the meantime reduced the capital Debt by £40,000,000, and the annual charge for the interest on the Debt by £1,250,000. I am much obliged for the interruption. I have thought it necessary to go into these details in order that people may see who are the reckless and improvident financiers. No doubt it is galling to right hon. Gentlemen opposite to find that the promise—I am almost afraid to call it a proposal, but let us say the prospect—of old-age pensions, which was dangled by them before the eyes of the electorate for the best part of a dozen years, has now for the first time become an actual, concrete, legislative proposal which Parliament is going to pass into law. It is also galling to them to find that more than half of the sugar duty is to be relieved, for which, in their opinion, the only compensating taxation is a tax on corn and meat. These are, no doubt, galling facts, and may account for a good deal of the violent language and irrelevant argument introduced into this

debate. When I ask the House to reject this absolutely unmeaning Amendment, and when I ask them instead to assent to the principle and provisions of the Budget, I do so on the grounds, as I have endeavoured to show and I think the debate has shown conclusively, that free-trade finance within the limits and upon the principles of free trade has given us a condition of financial stability upon which, without making any comparisons with other nations, we can fairly pride ourselves, find upon which, if we only pursue a fiscal policy on lines equally suited to the special exigencies of our national life, will enable us to meet, and more than meet, all the charges that lie before us.

Question put.

The House divided:—Ayes, 367; Noes, 124. (Division List No. 111.)

AYES.
Abraham, William (Cork, N.E.)	Brigg, John	Devlin, Joseph
Abraham, William (Rhondda)	Bright, J. A.	Dewar, Sir J. A. (Inverness-sh.)
Acland, Francis Dyke	Brocklehurst, W. B.	Dickinson, W. H. (St. Pancras, N
Adkins, W. Ryland D.	Brodie, H. C.	Dickson-Poynder, Sir John P.
Agar-Robartes, Hon. T. C. R.	Brooke, Stopford	Dilke, Rt. Hon. Sir Charles
Agnew, George William	Brunner, J. F. L. (Lancs., Leigh)	Dillon, John
Ainsworth, John Stirling	Bryce, J. Annan	Dobson, Thomas W.
Alden, Percy	Buchanan, Thomas Ryburn	Duckworth, James
Allen, A. Acland (Christchurch)	Burns, Rt. Hon. John	Duncan, C. (Barrow-in-Furness
Allen, Charles P. (Stroud)	Burnyeat, W. J. D.	Duncan, J. H. (York, Otley)
Armitage, R.	Burt, Rt. Hon. Thomas	Dunn, A. Edward (Camborne)
Armstrong, W. C. Heaton	Buxton. Rt. Hn. Sydney Charles	Dunne, Major E. Martin (Walsall)
Ashton, Thomas Gair	Byles, William Pollard	Edwards, Clement (Denbigh)
Asquith, Rt. Hn. Herbert Henry	Cameron, Robert	Edwards, Enoch (Hanley)
Astbury, John Meir	Carr-Gomm, H. W.	Ellis, Rt. Hon. John Edward
Atherley-Jones, L.	Causton. Rt. Hn. Richard Knight	Erskine, David C.
Baker, Sir John (Portsmouth)	Cawley, Sir Frederick	Essex, R. W.
Balfour, Robert (Lanark)	Chance, Frederick William	Esslemont, George Birnie
Barker, John	Channing, Sir Francis Allston	Evans, Sir Samuel T.
Barnard, E. B.	Cheetham, John Frederick	Everett, R. Lacey
Barran, Rowland Hirst	Cherry, Rt. Hon. R. R.	Faber, G. H. (Boston)
Barry, Redmond J. (Tyrone, N.)	Churchill, Rt. Hon. Winston S.	Fenwick, Charles
Beale, W. P.	Cleland, J. W.	Ferens, T. R.
Beck, A. Cecil	Clough, William	Ferguson, R. C. Munro
Bell, Richard	Clynes, J. R.	Fiennes, Hon. Eustace
Bellairs, Carlyon	Collins, Stephen (Lambeth)	Flynn, James Christopher
Belloc, Hilaire Joseph Peter R.	Collins, Sir Wm. J. (S. Pancras, W	Furness, Sir Christopher
Benn, Sir J. Williams (Devonp'rt	Compton-Rickett, Sir J.	Gibb, James (Harrow)
Benn, W.(T'w'r Hamlets, S. Geo.	Cooper, G. J.	Gladstone, Rt. Hn. Herbert John
Bennett, E. N.	Corbett, C H (Sussex. E. Grinst'd	Glen-Coats, Sir T. (Renfrew, W.
Berridge, T. H. D.	Cornwall, Sir Edwin A.	Glover, Thomas
Bethell, Sir J. H. (Essex, Romf'rd	Cotton, Sir H. J. S.	Goddard, Sir Daniel Ford
Bathell, T. R. (Essex, Maldon)	Cowan, W. H.	Gooch, George Peabody (Bath)
Birrell, Rt. Hon. Augustine	Cox, Harold	Grant, Corrie
Black, Arthur W.	Craig, Herbert J. (Tynemouth)	Grayson, Albert Victor
Boland, John	Cremer, Sir William Randal	Greenwood, G. (Peterborough)
Boulton, A. C. F.	Crosfield, A. H.	Greenwood, Hamar (York)
Bowerman, C. W.	Dalziel, James Henry	Grey, Rt. Hon. Sir Edward
Bramsdon, T. A.	Davies, David (Montgomery Co.	Grove, Archibald
Branch, James	Davies, Timothy (Fulham)	Guest, Hon. Ivor Churchill
Gulland, John W.	Lynch, H. B,	Redmond, John E. (Waterford
Gurdon, Rt Hn. Sir W. Brampton	Macdonald, J. R. (Leicester)	Rees, J. D.
Gwynn, Stephen Lucius	Macdonald, J. M. (Falkirk B'ghs	Rendall, Athelstan
Haldane, Rt. Hon. Richard B.	Mackarness, Frederic C.	Richards, T. F. (Wolverh'mpt'n,
Hall, Frederick	Maclean, Donald	Ridsdale, E. A.
Harcourt, Rt Hn. L. (Rossendale	Macnamara, Dr. Thomas J.	Roberts, John H. (Denbighs.)
Harcourt, Robert V.(Montrose)	MacNeill, John Gordon Swift	Robertson, Sir G. Scott (Bradf'rd
Hardie, J. Keir (Merthyr Tydvil	Macpherson, J. T.	Robertson, J. M. (Tyneside)
Hardy, George A. (Suffolk)	MacVeigh, Charles (Donegal, E.)	Robinson, S.
Harmsworth, Cecil B. (Worc'r)	M'Crae, George	Robson, Sir William Snowdon
Harmsworth, R. L. (Caithn'ss-sh	M'Killop, W.	Roe, Sir Thomas
Harvey, A. G. C. (Rochdale)	M'Laren, Sir C. B. (Leicester)	Rogers, F. E. Newman
Harvey, W. E. (Derbyshire, N. E.	M'Laren, H. D. (Stafford, W.)	Rowlands, J.
Harwood, George	M'Micking, Major G.	Runciman, Rt. Hon. Walter
Haslam, James (Derbyshire)	Maddison, Frederick	Rutherford, V. H. (Brentford)
Haslam, Lewis (Monmouth)	Mallet, Charles E.	Samuel, Herbert L. (Cleveland
Haworth, Arthur A.	Manfield, Harry (Northants)	Samuel, S. M. (Whitechapel)
Hazel, Dr. A. E.	Markham, Arthur Basil	Scarisbrick, T. T. L.
Hazleton, Richard	Marks, G. Croydon (Launceston)	Schwann, C. Duncan (Hyde)
Hedges, A. Paget	Marnham, F. J.	Schwann, Sir C. E. (Manchester)
Hemmerde, Edward George	Mason, A. E. W. (Coventry)	Scott, A. H. (Ashton under Lyne
Henderson, Arthur (Durham)	Massie, J.	Sears, J. E.
Henderson, J. M. (Aberdeen, W.)	Micklem, Nathaniel	Seaverns, J. H.
Henry, Charles S.	Middlebrook, William	Seddon, J.
Herbert, Col. Sir Ivor (Mon., S.)	Molteno, Percy Alport	Seely, Colonel
Herbert, T. Arnold (Wycombe)	Mond, A.	Shaw, Charles Edw. (Stafford)
Higham, John Sharp	Money, L. G. Chiozza	Shaw, Rt. Hon. T. (Hawick B.)
Hobart, Sir Robert	Montgomery, H. G.	Sheehan, Daniel Daniel
Hobhouse, Charles E. H.	Mooney, J. J.	Sherwell, Arthur James
Hodge, John	Morgan, G. Hay (Cornwall)	Shipman, Dr. John G.
Holland, Sir William Henry	Morrell, Philip	Silcock, Thomas Ball
Holt, Richard Durning	Morse, L. L.	Simon, John Allsebrook
Hope, John Deans (Fife, West)	Morton, Alphens Cleophas	Sinclair, Rt. Hon. John
Hope, W. Bateman (Somerset, N	Murray, Capt. Hn A. C. (Kincard.	Smeaton, Donald Mackenzie
Horniman, Emslie John	Murray, James (Aberdeen, E.)	Snowden, P.
Horridge, Thomas Gardner	Myer, Horatio	Spicer, Sir Albert
Howard, Hon. Geoffrey	Napier, T. B.	Stanger, H. Y.
Hudson, Walter	Newnes, F. (Notts, Bassetlaw)	Stanley, Albert (Staffs, N. W.)
Hyde, Clarendon	Nicholls, George	Stanley, Hn. A. Lyulph (Chesh.)
Idris, T. H. W.	Nicholson, Charles N. (Doncast'r	Steadman, W. C.
Illingworth, Percy H.	Nolan, Joseph	Stewart, Halley (Greenock)
Isaacs, Rufus Daniel	Norman, Sir Henry	Stewart-Smith, D. (Kendal)
Jackson, R. S.	Norton, Capt. Cecil William	Strachey, Sir Edward
Jacoby, Sir James Alfred.	Nussey, Thomas Willans	Straus, B. S. (Mile End)
Jardine, Sir J.	Nuttall, Harry	Strauss, E. A. (Abingdon)
Jenkins, J.	O'Brien, Kendal (Tipperary Mid	Stuart, James (Sunderland)
Johnson, W. (Nuneaton)	O'Brien, Patrick (Kilkenny)	Summerbell, T.
Jones, Sir D. Brynmor (Swansea	O'Connor, T. P. (Liverpool)	Sutherland, J. E.
Jones, Leif (Appleby)	O'Donnell, C. J. (Walworth)	Taylor, Austin (East Toxtsth)
Jones, William (Carnarvonshire	O'Kelly, James (Roscommon)	Tennant, Sir Edward (Salisbury
Jowett, F. W.	O'Malley, William	Tennant, H. J. (Berwickshire)
Kavanagh, Walter M.	Parker, James (Halifax)	Thomas, Abel (Carmarthen, E.)
Kearley, Hudson E.	Partington, Oswald	Thomas, Sir A. (Glamorgan, E.)
Kekewich, Sir George	Paulton, James Mellor	Thomasson, Franklin
Kettle, Thomas Michael	Pearce, Robert (Staffs, Leek)	Thompson, J. W. H. (Somerset, E
Kincaid-Smith, Captain	Pearce, William (Limehouse)	Thorne, G. R. (Wolverhampton
King, Alfred John (Knutsford)	Pearson, Sir W. D. (Colchester)	Thorne, William (West Ham)
Laidlaw, Robert	Pearson, W. H. M. (Suffolk, Eye)	Tillett, Louis John
Lamb, Edmund G. (Leominster	Perks, Robert William	Tomkinson, James
Lamb, Ernest H. (Rochester)	Philipps, J. Wynford (Pembroke	Torrance, Sir A. M.
Lambert, George	Philipps, Owen C. (Pembroke)	Toulmin, George
Lamont, Norman	Pickersgill, Edward Hare	Trevelyan, Charles Philips
Layland-Barratt, Francis	Pollard, Dr.	Ure, Alexander
Lea, Hugh Cecil (St. Pancras, E.	Ponsonby, Arthur A. W. H.	Verney, F. W.
Leese, Sir Joseph F. (Accrington	Price C. E. (Edinb'gh, Central)	Villiers, Ernest Amherst
Lehmann, R. C.	Price, Robert John (Norfolk, E.)	Wadsworth, J.
Lever, A. Levy (Essex, Harwich	Priestley, Arthur (Grantham)	Walker, H. De R. (Leicester)
Lever, W. H (Cheshire, Wirral	Priestley, W. E. B. (Bradford, E	Walters, John Tudor
Levy, Sir Maurice	Pullar, Sir Robert	Walton, Joseph
Lewis, John Herbert	Radford, G. H.	Ward, John (Stoke upon Trent)
Lloyd-George, Rt. Hon. David	Raphael, Herbert H.	Ward, W. Dudley (Southampt'n
Lupton, Arnold	Rea, Russell (Gloucester)	Wardle, George J.
Lyell, Charles Henry	Rea, Walter Russell (Scarboro'	Waring, Walter

Warner, Thomas Courtenay T.	Whitley, John Henry (Halifax)	Wilson, P. W. (St. Pancras, S.)
Wason, Rt. Hn. E (Clackmannan	Whittaker, Sir Thomas Palmer	Wilson, W. T. (Westhoughton)
Wason, John Cathcart (Orkney)	Wiles, Thomas	Winfrey, R.
Waterlow, D. S.	Williams, Osmond (Merioneth)	Wodehouse, Lord
Watt, Henry A.	Williamson, A.	Wood, T. M'Kinnon
Wedgwood, Josiah C.	Wills, Arthur Walters	Yoxall, James Henry
Weir, James Galloway	Wilson, Hon. G. G. (Hull, W.)
Whitbread, Howard	Wilson, Henry J.(York, W. R.)	TELLERS FOE THE AYES—Mr. Joseph Pease and Master of Elibank.
White, Sir George (Norfolk)	Wilson, John (Durham, Mid)
White, J. D. (Dumbartonshire)	Wilson, J. H. (Middlesbrough)
Whitehead, Rowland	Wilson, J. W. (Worcestersh. N.)
NOES.
Anson, Sir William Reynell	Fardell, Sir T. George	Morrison-Bell, Captain
Arkwright, John Stanhope	Fell, Arthur	Nicholson, Wm. G. (Petersfield)
Arnold-Forster, Rt. Hn. Hugh O.	Gardner, Ernest	Nield, Herbert
Ashley, W. W.	Gooch, Henry Cubitt (Peckham	O'Neill, Hon. Robert Torrens
Aubrey-Fletcher, Rt. Hn. Sir H.	Goulding, Edward Alfred	Parker, Sir Gilbert (Gravesend)
Balcarres, Lord	Gretton, John	Parkes, Ebenezer
Baldwin, Stanley	Guinness, Walter Edward	Pease, Herbert Pike(Darlington
Balfour, Rt. Hn. A. J.(City Lond.)	Haddock, George B.	Percy, Earl
Banbury, Sir Frederick George	Hamilton, Marquess of	Powell, Sir Francis Sharp
Banner, John S. Harmood	Hardy, Laurence (Kent, Ashf'rd	Randles, Sir John Scurrah
Baring, Capt. Hn. G (Winchester	Harris, Frederick Leverton	Rawlinson, John Frederick Peel
Barrie, H. T. (Londonderry, N.)	Harrison-Broadley, H. B.	Ronaldshay, Earl of
Beach, Hn. Michael Hugh Hicks	Hay, Hon. Claude George	Rutherford, W. W. (Liverpool)
Beckett, Hon. Gervase	Helmsley, Viscount	Salter, Arthur Clavell
Bignold, Sir Arthur	Hill, Sir Clement	Sandys, Lieut.-Col. Thos. Myles
Bowles, G. Stewart	Hills, J. W.	Sassoon, Sir Edward Albert
Bridgeman, W. Clive	Hope, James Fitzalan (Sheffield	Scott, Sir S. (Marylebone, W
Bull, Sir William James	Houston, Robert Paterson	Sheffield, Sir Berkeley George D.
Burdett-Coutts, W.	Hunt, Rowland	Stanley, Hn. Arthur (Ormskirk)
Butcher, Samuel Henry	Joynson Hicks, William	Starkey, John R.
Carlile, E. Hildred	Kennaway, Rt. Hon. Sir John H.	Staveley-Hill, Henry (Staff'sh.
Carson, Rt. Hon. Sir Edw. H.	Kerry, Earl of	Stone, Sir Benjamin
Castlereagh, Viscount	Keswick, William	Talbot, Lord E. (Chichester)
Cave, George	Kimber, Sir Henry	Talbot, Rt. Hn. J. G. (Oxf'd Univ.
Cecil, Evelyn (Aston Manor)	King, Sir Henry Seymour (Hull)	Thomson, W. Mitchell- (Lanark
Cecil, Lord John P. Joicey-	Lambton, Hon. Frederick Wm	Thornton, Percy M.
Cecil, Lord R. (Marylebone, E.)	Lane-Fox, G. R.	Tuke, Sir John Batty
Chamberlain, Rt. Hn. J. A. (Wore	Law, Andrew Bonar (Dulwich)	Valentia, Viscount
Chaplin, Rt. Hon. Henry	Lee, Arthur H. (Hants, Fareham	Walker, Col. W. H. (Lancashire)
Clive, Percy Archer	Lockwood, Rt. Hn. Lt. -Col. A. R.	Walrond, Hon. Lionel
Coates, Major E. F. (Lewisham	Long, Col. Charles W. (Evesham	Warde, Col. C. E. (Kent, Mid)
Cochrane, Hon. Thos. H. A. E	Long, Rt. Hn. Walter (Dublin, S.	Williams, Col. R. (Dorset, W.)
Collings, Rt. Hn. J.(Birmingh'm	Lowe, Sir Francis William	Willoughby de Eresby, Lord
Courthope, G. Loyd	Lyttelton, Rt. Hon. Alfred	Wilson, A. Stanley (York, E. R.)
Craig, Charles Curtis (Antrim, S.	MacCaw, William J. MacGeagh	Wolff, Gustav Wilhelm
Craig, Captain James (Down, E.	M'Arthur, Charles	Wortley, Rt. Hon. C.B. Stuart-
Craik, Sir Henry	Magnus, Sir Philip	Wyndham, Rt. Hon. George
Cross, Alexander	Marks, H. H. (Kent)	Younger, George
Dalrymple, Viscount	Mason, James F. (Windsor)
Douglas, Rt. Hon. A. Akers-	Meysey-Thompson, E. C.	TELLERS FOR THE NOES—Sir Alexander Acland-Hood and Mr. Forster.
Du Cros, Arthur Philip	Middlemore, John Throgmorton
Faber, George Denison (York)	Mildmay, Francis Bingham
Faber, Capt. W.V. (Hants, W.)	Morpeth, Viscount

Question put, and agreed to.