INCOME-TAX.

HC Deb 25 May 1908 vol 189 cc779-892

Motion made, and Question proposed, "That Income-tax shall be charged for the year beginning the sixth day of April, nineteen hundred and eight, at the rate of one shilling in the pound."—(Mr. Chancellor of the Exchequer.)

MR. AUSTEN CHAMBEELAIN (Worcestershire, E.)

The Prime Minister informed me of his inability to be present with us to-day, being detained by public duties in another place. I greatly regret that, because I am bound to refer, not merely to the general scheme which he has propounded, but with more particularity to some of the statements he made in the course of his Budget statement. When I followed the right hon. Gentleman immediately after his Budget statement was concluded, I felt it to be unfair to myself, and scarcely respectful to him, to attempt any full criticism of the scheme which he had propounded. I made some few observations, and with one exception subsequent reflection and consideration have only confirmed me in the opinions which I then expressed. For better or for worse I think that everyone will admit that this is a momentous Budget. It is a Budget which marks a new departure in our finance and which is equally important for what it does and for what it leaves undone. What it does is to start in this country a scheme of State-aided old-age pensions, and as I said in the few observations I made the other day, that undertaking is one which, I think, meets with almost universal goodwill in this House, for the question of a better provision for the old age of our people is one that has increasingly exercised the minds of all people who are interested in social progress. It has drawn to it the attention and the labour of not merely many of the most distinguished men in all sections of the House, but of a great number of labourers in the social field outside the House. Therefore I quite agree with the Government in thinking that the time has come when it is necessary for them to show an early intention to deal with the question. At the same time, I express my regret that the House is forced into consideration of it without being in possession of the results of the inquiry which is now nearing its close by the Royal Commission on the Poor Law. It was only this session that the Prime Minister alleged the fact that that Commission was at work, and would shortly report, as sufficient reason for not attempting this year to deal in any form with the question of unemployment and the unemployed. I am bound to say that if that was a sufficient reason for leaving that question untouched in the present session, it is at least an equally forcible reason for not at this moment starting an old-age pension scheme without any knowledge as to what is to become of our Poor Law in the course of the next twelve months. One thing is certain, and that is that the Poor Law and its administration has got to be recast; that we have got, in and through the Poor Law, to differentiate in a way we have never done before between the able-bodied unemployed and those unemployed who, by reason of their unemployment, come on the Poor Law for poor relief owing to unfitness, to illness, and to old age. I confess that it is extraordinarily difficult to discuss the question of old-age pensions reasonably or satisfactorily when we know that there are impending vast changes in the Poor Law, the effect and nature of which is hidden from us. The Government felt that they could not delay and they have propounded a scheme this year, and in the course of my speech I wish to make some observations upon it. But first of all I would like to make some observations on the general financial position of the country as disclosed by the Budget. I said that the Budget was remarkable for what it did, but even more remarkable for what it does not. What is our position at the present time? We have had for nearly two and a half years in power a Government and a Party pledged to reduce expenditure, and who on platform after platform in the country, having denounced their predecessors as extravagant and wasteful, have undertaken to reduce the expenditure of the country within more manageable limits. (Ministerial cheers.) I am glad to see I have the assent of hon. Gentlemen opposite, and that I have described correctly the attitude they took up in the country. But what have they done to fulfil that undertaking? The expenditure has not been reduced.

AN HON. MEMBER (on the MINISTERIAL Benches): The Debt has been reduced.

MR. AUSTEN CHAMBERLAIN

I will come to the Debt. Does the hon. Gentleman not understand the difference between the interest on Debt and the ordinary expenditure of the country? The charge for the Debt is exactly what it was when I left office, and stands at the figure at which I myself fixed it. The expenditure is not at the figure at which I left it. On the Supply services it is over two millions higher than when I left office, and that is the result of two and a half years' hard work by this Administration of all the talents, pledged before all things to reduce expenditure and to show how much more cheaply they could do the work of the country. When we find that the Prime Minister in his Budget of this year has to estimate the expenditure of the Supply services at very nearly 112 millions sterling and a total expenditure of 153 millions, we may take it that the clap-trap which served on popular platforms before the general election is exploded. It may be taken as an admitted fact that, while you can reduce a little here or there, you cannot make any great permanent reductions in the scale of the expenditure in which our country is involved. But that is not all. The day when you might look for reductions has gone by. What you have now to look forward to is not reductions, but immense and very early increases. The Prime Minister, by introducing his old-age pension scheme, has started us on a path which everyone will admit must lead in the immediate future to very great expenditure, and as the years go on must tend constantly to increase our expenditure. From a scheme of this kind once put in force there is no turning back and we should not desire to turn back if we could. There is no turning back, because on every side, almost universally throughout the country, there is this desire; that better provision should be made for old age. Nobody wants to go back, but nobody pretends that this scheme is complete. The Prime Minister has not provided the means for paying for the scheme. It is only the first step on the path we have got to tread, and before we place old-age pensions in a satisfactory condition the estimate of expenditure which the Prime Minister gave to the House will have to be doubled, trebled, or even quadrupled. What has the Prime Minister done? He has drawn a bill for £6,000,000. He expects to have to meet £1,200,000 within the present year. For that he has made provision. For the other £4,800,000 he has made no provision at all. Happy is the position of a Chancellor of the Exchequer who is able to make a Budget statement when he has already laid down the burden of that office, and can introduce large and costly reforms, leaving to others the obligation to foot the bill which he has drawn. Still, that is not all. It is not only on old-age pensions that the Budget of next year is going to show a much larger expenditure than the Budget of this year. Take the case of the Navy. It is admitted by the late Secretary to the Admiralty that if we did not lay down a single new ship of any class or kind whatever in the next financial year the Naval Estimates would still have to increase by between one and a half and two millions above the figure of this year. But we all know that we have got to lay down new ships. We have the definite pledge of the Prime Minister that, as long as he is responsible, nobody is to be allowed to challenge the two-Power standard, and that if foreign shipbuilding is carried on as rapidly as there is every reason to expect, we shall not only lay down the extra number of ships necessitated by that programme, but will make such progress with them next year that our supremacy shall be maintained in point of time and numbers. At the lowest computation we have to look forward to the Navy Estimates exceeding those of the present year by some £4,000,000. It is for that reason that I and my friends have thought the Government extremely unwise in paring their Naval Estimates so close this year. I should like to say that everything that has come to my knowledge since the discussions on the Estimates has convinced me not only that we must have a great programme of battleships next year, but that we must do a great deal more than we are doing with the minor ships of the Fleet, especially with small cruisers and torpedo-boats. It is not as if the ships were efficient; they are worn out through age. You cannot send them to sea and keep them at sea, because they shake themselves to pieces. I am speaking of destroyers twelve or fifteen years old. They cannot stand a severe test under war-like conditions, and if you attempted to keep them at sea you would soon find your docks blocked by these vessels coming in to be repaired. We have, practically, nearly £5,000,000 additional for old-age pensions and £4,000,000 for the Navy. Then what am I to allow for education? £1,500,000 is the estimate of the Government. The Vote for the Education Bill is obscured from us; we do not know what measure will eventually pass; but we can say this, and it is fair comment, that if anything approaching the Government Bill is to pass the increased contribution from the Exchequer will have to be not less than £1,500,000. Speeches made from the Government Bench suggest that if the Irish Members are to be bought off they can have another £500,000 for the asking. Very great efforts have been made by the Secretary of State for War to reduce the Army Estimates, and I have no doubt that both the late and the present Chancellor of the Exchequer are putting all the pressure they can upon the right hon. Gentleman for that purpose. He has had a certain amount of success, but how has he succeeded? He has made his saving by destroying the existing Army before he has anything to replace it. His savings are due to the fact that he has destroyed the Regulars without having brought the Territorial Army into being. This I do know, that if the Territorial Army scheme succeeds, and if the right hon. Gentleman by that interminable flood of speeches which he is pouring into the Volunteers all over the country to gain a new Territorial Army succeeds, those Estimates cannot be reduced. They must grow. The only chance he has of getting his reduction is by failure to recruit. I make no estimate of the growth of ordinary expenditure for education, owing to the natural growth of population and the attendance in the schools, or the ordinary growth of general expenditure. I will assume that that can be set off against the ordinary growth of revenue. What, therefore, have you got? £4,000,000 increase for the Navy, £1,500,000 for education, and £4,800,000 for old-age pensions. You have liabilities admitted by the Government to be tangible falling upon us next year to the amount of £9,000,000, and for that you make not one farthing provision. I say nothing of other legislative projects which you may or may not have in view. An Irish Council Bill has been before Parliament which proposed that there should be an Exchequer grant of £600,000, I think, to the new council thus established in Ireland, and if the declarations are to be followed by any practical results and we are to have some further scheme of Home Rule, the first thing that will be required in order to put an Irish Parliament or council on its legs will be a new draft on the Exchequer. It is one of the most extraordinary things in this Imperial Parliament that while we sit here year after year complaining of the waste of expenditure on Irish government, whenever we see a new project put forward for the government of that country it has to be accompanied by an increased grant from the Exchequer. We may, however, assume that the declarations at Manchester were mere expressions of platonic affection and that we shall not be called upon for anything in regard to them next year. Still, we have to face an extraordinary expenditure of £10,000,000, and the Government have not looked about for any fresh source of revenue for these new liabilities, but are abandoning the resources that now exist. The Prime Minister made a suggestion about the dead-weight Debt which he offered to the Chancellor of the Exchequer. His suggestion was that the right hon. Gentleman should raid the Sinking Fund. A great deal was said last year about economy of administration, but nothing was done. A great deal was said at the last election about the necessity for reducing the Debt, and yet it is left to the Prime Minister of the party which prided themselves so much on their financial integrity to propose that the Sinking Fund should be raided in order to find the means for his remissions of taxation. In that the right hon. Gentleman justified himself by what Mr. Goschen did in 1889. In 1889 Mr. Goschen was carrying or had just carried through his great conversion scheme by which he made an immediate saving of £1,500,000 on the National Debt, and he proposed to reduce the fixed charge for the reduction of debt by £1,000,000, so that instead of lessening the provision for the reduction of debt he actually increased it by £500,000. He reduced the fixed debt charge by £1,000,000 and increased the Sinking Fund by £500,000. That is the Prime Minister's precedent. If the Chancellor of the Exchequer says there is another precedent which would have been a good deal more to the point, I agree with him in thinking that the Prime Minister had a precedent which he might have used to much greater effect, instead of which he uses one that breaks in his hand. Hon. Gentlemen who advised him in this matter were so little careful to look up precedents that they chose a year when Mr. Goschen, instead of reducing the provision for the reduction of debt, increased it by £500,000. That was his first excuse. The second was that the Government had gone a long way in the last three years towards reducing the National Debt. So they had, but more by accident than by design. The Prime Minister spoke of the sacrifices and efforts which he and his friends had made. What efforts had they made?

MR. GUEST (Cardiff District)

£29,500,000.

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

Are you going to deal now with the 1899 precedent?

MR. AUSTEN CHAMBERLAIN

I shall be ready to deal with that when the Prime Minister founds himself upon it. At present he founds himself upon the reduction by Mr. Goschen, not of the Sinking Fund, but of the fixed debt charge. In the meantime I will continue my observations as to what the present Government has done in the way of the reduction of debt, and ask what sacrifice or efforts the Prime Minister has made. What has he added to the Sinking Fund beyond what was provided by his predecessors? He has been fortunately situated. He entered on his inheritance with a surplus; he was more fortunate than his predecessor who inherited a heavy deficit. He has had surpluses in subsequent years; and times of easy finance. What has he done to increase the provision that is made for the reduction of Debt? Nothing. He added £500,000 temporarily one year and he added £1,500,000 temporarily last year.

MR. GUEST

That was not accidental.

MR. AUSTEN CHAMBERLAIN

No, that was intentional. But before the year was out he took away with one hand what he gave with the other. In the first year he took £500,000 off the Sinking Fund for the purposes of the Secretary for War in regard to barracks. In the second year he seized another £500,000 for a similar purpose, and this year £600,000 for the completion of public works. Therefore, if the right hon. Gentleman added £1,500,000 to the Sinking Fund, he has subtracted £1,500,000, and, therefore, has done nothing beyond what was left by his predecessors. The right hon. Gentleman was really not quite fair in his comparison, although I do not think he-intended to be uncharitable to his unfortunate predecessor. He said that in the three years 1903–6, the Debt had been reduced by £27,500,000, and in the three years 1906–9 by £46,000,000. But there were one or two factors which the right hon. Gentleman forgot to mention. In the first place there was the singularly low price of Consols, that not even "the wasteful finance" of the late Government could reduce the price of Consols, and accordingly, whatever money the right hon. Gentleman had, went further than money went under his predecessors. But that is not all. He has been fortunate in having had prosperous years with large surpluses. The first of these surpluses was £3,500,000, inherited from his predecessor. The right hon. Gentleman said he was very grateful to me for that £3,500,000, but "that he had excluded it from his calculations. No, he has not. It is in the £46,700,000 for which he takes credit to himself. In addition to that £3,500,000, nearly another £10,000,000 for which he takes credit was accidental and not intentional, and not the result of under-estimated receipts and over-estimated expenditure. Therefore, out of £47,000,000 in these prosperous years, you have to take about £13,000,000 before you get the real amount which the right hon. Gentleman intended to devote to these purposes. But that is not all. The right hon. Gentleman and his friends are accustomed to take credit for having put an end to the system of borrowing for naval and military works. I am quite ready to admit that the particular works included may be open to challenge, as not involving that permanent increase which entitles him to borrow upon them. But I am absolutely unable to draw a distinction in principle between borrowing, as the right hon. Gentleman did, for telegraph construction, or seizing on the Sinking Fund instead of creating a new debt for the completion of public buildings, and using the same resources for great naval and military works of permanent utility. If the right hon. Gentleman is able to present naval and military estimates as moderate as those he has presented out of taxation, it is because he enjoys the result of, the operations of the Naval and Military Works Act. But he, too, is continuing to borrow. What has he done? He has said that no further work shall be included in those Acts. That had already been said in regard to naval works by the late Administration. The right hon. Gentleman has extended that to military works, and he has transferred a certain proportion of the charges which would have fallen under the Naval Works Act to the Vote; but he is still taking advantage of the large borrowing powers obtained by his predecessors, and he is still creating fresh annuities for works being executed. That is not all. He is living on capital to the tune of £1,000,000 a year, because there were surplus naval stores to the amount of £3,000,000 which they have exhausted very rapidly. Next year there will be no surplus, and the full charge will come on the Vote. What are the conclusions to be drawn? A great and growing expenditure, liabilities foreseen and practically announced to the House to the gigantic amount of £10,000,000, with absolutely no provision made for them. I see that my noble friend, Lord St. Aldwyn, said in the other House a day or two ago that this was unsound finance. It is, with a Budget such as. I think, has never been presented to this House before, in its reckless disregard of obligations incurred, and its total failure to do anything to meet them—it is under these circumstances that the Prime Minister invites the Chancellor of the Exchequer to raise this income. The right hon. Gentleman asked me if I would say anything about the earlier precedents which I might find in the more cautious action taken in 1887.

MR. LLOYD-GEORGE

No; 1899, when there was a reduction of the Sinking Fund by £23,000,000.

MR. AUSTEN CHAMBERLAIN

I am not prepared to say anything about that just now, because I set myself to answer the speech of the Prime Minister, and I frankly admit that the precedent to which the right hon. Gentleman calls my attention I had not noticed. Speaking from memory, if I remember rightly, at that time Consols stood at 110 or 112, and I am not sure that they had not reached 114; at any rate they were standing very high. Is there no difference between reducing the Sinking Fund at a time when every £100 of Consols purchased might cost £110 and reducing the Sinking Fund at a time when every £100 of Consols can be got for £80? I say there is a very great difference. As I am reminded by my hon. friend near me, at that time the National Debt was £150,000,000 less than it is now. I do not think that there is any parallel between those cases. Let me go back to the earlier case of Mr. Goschen. Was there any parallel then? Consols were not standing so high, it is true. What was the income-tax? What was the general level of taxation? You have in this country two great reserve in case of war. Gentlemen who are anxious to reduce our naval and military expenditure are never tired of telling us that our financial reserve is, at least, as important a factor in our defensive position as either our Army or our Navy. I think that is a slightly exaggerated way of putting it, because with an efficient Army or Navy our financial reserves would never have time to come into play. I admit the great importance of these financial reserves. They consist of the Sinking Fund and the income-tax. Both of these afford a great reserve for war or for sudden emergencies. But with a low Sinking Fund and a high income-tax then you have a poor and small reserve. When Mr. Goschen performed the operation which the Prime Minister, I am sorry to say, inaccurately described, the income-tax was at 6d., but to-day it is at 1s. When Mr. Goschen made his earlier raid on the Sinking Fund, the income-tax was reduced to 7d., the tea duty was 4d., and there was no sugar duty at all. If he had a smaller margin in respect of the Sinking Fund and its reduction, he had a greater reserve in the unused taxable capacity of the imposts already in force. Now you have a high income-tax and you propose to make a low Sinking Fund. That is perilous finance. It is an easy thing to do, and earn the cheap and quick approval of the moment, but it leaves your successors in time of emergency and national danger to bear the strain which we ought to be men enough to bear in times of peace. I say that under the circumstances it was the duty of the Government to provide new resources. Instead of that they dissipate the old ones. At a time when they are establishing a non-contributory old-age pensions scheme, they remit rather more than half of the sugar duty. But the new expenditure is for the benefit exclusively of the poor of this country. It is not intended to reach any of those who pay direct taxes, whether income-tax or death duties. But the Prime Minister wishes to persuade those who contribute neither to the income-tax nor to the death duties, those whose contribution is made through indirect taxation, that they can both have their cake and eat it, because when they eat it they can get a new one which comes from the direct taxes. I do not think that is very wise finance; I do not think that it is very honest finance. I am quite willing to join any body of opinion in this House in calling upon the rich and more well to do to join in schemes for the improvement of the less well to do in this country, and to contribute according to their means to these schemes, but I am not prepared to say that any class of the community may demand social reforms, or schemes that they call social reforms, without contributing anything towards the cost. They cannot or ought not to contribute the whole; their individual contributions must be necessarily less; but where the benefit goes to the poor, to say that they shall contribute nothing is only to teach them to look for boons of this kind without making any effort or contribution of their own. That it seems to me is not honest; it is a corrupting influence in our political system which once entered upon will lead you very far and involve very grave difficulties. ["No, no."] I notice hon. Gentlemen opposite express a good deal of dissent from that doctrine, but I fortify myself by the opinion of the Prime Minister, expressed as recently as January last in Lancashire. Speaking on the establishment of a system of old-age pensions, he said that— So far as it is drawn from taxation, it must be a scheme to which all classes of the community, including the working classes, make a just and adequate contribution. That is all I ask, but I do ask that. Where in the present Budget scheme, where in the present old-age pension scheme that the right hon. Gentleman has announced, with its liability this year of £1,500,000, and next year £6,000,000, and in the years to come £10,000,000 or £20,000,000, is the just and adequate contribution allowed for, or which he says working classes ought to make? I invite the Chancellor of the Exchequer in this connection to tell us what is the contribution of a working man who is a teetotaller and not an income-tax payer, to the taxation of the country. I what the question answered in two forms. I take, first, the teetotaller who is a smoker, and who we will assume drinks his share of tea, coffee and cocoa in the next place, the teetotaller who is also a total abstainer from tobacco, and I should like to know what is the contribution which either of these men, paying indirect taxes only, makes to the general expenditure of the State, by which, after all, as far as you can split it up and say that any portion of it is more for the benefit of one class than another, he is the greatest beneficiary of all. I do not imagine that the Chancellor of the Exchequer or the Prime Minister desires that any class of the community should escape all taxation whatever. There are Gentlemen below the gangway who do, but that view has not yet been adopted, I think, by any Member on the Treasury Bench except the First Lord of the Admiralty in an obiter dictum, to which it would, perhaps, be unwise to hold him. But what is the contribution of that man apart from his indulgence in alcoholic liquor? I had a calculation worked out when I was Chancellor of the Exchequer. I do not think it was an exorbitant contribution then, and certainly it is a very much smaller contribution now. Turning from that side of the Budget, with its enormous liabilities and its absence of provisions to meet them, I come to some observations that I have to make upon the old-age pension scheme itself. As I have said, it is obviously incomplete, but I do not make that a ground of accusation against it. It is incomplete in respect of age. I do not think anyone will be content to rest indefinitely on old-age pensions beginning at so late an age as seventy. But I make no complaint of the Prime Minister having fixed on that age at which to begin, and I do not wish anyone to suppose that I do. But I regret, and I repeat the regret that I expressed on the first day of this debate, that he has ruled out at once all consideration of contributory schemes. I said at that time that I was afraid that, having set before the country a non-contributory scheme, the light hon. Gentleman had made any contributory scheme impossible in the future. I think, possibly, there I was over-hasty. I think it may be that in order to obtain the greater benefits beginning at an earlier age, which we all desire to see, the mass of our fellow countrymen will be ready to come in to a compulsory national contributory scheme. Undoubtedly the choice made by the right hon. Gentleman has increased the difficulty; still I don not abandon the hope. And when I hear it said that this is an impossibility, I look at what the working people have done by voluntary contributions—for instance, for the Hospital Saturday collections, which I do not think brought in very great funds at first, but which developed along the line of a compulsory levy on the wages in a factory voted by the men working in the factory themselves, and is producing in Birmingham, for instance, thousands of pounds a year for the benefit of our great charities. If workmen are willing to tax themselves in their factories and authorise their employer to deduct 1d. or 2d. a week from their wages in order to maintain hospitals, I do not despair of the same thrifty, independent, industrious people being ready and anxious to make some direct contribution to a better provision for their old age. The Prime Minister did not attempt to argue this question. He waived it aside with a couple of references. The first was to the German scheme in regard to which the right hon. Gentleman made an amazing statement which has already formed the subject of Question and Answer between my right hon. friend beside me and the Chancellor of the Exchequer. He said that in Germany after thirty years only 126,000 persons were in receipt of old-age pensions. But the right hon. Gentleman has not taken the trouble to inform himself as to what the German system is, and I do not think that the right hon. Gentleman's condemnation of it will carry conviction. Under the German scheme the old-age pension given as such is the exception and not the rule. It is a transitional stage that is passing away. The great mass of the people who receive pensions are getting them before they reach the age of seventy. The German scheme provides for a pension to be payable at the time a man ceases to be able to maintain himself—when he is invalided and unable to work. Thus the great mass of the German pensions are given not under the name of old-age pensions but under the name of invaliding pensions; and instead of the total of pensionability payable under the German scheme being as the Prime Minister apparently thought, and as his words would have led any Member to suppose, 126,000, that is almost exactly the number of new pensions granted in 1907 alone, and the number of people actually in enjoyment of pensions is over 962,000. For anybody to talk of old-age pensions in Germany without taking account of the invaliding pension is, I am certain the Chancellor of the Exchequer will allow, the moment his attention is called to the matter, absolutely to ignore the essential features of the case, and, not intentionally of course, to give a very misleading account of the state of affairs. Then the right hon. Gentleman made a reference to a speech of my right hon. friend the Member for West Birmingham, delivered in 1899, and said that if anybody still had a lingering a Section for a contributory scheme he advised him to read that speech. It is quite true my right hon. friend said in that speech that he thought the hope of a contributory scheme must be abandoned. I am generally in very full agreement with my right hon. friend, but on this occasion at least I am more sanguine, at any rate until the scheme of the Government is unfolded. I believe that there has been a distinct advance on this question since my right hon. friend spoke, and that the contributory scheme is much more possible now than at that time. My right hon. friend went on to say— A universal scheme"— —which is not the Government scheme— is open to the fatal objection that it would make no distinction whatever between the provident, thrifty, industrious men and the drunkard and the spendthrift; any scheme must encourage thrift and independence, else it will do more harm than good. What have the Government done to distinguish between the provident, the thrifty, and the industrious, and the men who are drunkards or spendthrifts? What have they done to encourage thrift and independence? As presented to the Committee, their scheme is a direct discouragement to numbers of deserving men, who are to be treated no better than the thoroughly undeserving. I repeat again that I do not want an inquisitorial test into character. I have often spoken, like many hon. Members, at public meetings on this subject, and have always on those occasions expressed my preference for a contributory scheme, and I maintain now that the Government ought to distinguish between the thrifty and the industrious, and the undeserving. I do not believe that this is an unpopular view to take of the feeling among the mass of the working people. I do not think that the working men want the idler, the spendthrift, and the drunkard to be treated in the same way as the hard-working and industrious. Whatever the State wastes on the spendthrift and the drunkard it takes away from the deserving, and by adopting a non-contributory scheme the Government have made it much more difficult to distinguish between the thrifty, and the industrious, and the other class. Besides, the Government have limited the income to 10s. a week, the possession of which is to debar any working man from obtaining a pension. I think that the limit of 10s. is too low, and I hope that before the Bill leaves the House, hon. Members will be able to alter it to something more satisfactory. It is all very well to say, as the President of the Local Government Board did, that the benefit drawn from the trade unions does not exceed, except in very few cases, 10s. a week, but there are a great many men in these unions and outside them who are most thrifty, most provident, and most deserving, who have made a double provision for themselves, and who, in addition to their trade union benefit, get some benefit from a building society, a friendly society, or the Post Office Savings Bank, or some similar institution. I think the 10s. limit is too low. Though I think that a mistake, I think it is a still greater mistake to make the 10s. a rigid limit, and not to have some kind of sliding scale. You ought to encourage thrift. The moment a man has saved an amount equal to 10s. a week, unless he can see his way to saving more than another 5s. a week all inducement to save ceases. You discourage him. What is the effect of that going to be? Of course, when a man has got 10s., unless he sees a chance of making it up to £1 his saving will cease. Something will have to be done. Those who are earning between 10s. and 15s. a week will cease to earn more than 10s. a week as soon as the Old-Age Pensions Bill becomes law. This is the case now in regard to income-tax: workmen often prefer a wage that brings them just under the scale than one which brings them just over, in order that they may be free from taxation. In the same way you would have agricultural labourers earning wages of from 12s. to 13s. a week going to their employers and saying: "Give me 10s. a week, and then I shall be 3s. a week better off." Do you want that sort of thing? What is the result of all that going to be? The result will be that, under the name of a pension, the State will be paying a contribution in wages. We shall, too, have these men earning 10s. and eligible for a pension coming in and competing with men not eligible for a pension. I admit the great difficulty of dealing with these cases, but my view is that, by fixing the limit at which the right to a pension ceases so low as 10s. the difficulty is enormously aggravated. With a limit as low as that, a 5s. pension is a much more powerful factor than if you fix the income at 20s. to begin with. By making the stopping point rigid instead of having a sliding scale, the Government directly discourage thrift, encourage tampering with wages, and encourage evasion in respect of the income hitherto received by an old person from one of his dependants. That brings me to the case of the old married couple. I speak in no unfriendly spirit, and I certainly do not wish to appear merely as attempting to outbid the Government on this question. I recognise the enormous financial difficulties, and I try to speak with a corresponding sense of responsibility, but I cannot conceive, of all the restrictions imposed by this Bill, a harsher, more cruel, or more unjustifiable restriction than the one which penalises old couples living together. I cannot conceive that the House will allow that provision to remain as it is, and I hope that, at a very early stage, we shall have an undertaking from the Chancellor of the Exchequer that the provision will be modified. The Bill inflicts a double penalty on an old couple living together, for, instead of taking the income which is to deprive them of the right to a pension at twice that of the individual, the Government take it at about one third less, and, instead of paying them a pension at the full rate of 5s. each person, they reduce, it to 7s. 6d. per couple. That is done, the Prime Minister says, because 10s. for two persons living together is more valuable than 5s. for a single person. I do not see that. Does the Prime Minister think a single person of seventy in receipt of a pension of 5s. is going to keep house on that in a house of his own? That is not to be hoped for or desired. What is desired is that the 5s. should make the difference with the children that they should be able to keep the old man or old woman as an honoured guest in their own house instead of shuffling him or her off to the workhouse. It would very often be much easier for a single old person to find a home with a married son or daughter than for an old couple to do it, and I think 5s. in the case of a single person would often go further than 10s. in the case of a married couple. By what right are you going to penalise old people who have lived together for many years of their lives in decency and married happiness and say that, unless they consent to separate, they shall be fined in their pension rates? The cruellest feature of the administration of the old Poor Law was, admittedly, the separation of married couples in the workhouse. And now, outside the workhouse, it is actually suggested that we should re-impose this separation upon the old couples or fine them for continuing to desire to live together. I really think it is an outrage to suggest such a proposal, and I hope the right hon. Gentleman will abandon it at the earliest possible moment. It is, in my opinion, unsound finance to budget, as the Prime Minister has done, for a surplus of only £250,000, with such vast liabilities before him. I think the right hon. Gentleman has no right to give away the sugar duty when he is incurring such big gifts, but if he has a right to part with that money, then let us spend it in making the old-age pension a little more perfect. Let us give it to the old people, to whom it would be a blessing and a real boon, and not spread it over the whole community. Let us ask the community to continue to bear the charge as their contribution to the great social reform we are making, and in order that that reform may be more complete. I frankly say that I envy the right hon. Gentleman the opportunity of which he has availed himself; but in regard to the Budget as a whole, apart from old-age pensions, I can only say that the Budget is not one of which I envy the right hon. Gentleman, or one which I would have cared to produce.

MR. ASHTON (Bedfordshire, Luton)

congratulated the Prime Minister upon the introduction of his old-age pension scheme. They would all have been delighted to have seen old-age pensions started earlier than seventy years of age, but they were very grateful to the Prime Minister for making a start when they looked at the great cost. It was a great experiment, and the Government were perhaps wise in beginning at seventy instead of sixty-five. He was glad that the Prime Minister saw his way to take off the sugar duty. The Chancellor of the Exchequer, he understood, was satisfied that he would be able to raise the necessary amount of taxation to carry out the old-age pensions scheme, and the House ought to be satisfied with that. This Budget would be a very great boon to the poor people of the country and also to many industries in which sugar formed the raw material. The Government were to be congratulated on the very large amount of Debt written oft during the course of the last year, the amount being no less than £18,000,000. During the last five years the Debt had been reduced by £60,000,000. During the year the unfunded Debt had been reduced by £10,000,000, terminable annuities by £1,500,000 and the funded Debt by £6,500,000. The ex-Chancellor of the Exchequer had spoken of the great advantage the Prime Minister had had in having Consols so low, because he was able to buy them at a cheaper rate. He thought the Chancellor of the Exchequer ought to have bought more, because last year he only bought up about £2,000,000, so that he got very little advantage out of the low price. Even this year only about £6,000,000 Consols had been bought up; in other words the right hon. Gentleman had employed his available funds only to the extent of about one-third in dealing with Consols. He thought the time had come when the Chancellor of the Exchequer might take upon himself to deal more with Consols than with the unfunded Debt. During the war they increased the amount of the unfunded Debt to a large extent, amounting to something like £70,000,000 or £90,000,000, and it was very desirable that that Debt should be reduced, because it acted very detrimentally on the money market and locked up many of the resources which would otherwise be employed in the trade of the country. At no time ought the unfunded Debt to be a large one, and it should be kept in reserve for other liabilities. The unfunded Debt of the country now stood at a little over £40,000,000, and nearly a half of that sum was what re- mained still unpaid of the War Loan. The War Loan was due at the end of two years from now. Even there the Chancellor of the Exchequer might leave the Debt to be dealt with later on. During last year, speaking roughly, £6,000,000 had been paid off. That need not have been done, for, after all, if the time came when the Chancellor of the Exchequer had to deal with that loan he might well finance it by Exchequer bonds and Treasury bills. While Consols were so low he ought to have taken advantage of the time to buy them up. He thought City gentlemen would agree with him that the chances were largely that during the next few years the price of Consols would be distinctly higher than to-day. Everything was tending in that direction. They had cheap money and, unfortunately, a great easing off in trade, and when these two-things occurred in combination they would always find a rise in the best class of securities. Therefore, instead of paying off obligations which already stood at par, like the War Loan and Exchequer bonds, they should turn their attention to paying off those which might rise rather than those which could not rise at all. He agreed with the right hon. Gentleman opposite in viewing with great apprehension indeed the reduction of the Sinking Fund. He did not take quite so gloomy a view on that matter as the right hon. Gentleman. The new Chancellor of the Exchequer had to find £4,500,000 next year for the old-age pension fund, and he was at the same time being robbed of £3,000,000 in the form of sugar duty, so that there was a gap to fill up of £7,500,000 or £8,000,000 at the end of the present year. He hoped the Chancellor of the Exchequer could look forward with less apprehension than he himself did to the future at the end of this year. The late Chancellor of the Exchequer had foreshadowed a reduction of the Sinking Fund. He was not quite sure that the House, when the Prime Minister spoke, really realised what the position of the public Debt of the country was at the present moment. Before he gave out that there was to be a reduction of the Sinking Fund the right hon. Gentleman had just given some magnificent figures about the reduction of Debt, and the House was perfectly intoxicated at the amount of Debt paid off. He believed that large numbers of Members thought, after listening to the Prime Minister, that the War Debt had been reduced to the point where it was before the war took place. As a matter of fact, nothing could be further from the truth. The lowest point of the Debt was just before the Transvaal War, but at that time the dead-weight Debt of the country was, roughly speaking, £70,000,000 lower than to-day. At the end of this financial year it would still be £60,000,000 in excess of what it was just before the Transvaal War. He should have thought that the Prime Minister would have taken the figures at that date as the basis of comparison, but for another reason he took the figures of twenty years back. The right hon. Gentleman pointed out that we had got back to the amount at which the Debt stood in 1889–1890. He took that year because he wished to justify himself in proposing to reduce the Sinking Fund. He said that Mr. Goschen had been able to reduce the Sinking Fund at that date, and that therefore we should be able to get back to what it was in 1889. It was perfectly true that the deadweight Debt had got back to what it was then, but if he had taken the whole of the national liabilities he would have discovered that so far from the Debt being at the point it was at twenty years ago we were still owing about £60,000,000 more than in 1889 or 1890. Therefore, he did not think his right hon. friend was justified in giving the impression that we had come to a point where it was safe to reduce the Sinking Fund. He himself was convinced that we had not. At any rate, it should not be thought that the whole of the national liabilities were at the figure of ten years ago. The whole object of the Sinking Fund was that we should every year pay less interest and pay off more of the principal of the Debt. Sir Stafford Northcote, when he increased the Sinking Fund to £28,000,000 a year, pointed out that it would be like a snowball, so that annually we should have less interest to pay. There was no justification for stopping that process when the Debt was not at a less point than twenty years ago. He regretted very greatly indeed that a proposition of this sort had come from a Liberal Government. Liberals had prided themselves upon being the guardians of the finances of the country; they had prided themselves more than once of late years on dragging the finances of the country out of the mire into which Conservative-extravagance—he was not sure that it was not incompetence—had landed them. He was not speaking on this matter simply from his own point of view. Speaking in this House on 25th April, 1887, when Mr. Goschen proposed to reduce the Debt charge, Mr. Gladstone said— We in this country, with an estimated income of £1,000,000,000 a year, cannot bear to apply a sum not nearly so large as was applied for that purpose in 1860 when the wealth of this country was not, I think, more than two-thirds of what it now is. Is that a proposal worthy of the present Conservative-ministry? It is in these circumstances that we are invited to shrink from the very moderate efforts we have been making to pursue this wide and broad policy supported by all our best financial authorities, of applying considerable and sensible amounts to the reduction of the National Debt. He would ask his right hon. friend whether we were so poverty-stricken at the present moment that we should reduce the amount which we were paying for the reduction of the National Debt. We were proud to point year after year to the extraordinary prosperity of the country which had followed upon our free trade system. Why at the moment when we are so prosperous, and when our Debt was so heavy, should we talk of a reduction in the paying off of the National Debt? He would conclude with the following words of Mr. Gladstone— I cannot think that serious and deliberate reflection will warrant a proceeding so inadequately corresponding to the courageous tradition of Englishmen, to the far-sighted tradition of English statesmen, or to the general interests of the British nation.

MR. SAMUEL ROBERTS (Sheffield, Ecclesall)

said the right hon. Gentleman the Member for East Worcestershire, in his general criticism of the finances of the country, had told the Committee that at the general election the great cry was for economy. Had that been carried out? He would like to quote in connection with that question some words used by the Prime Minister when he was introducing his first Budget. Having quoted the figures relating to the expenditure of the late Administration in the previous ten years, the right hon. Gentleman said— These figures appear to me to call for no comment. They speak with an eloquence which needs no rhetorical embroidery. In my opinion they make a return to more thrifty and economical administration the first and paramount duty of the Government. Had they been successful? No. The expenditure this year on the Supply services alone was nearly two millions greater than it was in the first year of the present Administration, viz., 1905–1906. In the Civil Service alone there was an increase of £16,000,000 during the last ten years, and the increase was about £3,000,000 since the present Government came into office. Those figures were very eloquent as the present Prime Minister had said; but where was the economy which was promised to the country? The war taxation had certainly been reduced by something like £7,340,000, including part of the sugar duty. But when this Government came into power the War tax, which had been at its maximum, thirty-four or thirty millions more than the normal amount of taxation, had been reduced by the late Administration to £24,000,000. At present the war taxation stood at something like £16,000,000, the greater part of which was represented by the increase in the income-tax. When the income-tax was increased for the purposes of the war each one of the Chancellors of the Exchequer said that it should be the first, or ought to be the first, to receive relief when the war was over. Had that been done? The right hon. Gentleman the Member for East Worcester, when introducing his Budget increasing the income-tax from 11d. to 1s. in the £, said— I say for myself that in my opinion it is the income-tax payer who will have the first claim to relief, and I hope the sacrifice I am now asking of him will not endure for long. The present Prime Minister said last year— In regard to the income-tax I do not hesitate to associate myself with the declarations of more than one of my predecessors that an income tax of a uniform rate of 1s. in the £ at a time of peace is impossible to justify and difficult to defend. It is a burden on the trade of the country which in the long run affects not only profits but wages …. From the point of view of the nation it is open to the same objection as the continuance at an ab- normal figure of the floating Debt, viz., that it tends to destroy, or at any rate to contract, a most readily available reserve, on which the State can draw in a sudden and unforeseen emergency. They were endangering this great reserve, as they had just been told by the hon. Member for Bedfordshire. He quite agreed with the hon. Member that it was of very great importance to keep our two great reserves—the Sinking Fund at a high figure and the income-tax at a low figure, in order to be prepared to meet any time of emergency which might come to this country. As Mr. Gladstone said in his Budget speech of 1853, when speaking of the great necessity of keeping up the reserves of the country— Much as may be said of the importance of an Army Reserve and a Navy Reserve, and of having your armouries and your arsenals well stored, I say this fiscal reserve is no less important; for if it be used aright, it is an engine to which you may resort, and with which, judiciously employed, if unhappily necessity arise (which may God in His mercy avert) you may again, if need be, defy the world. That was the opinion of that great financier, Mr. Gladstone, in regard to the importance of keeping up the two great reserves. He was sorry that the Prime Minister was not present or he would have taken the opportunity of congratulating him on the speech he had made in introducing his last Budget. The right hon. Gentleman then said— Last year I gave relief and substantial relief to a large class of income-tax payers. This year, therefore, it would be the natural course for the indirect taxpayers to be relieved. Well, he thought the Prime Minister was wrong when he said he had given substantial relief to the income-tax payer. As a matter of fact, he. had taken more from him. He received £1,880,000 in excess of his Budget Estimate of last year and actually £780,000 more than the sum paid the year before the alteration, viz., £32,380,000. Therefore, he was making a claim from a large and important class of income-tax payers who did not come within the scope of the relief given by the Chancellor of the Exchequer last year—all those who, when the income-tax was raised first to 1s. and then to 1s. 4d. bore the burden without complaint, relying on the promises given by various Chancellors of the Exchequer that they would be the first to be relieved. These people had received no relief at all. And what was the prospect of their getting relief next year? It looked as though instead of being relieved they would have to pay more. [HON. MEMBERS on the LABOUR Benches: Hear, hear.] He expected that cheer to come from hon. Members below the gangway. Where was the money to come from to meet this expenditure on old-age pensions? The Chancellor of the Exchequer estimated that they would cost £6,000,000. He supposed that that was the minimum, but the probability was that they would cost a great deal more. He had taken some little interest in this question of old-age pensions, having introduced more than one Bill in the House on the subject. He would like to congratulate the Prime Minister on having faced the question, though he was afraid he must part company with him when he came to the methods by which the right hon. Gentleman proposed to deal with it. The question had been investigated by various Committees. The one which, he thought, was the most important in utility was presided over by the right hon. Member for Wimbledon. What was the problem that had to be solved? It was, to quote the Report of the Committee to which he had referred— To alleviate the lot of the deserving poor, who, in the closing years of their life, through no fault are relegated either to the workhouse or inadequate Poor Law relief …. and at the same time to do nothing to stay that growing development in the efforts of the working classes to make provision for themselves. The evidence with regard to what the working people in this country were doing to make provision for themselves at the present moment was most marked. During the past sixteen years the deposits in the Post Office Savings Banks had more than doubled. In the Trustees Savings Banks they had increased very largely, though they had not doubled. During the last six years the members of Friendly Societies had also increased, and their funds had increased during the five years preceding 1904 by something like £10,000,000. The problem was how could they relieve the deserving poor without interfering with the practice of economy and saving which was going on at the present moment? He was afraid that that could not be accomplished under the scheme of the Government. The only persons to be excluded from its benefit were paupers in actual receipt of Poor Law relief—indoor or outdoor; lunatics, and criminals actually under punishment. Everybody except these persons was to share in the scheme, whether they deserved it or not, whether they had led good lives and had done the best for themselves or not. He thought that that was wrong. There ought to be some discrimination between the deserving and the undeserving. In all the schemes which were at present in existence—in Denmark, France, New Zealand, New South Wales, Victoria, and Germany—there was a contribution made by the recipient, and relief was not given to those who did not deserve it. Before the right hon. Member for Wimbledon's Committee, very valuable evidence was given by Sir Henry Langley, the Chief Charity Commissioner, in regard to the schemes now administered by the Charity Commission, which had funds amounting to over £1,000,000 to administer. A question was put to Sir Henry by the Committee: "Do you find any difficulty in discriminating as to what is reasonable providence and what constitutes good character?" The reply was that so far as the Commissioners were aware there had been no considerable difficulty in practice; and he expressed the opinion that their scheme had worked satisfactorily and well. Mr. Munro, who was connected with another charity, gave similar evidence. The trustees, he said, had no difficulty in ascertaining the truth of the statements made, either through their own inquiry or in some cases through the Charity Organisation Society. He hoped, therefore, this scheme would receive some modification. It would be a grievous injury to the country if a scheme were launched which would stay the progress of economy and thrift. He noticed that the whole of the money for these pensions was to come from the Imperial Exchequer. Was that the proper course? [Cheers.] He thought that statement might be cheered, but his view, which corresponded with that of most of the Committees that had considered the subject, was that half should come from local funds in order that there should be a proper check upon the giving of the pensions. When the whole amount came from the Government, there was no inducement on the part of the pension authorities to be economical. The inducement was rather the other way—to put as many people as possible upon the national pension, in order that the local rates might be relieved of the cost of persons who would otherwise come on Poor Law relief. If half the contribution came from local funds that inducement would not exist, because the local authorities would give pari passu. Mr. Knollys, the head of the Department of the Local Government Board, said, in the evidence he gave before the right hon. Gentleman's Committee— The serious objection to a separate and distinct grant-in-aid of pensions only is the "temptation to relieve the poor rates by unduly adding to the number on the pension list to which the Government contribution would alone be made. He would like to see an alteration made in the Government scheme by which the contribution should be made by the local authority and the State in equal proportions, and by which also the pension authorities should be representative of the local authorities, as well as of the Government. For these reasons, he hoped the Government would see their way to listen to suggested modifications when the Bill came before the House and to accept some Amendments on the lines upon which he had ventured to address the Committee.

MR. HAROLD COX (Preston)

associated himself with the protests that had been made against what was called the raid on the Sinking Fund, and said he hoped that before next year came the Chancellor of the Exchequer would have attained a higher level of financial purity. This was the more important because there seemed to be a certain amount of justice in the criticisms of the right hon. Gentleman opposite as to the amount which had been devoted by the present Ministry to the reduction of Debt. The Chancellor of the Exchequer was a fair-minded man, and he would admit that a great deal of what had been done to reduce the Debt by the present Govern- ment was due to the fortunate circumstances that the country had been extremely prosperous, and there had, in consequence, been a large amount available for Debt reduction. The Debt reduction had been really due to arrangements made before the Government came into office. His right hon. friend the Prime Minister had added altogether £2,000,000 to the New Sinking Fund, but he had allowed his colleague the Secretary of State for War to raid the Old Sinking Fund to the extent of £817,000, and a further sum of £600,000 was taken this year, for capital expenditure upon new public offices, so that the additional provision made for the reduction of Debt over and above the provision previously existing was only £583,000. They would be content with that if it were not for the fact that the Government intended to reduce the Sinking Fund in the coming year. But not until they had wiped off at least the whole of the War Debt would they be justified in reducing the Sinking Fund. The whole idea of Sir Stafford Northcote in establishing the fixed debt charge was that the rate of debt reduction should be increased annually. The Government should not slacken their efforts until they had materially raised the price of Consols. On all these grounds he hoped the Government next year would have some other proposal to make with regard to that question. What was the great merits of the Government's finance during the last three years? It was the check they had given to the loan expenditure. The principle laid down by the Prime Minister that we were not to expend for works money obtained on loan was a sound principle. If a great nation did not expend money in one direction, it would expend it in another, and therefore, it was not necessary to adopt the principle of borrowing money to spend on works and to spread the repayment over a number of years. The loan system of the Government was analogous to the hire purchase system in the case of an individual. In that case instead of buying what was wanted and paying for it, a contract was entered into to receive the goods purchased and to pay for them in a number of years. The Government, however, had not succeeded in getting rid of the loan expenditure completely. They had reduced it from £6,000,000 to just under £3,000,000. That was a considerable reduction, but he thought they might still get rid of it altogether. A large part of the loan expenditure was for telephone wires, but instead of supplying the Postmaster-General with telephone wires on the hire purchase system the House ought to insist on the telegraphs and telephones being treated on a commercial basis. The real trouble in the Government's finance was the increase of the general expenditure. On the Government side of the House all the Members were pledged to economy, but he observed that the last year for which the late Government was responsible the Exchequer expenditure was £150,413,000, while the present expenditure was £154,109,000. That was an enormous increase. In 1901 the Chancellor of the Exchequer supported the present Lord Wolverhampton, then Sir Henry Fowler. Member for Wolverhampton, and voted against the then Government on the question of the extravagance of the general expenditure. Sir Henry Fowler, referring to the whole general expenditure of the country, said it was too much, and the right hon. Gentleman agreed with him, and followed him into the lobby. The expenditure then according to Sir Henry Fowler, was £125,500,000, and this was denounced as excessive. The figure at which the expenditure now stood was £154,109,000. On the other hand the fact had to be taken into account that we were not then paying off Debt so fast as now, and that the then Government were spending more money from loans than we were now. That was to the credit of the present Government. But when he had allowed for that he found that the expenditure now was not less than £20,000,000 in excess of that which was condemned by the right hon. Gentleman in 1901. The Civil Service expenditure since the Government came into office had increased by nearly £5,000,000 a year. That was a very serious fact, in view of what Liberals had said during the general election about the absolute necessity of economy in public expenditure. The Prime Minister in his Budget speech had quite rightly taken credit to himself for what he had done in amalgamating the local taxation accounts with the Exchequer receipts. That was a very valuable reform indeed. The right hon. Gentleman added that now the finance accounts and the Estimates showed the whole expenditure. Unfortunately, that was not the case. The right hon. Gentleman left altogether out of his view the question of appropriations-in-aid, a question to which Mr. Gibson Bowles, the late Member for King's Lynn, used constantly to call attention in the House. The appropriations-in-aid amounted to a very large sum annually, to more than £6,000,000, and in addition there were payments out of gross receipts amounting to £2,000,000. Further there were large transfers from Department to Department. The system was thoroughly unsound and full of anomalies. For instance, the fees received by the National Gallery were treated as additional revenue, whilst the fees received at the Tower were treated as a set off against the expenditure at the Tower. If they went through the whole of the accounts they would find the same thing constantly occurring—items treated as revenue in one case and in other cases as appropriations-in-aid. The right hon. Gentleman's former Department, the Board of Trade, was one of the first offenders in this matter; he did not blame the right hon. Gentleman; it simply arose from the way in which the accounts were drawn up. If the right hon. Gentleman would look at the Bankruptcy Department of the Board of Trade, he would see that the accounts were muddled up by all sorts of cross charges, so that it was extremely difficult to ascertain what that Department cost. The Post Office received nearly £250,000 from the National Telephone Company. Would the House believe that this huge item was nowhere entered in the accounts presented to Parliament? It did not appear in the Estimates, it did not appear in the Finance Accounts, but if they looked carefully they would discover it hidden away under the item "For transmission of telegrams, etc., collected in cash." The "etc." covered nearly £250,000 received, not for trans- mission of telegrams, but for royalties from the National Telephone Company. He hoped the Chancellor of the Exchequer would allow the House to have a return of the gross expenditure of each Department of the State, so that they might know exactly what the services were that the House controlled, and what they really cost the country. At the present moment no man in the country, certainly none in the Treasury, knew the total sum of the expenditure for which the House was responsible. As to old-age pensions, he was very glad indeed that the right hon. Gentleman who spoke a little while ago, had called attention to the extraordinary mistake made by the Prime Minister in his description of the German old-age pensions scheme. The Prime Minister had altogether overlooked the fact that the essence of the German scheme was that it provided pensions for people when they wanted them and not merely at the age of seventy. The Germans called them "invalidity" pensions; he thought the better name would be "infirmity" pensions. The German got his pension as soon as he was infirm, When he was in Germany last year he was told that a man aged twenty-eight years was receiving a pension. In Germany the system of giving pensions to people over seventy was only transitional; it was never intended to be permanent. The number receiving old-age pensions because they were over seventy a few years ago was 300,000; it was now only 126,000. Many people over seventy got the infirmity pension instead of the old-age pension and an increasing number would do so. The whole idea of the German scheme was to give a man a pension when he was no longer able to support himself. If he could support himself at seventy he would get a small pension, but he did not get the infirmity pension until he became infirm. He hoped the Chancellor of the Exchequer would take the opportunity of informing the country as to this rather misleading statement about the German system, owing to the unfortunate slip of the Prime Minister. The Prime Minister stated that the objection to a contributory scheme was that it could not come into operation for twenty years. The German scheme was contributory, and it came into operation at once. The law was passed in 1889, and eighteen months later a great many people were drawing their pensions. A point on which he strongly differed from the right hon. Gentleman opposite was as to his opposition to a reduction of the sugar tax. He only regretted that it was not abolished altogether; it seemed to him to be an utterly iniquitous tax. He could not imagine anything more unjust than that people who had very little means, and to whom sugar was one of the necessaries of life, especially for the children, should be called upon to pay this tax in order that somebody they did not know might draw pensions because they were over seventy years of age—somebody who might not have been a worker all his life, or somebody who might not be in need. He was sure that when the Government came to deal more closely with the question they would find many difficulties arise. He wondered whether the Chancellor of the Exchequer was prepared with a definition of what he meant by income. What was income? Did a free gift from a father to a son, or from the son to his parents, count as income? Supposing a son was making an allowance of £100 a year to his mother, under the law as applied to the income-tax she would still be entitled to claim 5s. a week for a pension. That was one of the numerous objections to dealing with old-age pensions on a charitable basis instead of by a contributory scheme. Certainly, if they had to raise more revenue, he would be opposed to any attempt to raise it by imposing additional taxation on commodities used by the masses of the people. The only sound system of taxation was the democratic system of direct taxation under which every man paid something, and every man knew he was paying.

AN HON. MEMBER: According to his means.

MR. HAROLD COX

Obviously. The objection to indirect taxes was that they were not according to means. The sugar tax on a labourer with a large family amounted to an income-tax of 6d. He believed most sincerely that the working classes of this country were prepared to face direct taxation. Of course, some people always grumbled. [Laughter.] Yes, in all classes. He believed that the masses of the people, when once the matter was put to them, would be willing to face direct taxes, and he was sure of this, that, unless they were so willing, it would be impossible to make democracy a success.

MR. LEVERTON HARRIS (Tower Hamlets, Stepney)

said he did not suppose that hon. Members on either side of the House grudged the Prime Minister his good fortune in obtaining revenue so largely in excess of his expectations when he brought forward last year's Budget. Fortune had showered upon him the produce of a 1s. income-tax in a year of booming trade. His new regulations had resulted in a more stringent collection of this tax so as to include many who had formerly escaped the watchful eye of the collectors. There had been no falling off in the mortality of the millionaires, and the net result of these happy circumstances was an available surplus of £4,400,000—a result of which the right hon. Gentleman might well be proud. While congratulating the Prime Minister on that result, he did so without approving the methods by which this revenue from taxation had been collected. He believed that most of those who sat on the Opposition side of the House agreed with him in dissenting from the Prime Minister's methods of finance, and for three reasons. First of all, they believed they were dangerous methods, which would imperil the security of the country; and so long as they had in time of peace, a 1s. income-tax, no room or opportunity was left for the expansion which might become necessary if unfortunately we found ourselves engaged in any great or prolonged war. Secondly, they asserted that the collection of over £130,000,000 in taxes was inconsistent with and in direct contravention of the pledges and promises given by hon. Gentlemen opposite at the last election, and on the strength of which they were returned to power. Lastly, they viewed with the greatest apprehension and alarm the inroads which were being made upon the Sinking Fund, and the huge and costly liabilities which this Government was building up, and which future Governments would have to meet. What were the promises of hon. Gentlemen opposite as to retrenchment and reduction? He would venture to remind the House of the condemnatory censure which was passed on the last Budget of his right hon. friend below him. In that year the sum of £129,500,000 was collected from taxes, and in that he included that portion of taxation appropriated to local requirements. They had been told by hon. Gentlemen opposite in the debate which then took place, on the occasion when the present First Lord of the Admiralty moved the reduction of the income-tax, also in the great meeting at the Albert Hall, and on every platform throughout the country, that the taxes which were collected under that Budget were an intolerable burden upon the commerce and industry of the country. That was on the eve of the general election, when hon. and right hon. Gentlemen opposite were courting the constituencies and leading the country to believe that they were about to inaugurate a blessed era of reduced taxation. He did not refer to the penny taken off tea, or the farthing recently taken off sugar, but to the general reduction which was promised, and the saving that was to be made for the taxpayers' pockets. Yet here they were, two and a half years after the party opposite had come into power, with the Prime Minister coming down to the House and congratulating himself, and openly boasting, that he had been able to collect in taxation £130,000,000, or £800,000 more than had been collected under the Budget of his right hon. friend below him, which had been described as an intolerable burden on commerce and the people of the country. What justification had hon. Gentlemen opposite to offer? Had the situation so changed as to justify them in abandoning the pledges which they gave at the last election? Trade had been good, and the income-tax had furnished a very handsome return. All that they admitted, but the question was whether the country was any better able to-day to bear this great and increased burden of taxation than it was in 1905 when it was described as intolerable and grievously oppressive upon the trade and commerce of the country. Take the case of the income-tax, the great staple tax of the country. He did not imagine that the payer of income-tax had much cause to expect relief or sympathy from Gentlemen sitting opposite, and that conclusion was borne out by a speech made two Sundays ago by the Solicitor-General at Whitfield's Tabernacle. After praising the courage of the Prime Minister, the hon. and learned Gentleman proceeded to say he hoped to see remedied the present system and an adjustment made which might lighten indirect taxation. But after all, the payer of income-tax was the payer of a tax which was the backbone of our financial system. Were the payers of income-tax better able to-day to bear the brunt of the tax than they were in 1905? Most emphatically they were not. Take the list of the securities of the country. Compare the prices which obtained in 1905 with those at which securities could be sold last year. Take first of all Government securities alone. There was a depreciation between these years of something like £50,000,000. Corporation stocks, railways, Colonial securities—every class of investment in which the income-tax payer had his money—showed a grave and severe depreciation since Gentlemen opposite had come into office. And yet last year in spite of this great depreciation the Government exacted from the income-tax payer nearly 32½ millions, or a million more than his right hon. friend below him obtained from them in the last year of the late Government. They were told that last year was a record year for trade. It was certainly a record year for taxation in time of peace, and this year when taxation was to be higher still it was going to be a record year for industrial depression and lack of employment. We had entered upon one of those cycles, which every country under every fiscal system at times had to meet, of industrial depression. Trade to-day was on the decline. From every part of the country, from every branch of commerce, they received the same disquieting reports. Hon Gentlemen opposite no longer quoted the Board of Trade Returns, and their publication had ceased in many Radical papers. Wages had been reduced in practically every trade, and there were at present all those elements which made for profound in- dustrial depression and the aggravated distress of the worker. In spite of this, the Prime Minister took a very cheerful view of the situation. He presented a Budget in which he expected to receive increased revenue from Customs, leaving out the question of sugar. He estimated that he was going to get more from death duties, and he expected to receive £600,000 more from income-tax. Time alone would show whether these increases would be justified. But whether they were justified or not they had this grave fact, that they were not collecting this huge amount of taxes in a year of booming trade, but in a year of very aggravated commercial depression. And this was only the beginning of worse things that were to come. Next year and the two following years they would be met by increasing expenditure in all directions. The Army, the Navy, and the Civil Service would make greater demands, and in addition there was the scheme of old-age pensions which was going to cost nobody knew exactly how much. In time of great prosperity or of low taxation when they had got an improving trade, or, possibly even under another fiscal system, they might be justified in accepting these great and unknown responsibilities. But to-day with excessive and oppressive taxation, at the very commencement of an acute and grave industrial depression, instead of curtailing expenditure they wildly and blindly rushed into new extravagances and new liabilities, the measure of which no one could estimate and the cost of which very few dared to contemplate. The Prime Minister frankly recognised this, and admitted the truth of it. He candidly confessed that in the future they would have to meet these new liabilities by fresh taxation. He would quote a few words from his Budget speech— In his opinion there could not be a greater mistake than to suppose that a free trade Financial Minister had come to the end or was nearly approaching the end of his resources of taxation. These words were received by hon. Gentleman behind him with cheers—he thought The Times report said "loud cheers." It was certainly very interesting to find that hon. Gentleman did not disapprove of increased taxation, when it happened to be free trade taxation and under the auspices of a Liberal Chancellor of the Exchequer. Clearly the Chancellor of the Exchequer contemplated increased taxation. But it was not a matter of speculation at all. As surely as they were sitting there, with all the great liabilities they were taking and the increases they would have to meet on the Army, Navy, and Civil Service, hon. Gentlemen opposite, if they continued to occupy those benches, would have very largely and gravely to increase the taxation of the country. The old-age pension scheme alone must be a continually increasing scheme. The Prime Minister also recognised that. He said that it was only the beginning of a sound and workable scheme. What he asked was the ultimate ideal at which this scheme aimed. What were the ends which the right hon. Gentleman had in view? What was the ultimate cost which he expected it would entail? That information ought to be given before they could pronounce any definite decision upon the scheme. It was usual when any policy was promoted which was admitted to be only the beginning of something further to explain what the further steps were to be. The great danger of the scheme to his mind was that it did not give anybody exactly what he wanted and asked for, and hence opened the door to very violent political pressure at elections. The friendly societies and trade unions were bound to ask that their pensioners should be included, and promises to reduce the age to sixty-five and to make the scheme non-contributory would be exacted by the Labour Party, and would be heedlessly given. Hon. Gentlemen opposite had given in to the Labour Party in the past. They struggled, but ultimately they surrendered— A little still she strove, and oft repented, And whispering she would ne'er consent, consented. Like the frail lady of whom these lines were written, he was afraid hon. Gentlemen opposite would struggle again and would be ultimately seduced by the blandishments or threats of hon. Members below the gangway. Apart from this, there was the natural growth of the scheme. Those at present over the age of Seventy were really the survivors of the population which existed before the year 1838, which was a mere fraction of the present population. Every year the number of persons over seventy would increase, and their increase would be proportionate to the increase of the population during the past seventy years. How was it proposed to meet these increasing charges? The right hon. Gentleman said they had not nearly come to the end of free trade resources. He very respectfully differed and asserted that they had already grossed the boundary of safe and sane free trade finance and had arrived within the danger zone. They might continue to increase taxes, have graduated income-tax, and tax mining royalties and site values, but the result would only be to cripple trade and industry and stretch to breaking point the elastic sources of revenue which should only be stretched in time of great national emergency or peril. He believed there was never a greater step taken towards tariff reform than that which the Prime Minister had taken in undertaking in a time of declining trade and diminishing revenue these great responsibilities and liabilities with which the free trade system would not provide him with the means of dealing. That was one of the reasons why he congratulated the right hon. Gentleman on his Budget.

MR. ELLIS (Nottinghamshire, Rushcliffe)

said that the Budget under consideration opened up a new chapter in their financial arrangements, and raised great possibilities. Following the almost immemorial custom, he proposed to deal with some of the wider aspects of the Budget statement. He was one of those, he frankly confessed, who looked with some concern upon the magnitude of our national expenditure, more especially that part of it dealing with armaments. The figures in this respect showed an almost appalling increase within the last ten years. He was not going to labour the matter, but the figures could not be too often recalled, not only to the attention of this House, but also to the attention of those outside the House of Commons. The figures of the net Exchequer receipts and issues showed that this country carried on its affairs in the year ending 31st March, 1887, with an expenditure of £78,000,000 sterling. That total rose in 1897 to £88,000,000, and by the year 1906 it had reached £123,000,000 sterling. It was as important to see where the money was going as to look at the volume. The most convenient way to do this was to break up the expenditure under three headings, viz.: Debt, Civil expenditure, and armaments. In the year 1887 this country spent £26,000,000 upon Debt, £20,000,000 Civil expenditure, and £32,000,000 upon armaments. In 1897 the figures were: for Debt, £25,000,000; Civil expenditure, £23,000,000; and £40,000,000 upon armaments. In the year 1906 the totals were Debt, £31,000,000; Civil expenditure, £32,000,000; and armaments, £60,000,000. Although during the first ten years of the period he had mentioned the expenditure upon armaments increased by 25 per cent., during the last nine years the increase under the same heading had been 50 per cent. He ventured to think that those figures would provide them with food for reflection. Figures relating to the South African War did not come into the years he had given. That gigantic increase in their expenditure, more particularly upon armaments, was not permitted to pass without protest from two Conservative statesmen of the very highest rank. The first year he would take was up to 31st March, 1887, for which a Liberal Cabinet was responsible. It was upon the proposal to increase that expenditure of £78,000,000 in the financial year 1887 that Lord Randolph Churchill sacrificed himself on the altar of economy. It would be remembered that Lord Randolph Churchill, when the Estimates for 1887–8 were before the cabinet, failed to convince his colleagues that a reduction in the cost of armaments and economy ought to be the order of the day, and upon those grounds he sacrificed the whole of his political career. The remarkable features of his proposed Budget had been disclosed to the public by his son in that remarkable biography which appeared a short time ago. What did another distinguished Conservative Chancellor of the Exchequer say—he alluded to Sir Michael Hicks Beach. What did he say with regard to the finance of the Conservative Government of which he was a member? In the year 1904, when Sir Michael Hicks Beach left the Government of which the Leader of the Opposition was then Prime Minister, he used most striking language, in which he said— We have again seen an increase in the present year of £2,750,000 on the Naval Estimates, for which I am bound to say that, in my opinion, no sufficient reason has yet been given. That was a clear condemnation of the naval policy, but Sir Michael used much more striking language, for he proceeded to say— I had protested as Chancellor of the Exchequer for years against the growth. I had protested to my colleagues; I had protested to this House, and I had endeavoured to show the country what I thought were the main dangers to our finances of that growth, because it must never be forgotten that that growth has been far in excess of the automatic growth of our revenue. My protests and my sermons were received with indifference. Had they been met with more sympathy I might not now be addressing the House from this place. Sir M. Hicks Beach told the House that he refused to continue a member of the Government because his protest against increasing expenditure had been ignored. The House would remember the policy of the days which led up to that tremendous leap which occurred in the expenditure of this country. They recollected the "long spoon" speeches and other unhappy language which culminated in the most unhappy war in South Africa. He thought John Bull had a pretty severe headache after that war, and he was now in rather a different mood. They had lived to see an entirely changed atmosphere in the country at large, and as a consequence in that House. There had taken place a most unexampled movement which sent the present Government into power with such an enormous majority, and there was a determination that the expenditure of this country had reached alarming proportions and ought to be reduced. He wished to give Lord Lansdowne, the Foreign Secretary of the late Government, every credit for the change he brought about in the expenditure upon armaments. They were all very glad to hear in the King's Speech the references which were made to this subject, and some of them had the privilege of hearing the Prime Minister at a recent gathering elsewhere in which he raised again the old watchwords of "Peace, Retrenchment and Reform." Peace was always and must be followed by retrenchment. He was glad to acknowledge that in this matter a good sound beginning had been made. [An HON. MEMBER: There has been an increase of £3,000,000 in the expenditure.] The Prime Minister had told them that within the last three years there had been a reduction of some £5,000,000 in the expenditure upon armaments. What he was pleading for was that this reduction of expenditure on armaments should be carried on at an accelerated rate. He was glad that the Campbell-Bannerman Administration had closed with the Budget they were now discussing. They had a new Government in a sense, and they had a new Prime Minister, a new Chancellor of the Exchequer, a new First Lord of the Admiralty, and they must have their due influence and effect. Looking to the future he agreed with what fell from the Chancellor of the Exchequer last year that they could not look upon a Budget merely as an isolated act by itself, and they must take into account the proposals contained in a series of Budgets. There was no question at the present time as to what was occupying the attention of the Committee, viz., old-age pensions. That scheme was a new element in the situation, and carried with it consequences which would be felt for many a long year to come. Looking upon the Budget for which his right hon. friend would be responsible, namely, for the year which would begin on 1st April, 1909, he was not so sure that they could regard the prospect with quite the same satisfaction as they could the present Budget and the one that preceded it. Exchequer on 1st April next would be face to face with an expenditure of £7,500,000 or £8,000,000 which was not included in the expenditure this year. There would be £4,500,000 to £5,000,000 for old-age pensions, £1,500,000 for education, and assuredly an automatic increase of £1,500,000. That additional expenditure would have to be provided for nolens volens. How was that to be obtained? He was not going to prophesy what would be in the Budget next year. "Sufficient for the day is the evil thereof." He had heard some suggestions as to the diminishing of the Sinking Fund and the appropriation of the income-tax. He hoped the Chancellor of the Exchequer would be chary about accepting any idea of that kind. He agreed with his hon. friend the Member for Bedfordshire as to the vital importance of maintaining the provision for the repayment of Debt. It must be remembered that the lowest point of the deadweight Debt in the last ten years was £628,000,000. The Prime Minister told them—and no doubt he was right—that, by the end of this financial year the Debt would be a little under £700,000,000. It would, therefore, at the end of the financial year stand £70,000,000 higher than ten years ago. In these and other circumstances that might be mentioned he doubted very much whether there was any room for slackening the repayment of the Debt. Our national credit depended upon it. Those who knew anything bout money matters in the City of London knew how vital the treatment of the Debt by the Chancellor of the Exchequer for the time being was to our highest financial interests. Therefore, he respectfully and earnestly warned his right hon. friend against lending too ready an ear to the suggestions as to finding some of his deficit from a reduction in the Sinking Fund. The right hon. Gentleman might get something more from the death duties. He had always thought that some of the little steps in the gradation of these duties might be swept away. There were other sources no doubt. But in the long run the only safe source for the Chancellor of the Exchequer to look to for securing the necessary funds would be that described by the old word "retrenchment." In 1897 the expenditure on armaments was £40,000,000. Surely we need not spend £60,000,000 now. He hoped that the Cabinet would apply its mind strongly to the matter of the reduction of expenditure. There was room surely for a vigorous effort in this direction. It was a good thing on its own merits. He maintained most strongly that all they spent on armaments above a certain figure—he admitted that they must reckon on spending up to a certain figure—was a diversion of money from productive industry and employment. [An HON. MEMBER: What figure?] Of course the Cabinet must in the last resort be the judge and stand or fall by their decision. Then they came to the experts. He had had a good deal to do with experts. Whether they were lawyers, architects, or engineers, they were very good servants but very bad masters. They always wanted the arrangement of policy in their own hands. What did Peel say on this subject? He said— If you adopt the opinions of military men, naturally anxious for the security of every available point, naturally anxious to throw upon you the whole responsibility for the loss, in the event of war breaking out, of some of our valuable possessions, you would overwhelm this country with taxes in time of peace. These words were as true to-day as when they were spoken. Speaking on 30th June, 1893, Mr. Gladstone said— I must make an admission. I do not think that in this matter we ought to be guided exclusively—perhaps even principally—by those who may consider themselves experts. That was quite a sound doctrine. It was the doctrine held not only by Mr. Gladstone, but by Sir William Harcourt and by Sir Henry Campbell-Bannerman. He hoped the Prime Minister would bear in mind the remarkable words spoken in 1904 by Sir Michael Hicks-Beach. He said— It is impossible for any Chancellor of the Exchequer, whatever his ability, whatever his desire for economy, really to check the expenditure of this country, unless he has the active, the firm and continuous, support of the Prime Minister of the day. They might look with confidence to the Chancellor of the Exchequer having that firm and continuous support from the Prime Minister of the day. They had as First Lord of the Admiralty one who had been at the Treasury where he had gained experience which would be useful in the office he now held. He hoped that the Treasury and the Chancellor of the Exchequer would not listen indulgently, or too speedily, to all the demands made even by Members on their own side of the House. They had a Secretary of State for War who was always urging the claims of the Territorial Army. He had sometimes differed widely from his right hon. friend during the many years he had known him, but he had always done justice to his extraordinary intellectual ability. He believed that if the Cabinet were to say to the right hon. Gentleman: "Here is £25,000,000 for the Army" he would be able to give them a good Army for that. They knew the record of the Chancellor of the Exchequer, and they had the greatest possible confidence in him. He hoped the right hon. Gentleman would take care to impress on his colleagues that the need for financial retrenchment was great. Courage was needed no doubt to resist experts and courage to resist a sort of clamour for armaments even from a section of the supporters of the Government. But they looked to the Government for courage. The opportunity for retrenchment was peculiarly favourable at the present moment. Our foreign relations were good. As to the Colonies, especially South Africa, matters were in happy contrast to what prevailed a few years ago. He believed that retrenchment in itself would be productive of the very greatest good to the country. It would provide funds for much-needed social reforms, and he was satisfied the Government would have at its back not only the great majority of those who called themselves supporters in this House, but overwhelming sentiment outside. The utterances of Ministers were all that could be desired, and all that was wanted was that they should translate those utterances into strong action.

MR. SNOWDEN (Blackburn)

said he wished, speaking on behalf of the Labour Party, to take a point of view very different indeed from that taken by the hon. Member for Stepney. The Labour Party in this House and in the country, especially the active Socialist section of that Party, looked to the Budget not merely as a means of annually discharging the disagreeable task of providing for unavoidable national expenditure, but as a very valuable means of redressing some of those social inequalities which they believed should be the first and foremost consideration of this House. They accepted the orthodox canon of taxation that every class should contribute to the expenditure of the country in proportion to the benefits they receive from the Government. The Chancellor of the Exchequer or the Prime Minister acting in his behalf had dilated in the usual rhetorical free trade way on the wonderful expansion of our foreign trade during the last few years. It seemed to be very difficult for the orthodox free trader to estimate the social condition of the country except by the figures on the two sides of the Board of Trade Returns. During the last seven years there had been an enormous increase in the total of our foreign trade, There was another side to this question, and it was to that side he desired to direct the attention of the Committee. Reference had frequently been made in the debate that afternoon to the remarkable improvement in trade during the last four or five years, the increase in production representing an increase in wealth. The increase of the wealth must go somewhere. Now, where had this increased production during the last few years gone? According to official figures there had been during six of the last eight years a reduction in the aggregate wages received by the wage-earners. It was quite true that during the years 1906–7 there had been some improvement, but the reaction had already set in. From the Board of Trade Returns for April there had been an aggregate decrease in the wages of £10,000 a week; and the number of unemployed, not including those locked out or who were resisting a reduction of wages, amounted to 7½ per cent., an increase of more than 50 per cent. during the last twelve months. The latest Report with regard to pauperism showed that the number of indoor paupers was higher to-day than at any previous period on record. The total number of paupers during the last ten years—during the boom in trade—had increased by 16 per cent., and in March last they had increased by 3 per cent. compared with the corresponding month twelve months ago. He came from Birmingham that morning and saw from a local paper that in two unions in that great centre of industry, after six years of unparalleled trade prosperity and increased wealth production, there was an increase of 15 per cent. in the total number of paupers as compared with twelve months ago. He cited those facts to prove that that enormous increase of wealth during the last five or six years had not gone to improve the condition of the people. They had not received it in better wages. There was another important factor, and that was that during that period of good trade there had been an inflation of prices. Anyone acquainted with retail prices of the necessaries of life was aware that the cost of living to the working classes of this country had increased 25 per cent., so that while somebody had been getting richer—enormously richer—during the last five or six years, the condition of the wage-earning classes of the country was actually and to a greater extent relatively poorer than it was before. That was a problem which must be considered in framing any financial statement by the Chancellor of the Exchequer. They, as Socialists, had recognised that those extremes of poverty and riches, and the causes of them, could not be wholly dealt with by Government financiers. But they looked to two remedies which they hoped to see applied simultaneously. They must get down to the root cause, to the monopoly of the means of living, to the private ownership of land, of capital and the means of production, and to the transfer of those undertakings, those private monopolies, to public control. At the same time they wanted to see the powers of taxation used in order to palliate the existing evils due to these causes. He had said that Socialists would accept the orthodox canon of taxation that a man ought to contribute to the State according to his means. He made bold to state that the great mass represented by at least 2,000,000 families in this country, or a population of over 8,000,000, had not an average income of £1 a week. Imagine the housing, food, clothing and all the other expenses of a working man's family to be paid for out of less than £1 a week! What did a family like that owe to the State? What were the benefits they received from the State? He ventured to say that there was not a state of barbarism where, without Government, a man and his family could not live in the full standard of comfort within their knowledge. They never suffered hunger; they never suffered privation. He held that they might say of the majority of the wage-earning classes that they owed nothing to the State; and yet under the present system of taxation that was the class which was contributing to a very great extent to the expenditure of the country. He found that since 1900 there had been an increase of something like twenty millions, or more, in Customs and Excise taxation, and of that probably four-fifths was paid by the working classes. It was admitted that there had been an enormous increase in the wealth of the country as represented by the Income-Tax returns. During the first ten years of the last twenty years the growth of the gross amount of income brought under the review of the Inland Revenue amounted to £98,000,000 a year; but during the last ten years of the last twenty years the increase was represented by the sum of £246,000,000 in the year, which showed that during the last ten years that small part of our population which were assessed for the income-tax had been growing richer at the rate of more than two and a half times more rapidly than in the previous ten years. And yet they had hon. Members who told them the limits of taxation had been reached by an income tax of less than 1s. in the £. Therefore the criticism of his Party that the Budget did little to relieve the very unfair burden of taxation which weighed on that portion of the population least able to bear it. The Prime Minister said that last year he had relieved a certain section of income-tax payers and that this year it was in the natural order the turn of the indirect taxpayers. The turn of direct and indirect taxpayers was to come alternately it appeared! The late Chancellor of the Exchequer, in his first Budget speech, reduced the tea duty by 1d. in the pound, but that did not affect the working people only. It affected the income-tax payers to the same extent, perhaps a little more. Last year there was not a single penny of relief to the indirect taxpayers—the working classes. This year there was a relief of half the sugar duty, but that did not apply only to the working people; it also applied to the income-tax payers. Therefore it was the rich man's turn every time, but in the natural course of events those upon whom taxation bore most heavily had only to expect relief alternately. He would not deal generally now with the old-age pensions scheme, but only refer to it as illustrating the way in which the means of social reform should be dealt with. A million and a quarter was taken out of taxation this year to pay for old-age pensions; but they on those benches had not forgotten that twelve months ago, the Chancellor of the Exchequer stated that this year he would have a sum of not less than £2,250,000 for old-age pensions. That statement had done duty on every Liberal platform during recent bye-elections. That was the promise, but the redemption of the promise was that only something less than half that amount was to be devoted to the purpose of old-age pensions. But where was this £1,250,000 to come from? Who was to pay it? It was to be obtained by only taking off half the sugar duty, and, therefore, to be obtained from a tax on the people's food. This free trade Government, this social reform Government, was prepared to prove that the maintenance of free trade and the carrying out of social reforms were compatible with each other. Was that to be done by a retention of the taxes upon the people's food? Session after session, generation after generation, had been spent in passing Acts of Parliament, but the condition of the people remained practically the same. The chief reason for that was the financial basis of this so-called social reform, as this old-age pensions scheme would make no great change in the distribution of wealth. On the contrary, it would make the rich richer, and the poor poorer; it would make the rich better off than they were, for it would relieve their poor rates and it would enable them, like the brewers, to withdraw their subscriptions from charitable associations. No rich man was going to be a penny poorer than he was to-day by this scheme. Hon. Members had stated that every hon. Member who came to the House at the last election was pledged to economy. The Labour Party made no such pledge. They were in favour of high taxation and great expenditure, but they wanted that expenditure to be in the direction of improving the condition of the people, and they wanted the taxation taken from the bloated incomes of the rich. He believed in high expenditure wisely carried out, because he believed by such expenditure the people would receive a better return than by individual expenditure. The Prime Minister had stated that Mr. Charles Booth's scheme would cost from £16,000,000 to £28,000,000 a year—a cost which he said was "obviously prohibitive." It was prohibitive only to those who were too blind to see whence the money could be obtained. The incomes received largely in the form of dividends from limited liability companies had increased during the last ten years by £250,000,000 a year. He did not suggest that that should be taken this year; but if they were to take the whole of that, not one of those persons would be a penny the worse off than they were ten years ago, and they were certainly not next door to the workhouse then, and it would pay for Mr. Charles Booth's scheme of old-age pensions ten times over. But he would make a more moderate suggestion. The Prime Minister rejected the recommendation of the Select Committee in favour of a graduated income-tax because he said the difficulties of graduation were insuperable. But who said so? The permanent officials of the Inland Revenue. But it was always the business of permanent officials to resist changes in the administration of their departments. Every Chancellor of the Exchequer in the past had said that differentiation of income-tax was impossible, yet the Board of Revenue, when it was forced upon them had evolved a scheme of differentiation. If the Chancellor of the Exchequer said: "Prepare me a scheme of graduation of income-tax," it would be done within a month, and when it was carried into effect no insuperable difficulty would be found. He was a very moderate man, and a merciful man, and he was always prepared to show those who had plundered the people in the past more mercy than they had had shown the people. He, therefore, suggested that the Government should have a graduated income-tax for incomes of over £5,000 a year, and he would leave a person with such an income sufficient to provide the necessaries and some of the luxuries of life. Sir Henry Primrose had stated there were 10,000 persons in the country with an income of over £5,000 a year, and their total annual income was £120,000,000 a year; but that was a conservative estimate. It would be a truer calcula- tion to say there were 16,000 of such persons, and their total income could not be less than £200,000,000 a year. A. 10 per cent. tax on that income would bring in £20,000,000 a year, which would provide old-age pensions, and still leave £180,000,000 a year to be enjoyed by 16,000 persons. There were no insuperable difficulties in carrying out a scheme like that and it contained, he believed, all the essentials of good taxation. Such an impost would tax only a small number of people, and be exceedingly popular with everybody except the 16,000 persons. The Prime Minister said it would be difficult to ascertain the incomes of those people. Not at all; the income of a very rich man was much more easily ascertained than the income of a comparatively poor man. He could not hide his income, for it came largely from permanent property. But that did not exhaust the resources of the Chancellor' of the Exchequer, for there was still the death duties. They looked at this question of taxation in his opinion entirely from the wrong point of view. They looked upon what they took; they ought to look upon what they left after they had taxed it. Ten per cent. on an estate of £1,000,000 took £100,000. That was a big sum, but it left £900,000, but if they took 50 per cent. it still left. £500,000, which was sufficient for a man to leave to those behind him, and he believed that if such a man knew that by his death he must contribute such an amount to society, he would pass to the life beyond in a much more comfortable frame of mind. He appealed to the Chancellor of the Exchequer to transfer a large proportion of the taxation at present borne by the poor part of the population to those who had more than they were able to spend usefully either upon themselves or upon others, and to signalise his taking of office by using the powers of the Finance Bill to carry out this great scheme of social reform to which his party, above all, were pledged at the general election.

MR. J. F. MASON (Windsor)

said that the hon. Member for Blackburn had pointed out to the right hon. Gentleman the immense amount of wealth which lay direct to his hand in direct taxation; but on the assumption that indirect taxation would continue to prevail, he would confine his remarks entirely to that side of the problem. He believed that a Budget was not only an estimated expenditure, but also a proposal as to how that expenditure was to be met. If that were so, the Budget which they were now discussing was hardly in every respect satisfactory. The Prime Minister had practically told them last year that it was the duty of the Chancellor of the Exchequer to budget forward. This year that policy had been so wholly abandoned that, far from budgeting forward, there was not even adequate provision to meet the undertakings which the right hon. Gentleman's proposals involved. The Budget discouraged thrift in the individual by making it unwise or save more than would produce 10s. a week. It practised improvidence on the part of the State, for it made no provision whatever for the greater part of the old-age pension scheme which was to be introduced, nor did it provide for the enormous increase in naval expenditure which it was agreed on all hands would be necessary in the coming year, owing to the shortage of the provision already made. It seemed to him that this cynical acquiescence in its own helplessness was characteristic of the Government. It was apparent in the licensing scheme now before the country. The Government had told them that the clubs were a great difficulty, and they asked their opponents to find a solution. The same thing had taken place on the Education Bill. They acknowledged that a concordat might be arrived at, but they asked somebody else to effect it. Was it to be the same in this case? They had created difficulties in the system of taxation, and they asked somebody else to find a way out for them. Surely, one would hardly expect that the Government would look to their opponents in this case for their fiscal salvation. It might be party politics, but it was hardly statesmanship. He would like to deal briefly with the question of indirect taxation. The sugar tax had been reduced, and he heartily approved of that reduction, though not because he thought on existing lines they could afford that reduction at all, but because he believed that the whole of this system of indirect taxation was absolutely wrong. It put taxes on those articles which, because they could not produce the articles in this country, were paid by the consumer, and by him alone. The amount of taxation levied was fixed by the demands of the Exchequer and not by the casual product of any given set of taxes. The indirect taxes now raised in this country amounted to £60,000,000, and they were raised entirely on articles of food, drink, and other articles which were the luxuries of the poorer classes, and on which everbody was agreed that the consumers paid the whole of the taxes. Yet this was a "free food" country, and the Government was a Free Trade Government. The question of whether we had not better raise a portion of these taxes on articles which we could produce, of course brought up the whole subject of the incidence of taxation, and whether under all the circumstances the consumer paid the whole of the taxes or not. On this point, he thought he was entitled to quote the Prime Minister as giving the free trade view. Speaking at the Colonial Conference last year, the Prime Minister said— When we impose an import duty upon a commodity which is a necessity of life or of industry, one or the other, and when the commodity is of such a kind that you cannot substantially make good the supply you want from domestic sources—given these two conditions (I carefully limit my proposition in that way) sooner or later, though the process may be delayed or deflected for a time, that duty appears in added cost to the consumer. This meant that the consumer paid the whole tax under two conditions. One was that the article must be a necessary of life or of industry, and therefore must be bought, no matter what the price; and the other condition was that it could not be substantially made good from domestic sources. He would respectfully attempt to test the truth of that doctrine. Everybody was agreed that on an article like tea, which we could not produce in this country, the consumer paid the whole of the tax. He thought that everyone was equally agreed that, if they had an import tax on an article like coal, which was practically entirely produced in this country, the quantity coming from foreign countries being very small, no matter what the import duty was, it would have no effect whatever on the price, and, therefore, in that case the foreign importer would pay the tax. If that were so, then in, between these two extreme cases, there must be a large middle territory of articles which we produced in considerable quantities in this country, but of which we could not substantially "make good" the whole of our requirements. The question was at what point between these two extreme cases did the Prime Minister's words "make good" come into operation. Was it when the quantity imported was 5, 50 or 95 per cent.? Did the Prime Minister suggest that when they arrived at that point the tax would suddenly jump from the shoulders of the consumer to the shoulders of the foreign importer? It was evident that there was a point where the foreigner paid a portion of the taxes although the consumer paid a portion, but that point was not necessarily one where we could "make good" the whole of our requirements. The fact was that the less dependent we were on foreign importers the more nearly must they come to our terms even if those terms included duties if they wished to get into our markets. They would pay to get into our markets. They would pay the tariff in direct proportion as they needed our markets and we did not need their goods. The tariff acted in two ways. It developed the home supplies, and in that way it had a counteracting influence against a rise in prices. He admitted that the tariff tended to raise prices, but it also tended to foster the home supply, and the more it did the latter, the less could it have the former effect; that was to say, the more a tariff tended to foster supply the less would tariff tend to raise prices, because the country was increasing its home supply. In other words, they might say that the inherent tendency of tariff was more to shift the area of supply than the quantity of that supply. If that were so, then no matter whence came the supply, whether from inside or outside a tariff wall, the only thing that was necessary not to affect the price was that the amount of supply should be the same and that it should be produced equally cheaply. If the supply remained the same, and they could foster the national supply rather than the external supply, and the price, therefore, remained the same, then the consumer paid nothing extra; but it made a world of difference to the producer here; it made a world of difference to a country like ours which depended on its industries; it made a world of difference whether we produced what we required for ourselves, or whether we imported those articles made by foreign hands. In discussing a problem of this kind, of course they must assume, as they were justified at any rate in assuming, that any scheme of tariffs would be accompanied by a preferential scheme, and that the products of our colonies would come in free, while the products of foreign countries would be taxed. But, if so, then the word "domestic," as used in this case, immediately became changed into the word "imperial," and it was a question of what came from imperial sources of supply as against foreign sources of supply. There were few articles which could not be substantially "made good" over the whole of our Empire, but which we now imported from foreign countries. It seemed to him that the British Empire, like the United States of America, was in an exceptional position to have a system of tariffs with the maximum of advantage and the minimum of cost. On the one hand, owing to a plentiful supply in all parts of the Empire, we had the unique capacity of becoming almost self-sustaining. On the other hand, owing to the variety of people who lived in that Empire, we had an Empire which must always remain a magnet for the trade of foreign countries throughout the world. If a 2s. duty were put on American wheat while Canadian wheat came in free, the American exporter would ask himself whether it would pay him to send into the English market. He would say he could not make a better profit elsewhere because he was only dealing with his surplus stock, and there was no other country that would let him in so cheaply and so long as there was any margin of profit at all he would send it and pay the duty rather than give up the only outlet that he had for a large proportion of his surplus production. By such a system we must gain in one of two ways. If the foreigner went on sending into our markets and paid the duty there was so much the less taxation for us to pay ourselves. If he did not send them it would be because our tariffs had increased the supply from inside the barrier, and to that extent made us more independent of foreign supply and lowered the price. There was a very definite concrete case where the producer most certainly paid the burden. He was told that the freight on wheat from Buenos Ayres was 19 cents a bushel higher than it was from Winnipeg, but given equal quality it was sold at the same price. Did anyone suggest that the consumer paid that 19 cents? But what was the difference? The 19 cents was a geographical burden imposed by nature, and a duty was a fiscal burden imposed by man. If the foreign exporter and not the consumer paid the one, by what logical argument could it be suggested that the consumer paid the other and not the foreigner? If, as everyone acknowledged, the foreign exporter paid the burden in order to get his wheat into our market, why should he not pay the burden in just the same way if it was imposed by man instead of by nature? Some words used only a few days ago by a late free trade Chancellor of the Exchequer in another place rather implied the same thing that he had endeavoured to point out. The point he made was that the preference would be inoperative because foreign importers would reduce their prices so as to render it inoperative. If that was the case, it was quite evident that the consumer would have nothing extra to pay. There was another concrete case in quite a different direction. Under the recent Australian Commerce Bill English cotton goods were to have a preference of 5 per cent. against German cotton goods. The result at first was that the German goods were 5 per cent. dearer than the British, and the British makers immediately jumped at the conclusion that they had disposed of the German competition. But the moment the German makers realised their position and saw that they could not afford to lose this valuable market, they immediately reduced their prices sufficiently to counteract it by sacrificing 5 per cent. of their profits. There was no question that where the market was of value, as in this case, provided the duty was low enough to leave some margin of profit, the exporter would always be willing to sacrifice up to that point in order to retain the market which he regarded as essential. The burden only fell entirely on the consumer when we taxed such articles as we could not produce in this country, but where duties were put on articles which could be produced in the country, some portion of the tax fell upon the foreigner, and to the extent that it fell on him we were relieved from a portion of the £60,000,000 of indirect taxation which now fell entirely on our shoulders. For these reasons he would gladly see a larger proportion of the sugar tax and tea tax, and similar taxes, replaced by taxes on imported articles of the kinds which we could make in this country.

MR. ELLIS DAVIES (Carnarvonshire,) Eifion

said it had been suggested from both sides of the House that the pension scheme should be a contributory one, apparently because it was assumed that the working classes were undertaxed, but it was difficult to reconcile the suggestion with the facts, and especially with the admission that taxation should be adapted to the means of the taxpayer to meet it. It seemed to him that they ought to go a little further and say that taxation ought to be adapted to the ability of the taxpayer after meeting the ordinary expenses of life. At present the working classes and lower middle classes were paying no less than £12,000,000 a year in food taxation alone, while a great deal of sympathy was expended on the richer portion of the community which was being called upon to pay estate duty. The total estate duty paid last year was only eighteen millions, or only six millions in excess of what was wrung out of the very necessities of the poor. Not only that, but the Chancellor of the Exchequer admitted the other day in answer to a Question that to the extent of fifty-six millions, that portion of the war expenditure had been paid out of food taxes, namely, tea and sugar. But in addition to these indirect contributions to taxation which were enforced on the poor there was also imposed on them by way of local taxation a sum which was very unfair and exceedingly burdensome. The hon. Member for Blackburn had referred to the large proportion of the working classes whose income was less than 20s. a week, and he asked how a family could be reared on 20s. a week after payment of rent and other general expenses. He found that in his own constituency the London and North-Western Railway Company were paying some of its employees a pittance of 17s. 2d., out of which he understood rates, taxes, and rent absorbed 4s. a week, leaving the small sum of 13s. to meet the expenses of the family. Over and above the working class there was another class which he thought deserved the consideration of the House, the class which was immediately above the working class, and which might be referred to as the lower middle class. No one who had come in contact with this class could fail to realise the tremendous burden of local taxation insofar as it fell upon them. In addition to that, if they rose a little in the social scale and their income was increased, they came within the pressure of the income tax. Not only must the question of local taxation be met, not only must the Imperial Exchequer provide funds for carrying out social measures, but the lower middle class, as well as the working men, deserved either by way of new sources of revenue or an increased grant from the exchequer considerable relief from the weight of taxation. The hon. Member for Blackburn had argued, and he believed rightly, that of the wealth that was produced in the country, very little reached the working classes in the shape of wages. But there were some marvellous figures issued by the Treasury with regard to the lower middle classes. Leaving aside the question of the working classes and their poverty, which was often wrongly ascribed to drinking and gambling, rather than to the conditions in which they lived, and the very low incomes which they received, the statistics issued by the Treasury proved that the wealth of the country, even if it reached this class, certainly did not put them on a scale where they could enjoy life under decent conditions, still less enable them to provide for their old age or for those who were dependent upon them. They were in the unfortunate position that in discussing questions of taxation they had really no figures. The Chancellor of the Exchequer had admitted that there were no figures available which showed the distribution of incomes up to £2,000 a year. If they had these figures they would know what was the exact income of the people and how it was distributed. But there were figures which were really quite as expressive and which afforded a very fair indication of the real wealth of the country and its distribution. Last year some 66,000 estates passed through the Treasury, and no less than two-thirds of them represented sums of less than £1,000. The whole of those estates represented about £18,000,000 and the average was about £415. At the other end of the scale there were ten people who died and left £34,000,000 or £16,000,000 more than the entire total wealth of the other 44,000 estates valued under £1,000 each. Taking the class with less than £10,000 each and which included the professional classes, large farmers, and the best business men of the country, estate at death was but the average, £3,600. The important point was that whilst five-sixths of the estates of less than £10,000 which passed through the Treasury represented £98,000,000, the other one-sixth represented £200,000,000. In the interests of social requirements and a better distribution of wealth it was the duty of the Government by a super-tax or an increase in the estate duty to obtain in this way the additional income required to carry on the affairs of the country. It was imperative that the taxation of the country which now bore so hardly upon the food of the poor and on the lower middle classes should be very considerably modified, and the Government ought to obtain the money which was necessary to reduce that taxation on the one hand and on the other to provide for future social reform by either a super-tax or an increase in the estate duty.

SIR WILLIAM BULL (Hammersmith)

said he again wished to bring forward a subject he had introduced for several years past, the question of adding together the income of married persons for the purpose of taxation. It was not a very large question, but it was important to the middle classes. An answer given him a few weeks ago led him to expect some reference to the subject in the Budget statement. This was a law which placed a restraint on marriage, and this taxation of married people bore extremely hard on a large class of the community. He would give the House a concrete case.

The following was the income-tax paid by A+B, married:—

	£	s.	d.
A's unearned income	320	0	0
Tax, at 1s. in £	16	0	0
B's unearned income	160	0	0
Tax, at 1s. in £	8	0	0
B's earned income	180	0	0
Tax, at 9d. in £	6	15	0
Total tax on the income of A + B	30	15	0
Less 9d. in £ on £70, owing to total combined incomes being under £700	2	12	6
Total tax paid by A + B married	28	2	6

But the income-tax payable by A + B if unmarried was as follows:—

A's unearned income	320	0	0
Tax, at 1s. in £	16	0	0
Abatement allowed of 1s. in£ on first £160 owing to A's income being less than £400	8	0	0
Total tax payable by A	8	0	0
B's unearned income	160	0	0
Tax, at 1s. in £	8	0	0
B's earned income	180	0	0
Tax, at 9d. in £	6	15	0
Tax on B's earned + unearned income	14	15	0
Abatement allowed of 9d. in £ on first £160 owing to B's income being below £400	6	0	0
Total tax payable by B	8	15	0
Total tax payable by A + B unmarried	16	15	0

It thus appeared that A and B paid £11 7s. 6d. more income-tax when they were married than they would have to pay on the same income if they were unmarried. Was marriage then a crime? Was the married man a menace to the State? Did he evade the duties of citizenship by entering into matrimony? If not, why impose this unfair burden on the man and woman who marry? Again, was it right that the State should offer an annual premium, amounting to as much as one-fifteenth of their combined quarter's income, to the man and woman who would consent to live together in defiance of moral and civil law without entering into the married state? He thought not. Owing to the regulation which permitted the Revenue authorities to combine the incomes of man and wife they were deprived of the benefit of abatement, so that the two persons were taxed £28 2s. 6d., while if they were two sisters or two brothers living together with precisely the same incomes the amount would be £16 15s. This looked like a penalty imposed on marriage, and in his view it had some effect on the marriage rate, which in 1907 showed a decline of 21 per cent. He did not suggest that both persons should receive the £160 abatement, but an abatement of £240 on the two incomes combined would be a sensible relief to small incomes; and, further, he suggested a rebate of £20 for each child. He had made a careful calculation and found that 50,000 families would be affected, and the cost would be £200,000, or less than one-tenth of 1d. in the £ on the present basis. When the Chancellor of the Exchequer answered his question two years ago he promised to consider this subject, and he would have thought that, when the income-tax remained at 1s. with a reduction to 9d. on earned incomes, this year he might have made the further concession for which he had pleaded so long. He would probably be told that the matter was too small to deserve consideration at the hands of the Inland Revenue, but that was all the more reason why it should be remedied. In many cases the joining of the incomes of the husband and wife caused a real grievance. If a man's income was £400 and he remained unmarried he would have the £160 abatement; but if he married a woman whose income was £160 and exempt before marriage, the abatement would be £120. It amounted to a penalty upon marriage. It might be necessary to raise the limits somewhat, but he hoped the new Chancellor of the Exchequer would next year do something in justice towards the middle classes on whom the income-tax fell so heavily.

MR. BRACE (Glamorganshire, S.)

said it was unblushing effrontery for supporters of a great war to come down to the House and repeatedly demand a reduction of the income-tax before the debt incurred through that war had been paid off. It would be well for politicians to try and realise that they should not support a war without being prepared to carry out the responsibilities and obligations which it involved. The right hon. Gentleman who was Chancellor of the Exchequer in the last Administration had stated that it would be corrupting the workers to give them old-age pensions unless they made an effort to do something themselves. He did not understand this kind of philosophy; it was not the kind of philosophy that Members of the Opposition practised themselves when they were in office. He did not wish to be offensive, but there were Members of that House who were receiving pensions from the State, given to them by the late Administration upon the principle, not that they were contributory parties, but that they had not made the provision necessary for keeping up a certain standard of living. It was not just and fair to preach one philosophy for members of a particular class and to preach another philosophy for the working classes. He congratulated the late Chancellor of the Exchequer upon his reduction of the sugar duty. He was speaking on behalf of the labouring classes largely when he said that it would be a great boon to those who were employed in trades using sugar as a raw material as well as to consumers. In taking this step the right hon. Gentleman had endeavoured to meet an acute position among the working classes, and they received the reduction of the duty in the hope that next year he would be able to remove it altogether. With regard to the old-age pension scheme he thought the age limit was too high, but he should support the scheme on the principle of getting all he could to-day and taking to-morrow all that was left over. He thought sixty-five should be the starting age, but he was glad to witness the time when a Chancellor of the Exchequer had laid down the principle for an old-age pension scheme which, if not universal in its application, was, at any rate, non-contributory in character. He regretted that the scheme was not intended to apply to those in receipt of poor relief. It meant a saving of money not to give old-age pensions to those who were in the workhouse, but in justice he could not differentiate between the right of the inmate of the workhouse to receive a pension and the right of a person who was not in receipt of poor relief to receive one. If the Government were not at present prepared to make the scheme apply to the inmates of workhouses he asked them to make it apply to those who were receiving out-door relief. Such a concession would carry into many homes a hope they had not yet got. Again, he asked why should there be a differentiation between married men and women and single men and women. He strongly appealed to the Government to amend the scheme, in this respect before the Bill passed, and to provide for a pension of 5s. each to married as well as to single pensioners. In some cases it was more expensive for husband and wife to live together than to live apart. To leave the scheme as it was would be to penalise the very men and women who were the backbone of the Empire they heard so much about, and would not tend to encourage the building up of that family life of high character that Britons liked to see. He also thought the income limit for married couples should be just double the amount fixed for a single man or woman. He advocated a system of old-age pensions universal in its application, and he regretted that there should be any income limit at all. Unless the scheme was made universal they would always have about it that taint of pauperism which would be so offensive to sensitive natures. He opposed the idea of a contributory scheme because it would leave outside a great mass of women who would be unable to contribute anything, and whatever claim could be put forward for granting old-age pensions to workmen, an equal and even greater claim could be urged for giving such pensions to women. The Government should, after all, regard the old-age pension as only giving to the soldiers of industry that which had long been recognised as fair in the case of soldiers of war. The Government should have full credit for the scheme, but that was no reason why they should not make it more acceptable to the working classes as represented through the decisions arrived at by organised labour in the Trade Union Congress. Seeing that they had waited so long they were entitled to ask the Government not to send out a scheme which was objectionable, not in principle but in detail, but one which would enable them to go to the country and declare truly that the poorest of the poor would have an old-age pension.

MR. GOOCH (Bath)

said that hon. Members on the Opposition Benches appeared to be in considerable doubt as to whether the Government could find the money for old-age pensions. All in the House were aware that this Parliament was incurring heavy liabilities and that they must look forward to considerable additions to the expenditure on education. They not only looked forward to finding more money for new needs, but to the abolition of what remained of the sugar tax before the present Government went out of office. On the other hand there were several items which had to be put on the other side of the balance sheet. He was glad to hear the right hon. Member for Rushcliffe refer to the cause of retrenchment, and he welcomed the recent speech of the Prime Minister in which the right hon. Gentleman spoke quite clearly and definitely of a further retrenchment in expenditure as being within the range of practical politics in the near future. Hon. Members on the other side seemed to regard that with mixed feelings. There was one means of finding money for current and future expenditure which had not been adopted in the present Budget, although it had been referred to many times in debate; he meant the graduation of income-tax, to which they on that side of the House looked forward with as great an assurance as they did to the complete abolition of the sugar-tax. Therefore, in their opinion, there was no serious reason why they should regard the future with any great apprehension. As to old-age pensions, this was a subject in which he had taken deep interest, and to which he had given particular attention for many years. In the first place, he felt most strongly that the Government had been ill-advised in rejecting the suggestion of a sliding scale in the old-age pension scheme above the limit of 10s. The 10s. limit was, of course, very well, and it had been recommended by the Chaplin Committee eight or nine years ago; but the Government ought to depart from the Chaplin proposals in this particular. He thought it would be most desirable that the money limit should not be fixed, but that it should be a sliding limit, and he suggested, what indeed had been sug- gested a dozen times, that for every shilling a recipient had over 10s. he should have the maximum reduced accordingly. Thus, if he had 11s. a week, he should get a pension of 4s., and if he had 12s. he should get a pension of 3s.—15s. being the maximum limit of the income. He believed that the additional cost to the Exchequer would not be very large. In that way they would meet the justifiable charge of discouraging thrift on the part of those who had an income of 11s. or 12s. a week from their own savings. The second point was one on which there was most disagreement, though not of a party character. He meant the treatment of a married couple who were to receive only a joint pension of 7s. 6d. per week. He could not associate himself with the passionate attack on the Government made on that point by an hon. Member opposite, because he believed the Government proposal was intended to confer an equal advantage on everybody. To a simple couple living in one room and paying for rent, light and firing, 4s. a week each would be equal to 5s. to one person who did not share the rent, light and firing of a room. Therefore, the Government were not to be blamed for reducing the grant to the married couple. He would make it 8s. 6d. or 9s. a week, and he should like to empower the local authority to make this reduced grant not only to married people who lived together, but to two old women or two old sisters living together, and who were too old to live alone. They did not know what disqualifications were going to be added to those enumerated by the Prime Minister. He would urge that a record of continual drunkenness should be as much a disqualification for the receipt of an old-age pension as perpetual vagrancy or crime. He reminded the House that that was one of the disqualifications recommended by the Chaplin Committee. He felt rather surprised that so little discussion had been devoted to what might be called the character aspect of this problem. Everybody in the House agreed that the weighing up of merits and virtues was not only a difficult task, but one which none of them was good enough to undertake. On the other hand, they were anxious to see the money go to those who deserved it and would make a good use of it, and that it should be kept from those who would make a bad use of it. There were only two ways to secure this result: first, by having a stricter character test and, secondly, by cancelling the pension when necessary. If nearly everybody received a pension unless they were of notoriously bad character or were criminals, they must be exceedingly careful to see that they used the pension properly, and if it was not used properly it should be taken away from them. The scheme, as outlined by the Prime Minister, was far more lenient and lax from the point of view of character test than any other non-contributory system now at work in the world. In Denmark the test was far stricter; in Australia the investigation into the character of the applicant for a pension was incomparably more thorough than they were likely to see under the Government scheme. Many critics of the pension scheme had said that the unthrifty man and woman who had lived bad lives, although not bad enough to disqualify them altogether, were to be treated just as well as the thrifty, and this was an exceedingly serious charge. Therefore, he would look to the local authority to rebut that charge by keeping a sharp eye on the people who got the pension, and taking it away if they used it badly. As to the exclusion of existing paupers, indoor and outdoor, from the pension scheme, it was common knowledge that from 80 to 90 per cent. of indoor paupers could not, or would not, live out of the Workhouses. Many of them were physically or intellectually incapable of doing so, and of those who were capable a large number had no friends to whom they could go. But there were from 5 to 10 per cent. of paupers in the workhouses who might be allowed a pension and go out of the workhouses in the event of their having friends or relations who would take them in and care for them. The real problem was the outdoor poor. The House did not know how they were to be denned until the Bill was circulated. It was clear that people would not be disqualified because they happened to be in receipt of Poor Law relief on 1st January next, because if they knew that they would make special efforts to get themselves off the list a few days before. In any case they all felt that, admitting the present scheme was only temporary, any permanent exclusion of persons now in receipt of outdoor Poor Law relief would be exceedingly unjust and distasteful to the country. The Aberdare Commission could not recommend any old-age pension scheme, but suggested that decent old people should not be driven into the workhouse. The Local Government Board then issued a circular to the guardians not to drive decent people into the workhouse but to give them outdoor relief. Therefore, they might say that those over seventy now in receipt of outdoor relief were persona of good character and would be rightly claimants under a Pension Bill. He hoped that the Government, when it had the money to take in the greater part of these outdoor paupers, would not tempt the local authority to transfer the cost of the outdoor pauper to the Treasury, but that the Exchequer would only make up the difference between outdoor relief which was paid by the locality and the pension of 5s. In the Pensions Bill there was no room for people who were less than seventy years old and at the same time suffered from incapacity or incurable disease. In almost every country the necessities of such cases were recognised and met. As soon as the money was forthcoming he hoped such cases would be met in this country, say, at the age of sixty. He would far rather that the pension age should remain high for a time and that the money to spare should be used to deal I with these hard cases at the earlier age of sixty. He thought the payment of pensions should not be weekly or fortnightly, but monthly, as it was in New Zealand. With these additions and alterations the pension scheme in his opinion would be a splendid one. Even without these changes he was quite sure that the Budget meant the dawning of a new and happier day for the working classes and that the burden imposed upon the country was not too heavy to bear.

SIR GILBERT PARKER (Gravesend)

said he had been reminded to-day, and it was not a pleasant memory, of the first occasion upon which he had spoken on this question. He then made a criticism on the Budget campaign which was unpopular on the Opposition side of the House. He said then he had no hope that the expenditure would ever be less, but that he was certain it would be more; that it would increase from year to year; that there were very few avenues for economy. He stated at that time that the expenditure for the Army and Navy must necessarily increase; that the expenditure for education could not possibly decrease, and that in the expenditure on the Civil Services there would be very little opening for economy. Not one single Member to-night had ventured to defend the position taken up by hon. Gentlemen opposite seven years ago, when the principle of economy was so strongly asserted by them, with the exception of the right hon. Member for the Rushcliffe Division of Nottinghamshire. The right hon. Gentleman had certainly pointed out that there was an opportunity for decreased expenditure on the Army and Navy, but he did not notice that there was a very hearty response from hon. Members opposite or from hon. Members below the gangway to that sentiment. But the right hon. Gentleman neglected to point out where in that expenditure any reasonable reduction could be made. The hon. Member for Bath in one or two happy phrases had drawn a pretty picture of the effect of this Budget on the poor. Ho said it would be the dawn of a brighter day—the dawn of old-age pensions for those who reached the age of seventy! But they had to look at what the proposal itself meant. The average of compositors was fifty; of carpenters, fifty; of bricklayers, forty-nine; of stone masons, fifty-seven; and of engineers, fifty-two. Therefore, this scheme of old-age pensions would reach a very small number of the population. The promise of old-age pensions did not afford an immense amount of satisfaction to those who supported the scheme, unless they were satisfied that this non-contributory scheme was, as they hoped, going to be greatly extended and to be enjoyed, with a little pressure, by those who paid the taxes in the country. The one proposition that had come up in the debate was that all incomes above £5,000 a year should be taxed, and it was said that those incomes were enjoyed by some 16,000 people. He appealed to the Chancellor of the Exchequer, who was a reasonable man, though sometimes he was led astray by free trade rhetoric, did he not think it was a dangerous thing to put too heavy a pressure upon one point of taxation? Incomes below £5,000 were now taxed just as heavily as they ought to be; in fact, they were taxed far too heavily. He believed the taxation of income to the extent of 1s. in time of peace was disastrous in many ways. The Prime Minister himself had said— It is a tax on property and a tax on earnings, a burden on the trade of this country which in the long run affects not only profits but wages. At the present time they were levying between £11,000,000 and £12,000,000 by means of a tax on incomes—a war tax. Such pressure had been put on incomes that in the event of a war breaking out, which God forbid, the Government would have no resources. They had dried up the source of income against any extraordinary pressure in time of national crisis. The hon. Member for Bath had expressed regret that any proposition should be made to decrease the contribution for the reduction of the National Debt, but if he (Sir Gilbert Parker) read the right hon. Gentleman's remarks aright, the right hon. Gentleman was in absolute agreement with himself. What lay behind that argument? They must steadily reduce the National Debt, or in times of crisis they would have too heavy a burden upon the resources to which a Chancellor of the Exchequer might go. He had a great respect for the Chancellor of the Exchequer, for his business ability and commercial acumen; and he ventured to say he would agree that they must by every possible means reduce the National Debt. That reduction in itself was a resource upon which they must necessarily rely in time of any national danger or crisis. They ought not to put upon any one source of taxation too heavy a pressure. It was so in the case of the Death Duties. After all, property actually represented accumulated energy. Somebody had worked and toiled for it. It had been piled up in the hands of an individual or many individuals and was accumulated energy in the form of capital. The State stepped in and did what to his mind was dangerous to the whole financial structure of the country and to the national energy and capital. It stepped in and said it would take for the purposes of current expenditure a certain proportion and to that extent that capital was destroyed. He did not say there should be no death duties, but he did say that to carry the principle of taxing accumulated capital to any far degree was to strike at the roots of ambition of individuals, and of the active natural energy of the people. They had no right to do that, and he thought it unwise and unsound. Hon. and right hon. Gentlemen opposite refused to broaden the basis of taxation, and said that they would get from the little circle they had been travelling round during the last sixty years that which they needed for social reforms. The hon. Member for Blackburn said that in spite of increased exports and imports, and increased manufacturing output, the percentage of pauperism was greater than it had ever been in the history of the country, that wages were relatively lower and unemployment greater than ever before. He went on to say that at the same time there were £98,000,000 of increased taxable income in one ten years, and £230,000,000 in the last ten years. He asked what the poor had got out of that: "Neither greater employment nor improved social conditions." In the words of the Daily News, used after a certain election in the suburbs of London, free trade "had left them at the bottom of the abyss." That was, in effect, what the hon. Member for Blackburn had said. He was not arguing for protection at all; he was only pointing out the position in which they found themselves. It was not strictly accurate to say that this increased taxable income represented a vast increase in wealth. It was due, as the late Chancellor of the Exchequer said, to the increased stringency in the methods of collection. The Chancellor of the Exchequer shook his head, but that had been repeated over and over again in the House. They had an increased ex- penditure by the present Government over that of the past Government, in spite, as he believed, of the most honest efforts to reduce taxation. He did not think the Government desired to be extravagant, but they had increased the expenditure of the late Government by £3,000,000, and they had committed the country, as the right hon. Gentleman the Member for Worcester had said, to an increase of expenditure of £10,000,000 next year. Where were they going to find the money? They could only find it from the income-tax, the death duties, or from the breakfast table. The hon. Member for Bath considered, as he believed most of the Members on that side of the House did, that the taxes should be completely taken off the breakfast table. If that was so, the sources of taxation were limited to three—income-tax, death duties, and taxation on land. The present Government came into office—and hon. Members supported them in their view—saying the thing to do was to encourage the people to go back to the land. Three years had gone, but they had not seen very many return to the land. He did not suppose this Government would contend that they could get anything more out of the land, so that incomes and death duties were the only resources remaining. Did they think they were satisfactory resources? He thought hon. Gentlemen opposite were wrong in the view they took of taxation. It was a fact that an indirect tax was less burdensome than a direct tax. It was much easier to pay a little day by day by indirect taxes than deliberately to save in order to pay a sum at the end of the year or half year, and he thought the people of the country would rather pay by indirect than by direct taxation. He was not going into the respective merits of taxation. Hon. Members might drink their cup of joy to the full to-day, because trouble would come with succeeding years. If they proposed to get their income for national expenditure out of incomes of £5,000, they would find that any undue pressure upon any source of taxation ultimately dried it up. He could not understand the argument of the hon. Gentlemen below the gangway in favour of a graduated income-tax, which amounted to a deliberate assertion that an income of over £5,000 was necessarily too great an opulence for any one individual, and that the State had a right to step in and take an unreasonable proportion of it for national expenditure. He ventured to say that that, even in the opinion of the Chancellor of the Exchequer, who had a different position to defend, was wholly untenable. He had not risen to throw cold water upon the efforts of the Government to reduce taxes. He had never believed they could very much reduce taxation. He had not risen for the purpose of throwing cold water on the old-age pension scheme. He believed both a contributory and non-contributory scheme could be run and run successfully in the country. He honestly thought, with all his desire to see the working man relieved from the pangs and miseries of old age, that a non-contributory scheme, taken by itself, would reduce the national self-respect. He did not care how small the contribution was, he believed it would conduce to the self-respect of every man who felt that he found some insurance towards his old-age pension, and he thought that hon. Members on the other side of the House would still come to think of a contributory scheme with something like acceptance. Behind it lay one of the great principles of human independence—self-respect. He did not wish to say anything disrespectful of the working class, but the dependence of class upon class was not good on the whole for the people; and he felt very strongly, while supporting an old-age pension scheme, that a contributory scheme might very easily be run parallel with a non-contributory scheme. By increasing the size of the pension under a contributory scheme, and still preserving their non-contributory scheme, they could have that stimulus to national energy, self-respect, and human independence which was so good for men and women in every class of life. He believed there was no class, no people, more strenuous, more active, than our fellow countrymen. But at the same time there was a danger which the Prime Minister, he thought, would acknowledge. He had not, as would have been noticed, made a speech in favour of a change in our fiscal system. He did not think it necessary in the circumstances. Upon occasion he could and would do it. But he wished to point out this. The Prime Minister and the Chancellor of the Exchequer were steering the House and the country into an impasse, with their old-age pensions or the more extended scheme advocated below the gangway, and with the ever continuing increase of expenditure on the Army and Navy, Education and Civil Service, to which the only outlet was that provided by the cause and the principles which they on that side of the House advocated. The hon. Member for Blackburn had pointed out that free trade had failed absolutely. It was the choice by inference between the policy which they advocated and the policy of socialism. This country would not accept the principles laid down by the hon. Member for Blackburn, the seizure of private interests to be worked for the good of the population generally, but he was not sure that it would not advocate and accept the principle which had been put in motion by the Chancellor of the Exchequer in more than one direction since he became President of the Board of Trade, in his Patent Law and his Merchant Shipping Act. If the Chancellor of the Exchequer could show how the expenditure was to be met otherwise he would be only too glad to support him if it could be done for the good of the working classes and the trade and commerce of the country.

MR. HARWOOD (Bolton)

asked the Chancellor of the Exchequer and the House to give very serious consideration to the speech of the hon. Member for Blackburn, not because of the particular suggestions he made, but because of the truth underlying his whole argument that the working classes of the country had not derived their fair share of the advantages of machinery and general progress. If machinery increased production as it had done in his own lifetime, say six-fold, and made things six times cheaper, the working classes either ought to have six times more commodities or six times more leisure. But they had neither, for their present condition was practically not as good as it was in the time of the Plantagenets. Apart from that, passionately as he loved free trade, not chiefly for its material advantages but for its moral justification, unless some means were found of removing this injustice free trade was in great danger. He wished to make a practical suggestion as to the way the balance sheet was presented to the nation. No private firm and no treasurers of a third rate corporation would make out the balance sheet as it was presented to the. House. National expenditure meant in the mind of the public expenditure for national purposes—carrying on the Government of the country, the Army, Navy, Civil Service, and so forth. The nation carried on not only the nation but certain private businesses, for example, the Post Office, which was once carried on by private persons and might be again, and the telegraph and telephone businesses, and if the suggestions of the hon. Member for Northwich were carried out it might carry on the right hon. Gentleman's and he would be glad to see it. He asked that in the column of national expenditure they should not include the gross outgoings of these different private businesses, but keep a separate account for them and only bring forward balances. His own corporation supplied electricity, water and gas, and in offering its balance sheet it had an electricity account, a gas account and so forth, and then brought the balances forward only. The advantages would be that the nation and Parliament could see whether these different businesses paid or not, and they could make some sensible calculations as to national expenditure. The hon. Member for Preston had spoken of the national expenditure growing by £20,000,000. Everybody talked of the growth of national expenditure and they were told that it was £152,000,000 last year. He found that that included £17,000,000 on the Post Office service which was a profitable undertaking. He was told when he raised the point before that Mr. Gladstone was in favour of this scheme. No doubt he had better reasons than they could see, but he objected to being knocked over by any person's name. They had to face things as they found them now. He asked that for the sake of being able to compare national expenditure year by year they should have really national expenditure and not profitable expenditure in carrying on business. If our total outgoings jumped up by £100,000,000, people would say that the national expenditure had jumped up by £100,000,000, but it was nothing of the sort. This way of rendering the national accounts was unique, and he hoped the Chancellor of the Exchequer would in future so render the accounts that they would be able to see how their businesses were doing, and how they were doing in regard to national expenditure. Everybody had said the Chancellor of the Exchequer would be hard up, and it looked to him rather as if he was going to be very near the line. He was afraid the Prime Minister did not realise the serious setback of business. But at any rate the Chancellor of the Exchequer would have to cast about for all the means he could think of to raise money, and he asked him to return to something that was abandoned by his predecessor, and that was the export duty on coal. He did not say it was a charming thing in itself. No taxation was. There was a drawback to every tax, but this had fewer drawbacks than a great many other taxes that could be suggested to fill up the deficiency that they saw before them. The Chancellor of the Exchequer had approached other things with a free mind and he had not had the pleasure of sitting beside him so long without knowing that quality, and he thought he would look at it quite apart from the fact that both parties had given it up. Really, when he founed both parties give up anything he thought he must be right. They were probably doing it for motives of winning votes and were not considering the real truth of the matter. He asked the right hon. Gentleman not to be led away either by a kind of pedantic doctrinairism. There was a sort of idea that exports and products must not be taxed. But coal stood in a category by itself. It was not a manufactured product. It was a gift of which they could say, at any rate, that no more could be made when it was gone. He was not speaking from any fear of its being done up. He knew the Report of the Royal Commission and all that. He was speaking of it as a pure matter of taxation and raising revenue, and he held that the bulk of a tax on coal would be paid by the foreigner. He knew there were wails of weeping millionaires, and so forth, but as a matter of fact, the imposition of the tax did not reduce the export to any appreciable degree, and for a very good reason. The fact of the case was that the foreigner had to have our coal within certain limits even if he paid more for it. What was the case now? A cotton-spinner in Rouen could get Welsh coal cheaper than he could get it in Manchester. He would have it. He was not speaking of Welsh smokeless coal. A French syndicate was being formed lately to obtain some mines there, because there was no other known in the world at present. Why, therefore, should they part with this special gift which belonged to the nation and get nothing for it? It was said that this tax bore unequally upon certain mines, and that if they could levy it on all mines it would be different. The chief value of coal lay in its potentiality for productiveness. Even if the revenue did not gain they would get the benefit of the use of the coal at home, while, if they parted with it, they got nothing but the price. He spoke as a land reformer, and as President of the Land Nationalisation Society of Lancashire, and he was surprised that so many of his hon. friends on that side of the House who were so strong in advocating the principle of land nationalisation were so very backward in seeing how they applied in a case of this sort. The principle was this. The coal was not the absolute property of the owner of the surface, but the nation had rights in it; it partly belonged to the nation. It was partly national property. When they exported it the nation was parting with a national asset without getting anything national back for it. It gave employment—so did other things—but they did not get a national contribution. The landowner got a royalty, and the coal-miner got his wage. He did not think the Chancellor of the Exchequer would find any other tax that would contribute £2,500,000 to the Exchequer with less burden to the nation than the coal tax, and he believed it was a perfectly just plan of vindicating the principle of land nationalisation and giving the nation some benefit from its own property.

MR. BONAR LAW (Camberwell, Dulwich)

said the hon. Member for Bolton usually disagreed with every other section of the House, and that made his speeches interesting. There was one remark made by the hon. Member with which he could not agree. He had himself sometimes joined in the praising of the Chancellor of the Exchequer, but he had never before heard anyone suggest that the right hon. Gentleman's nature was one which was likely to rise above party exigencies. To-night he thought they were in a somewhat peculiar position. This subject had now been under discussion since four o'clock and not a single Member on the opposite side had had a word to say in favour of the Budget—the most momentous that had been presented to Parliament in the experience of any Member of the House. A striking characteristic of the Budget speech of the Prime Minister was the glorification of his party on account of the reduction of the National Debt. He was perfectly at a loss to understand the ground of that jubilation. The surpluses by which alone Debt could be reduced could be obtained either by the difficult way of reducing expenditure or by the easy way of maintaining a high level of taxation. He was sure hon. Gentleman opposite expected to see the financial reforms of the Government take the shape of reduced expenditure. None of their many election promises was so definite as this—that there was to be a reduction in the extravagant scale of expenditure of their predecessors. There had been no reduction, but, on the contrary, an increase in expenditure compared with the last year in which the late Government held office. The Government had reduced the National Debt by a method open to anybody, by keeping up taxation. When the Prime Minister claimed credit for the democratic majority which sat behind him for the great sacrifices they had made in order to reduce Debt, he did not sufficiently recognise the claims of other parties. Some part of the credit should be given to the Nationalist Party. If they had accepted the Home-Rule-by-instalments Bill some part at least of the funds which had been available for the reduction of Debt would have been absorbed. Again, the House of Lords deserved some credit. But for them several millions would not have been available, but would have been absorbed in expenditure under the name of education. The two outstanding features of the Budget were the proposals for old-age pensions and the reduction of the sugar duty. Both of these proposals were popular. It was intended to be a popular Budget, and perhaps it was. So far as he could see, it was framed for one object, and one only, viz., to stop the rot which had set in in the constituencies against the present Government. A great deal could be said for either of these proposals by itself, but he did not see how it was possible to justify them taken in conjunction. What was the position in which the Budget left the finances of the country? The Budget of this year had committed the country to a payment of £6,000,000 on old-age pensions, but only a little more than £1,000,000 had been provided in this Budget to meet that increased expenditure. A year hence an additional sum of nearly five millions would have to be provided, but the question of how it was to be met had not been faced. A Budget of that kind was entirely new. There had never before been, in their whole Parliamentary history, a case where the Chancellor of the Exchequer had deliberately imposed a burden upon the country without at the same time honestly and openly facing the means by which that Budget would have to be carried out. The strongest condemnation of the Budget was to be found in the speeches made by the Prime Minister himself last year. Twelve months ago the Prime Minister laid it down that nowadays, in view of the fiscal and social obligations in front of the country, it was impossible to treat the Budget of a single year as a thing by itself; one must regard it as a whole and look several years ahead. Speaking of the sugar duty, he said that in the two or three years for which the Government expected to be responsible for the affairs of the Exchequer he could see no prospect of any diminution in the national revenue. What a difference had twelve months made. What was the explanation? The right hon. Gentleman's horizon now was much more limited. Apparently he scarcely looked beyond the effect on the next bye-election wherever it might be. [MINISTERIAL cries of "Oh, oh."] How could they justify the tone adopted by the Prime Minister twelve months ago with the actual adoption of this Budget? It was not merely an additional £5,000,000 of expenditure to which the country was being pledged. The Prime Minister had definitely committed the country to additional expenditure. He had emphatically declared that if the German naval shipbuilding programme which had been introduced this year looked next year like being carried out, we should have a shipbuilding programme in this country. Why the right hon. Gentleman had postponed the matter till next year was one of the mysteries which no one but the right hon. Gentleman could explain. The experience of the two previous German programmes afforded no ground for anticipating that the present programme would not be carried out. Then if the ships built under our programme were to put to sea for the purpose for which they were built we should not need the ships alone; there must be a naval dockyard in the North Sea to which they could repair. He believed that the figure of £10,000,000 was an under-estimate of the expenditure which would be involved. It was a time when these inevitable obligations were in front of us which had been selected for reducing the sugar duty. The Chancellor of the Exchequer would find himself tremendously handicapped by reason of his predecessor's scientific economics. It was not merely that the Prime Minister was an expert in economic science in the sense of having absorbed the learning of other people; he was an original thinker on the subject. During the short time the right hon. Gentleman was Chancellor of the Exchequer, he had laid down a completely new system of economics. It was remarkable for many things, but chiefly so for its extreme flexibility. In 1906 he told the House he was going to take a penny off the tea duty, because, of all reductions, that was one which must inevitably accrue at once to the benefit of the consumer. In 1907 he told them he could not do that, because it was a reduction which would not reach the consumer. Then there was the sugar duty. Last year the right hon. Gentleman told them there was no use in taking off part of that duty because it could not possibly benefit the consumer. This year he told them that, after further examination, he believed the whole of the reduction would reach the consumer. That was a great advantage to any Chancellor of the Exchequer, but it was not exactly the science of economics. It was the economics of the politician. No doubt all sections in the House would like to see the sugar duty reduced, but on one condition—namely, that they were satisfied that something more objectionable would not be substituted. He admitted that the duty was open to many great disadvantages, but it was easy to exaggerate them. For instance, it had been claimed that, because sugar was the raw material of some industries, it therefore suffered on account of the duty. He could not see how trades which used sugar suffered in any degree from the duty except to the extent to which the consumption of its products was diminished through the duty. The complaint he made of the action of the Government on all these questions was that they would not look at them on their merits, but settled them on what they thought to be the right theory. He would take as an illustration the coal duty. As a matter of fact, when that duty was imposed he was not in favour of it, and he helped a little in getting some concessions at that time; but it seemed to him that the arguments that could be adduced against the imposition of the duty were not nearly so strong when the duty had been imposed and the trade had become accustomed to it. The time to take off the duty was when it was evident it was imposing a severe burden on the coal trade; but during the whole time the Government had been in office the trade had been unusually flourishing, and the price of coal unusually high. When other taxation was pressing so heavily on the country it was the height of folly to take off a duty which was not felt in the trade, and when the effect of so doing was inevitably to raise the price of coal both to the home consumer and the other industries dependent on it. Precisely the same thing, to some extent, applied to sugar. As it happened, since this Government had come into office nearly every article of general consumption had risen to very high prices. Sugar now, owing, as he thought, partly to the Convention which the Government did so much to oppose in Opposition and which they were now doing all they could, so far as they could without breaking their pledges to their followers, to retain, was not at a high price. Therefore, the duty was not pressing heavily on the trade now, and whether or not they ought to be in favour of the duty depended altogether on what was the substitute the Government intended to give them. That was the crucial point of the Budget. The Prime Minister had not faced the new obligations he imposed on the country, but he had made two suggestions as to the way in which they might be met. The first was that there should be a diminution in the contribution to the reduction of the Debt. He did not say that it might not be possible to reduce that contribution in certain circumstances, but that was a change which the House of Commons ought to be very slow to sanction, and to sanction only with very great cause. What was the ground on which the Prime Minister suggested that a change might be made? He said that by the end of the year the deadweight Debt would be reduced to the level at which it stood in 1889. He did not think that was quite accurate. As a matter of fact the right hon. Gentleman's obligations would be £60,000,000 greater than in 1889. But suppose that account was drawn upon even to the extent and on the same basis that it was left by Mr. Goschen. Even then the surplus was not large. It was true the reduction estimated in the Debt this year was £15,000,000, but of that £4,000,000 represented last year's surplus, which would not be available next year. The amount available would be only £11,000,000, and the reduction by Mr. Goschen was between £7,000,000 and £8,000,000. Even on that basis there would be only a margin of £3,000,000. But he maintained that the conditions now were very different from those of twenty years ago. It was admitted on all sides that the financial credit of a country was one of the great factors on which success in war must depend. The importance was relative to that of the country with whom the struggle was conducted. It would be admitted that the relative wealth of this country was not what it was twenty years ago; it was matter of general opinion that London was not now the centre of the world's money market as it was then, [Cries of "No, no."] It was generally admitted, and in any case it was the fact. [Cries of "No, no."] The test of credit was not, of course, the amount of debt, but the price at which national securities stood. He had tried to find the relative prices of British and German securities twenty years ago, but had not been able to go further back than 1894. In that year the lowest price quoted for German 3 per cents. was 85, and the price now was 81, a fall of 4. In the same year the lowest price for Consols was 97½, and now it was 86½. [An HON. MEMBER: They are 2½ per cent.] He had not kept that out of view. Although our price was still better than Germany's relatively, our position was not so good as it was in 1894. Another test of strength was the taxable resources of a country. It was surprising to hear the Prime Minister in a complacent manner speak of Germany borrowing while we paid off debt. What were the facts? The direct taxation per head of the German population, taxation of individual States as well as Imperial, was 8s. as against 18s. in the United Kingdom. Indirect taxation was in Germany 26s. per head, and in the United Kingdom 48s. per head of the population. Taking the two sources together, the burden on the people of this country was twice as heavy. He had not the figures of local taxation, but everybody knew that the rates levied in the United Kingdom were enormously heavier than the rates in Germany. It was evident, then, that the untaxed resources of Germany were greater than ours. [AN HON. MEMBER: Why do they borrow?] Germany had one disadvantage from a financial point of view as compared with this country—the unification of Germany was not complete. But that disadvantage would disappear under strain of war and stress of national danger; the resources were there, and if required would be available to meet the national needs. Even of that advantage which we enjoyed there were hon. Gentlemen on the Ministerial benches, who would deprive us, by giving Home Rule to Ireland, and, for all he knew, to Scotland and Wales. The facts and figures showed that a great change had taken place since 1889, and the amount of reduction adequate then was not adequate now, and we ought to persevere more than the Prime Minister suggested in still further reducing the National Debt. The Prime Minister had made another suggestion for meeting these liabilities which he thought was much more alarming than the prospect of raiding the Sinking Fund. There was a difference on all questions of social reform between those who sat around him and those who sat below the gangway. The hon. Member for Blackburn had proposed that the needs of the poorer class should be supplied entirely by the taxation of the richer class. The Unionist Party also desired to see the condition of the people improved, but in their view the difference between socialism and social reform was simply the way in which it was to be paid for. They proposed that it should be paid for by all classes in proportion to their means; hon. Members below the gangway proposed that the money should be raised from one class entirely for the benefit of another class. That was what they objected to. The attack made on the Government by the hon. Member for Blackburn was entirely unjustified. In his opinion, by this Budget, and by the speech of the Prime Minister, in which he suggested that the increased revenue should be raised from the death duties and the income-tax, the Government had definitely placed themselves on the side of hon. Gentlemen below the gangway. From their point of view they were perfectly right. There was no other means by which they could get their revenue. The speech of the Prime Minister clearly indicated that even that source of revenue was not without its limits. He pointed out that by making the income-tax a little lower there had been a great increase in its produce, but evidently the reverse effect might happen. If they strained any particular form of taxation to the point at which it seemed to be unjust and confiscation, they would dry up the source of revenue. He was not going to answer the speech of the hon. Member for Blackburn now. The time must come when speeches of that kind would have to be met and answered, but they had not got that length yet. He would, however, point out that the idea that there was an inexhaustible fund available for the benefit of the working class was a sheer delusion. It all rested on a fundamental fallacy. Hon. Members who held that view did not take into account the effect which individualities had in the creation of wealth. The Duke of Wellington once said that the presence of Napoleon on the battlefield was worth 100,000 men. The difference between individuals had to be taken into account in industry as well as in war. The Government had thrown themselves definitely on the side of hon. Gentlemen below the gangway. That was a clear issue and he was not sorry that it had been raised. The issue which would be decided at the next election was whether the increased fund for meeting these social reforms should be raised by confiscation or by a change in our fiscal policy.

MR. LLOYD-GEORGE

The hon. Member who has just sat down indulged in what we always expect now from hon. Gentlemen opposite—a great eulogy of Germany. German finance, German taxation, German old-age pensions are all better than our own. But there was one thing that he did not take the trouble to explain—why Germany, who has been experimenting for years with old-age pensions, is only able to find £2,500,000, whereas we are finding £6,000,000. [OPPOSITION cries of "No."] If hon. Members will just wait I will point out that we are going to find £6,000,000. Germany is borrowing £10,000,000 a year for shipbuilding, whereas we are building our ships out of revenue. [OPPOSITION cries of "We are not building them yet."] Our Fleet is as three or four to one compared with the German Fleet. The hon. Member has not thought it necessary to explain to the House what the distinction is. They have got in Germany the perfect system which the hon. Gentleman looks forward to, and yet they are borrowing for the current expenditure of the year. The hon. Gentleman endeavoured to explain that by saying it had something to do with their Imperial system. Surely if Germany wants to raise this money there is nothing in her system to prevent her doing so if her Legislature wishes it. There is no limit to their powers. But before I accept the hon. Gentleman's figures for Germany I should like to ask whether he has taken into account that a good deal of expenditure there, as upon education, for instance, is State expenditure instead of Imperial expenditure. Has he taken that into account?

MR. BONAR LAW

Yes. I said distinctly that the taxation included not only Imperial taxation, but State taxation.

MR. LLOYD-GEORGE

Then all I can say is that that is not the information I have got in regard to Germany, and I shall have another opportunity of scrutinising his figures. At the beginning of his speech the hon. Member complained that every speech made in the course of this debate had been a speech made rather in criticism than in defence of the Budget. His experience of Parliamentary debates will lead him to the same conclusion as my own—namely, that those in favour of a proposition put forward by the Government do not think it necessary always to get up one after another just to say that they approve of it. On the contrary, the more they approve of it the less they say, because they want to get it through. It is only when he has a criticism to offer that a Member gets up. If the hon. Gentleman thinks that this Budget does not command the approval and support of hon. Members on this side of the House he can put the question to the test in a very effective way. I wonder whether he will care to do it! After his speech I am at a loss to know why he objects to he Budget. Does he object to old-age pensions? No; then he approves of that part of the Budget. But he suggested that this was one of the numerous promises at the last election. The hon. Member will remember that another Government were lavish in promises, and their promises included old-age pensions. That was ten years ago. The one difference, or rather one of the differences, between that Government and the present is that whereas this Government has made a colossal effort to redeem its promise, the former Government did not redeem its promise up to the very hour of its demise. It left the promise, on the strength of which it secured the suffrages of the majority of the people of this country, to be redeemed by us.

MR. AUSTEN CHAMBERLAIN

The right hon. Gentleman persists in saying that the late Government promised old-age pensions. That is completely unjustified.

MR. LLOYD-GEORGE

I should have thought the right hon. Gentleman would have been the very last to deny it. He might have left it to some of his colleagues, because if any part of the country is more responsible for that promise than another it is the neighbourhood of Birmingham.

MR. AUSTEN CHAMBERLAIN

It was just because I supposed the Chancellor of the Exchequer referred to my right hon. friend the Member for West Birmingham that I took the opportunity of denying his statement. My right hon. friend himself denied the statement in this House and justified his denial in the very speech to which the Prime Minister has referred.

MR. LLOYD-GEORGE

I should be sorry to say a word in the absence of the right hon. Gentleman the Member for West Birmingham, and, therefore, I will pass to the promise made by the right km, Gentleman the Leader of the Opposition. He went to the electors of East Manchester with a card: "Vote for Balfour and Old-Age Pensions." If that is not a definite promise by a statesman of his position, I, do not know what a promise means. At this time of day I should not have thought it was possible to challenge that. But the right hon. Gentleman opposite says it was not a promise. These refutations are coming ten years too late. The hon. Member who has just spoken says this is merely an electioneering dodge to stop the rot in the constituencies. I think it has done a good deal to stop the rot that is talked in the constituencies about free trade finance having been exhausted, and I think hon. and right hon. Gentlemen are beginning to discover that. A second objection to this Budget is that we are not making provision for the payment of Debt.

MR. BONAR LAW

No, I did not say that.

MR. LLOYD-GEORGE

Let us see what the position is. In the course of the two years we have been in office we have made provision, including the arrangements of the present financial year, for wiping off £41,000,000 of the national liabilities, and when I use that word I am including all the liabilities of the nation—not merely the permanent Debt, but all the other liabilities for increasing the liabilities of the nation. And that is rather an important distinction. Because the late Government used to make provision at the beginning of the year for a liberal Sinking Fund to wipe off £6,000,000 or £7,000,000 of the National Debt, and then proceeded to increase the liabilities. In one year they started with a provision of £11,000,000 or£12,000,000 for payment of Debt, and at the end of the year, having raised money for other purposes, they were £2,000,000 or £3,000,000 to the bad. The present Prime Minister has made provision for wiping off £41,000,000 of the national liabilities of the country in three years. What provision did the late Government make for wiping off Debt during the ten years they were in office? I am not referring to the war. I give up the war. That was a little accident. I give them credit for the special provision they made during their last three years of office for the purpose of reducing the war debt. During the whole of their ten years of office they only reduced the National Debt by £22,000,000; during our three years we have wiped off nearly twice as much. The right hon. Member for East Worcestershire referred to the raiding of the Sinking Fund by previous Chancellors of the Exchequer. Very wisely he avoided the precedent of 1899, but I cannot allow him to forget 1899. At that time there was no prospect of war. The income-tax was fairly high—it had gone up from 6d. to 8d. in a time of peace. The Sinking Fund was reduced, not because Consols were high, but because he did not want to increase the taxes of the country. In the words of the then Chancellor of the Exchequer he did not feel justified in increasing the taxation. The then Chancellor of the Exchequer said— If I do not reduce the amount applicable to the reduction of Debt I shall have to impose taxation both direct and indirect. The reason he assigned for the raiding of the Sinking Fund was the avoidance of taxation. There was no special provision for social reform, and there was no justification except that he did not want to increase the taxation of the country. Having raided the Sinking Fund to the extent of £2,000,000, and having already reduced it by £3,000,000, Mr. Goschen proceeded to borrow something like £2,500,000 to £3,000,000 altogether. That is a proceeding which I commend to the right hon. Gentleman the next time he speaks upon the Budget. I should really like to have his defence upon it. Now the right hon. Gentleman said we have been exceptionally lucky, and he rather suggested that the fact of Consols being so low is really attributable to the present Government, and there is a great financial party on the other side who seem to accept that suggestion. What happened? The price of Consols had been 106 in 1899.

SIR F. BANBURY (City of London)

One hundred and eleven.

MR. LLOYD-GEORGE

I am taking the figure the year before the war, when it was a little over 106. When the right hon. Gentleman left office it had come down from 111 to eighty-nine—that is, twenty-two points. Consols are now eighty-seven.

SIR F. BANBURY

Eighty-six.

MR. LLOYD-GEORGE

Very well, say eighty-six. They dropped twenty-two points under the finance of the right hon. Gentleman and his predecessors; they have dropped three points since. ["Oh, oh."] I am answering the point made by the right hon. Gentleman. He said that not even the finance of the late Government could have reduced Consols to the present point. I am pointing out that it was the finance of the late Government that did depress Consols. The hon. Member for Preston and some Members on the other side appealed to me not to raid the Sinking Fund. Well, I agree that it is a serious responsibility for any Chancellor of the Exchequer not to make proper provision for the reduction of Debt. But my hon. friend must bear in mind that during the three years of the present Government provision has been made which is absolutely unexampled for the reduction of Debt, although attempts have been made on the other side to prove that it is purely an accident. I know. Those accidents always happen when Liberal Governments are in power. I was looking through the reduction of the Debt this morning, and I found two or three very good years, 1893–4–5—purely an accident. Mr. Gladstone reduced the Debt by huge sums of money—I suppose that was an accident. In the last three years of the right hon. Gentleman opposite the net reduction of the war debt was something like £9,000,000. The reduction in three years under a Liberal Government is £41,000,000—purely an accident. I think there is a justification for a Liberal Government that can bring such fortunate accidents to the credit of the country. But I want my hon. friends to bear that in mind when we consider the finance of next year. This is not an opportunity for me to expound the Budget of next year, and I cannot go into a profit and loss account and tell the House what I propose to do. It would be unwise, even if I had made up my mind. What is the good of adding another year of torture to the victims of next year? This much I will say, however, that a criticism has been passed upon the Prime Minister's Budget which, I think, is an unfair one—namely, that he has provided for a liability of £6,000,000 without at the same time making any provision for meeting it. How could he? It is not a liability for this year, but for next year. He has provided for all the liability which falls in this year. It is true that next year you have a liability of six, and possibly seven, millions—for it is very largely conjectural. Very well, it will be for the Chancellor of the Exchequer for the time being to meet that. The hon. Member said it was absolutely without precedent to bring in further liability and not to make any provision for meeting it. It would be still more without precedent for the Chancellor of the Exchequer to deliver not merely his own Budget, but the Budget of his successor next year, and indicate the taxes he would put on. But this I can assure the hon. Member and the House, that the resources of civilisation are not yet exhausted, and the resources of free trade finance are not exhausted. Another point made by the right hon. Gentleman was that we had not redeemed the pledges of reduced expenditure and economy. My recollection is that we gave pledges not to reduce expenditure, but only to reduce expenditure upon armaments. I do not think it is possible for you to give general pledges of reduced expenditure, and I will tell the hon. Member why. We certainly contemplated old-age pensions, an improved educational system, and social reform generally, and we could not possibly have given pledges for a reduced expenditure when we contemplated social reform which involved increased expenditure. What we did promise—and it is a promise which we have gone a certain way to redeem, but not as far as I should like, not as far as I hope we shall travel along that road—what we did promise was, I think, to do our best to reduce the Army and Navy expenditure. And we have done it. In the last few years the money which the late Government used to borrow we have put on the current expenditure of the year. The Army and Navy expenditure has been reduced by £5,000,000 or £6,000,000. That is a very considerable reduction to be effected in two or three years, and I hope to see further reductions. We are therefore doing our best to redeem the promises that we gave in respect of economy. Where do the increases arise? In the Post Office, which is largely automatic and productive; and I hope under the able administration of my right hon. friend there will be more economy as well as more reproduction. Then there is an increase in the Education Vote, and an increase this year of £1,500,000 in respect of old-age pensions. But these are increases we have all contemplated, and in respect of which we had given pledges, and, therefore, as far as that criticism is concerned it has no basis at all in fact. The hon. Member for Preston was very severe as to the borrowing of money for telegraphs and telephones and he appealed to our experience in buying furniture on the hire system. The only thing I have bought on the hire system is the "Encyclopædia Britannica." That was my experience of the hire system, and it has justified completely the criticism of my hon. friend. It is a bad financial system, and induces you to buy things which in reality you are far better without. My hon. friend reminded me that borrowing on the telegraphs and the telephones is not a new system. There have been three Bills and we have always borrowed for the telegraphs. After all, the telegraph system is productive, and there is a profit made out of it. It is, therefore, in a different category from borrowing for the purposes of the Army and Navy. The local authorities do it; in a business establishment you do it, and any system which is conducted on pure business principles involves the borrowing of money on things like the telegraphs and the telephones. But I do not in the slightest degree underrate the seriousness of my hon. friend's criticism, and I will bear it in mind. I do not propose to enter into any length on the criticisms of the old-age pension scheme at this stage. The Bill will be, I hope, circulated in two or three days, and the Second Reading stage of the measure will be the proper opportunity to raise detailed criticism upon it. The right hon. Gentleman said that we did wisely to start the age at seventy; but he pleaded in the first instance for a thrift test. That question was carefully considered by the Government, and we came to the conclusion after very mature consideration that it was a very difficult test to apply, unless you have a contributory scheme. If you have a contributory scheme, you have a test ready made. But we came to the conclusion that a contributory scheme would not work in this country—because, after all, this country is not like Germany. The conditions are quite different; labour is much more mobile here, and there are other reasons which go to the root of the difficulty. But once you dismiss a contributory system from your minds, it is very difficult to apply a thrift test. It is bound to become arbitrary. Who is to administer it? Who is to sit in judgment upon a man as to whether he has been thrifty or improvident? Is it a magistrate? Then the whole community are at the mercy of the local Bench, or at least they will think so. The right hon. Gentleman said, Are you really going to pension a drunkard, the man who has been drunk all his life? Well, if he has been drunk all his life the chance of his living to seventy years is a very poor one, and, from the point of view of a contributory system, I know of no man who has contributed more lavishly to the national revenue. Therefore, I think that rather from that point of view the right hon. Gentleman might put in a word for him. But really that is a very exceptional ease. The kind of man who has got to that stage is as a rule the man you will find in the workhouse. The right hon. Gentleman put in a very strong, pathetic, and eloquent appeal for old couples. I have only one word to say to criticism of the kind which involves increased expenditure. I want the House to remember that this case of old couples will only be one out of several cases. There are many appeals which can be made to the Government to apply their money to other hard cases, but I want the House to remember that this is a beginning; it is an experiment. The expenditure will be at the least £6,000,000. In my judgment it will be more; that is my firm conviction. Not, perhaps, in the first year, but the second year I am certain it will be more unless I am very much mistaken, and I have gone into the figures very carefully. I therefore appeal to the House not, at the beginning at any rate, unduly to extend the area. The case of the old couple is not nearly as hard as the right hon. Gentleman seems to imagine. The case of the old man or the old woman who is alone is that, undoubtedly, of a man or woman who is probably being maintained by relatives. That is not the case with the old couple. It is a case, as a rule, of old people living together in a cottage, not, as a rule, maintained by their relatives. There rent comes in as an element, and after all rent is the same for a couple as for one. But if the House presses too hard for the extension of the scheme, and cuts out all these limitations, it will go far beyond the revenue which the Government can possibly provide, at any rate in the near future. This is the only answer I can make to these hard cases that are pressed upon us; but I do protest against the word "penalising" used by the right hon. Gentleman opposite. How can he use a word of that kind when, at any rate, we are providing better for these old couples than anybody has done before? At present their lot is to receive half-a-crown or 3s. a week, accompanied frequently by a loaf of bread. We, at any rate, are offering to them 7s. 6d. a week. That is not penalising them; it is improving their lot by 100 per cent.; and it really is not fair that, when we have put forward a scheme which will cost from £6,000,000 to £7,000,000 a year to provide for people over seventy years of age, we should be charged with penalising them and treating them unfairly, harshly, and cruelly. I do not think it is fair to a Government that brings forward proposals like these. With another criticism I am rather disposed to sympathise. I think the right hon. Gentleman said that in Germany they make provision for the infirm and sick, and he seemed to attach more importance to that than to the direct provision for old age. I am disposed to agree with him. There may, I think, be many cases of young people who have broken down with family cares, which are much harder than even cases of old people; and I hope that in the future the Government—whether this Government or some other, I do not know—will take cases of that kind into account. At the present moment sufficient unto us is it to provide £6,000,000 or £7,000,000 for old-age pensions. I now come to the criticisms advanced by the hon. Member for Blackburn. His speech divided itself into two parts. The first part was rather too much flavoured with vinegar, and I do not think he helped the subject forward by the undue acridity of his criticisms upon our scheme. After all, we have undertaken to find £6,000,000 for old-age pensions; we are reducing the burden of taxation upon the poorer classes by £3,500,000—that is, we are undertaking to face the loss of something like £10,000,000 in the direction which the hon. Member desires us to travel. The hon. Member evidently thinks that is a case upon which to make an acrimonious and rather sour attack on the Government. Sourness and Socialism are really not necessarily concomitants. In the second part of his speech he made many suggestions which will be valuable, no doubt, to future Chancellors of the Exchequer as to methods of increasing revenue. For the moment I think we can do with a great deal less, and I cannot usefully or instructively, at the present stage, embark upon a discussion of his suggestions in regard to the death duties, super tax, and matters of that kind, but they are all suggestions which I shall have to consider very carefully in the course of the year and I shall take note of the very valuable suggestions he has made with regard to the method of raising revenue. My hon. friend the Member for Bolton made a very earnest appeal to me to put on the coal tax. I know that the usual criticism of those in favour of the coal tax is based on Cardiff coal. Well, Welsh coal, like everything else Welsh, is of most exceptional quality, and therefore it can very readily command a market. But, after all, that does not apply to coal in other parts of the United Kingdom, and the effect of putting an export tax on some parts of the kingdom was practically to exclude coal of the second qualities from the markets where there was was any competition. Cardiff had to compete with Westphalian and French coal, so that the effect was felt on the cheaper class of even Cardiff coal. In some parts of Monmouthshire it certainly had a detrimental effect on the market. Scotland suffered very considerably, and the same thing applies to Northumberland and the Midlands. Therefore it is not fair to quote Cardiff smokeless coal as if that were really the test. However, it is beyond the realm of practical politics, and I doubt if the hon. Member would find a seconder for his proposition, not even in the hon. Member for Preston, who is generally engaged in these forlorn hopes. A very weighty criticism was made by the right hon. Member for Rushcliffe, and I regret that there was not a larger attendance to hear him, especially of my colleagues, because it was addressed rather to them than to the House of Commons. He made a very strong appeal for economy, especially in military armaments. It was a very useful appeal, and I hope that it will carry weight in the proper quarters. A good deal has been done in the last two or three years, and I do not despair of more being accomplished in the coming year. When so much has to be done in the way of social reform—and here I agree absolutely with the hon. Member for Blackburn as to the poverty, distress, and misery prevailing not merely in this country, but throughout the whole of Europe and in all the old countries—it does seem a piece of gigantic folly that we should be spending hundreds of millions a year on machinery for blowing each other's brains out. One of the first things told me at the Treasury was that Lord Randolph Churchill resigned because the Army and Navy expenditure was likely to aggregate £31,000,000, and I was told, "The first thing you must do is to find £60,000,000." That is an increase of £30,000,000 in twenty years. I do not know if we get any advantage from it. [Cries of "No."] It is simply this mad competition for which we are just as responsible as any other country in the world. I am not sure, really, that in many respects we have not forced the pace, especially in the matter of shipbuilding. The result is that we are helping to frighten other countries and there is an undue nervousness of each other which is quite as responsible for the increase in armaments as anything else—this distrust, this fear, and this idea that if one country has anything, other countries are preparing to seize it. We think that Germany is preparing to attack us and Germany thinks that we are preparing to attack her. And the result is that the Press in both countries is doing its very best to work up this feeling of panic. Within the few years in the compass of my Parliamentary life, we have increased the expenditure of this country by what would be more than sufficient to provide an old-age pension for every man over sixty-five and to provide a fund for the sick and unemployed as well. Now I think really it is a very serious matter, and I agree there absolutely with the right hon. Member for the Rushcliffe Division. But the House of Commons is just as responsible for this as the Government. I have sat during many Army and Navy debates in this House, and what is the experience of every Minister? The bulk of the people who are interested in the finances of the country are not present, but you get men who are specially interested in some branch of the Services, and each gets up to urge some fresh expenditure, and Ministers who are connected with the Treasury find that there is no one present as a friend of economy. The result is that inevitably expenditure goes up. The House of Commons itself ought to take a matter of this kind in hand. If they do not—and here I agree absolutely with the hon. Member for Dulwich—there are only two ways of providing for social reform. One is reducing expenditure, the other is increasing taxation. If you do not reduce expenditure, you must inevitably provide increased taxation, and if increased taxation has to be provided, and I have some hopes that it will not be necessary, I do not agree with the criticisms of hon. Gentlemen opposite that the resources of free trade finance are at an end. The wealth of this country is enormous. It is not merely great, but it is growing at a gigantic pace, and I do not think it is too much to expect the more favoured part of the community who have got riches so great that they have really to spend a good part of their time in thinking how to spend them, to make a substantial contribution to improve the lot of the poorer members of the same community to which they belong, because it is their interest after all that they should not belong to a country where there is so much poverty and distress side by side with gigiantic wealth.

MR. CHAPLIN (Surrey, Wimbledon)

I desire to make one or two observations in relation to old-age pensions. I have nothing whatever to add to the criticism offered by my right hon. friend who spoke this afternoon generally on the Budget, except to say that I think the right hon. Gentleman opposite has entirely failed to answer his criticism in any way whatever. It is quite true that the right hon. Gentleman spoke of what had been accomplished by the Government in relation to the reduction of Debt, but he cannot deny the enormous commitments of the present Government—the great liabilities to which they have been pledged and the absolute lack of any provision whatever in this Budget to meet them. That was the gravamen of the of the charge of my right hon. friend. It is that which constitutes what he describes as reckless finance, and I have not heard a single word in the speech of the Chancellor of the Exchequer to disprove it, although we have had his assurance for what it may be worth that the resources of free trade finance are not yet exhausted. If I may turn for a moment to the question of old-age pensions, I shall begin by noticing the extraordinary speech which we heard from the hon. Member for Blackburn. As I understood his complaint, it was not that the scheme of the Government would not do something to help the poorer classes, but that it would not make a single rich man in the country poorer than he is at the present moment. That appears to be the charge of the hon. Gentleman against the scheme of the Government. I thought his charge consistent with the mode in which he suggested that the pensions should be paid for. How were they to be paid for according to the hon. Member? By a tax of 10 per cent. imposed on 16,000 people in this country out of 42,000,000 with incomes amounting to what he estimated at £200,000,000 a year. The hon. Member seems to think that that would be a perfectly equitable mode of dealing with this question. Such is the policy—I think I might almost call it the morality—of a representative Member of the Labour Party in a country where it has hitherto been our boast—and I hope it will continue to be—that equal and impartial justice shall at least be administered to all. Although that is the view of the hon. Member, I shall be very loth to believe that in the statements he made he represents the working classes of the country. The Chancellor of the Exchequer said—and I agree with him—that there would be a far better opportunity of dealing with the question of old-age pensions in detail when we have the Bill before us, but, like my right hon. friend, I am greatly disappointed that the question of contributory pensions has been ruled out altogether by the Government. I am more sorry even for something else. The right hon. Gentleman has discovered—it is a recent discovery on his part—that the question of thrift is so difficult that it is almost impossible to be dealt with. I had the advantage of serving on a Committee in 1899 with the right hon. Gentleman, and I am going to remind him of a paragraph which has been quoted already this afternoon bearing directly on this question. I do so because I hope before we come to consider the Bill itself he will be able possibly to reconsider the judgment he has passed on that part of the question, and to go back to the older, and what I think the better, opinion expressed in the paragraph. In paragraph 49 of the Report of the Committee there occurs this passage— In dealing with this question there are two considerations which we think should always be borne in mind. One is the painful position and of hardship of many of the poor who are deserving but who cannot help them selves and who are relegated in their closing years either to inadequate out-door relief, or still more distasteful shelter in the workhouse. The other is the marked development in many of the poorer classes to make provision for themselves, and the problem to be solved is how to reconcile two different objects which may appear to be conflicting. In other words, how to devise a means of making kinder and more humane provision for the one class, without doing anything to discourage the laudable efforts of the other. The Committee laid down the problem in those words. They go on to say— We hope and we believe that that may be done by the proposals which we make. What were these proposals? One of the conditions of the receipt of a pension was this— That the claimant has endeavoured to the best of his ability by his industry, or by the exercise of reasonable providence to make provision for himself and those immediately dependent upon him; and further, with reference to the exercise of reasonable providence, we think that the authorities should be bound to take into consideration how far it has been shown either by membership of a benefit society over a period of years, or by the endeavour of the applicant to make some provision for his own support by means of investments in some other definite form of thrift. There was no difficulty about it in those days, for the first two paragraphs were unanimously agreed to by the Committee without any division whatever. The whole Committee had no doubt about it; and I do not think it is a sufficient explanation that the right hon. Gentleman should, after a departure from his old position, only tell the House of Commons that the test of thrift is found exceedingly difficult. It is not more difficult to-day than it was a few years ago, and I expect—we are all entitled to expect—that we shall receive some better reason and explanation of this complete departure by the right hon. Gentleman from his own report. One or two other words and I am done. The question of character, which was one of the four categories into which the conditions were laid down to qualify for a pension have been very lightly dealt with. On that question the Prime Minister said: "The less said about it the better." We have heard nothing more from the right hon. Gentleman. I asked this question at the close of the debate on the Budget, because I thought it was an admirable illustration of the mistake the Government were making. I repeat the question again, the more so because it has been raised by my right hon. friend and a most unsatisfactory answer has been given. Here you call upon the brewers to make a most unheard of sacrifice in order to diminish drunkenness in the country. I put the question to the Prime Minister and I repeat it to the Chancellor of the Exchequer. If you are really desirous of diminishing drunkenness in this country, do you or do you not mean to give to a man who is notorious for his habits of drinking a pension in order to enable him to drink more than he was able to do before? That is a question which has to be answered in the course of these debates, and I am sorry that the right hon. Gentleman has not taken the opportunity of dealing with it to-night. In regard to this question of ascertaining character and the difficulty of doing it, the right hon. Gentleman must remember—I could read to him paragraphs on that point from the Report to which he has agreed and nothing has occurred to change people's opinion since then—the right hon. Gentleman forgets that there have been vast numbers of old-age pensions—[Ironical MINISTERIAL cheers]—given by the Charity Commissioners—[MINISTERIAL cries of "By the State."] I gather to the extent of nearly a million at the present time. The Charity Commissioners were examined before this Committee and they were unanimous in saying that there was not the slightest difficulty in the world in ascertaining the character and repute of those receiving pensions, and all worked as smoothly as possible. A good deal has been said by the Prime Minister with regard to old-age pensions in New Zealand. It is made a special condition there that the applicants must prove that they have been sober for five years before they are entitled to a pension. There appears to be no difficulty on that point in New Zealand. Here, in England, we have a test of thrift, of character, of good conduct in the past, and, as in New Zealand, it has been regularly applied for years without the slightest difficulty. The only reason given by the Chancellor of the Exchequer for this new and entire departure from his own proposals is that it is difficult. I hope before the debates are concluded we shall have a better explanation than that.

MR. GUEST (Cardiff District)

said he had no desire to delay the Committee coming to a division. He had not had the opportunity of listening to the whole debate, but judging by the speeches he had heard from the Opposition side of the House, the main difficulty in regard to the Budget presented by the Prime Minister was that the present Chancellor of the Exchequer had a large commitment which he was quite unable to meet, and the various arrangements which had been made as to the rate of the Sinking Fund. The Debt charge at the present time was £28,000,000 and the total net liability of the State £696,000,000. In 1875, when Sir Stafford Northcote negotiated his Budget, the total State liability was £769,000,000, nearly £75,000,000 more than the present Debt. The provision for reduction of Debt which Sir Stafford Northcote thought necessary in that year was £28,000,000. But at that time the State was paying 3 per cent. instead of the 2½ per cent. we paid now; therefore that £28,000,000 represented no larger sum than would at the present time be represented by £25,000,000. The next comparison was that to be drawn between the present year and 1899, when Sir M. Hicks Beach was Chancellor of the Exchequer. The total net liability at that time was £634,000,000 and Sir M. 'Hicks Beach thought £23,000,000 a year was sufficient to allocate for the reduction of Debt. In 1899 Consols stood at £111, whilst to-day they were at £86. That £23,000,000, therefore, represented a reduction far less than would be represented by the same amount at the present time. A further comparison in which he had great faith was that between the year 1903 and the present year. In 1903 the late Lord (then Mr.) Ritchie was Chancellor of the Exchequer, and the Debt had risen to £790,000,000 owing to the charge incurred for the war. Mr. Ritchie thought it necessary to increase the debt charge to £27,000,000 and at the time he made that change he pointed out that the amount he proposed to allocate was sufficient because it was capable of paying off the entire Debt in fifty years. If they compared the £790,000,000 of 1903 with the £696,000,000 of the present year it was perfectly obvious that if £27,000,000 was enough to pay the former in fifty years the £28,000,000 now devoted to the Sinking Fund would pay off a smaller Debt in a much shorter time. Then it was to be remembered that the whole of the Debt was not held by the public, and therefore there was a portion which it was not within the range of the Chancellor of the Exchequer to purchase. A certain proportion was held by public departments. In 1899 public departments held £162,000,000, leaving only £358,000,000 in the hands of the public. It had been the recognised principle of all Chancellors of the Exchequer that the sum set aside for the reduction of Debt should be in a definite proportion not to the whole of the Debt, but to that proportion which could be purchased in the market. Mr. Ritchie said that his figure was capable of reducing the whole of the National Debt in fifty years. If so, the proportion that could be purchased in the market would be reduced in a shorter period. He merely gave these figures because his right hon. friend the Chancellor of the Exchequer had been challenged by hon. and right hon. Gentlemen opposite. It had been pointed out by them that his right hon. friend had been committed to the principle of old-age pensions, and that no provision had been made to meet that charge. But if he had made his point clear it would be seen that the Chancellor of the Exchequer would be more than justified on all previous precedents in reducing the Debt charge from £28,000,000 to £24,000,000. Without going to the best of all precedents the right hon. Gentleman had £4,000,000 which he could take from the Debt charge without risking the national credit or sacrificing the interest on the Debt. If that were true it put a different complexion on the proposal of the Prime Minister. The right hon. Gentleman had taken £1,200,000 for this purpose, the Chancellor of the Exchequer had another £4,000,000 which he was entitled to take from the Debt charge, making in all £5,200,000. When they considered that, together with the automatic increase from taxation which had always since he had been in the House amounted to £2,000,000, it must be that the Prime Minister had left his successor ample means to meet that charge. They were told by hon. and right hon. Gentlemen opposite that they came into power on economy and reduction of expenditure, and since the present Government had been in office they had increased the expenditure. Let them look at the two figures presented to the House by the Prime Minister with regard to the expenditure of this year and last. The increase was mainly due to two heads. One was the Post Office services and the other was the Navy. With regard to the Post Office services, as everybody knew, the increase under that head was not by any means wholly due to an increase in the net expenditure of the year. During the time he had been in the House the expenditure of the Post Office had increased, but the net receipts had increased also. The other item, the Navy, was surely hardly one on which the Opposition would challenge the Government. If there was one thing on which they had insisted more than any other during the course of this session, it was that in their view the Government had entirely starved the Navy. They had pointed out again and again that not only was the existing increase necessary, but that a much larger increase would be necessary in future. That expenditure, as the House knew, was not due to the policy of the Govern- ment. We were conscious of the fact that our rivals had increased their Naval Estimates, and with the concurrence of the whole House the Government had affirmed the principle of maintaining a certain standard of power. We did not wish to embark upon a race in armaments, but at the same time it was, he thought, the view of the majority of the Members that we must indicate our intention of maintaining our position. Therefore, the accusation that they had failed to economise on the services of the Crown was, in this year at any rate, reduced to the two cases of the Post Office and the Navy. The Post Office was largely a matter of investment and business, and in the case of the Navy, if there was any increase, it was with the concurrence of the whole House, and with the advice and at the prompting of hon. Gentlemen opposite. Under those circumstances those two charges levied against the Budget and the Prime Minister by the Opposition had failed. They had not increased the normal expenditure except in the particulars he had mentioned, and they had not laid themselves open to commitments for which due provision had not been made. The Prime Minister had thoroughly considered the whole position. He had produced a Budget which made provision for the aged poor, and he had reduced the taxation of the country on tea and sugar, and, above all, had abolished the coal tax. Long after these debates had ceased to ring in their ears, the Prime Minister would go down to posterity as the most successful, able, and skilful of financiers.

SIR F. BANBURY (City of London)

said he had much pleasure in congratulating the right hon. Gentleman on having at last found a supporter on his own side of the House. He was not at all sure, however, that the right hon. Gentleman had added to the efficacy of the Budget. The right hon. Gentleman had told them that Germany was in a worse position than this country, because Germany was borrowing money. She was borrowing money to build ships, and, he believed, for railways. The right hon. Gentleman must remember, however, that we would like to borrow, but had not been able. We had lent £5,000,000 to the Transvaal, but we had not been able to get the money. We had been obliged to borrow from the Departments short money because we could not issue a loan. The right hon. Gentleman shook his head, but it was a fact. Why had not we borrowed money for the Irish Land Act? If the Government could borrow money in order to complete the purchase of Irish land they would do so. They could not do it. The fact was that Germany could borrow money, and we could not. The argument of the right hon. Gentleman on the financial situation, therefore, fell to the ground. He wished to say a few words on the question of the reduction of Debt. Hon. Members did not seem to be aware that there were two ways of reducing the Debt. One was by the new and the other by the old Sinking Fund. The new Sinking Fund was placed at £28,000,000 by the last Conservative Chancellor of the Exchequer, and a great deal of the reduction of Debt had been owing to that. The remaining reduction of Debt effected was owing to the old Sinking Fund. It was not to the credit of the right hon. Gentleman or his predecessor. He was bound by Statute to devote the surplus under the old Sinking Fund to the reduction of the Debt; but he had occasionally made incursions upon the Sinking Fund. The only contribution the Party opposite had made to the reduction of Debt was £1,500,000 added to the new Sinking Fund last year. The right hon. Gentleman knew as well as he did that that was the case. The Chancellor of the Exchequer passed by without a single word in defence of the attitude he was going to take up on their criticisms on the reduction of the Sinking Fund next year. He would point out to the Committee the difference in the situa- tion between now and in 1899. The deadweight Debt in 1899 was £625,000,000; it was now £696,000,000. Consols, in 1899, stood at 111, and money could be borrowed at 2½ per cent. They now stood at 86, and they could not borrow except by paying 3 per cent. He had had a good deal of experience in the City, and he knew that it used to be said that the proud position in which England stood in reference to her great capacity for providing funds for war was due to the fact that she was in a better position to borrow money than other countries. It was said that although Germany had a great war chest with the money in it this country was in a much better position because we could borrow money more easily. He wished to point out, however, that whereas in the year 1899 we were able to borrow money at 2½ per cent. we could not borrow now at less than 3 per cent. The Chancellor of the Exchequer had to deal with the present state of things no matter which Government was responsible for them, and he had therefore to meet all present liabilities. In addition to the fact that the deadweight Debt was £170,000,000 more than it was ten years ago, no less than £100,000,000 had to be borrowed for the purchase of Irish land. The Sinking Fund had disappeared because they could not now borrow money at the rate which was contemplated when the Bill for the purchase of Irish land was passed. [Cries of "Divide, divide."] Ten years ago the income-tax was 8d. in the £ and now it was 1s. It should not be overlooked that the income-tax was supposed to be a kind of reserve upon which to draw in any sudden emergency, but they had now parted with that reserve altogether, and in spite of that the Chancellor of the Exchequer would find great difficulty next year in making both ends meet. He had pointed out the fallacies of the financial aspect of the Budget of the right hon. Gentleman. In all his financial experience he had never before heard of any sound financier who contemplated the expenditure of over £6,000,000 upon a certain object and only made provision for £1,200,000 to meet it. The proper course for the right hon. Gentleman to have pursued was to have made old-age pensions to begin at once or else have waited until next year and then he could have started the whole scheme upon a sound financial basis. To provide this year only such a small sum towards this great scheme was a financial error. They did not really know where they were going to under this scheme. The cost of old-age pensions might easily become not £6,000,000 or £7,000,000, but even £14,000,000 or £15,000,000, in future years. He was absolutely against old-age pensions, for he did not believe that the country would be able to find the money, and he thought also that they would be demoralising. The only way to provide old-age pensions without demoralising would be upon a contributory basis. To rush wildly into a matter of this kind in the way proposed was foolish finance, and he was sorry that the right hon. Gentleman had not taken a more serious view of the question in his first speech as Chancellor of the Exchequer. He had avoided all the difficult points and made a light and amusing speech which did not, however, touch the real question at issue.

MR. HUNT (Shropshire, Ludlow)

said the Prime Minister had told them that if Germany continued her present naval policy she would have thirteen battleships of the "Dreadnought" type, and we should have only twelve. Consequently we should have to spend next year £5,000,000 or £6,000,000 extra on the Navy. Where was all that extra money to be found? Hon. Gentlemen opposite took the view that there was no chance of war so long as they remained sufficiently peaceful. Past history, however, taught them that the reverse was the case. He happened to know a certain number of German naval officers. [An HON. MEMBER: How many?] He asked them last autumn against whom they were building all those ships, and they replied, "What do you think?" What did hon. Members suppose these German officers said? They replied that they were building this great navy to attack Great Britain in order to take our Colonies and our commerce. [Cries of "Oh, oh."] That at any rate was what the German naval officers said. [Cries of "Name."] Why should they have said it if it was not true? In regard to their naval policy the Government were now living in a fool's paradise, and when an emergency arose it would be too late. The Minister for Agriculture had informed them that the Government could not put a duty on foreign corn, because it was the food of the people. He wished to point out that sugar, tea, coffee and cocoa were also used as the food of the people, but they still put duties on those articles. The Govern-men would not put a duty on hops, because it would help the British agriculturists and British labour, and that was what they called a free trade system. That was the system of taxation which it was claimed would benefit the workers of the country. He could easily show the absurdity of the principle upon which they levied taxes at the present time. A short time ago a farmer pointed out to the Prime Minister how heavily he was being taxed upon all he produced, and how the foreigner was not taxed at all. [Cries of "Shame."] The Prime Minister did not attempt to deny that. That farmer pointed out to the Prime Minister that in a good year he had to pay taxes to the extent of £15 out of every £100 worth of produce on his farm, whereas the foreigner was allowed to send his stuff over here and did not pay a single halfpenny towards the expenses of the country. The British people would not stand a system of that kind much longer. Until they gave British agriculturists fair play it was impossible for agriculture in this country to prosper and they would never be able to get the people back to the land. He knew the argument of the free traders. They said "Oh yes! the foreigner pays taxes in his own country." [Cries of "No."] He believed he was correct in that statement. The foreigner paid taxes for the upkeep of his own country, but he did not pay one farthing towards ours. Was it not a fact that protectionist countries had far more free trade than this country? [Laughter.] Hon. Gentlemen laughed. Germany did not pay a halfpenny towards the upkeep of our country, and yet she had access to our market; absolutely free. We had to pay for the upkeep of our own country in Imperial and local taxation between £250,000,000 and £300,000,000 a year. If we wanted to send anything to Germany we had to pay tariffs at German ports. Did not that mean that we were paying for German government very heavily? The Prime Minister, when Chancellor of the Exchequer, replying to a letter from a correspondent, said— I am desired by the Chancellor of the Exchequer to say that he fully recognises that the national and local taxation of a country in which commodities are produced is an important element in the cost of production. This taxation can, however, operate to the disadvantage of a particular country only if its own taxation is excessive or inequitable as compared with that of other countries. It appears, therefore, to Mr. Asquith that the efforts of reformers should be directed to lessening the burden and adjusting the incidence of national and municipal taxation in this country, rather than seeking to impose on imported articles additional taxation which would be borne in the main not by the foreign producer, but by the home consumer, and, so increase the burden on British industry which it is intended to alleviate. He wished to know what the right hon. Gentleman meant by the additional taxation which would be borne in the main by the home consumer. The average taxation in this country was calculated to amount to about 12 per cent. on all we produce, whether it was agricultural produce or manufactured goods. That was what the industries of this country had to bear at a time when all the protected countries in the world had more free trade than we had. The Chancellor of the Exchequer the other day stated that the taxation per head in this country was 15s. 3d. In Germany it was only 9s. 3d. The German Minister of the Interior said recently that he would like to know who invented the fairy tale that Great Britain was a free trade country; he pointed out that the taxation of Great Britain, which was far more per head of the population than in Germany, was almost all levied on the necessaries of the poor. In Germany, to an enormous extent, taxation was levied on goods which in no way affected the poor. Therefore it was the fact that in this so-called free trade country we were far more heavily taxed than they were in protected Germany. Not only that, but we allowed to come in here from Germany, with the exception of alcohol and tobacco, which were the luxuries of the poor, the whole of the luxuries of the rich, without their paying one halfpenny. We let in all the competing manufactured goods, which would, if made at home, provide our people with an enormous amount of labour and wages. We let in all these things absolutely free, to swamp our markets, driving our manufactures abroad, and preventing our own people from getting regular work and earning regular wages. These were the facts, nobody could deny them. This free trade theory was a very old one, and surely working people must see that under the existing system they were buying foreign labour. They called for foreign goods, but they were really buying foreign labour, for all the fully manufactured goods were almost all foreign labour. Manufactured silks, smart dresses, and motor-cars, all come from abroad. The Home Secretary—he did not know if he was in his place now—appreciated this system. No doubt he, and his brothers, and his sisters, and his uncles, and his aunts—[An HON. MEMBER: They are not Members of this House.]—but they had got their money invested abroad in mills that paid a very high percentage. ["Order."] Surely, for working people, this system was all wrong. ["Divide, divide."] Surely they wanted to take a share in regulating the trade of this country. [Cries of "Divide, divide," and "Speak out."]

THE CHAIRMAN

I must ask hon. Members to be quiet.

MR. HUNT

said that if there was any truth in the free trade theory that imports were paid for by exports, surely we could put a certain amount of duty on their [Cries of "Divide," and "Order"] highly manufactured imports, and so prevent them to a certain extent from coming into this country. That would help us with our manufactures,

and would provide the people of this country with an enormous additional amount of work and wages. That was exactly what Germany was now doing to us. He could show how Germany provided her people with work and wages. During the ten years ending in 1905, Germany took from this country [Cries of "Divide,' and "Order"] £63,000,000 more in gold than we took from her; and if they looked into the German Green-books, they would see that he was right. [Cries of "Divide."] He thanked the House very much indeed for listening to him, and he hoped that Members would look into this question very closely, and would not be tied down to a rotten, out-of-date system, disbelieved in and done away with by the rest of the civilised world.

Question put.

The Committee divided:—Ayes, 230; Noes, 31. (Division List No. 104.)

AYES
Abraham, William (Rhondda)	Cherry, Rt. Hon. R. R.	Gibb, James (Harrow)
Acland, Francis Dyke	Churchill, Rt. Hon. Winston S.	Glen-Coats, Sir T. (Renfrew, W.)
Agnew, George William	Cleland, J. W.	Glover, Thomas
Ainsworth, John Stirling	Clough, William	Goddard, Sir Daniel Ford
Alden, Percy	Cobbold, Felix Thornley	Gooch, George Peabody (Bath)
Allen, A. Acland (Christchurch)	Collins, Stephen (Lambeth)	Greenwood, G. (Peterborough)
Allen, Charles P. (Stroud)	Cooper, G. J.	Guest, Hon. Ivor Churchill
Baker, Sir John (Portsmouth)	Corbett, C. H. (Sussex, E. Grinst'd	Gulland, John W.
Balfour, Robert (Lanark)	Cory, Sir Clifford John	Gurdon, Rt. Hn Sir W. Brampton
Baring, Godfrey (Isle of Wight)	Craig, Herbert J. (Tynemouth)	Gwynn, Stephen Lucius
Barker, John	Crean, Eugene	Hall, Frederick
Barnes, G. N.	Cremer, Sir William Randal	Harcourt, Rt. Hn. L. (Rossendale
Barran, Rowland Hirst	Crooks, William	Harcourt, Robert V. (Montrose)
Barry, Redmond J.(Tyrone, N.)	Crosfield, A. H.	Harmsworth, Cecil B. (Worc'r)
Beale, W. P.	Crossley, William J.	Harmsworth, R. L (Caithn'ss-sh
Bennett, E. N.	Davies, Ellis William (Eifion)	Harvey, W. E. (Derbyshire, N. E.
Berridge, T. H. D.	Davies, Timothy (Fulham)	Harwood, George
Black, Arthur W.	Davies, W. Howell (Bristol, S.)	Haslam, Lewis (Monmouth)
Bowerman, C. W.	Dewar, Arthur (Edinburgh, S.)	Haworth, Arthur A.
Brace, William	Dewar, Sir J.A. (Inverness-sh.)	Hazel, Dr. A. E.
Bramsdon, T. A.	Dickinson, W. H. (St. Pancras, N	Hazleton, Richard
Brigg, John	Duckworth, James	Helme, Norval Watson
Brocklehurst, W. B.	Duncan, C. (Barrow-in-Furness	Hemmerde, Edward George
Brodie, H. C.	Dunne, Major E. Martin (Walsall	Henderson, Arthur (Durham)
Brooke, Stopford	Edwards, Sir Francis (Radnor)	Henderson, J. M. (Aberdeen, W.)
Brunner, J. F. L.(Lancs., Leigh)	Elibank, Master of	Henry, Charles S.
Bryce, J. Annan	Ellis, Et. Hon. John Edward	Higham, John Sharp
Burke, E. Haviland-	Evans, Sir Samuel T.	Hobart, Sir Robert.
Burnyeat, W. J. D.	Everett, R. Lacey	Hobhouse, Charles E. H.
Byles, William Pollard	Fenwick, Charles	Hodge, John
Carr-Gomm, H. W.	Ferens, T. R.	Holt, Richard Durning
Causton, Rt. Hn. Richard Knight	Findlay, Alexander	Hope, W. Bateman (Somerset, N.
Channing, Sir Francis Allston	Fuller, John Michael F.	Horniman, Emslie John
Cheetham, John Frederick	Furness, Sir Christopher	Horridge, Thomas Gardner
Hudson, Walter	Nicholls, George	Strachey, Sir Edward
Hutton, Alfred Eddison	Nolan, Joseph	Straus, B. S. (Mile End)
Hyde, Clarendon	Norton, Capt. Cecil William	Strauss, E. A. (Abingdon)
Illingworth, Percy H.	Nuttall, Harry	Stuart, James (Sunderland)
Johnson, W. (Nuneaton)	O'Brien, Patrick (Kilkenny)	Summerbell, T.
Jones, Leif (Appleby)	O'Connor, T. P (Liverpool)	Sutherland, J. E.
Jones, William (Carnarvonshire	O'Donnell, John (Mayo, S.)	Taylor, John W. (Durham)
Kincaid-Smith, Captain	O'Dowd, John	Taylor, Theodore C. (Radcliffe)
King, Alfred John (Knutsford)	Parker, James (Halifax)	Tennant, Sir Edward (Salisbury)
Laidlaw, Robert	Pearce, Robert (Staffs, Leek)	Thomasson, Franklin
Lamb, Ernest H. (Rochester)	Philipps, Owen C. (Pembroke)	Thorne, G. R. (Wolverhampton
Lamont, Norman	Phillips, John (Longford, S.)	Tomkinson, James
Leese, Sir Joseph F. (Accrington	Pickersgill, Edward Hare	Toulmin, George
Lehmann, R. C.	Pirie, Duncan V.	Ure, Alexander
Lever, A. Levy (Essex, Harwich	Priestley, W. E. B. (Bradford, E.	Verney, F. W.
Levy, Sir Maurice	Radford, G. H.	Walker, H. De R. (Leicester)
Lewis, John Herbert	Raphael, Herbert H.	Walters, John Tudor
Lloyd-George, Rt. Hon. David	Rea, Russell (Gloucester)	Ward, John (Stoke-upon-Treat)
Lupton, Arnold	Reddy, M.	Ward, W. Dudley (Southampt'n
Luttrell, Hugh Fownes	Rees, J. D.	Waring, Walter
Macdonald, J. R. (Leicester)	Rendall, Athelstan	Warner, Thomas Courtenay T.
Macdonald, J. M. (Falkirk B'ghs	Ridsdale, E. A.	Wason, Rt. Hn. E (Clackmannan
Mackarness, Frederic C.	Roberts, Charles H. (Lincoln)	Waterlow, D. S.
Maclean, Donald	Roberts, G. H. (Norwich)	Watt, Henry A.
MacVeagh, Jeremiah (Down, S.)	Roberts, John H. (Denbighs.)	White, J. D. (Dumbartonshire)
MacVeigh, Charles (Donegal, E.)	Roche, John (Galway, East)	White, Luke (York, E. R.)
M'Crae, George	Rogers, F. E. Newman	Whitehead, Rowland
M'Laren, H. D. (Stafford, W.)	Rowlands, J.	Whitley, John Henry (Halifax)
M'Micking, Major G.	Russell, T. W.	Whittaker, Sir Thomas Palmer
Maddison, Frederick	Samuel, Herbert L. (Cleveland)	Wiles, Thomas
Manfield, Harry (Northants)	Samuel, S. M. (Whitechapel)	Wilkie, Alexander
Marks, G. Croydon (Launceston)	Scarisbrick, T. T. L.	Williams, J. (Glamorgan)
Marnham, F. J.	Schwann, C. Duncan (Hyde)	Williams, Llewelyn(Carmarth'n
Mason, A. E. W. (Coventry)	Sears, J. E.	Williamson, A.
Massie, J.	Seaverns, J. H.	Wills, Arthur Walters
Menzies, Walter	Seddon, J.	Wilson, Hon. G. G. (Hull, W.)
Micklem, Nathaniel	Shaw, Rt. Hon. T. (Hawick B.)	Wilson, J. H. (Middlesbrough)
Mond, A.	Shipman, Dr. John G.	Wilson, P. W. (St. Pancras, S.)
Montgomery, H. G.	Silcock, Thomas Ball	Wilson, W. T. (Westhoughton)
Morgan, G. Hay (Cornwall)	Smeaton, Donald Mackenzie	Wood, T. M'Kinnon
Morrell, Philip	Spicer, Sir Albert
Morton, Alpheus Cleophas	Stanley, Albert (Staffs, N.W.)	TELLERS FOR THE AYES—Mr. Whiteley and Mr. J. A. Pease.
Murray, Capt. Hn. A. C. (Kincard.	Steadman, W. C.
Newnes, F. (Notts, Bassetlaw)	Stewart-Smith, D. (Kendal)
NOES.
Acland-Hood, Rt Hn. Sir Alex. F	Fetherstonhaugh, Godfrey	Rawlinson, John Frederick Peel
Balcarres, Lord	Gooch, Henry Cubitt (Peckham)	Rutherford, W. W. (Liverpool)
Barrie, H. T. (Londonderry, N.)	Gretton, John	Starkey, John R.
Beach, Hn. Michael Hugh Hicks	Hamilton, Marquess of	Talbot, Lord E. (Chichester)
Carlile, E. Hildred	Harrison-Broadley, H. B.	Thomson, W. Mitchell- (Lanark)
Castlereagh, Viscount	Kerry, Earl of	Thornton, Percy M.
Clive, Percy Archer	Law, Andrew Bonar (Dulwich)	Valentia, Viscount
Courthope, G. Loyd	Lockwood, Rt. Hn. Lt.-Col. A. R.
Dalrymple, Viscount	MacCaw, William J. MacGeagh	TELLERS FOR THE NOES—Sir Frederick Banbury and Mr. Hunt.
Du Cros, Arthur Philip	M'Arthur, Charles
Faber, George Denison (York)	Middlemore, John Throgmorton
Faber, Capt. W.V. (Hants, W.)	Morpeth, Viscount

Resolution to be reported this day; Committee to sit again this day.

And, it being after half-past Eleven of the Clock on Monday evening, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-three minutes after Twelve o'clock.