INCOME TAX AND SUPER-TAX.

HC Deb 04 July 1910 vol 18 cc1343-410

Motion made, and Question proposed, "That Income Tax shall be charged for the year beginning the sixth day of April, nineteen hundred and ten, at the rate of one shilling and twopence in the pound, and that the same Super-tax be charged for that year as was charged for the year beginning the sixth day of April, nineteen hundred and nine."—[Mr. Lloyd George.]

Mr. AUSTEN CHAMBERLAIN

It is understood that, with your permission, we are to be allowed to continue on this Motion the general discussion to which the introduction of the Budget gives rise. I understand the Government allot practically one and a half days for the Resolutions. Although nominally two days are allotted, the second day is Wednesday, and the latter half of Wednesday will, I understand, be taken up by the consideration of the Birmingham Bill. There is practically only one Resolution besides the Tea Duty we have passed necessary to be passed this year—the Income Tax Resolution and the ordinary Resolution for the amendment of the law. If that is so, I think it would be for the convenience of the Committee generally that the discussion should go on on this first Resolution practically up to 8.15 on Wednesday, or at any rate as long as is required, and that the Second Resolution should, if necessary, be taken formally after eleven o'clock that night. I may have to press the Government to reconsider their plans, for my hon. Friends tell me that not only is half of Wednesday withdrawn from public business for private business, but there is an important Instruction down by Order tonight on the Port of London Bill, which may withdraw half the time this evening.

The PRIME MINISTER

I was not aware, when I named Wednesday, that it was to be taken up by the Birmingham Bill, otherwise I should not have named that day.

Mr. AUSTEN CHAMBERLAIN

I am much obliged to the Prime Minister. I am sure he will meet the House pretty fairly in his plans and in regard to what inroads may be made on the time it was intended to allot. All I wish to say at the moment is that I think it would be for the general convenience of the Committee that we should be allowed to continue as long as the Committee wants the discussion of this first Resolution and skimp the mere formal Resolution if it becomes absolutely necessary. In following immediately upon the speech in which the Chancellor of the Exchequer opened his Budget the other day, I made some observations on some of the things which that speech contained. It was remarkable in some ways for introducing matter not usually contained in a Budget statement. He went out of his way to challenge a discussion on the relative merits of our own and other fiscal systems. He went out of his way to forecast what might be the position of the Government and the powers of the Chancellor of the Exchequer in regard to expenditure, not in the year for which he was providing, namely, 1910–11, but in the early months of 1912. I think that was unusual and remarkable, but I am bound to say, after carefully reading the speech, I think the things he left out, the gaps which he left in his speech, were at least as unusual and as remarkable.

This is probably the first time the Chancellor of the Exchequer has succeeded in introducing his Budget without telling the Committee at what rate he proposes to collect any tax in the year with which he was dealing. I thought at the time I had failed to follow the right hon. Gentleman, and that at some moment when my attention had lapsed he must have told the Committee at what rate he proposes to levy the taxes. Not a bit of it. That was a matter he did not think it worth mentioning in his Budget speech. I infer from his silence that the taxes are to be collected, all of them, at the existing rate. Neither did he mention at what rate he proposes to fix the Sinking Fund, and that is really a very important matter. Half an hour ago, or rather more, when I came down to the House, I was still in hopes the Chancellor had chosen a better course than he has, for until I came down to the House I was unable to have a copy of the financial statement with the figures filled in which it is customary to distribute the day after the Budget statement. I do not want to lay stress upon this, but I do enter a protest against the delay in the appearance of that statement this year. I do not think the delay is due to the Chancellor of the Exchequer, but I would ask him to inquire why the usual practice is not followed, and why, in fact, his statement has not been circulated even now. The Budget statement was made on Thursday, and this Paper was not available until we came down to the House to-day and inquired for it at the Vote Office. That was very inconvenient, and. if I may be permitted to say so, it caused me, and I daresay other Members who have been trying to understand the statement, an infinitude of trouble, which we might have been spared if we had had the Paper before us.

I gather from that statement that the Chancellor of the Exchequer proposes, as though it were a matter of course, to fix the Sinking Fund at £24,500,000 for the year. Against that I enter my protest. The Chancellor of the Exchequer will recognise I have not been unreasonable in my criticisms or in my observations on his treatment of the Sinking Fund; indeed, there has been much sharper criticism from his own side than I have thought it necessary to make. I raised no protest, under the circumstances of the time, to his reducing the fixed debt charge to £25,000,000. In the course of the Budget discussions of last year, which were very prolonged, he was led to make certain concessions which cost him about £500,000, and when, in the late autumn, almost in one of the winter months, he presented his final estimate of the cost of these concessions, he said, I thought very fairly, that at that time of the year he could not be expected to raise a new tax to meet the concessions he had made, and he must draw upon the Sinking Fund for another £500,000. Again I did not criticise him. I did not utter a word which was hostile to his proposal. That further raid of £500,000 was justified, and only justifiable, because of the period of the year which we had reached, and of the impossibility of adjusting taxation to meet it at the moment. Now I find from this White Paper a fact which was never mentioned in the Chancellor's speech, that he proposes to stereotype the fixed debt charge at £24,500,000 instead of £25,000,000. This Paper is inaccurate. It states in a footnote that the permanent fixed debt charge of £24,500,000 was approved by the House of Commons on the Finance Bill of 1909–10. That is not so. All that the House of Commons approved of was a temporary reduction. It approved, in the first instance, of fixing the permanent charge at £25,000,000, but later in the autumn months it approved of a reduction of that sum by £500,000 for that particular year. I should like to know on "what grounds the Chancellor of the Exchequer now, as a permanent proposal, and not under the necessity of any temporary emergency, proposes to take, not the figure which he originally chose as the right figure, but the figure he was forced temporarily to adopt in consequence of the difficulties of adjusting taxation at the moment. For my part, I say that to make this new raid permanent is a bad step, and here, at any rate, I separate myself from the course of action which the Chancellor is taking in regard to the Sinking Fund. The Chancellor's dealing with the Sinking Fund when he did mention it was, I think, not quite candid. He spoke of the total reduction of the debt to be effected in the course of the year, but in order to produce a good effect on the mind of the Committee he lumped on to the amount available for the Sinking Fund the other Special Sinking Funds which appear in the Votes and which are not charged on the Consolidated Fund, but which are attached specifically to certain short guarantee loans, and which were so attached at the time they were raised. In that way he produces a total of about £9,500,000 as the amount to be applied to the reduction of the debt in the present year, but of that £9,500,000, £3,000,000 in round figures—a little over £3,000,000, in fact—is attributed to these special Sinking Funds. These Sinking Funds were set up, specifically and intentionally, quite apart from the fixed debt charge. It was intended that they should be treated entirely separate, and that the loans to which they were attached should be kept apart from what I may call the permanent funded debt of the nation, and that these loans should be redeemed in most cases, as to large amounts at any rate, within a very short time. I think nothing but confusion and misconception can arise by lumping the two together. It is absolutely unjustifiable, as the Chancellor of the Exchequer did, to take credit for the amount attached to these short loans and to use that as an argument to persuade the Committee to reduce the Sinking Fund and the amount available for debt reduction within the fixed debt charge. Having said so much about the Sinking Fund and the rate at which the Chancellor of the Exchequer proposes to levy his taxes, perhaps I may summarise what I understand to be the figures of the year. I shall be much obliged if the Chancellor of the Exchequer will follow my summary and correct me if I am wrong. I understand the actual tax income of the year is £169,745,000, and that the arrears of 1909–10 to be collected this year amount to £30,046,000, giving a total income appertaining to the year itself, and to the past year, but to be collected this year, of £199,791,000. Against that you have to set off the actual expenditure properly attributable to this year of £171,857,000; then you have carried forward from 1909–10 £26,248,000, arrears of local taxation due to the same cause £825,000, making a total expenditure of £198,930,000, and producing a balance of £861,000.

If these figures are right, the first point to which I wish to call attention is that the revenue rightly attributable to the year does not balance the expenditure of the year. What I may call the true revenue of the year is £169,745,000, while the true expenditure is £171,857,000, or more than £2,000,000 in excess of the revenue. These figures, of course, exclude arrears of both revenue and expenditure. The arrears of revenue to be collected this year are greater than the arrears of expenditure by about £3,000,000, and the point I wish to urge, as resulting from an examination of these figures, is this: not only is the surplus of £861,000 entirely due to the revenue of last year, and not to the revenue of this year, but instead of there being a surplus at all, there would be a deficiency of something like £2,000,000 sterling.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

I think it ought to be fairly stated.

Mr. AUSTEN CHAMBERLAIN

I believe I was coming to the point which induced the right hon. Gentleman to interrupt me. I will deal with it at once, and alter a little the order of my speech. I think the Chancellor of the Exchequer was about to say, what I should have said at a later stage, that though he is going to meet this year's expenditure in part out of last year's revenue—out of revenue which really belongs to last year—he estimates that of the revenue which ought to be collected this year an equal sum of £3,000,000 will be thrown forward into next year.

Mr. LLOYD GEORGE

More.

Mr. AUSTEN CHAMBERLAIN

I fail to follow the word "more." I did follow in the right hon. Gentleman's statement his anticipation that £3,000,000 on account of Income Tax which ought to have been collected in this year will not be collected until next year, and therefore I presume the right hon. Gentleman said, in effect, if he robs last year to pay this year, after all, it does not much matter, because next year will be able to rob this year. Is that a perfectly satisfactory position? Does it leave us where we ought to be when the whole transaction is concluded? How does he get the surplus from last year? He gets it by having last year extinguished every penny of the Sinking Fund which it was in his power to do. There were annuities which he was obliged to pay. There was £1,000,000 sterling which, I have some satisfaction in thinking, I put it beyond his power to absorb, because that million in bonds had to be drawn and paid. But every penny of the Sinking Fund the Chancellor of the Exchequer could lay his hands on he took to meet his current expenses. On what ground did he do that? On the ground that, owing to the delay in the passage of the Budget, he would be unable to collect his revenue within the year, and he could not pay off debt with one hand while he was borrowing money in the market with the other. But I said to him at the time, and I repeat it now, that that was a legitimate and proper arrangement provided, when his revenue did come in, as it was going to a little later, he refunded the money which he had abstracted from the Sinking Fund. He told us in one of his speeches that when the accounts were finally closed he would have a balance on the year. I at once inquired what he was going to do with that balance, and whether, having secured it by raiding the Sinking Fund, when he got it would he return it to the Sinking Fund and use it for the reduction of debt? The Chancellor of the Exchequer behaved very prudently, as he habitually does when questions are put to him in Debate, and he refrained from answering the question. He devoted himself to other matters which perhaps were less difficult to deal with. But I make my protest against the Chancellor of the Exchequer permanently treating this money as revenue when, in fact, it ought to be part of the Sinking Fund, when it ought to be paid back to the Sinking Fund and go to the reduction of debt. It is no answer to that contention to say that next year there will be £3,000,000 of Income Tax which ought properly to be collected this year. That brings me to another question which I wish again to address to the right hon. Gentleman. Last Thursday he was good enough to refer to various observations of mine, but one specific question which I asked he passed over in silence. The question was: Why does he anticipate he will be unable to collect £2,000,000 of the ordinary Income "Tax this year? I do not profess to have very much experience in these matters; I was only a very short time at the Treasury as Chancellor of the Exchequer; but I put it to any Member of the Committee whether there is any reason why ordinary Income Tax to the extent suggested should be outstanding at the close of the present financial year. The Chancellor of the Exchequer tells us that when he made his statement on 30th June he had collected every penny of arrears outstanding from last year. It is notorious that the great bulk of Income Tax is not collected until after 1st January, and therefore he has cleared off all arrears six months before the moment comes when Income Tax collection becomes active in the normal year. What happened six months before 1st January which should delay the collection of Income Tax afterwards? In what has occurred at any rate between 1st January and 31st March I can see no possible explanation for the estimate which the Chancellor of the Exchequer has made, and I should be very much astounded, providing that the Inland Revenue people do their duty, as they always do, if they are not able to make practically as close a collection up to 31st March next year as they have done in any normal year. But the Chancellor of the Exchequer did not answer my question the other day, and I therefore venture to repeat it to him to-day. I understand, of course, the position in regard to the Super-tax. T can well understand that there may be greater delay, but I am really surprised that the Chancellor of the Exchequer has put the amount of the delayed collection so high as he has done.

Mr. LLOYD GEORGE

It is a question of assessment.

Mr. AUSTEN CHAMBERLAIN

Why should there be any delays in the assessment to the ordinary tax? I understand there will be delays in the assessment to the Super-tax, because the authorities are busy over the assessments to the Supertax for last year, and that may delay them in getting up the assessments for it this year. But why the assessment to the ordinary Income Tax should be delayed by what has happened passes my comprehension, and I think I may safely say that, whatever be the reasons that convinced the Chancellor of the Exchequer, there is no Member outside the official classes who can give to the House any justification for the estimate which the Chancellor of the Exchequer has made. I wish the Chancellor of the Exchequer had told us a little more about the Tobacco Duty. I confess I had viewed with grave anxiety the effect on the tobacco trade of the imposition of these large new burdens. The Chancellor of the Exchequer has stated that the results have equalled his highest anticipations; that the revenue has been ample, and that, therefore, he has been justified this year in estimating for an increased yield of £763,000, or, putting it alternatively, in estimating for an increased consumption of 1.5 per cent. That looks very encouraging, £763,000 as partly the effect of the forestalment of the new duties. The amount of additional revenue which he hopes to get this year is £763,000 and the additional consumption is 1.5. I am not being led into the mistake of supposing that I can convert the £763,000 into the 1.5 in any way or derive from the £763,000 in figure 1.5. No, but the Chancellor gave us those two figures; they are interesting. Of course improving trade under ordinary circumstances means a greater spending power among the working classes, and that would produce a larger revenue in tobacco; but the accounts that I get from trade sources I must say I find very hard to reconcile with the accounts with which the Chancellor of the Exchequer is supplied. My anxiety originally was, not merely the effect on the total tobacco consumption of the country of the new rise in duty, but as to the destruction and as to the disturbance in trade which the Chancellor of the Exchequer would produce. The tobacco trade has been coming through a period of very considerable difficulty. It has been opposed within the last few years by an American competition which at one time was very sharp and led to the formation here of a very powerful combination which has absorbed a great number of formerly independent manufacturers. I do not wish to be considered as blaming their action, but still the effect has been the driving of a number of small men out of the trade because they could not compete.

I am always sorry to see that. It is a tendency which is prevalent in all branches of national industry, I am afraid, and although it may be necessary in order that the trade and production of the country should compete with foreigners on equal terms, it is in itself an undesirable thing; it is in itself socially bad; it tends to a greater separation of classes and prevents or tends to prevent the diffusion of wealth. It is a thing to be regretted and is certainly not a thing to be fostered or encouraged by the State. Holding that view, I saw with some anxiety the proposals of the Chancellor of the Exchequer, and I have read with considerable regret information that has reached me at different times from correspondents connected with the trade as to the disastrous effect which the increased burden is having, especially upon smaller manufacturers, particularly upon those who are most dependent upon the trade in the working man's 3d. an ounce tobacco. They have had to raise the price in many cases, and in other cases I dare say they have tried to diminish the quality and so save part of the cost; but I am informed that firms who were mainly dependent upon that trade have found it excessively difficult to make both ends meet, and several of them have gone out of existence. I am further informed that the total consumption of tobacco last year was decreased by six million pounds. I have not been able to test these figures, of course, though I think they are quite reconcilable with those which the Chancellor of the Exchequer has given with regard to the trade. But I wish he would say what the consumption of last year was and how it compared not with the year before, but how it would have compared with the normal increase of consumption if no increase of duty had taken place. I think this increase of duty gave a distinct check to the steady growth in the consumption of tobacco which bad been taking place, and I am a little surprised that, having regard to what reaches me from the trade, the Chancellor of the Exchequer felt justified in anticipating so large an increase in the present year.

I come to the Spirit Duty, and as to that the Chancellor of the Exchequer says that he anticipates an increased revenue of £1,800,000. Considering how much of the battle was waged about the Spirit Duty no doubt an additional revenue of £1,800,000 looks as if it was an additional feather in the cap of the Chancellor of the Exchequer, but in fact he has no increase; he has no real additional revenue which he has described. He has accelerated the decline in the consumption which was already going on, and the result is, taking his own figures, and I am accepting them for this purpose, that instead of having gained £1,600,000, as he hoped last year; from his Spirit Duty, or £1,800,000, as might be inferred frm his statement, he has only got £500,000 to bless himself with. Was it worth while creating the confusion which he has brought about, the hardship which he has inflicted, the amount of ruin,, or, at least, of prohibition of trade upon a certain number of firms, and striking through those on whom the charge was directly made at the agriculturists behind them in poor districts, where they were mainly dependent upon the whisky trade alike for the market for the cereals which they produced and the offals which they required—was it worth while to do all these things as a financier only to get £500,000? Does not the right hon. Gentleman think in his candid moments that had he left the trade alone he would have been better off financially now than he will be with his increased duty? As to the improving trade, of which he takes a much more sanguine view than I do, such few inquiries as I have made amongst men engaged in the business do not lead me to think that they have yet seen all the blessings which have occurred to the lively imagination of the Chancellor of the Exchequer. But does not he think that the improving trade under the old duty might have checked the downfall of consumption, and that he might have been financially better off if he had left the Whisky Duty alone? I am convinced that he would have been, and I am convinced that as a financial expedient it was not worth while to inflict all the hardship he did in order to obtain half a million of money.

Of course, the Chancellor of the Exchequer has two strings to his bow. He commended this duty a year ago to us as a great financial expedient, but when that string breaks he takes a different view, and while he says it is not of much use for finance the blessings which it has achieved in other ways are of a desirable character. I am sceptical about the permanent and enduring effects of this increase of duty, and I must confess I am sceptical about the fairness of the comparison which the Chancellor of the Exchequer made in his Budget speech. He took the figures of a far too short a period, and with regard to particular instances alone, but although particular individual trade interests are very suggestive and interesting, to be conclusive of anything you want much wider and more experience to justify the broad fabric of speculation which the Chancellor builds upon this very shallow foundation. The Chancellor of the Exchequer says that beer will be £432,000 down. I assume, I do not know—perhaps he can tell me across the Table whether I am right—that does not include the brewer's licence of 3d. a barrel on manufacture, and that would not go into Customs and Excise. Therefore it must be remembered that, in addition to a decrease in the consumption of whisky, there is also a decrease in the consumption of beer. Just think of it! The Chancellor is delighted to have reduced in some cases, he says, by 33 per cent., and largely in other cases, excepting the city of Waterford, the consumption of whisky, but the consumption of beer is also going down, and that is the moment he chooses to put an unprecedented burden on people who have to make their living out of selling whisky and beer. Does he really think that at the moment when he was killing one-third of the trade in whisky, and the beer trade was falling itself without any aid from him, that that was the proper moment to put a large burden upon the trade?

I think the moment was badly chosen, unless he wanted to inflict upon the people from whom it was raised the maximum of hardship and suffering; but will the Chancellor of the Exchequer tell us about the licences? That is one of the gaps in his speech which it would be extremely interesting if he would fill up. He told us that very little had been collected except in Scotland, and he praised the Scotchman for paying off his obligation. [Mr. GEORGE YOUNGER dissented.] I was not making myself responsible for all the statements of the Chancellor of the Exchequer, but for my present purpose it is quite sufficient to quote the right hon. Gentleman, and I will not deprive my hon. Friend of the pleasure of proving that his countrymen are not so virtuous as the Chancellor of the Exchequer thinks them. But although the Chancellor of the Exchequer has not collected it all, he has demanded it, and I should be glad if he could give me the complete figures. He will not have assessed all the houses over £500 in value—hotels and so forth. I should be glad if he can tell me what is the amount of the increase in Licence Duty demanded by the Commissioners in the case of fully-licensed houses and of beer-houses of under £500 in annual value in Scotland, Ireland, and England and Wales respectively. I should like to have not merely the totals but, if he would give them to me, the separate figures for the three countries of what is the amount of the increase in Licence Duties demanded by the Commissioners as for the past year in the case of fully-licensed houses and beer-houses under the £500 annual value in the three parts of the United Kingdom respectively. I should like the figures for over £500, but I imagine their assessments have not been made, and that the demand has not been presented, and therefore, in regard to licenses not covered by the question I have put, I was going to ask what is the latest estimate of the Inland Revenue of the amount which they will receive?

Mr. LLOYD GEORGE

I want to understand the question. Does the right hon. Gentleman want to know the aggregate amount, because after all there are three categories. First of all there is the ordinary public-house and beerhouse, the case under £500, where the publican could not claim what I call hotel terms. The second class is the case of the publican under £500 who can claim hotel terms. Then comes the third case of the publican over £500. I should like to know whether the right hon. Gentleman wants to know the aggregate, because that would be quite impossible now?

Mr. AUSTEN CHAMBERLAIN

My first question is directed towards a fact, and I conclude that there can be no difficulty in answering it. What amount do the Commissioners demand? Where the house is over £500 in value they have not demanded anything, because they have not yet made their assessment where the house comes under the hotel clause, but for the ordinary house not over £500, and not coming under the total exemption for hotels, the demands have been issued. I think they were payable on 1st July, and they ought to have been issued at least a fortnight before that date. They were not issued a fortnight before that date, but I believe they have all gone out so as to be received on 1st July. What is the amount the Commissioners have demanded—the excess amount over the old licences? Let us have, for these houses on which the new demands have been sent out, the amount that they would have paid under the old system, and the excess amount demanded by the Commissioners.

Mr. LLOYD GEORGE

The aggregate?

Mr. AUSTEN CHAMBERLAIN

I do not want each house separately, but the total for each part of the United Kingdom. Then as regards the rest, which is still speculation, I want the latest speculation of the Chancellor of the Exchequer and his advisers. He has more information now than when he last spoke on the subject. What do the Inland Revenue now think they will get for last year? Both these questions refer to information as regards last year. Then I want information as to the current year. What does the right hon. Gentleman anticipate that he will get from the increased Licence Duties this year? He surely does not suggest that he cannot tell me that. He has budgeted for a figure. It is included in the revenue of the year.

Mr. LLOYD GEORGE

I put exactly the same figure. May I point out that I am exactly in the same position as I was in last year? There are two disturbing factors. One is the number of houses which will be closed, and the second, a much greater disturbing factor, is the number of houses which can claim hotel terms, and, if they can successfully claim hotel terms, what the assessment will be. I know no more about it than I did then. I probably shall in a few days know the number of houses which will claim hotel terms, but I cannot know their assessment. I put in the same identical figures as last year because I have no further information.

Mr. AUSTEN CHAMBERLAIN

That is the answer to my question. Last year, of course, the right hon. Gentleman allowed for a considerable number of houses being unable to carry on the business by reason of the new terms that he exacted from them. He has seen no reason to modify them, and he expects that the Licence Duties which he now demands will drive a great number of men out of business and force them to close their houses. Now I come to the Death Duties. The Chancellor of the Exchequer said, as I thought wisely and rightly, that he could not take last year as a measure of the yield of the Death Duties this year. Last year was an abnormal year. He was extraordinarily fortunate in the number of big fortunes which passed during the year and paid tax, and he cannot take the same figures as the basis of his estimate this year. "The ordinary course is to take a three years' average, and that," he said, "I have done, subject only to this: that as trade is improving, and as collection of revenue and methods of valuation are improving also, I make some addition." What is the addition which he has made? I do not quite understand how the improvement of trade can directly affect appreciably the amount of Death Duties. Is the improvement of stocks what he meant by the improvement of trade? I thought the reason why Consols were so low under the present Government, according to the present Government, was because trade was so active that it required all the money in the country, and no one put it into Consols. But it is not good trade which appreciably affects the amount of Death Duties for that year. Of coarse, good trade increases the capital of the country, and in the long run makes it richer and makes the yield of Death Duties greater, but one year's good trade will not in that year produce any appreciable effect. A rise in the price of securities produces an immediate effect. My first question is, Was it the rise in the price of securities that the right hon. Gentleman meant to allude to and not the improvement in trade? If it is the improvement in trade you cannot attach much importance to that. It will not explain much of the increase. I admit I am astounded. The right hon. Gentleman estimates for £4,200,000 more than the original estimate of last year. The original estimate of last year, according to the right hon. Gentleman's explanation, was the result of an average of the three previous years. But he said that though it is £4,200,000 more than the original estimate of last year, it is only £2,500,000 more than the actual receipts of last year. But last year was an abnormal year which the right hon. Gentleman could not expect to repeat. Does he really think that by improved methods of collection or by the improvement of trade he can make such an addition this year as will bring up the average of three years to £2,500,000 above the abnormal and phenomenal year, which he says is no safe guide? Surely there must be some mistake in the figures which he gave and which are printed in the OFFICIAL REPORT?

Mr. LLOYD GEORGE

The additional Death Duties come in for the first time for a full year.

5.0 P.M.

Mr. AUSTEN CHAMBERLAIN

Oh, it is not due to the improvement of stocks or the improvement of trade or the improvement in collection. It is due to the fact that the new Death Duties come in for the first time for a full year. That is a point which the Chancellor of the Exchequer did not mention in his Budget statement. Am I not right in saying that if he had left out the things which were not necessary to clear apprehension of his speech, and if he could have found time to put in the things which were, he would have saved us a great deal of trouble? Now I come to the surplus, and the use which the right hon. Gentleman proposes to make of it. There, again, what I have to say takes the form of questions rather than of any criticisms of my own. I understand that the right hon. Gentleman proposes in the first place to rescind the bargain which he made in the House last year that half the new Land Taxes should go to the local authorities, and that he proposes to substitute for that a Grant which gives to the local authorities what they have lost in Whisky Duty, and perhaps gives them something more. He treats them generously, and, where they were entitled, on a strict interpretation of their rights, to £240,000 or £250,000, he gives them £328,000. But is not that rather a Greek gift for the local authorities? In the first place the Whisky Duty might have yielded more. It might have recovered part of its fall, though the Chancellor of the Exchequer thinks not. But, putting that on one side, the promise was that half the Land Duties should be additional to anything that the councils then had. Now, having given it to them as a free gift—I do not think it was a very free gift; it was a gift under compulsion, but it was to be for them to use as they pleased—he says, "I will give it you to make good the deficit from the Whisky Duty." I think that is rather a bad bargain for the county councils and a worse bargain if the Chancellor of the Exchequer is right about his Land Tax, because his promise to the local authorities was that they should have half the Land Taxes, and it was only on that that he got the Land Taxes. That was an open Parliamentary bargain made in the House to induce the House to pass the taxes, and to obviate the hostility which was general in all quarters of the House at taking away from the local authorities all chance of enjoying the revenue to be derived from taxes of which certain of these local authorities had been the first and foremost advocates, and which had always been supported by those who did support it as revenue for local purposes. The Chancellor of the Exchequer says, "Instead of halving these taxes, which are going to do magnificently—we are still in the day of small things, they only bring in £600,000 now—I will give you half that £600,000 in pepetuity." But the moment before he told you, "Wait a year or two and see the results they will bring in." Are the local authorities to sell their birthright for a mess of pottage? In order to get £300,000 now, are they to give up all their share in the future growth of these taxes, which are to be so fruitful? I do not think that a good bargain. I do not think that when the local authorities look at it they will like it, and it seems to me so unfair and so contrary to the Parliamentary undertaking given last year, and on which the taxes were voted, that I really cannot believe the Chancellor of the Exchequer himself realises what he is doing. I shall be interested as to what he has to say in reply. Then I come to the other portion of his surplus. That he proposes to spend in relieving the pauper disqualification from 1st January. I confess that after our experience of the initiation of old age pensions, I distrust all estimates of the cost of anything to do with old age pensions. When the Prime Minister brought in his proposals he thought that they would involve an ultimate burden on the taxpayer of £6,000,000, We are now within sight of £12,500,000, if the Chancellor's estimates of future expenditure, and which he himself does not lay much stress on, are as correct as the Prime Minister's were wrong. I am afraid that is not likely to be the case, and I put in a word of warning against this practice of beginning large expenditure just at the end of the year, so that with a very little sum at the moment, when you are beginning, you undertake a liability of enormous amount thereafter, and that, really, without any security that when the time comes you will have the money to meet those liabilities. We surely had a lesson with old age pensions of the rashness of starting schemes lightly without making sufficient provision for their cost, and I think it is regrettable that the Chancellor of the Exchequer should not merely repeat that same procedure, beginning his removal of the pauper disqualification with a margin of £400,000 or so, but should do so without knowing what other calls are going to be made upon him next year, and knowing that if this call involves him in the least possible deficit he will have to find at least a further £2,000,000 next year. And not content with that he goes on to say what he will do if he is spared to grace the position he now occupies on 1st January, 1912. He thought I was unjust to him the other day for talking of his speculative estimates and his speculative prophecies. Could anything be more speculative? I am afraid that people in the country—and I know his partisans of the country—do not put in the qualifications which he himself puts in. They leave them out and they promise that if only you will keep the right hon. Gentlemen in their office these great schemes shall be initiated on 1st January, 1912, to be paid for in 1913, because there, again, you are to begin with only a quarter of a year and having found only a quarter of the money you are to leave to the future the responsibility of meeting the new deficit you create. On what will these promises depend? "Next year," says the Chancellor of the Exchequer, "if the taxes come up to expectations and if we return to a normal naval expenditure we can see our way," etc. "If." Most Chancellors have been content to make Budget estimates for one year, and on the few occasions on which Chancellors have estimated for more they have generally signally failed. At the moment I recall only Mr. Gladstone's attempt to forecast seven years, at the end of which period he would be able to dispense with the Income Tax. In the meantime the Crimean War and the Indian Mutiny intervened and instead of dispensing with the Income Tax at that moment we have never been able to dispense with it and no one now suggests that we should dispense with it, not even my hon. Friend the junior Member for the City of London (Sir F. Banbury). Is it not rather rash to begin holding out hopes of what you will be in a position to do on 1st January, 1912, when you have not the slightest conception of what may intervene to upset all your calculations or what possibilities there are in store for us between now and then? That is not all. "If we are able to bring back our naval expenditure to the normal." I do not know what he calls "normal," and I do not suppose he knows himself. In an earlier passage of his speech he explained to some extent what he had in his mind. The original naval programme of Germany comes to an end in that time and the rate of construction provided by the original scheme, of big ships at any rate, is, I think, reduced to one half, "if things remain unchanged." Yes, Sir, but does he think they are likely to remain unchanged? Does he think that Germany, having entered on this path, is likely to be content with the scheme they set forth some years ago, and does the right hon. Gentleman think it well to begin holding out expectations to poor men of the vast benefits that he will confer upon them some eighteen months hence when his power to fulfil those expectations depends, on his own showing, on the naval policy of another Power? Does he think it right or statesmanlike or wise to tell the people, as he does on these occasions, that if they want social reform they must give up national defence; to set the two always in opposition, and to tell them to choose present comfort instead of permanent and future security? I think it an ill-omen when a person with the responsibility of the Chancellor of the Exchequer shows so little regard to his duty as one of the confidential servants of the Crown in relation to the matter of defence as to invite and to seek on every occasion in his Budget statement opposition from below the Gangway opposite to the naval expenditure which his colleagues have found necessary and have agreed upon. There is only one course for a Chancellor of the Exchequer who thinks the naval expenditure of the Government not justified to pursue. It is to resign his office. As long as he sits on that Bench he is bound, in honour to his colleagues, he is bound, in honour to the nation, to defend and to support on every occasion the programme upon which the Government have agreed.

Mr. JOHN DILLON

I think that all Members of the House will agree that the speech to which we have just listened was an exceedingly mild speech; there was no fight in it. This Budget, which is a repetition of the Budget of last year, is treated by the right hon. Gentleman as a humdrum, matter-of-course Budget, and he confines his entire speech, which was very able in detail, to throwing cold water upon all the good intentions of the Government as regards social reform. Well, that speech gives one the idea—I do not know whether it is a correct idea or not—that the proceedings of the Conference must be exceedingly peaceable, and I suppose the temper of the Conference room has spread to the two Front Benches. The Budget has been described as a "humdrum" Budget. I do not think a greater misdescription has ever been applied to any measure in this House. It could not truly be spoken of as a humdrum Budget, inasmuch as it follows the financial revolution of last year, and no Budget which accepts the financial provisions of last year can be treated in any respect as matter-of-course. Not only is it true that this Budget accepts as part of the permanent financial system of the country all the great revolutionary changes which were made in the Budget of last year, but the Chancellor of the Exchequer went out of his way to raise many other questions in the course of his statement, all of which are, to say the least, very highly debatable and of exceedingly interesting character. First, he spoke of the future provision for technical education in this country and for intermediate education in Ireland. That is a subject of considerable interest, and one which will necessarily lead to much debate. Secondly, he spoke of his new scheme—because it is a new scheme—for the removal of pauper disability in relation to old age pensions, a scheme which will also necessarily lead to a great deal of debate and complication. He then spoke of the prospects of unemployment and sick insurance next year, and the relation of those prospects to increased naval expenditure. I think there could not possibly be a subject thrown down upon the floor of this House more calculated to provoke discussion. The right hon. Gentleman has given his views on the relation between naval expenditure and social reform. Fourthly, the right hon. Gentleman, in discussing the separate taxes, raised an astounding and a most far-reaching principle, as he will find out in the course of these Debates; a principle which, so far as my knowledge goes, has never in the whole history of British politics been asserted by a Chancellor of the Exchequer in the House of Commons, namely, that you are entitled to maintain a tax which produces no revenue, but which injures revenue, in order to effect a social reform. That is another contentious and debatable point of which the Chancellor will hear a great deal during the coming Debates. I must say I think that, in view of all these points, the Government has acted most wisely in adjourning the later stages of the Budget until the Autumn Session, because it would be absolutely impossible—and I do not for a moment imagine they contemplate such action—to closure, or attempt to curtail, the necessary discussions of the details of this Budget. There is one point which the right hon. Gentleman himself appears to me to have to a great extent overlooked, and that is the enormous change in the situation, which was alluded to by the hon. Member for Waterford (Mr. Redmond). I am speaking rather from the point of view of the Irish, although I think the same point of view affects a great many others. Last spring, after the last election, the Budget of last year was presented to us as a whole, as part of a great policy, and the only choice left open to us, if we wished to take action was to defeat this Government and to defeat the whole policy contained in the Budget, the whole policy of social reform for which this great financial reform was introduced.

The only issue given to us was, "Shall we defeat this Government and destroy the whole structure of reform which is involved in the Budget, or shall we swallow certain taxes and details of the Budget to which we strongly object?" We took our choice, and I think we were amply justified. We were told on these benches that on account of the course we took we dare not go back to Ireland and show our faces to our people. The result has shown that an overwhelming majority of the Irish people endorsed our action on that occasion. But now the whole situation is changed. It is changed, not only in the particular directions mentioned by my hon. and learned Friend the Member for Waterford (Mr. J. Redmond), but also because the Budget of this year comes up under such circumstances that its details are open to separate criticism on every single point. Any single principle in the Budget of last year can be raised under this Budget, and discussed as a separate issue. All those points will be discussed, no doubt, with regard to the consideration whether they are vital to the whole structure of the Budget or not. If they are not vital to the whole structure of the Budget, they must be decided on their merits, and therefore I say our attitude towards these reforms will be entirely different. I shall follow the example of the Chancellor of the Exchequer himself when he made his Budget statement on Thursday last and deal first with the Spirit Duty, and at the very outset I must protest in the strongest manner I can against the language which was used by the right hon. Gentleman. Without waiting to hear if any argument could be made against the Spirit Duty, and without, so far as one can judge, devoting the smallest attention to the case against that tax, he said: I say if any Chancellor of the Exchequer, in the face of these facts, in response to any appeal from any interests, were to alter a tax that had such very beneficent results, he would be guilty of a crime against society. I say that is a monstrous statement to make. I say that the business of the Chancellor of the Exchequer is to wait before he makes such a statement and before he burns his boats in such a complete manner, to wait until he has heard in Debate what can be said against a tax. That attempt on the part of a Minister to foreclose discussion and to inform us beforehand that, no matter how strong the case may be, he will not listen to it, as he has already made up his mind, was followed by the statement that he must adhere to the tax, because financially, and from a higher point of view, I consider it an unqualified success. So far as Ireland is concerned, no facts were brought forward by the Chancellor of the Exchequer except that the consumption of spirits had enormously fallen, that a leading manufacture of the country was very severely injured, and that financially the tax had been a most dismal failure. Let me take, first, the statement as to the financial success of the tax. I was amazed to hear the statement of the right hon. Gentleman who accepted the estimate, or rather statement, because I will not call it an estimate, that by this extra Spirit Duty he would be better to the extent of £500,000. Here is the language which he used in attempting to justify that statement:— I do not think the Chancellor of the Exchequer is bound merely to consider that, and I think this is the view taken by the right hon. Gentleman sitting opposite—that is not his view certainly of this fiscal reform—at any rate, he is bound to consider the revenue. Now, what has been the effect upon the revenue? I should like the Committee just to follow the figures. There is an idea that we have lost money by it. We have not. Take the following: There was a steady, continuous-diminution in the quantity of spirits consumed in this, country. There was a drop of ft per cent, between 1907 and 1908. Taking the true revenue of 1908–9—we must eliminate forestalments for that period—there was a drop of 5 per cent. If you assume for a moment that we had not touched the Whisky Duty, but kept it at 11s., the diminution, which had been steady and continuous for years at something like 3 per cent, per annum, going on at the same rate in 1909 and 1910, what would happen? If you put the revenue at 11s. and on that basis compare it with the revenue and diminution of consumption at 14s. 9d., we have at least £500,000 to the good. It has been a substantial gain to the revenue and not a loss. That is one of the most extraordinary statements I have ever heard made in the House of Commons. I base myself on the figures given by the Chancellor of the Exchequer and the Secretary to the Treasury. I must say that in all my experience of statements by the Chancellor of the Exchequer—and I have heard about twenty of them—I never heard a more loose statement made in the House of Commons, or one less justified by figures than that which I have just quoted. Let me say a word or two on the reference to the decrease in the consumption of spirits of which the Chancellor of the Exchequer made a great deal. In the first place the decrease in consumption in 1908 was due, of course, to a fall in trade, but there were two other causes powerfully in operation so far as Ireland is concerned, which accounted for a great deal of the fall in consumption. The first is a cause which the Chancellor of the Exchequer, throughout the whole of his speech ignored, although it is a matter of the highest importance, namely, that there has been in operation in Ireland for the last four or five years one of the most remarkable temperance movements known in Ireland since the days of Father Mathew. The Chancellor of the Exchequer said that in some parts of Ireland the arrests for drunkenness had fallen 70 per cent, or 80 per cent. That has nothing to do with the Whisky Tax. I could show him parishes in Ireland where before the tax was ever heard of drunkenness had fallen 50, 60, and 70 per cent, following on missions to the people and on the appeals made by the priests—parishes where nearly the whole of the population had taken the temperance pledge and kept it for a year or two. [Laughter.] Yes, I am very doubtful of the permanence of the movement. But this is no laughing matter. It is one of the most beneficent movements we have known in Ireland, and it unquestionably accounts for a great deal of the fall in the consumption of spirits.

There is another point, and that is that Ireland has been steadily and very rapidly becoming a beer drinking country. You would be astonished if you had the figures on that matter. It has generally been understood hitherto that Scotland and Ireland were whisky-drinking countries, and that England drank mostly beer. That was the case until fifteen years ago, but Ireland has become rapidly a beer-drinking country, and the consumption of spirits has been falling rapidly owing to the consumption of Guinness's porter and other beers. I am sorry to say that it is quite as easy to get drunk on Guinness's stout as on whisky. [Several HON MEMBERS indicated dissent.] I believe it is possible if consumed in sufficient quantity, and a great number of people enjoy the pleasure of drinking the greater quantity, to get drunk. The greatest part of the drunkenness in Ireland is due to the consumption of beer and porter. Therefore those causes which I have mentioned have been at work, and they account for the decrease in the consumption of spirits. [An HON. MEMBER: "NO."] It is a matter of opinion, and that is my opinion. All these causes have been ignored by the Chancellor of the Exchequer in his very insufficient treatment of the subject. He says it has been an unqualified financial success. How does he make that out? Let me deal with the figures. According to his own figures, given by the Secretary to the Treasury, in answer to a question two or three days ago, he estimated that last year he would realise an increase of £1,900,000 from the tax. I hope the Chancellor of the Exchequer will correct me if I am wrong in any of these figures. As a matter of fact, he realised £3,559,000 less, and I say that in the whole history of British finance there never has been a case of so outrageous a miscalculation on the part of the Inland Revenue as this instance. The Chancellor of the Exchequer dealt with that lightly. He said, "I was wrong by millions, but the only comfort I have is that everybody else was more wrong." That is not a very satisfactory excuse for the Chancellor of the Exchequer to give when he has all the enormous machinery of the Inland Revenue Department for making his estimates.

Mr. LLOYD GEORGE

What better machinery had I for estimating the probable decrease in the consumption of spirits than any other person? The yield of the tax depended entirely on the effect which the tax would have on the consumption of spirits by the people. There is no machinery by which you can estimate that.

Mr. DILLON

I thought that was what the Inland Revenue had been doing for years. Surely the Chancellor of the Exchequer does not mean to tell the House of Commons that when he refers to the officials of the Inland Revenue, and asks how a new tax or an alteration in a tax will affect the revenue, the officials do not attempt to estimate what the effect will be, having at their command all the vast machinery of the Department and all the experience of the men who have been at this work all their lives. Does the right hon. Gentleman mean to say that they have no better means of estimating the effect of a tax than an ordinary man? I think that is most absurd. If it were true I should say that the Inland Revenue officials must be of very little use. Now the Chancellor of the Exchequer says that he estimates this year for an increase of £1,555,000 over last year.

Mr. LLOYD GEORGE

I said £1,800,000 for spirits alone.

Mr. DILLON

That leaves this year, according to his own estimate, £1,700,000 short of 1908. He said that figure had to be corrected by making an allowance for the gain of revenue in 1908–9 in respect of forestalments. I have looked into the figures very carefully, and I think the full allowance would be £1,000,000 gained by forestalments in the revenue of 1908. That would produce these results. The result of the new tax according to the right hon. Gentleman's own figures is a loss of £700,000 this year as compared with the true revenue of 1908. And when we remember that the Estimate for this year applies to a year of greatly increased prosperity as compared with 1908 I think it is amazing on the part of the Chancellor of the Exchequer to say that he is better off by £500,000 a year when, as I make out, by the figures he is certainly worse off by £700,000 a year.

I am perfectly well aware that when the Chancellor of the Exchequer makes the excuse which he has made for this extraordinary miscalculation, that he is better off, he is nearer the mark than the trade and other people. I am perfectly well aware that the trade and certain other critics of ours, whom I am accustomed to describe as the two million a year critics of Ireland, did make, and are making, most preposterous statements, and in my opinion are largely contributing to the maintenance of this tax by their wild exaggerations and ridiculous charges. Last year, undoubtedly, certain Irish Members attacked the Chancellor of the Exchequer, and pointed out that under this new Whisky Tax Ireland would be made to pay at least £700,000 a year extra taxation. As a matter of fact, Ireland is paying a great deal less taxation under the new Whisky Tax. Instead of taking more taxes out of Ireland it is taking less. But in their efforts to make up this £2,000,000 a year extra which the Budget is placing on Ireland they were obliged to assume that there would be practically no diminution in the quantity of whisky consumed, in order to show that £800,000 a year would be laid on Ireland by the new Whisky Tax. Then we have the case of the distillers and brewers. I really was exceedingly amused to read in the newspapers the other day the wail about the closing of the great distillery of Kinahan's in Dublin. First of all, I read in one Irish newspaper and one English newspaper—I think "The Times"—as an instance of the scandalous conduct of the right hon. Gentleman and the dreadful effects of the Budget that Kinahan's distillery, one of the greatest and most valuable distilleries in Ireland, had been closed that morning; and I read in another English newspaper that Kinahan's well-known brewery, one of the greatest breweries in Ireland, had been closed, and all the employées were dismissed. In the first place, Kinahan's—about the quality of whose whisky a great deal of difference of opinion exists—never had a distillery, and I need hardly say they never had a brewery, and really I cannot avoid reading, in order to show the monstrous mischief done by these reckless statements, an extract from the report of the meeting of Kinahan's, which took place in Dublin, on Friday last. Here is the statement of Sir Robert Gardner, one of the greatest accountants whom we have in Ireland—I suppose the greatest. He was called upon to address the meeting, and he said:— The facts were that for more than ten years the ordinary shareholders had received no dividend, and for two years the preference shareholders had received no dividend. And then a third and even more important factor was that the dwindling profits of the past years had totally disappeared last year. That is the statement made by the official accountant of Kinahan and Co. That has gone the whole round of the English Press, as an instance of the destruction of Irish distilleries and breweries caused by last year's Budget. That class of argument, and the class of argument to which I have alluded by the Gentlemen who want to make out that Ireland had to pay two millions a year extra under the Budget, is responsible for a vast deal of mischief, and has incidentally done much to encourage the Chancellor of the Exchequer in persisting with what I think is a most unwise and most unjust course, by displacing or neutralising the strength of our argument against this tax. When I protested against this tax last year, and asked the Chancellor of the Exchequer why he had selected this Budget against alcoholic liquid for his taxation, his answer was not that he desired to promote temperance. We never heard a word about that last year. He said, "I have to find £16,000,000. I looked at sugar, tobacco, and every other article I could tax, and the only thing I could tax was whisky." He never said his object was to promote temperance. He said it was to get money. That is his only excuse. Then I asked him, "Why not tax beer? "His reply was, "If I tax beer I would get a great deal more than I want." That is a rather unusual complaint for a Chancellor of the Exchequer. But now he says that this tax must be looked at from the point of view of the highest interests, and he is bound to consider, not only the financial aspect of the tax, but its moral effects upon the people. I think that I have proved that from the financial and fiscal point of view the tax is condemned. It has produced no revenue, and the Chancellor's statement that it has is, in my opinion, entirely incapable of being supported by figures. As it has produced no revenue, it is, therefore, according to all the principles accepted up to this date by English financiers, a tax that ought to be dropped. It cannot be defended. Then he says that he is bound to defend the tax, as it has produced the most extraordinary results in Scotland, where the arrests for drunkenness have fallen off by over one-half. I cannot answer for Scotland; I know nothing about it; but I do know about Ireland, and I say the Chancellor of the Exchequer did not give a single figure in support of his statement about the effect of his tax upon Ireland, and I deny that this tax has had any wonderful effect in reducing drunkenness in Ireland. But suppose, for the sake of argument, I were to allow—which I do not—the assumption upon which the Chancellor of the Exchequer based his statement that it had reduced drunkenness, does he not see how far that will carry us? It is a totally novel principle in British taxation.

Mr. LLOYD GEORGE

It is not.

Mr. DILLON

It is absolutely. I defy the right hon. Gentleman to mention a single case in which a tax has been laid on, admittedly not bringing in a revenue, and for the purpose of producing some moral result.

Mr. LLOYD GEORGE

It absolutely destroyed gin-drinking in this country.

Mr. DILLON

When was that passed? I never heard of it. I am speaking of the great days of English finance—since the days of Sir Robert Peel and the modern principles of English finance which govern us in these days—and I want to direct the attention of hon. Members opposite to the interchange which took place between the two Front Benches at that particular point in the Chancellor's speech. Speaking to the ex-Chancellor of the Exchequer (Mr. Austen Chamberlain), the right hon. Gentleman said, "You at least would not repudiate the doctrine that a Chancellor of the Exchequer may aim at other doctrines by extra taxation." The Member for East Worcestershire heartily cheered. He was thinking, no doubt, of Tariff Reform and he cheered the principle. The ex-Chancellor of the Exchequer was thinking not only of the revenue but of another purpose. He did not go as far even in this, principle as the present Chancellor of the Exchequer, because, as far as I know Tariff Reform, its friends always claim that they will kill two birds with one stone—that in the first place they will get revenue and, in the second place, promote industry at the same time, or Imperial union. But I never yet heard a. Tariff Reformer admit that he proposed to lay on Tariff Reform taxes for the purpose of promoting industry and without any reference to revenue at all. This is a new and very far-reaching principle, and if it is accepted I do not quite know where it is going to end. Because, after all, one of the greatest evils of these modern days is the gross inequality of incomes, and the Chancellor of the Exchequer, if his principle is once embodied in the finances of this country, may come down here in a year or two and say that every man with over £3,000 a year must give up 50 per cent, of his income to be distributed among those who have less. That would be having a good moral object in view. Some hon. Members cheer that, but I do not know that the whole of the Liberal party would accept it; but it is based on precisely the same principle. No doubt it is an extension of the principle, but if you accept the principle that you may pursue objects of moral reform and the greatest good of the people, apart from finance, by taxes, then it will carry you very much-farther than you have the slightest idea; of at present.

I will pass to the next point which the Chancellor of the Exchequer raised, and I would only say, in conclusion, that as far as I am concerned I am opposed to this tax, and when the proper time comes I think we will make so strong a case against it on the arguments that the Chancellor of the Exchequer will have seriously to reconsider his declaration as to a crime against society. On the question of education I must confess that I am grateful to the Chancellor of the Exchequer for having raised it. The state of affairs in Ireland with regard to the Whisky Duty and intermediate education has long been a crying scandal. It is most shameful that for nearly thirty years, since the intermediate education system was forced upon us—a horribly bad system in my opinion—we have been denied an opportunity of discussing this matter on the Estimates in this House. We have again and again asked the Chancellor of the Exchequer, and we have never been allowed to discuss it except on private Member's Motions, which is a very ineffective method of discussing it. While as regards England and Scotland, the whole educational system of the country has been brought up for review every year, yet in Ireland where the system is infinitely worse and owing to many causes is starved, we are not allowed to discuss it. I was delighted to hear that the Chancellor of the Exchequer has decided to put the payments on a firm basis and not to have them subject to the fluctuations of the consumption of whisky. I will not enter into that now because it will be debated fully when the matter comes on. But I wish to protest against the suggestion that we can accept as satisfactory the basis of 1908. He said it would be placed on the basis of that year. According to the figures which I have here that would not be a satisfactory result for Ireland because in 1908 the Grant to Ireland had decreased by something like £20,000 as compared with six years previously. I suppose it was because of the steady decrease in the consumption of whisky in Ireland. According to this principle, the more sober our people and the less whisky they drink the more they starve the education of the country. When that subject comes up I wish to give the Chancellor ample notice that we shall feel it our duty to raise the whole question of the financial treatment of secondary education in Ireland, and to show that whereas in Ireland we only get this decreasing and vanishing Whisky Duty large sums are granted in Scotland and England from the general finances of the country.

I pass to the question of pauper disqualification, and must point out to the Chancellor that this is a new proposal. We were distinctly given to understand, all of us, that this was to be an automatic removal of the pauper disqualification, and that the pension should be given on the same terms as those on which it was given to the old age pensioners who already receive it. The Chancellor of the Exchequer now tells us that it can only be done by compelling the local authorities to contribute what it costs them for paupers to old age pensions. I ask the right hon. Gentleman to reconsider this question. In the first place there will be bitter disappointment among the local authorities, who, in all the discussions which took place, never heard the suggestion that this would be the basis. [HON. MEMBERS: "Oh, yes."] I do not think there was any statement that they would be bound to contribute the whole sum that it cost them for the paupers. I know it was not so understood in Ireland. The difficulty of calculation will be extremely great, and I should like to have some word from the Chancellor of the Exchequer on that point. Take the case of the North Dublin Union. There, thinking that they were sure to have the pauper disqualification removed, they automatically put the old age paupers outside on 4s. or 5s. a week, believing that it would be only for a few months. Is the Chancellor of the Exchequer going to charge them that, because they had the humanity to treat the paupers in that way? Then take the case of indoor paupers. How is a calculation going to be made with regard to them? Is it intended to take the cost of administration, or only the cost of food? The calculation will be an extremely difficult one; it will vary from union to union, and there will be different bases of contribution in the unions. It is unfortunate that this should take place, for it will make the whole of the right hon. Gentleman's scheme fall to the ground, because those unions will profit where they have treated the paupers most cruelly, while those who have been humane in their treatment of the paupers will not profit. In the City of London the whole thing will result in the union having to bear the entire cost, so far as I know. I am afraid this new principle will lead to infinite complications in the removal of pauper disqualification. I am one of those who have held that the policy of the Chancellor of the Exchequer is the most magnificent one ever devised for the poor and for the workpeople of this country, and I would be very sorry to see it involved in prolonged wrangles with the local authorities. On Thursday the right hon. Gentleman said it would be a most unjust thing to anticipate the discussion on local finance, which is to come on next year or the year after; but you must look at finance as a whole, and if you relieve local finance of the cost of these paupers, you set free a certain portain of the rates for other purposes. Local finance does not consist of watertight compartments.

I now come to the crucial point of the whole of this question of future social reform, which is involved in the Budget. It really turns on the question of naval expenditure, and the right hon. Member for East Worcestershire (Mr. Austen Cham- berlain) rightly wound up his speech by dealing with this subject. This naval expenditure hangs like a foul shadow over the whole subject of social reform, and when the Chancellor of the Exchequer tells us that next year he hopes to bring forward a scheme for insuring against unemployment and a scheme for insuring against invalidity—two measures which will be the greatest blessings that could possibly be enacted by this House for the working classes of this country—I say that if something is not done, and done drastically, to check naval expenditure you will not be able to achieve those objects. What has happened within the year? The sum of £5,500,000 has gone on increased naval expenditure as the result of a scare, and the statements which led to that scare have been disproved in every particular. Last year we were told by Members of both Front Benches that Germany was going to have so many "Dreadnoughts," but there is not a single statement made on either Front Bench up to now which has not been disproved. Every one of those statements which were calculated to anger the German people and greatly increase the power of the Navy League in that country, while the people of this country were lashed into a state of absolute panic, insane panic, has been disproved. There never was any ground for them, except in the imagination of English Ministers. The right hon. Gentleman said that Austria had laid down four "Dreadnoughts," and the Noble Lord (Lord Charles Beresford), who has again graced us with his presence, and who is an advocate of a big Navy, must have felt humiliated when the British Navy was threatened by Austria. What do we hear to-day on that point? The hon. Member for Mid-Armagh, supported by one of the Members on the Front Opposition Bench, asked about the Austrian "Dreadnoughts," and it appears they have "vanished into thin air"; nobody knows anything about them; the keels have not been laid. But they served their turn, and they and the imaginary increase of the German Navy together have cost this country £6,000,000 one year and may cost us another £3,000,000 in the next year. The result will be that the Chancellor of the Exchequer, in spite of all his efforts and all the triumph of his Budget, will find himself next year with a large deficit and unable to deal with insurance, either for unemployment or invalidity, nor is he able to deal, as he would wish, with the relief of pauper disqualification without taking from the ratepayers all the money they have contributed towards the maintenance of paupers. And all this because his millions have been swept away for this gigantic naval construction. That is the position of affairs, and I deeply regret it. This Budget, as a whole, as I have said before in this House and on many an Irish platform, properly judged, with all its social reforms which are part and parcel of the policy which is embedded in it, and of which it is a foundation, is a great and good measure, and especially great and good for Ireland, except in respect of certain details to which we object, which we propose to fight, and which are in no way essential to the measure. The only thing that disheartens me and makes me sympathise deeply with the Chancellor of the Exchequer is that, having achieved, against many difficulties, this great triumph, and placed the finances of this country on such a solid basis, while Continental Governments are simply going from loan to loan and deficit to deficit, the right hon. Gentleman should be robbed by a bogus scare that has taken away the millions to which he looked for relief of the grievances of the working classes.

Sir THOMAS WHITTAKER

The hon. Member opposite (Mr. Dillon), in regard to the Spirit Duty, criticised the Chancellor of the Exchequer because his estimates of the yield from that duty had proved somewhat incorrect. But the Chancellor of the Exchequer may claim that, however bad his estimate has been, others have been much worse. I confess that I was one of those who believed the Chancellor of the Exchequer's estimate to be a bad one, and I thought the duty would produce a great deal more. I believe that was the general view of the trade in the country. The estimates have proved to be wrong, but it is the fact that the Chancellor of the Exchequer's estimate has proved to be nearer than that of anyone else. When there has been that general discomfiture, the man nearest the mark is entitled to some credit. The contention is, first, that no revenue has been produced, and, secondly, that you are not entitled to maintain these duties on moral grounds. The Chancellor of the Exchequer, it is said, is only entitled to look to financial grounds. In the first place, the right hon. Gentleman told us that this Spirit Duty has produced £500,000 more than would have been produced by the old duty. As the hon. Member has challenged these figures, the Chancellor of the Exchequer has given me the estimates on which his figure is based. Of course, it is very difficult to make this estimate accurately, because we have to remember that the receipts for the year 1908–9 from the Whisky Duty were abnormal owing to the enormous forestalments and the consequent extra payment of duty in that year. The forestalments enormously reduced the amount of duty that was collected last year, because the whisky which was taken out of bond previously was used in the following year. That complicates the matter very much indeed. The estimate of the Inland Revenue authorities is this. The receipts in 1908–9 were £21,417,000. Of that it is estimated, based on the figures of previous years, that the forestalments represented a duty of £695,000. That brought the duty, the real duty for the consumption of that year, to £20,722,000. We have had a steady diminution from year to year in the consumption of whisky. It has fallen year by year, and there is no reason in the world to believe that the fall would not have continued last year and this year if there had been no change in the duty. The diminution has been an average of 3 per cent., and, taking 3 per cent, for last year and 3 per cent, for this year, that brings down the estimate, at 11s., to £19,498,000, whilst the Chancellor of the Exchequer has estimated—and he believes it to be a moderate estimate—that with the duty at 14s. 9d. he will get £20,000,000, and that it is really £500,000 increase. These are the figures on which it is estimated that this extra duty will bring an increase of £500,000, and therefore it is not correct that it is a loss—it is an increase of revenue. It is said, "You have no right to levy a duty on purely moral grounds." The taxes on whisky have been largely placed on that article upon moral grounds. No one would suggest that on purely fiscal grounds, and as a matter of fiscal equity, we should put a tax of 11s. a gallon on spirits. That high duty was justified alone on moral grounds. It has always been the practice of this House to levy this duty on moral grounds, and the only limit, to use the expression of the hon. and learned Gentleman, the Member for Waterford (Mr. John Redmond) was "the smuggling limit." This tax has been raised to 14s. 9d. without reaching the "smuggling limit." It is very difficult to understand what really is the cause of grievance on the part of those who are opposed to this duty—they take so many different grounds. First of all they tell us it has not promoted temperance. That means it has not caused a reduction in the consumption, and if it has not caused a reduction in consumption where is the distillers' grievance? Again, they say that the reduction in consumption is due to the temperance movement. If that is so, it is not due to the duty, and, therefore, they have no grievance. On the other hand, they tell us it is due to the duty. When they say that we say that it produces a great moral effect on the country and that its justification is its moral effect. The hon. Member for Ayr (Mr. G. Younger) told us, and the hon. and learned Member for Waterford (Mr. John Redmond) told us the same thing, namely, that it has led to the consumption of crude, immature raw whisky, maddening stuff, that causes drunkenness. But the ugly fact that they have got to get over is that there has been far less drunkenness under this consumption than there was before. Therefore their theory, their pure invention in my judgment, that it has led to the drinking of immature whisky, is not justified by the facts, and, in fact, is opposed to the facts. The hon. Member for East Mayo (Mr. Dillon) tells us that the temperance movement is the cause of the diminution of the consumption of whisky in Ireland.

Mr. DILLON

I say contributed largely. I did not say it was the sole cause of it.

Sir T. WHITTAKER

If the hon. Member admits that the duty has diminished the consumption, there, I say, is the justification for the continuance of the duty.

Mr. DILLON

Of course I admit it; everybody knows it.

Sir T. WHITTAKER

I am very glad the hon. Member admits it.

Lord HUGH CECIL

Does the hon. Member say that all consumption of whisky is intemperate consumption?

Sir T. WHITTAKER

Certainly not. I am using the term in its general acceptance. Of course I should be glad if no one drank whisky, but taking a general point of view the duty has led to a great diminution. The figures as to drunkenness in Scotland are conclusive, and show that it has diminished what everybody will admit to be intemperate consumption. What would a reduction in this duty mean? On the experience of the past year it is perfectly clear that it would mean an increased consumption and increased sale. It is for that purpose it is desired; it is for the benefit of the whisky trade in order to increase sale and consumption, and in that way it would increase the drunkenness, and not only increase drunkenness but a good deal of other misery, poverty, bad health, and brutalities which result from drunkenness, and are not all represented in the police returns. Diminished drunkenness means an enormous boon to the people of this country. When we have got an increase in revenue and a great moral reform I consider that the Chancellor of the Exchequer is justified in adhering to this duty, and personally I wish to thank him very warmly indeed for adhering to it. It is true that that is not the effect that was anticipated and that it was a surprise, but when it has happened so let us have the sense to learn the lesson and adhere to it.

As to the question of the readjustment of local taxation, the Chancellor of the Exchequer has undertaken to deal with that matter. I do hope when he comes to deal with it that we shall find that the Land Taxes go largely to the localities. With regard to the removal of the pauper disqualification, it seems to me quite reasonable that he should ask the localities to contribute towards that cost as much as they are paying at the present time. With regard to dealing with the question of unemployment, and the bearing that naval expenditure has on that, we shall all agree in deploring the enormous naval expenditure if we may not be all agreed as to the possibility of avoiding it. We do deplore it, and shall be glad to see it cease, but I hope that this question of dealing with unemployment will not depend on our being able to diminish our naval expenditure. Somebody bears that burden now; it is borne by the poor fellows themselves and their families; and if the nation as a whole bears it, it is not an extra cost to the nation, it is merely spreading over the whole community the burden which is now borne by those least able to bear it. In connection with the Chancellor's estimate for a great increase in revenue during the present year, you must bear in mind that that does not arise entirely from anticipation of improved trade, but only a certain proportion of it. A great deal arises from the fact that this year, for the first time, we shall get the full effect of some of the new taxes; we shall get the full benefit of the Whisky Tax, because last year the revenue was deprived of a. large amount owing to the forestalments of the year before. There is also the curious fact that in the last financial year there were two Easters, while in this financial year there is not one, and that means a considerable difference in the revenue for the year. We have also the ordinary increase in the population and the growth of wealth. It is estimated that the ordinary average increase in the income and wealth of the country is something like 2 per cent. That must be taken into account. We would also do well to remember that when we are looking at, or getting alarmed at, the increased expenditure of the country, there are some items in our account which do not represent taxation of the people. I have been looking back into our expenditure for the past thirty years, and I find that that in the Post Office has grown from five millions to nineteen millions. That is not a tax on the people of the country, but is a profitable expenditure bringing in an ample return. That item appears as if our expenditure had gone up by the difference, while that is not so.

Another interesting figure I came across was that, as compared with thirty years ago, we are paying £5,000,000 per year less in connection with our National Debt. Our civil expenditure has risen from £17,000,000 to £42,000,000, our expenditure on the Army and Navy has risen from £25,000,000 to £68,000,000, and on the Navy alone from £10,000,000 to £40,000,000. That is a very serious burden indeed. When we come to look at the way in which the money is raised, it is very interesting to note the trend of taxation. During those thirty years our income from Excise and Customs which is pretty well spread equally over all classes of the community, has increased by 50 per cent., but our income from Income Tax, Death Duties, Land Taxes, House Duty, and stamps, representing taxes on property and income above the working-class level—those have during the thirty years increased by 225 per cent. That is an enormous increase in the amount of revenue that has been taken from the middle and well-to-do classes of society. I am not now criticising it or saying that this is unfair, but I think it is well that we should realise that during the last thirty years we have enormously altered the incidence of taxation in this country. That represents a larger proportion than the increase in the incomes of the country, as indicated by the Income Tax returns. That increase of incomes amounts to 64 per cent., while further taxation upon that class has increased by 225 per cent. Thus it will be seen that the middle and well-to-do classes are bearing a very large share of the increased expenditure. I am very sorry that the hon. Baronet the Member for the City (Sir F. Banbury) is not in his place. He is continually referring, as did the hon. Member for South St. Pancras (Captain Jessel) the other day, to the fall that has taken place in the price of Consols during the time the Liberal Government has been in power. It is their habit continually to attribute to the Liberal Government in power the blame for the fall in Consols during the time they are in power, and when they are reminded that during the time the Conservatives were in power Consols fell very much more, then they set to work to find all sorts of excuses. They never think of the explanation as regards the Liberal Government, and the mere fact of the fall is sufficient, they think, to justify them in blaming the Government. During the time the Conservative Government were in power British Consols fell 22 per cent., and enormously more than the securities of other Governments. What are the reasons?

Captain JESSEL

In stating 22 per cent, does the hon. Member bear in mind that Consols are now 2½ per cent., and that they were then 3 per cent.?

Sir T. WHITTAKER

Just so; they always begin to give the reason. When the Liberal Government is in power they are responsible, but when the Tory Government is in power there are all kinds of explanations, and that is one of them. I was going to point out what are the real reasons for the fall in the price of Consols. The first of all is that the rate of interest is lower. The second is that there was an enormous increase in the amount of the National Debt owing to the South African war. The next is the great extension of the area of trustee investments. By opening Colonial securities trustee investors obtained a great supply of securities in the market.

Mr. STEEL-MAITLAND

Will the hon. Member tell us how many of those causes have been operative since 1905?

Sir T. WHITTAKER

They are operative to-day. In addition to that there is the creation of Irish Land Stock. There are £47,000,000 of Irish Land Stock on the market to-day. We have the guaranteed Transvaal Loan of £40,000,000 more at 3 per cent., which is practically Government Stock guaranteed by the British Government. In addition to that we have had the very large increase in the borrowing of municipal corporations recently, and for some years past, at the rate of 4 per cent. Very fine securities they are, and they compete with Consols. There has been as well a great addition to the supply of gilt-edged securities in the market. During the last year we have had exceptional borrowings in the Money Market by the Government to meet the financial necessities of the day. The last reason of all, and a very important one, has been the great improvement in recent years in the financial status of many countries in South America and elsewhere which made the British public more willing to invest in those securities than they had been because they had very much improved. Of those causes how many of them are due to the present Government? Who reduced the rate of interest? The Tory Government. Who increased the debt for the South African War? The Tory Government. Who extended the area of trustee investments to Colonial securities? The Tory Government. I am not complaining; but these are some of the reasons, therefore do not blame us. Who established the Irish Land Stock, and rendered it necessary? The Tory Government. Who rendered it necessary to guarantee the Transvaal loan? The Tory Government. Who rendered necessary the borrowing this year to carry on the finances of the country? The House of Lords, against the Liberal Government.

There are only two reasons left, one is the increase of municipal borrowing. Neither party is responsible for that; you cannot blame the Government of the day for it. The other is the improved status of many foreign Powers. We are not responsible for that, but we are very glad it is so. Where in these reasons is there ground for complaining of the Government of the day? There is none. The reasons, so far as they can be put down to either side, are attributable to the Tory party. I am not saying that they were not justified in doing what they did. An hon. Member asked what these reasons have to do with the present price of Consols. They are having their influence to-day. The wide extension of the field of investment has seriously affected the price of Consols, and continues to do so. The continued fall in price brought about by each of these causes has shaken people's confidence. They wonder how much farther Consols are going, and they refuse to invest in them. I suggest, therefore, that the charge against the Government breaks down entirely, and, like many other arguments used by hon. Members opposite, is very shallow and superficial.

I think we may congratulate the Chancellor of the Exchequer on his Budget, and on the prospects which he holds out for the future. The dark spot ahead is, as the hon. Member for East Mayo (Mr. Dillon) has said, the enormous expenditure on the Army and the Navy. One hopes, however, that common-sense will dawn some day. We have also to remember that we are in better times. Whether or not the forecasts of the Chancellor of the Exchequer are too sanguine, I do not know; but any man who has any acquaintance with the commerce and industry of the country knows that trade is improving, and that there is a far more hopeful spirit than there has been for some time; and that also will improve the revenue.

Lord CHARLES BERESFORD

There have been so many remarks made, both by the Chancellor of the Exchequer and by other speakers, as to "scare," "panic," and "invasion," that it is time to ask how the so-called scare—I prefer to use the term "grave anxiety in the country"—was brought about. It entirely rests with the Treasury Bench. Ministers on that Bench, in March, 1909, made certain speeches of a very grave character. The gravest speech of all was one made by the "Secretary of State for Foreign Affairs. It was as grave a speech as could be made, not only by a Minister, but by the man who must know more than anybody else in the country, because he has charge of the Foreign Department. Those speeches were justified by the Government adding to the Navy Estimates not £5,000,000, as you must take into account Supplementary Estimates, but £6,000,000. They then brought in last year Navy Estimates of £3,000,000 over the preceding year, and there is another £5,500,000 this year. Their own party, with the exception of three, opposed them. We supported them, because we believed that the Ministers were right, and knew that they were right, in their statements of March, 1909. Then we are charged with causing a scare, and with being party on the question of the Navy, when we simply supported the Ministers of the day, who proved their own statements to be correct by bringing in increased Navy Estimates. I think we should be fair, no matter to what party we may belong. The Ministers of the day must know more than we know. We can only be critics in Opposition, and when Ministers make such speeches and justify them by bringing in immense Navy Estimates, it is not fair to say when we support them in the House that we have made the Navy a party question in the country.

We have been rather abused also for speaking about invasion. Who ever heard of invasion until the Secretary of State for War said that we must rebuild the whole of our Fleet unless we wanted to become the conscript appendage for a foreign Power? How could that happen unless there was an invasion? The War Minister is responsible for what has been called the invasion scare. I object to the word "scare" and to the word "panic." It is not British, and it never does any good. If you have a panic you have to pay the highest price for the worst article, and as my countrymen would say, you do not get it then. You ought to have a common-sense policy, to make out what your requirements are, and why you want them. You should make out a big programme. As sure as you are going on as you are now, with Germany neck-and-neck, you will come to a panic and to war sooner or later. You want a bigger, better, and quicker programme than a neighbouring nation—which has a perfect right to build a hundred "Dreadnoughts" without our saying anything offensive to her—and this insane competition of armaments will stop, and we can think something about reducing them. But we have got to live, and there is no Member on the other side who will deny that we have to live by keeping control of the sea. Where, then, is the difference of argument? The point of argument is about what is necessary to keep the control of the sea. The Government have brought forward these enormous estimates and the Chancellor of the Exchequer is perfectly right when he says we shall have a further increase next year. We shall have an enormous increase next year. Where is the fault? Knowing what they knew, the Government delayed their shipbuilding for economy's sake. Hon. Members opposite are quite right in fighting for economy. We all want economy. But you cannot, for the sake of economy, sacrifice the safety of the Empire. The Govern- ment delayed their shipbuilding, and when they laid down ships they retarded them or put them back. They are now a long way behind where they ought to be. They ought to have had their four contingent ships last year instead of this, and their five other ships this year instead of next. If they go on like that their expenditure will go on, the insane competition in armaments will continue, and next year the Chancellor of the Exchequer will come down with a largely increased estimate.

I listened to the right hon. Gentleman's Budget speech very attentively; he seemed to have tears in his voice, and to speak as though he had to produce this money for unnecessary ships. The right hon. Gentleman is in the Cabinet; he knows perfectly well that these ships are necessary, and that more ships will be necessary next year. It is his Cabinet that is to blame for that state of affairs. If the Government had kept up the normal rate of building instead of reducing it, I venture to say that a neighbouring Power would not have accelerated their programme, because they would have seen it was useless. It was those reductions that caused them to accelerate their building, and when the Government produced their big Navy Estimates there was nothing new—nothing they had not known for four years—going on on the Continent. They suddenly found themselves in a fix because they had made false economies, and they came down on the public, who, consequently, had to pay a great deal more than they would have had to pay if the Government had kept up the normal shipbuilding programme. That is my opinion on that question, and I think it is well founded.

There is another reason why I blame the Government. It may be asked how this state of affairs has arisen. I have said before, and it cannot be too often repeated, that it was in consequence of the arrogant pretentions and assertions made with regard to what the "Dreadnought "would do with other fleets.

The CHAIRMAN

How does the Noble Lord connect this with the question before the Committee?

Lord C. BERESFORD

It is very difficult to say. I may, however, refer to this point. I have a doubt as to the Estimates next year, because the party opposite is entirely under the orders of my countrymen. I do not know whether the Chancellor of the Exchequer has ever read a Chinese edict. The orders are very drastic, and they always end with the words, "and tremblingly obey." The Cabinet have been tremblingly obeying for some time. The Chancellor of the Exchequer has now put his foot down about the Whisky Tax, and I think it will be a matter of some considerable excitement later on to see whether the trembling will be on the benches opposite, or on the benches below the Gangway on this side. However, there is no question that the Irish hold the field. I am an Irishman, I dislike my countrymen's politics immensely; I am an anti-Home-ruler; but I cannot help being amused, I will not say satisfied, by seeing my countrymen at this moment absolutely ruling the roast in the British Empire. How long the Anglo-Saxon race will stand what I may call the benevolent autocracy of the Member for Waterford, I do not know. I expect we shall see some curious things next November or a little later. I seriously believe that what is coming in this country, owing to the extraordinary mismanagement of naval affairs by the Government, is the question of sea-power versus Socialism. The party opposite are asking for an enormous amount of money for social reform. Everybody on this side wants social reform. But no matter how necessary social reform may be, or how certain it is that it will have to be carried sooner or later, is it secure unless you have your defence secure? The hon. Member for East Mayo said very wisely that this competition in armaments is a tremendous drag on the country. I say that drag would have been stopped if you had kept up your normal expenditure, and not come with a rush. But that drag, owing to the increase of foreign Powers will have to go on because you have got to keep control of the seas. I believe, myself, that signs are not now wanting that a serious attempt will be made to sacrifice the maintenance of sea-power to the demands for a social programme. I am not at all trying to make out that these social reforms are not necessary. We know they are necessary. I think a great deal of what the Chancellor of the Exchequer has done in the way of relieving the poor was right, necessary, and ought to have been done long ago. But may I ask where the poor will be unless you can keep control of the seas? I am perfectly willing to see the Navy reduced, the Constitution smashed, and the Empire broken up if that is the will of the people. Naturally! But I want to know that it is the will of the people. The basis of the whole thing is in this House. You talk about reform of the House of Lords. It is this House that wants reforming—

The CHAIRMAN

May I remind the Noble Lord that we are dealing with finance.

Lord C. BERESFORD

Well, Mr. Emmott, it is very difficult to get round this question. The supply of the year is passed by the House of Commons, and that is what I was coming to. The House of Commons is elected by the people, but when 33,000 electors send one man to the House, and 1,700 electors send another man to the House—

The CHAIRMAN

The Noble Lord is going quite too far.

Lord C. BERESFORD

I am very sorry Mr. Emmott, that I turned my remarks in the wrong way. This question of sea-power is a predominant one. If you have not got your Empire properly defended, and you do not keep command of the sea, all these social reforms which we all want—I do not say we can carry them in the way that hon. Members opposite desire—can never be carried, and can never be secured if they are carried.

Mr. SNOWDEN

The Noble Lord who has just sat down is the representative of sea-power.

Lord C. BERESFORD

Hear, hear.

Mr. SNOWDEN

I rise to speak as representing Socialism. It is perfectly true that the issue raised by the financial proposals now before this Committee are as stated by the Noble Lord. That is whether the available resources of the country are to be used for the purpose of increasing the power of the Navy or are to be devoted to financing schemes of social reform. The exceptional circumstances under which the Chancellor of the Exchequer has introduced his Budget this year forbids anything in the nature of ungenerous or captious criticism. I hope, therefore, that in any adverse remarks I offer the right hon. Gentleman will believe that I speak more in sympathy than in anger. Although the Budget has been described as of a humdrum character, the total figures of that Budget, I think, can hardly be described as humdrum. The Chancellor of the Exchequer last year introduced and eventually passed into law an epoch-making and revolu- tionary Budget. He has this year established another record. He is imposing upon the taxpayers of this country a larger burden than has ever been laid upon them in any previous year. I am not an economist in the old Radical sense of the term. I am not appalled by the total figures of the right hon. Gentleman. I hope to live to see the time when the Chancellor of the Exchequer will stand at that Table and propose a Budget of £300,000,000 or £400,000,000. A Budget must be judged, not by the taxation which it imposes, but by the purposes for which that taxation is imposed, and by the methods which are adopted in order to raise that financial revenue. The only thing I can say by way of congratulation at the total figures of the Budget is that there is included in that taxation a larger sum for the purposes of social reform than perhaps had been included in any former Budget. But I think that considerably more than half of the £170,000,000 which is to be raised this year is for purposes which we all deplore, however necessary they may be. Something like £70,000,000 of that total is required for fighting purposes. Including the interest and redemption on the National Debt nearly £100,000,000 of this revenue will be needed for preparations for war, for war, and for past wars. That Budget of the future, which I am looking forward to, will provide additional millions for the purpose, not of fighting, not of the destruction of life and property, but for the increase and for the protection of both. "There is that scattereth, and yet increaseth; and there is that withholdeth more than is meet, but it tendeth to poverty." The wise man of Israel said that. I think it might be a text for the Chancellor of the Exchequer. It might be a policy for this House.

I began by taking up the remarks of the Noble Lord opposite that the immediate issue raised by this Budget was whether the increased taxation was to be devoted to increasing the Navy or whether it was to be used for the purposes of social reform. When I was speaking a few weeks ago upon the increased Naval Vote I ventured to say that we who sit on these benches would not be content to see "Dreadnoughts" take the place of schemes of social reform. That statement of mine was applauded from the Government benches. I repeat that here this afternoon. The Chancellor of the Exchequer has postponed the eighteen- months'-old Government pledge to deal with the question of the insurance of unemployment and infirmity until next year. The redemption of that promise depends upon the expenditure upon the Navy next year resuming its normal condition. [An HON. MEMBER: "There will be a great increase."] The Noble Lord said that next year there will be an appalling and alarming increase in the expenditure upon the Navy. The Chancellor of the Exchequer just now did not contradict that statement made by the Noble Lord. Therefore I think we are justified in assuming that next year the position will not be better than to-day. If there be no money for the purpose of carrying out these schemes of social reform this year, then there cannot be money for that purpose next year. In that connection I want to call the attention of the Chancellor of the Exchequer to words he uttered last year—words which have a very pertinent bearing upon the matter which I am bringing before the attention of the Committee. The right hon. Gentleman said:— Can the whole subject of further social reform be postponed until the increasing demands upon the National Exchequer by the growth of armaments has ceased? Not merely can it be postponed, but ought it to be postponed? Is there the slightest hope that if we deferred the consideration of this matter we are likely within a generation to find any more favourable moment for attending to it? That is what I say to the Chancellor of the Exchequer now. He is postponing until next year the fulfilment of the Government pledge to deal with what I believe to be the gravest of social problems, namely, the problem of unemployment, of infirmity, and of invalidity. I ask him—and I ask him to reply to this—is there any reasonable hope that next year he will be in a better position than he is to-day to redeem that pledge? He cannot redeem it next year except by imposing additional taxation. The Chancellor is probably anticipating a surplus—that is a digression that I cannot enter into just now—though I do not think he is justified in anticipating it, for I do not think he will have a sufficient surplus to meet even the increase in the naval expenditure. He cannot, I say, redeem the pledge next year in regard to the three matters I have named without the imposition of new taxes. Why, therefore, cannot he do it this year? There is no reason why he cannot. The cost of this insurance is £1,250,000. A halfpenny on the Income Tax would do it. Surely it is far better, from the point of view of the welfare of the community, that 5,000,000 of men should be supported in their privations, extremity, and misery than that a halfpenny in the pound should still remain in the pockets of those who have already far more than they can use, either with benefit to themselves or with benefit to the community!

I want to say a word or two upon one or two other matters. The Chancellor of the Exchequer interrupted me just now with a query as to how I believe it will be necessary next year to impose additional taxation for social reform. The right hon. Gentleman is probably anticipating a surplus next year from this great trade boom of which he has spoken. I do not deny that trade has improved. I think, in spite of the statement made by the right hon. Gentleman the ex-Chancellor of the Exchequer this afternoon, that trade has very generally improved. If we have not already entered upon that improvement, at any rate we have in front of us a period of exceptionally good trade. The point I want to bring to the attention of the Committee is this: that the condition of a great mass of the people of this country remains practically untouched by the improvement in trade. The only section of the working classses which benefits from any improvement in trade, whose condition is better in booming times than in times of trade depression, is that margin who are thrown upon the unemployed market during the period of bad trade. I might put it that 90 to 95 per cent, of the working classes of this country are not better off during a period of good trade than in a period of trade depression. As a matter of fact, if I wanted to make a point, I could prove they were worse off, because during a period of good trade there is always a considerable increase in the cost of living, and the wages of the working people do not increase during the period of trade prosperity, with the exception of one or two large industries. I should like to bring to the attention of the Committee one or two interesting figures bearing upon that point. The Chancellor of the Exchequer, in his Budget statement, said that probably this year the total of our foreign trade will be the largest on record, and he spoke of the general prosperity of the country as a consequence of that. Does the condition of the working people of this country depend upon the extension of our foreign trade? I am quite prepared to concede if you have a large foreign trade, you have at the same time a large boom. I find that in 1901 the total of our foreign trade—I am not now including re-exports, but imports and exports—amounted to £801,000,000. The unemployment at that time, according to the Returns was 2.5. In the year 1905 our foreign trade had risen to £894,000,000; the unemployment was double in percentage; and although in these four years (1901 to 1905) the foreign trade had risen by nearly £100,000,000, according to the Board of Trade Returns; wages in these five years had gone down by £13,000,000. You had an increase of £100,000,000 in the amount of our foreign trade, a doubling in the percentage of unemployment, and a decline of £13,000,000 in wages.

Let us now turn to the Income Tax returns. In 1901 the gross amount assessed for Income Tax was £833,000,000. In 1905 it had risen to £912,000,000. The amount assessed for Income Tax had gone up by nearly £100,000,000; the numbers of unemployment doubled and the wages had gone down by £13,000,000 a year. In 1906 foreign trade had risen to £983,000,000; unemployment was down. The Income Tax assessment had risen to £935,000,000. In 1907 the foreign trade record was £1,072,000,000; unemployment was slightly higher than in the previous year, when the volume of trade was lower. In 1908 foreign trade was down, and a decrease of £3,225,000 in wages. In the following year, 1909, foreign trade had gone up to £1,003,000,000, unemployment was practically a record, and wages during these two years were down by nearly £7,000,000. What do the Income Tax returns show? Bad trade or good trade it is ever swelling bigger and bigger. Between the years 1901 and 1909 the assessment of Income Tax has risen to £1,040,000,000. The right hon. Gentleman in his Budget speech the other day did not give us the gross assessment of Income Tax last year. I venture to say that I should not be far wrong if I say that the current amount upon which Income Tax will be assessed during the coming year will not be far short of £1,100,000,000. What does that prove? The boom in trade is upon us, let us see how are wages. The Board of Trade Returns for the five completed months of this year show that there has been an increase in wages of £8,139 a week, and a decrease of £5,587. That shows and proves the statement I make that the working people are not going to share in this prosperity, and that it will go as the result of all former prosperity has gone, to increase the wealth of a small class of the community who are already enormously rich.

My right hon. Friend the Member for the Spen Valley (Sir T. Whittaker) demolished, I think, very effectively, the statement made from the other side in regard to the reason for the fall in Consols. I do not really know much about them, but I know quite sufficient to be able to say that there are many ways in which the price can be manipulated. There are other indications of the wealth of the country besides the rise in Consuls, and you have them here in these figures—in regard to Income Tax. I mention these things because I want to show that these urgent schemes of social reform, these long-promised schemes, need not wait, they can be begun now if the Chancellor of the Exchequer will be only as brave and courageous as he was last year. I hope he is not going to weary in well doing. Those of us who supported the Budget last year did so not because it was the end of all things, but because it was the beginning of something. I have never hidden the reason of my support of the Budget, and I heartily agree with the statement made by the hon. Member for East Mayo (Mr. Dillon) in which he suggested the possibility of taxing incomes of over a certain amount at the rate of 50 per cent. I suggested that many years ago, and I did it not only for the purpose of bringing about a rise in the revenue, but to effect very desirable social reform.

Perhaps I may say in passing that if we as Socialists had complete control of the matter of formulating the legislation submitted to this House, that we should endeavour to secure revenue not by increment upon land or taxing land values or monopoly value of licensed premises, but in a much more effective way, and in a way that would not inflict as much hardship upon the individual as is attempted by means of taxation. I would give the present landowners every penny of the present value of their land. The State would then resume the ownership, and you would have settled for all time the question of future increment. It would all accrue to the community, not 20 per cent, of it, but 100 per cent, of it. I would treat the liquor traffic in the same way. I would not tax them out of existence; I would buy them out of existence; and it would be the best bargain the State ever made for millions of people. That is not new. [An HON. MEMBER: "Where would you get the money?"] That is a question very often put by an ignorant man who attends your meeting. It is most frequently addressed to us from the back of the crowd. Where would I get the money? If you tried to float the public-houses of this country as a trust to-morrow, with the assurance that they were to be free from increased taxation, you would not have the slightest difficulty in raising all the money you want. It would be subscribed ten times over.

Mr. PETO

Would the hon. Member guarantee steady consumption of liquor?

Mr. SNOWDEN

If it cost the community £1,000,000,000 to buy them, and the State were able to abolish them, the advantage that would come to the community in the saving of the money now wasted in the consumption of alcohol and in other directions following from it would be far more than a recompense for this immense expenditure. But that is a digression. I was pointing out that the Chancellor need not wait until next year to find the money to finance his promised schemes of social reform, and I do not think he is justified in waiting. He has no reason whatever to show that next year he will be in any better position to do so than he is to-day. In all friendliness, I can assure the right hon. Gentleman that we are not going to take as a substitute for unemployment something that is like offering to starving men a smell of a beefsteak in order to satisfy the appetite. The right hon. Gentleman mentioned with approval that twenty-five years ago a Tory Chancellor of the Exchequer resigned office rather than submit to a £13,000,000 Navy Vote, and I gathered from another remark of the right hon. Gentleman that he believed that there is a good deal of insanity in the present naval expenditure. If that be so, let me repeat the appeal made to him—and I do not often find myself associated in an appeal coming from the right hon. Gentleman the Member for East Worcester (Mr. Austen Chamberlain)—that if he believes there is insanity in the present naval expenditure, if he believes it to be unnecessary, if, as he stated upon a former occasion, that it is building against nightmare, why does he not have the courage and the consistency of a former Tory Chancellor of the Exchequer and resign? The right hon. Gentleman made himself immensely popular in the country last year, by his Budget, and if he were to do that he would raise himself on a pedestal of popularity higher than he ever dreamed of.

I want to enter my protest, which I have entered year after year since I came to this House, against the unfair and oppressive burden of taxation which is thrown upon the working people of this country. In this Budget something like £67,000,000 is to be raised in indirect taxation. The right hon. Gentleman the Member for the Spen Valley pointed out the proportion in recent years between indirect and direct taxation. What are the actual figures? £67,000,000 is this year the amount of revenue to be raised by indirect taxation. The figure was raised by the late Tory Government, so that this year it is something like £3,500,000 less than it was five years ago, and I congratulate the right hon. Gentleman and his predecessor upon that fact. But still it is far too high. Of course, I am excluding stamps from my calculation, because stamps are something like Mahomet's coffin; they stand midway between direct and indirect taxation, and economists do not know whether they should be placed in the one category or the other. The amount of direct taxation is £70,000,000, and indirect taxation £67,000,000, so that the proportions are most unfair. I agree with the right hon. Gentleman the Member for Spen Valley that all sections of the community contribute in a fair proportion to indirect taxation. There are many indirect taxes, of course, on which the working classes pay more than people in better circumstances. They depend more certainly upon tea, and probably upon sugar. We have had in the last four years a great deal of sympathy in regard to the present burdens occasioned by the sugar and the tea taxes from hon. Gentlemen opposite. I am looking forward to the time when hon. Members opposite will bring in their Budget, and I shall be anxious to know whether we will then have the same sympathy and whether they will show the same desire to have these taxes repealed which they now manifest when they have not the power to do it.

7.0 P.M.

The sum of £10,000,000 is going to be raised this year upon food taxes. There are few things—I have this conviction because of my experience—that help Tariff Reformers so much as the fact that taxes are already imposed upon articles of food. It is very difficult on a public platform to denounce the taxes on food when at the present time something like £10,000,000 are being raised by taxes on food. Revolutionary as I am, I do not ask the Chancellor of the Exchequer to repeal all the food taxes this year, but let him make a beginning by repealing all the small food taxes that do not bring in very much revenue and yet are very effective for the purposes of our political opponents. I daresay all the Members of the House had sent to them, as I had sent to me, this morning this placard. [The hon. Member exhibited a placard headed "Exposed."] I want the Chancellor of the Exchequer, because of my interest in Free Trade, to make a placard like that impossible. It is a most effective placard. I am quite sure that that used in a by-election must mean hundreds of votes. Of course, it is not true; it is lies; but lies help to win elections. It is quite, evident hon. Members opposite know that from their own experience. I will compliment the Tariff Reform League by saying I think this is the most effective placard I have ever seen issued by that organisation. There is accompanying it a smaller placard also dealing with the same question, and it is equally as effective. The last sentence is especially effective. After pointing out that the cocoa trade is highly protected, it finishes up with the appeal that— If a protective tariff enables cocoa and chocolate manufacturers to build garden cities, why should not other industries equally benefit? Could you imagine—I appeal to the Chancellor of the Exchequer—anything more attractive to working men than the promise of a garden city by promoting Tariff Reform? The right hon. Gentleman can stop all that, and he can stop it at the cost of something like the paltry sum of £300,000 a year. If he would repeal the Cocoa Duty he would take away the Protectionist argument, and he would do something to redeem the long standing Radical promise to abolish taxes on food. He might also do something to lessen the Tea Duty, to take away the reproach that the Budget is a Budget to promote the stewing of tea. I would also like him to sweep away altogether the remaining tax upon sugar. Putting it on the very lowest plane, the party advantage in that would be incalculable.

Dr. HILLIER

On a point of Order. The hon. Member has denounced this placard as a lie. Will he demonstrate the inaccuracy?

The CHAIRMAN

That is not a point of Order.

Mr. SNOWDEN

The Chancellor of the Exchequer proposes to redeem the pledge to put the paupers on the old age pension list at the beginning of next year by calling on the local authorities to contribute part of the cost. I am opposed to that altogether for several reasons. First of all, when we succeeded in Committee in obtaining that Amendment to the Bill from the right hon. Gentleman, he never suggested, and no Member of the Committee ever suggested, that when the time came for the redemption of that pledge it should be redeemed by putting part of the cost on the local authorities. I know the right hon. Gentleman last year made the suggestion, but I think most Members will agree with me that was the first we had heard of such a proposal. The cost of supporting the aged poor should be a national and not a local charge. Most of the services, or, at any rate, a good many of the services which are now paid for out of local rates, have during the last fifty or a hundred years become national in their character. I believe the present system of local rating is the same as that which existed in the time of Queen Elizabeth. In the old days it was quite a proper, quite a right, and quite a just thing that the cost of maintaining the aged poor and the cost of education should be placed upon the parish, but in those days children were educated, not for the State, as they are to-day, but for the parish. Today children do not remain in that district afterwards, and therefore the cost ought to be charged on the National Exchequer.

The Chancellor of the Exchequer says he cannot deal with the question of the relations between national and local taxation piecemeal. When did he become of that opinion? He was not of that opinion last year. If so, why did he hand over half the proceeds of the Increment Tax to the local authorities? If he was of that opinion, why did he put upon the National Exchequer such a considerable part of the cost of maintaining or of improving or of making new roads in the country? The circumstances are the same this year. If it was right twelve months ago to relieve in part the pressure of local expenditure, it is equally right to-day. The Chancellor of the Exchequer about two years ago had a deputation wait upon him representing the education authorities, and he made a statement to them which impressed me very much. I was surprised the right hon. Gentleman should make such a statement. He said the local ratepayer and the national taxpayer was one and the same person. That is not so. I will illustrate that by taking this proposal with regard to old age pensions. Suppose the Chancellor of the Exchequer succeeds in his proposals, he is going to leave the burden of maintaining the aged poor to that extent upon the poor localities in the country. The rich parishes in the country have practically no outdoor poor to support, and therefore this system of local rating for national purposes imposes an excessive and undue burden upon the poorest part of our population and exempts those who are better able to bear it, whereas national taxation is spread evenly over the whole country and imposes an equal burden upon all who contribute to it.

I have ventured to submit these desultory remarks for, I hope, the edification of the Chancellor of the Exchequer, and I trust I have been sufficiently forceful to induce him to reconsider certain proposals of his Budget, and at any rate to make provision during the current financial year for the carrying into effect of the promised scheme of insurance against unemployment and invalidity. We who sit upon these benches are not the least earnest and least active of the supporters of Free Trade, but there is a difficulty, I admit, in supporting Free Trade when it is so easy for those opposed to Free Trade to point to existing social evils. The only way to permanently maintain our Free Trade policy is to remove those evils upon which the Tariff Reform movement lives. That can be done, and, if the Chancellor of the Exchequer would at the earliest possible moment redeem that promise with regard to unemployment and invalidity, he would do a great deal more to kill Tariff Reform than he did by the proposals of the Budget last year. I hope therefore this appeal will not be in vain. I am deeply earnest upon this matter. I feel strongly upon it, and every Member of the party with which I am associated feels strongly upon it. There is another reason why the Chancellor of the Exchequer should do it. We are told the election is going to be very soon, and he may not have the chance next year. Suppose the Tories came into office next February—a consummation devoutly not to be wished—they would not repeal that Act. They would have to find the money for it, and the Chancellor of the Exchequer would get the credit for it. If he would do it this year it would not; cost him £1,250,000. I hope therefore he will do it. Will he do it as some payment for the support the Members of my party rendered him last year—the enthusiastic support we gave him in all the stages of the Budget? We are Free Traders, and we look upon this Budget, as the Chancellor of the Exchequer looks upon it, as a triumph of Free Trade principles; but we have yet got to see whether we can solve all our social industrial problems within the limits of Free Trade finance.

MARQUESS Of TULLIBARDINE

I have no intention of following the hon. Member for Blackburn in the speech he-has just delivered, but I may observe that I have never done the Chancellor of the Exchequer the honour before of saying I am glad he held that position until I heard the proposals of the hon. Member for Blackburn, and learned what Budget he would have brought in had he held the position of Chancellor of the Exchequer. I am very anxious this afternoon to call the attention of hon. Members to one aspect of the Budget, and that is the tax upon a Scottish and Irish industry, namely, afforestation and timber. I want to show how very much those industries were affected by the Death Duties in the last Budget, and how I presume they will be affected by the duties of the next Budget. Hon. Members opposite have been in the habit of speaking as if there were only one industry in Scotland and Ireland. Even though some are teetotalers they seem always to be blinded by whisky; we never hear of anything from them except about the Whisky Tax, and one would think it was our only industry. It will be in the memory of hon. Members that at the election before last every Liberal candidate upon Radical platforms—dukes were not invented then—when in doubt as to what political card to play, stated what he would do for afforestation and the employment which it would give. But after the election we never heard another word about it. People thought that if the present Government were returned in a very few years they would see all the hills of Scotland and the deer forests, growing wood and timber, with the result that there would be general employment all round. I want hon. Members to know that I am not complaining of the Death Duties on ornamental timber or pheasant coverts, what I complain of is the effect that these Death Duties will have on timber-growing generally for commercial purposes—timber that does provide employment, and that will do a great deal to help us to get a proper system of small holdings in the poorer districts of Scotland, it must be remembered that on large estates only can big plantations best be made, and it is on the large estates that timber is subject to the biggest taxation in respect of the Death Duties. The Chancellor of the Exchequer has offered us a certain amount of pity, and to follow the simile of the hon. Member for Blackburn—pity without relief is like mustard without the beef, and after all we are getting a great deal of mustard with but very little meat. It is intolerable that hon. Members opposite should go about my country talking about afforestation, and what they are going to do for it if they are elected, and then they should come here and vote for a clause in the Budget which will make afforestation perfectly impossible. The other day, when I spoke on the question of whisky, the Chancellor of the Exchequer stated that I was exaggerating in what I said as to the effect of the Budget on barley growing. I can only tell him that on that occasion I took my statistics from the principal Radical paper in Scotland, and if they were wrong I have nothing more to say, but now I am going to talk about a business of which I know personally a good deal, as I come from one of the principal timber districts in Scotland, and I can only say that in a very few generations, if this system of Death Duties is continued by the present Chancellor of the Exchequer, it will do more towards depopulating Scotland than anything done by any previous Chancellor of the Exchequer. Hon. Members sometimes forget that to plant timber in Scotland a man has to be, to a certain extent, a patriot, because he will never see a money result; the cash has to be invested for something like eighty years, and his descendants get the benefit, I think, therefore, it is only right that he should be very leniently treated by the State when he prosecutes this industry. Hon. Members opposite quite forget to mention that among the risks attending afforestation in Scotland are the weather risks; we are subject to gales which few other countries suffer from; microbes, too, are very prevalent. Therefore, it is a very risky operation, and a man who undertakes it deserves a good deal of encouragement. I am going to show, as shortly as I can, how very badly affected we are by this present Budget. My right hon. Friend the Member for the Leith Burghs, than whom nobody has done more to stimulate interest in this question, stated on 19th April that woodlands were practically excluded from the Death Duties under the Budget. I could not understand how he justified that statement, because in my opinion they are affected very much more than they were before. I, therefore, asked the Chancellor of the Exchequer if, under the Budget of 1909–10, timber was to be valued for the purposes of Death Duties separately from the estate; whether it was subject to a higher scale of Death Duties; and whether the rate of Death Duty on the timber increased in proportion to the rest of the estate, the timber being aggregated to cause that increase, and whether, in consequence, not only timber would be valued at a higher rate, but also the land upon which it stood and also that agricultural land on an estate which was not under timber. The right hon. Gentleman answered all those questions in the affirmative, and a little while afterwards he said that agricultural land was not prejudiced under the Budget. Let me explain. In the old days land and timber in Scotland were valued together on their grazing, rental, and the timber was only valued as such if it were necessary to include it to bring an estate up to the value of twenty-five years' purchase. Now under the present Budget this is all abolished. First of all, in order to get as many values as possible out of the land it is separated from the timber and treated as if there were no timber on it, and valued as such; the land itself is assessed at its capital value, and then the timber is taken at its capital value. Then the next process of this act of Shylockism is to lump them together again in order to get a higher value on which to charge Death Duty. May I show how this works? Under the old system the duty would be paid on about £6 10s., whereas now not only will it be assessed on the £6 10s., but perhaps £100 per acre will be added to the assessment as the capital value of the timber standing on it. Therefore, in this case, per acre, timber is at least £100 worse off than it was before.

I want to point out how very adversely we are affected by aggregating the timber with the rest of the estate which we have not done formerly. If you have an estate with timber worth £100,000 and assume that the timber itself is worth £50,000, under the old system of valuation it would have had to pay 6 per cent, over all. Now first it will have to pay the increased scale proposed by the Budget, namely, 9 per cent, instead of 6 per cent., and then the value of the timber will have to be aggregated, and that will bring it up to over 10 per cent, on the whole property. I will give another example to show how agricultural land is affected. Take two perfectly similar estates, similar in every respect, each having the same amount of farm land, and of moorland. The owner of one plays the game and makes small holdings. He plants his moorland at considerable expense, and in consequence he will foe assessed at a far higher value than the owner of the other estate, who, instead of planting the moorland, clears it and devotes it to sport. The estate of the latter landowner, having no timber on it, may be valued at a low percentage, and Death Duties are paid on the farms at 6 or 7 per cent., whereas the duty on the farms on the other estate, with timber growing, is assessed at something like 10 per cent. I want to be perfectly clear, I am conscious that the Chancellor of the Exchequer did make one concession—and a very big one—which my right hon. Friend the Member for Leith Burghs claimed to be a fair concession—namely, that the duty would not have to be paid until the timber is cut and if cut. I think that was only fair. It would be perfectly absurd to charge Death Duties on this huge scale on timber of which a man was never going to reap the benefit. It was also suggested that the labour spent on the trees after the death of the deceased might be deducted from the Death Duties; but what labour is there in ripe timber to which that would apply? If the right hon. Gentleman wanted to give some concession he might have given it in regard to the labour expended in growing the trees before the death of the deceased. As it is, the concession is of practically no value. In any case I do think it would be very unfair, even in the timber you do get the benefit of, you should have to pay a rate of death duty that is made up by the value of the timber which you do not cut and which you can never enjoy. When the death Duties are placed on an estate, the value of the timber is added, and it runs it up to about 10 per cent. In nine-tenths of the cases the owner only gets the return from a very small portion of the timber, namely, that bit which he cuts, but he has to pay a rate of Death Duty made up Toy that portion which he does not cut and never enjoys, not only on his timber but on his whole estate. I have raised this subject, which is a very technical one, not because I supposed the discussion would be persisted in, but simply in order to appeal to hon. Members opposite to do what they can for afforestation, and not to block it. I also want to appeal to the Chancellor of the Exchequer to do what he can for an industry which is tottering at present. You may go up to Scotland and see woods and forests being cut down, but hardly any planting going on, simply because it is not going to pay. Unless you can make timber planting pay, it is no use whatever to say you are going to assist afforestation. We do want to know, however, whether we are going to be penalised in this way or not. If we are, I do not object, but we will put our money into some very much better paying concern for ourselves, but not for the nation at large.

The FINANCIAL SECRETARY to the TREASURY (Mr. Hobhouse)

The Noble Lord who has just sat down will excuse me if I do not follow him through all the details which he has given to the Committee, because I confess he has taken me by surprise, and I do not profess to be master of the subject in the same way that he is. I do think, however, that the subject which he has raised is of universal interest, and whatever may be my feelings as an official of the Treasury, I can assure him he has my sympathy and support. Before I pass to deal with the criticisms which have been put before the Committee by the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) I should like to say a word or two on the speech which was delivered by the hon. Member for Blackburn (Mr. Snowden). He said in the course of his speech that the Chancellor of the Exchequer had this year imposed upon the taxpayer a larger burden than any other Chancellor of the Exchequer before him had laid upon that long-suffering person. That is quite true, but I think the Committee ought to recollect, and I am sure the country will recollect, that it is the relative burden, and not the absolute burden, that matters to the taxpayer and to any bearer of fiscal burdens; and when you deal with the relative capacity of the taxpayer to meet taxation to-day and his capacity even twenty years back, I think that figures can be produced in support of his ability to pay which are nothing short of miraculous. I should not be in the least frightened at the imposition of a Budget of £300,000,000 or £400,000,000 sterling a year if the wealth of the country were in proportion to the burden laid upon it. In the first year that I came into the House the Budget was something like £80,000,000 or £90,000,000, and it was said then to be an almost impossible burden to bear, but the wealth of the country and the wealth of the individual has grown so enormously since then that a Budget which was thought then to be impossible would be welcome now as a measure of relief to the taxpayer. So it may well be that three or four years hence a Budget of £300,000,000 or £400,000,000 will be borne with no greater effort and sacrifice on the part of the taxpayer than the Budget of £200,000,000 is borne to-day. Let us see what ten years ago—not twenty years ago, but ten years ago—the tax revenue of the country was, and what it is to-day, also what the income was ten years ago and what it is to-day; because, after all, it is the relative burden which has to be taken into account. Ten years ago, I find, the tax revenue of this country was as nearly as possible £95,000,000, and the amount of income which was assessed to the Income Tax was in those days £760,000,000. To-day the tax revenue of the country is something like £120,000,000, but, as the hon. Member for Blackburn pointed out, the income assessable—the gross income assessable to Income Tax—had gone up to over £1,000,000,000.

Mr. AUSTEN CHAMBERLAIN

I take it that the right hon. Gentleman is speaking of the gross sum on which taxation is assessed, whereas, as he knows, a very large proportion of that is really tax free. Can he give us the net amount?

Mr. HOBHOUSE

These figures are produced on the spur of the moment to meet and explain the argument of the hon. Member for Blackburn, but if I can trust my memory I think in regard to each of these cases about two-thirds is net assessable income. Quite apart from the hon. Member for Blackburn, I think there is this further argument to be considered, which is of vital importance in dealing with the taxation. You cannot withdraw money primarily from industrial work for the purpose of taxation without doing some considerable harm to the general industry and commerce of the country. You have to meet the pressure from this House, and hon. Gentlemen who are Members of this House have pressure put upon them by their constituents and by public opinion, and we have to meet the requirements for social reform and for all sorts of matters of domestic and; public concern. You have to meet expenditure upon these points by the taxation of various interests and persons in the country; and unquestionably the amount which you do withdraw from them for the purpose of meeting this taxation is money which is unproductive in a national sense, and it must be some detriment—how much it is impossible to-say—to the commerce and industry of this country. There was one further point in the argument of the hon. Member for Blackburn, as to which I should like to say one word. He drew a comparison between the trade of this country when it was £801,000,000 and when it was £890,000,000, and he pointed out that wages had gone down in the latter period as compared with the former; but you have to test the expansion of foreign trade not only by the value which you put against it in statistical statements, but you also have to test it by the volume of trade itself. It is quite possible that there may be a smaller trade with a higher apparent value attaching to it in one year and a larger volume of trade with a smaller money value attaching to it in another year, and such considerations as those would vitiate the comparison on which the hon. Gentleman started.

I come now to deal with the criticisms of the right hon. Member for East Worcestershire. He began by criticising my right hon. Friend for the arrangements which he had made in connection with the Sinking Fund, and he complained of the stereotyping of the charge for the reduction of the debt which he said had been sprung upon the Committee for the first time. That is not so. If the right hon. Gentleman will turn to the original Finance Bill as it went up to the House of Lords he will see—I think it is in Clause 92 of that Bill—that the amount was then fixed by the Chancellor of the Exchequer at £24,500,000, and my right hon. Friend still adheres to that figure; therefore there is no new proposal on his part this year to stereotype permanently the amount of the debt charge. The actual words were to the effect that £24,500,000 should be applied in the current and every subsequent year. Therefore the right hon. Gentleman must have forgotten what was in the mind of my right hon. Friend as to what was the proper amount to be devoted to the Sinking Fund. I should like the Committee to remember this point, that both this year and last year we devoted an unparalleled amount to the redemption of debt. Last year we devoted a sum of no less than £14,000,000, and this year we propose to devote a sum of no less than £10,000,000 also in redemption of the deadweight gross debt of the country, so that in two years, making every allowance for the sums which we propose to borrow, following the example of the late Government, for telephone and telegraph purposes—a very small sum indeed—making every allowance for that, we shall have devoted no less a sum than £24,000,000 in the reduction of the liabilities of this country. I say, in view of the financial difficulties of the Government last year and the circumstances of the country last autumn, on behalf of my right hon. Friend, that that is a most creditable sum to set aside for the redemption of the liabilities of this country, and, as far as I know, such a step has not been attempted, and certainly not accomplished, by any other country in the whole of the universe. There is no country, with the possible exception of Japan, which year by year devotes a regular sum to the reduction of its liabilities, and we, in spite of our troubles, have devoted this large sum to that purpose. Another point which was made by the right hon. Gentleman was in connection with tobacco. He said the figures which he had in his hand showed that there had been a decrease of something like 6,000,000 lb. in the consumption of tobacco. That is true, but only to a certain extent. Of that 6,000,000 lb. 3,000,000 lb. at least must be ascribed to forestalments in March and April of the previous year and the holding back of withdrawals up to the end of the last financial year in the hope that the duty would be reduced. Putting these two causes together, 3,000,000 lbs. may be attributed to that, and it is upon the amount so reduced that the Chancellor of the Exchequer has based his estimate of an increase of 1½ per cent, for the current year. The normal increase is approximately 1.5 per cent., and my right hon. Friend must take the same amount of increase as being probable in the forthcoming year, but that increase has been based not on what might have happened had this tax been imposed, but he has taken it on the annual consumption of last year, and that amount "will give him the increase of revenue which he budgeted for.

Mr. AUSTEN CHAMBERLAIN

What in millions of pounds weight is worth 1.5 per cent, of consumption?

Mr. HOBHOUSE

The consumption in the year 1908–9 was 90,000,000 lbs. The reduced consumption of this last year will be—I speak again from memory—about 87,000,000 lbs., and it is upon that that the 1.5 per cent, has been calculated. It may be satisfactory to the Committee to know that up to the present the revenue from tobacco has been quite up to our expectation, and perhaps a little above it, and there is ample justification for my right hon. friend's calculations. The right hon. Gentleman expressed regret at the gradual extinction of the small firms and the substitution for them of combines. He dwelt upon the hardships, the deprivations, and the distress that came upon the persons engaged in a small way of business when they were squeezed out by a great combine, and he very justly said that the combine had been greatly assisted by the imposition of the extra duty. If that be so I am tempted to ask what would be the effect on these small businesses if heavy duties were imposed upon them by a general system of tariffs?

Mr. AUSTEN CHAMBERLAIN

I do not suppose that a duty of 800 per cent, would be put on.

Mr. HOBHOUSE

These duties begin in a small way, and, as other countries have experienced, they grow out of all proportion to the original ideas of their authors. I am quite certain that if the right hon. Gentleman ever establishes a system of general tariffs he will find that the small trader will be in a state of distress and extinction owing to the creation of a great number of combines. I hope then that he will get relief and some practical sympathy from the right hon. Gentleman. The right hon. Gentleman went on to say that last year the Chancellor of the Exchequer had been exceptionally lucky in the matter of Death Duties, but that in spite of his luck he budgets for an increase of £4,250,000 on his estimate, and £2,500,000 on his actual receipts last year. He has, however, forgotten one or two very important points. One is that there is a great difference between Income Tax and Death Duties in this respect. Income Tax is calculated on an average of three years, while Death Duties are not calculated on an average but on the actual value of the property passing at the time of death. The consequence is that the moment there is an improvement in trade, that is in the value of industrial concerns, or in the price of stocks, Death Duties at once reap the benefit, and it makes it much more probable that there will be an increase in the yield from Death Duties. The second point which the right hon. Gentleman forgot is one that the Chancellor of the Exchequer referred to in his Budget speech, that is the Legacy and Succession Duties coming into operation. They are calculated to yield a sum of something like £1,150,000, which, of course, is a very large proportion of the £2,500,000 increase. The third reason which justifies the Chancellor of the Exchequer in calculating on a large increase on Death Duties is the increase in value all round following upon good trade. The right hon. Gentleman rather questioned that point of view, but I think he forgot this, that it is not merely that stocks and shares go up in times of good trade, but the whole value of industrial and commercial concerns rises very quickly in times of good trade, when credit is ample and business is brisk. It may quite possibly be that for the moment Government securities may go down as people sell and transfer their interest to industrial and commercial concerns, but the shares of industrial and commercial concerns rise in a far greater proportion than Government securities, and you have to add to that the values of all these business and trade concerns which are not represented by securities at all, and which come under the review of the Inland Revenue at the time of death, and which rise out of all proportion to one's expectations at times of booming trade.

There was one other allegation which the right hon. Gentleman made against the Chancellor of the Exchequer. He repeated that my right hon. Friend was engaged in speculative finance. I do not think he was justified in that. There has been an unprecedented increase in both the import and export trades, and there has been an extraordinary decrease in the amount of unemployment, and there is every sign that we are going to get a state of trade which is quite unprecedented. If the right hon. Gentleman would only look at the Returns for May and at the Returns for the year up to the end of May, he will see figures which will be at once startling and satisfactory to him. The Returns for May are £55,000,000 imports and £33,000,000 British exports, as against £44,000,000 imports and £29,000,000 of British exports in 1909, and £44,000,000 of imports and £31,000,000 of British exports in 1908. Taking the whole year up to the end of May, whereas the trade in 1908 was £194,000,000 and in 1909 £185,000,000, this year it is up to £216,000,000. When trade has gone up by something like £30,000,000, imports and exports, before half the year is out, can it be called speculative finance that the Chancellor of the Exchequer should base his calculations upon that great revival in both home and foreign trade? The right hon. Gentleman, in conclusion, asked, "Is it right to set social reform against national defence?" as if in order to promote one you must abandon the other. I cannot conceive, and certainly experience does not show, that these two things are mutually exclusive. We have provided, during the five years in which this Government has been in office, an average sum of £.34,000,000 a year for the defence by sea of this country, and for the protection of its commerce. That is a larger sum than was set aside in the last year of the right hon. Gentleman's tenure of the Chancellorship of the Exchequer, and during that time every year there have been one or two great measures of social reform passed—in 1906 the Workmen's Compensation Act, in 1907 the Small Holdings Act, in 1908 the Old Age Pensions Act, and last year the Town Planning Act. It is not fair to suggest that the carrying out of social reforms prevents the Government from also maintaining its obligations to protect the trade of this country and to maintain its shores inviolate. Both of these things have been carried simultaneously by the Government, and without making any controversial or, I hope, too party claim for the Government of which I am a Member, I say it has discharged its duties to the public which it represents, and that the finance of my right hon. Friend in his Budget of last year will be amply justified by the results.

Mr. SAMUEL ROBERTS

This Budget has been called a humdrum Budget, and I quite agree that in one sense it is, because it does not alter the taxation of, the country. But in another sense it is not a humdrum Budget because it charges £172,000,000, which is quite unprecedented in recent years. When the late Government came into power in 1906 their charge against our party was that we had been extravagant and that we had sent expenditure up by leaps and bounds. What was it in that year? £141,000,000 or £142,000,000, and the present Prime Minister, who was then Chancellor of the Exchequer, when he introduced his first Budget, after quoting the figures I have named and showing that there had been an increase in the last ten years of 39 per cent., made this remark:— 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. That is to say, a return from £142,000,000 to what they were ten years before, £101,000,000. While the Chancellor has to impose this immense sum in taxation he has the whole of his taxes up to the hilt. The Income Tax is at war pitch, and his indirect taxes cannot be extended any further. The Spirit Duty failed him this time, and the Tobacco Tax very nearly failed him. Supposing in this Budget he had required to put on more taxation, where would he have got it from? Where is the margin of productivity which he could rely upon? Was he going to rely on a higher Income Tax, higher Death Duty, higher Tea Duties, Spirit Duties, or Tobacco Taxes? All these taxes are already up to the hilt, and the limit of productivity has been reached. While this is the state of things, the Chancellor of the Exchequer boasts of this large expenditure, and congratulates the country on being able to raise the money.

8.0 P.M.

Then he goes on to say, "What country in the world can show such a record?" I do not think he has studied very well the finances of our great competitors if that is his opinion. What is the position of the United States of America.—a country most prosperous in every way? How do they raise their money? Last year in the Budget of the United States the total revenue raised was 604,000,000 dollars, and out of that about half was raised by Customs duties alone, and the other taxation was raised by what is called internal revenue—charges on liquor, tobacco, and things of that kind. They have not a penny or Income Tax, and they have no Death Duties. Almost the whole of their revenue comes from indirect taxation. And yet the Chancellor asks what country id the world can show such a record as ours! Where would the United States be in case they wanted money for war or other emergency? They have the whole of the Income Tax to go to and also the Death Duties. Surely there is a great financial reserve in the United States of which we cannot boast? Then take Germany. We heard a good deal during the Debates last year about the German Income Tax, but I think we showed pretty conclusively that the German Income Tax is nothing compared with ours. It is a graduated tax in each of the States of Germany, but it includes almost all the rates, whilst in Prussia, the largest of the German States, it is almost the only tax which the Prussian people have to pay. Five-sixths of the revenue of Prussia is raised from assets owned by the State—mines, forests, railways, iron works, slate works. Therefore, you have in Prussia, a graduated low Income Tax, which includes all the local rates, and is about the only tax the people have to pay. There is hardly any Death Duty at all. They have what is called an Inheritance Duty, not chargeable on the direct succession, but on strangers and indirect succession, and it only 'brings in about £2,000,000 a year. My contention is that both Germany and the United States could stand a financial strain much better than we could, because they have the whole or nearly the whole of their direct taxation untouched.

I should like to remind the Committee that by their Customs Duties they are making the foreigner pay his share for the use of their markets. Hon. Members opposite may laugh, but it is the opinion of modern economists that an exporter to those countries has to contribute, by lowering his price, his profit, and his wages, towards the import duties which his goods pay, so that here in this Free Trade country our manufacturers and our workpeople are contributing in that way their share towards the expenses of our competitors. As I say, you have these two great countries more able to bear a financial strain than we are. France is in the same position, although it is not quite up to the standard of Germany and the United States—for one reason because the public debt of France is the largest of any in the world. It amounts at the present time to £1,231,000,000. That is one handicap that France has to bear; but, with all that, the greater part of taxation in France is indirect taxation. It is in the proportion of one to four. There are Death Duties, but they are moderate, amounting to one-third of the indirect succession. There are some countries which have no-Income Tax at all. Russia, Hungary, Bel- gium, and Portugal have no Income Tax. Denmark, Sweden, Norway, and the Netherlands have a very moderate Income Tax. The result of the financial operations of the present Government has been to turn the balance of our taxation from an equality between direct and indirect taxation, as it was in the year 1904–5, to a balance of direct taxation in the proportion of about fifty-seven to forty-two. It is a state of things which one of the Chancellor's predecessors, the late Mr. Gladstone, would not have approved. He used very strong language in regard to Income Tax. He called it "a most dangerous tax, vexatious to trade and industry," and he reduced it as far as he possibly could. I think he got it down to 2d. in 1873, and he promised the country if they returned him to power again that it would be abolished altogether.

You have the authority of John Stuart Mill, who said:— Direct taxation of income should be reserved for great national emergency. A tax on profits is, in a State of capital and accumulation like England, extremely detrimental to the national wealth. Then the late Mr. Lecky said:— No principle in political economy is more certain than that heavy taxation of capital which starves industry and employment will fall most heavily on the poor. I believe that is also the opinion of the present Prime Minister, because he said, in a Budget speech, that he could not approve of a uniform rate of 1s. in the £ Income Tax, because it was a charge and a tax on industry and wages. Our present rate is 1s. 2d. in the £, which was the average rate in the times of the Crimean War and the Boer War. It has only twice been higher. It went up to 1s. 4d. in 1853, the second year of the Crimean War, and to Is. 3d. in 1902, the third year of the Boer War; but what was the state of things when the Income Tax was increased in the time of those wars? It was increased from a low rate of 7d. and 8d. respectively to 1s. 4d. and 1s. 3d. But it would be a very different thing in case of war now if we had to double the Income Tax of 1s. 2d., and the Chancellor is running a danger in using this great financial reserve, which Mr. Gladstone insisted was so important to the country. He said, in his famous Budget speech of 1853, "Much as may be said of the importance of an Army Reserve or a Navy Reserve, and of having your armouries and your arsenals well stored, I say that a 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—though may God, in His Mercy, avert it—you may defy the world." That is our first great reserve in case of necessity. What is our second? It is the Sinking Fund; and I very much regret the Chancellor of the Exchequer has not seen his way to keep the fixed charge at £28,000,000, the sum fixed by Sir Stafford Northcote in 1875. He fixed it at that for this reason: He showed that before 1860 there had never been a less sum paid than £28,000,000, and he argued that if that were so, the country, which in 1860 could afford a fixed charge of £28,000,000 to pay interest and capital repayment, could afford to pay more in 1875, because it was richer and had a greater National Debt. I should like to argue on that ground now, for if the country could afford it in 1875, it ought to afford it at the present time. We know that the dead-weight debt is about £700,000,000. It is put down on the Departmental Papers at £713,000,000, but we are aware that it has been raised temporarily during the present year, because of the borrowings of the Chancellor of the Exchequer. Before the Boer War the deadweight was £635,000,000, and if you deduct the one from the other you will see that there is still about £67,000,000 borrowed for the Boer War to be repaid. My argument is that until that money is repaid the fixed charge ought to be kept up to £28,000,000. That would leave the Chancellor of the Exchequer about £10,000,000 a year towards the repayment of debt. But he is only going to keep it up to £24,500,000, and at that rate he will only have about £6,500,000 a year to devote to the repayment. He will have to wait a very long time at that rate before the debt is reduced to what it was before the Boer War. Until it is brought down to what it was then the fixed charge ought to be kept up to at least £28,000,000. I should like to draw the attention of the Committee to this fact. I have spoken of the National Debt of France. We come second, but the debt of our great competitors, the United States and Germany, is very much smaller indeed In the United States it amounts to only £2 per head of the population, and in Germany to £3.

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