HC Deb 04 July 1910 vol 18 cc1426-54

"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."

Debate resumed.


When the Debate was interrupted I had very nearly concluded my remarks on the subject of the Budget Resolution. I should like very briefly to sum up what I venture to submit are the three lessons that are to be learnt by the country on the presentation of this very large Budget. The first is the great need, through all parts of this House, of a resolve for economy in every Department as far as possible. That is the first great lesson—subject to this reservation, that I think the first duty of the Committee is to see to it that the nation is safe. The national security above all must be maintained. It can only be maintained by keeping the supremacy of the seas. It is our first duty, in my opinion, to see that this country always has such a Navy that it would be impossible that we should suffer defeat at sea. The second lesson which I think we may learn from the Budget is that the present sources of taxation have reached their limit of productivity. They are now at such a point that they cannot stand a greater strain. Income Tax is at war pitch; all other taxes—indirect taxes—are at such a point that if you attempt to raise them you will get no more revenue from them. That the Chancellor of the Exchequer has already found. The third point is that the two great national fiscal reserves must be kept up. These fiscal reserves are, first, that the Income Tax should be kept in time of peace at a low rate in order that when the emergency comes it can be easily raised without any undue discomfort or inconvenience to the nation. The second is that the fixed charge for the Sinking Fund should be kept up to a properly high limit. I suggest the limit that Sir Stafford Northcote fixed in 1875 of £28,000,000 a year. The charge for interest and management comes to about £18,000,000 a year. After that is paid the balance of fixed charge is about £10,000,000. This should be devoted, at all events at present, to the National Debt until it is reduced to the figure at which it was before the South African War. Until that period is reached the fixed charge should be kept up to £28,000,000. Unfortunately by this Budget the Chancellor of the Exchequer is proposing to put the fixed charge this year at £24,500,000, the same as last year. I venture to close with a quotation from Mr. Gladstone on the importance of these two great fiscal reserves. He said:— They are no less important, for if used aright they are an engine to which you may resort. If, unhappily, necessity arise, yon may again resort if need be, and you can defy the world.


Looking to the number of criticisms which have been directed to the proposals of the Chancellor of the Exchequer to retain the Whisky Duty at its present figure of 14s. 9d., I should like, as a Scottish Member, to say a few words on the Spirit Duty from the point of view of Scotland. I should like, in the first place, to congratulate the Chancellor of the Exchequer very heartily indeed on the decision at which he has arrived. I can say with assurance that his decision has caused very general satisfaction indeed all over Scotland. The Chancellor of the Exchequer has, I think, made out an unanswerable case for retaining the duty. It is one which will not only appeal to those whom hon. Members opposite delight in calling the temperance faddists and fanatics, the temperance supporters of the Government, but it will appeal to the great mass of the people, and to all who have the true welfare of the nation at' heart. I cannot understand how any Member of this House or any person attached to any of the great political parties, even if his own private interests in this matter were concerned, could object to a diminution of the crime which springs directly from excess in the consumption of strong drink, or how any Member could justify the fact that our national drink bill stands at £155,000,000. I think that figure suggests a great deal of room for some immediate and considerable reduction in the consumption of strong drink. That is an immense drink bill, two-thirds of which is contributed by the working classes of this country. I was glad to notice in the course of the Debate that it was hinted at by some hon. Members opposite that it was indeed a desirable thing to reduce the consumption of liquor. I am glad to find the hon. Member for Ayr Burghs (Mr. G. Younger), who is a most vigilant advocate of the trade's interests in this House, was quite candid in the matter when he said that it was an advantage that the people were getting less whisky, but then he went on to say—and he was supported in this by the hon. Member for Waterford (Mr. John Redmond)—that the whisky which was now being sold was of a much more injurious character and was unlike the whisky used before, which, if it produced drunkenness, produced a pleasant drunkenness as contrasted with the foul and brutal drunkenness resulting from the consumption of raw and crude spirits. I will not enter into the different degrees of drunkenness or the merits or demerits of the different kinds of whisky. I do not think it would be a profitable inquiry. It would, however, lead to the conclusion that whisky, whether capable of producing a pleasant state of intoxication or drunkenness that was brutal, produced the same evil result in the homes of the people.

We have very good evidence on which to satisfy ourselves in Scotland as to the effect of the Whisky Duty. The evidence we have in our possession proves without doubt that there has been a decrease in the brutal form of drunkenness. There has been a decrease in the drunkenness associated with the assaults and breaches of the peace, and the criminal statistics make that quite clear. The Report of the Prisons Commissioners for last year is worthy of a good deal of attention. So far as Scotland is concerned we find in 1909 there was a decrease in assaults and breaches of the peace as compared with the year before of 2,972, and a decrease of offences against the Liquor Laws of 5,223. These figures speak very eloquently. The Report goes on to show that there has been a large diminution in the number of persons in the prisons, and this the Commissioners say was largely due to the increased price of whisky which took place in April. The Commissioners publish with their Report a diagram in connection with this increased price of spirits, which I think is very useful to look at. Since the first week of May there has been a steady decrease in the prison population as compared with previous years of some-think like 500 or 600. With regard to convictions for drunkenness, set forth in the Report, it will be found that for the first four months of 1909, taking the large centres in Scotland, such as Edinburgh, Glasgow, and Dundee, you find a decrease in the first four months of 735. When you come to the period when the effects of the Whisky Duty was felt, you find the decrease very much greater. In the second four months the decrease was 2,993, and in the third four months 3,237.

I should like to refer also to the figures given in this House by the Lord Advocate as regards the arrests for drunkenness. In 1909, in the four principal cities in Scotland, arrests diminished by 8,782, a decrease of 26½ per cent, and I am very glad to think that since the beginning of the year these figures have even improved. The figures given for the whole year ending 31st March, 1910, show a drop in convictions for drunkenness of 33 per cent. These figures, of course, it may be said are not likely to continue. I am glad to think they are, as we have evidence showing that this tendency is continuing in Scotland up to the present time. I should like to refer to the very latest figures available for Edinburgh. Up to the end of last week, for the second quarter of the year, you will find that the statistics, according to the city police for the work in their courts, show that during the past three months the number of cases dealt with was the smallest recorded during any quarter for many years past. From the 1st of April to the 1st of July 2,436 persons were apprehended, showing a decrese of 125 as compared with the previous quarter of this year, and then, if you turn to last year and take the second three months and compare them with the second three months of this year, you will find that while 1,642 persons were apprehended for offences while drunk during that three months last year, the number during the past three months was 1,324, being a reduction of 318. That is what Edinburgh has shown in the last three months. The improvement has been continuous, and I venture to hope we may see everywhere the same progress shown in the next few months as that which the Chief Constable reports from the City of Edinburgh, which ought to lead the way. You will find that, according to the Chief Constable's report, drunkenness has not been so low in the last fifty years as it has been in the year 1909. I should like to direct the attention of the Committee particularly to the fact that you find the sudden diminution occurring in the month of May. According also to the Prison Commissioners' report, it began at that time, and it continues, and the same applies to other figures I have quoted. We have thus the best evidence that can be afforded embodied in this report by persons who have considered this question, on which they are the highest authorities, and who all agree that the vast percentage of criminal offences, are due directly to the fact of the excessive consumption of alcohol.

A number of hon. Members have pressed the argument as to whether the Chancellor of the Exchequer is entitled to put on the Whisky Duty for considerations other than those of a purely financial character. I am glad to think the hon. Member for East Worcestershire (Mr. Austen Chamberlain) did not himself follow up that argument at all, because we are accustomed to the answer to the query so frequently put to our Tariff Reform friends: "How are you going both to get revenue and keep out the foreigners' goods? "They always meet us by saying, "We are quite prepared to sacrifice the additional revenue to a very considerable extent if we can only secure what we conceive to be a good result for the people of this country—the better provision of work."


That is not the answer.


I think I am correct in saying that is the answer very frequently given, but perhaps, if the hon. Gentleman follows me he will give a better answer, if there is one. I think it is demonstrated from the figures I have quoted—and I can produce many others—that there has been a very substantial diminution in the consumption of strong liquor. That has a most important bearing upon the habits of the people themselves, and anything you can do to improve the habits of the people and to divert the unproductive expenditure on strong drink into other channels means more happiness and greater prosperity, and is worth a great deal more than any possible scheme which Tariff Reformers can secure for the people of this country. The Chancellor of the Exchequer in retaining this Duty of 14s. 9d. is proceeding on the soundest fiscal lines. In the first place, whisky is admittedly a luxury and is not a necessity of efficient subsistence. In the second place, the consumption of whisky entails upon the community a very heavy expenditure in respect of its social effects in the upkeep of gaols and workhouses, cost of the police, etc. If you take the highest authorities in finance, you will find that eminent statesmen on both sides of the House have recognised the principle of imposing the highest duty possible on the smallest consumption of spirits possible. Mr. Gladstone, in 1864, when justifying the increase of the Spirit Duty on home-made spirits from 8s. to 10s., laid down the principle, which was accepted, I think, by hon. Members on the other side. The principle on which Parliament has always acted with respect to the Spirit Duty is to impose on that article the highest amount of duty which it is possible to levy without increasing illicit distillation. The whole Debate turned on whether that point had been reached or not. There is no question to-day of illicit distillation as a result of the Whisky Duty. Mr. Gladstone went on:— Whatever revenue was to he raised from spirits, it was desirable that it should be raised from as small a consumption as possible. In dealing with tea, sugar, and such articles, He added:— the principle was to raise the revenue by a duty as low as possible, in order not to interfere with the expansion of trade; but the exact reverse of that principle was applicable to spirits, and it was sought to raise the largest revenue which could he got from the smallest area of consumption. That principle was accepted by hon. Members on the other side of the House, because Lord Iddesleigh, then Sir Stafford Northcote, following Mr. Gladstone, said:— Although the right hon. Gentleman had made a very considerable miscalculation …he still doubted whether the House ought at once to pronounce against the experiment the right hon. Gentleman had made. It had only been tried for three years and its failure from a fiscal point of view did not prove that the House ought to reverse its policy, which had never been to stimulate the consumption of ardent spirits, as it had done in the case of tea and coffee. Following the views thus expressed, I think the right hon. Gentleman has acted on very sound lines in his attitude towards the Whisky Duty. It is suggested that it is a partisan device in order to act in vindictive fashion towards a particular industry. That is not the case. If hon. Members will refer to the eleven legislative proposals, effective or abortive, to increase the taxation of beer and spirits during the past thirty years, they will find that no fewer than six came from Unionist Chancellors of the Exchequer and five from Liberal Chancellors of the Exchequer. I think that disposes altogether of that argument. I feel satisfied the Chancellor of the Exchequer will get a substantial revenue from the duty. The forestalments and the exhaustion of reserves which took place last year will act as a very important element this year, and will be felt in a very substantial addition to the revenue from this source.

I feel sure the proposal to remove the pauper disqualification for old age pensions will give the greatest satisfaction in Scotland as well as in other parts of the country. We have always recognised the great injustice to those who were disqualified under the earlier scheme, but we also recognised that that scheme was simply a beginning, and we accepted it fully believing the Government would redeem its pledge at the earliest possible moment. I think it reasonable we should at the present time accept the proposal of the Chancellor of the Exchequer that the local authorities should be asked to contribute for a period in order that this scheme may be brought into operation at once. If we do not accept that view, the scheme must necessarily be postponed for a period. The money could not be got out of the present surplus, and what is more, and what counts with me for a great deal, is that you would also risk the postponement of that other scheme of State insurance which, I think, is one of the most important schemes ever placed before the country. I hope it will not be delayed for a long period. The fishermen in my Constituency do not, in one sense, know what unemployment is; they are always employed, but very often they have very little to show for their work. There is no calling more exposed to risks than that of fishermen, and I hope the right hon. Gentleman will include that very deserving section of the community within the scheme so far as insurance against invalidity and sickness is concerned. The Budget has been characterised as "humdrum." I was surprised at the quarter from which this expression came. If "humdrum" means no increase in taxation, I hope we may long see "humdrum" Budgets in this House. This Budget represents a triumph on the part of the Chancellor of the Exchequer. He has not only succeeded in redeeming all his pledges, but the Budget has vindicated the foresight and wisdom of his proposals last year, and has taken us a step nearer the goal which the Government have set before them to secure the dawning of a better and brighter day for the toiling millions of our land.


As this is the first time I have had the privilege of addressing the House, I feel sure I shall be accorded that consideration which is always granted to new Members in this somewhat unenviable and trying position. It seems to me that although those affected by the Income Tax have, from patriotic views, refrained from speaking, as they consider that under the present fiscal policy of this country the money necessary for the service of the State cannot well be obtained from other sources than Income Tax, still the Committee should not fail to recognise that an Income Tax of from 1s. 2d. to 1s. 8d. in the £, as the case may be, in a period of profound peace, is a very great anomoly and one of serious import. Putting aside the handicap which it must entail upon capital and industry, I consider that there is another position, and that is that it has always been held in the past to be an axiom, and one, I believe, which Mr. Gladstone was keenly alive to, that the Income Tax should be treated as a great national reserve fund in time of emergency or danger. As long as it was known to the people of this country in general that this reserve was in hand, so long the nation felt secure that its resources could bear an exceptional strain. But now that the reserve fund is depleted annually for current expenditure, it is not available for extraordinary needs. In addition to this, the enormous Death Duties are used for purposes of revenue, whereas in reality they are capital, and we are, therefore, forced to the conclusion that the financial position is not as sound as it once used to be, in spite of everything which the Chancellor of the Exchequer has said upon the matter. I think, therefore, I may be excused for saying that the situation demands the grave and serious attention of all thoughtful politicians on whichever side of the House they may happen to sit. We hope on our side that, by a change of fiscal policy, we may be able to tap other sources of revenue. We also hope in doing so to relieve the taxpayers of this country of their present heavy burdens, and at the same time benefit the trade and industries of the country as well as those engaged in them.

There is another matter which I should like to refer to for one moment, and that is the mode proposed for obtaining some of the money required for the extension of old age pensions. I, for one, think it very necessary and right that the Poor Law disqualification should be removed, and that a pauper should receive the old age pension the same as other people. But I very much fear that the proposal of the Chancellor of the Exchequer means an additional tax on the ratepayers. As I understand it, for every indoor or outdoor pauper who will become a pensioner the guardians will have to pay an amount equivalent to the sum by which they will benefit. Supposing that an indoor pauper costs the guardians 5s per week, I presume that this sum will be demanded from the guardians by the Government in respect of every pauper who leaves the workhouse on receipt of the pension. But it must be remembered that our workhouses are constructed to accommodate a certain number of inmates. There are also establishment and administrative expenses, and I think it is extremely doubtful whether the expenditure can really be reduced by the removal of a few paupers in order to accept old age pensions. It seems to me that the cost per head of those who will stay m the workhouse will increase, and the total cost, therefore, at the end of the year will not be diminished, while 5s. per head will still have to be paid by the guardians to the Government. I hope that my fears may not be realised, but it certainly seems to me to be an instance in which the ratepayer is very likely to lose over the transaction.

There is one other point which caused me much surprise in the speech of the Chancellor of the Exchequer. I was amazed at the extraordinarily optimistic terms in which the right hon. Gentleman alluded to the trade of this country. As I understood him, he said a great boom is now in progress, and that next year it is going to be followed by an extraordinary boom. I sincerely hope he will be more accurate in the latter prophesy than in his present statement about good trade. Wherever the boom exists, it certainly does not exist in the licensed trade, and I can also answer for it that it does not exist in the Constituency (Stalybridge) which I have the honour to represent. It is a constituency which comprises many industries, but principally it is composed of cotton operatives. The right hon. Gentleman's optimism reminds me rather forcibly of a story which I believe once emanated from Scotland of a (barometer which persistently would point its finger at "set fair," whilst the rain descended in volumes, as it had been doing for a week all over the country. At last the owner of the instrument lost all patience with it, and unhooking it from the wall he shook it very energetically, and with a great many expletives and, I am afraid, much unparliamentary language, took it outside and said, "See the weather for yourself." I do not suggest that the Chancellor of the Exchequer should be taken outside or severely shaken, but, at the same time, I should like him to be quietly and gently taken throughout not only my Constituency, but also the whole of the industrial localities in Cheshire, Derbyshire, and Lancashire, and he will find that trade in that by no means unimportant part of industrial England is in a deplorable state, and the cotton trade especially is suffering acutely. It seems hypocrisy to tell workers, when many of them are almost on the verge of starvation, that trade is improving by leaps and bounds and the Industrial barometer is rising rapidly. I notice also that the Chancellor of the Exchequer stated that there is to be an abundance of cotton raw material shortly. I did not know before that the Chancellor of the Exchequer was a prophet, but I sincerely trust that his predictions may prove true, for it is what the trade is anxiously watching and waiting for. I have only to add that the Board of Trade Returns, upon which the right hon. Gentleman so plumes himself are not by any means always a fair reflex of the state of trade throughout the country, and I am much afraid that this is only another instance of that character.


The Members on this side of the House have been taunted with the assertion that in the discussion on the Budget entry has not been made into details of the various matters the subject of debate, and the hon. Member for North Somerset particularly has denounced and accused us of cowardice and various vices of that sort. The reason, I imagine, that there has not been any detailed discussion up to this time may be due to the fact that there is no particular novelty in the vices of the Chancellor of the Exchequer. The vices are the old ones. The Budget is a reproduction of the old illness, and the only difference in the illness which one can trace at the moment is that while it was acute last year, this year it is tending to become chronic. It is surprising that we should be called upon to try and convert people who know perfectly well that they are not open to conversion, and surely it is right that this stage of the discussion should be devoted rather to what experience has shown since the proposals of last year. I notice a belief on the other side of the House that so long as a Radical majority is present in the Chamber you have an accurate reflex of popular opinion outside, and I know it is officially believed that that opinion will readjust itself in consonance with the constantly changing opinion outside. When I hear that, it only surprises me that there is ever any change of parties in this House when once the Radical party gets into power. Because, if they are so capable of interpreting the will of the people outside, surely when the next general election comes they will and should foe returned to power. But it has not been proved that any majority at any time in this House necessarily represents the views of the people outside. I think I may say that hon. Members opposite will probably agree with me that they have fixed political convictions. That is true of all of us; but the only difference in their view between this side of the House and the other side is that while they are gentlemen of fixed principles we suffer from fixed delusions. But fixity is the note of all politics as discussed in this House, and that may be a sufficient excuse why no detailed discussion of the Budget on the old lines has been insisted upon at this stage of the debate.

The only, in one respect, new aspect of the matter is that the Chancellor of the Exchequer is still fortunate enough to be without the help of experience in regard to the new imposts proposed by him. He has acknowledged that in regard to the Land Taxes, the Super-tax, and various other taxes, and in that respect we believe him to be extremely fortunate. As to the Spirit Duty, it is certainly surprising to us new Members of the House of Commons to find the Chancellor of the Exchequer acknowledges himself as a financial failure, and as a fiscal proposer saying, in excuse for himself, "Well, if I am a very bad Chancellor of the Exchequer I am at any rate a very good temperance reformer." Surely it is a violation of the whole sense of the Budget to deal with such questions; and surely it is foreign to the business of the Budget to introduce into an ordinary question of finance the question of national temperance. As regards a part of this Budget we know this, that upon a trade which was already overburdened with taxation new imposts were imposed. That trade already gave evidence in many ways that it could not bear a greater burden, and that the strain was almost too much, but it was chosen by the Chancellor of the Exchequer as the trade upon which to impose new and great imposts. We know the result. We know the confession he makes with regard to that. However it may appear to gentlemen from the other side of the Tweed who are so concerned in the state of temperance in that part of the United Kingdom, we are concerned here with the question whether revenue is being raised in an efficient manner and from proper sources. When the Chancellor of the Exchequer says "I know I was wrong in my calculations, I know I am taxing a declining trade," he shows that he is not confining himself to two points to which every Chancellor of the Exchequer traditionally should confine himself: Tax where you can produce revenue and tax where you will not produce inconvenience. Against both those canons the Chancellor of the Exchequer again sins, and this time he sins in the face of the light because whatever he could say on the former occasion as to the production of revenue he knows, now that he sins again, he has not the excuse of "no practical experience "behind him.

As to what we have heard about Death Duties, the Chancellor of the Exchequer congratulates himself that this country is living upon income. With great respect he deceives himself. The capital of the country is only the aggregate capital of the people of the country together with the national credit. Where in the case of the Death Duties you are living upon the capital of the individual transferred into the pocket of the State, you are just as much living upon the capital of the State as if the money was originally the State's itself. If you are doing that you are doing also this. By the withdrawal of national capital, owing to the destruction of individual capital you are destroying national credit. As regards the Land Duties we have not got practical experience of them but I think it is fortunate for the Chancellor of the Exchequer that he has the less to explain. He says that he is in favour of land nationalisation, but that he is walking warily and going by degrees. By natural sequence that brings one to the speech of the hon. Member (Mr. Snowden). It is good to know from the assurance of the hon. Gentleman himself that he is practical and not a theorist. It is, however, worth while to consider what his innocent proposals amount to. He would nationalise the land by purchase, and he would pay the purchase price by creating a trust. I thought trusts were things which were to be hurled at the heads of Tory candidates as indicative of Tory despotism and cant. But to nationalise the land the hon. Member will create a great public trust. I do not know whom he will invite to take the scores of millions of shares which he would have to issue, but I hope sincerely that he and some of his friends will underwrite the issue. It makes one put to oneself the conundrum: When is a trust not a trust? And the answer would appear to be: "When the trust is created by the State."

10.0 P.M.

The interesting development of the argument of the hon. Member is that he is not going to confiscate. He is not going to steal from anyone. He is going to pay everyone his fair purchase price, but as soon as he has converted the purchase price into a convenient form of liquid assets, which can readily be raided by any Chancellor of the Exchequer, the first thing he is going to do is to take all he can off the local rates and put it upon Imperial taxation. As soon as he has done that he will gladly charge 50 per cent, upon incomes over a certain amount, and as soon as he has done that for one or two years he has the satisfaction of knowing that he has not only got the land, but has the money as well, and that he has done it so neatly that no one can see his sleight-of-hand. These are the proposals of the hon. Member. I do not discuss the result to the State. There are still those who think that human nature is, and may remain, human, and that you are likely to produce chaos by destroying all motive for private initiative and enterprise. I hope he puts forward this doctrine with motives more creditable than others which he urges the Chancellor of the Exchequer to adopt in reference to the finances of this country. The hon. Member over and over again begged the Chancellor of the Exchequer above all things to be popular. He told him to introduce measures for which he had no money, and to leave the footing of the Bill to the Tories when they returned to power, to get the credit of introducing the measure, and leave the Tories to get the odium of paying the Bill—advice which I sincerely trust for the credit of the great office which he occupies, the Chancellor of the Exchequer will hesitate to adopt.

I have a suggestion to make to the right hon. Gentleman. I am afraid I may be suspected of being more extreme than the hon. Member (Mr. Snowden) himself, but I do not claim credit for the suggestion. The idea occurs in the refrain of a song. We are familiar with the People's Budget, and we are familiar with the ways by which it was sought to catch favour by stimulating every sort of motive of greed and jealousy in the people. The People's Budget may some day be not so popular as it is deemed to be now by hon. Gentlemen opposite, and the suggestion I make will be convenient when the People's Budget loses some of its popularity. I think it will be unrivalled in popularity. The only feeling I have about the matter is that I think I owe an apology to the hon. Member (Mr. Snowden), because I feel that if the suggestion I am about to make takes favour the schemes of the hon. Member will fall into disrepute as being moderate and slight compared with the thoroughly Radical scheme which forms the refrain of the song. This I would commend to the Chancellor of the Exchequer, and to the hon. Member for Blackburn as material for a future Budget:— Let us call all the 'quids' in, and share them out alike— Pile them up in the market square, and share them out alike. And when the poor have spent their share on oysters and champagne, Well, pile them up in the market square, and share them out again.


I rather hoped that after the Chancellor's speech the other day we should have less of the "organised despondency" from the other side. I do not think that the hon. Member who has just sat down need really take such a gloomy view of the future in spite of the Member for Blackburn (Mr. Snowden's) speech. After all, the criticism of this year's Budget has been purely speculative, and rather similar to the criticisms we heard on previous occasions. Whenever a Budget has been introduced, at any rate since 1906, we have heard complaints about the failure of British credit; we have had the same talk of the fall of British Consols, of the increase of unemployment and of the death of Free Trade. But here we are to-day with a marvellous position of being able to wipe out a deficit of £16,000,000 without putting on a penny of extra taxation. I think it is a most splendid result of Free Trade finance, and if I criticise parts of this Budget I trust I shall not be hypercritical, or in any way wishing to detract from this vindication of last year's Budget. I wish first of all to say that I do heartily press the Chancellor to increase the Sinking Fund at the earliest possible moment. I regard £24,500,000 as wholly insufficient when the vast sum of our public debt is considered, and I would readily myself pay an increase in income tax if only we could get that Sinking Fund up to the £28,000,000 again at which it was three or four years ago. In saying that I believe I carry with me hon. Members on both sides of the House; that in order to put our finances into a sound position they would welcome extra taxation devoted solely to that object. Repayment of debt is one of the strongest influences on the general trend of the nation, providing cheap money; whilst it is also invaluable in case of war to have a big sum to draw on. Let me pass on to another point. In discussing the extension of the Old Age Pensions Act let us remember that the abolition of the pauper disqualification is not in itself the removal of the greatest blot upon that Act. The earliest possible step should be taken to wipe out the 12s. a week limit, because all who work during their lives, and who pay rates and taxes have a right and a claim to an old age pension whether they have managed to lay by a little money or not. It is in the highest degree a bad principle, and bad for the nation, that those people who have subscribed to a friendly society, or to their trade unions, or who have managed to put by a little money in the Post Office Savings Bank, should not get their full pension, whilst the improvident are getting it, and it would certainly be in the interests of the whole community if this pension, which is a statutory right of every man who has paid his rates and taxes, should be paid to everybody, including myself. There is another criticism of this Budget, in regard to which I find myself for the first time in full agreement with the Member for Blackburn (Mr. Snowden). I do think that in the interests of Free Trade, as well as the interests of sound finance, steps should be taken to wipe out those ridiculous taxes on cocoa and chocolate. I am encouraged in that by the cheers from the other side. Surely, when the other side are willing to pay the £300,000 a year that this would cost in some other form of taxation in order to relieve the consumers of cocoa and chocolate, the Chancellor of the Exchequer should jump at the opportunity of conciliation, of conference, and of compromise, and put this change in taxation through with every speed, while every side of the House is prepared to welcome it. Therefore, I think it would be a good thing to press even to a Division the reduction of these taxes on cocoa, chocolate, and all such articles. They cost to collect far more than the big, staple taxes. The cost of collection is very large, the amount of the revenue received is very small, and the burden on the consumer is considerable. Therefore, I think, the Chancellor should take the earliest opportunity for getting rid of that taxation. Then I trust that before next year's Budget we shall take some steps to fulfil that promise which Liberal Members have given to their constituents that the "breakfast table duties" should be reduced. I know it is the custom in this House to draw some sort of elaborate comparison between direct and indirect taxation. I do not think that really there is any mark of distinction between direct and indirect taxation. Nearly all the taxation which we commonly call direct is, in effect, indirect. For instance, Income Tax, now that it is deducted from the source, whilst, perhaps, more visible than it used to be, is an indirect tax upon those who use capital, and is borne ultimately not by the man who owns capital but by the person who uses it, by the working classes. Any taxation of wealth increases the cost of capital, and therefore increases the amount the owner of capital is able to charge on the man who wishes to use it. Therefore income tax, if considered from an economic point of view, may be taken to be an indirect tax. The profits of the Post are an indirect tax upon industry. Stamp Duties are a tax upon industry, and therefore a tax upon the worker who is employed in industry, and add to the cost of all goods that are produced by industry. Therefore I wish we could get out of the habit of making any contradistinction between direct and indirect taxes, because all that we are accustomed to call direct taxation is really in the long run indirect taxation and a burden upon industry. Having said so much to urge the Government to an early reduction in the taxation of coffee, cocoa, and sugar, let me say I am heartily at one with the Chancellor in the proposal, when relieving local authorities from the burden of supporting the aged paupers, of recovering from the local authorities the amount that those paupers have been a charge upon the local authorities. It will be difficult to share it out, but I am confident he is taking the right line in insisting upon getting from local taxation an equivalent to the amount he is going to save the local authorities. This extension of the Old Age Pensions Act will reduce the poor rate which has been, since the time of Elizabeth, a hereditary burden upon the land. Every man who has bought land or who has inherited land has inherited or bought with it a statutory charge to provide for the poor in the neighbourhood, and if you do away with this poor rate and substitute in support of the poor a tax upon industry, upon the people as a whole, you are presenting to those people who have inherited or bought land a capital sum, raising the value of their land, permanently raising the value of what they have bought or inherited, entirely unjustifiably and without giving any quid pro quo to the people of the country as a whole. In the Minority Report of the Royal Commission on Local Taxation, which was signed by Lord Balfour of Burleigh, Mr. J. B. Balfour, afterwards Lord Kinross, Sir George Murray, and Sir E. Hamilton, chiefs of the Treasury, whose names carry conviction with both political parties, it is stated emphatically that if relief was to be given as they proposed to local authorities, in order to pay the increased charge for main roads, asylums, police, and various other matters, it was only just and right that the money required from the Exchequer in order to provide this relief should be taken from a tax or rate upon land values, because relief of the local rates, sooner or later, went into the pockets of the landlords and led to an increase of rents. Therefore I welcome the position taken up by the Chancellor of the Exchequer when he says that he is not going to give a large addition to the local rates and that he is going next year to require from the local rates the money he has to pay for taking paupers off the rates.

I think that by far the most important thing the Chancellor of the Exchequer foreshadowed in his Budget statement was that next year the whole question of the relation between local taxation and Imperial taxation was to be considered. Everyone who knows the appalling complexity of the various Government contributions to the local authorities for education, police, or anything else—everyone who knows the bad finance, and the bad checks on expenditure induced by the present system, will welcome that proposed change. I think the Chancellor of the Exchequer, after he has got the complete valuation of the land, apart from the improvements on it, which is provided for in last year's Budget, will be able to effect this change and put really national burdens on national shoulders in a fair way, without giving at the same time a large present to the landlord.


May I ask the hon. Member if he is referring to urban landlords or agricultural landlords?




It was only urban land that the minority Report of the Royal Commission dealt with.


Certainly; but the same principles are true in both cases. I think the hon. Member for Somerset was referring to my speech, and I meant that relief would be given to landlords, both urban and agricultural, if the rates were reduced by a Grant from the Imperial Exchequer. That is true whether you apply it to urban or agricultural land. I wish to call the attention of the Labour party to the attitude they have taken up on this subject. I do not know whether the House really appreciates the supreme joke of last Thursday, when the hon. Member for Blackfriars (Mr. Barnes) spoke very much as I am speaking now, and said that any relief of local rates would be a gift to the landlords, and he therefore welcomed the Chancellor of the Exchequer's position. At the same time, in one of the Committee Rooms down below, the Labour party were for about the fifth time this Session throwing over their leaders, and proposing Resolutions in a directly contrary sense. [An HON. MEMBER: "What about yourself?"] I myself have been disposed to differ from my leaders, but it has been in trying to get them on to a more advanced position. The difference is that the Labour party try to drag their leaders back by their coat-tails. It was the same last Session. The hon. Member for Blackburn (Mr. Snowden) protested against the Chancellor of the Exchequer's gift of £600,000 a year to the landlords, and he was deserted by his entire party. This Session the hon. Mem- ber for Blackfriars has been given away over and over again by his party. I think they might avoid passing Resolutions and giving them to the public in future until they have found out what their leaders really think about the matter. I do not know who was present at that meeting. Of course the majority of them did not know what the effect would be, but the hon. Member for Leicester (Mr. J. R. Macdonald) and the hon. Member for Halifax (Mr. James Parker) have no such excuse, and I should like to know how they justify the vote which they gave in the Committee Room down-stairs to present a million a year to the landlords of this country? Perhaps I have, in the heat of speaking, attacked the Labour party further than I intended. I only wished to emphasise the fact that in giving away this vast sum to the ratepayers I think they are actuated by the desire to cadge votes, and are not going on sound principles. Of course, the hon. Member for Blackburn (Mr. Snowden), speaking here to-day, referred to me as a theorist. He said that he was a practical man; that, although my theories were all right, he knew perfectly well that when this money was given away it would not lessen rates in any way, because our expenditure would increase. When he accuses me of being a theorist, and says that he is a practical man, I ask him is not that exactly the argument that is used against us both by Tariff Reformers opposite. They say, "You are all right in theory; we are practical men. We know that a duty on pottery will mean more pottery in North Staffordshire." I prefer to be a theorist, and to base myself on sound argument and sound political economy, and neglect the question of whether we are likely to get votes, a position which is far more easily taken up, but far more fatal to this country in the long run


We on this side have been appealed to as to whether we would not join in supporting the Chancellor of the Exchequer in reduction of the duties on cocoa and chocolate, which would cost this country about £300,000 a year. I think that many of us would not wish that he should put himself to that expense. We would only support the much more modest proposal of the Member for Aberdeen, and that is that he should effect a reduction which would only cost him about £25,000 a year, in order to put the cocoa and chocolate duties on a Free Trade basis, in accordance with his principles. But there is one small matter in which the hon. Member for Aberdeen may have made a mistake—namely, that the cost to the Chancellor of the Exchequer would not merely be £25,000, but there would be the far more valuable consideration—the support of Captain Coe and his merry men. The only two other challenges thrown across the floor of the House were by the hon. Member for St. Andrews Burghs (Mr. Duncan Millar). He repeated some of the old arguments about our alternative fiscal system, and said we would have to choose between Protection and revenue; but I would point out to him that any article manufactured in this country under the proposed change would produce revenue just as surely indirectly as it would be doing directly if imported and paying Customs duties. This is not the occasion for a general discussion, but on any Amendment or on the Second Reading, when this matter will be more immediately brought up for discussion, I am quite sure that any of us will be perfectly willing to meet the hon. Member in argument in this House or in any other place in support of the contentions we put forth. The other challenge which the hon. Member made had reference to the number of duties which had been placed on beer and spirits by Unionists Governments as distinguished from the party now in power. The hon. Gentleman stated that out of eleven increases in duty six had been proposed by Unionist Governments. Of course, anyone who analyses the question will see that it is not the number of increases but the aggregate amount of them that is the real point. My answer to him would be of another kind. If he says that the present Government cannot be accused of being vindictive because they have only proposed five increases, as against six by the Unionist party, then we trust that the hon. Member and others opposite who share his opinion will no longer go about saying that we on this side are friends of the brewers, after what he has said. The most striking speech after the opening criticism by the right hon. Gentleman the Member for East Worcestershire, was that of the Member for Blackburn (Mr. Snowden). We on this side of the House, who disagree with him, and disagree entirely with some of his inferences, I am sure at the same time fully appreciate the well-argued and concise way in which he put his views. Perhaps it is well that some one on this side should State how it is that, while equally sincere in our wish for some of the objects which he and his colleagues desire, and while agreeing with many of the criticisms that the hon. Member has passed, we yet can differ from him entirely both in his support of the Government and in the fiscal views and economic views which he has brought forward. We agree with him, and we thank him for one minor point that he urged on the Committee earlier this afternoon. He urged upon the attention of the Chancellor of the Exchequer the fact that the increase in imports and exports—that is to say, in the total of foreign trade—need be no indication whatever of the prosperity of the country in general. If I may direct the attention, I think it was of the Financial Secretary to the Treasury, to the actual Returns, I think that even, on his own argument, he will see that the general figures of the Returns of foreign trade as compared with a couple of years ago, both for Germany and the United States show that our own increase does not, although it is great, compare very favourably with the returns for Germany and the United States. But the main point with which we agree with the hon. Member for Blackburn was that the Returns for foreign trade need be no real index of the general state of the home trade and employment in this country. The reason is an obvious one. I am not denying for one instant that at the present moment trade is better in this country than it was. There are fluctuations in trade, up and down, under any fiscal system at all, but at the same time, when the total of our foreign trade presents a proportion of our whole trade which is always changing, and which at this present moment is a greater proportion of our total trade than it was some years previously, the mere increase in the totals of foreign trade is not an index of the growth of trade done in the country at large.

When the hon. Member for Blackburn went on to bring forward another argument then I think that in his critical faculties, which are very clear at dissecting the faults of others, he was himself at fault. He was alluding to the great increase of wealth in this country as compared with the fact that wages in certain years had not increased. He himself took as his criterion the figures of the gross assessments to Income Tax. If I may venture to suggest to him, I think he ought to take some fairer criterion of the wealth of the richer classes of the community than the gross assessments to Income Tax. Let me illustrate the matter by one perfectly simple case. Suppose a man is earning £2 10s. per week, or, say, about £150 per year. It is probable that he is not assessed to Income Tax at all. If his wages are raised by ten shillings per week then in the subsequent year he is earning £170, and the figures of the gross assessment to Income Tax go up, not by the increase of £20, but by the whole £170. So as wages gradually do tend to increase in the country, if a period of years is taken, there is nearly always from time to time a rather larger portion of the community which come under the assessments for Income Tax, and that fact throws out altogether any inference as to the wealth of the richer as compared with the poorer classes in the community which the hon. Member for Blackburn sought to draw.

There are two main points in which, if I may, I would like to express my almost entire agreement with his views. The first is with regard to the cost of the Navy. I am anxious, and I believe many of us are anxious, that sums of money should be devoted to social reform, and wisely devoted to the right social reform. The extraordinary cost of the Navy at the present moment is absolutely deplorable, but at the same time that we absolutely deplore the cost of the Navy, the amount of millions that are spent upon it, which might quite easily be spent either upon more productive work, or on labour employed in productive agencies, or else in remedying some of the hardships that quite undoubtedly exist, quite earnestly I urge the view that was put forward by my Noble Friend this afternoon. It is absolutely necessary, as has been urged again and again from this side, that the safety of the country should be made secure. That being the case, with whom does the real responsibility for the growth in the Navy Estimates lie? Armaments in these days are competitive. It is a mere platitude to say so. Where there is no agreement in these matters, then, as in business, there is competition. In that competition you have all the conditions that obtain in competition in other walks of life, and amongst others is the factor of the personal equation—whether your competitor believes you are in earnest or not.

Some years ago, when the proposal was made at The Hague Conference for a limitation of armaments, some of us were quite willing at that time that the programme of battleship building should be cut down from four to three, as a proof of bona fides, for that one year only. What happened? The proposal that was made was not accepted. Had the matter of disarmament been pursued at all on businesslike lines, it would have been made clear that while our proposal was bonâ fide, yet at the same time we were determined to safeguard our position, and that if it was not accepted, as it was not accepted, next year, at any rate, our programme would be restored to its previous, if not to a higher, standard. Instead of that, our programme was further cut down. Battleship building is competitive, and the result was nothing else but to spur our rivals on, in the belief that we were not in earnest in our programme. Just because they were spurred on, we are landed today with these enormous Navy Estimates. It is my firm belief that neither Germany nor this country would be spending nearly the vast sum we are spending to-day upon armaments if our Government those few years ago had shown that they were in earnest by not decreasing their programme still further when foreign countries refused to accept our offer in the first instance.

The next point on which I find myself in full agreement with the hon. Member for Blackburn is the great desirability of introducing some system of invalidity insurance. Every person who works amongst those who are specially affected by illness agrees as to the importance of such a measure. Anyone acquainted with them, or who has lived amongst them, knows that a system of invalidity insurance is really of more importance to the country at large than a system of old age pensions. The latter appeals, no doubt, to the pathetic side of human nature; but, so far as actual individual suffering is concerned, and so far as advantage to the community is concerned, it is probable that invalidity insurance to a man in the prime of life, with a wife and family dependent upon him, is of more importance than even a system of old age pensions. That being so, we are given various reasons why a system of invalidity insurance has not been proposed this year. The Chancellor of the Exchequer has given as his reason the delay in the passage of the Budget last year. I think the reason is quite a different one. It is neither that nor the amount of our armaments. I wish to say it without any offence at all: the reason is that the social reform policy of the Government has had electioneering as its main principle, and social reform as its second. If hon. Members will consider the matter quite frankly, apart from the heat sometimes engendered in Debate, I think they will admit there has been a great deal of electioneering in regard to these matters, and not perhaps a sufficiently full consideration of those social reforms which first need to be carried out in the order of preference. If there was an order of preference in which reforms needed to be carried out it was a system of invalidity first. Anyone who knows the pressure of illness upon a family such as I have described, anyone who is acquainted with that particular type of worker, knows quite well that however much he may have provided for himself according to his means, yet he cannot very often have the means in order to provide both for his family while he is ill and also for his own efficient cure. I myself have come across individual case after individual case—histories that I have personally traced and tabulated—of skilled workmen who through illness of that kind are now to be found, having lost their peculiarly skilled occupation, amongst the ranks of the casual labourers. I think if the Government had been both enlightened and fully in earnest from the point of view of social reform—of social reform first of all and electioneering afterwards—that there is no question whatever that it is this system of invalidity that they would have first undertaken instead of the other.

With regard to the other point which has been laboured by the hon. Gentleman the Member for Newcastle and other hon. Members who spoke from the opposite side, the consideration I have mentioned affects the whole question of this pauper disqualification as well. The reason, no doubt, for the pauper disqualification formerly was that it was more or less recognised that if a man was a pauper he had looked after himself less well than those other members of his own surroundings who had kept themselves in independence. The reason for the abolition of this pauper disqualification itself is, if I may say so, a matter of sentiment as well as of reason by most people, who believe that there are certain great classes of circumstances which make the general principle untrue. A man may fall upon misfortune through illness or through lack of work. These cases, it is urged, form such a large proportion that it is no longer fair to say that be- cause a man is a pauper that therefore he does not deserve equal treatment with other men. Hon. Members opposite below the Gangway will, I think, really realise, as well as everybody else, that so far as it is possible to discriminate between the deserving and the undeserving it is right to do so. The abolition of this pauper disqualification is only suggested upon the grounds that at present it is not possible to discriminate between them. One of their own authorities, Mr. Sidney Webb, in one of his recent books,, states—he has put it with a certain mildness and niceness—that the natural habit of persons, where they can do so, is rather to consume commodities and services where they have not earned them than to earn them with out consuming them. Everyone, I think, in all quarters of the House will realise, if it is possible to discriminate, that it is right to do so. A part of the whole object of the Government's programme has been to change the conditions which may cause a man to become a pauper through no fault of his own—

The CHAIRMAN (Mr. Emmott)

The hon. Member should remember that his remarks should bear some relation to the question under discussion.


May I ask whether you, Sir, have in mind the fact that included in the Budget proposals is the removal of the pauper disqualification to which my hon. Friend is referring?


The hon. Gentleman is dealing too much with the question of social reform.


I shall endeavour to confine myself directly within your ruling, Mr. Emmott. May I suggest that in so far as part of the Government programme is to produce this system of invalidity and insurance in the near future which is foreshadowed in the Budget, and as part of the Government programme in the late past has been to produce a system of Labour Exchanges—these are two which will do away with the whole cause according to a number of hon. Gentlemen opposite—though we would add some fiscal changes as well—of the pauper being brought to his present state of destitution through no fault of his own, and the more proper course for the Government would have been to have done away with the cause of unmerited hardship, and to have dealt with the cause of pauper disqualification afterwards. I would urge again upon the attention of the Committee that, however good some of these objects may be, yet taken in the main the whole of the policy on which this Government came back to power was the policy of peace, retrenchment, and reform. It was on that policy that they appealed more than once to the country.

However desirable some of these objects may be, there is justification in every Budget for every object that entails expenditure. For that reason that cry ought to be given up, and no longer appealed to by hon. Members opposite as a means of obtaining favour in the country, or else some effect should be given to it in the financial proposals of the year. The right hon. Gentleman the Member for East Worcestershire (Mr. A. Chamberlain) showed the other day that the increase under the present Government was a matter of sixteen millions of money per annum. That increase was nothing either to the hon. Member for Blackburn (Mr. Snowden) or to the Financial Secretary to the Treasury (Mr. Hobhouse). They were both prepared to have an increased Budget of even £300,000,000 or £400,000,000 per annum. To advocate an increase of the Budget until it stands at such a figure as between £300,000,000 and £400,000,000 is either platitudinous or preposterous. It is platitudinous if you suppose, with the Secretary to the Treasury, that the population, the wealth, and production of the country were to go up proportionately, so as to justify it. But if the Budget is a Budget when the production and the industries of this country are on approximately the same basis as at present, as is supposed by the hon. Member for Blackburn, then it is preposterous, and I tremble to think that the Financial Secretary to the Treasury would ever give countenance to the proposals made by the hon. Member for Blackburn. But the increase of £16,000,000 is not by any manner of means the total increase in the burdens of the community. The Government have pointed to the number of social reforms they have carried out. Some of these have been borne upon the Budget; others have been borne simply upon the industries of the country, such as the Trade Boards Act and the Workmen's Compensation Act, but they are none the less burdens upon the country. Other reforms, again, such as reforms in education, town planning, or small holdings, for which credit is taken, are borne not by the Budget, but by the local rates. Hence the increase is not merely one of £16,000,000, but of £16,000,000 plus the increase on the local rates, which have gone up something like 104 per cent, in the last twenty-four years, and the whole of the increase laid on industry direct.

I do not think anyone on this side of the House can look upon the policy of the Government without somewhat of that despondency which the Chancellor of the Exchequer deprecates. In the first place, the Sinking Fund is not what it ought to be. I believe the proportion of the Sinking Fund to the total of the Debt is less than it has been for some twenty years, except for the years of the war. It should not only bear a certain proportion to the total of the debt, but it must also be somewhat regulated by the annual expenditure. If a man has a mortgage upon either his buildings or his land, what the mortgagee looks to is the margin of security. The margin of security in the matter of the National Debt and of national borrowing is the power of the country to pay the interest upon the debt which is created; and in so far as by these huge estimates you diminish the power of the country to pay possible charges upon the debt, you ought to be the more scrupulous in keeping up the Sinking Fund to a higher level than is at present indicated in a fixed charge of £24,500,000. It is hardly possible to rely completely upon the statements of the Chancellor of the Exchequer, or of his supporters behind him. The right hon. Gentleman the Member for Spen Valley (Sir T. Whittaker) gave some reasons for the fall in Consols, but the whole of them, with one exception, were inaccurate. The one accurate reason he gave was that there was better information diffused now with regard to securities abroad, and that consequently there was a greater tendency, other things being equal, for investments to be made abroad. That is perfectly true, but with the depreciation in the securities at home the outflow is greatly increased. Extraordinary and striking figures were given to me by a firm in the City the other day with regard to investments made through one considerable avenue. They had been asked out of every £100 to invest £67 in foreign countries, £27 in our Colonies, and £6 only in this country, whereas nearly all the securities they were asked to sell in order to make those investments were English. The right hon. Gentleman gave as other reasons for the fall in Consols the extension of trustee securities, the change in the rate of interest, and the amount of borrowing there had been. That is all very true, but the whole of those tendencies had come into full operation before ever this Government came into power. They may well explain any fall in Consols which took place before the Government came into office, but it is no explanation whatever of the fall that has taken place since that date. The same inaccuracy appears in the speech of the Chancellor of the Exchequer himself. "When he came to his peroration he seemed to fall into a habit which has become chronic with him—one of mingled emotion and inaccuracy. He alluded to the awful warning given us by foreign countries, and spoke of the favourable position we were in with regard to our own finances. Perhaps the right hon. Gentleman might, with the help of the hon. Member for Swansea, make an excursion into the actual finances of foreign countries. If so he will find that the deficit in Germany is not really due to inability to find the money—but to the financial Home Rule which exists in Germany as between the various States of the Empire. The suggestion of inability to find money in the United States, too, is inconceivable and not worth argument. We have, therefore, some reason to look upon the whole course of the expenditure of the Government, so far as caused by social reforms, as lacking in principle. We have some reason to be anxious by reason of the loose way in which commitments have been made for the future without any certainty that the revenue of the future will be sufficient to meet those commitments. When the hon. Member for the Blackfriars division of Glasgow characterises this Budget as humdrum, and when other Members describe it as a peaceful Budget, I can only say we on this side of the House realise there are two reasons why a thing is humdrum or why it is peaceful. The first I might call the quiet of healthy content. The second is what the hon. Member for Swansea will understand to be what the Germans call Katzenjammer which means the unhealthy period of quiet which follows after a strenuous period of financial debauchery.


I do not propose to follow the last speaker in his general disquisition, but I must say I think he has strange courage when he says this party has been using social reform to catch votes. I have an election card of the Leader of the Opposition in 1895, having at the top the Union Jack and the portrait of Queen Victoria, and on it appears the words, "Old Age Pensions."

And, it being Eleven of the clock, the Chairman left the Chair to make his Report to the House.

Committee report Progress; to sit again to-morrow (Tuesday).

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