INCOME TAX AND SUPER-TAX.— [Progress, 4th July.]

HC Deb 06 July 1910 vol 18 cc1638-708

Considered in Committee.

[Mr. EMMOTT in the Chair.]

(IN THE COMMITTEE.)

Motion made, and Question again 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 two pence 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."—[The Chancellor of the Exchequer.]

Mr. J. M. HENDERSON

I was endeavouring on Monday night, when the Debate was adjourned, to answer the charge made against us of using the cry of social reform to catch votes. I do not want to labour that point beyond this: That when the charge is made against us, our withers are unwrung. I think we have done more than a little to redeem the pledges we have made. I should like to answer the complaint of the hon. Member for East Birmingham (Mr. Steel-Maitland) with regard to Consols. What is the matter with Consols to-day? Two and a half per cent. Consols to-day are on a parity with the old Three per cents, over par, and for twenty years the Three per cents. were as good as ever they were before they were converted. So that Two and a half per cent. Consols to-day is the dearest gilt-edged security in the market. What really wants to be explained—and that I shall endeavour to do to the satisfaction, I hope, of the hon. Gentlemen opposite—is why the Two and a half per cent. Consols ever reached the extravagant price they did. The Committee will remember they reached the price of 113. Why did they get to that price? [HON. MEMBERS: "Because they were worth it."] The particular factor was cheap money. There is this extraordinary fact to be noted: that from 1891 to 1893 the Bank rate never touched 5 per cent., and from September, 1893, to October, 1896, the Bank rate never touched 4 per cent. From the month of February, 1894, to the month of October, 1896, the Bank rate stood at 2 per cent.—a rate unparalleled in the history of the Bank of England. Now, what took place? During all that time the Government were redeeming Consols and Annuities, and the consequence was there was such a plethora of money that the discount was cut down to If to 11¾ and call money to?½ and to? per cent., and even it could not be lent at all.

The Banks commenced to buy Consols. Consols were scarce, but rather than lend money at ½ per cent, they bought Consols, and afterwards, of course, they burned their fingers. Then, in 1899, came the war. I do not intend to discuss the war. Suffice it to say it came, and then we had a break in the continuous low Bank rate. Money became dearer and Consols fell. From that time up to 1905 Consols dropped £22. I do not blame the Conservative Government for that. They could not help it; it was entirely a question of the Money Market and of supply and demand of first-class securities.

Sir F. BANBURY

The interest was reduced a quarter per cent.

Mr. J. M. HENDERSON

The hon. Baronet reminds me the interest was reduced. Yes, it was reduced to 2¾ per cent. In 1889, and it was reduced to 2½ per cent, in 1902. There is no question about that. But then the savings banks and the insurance companies, at a time of cheap money, bought this security. It was very little in the market, and once it was there the price ran up. When the war came, and subsequent to the war, money became dear. There was more trustee securities, and therefore the price went down.

At the time the Conservative Government went out of power they had dropped to 91 or 91½. Since then they have dropped to 82½. Therefore, if we are responsible for a drop of 9, they are responsible for a drop of 22, but I do not blame them any more that I blame this Government. Consols used to be a very favourite security for the insurance companies, but insurance companies must have an average yield upon their investments of somewhere between 3 per cent, and 4 per cent. At that time, rather than buy Consols, some of them came to Parliament for powers to lend money out of the Kingdom, and any quantity of it went to Canada and Australia. Consequently, there has been less demand for Consols. After all, the present Two and a half per cent. Consols are a good price. They are over par compared with the old Three per cents., and I do not think anybody should ask them to go higher. That is my own view. If the hon. Member says this Government was responsible, will he say they were responsible for the conduct of the City of Birmingham or of the City of Liverpool? The Chancellor is not the Lord Mayor of either Birmingham or Liverpool yet whatever he may be. What did they do? They wisely took advantage of the cheap money. Birmingham actually offered for tender Two and a half per cent. Stock at 101, and they got 102. Liverpool did the same thing. They offered at 102, and they got 104. What is the price of these to-day? Not 82, but 71. Who is responsible for that drop of 301

Sir F. BANBURY

The Radicals.

Mr. J. M. HENDERSON

I am glad to hear they control Birmingham. I hope they will continue to do so. It is therefore absolutely idle to try and make out that this Government are in any way responsible for the drop in these securities. It was an inflated time of cheap money. People nowadays are not content with 2½ per cent. What your charge means, if it means anything, is that when a Liberal Government is in power people want 3 and 4 per cent., and that when a Conservative Government are in power they are content with 2½ per cent. There is another complaint that has been answered in this House, but I want to answer it in rather a different way. The complaint is about capital going out of the country. An hon. Gentleman said that out of £100, £67 went abroad, £27 to Canada, and only £6 remained in this country. What are the facts with regard to that? There are no less than 7,860 banking offices in the United Kingdom. There are £1,000,000,000 on deposit at these banks, and of that sum at least £600,000,000 is lent to commercial men, traders, and to the industries of this country. Let me cite one example of the ease with which money may be got. During the boom in cotton we all know that capital was found for building fresh mills a long way in advance of the time for them, and there is not a single trader conducting his business properly and showing a sufficient margin of profit who cannot get money in this country to expand his business and still leave plenty to go abroad. A great deal goes for Argentine railways and for Canadian railway extensions. Will hon. Gentlemen keep that money in this country for railways? Where are you going to build them? The London and North-Western goes from London to Holyhead and cannot go any further. Railway development is as big as it can be in this country, but in Argentina and Canada there are thousands of miles ready for development. Surely if the hon. Member was offered Birmingham Stock at 2½ per cent, and Canadian Railway Stock at 5 per cent, he would not hesitate which to take.

I can give the House another simple figure with regard to the increased facilities for banking in this country. The overturn at the Clearing House in the first week in 1908 was £242,000,000, in January, 1910, it was £335,000,000, and in April, 1910, it reached the record figure of all the Clearing House returns in existence of £389,000,000. That shows there is plenty of money circulating in this country, and that the point they try to make that money is going out of this country at such a rate that it does not leave enough for development here is altogether ridiculous. Would hon. Gentlemen wish to keep some of that money in this country for the purpose of reviving some of the decayed and decaying industries that we hear of? Would the hon. Member put down £10,000 to revive a factory for pearl buttons? There is no necessity for wasting money in trying to revive trades for which we have found no use and which have gone away from us. I can remember, and I dare say other hon. Members are old enough to remember, the pearl buttons, and the nuisance they were. The man who revived that trade would deserve to be executed. There is plenty of money for all purposes, and there is plenty to go out and increase our trade and bring us income. So long as foreign politics do not intervene, I do not suppose either party, whatever their policy, will affect the Money Market or the value of securities to any appreciable extent.

I should like to say a word to the Chancellor with regard to old age pensions. I entirely approve of his removal of the restrictions of the pauper disqualification, but I heard a good deal of complaint in the North of pensions being paid to people who had money in reserve at the bank, some £500, £600, £700, and even as much as £800 and £1,000, which was earning only deposit interest, the balance being made up from the pensions. I do not think that is right. I have no objection to encouraging thrift in every possible way, but it does not seem to me that this is a question of thrift. If a man has £800 or a woman £500 or £600 they can buy an annuity for themselves which would be in excess of the total pension, and I see no reason why we should provide not a pension for the pensioner, but provision for his next-of-kin. We ought, I think, to draw the line at that, and I should be glad if the right hon. Gentleman can see his way to remedy that.

I want to make an appeal once more to the right hon. Gentleman with regard to the Licence Duties, which press somewhat heavily upon second-class hotels and restaurants. He said 70 per cent, of the Licence Duties had been paid. I quite believe it, but, then, 70 per cent, would only be raised to a very small extent, if at all It is the others we are concerned with. I am appealing on behalf of houses which serve a certain useful purpose in towns, and I have some cases here which illustrate the hardship to which they are subjected. I have here one on which the old duty was £35 which has been called upon to pay £145, an increase equivalent to 350 per cent., and I am told that that is but a sample of many cases.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

In that case is not the higher figure based on the assumption that it is the maximum charge on the rateable value of the house? I should not think it possible at the present moment to assess the amount the hotel or restaurant will have to pay. It depends entirely on the proportion of the receipts from alcohol to the total receipts.

Mr. J. M. HENDERSON

But these figures are taken from the actual demand notes. The right hon. Member for the Spen Valley (Sir Thomas Whittaker) smiles. I am not pleading the case of anyone connected with liquor, but if you are going to have restaurants—and it will be admitted that they are a necessity— you must not subject them to a tax which will render it impossible for the business to be carried on at a profit. I have here another case—a small hotel, the old duty on which was £50; the demand for new duty is £333! At that hotel 1,400 gallons of whisky are sold in the year. There is a shop rated at the old duty at £21, and at the new duty at £35—an increase of only £14, which sells 3,500 gallons of whisky. In the case of the restaurant there must of necessity be a larger rating, because more space is required for the restaurant business, and it makes it unfair that that space—devoted to restaurant purposes— should be assessed on the same basis as the smaller space where nothing but drink is sold. Yet a shop, rated at £50, if it happens to be in the centre of a large industrial community, sells more drink than a £300 house in the City. I know the Chancellor of the Exchequer will contend that he is bringing these houses under the compensation value. But I am speaking of houses in Scotland, where at present compensation is not known. I suppose, however, that there ultimately we shall know all about it. I think hon. Members of this House, without exception, will admit that the Licence Duty must hereafter be based on a percentage of actual sales. Until that is brought about there will be an enormous number of anomalies. Men will be paying more or less—as the case may be— than they ought to pay. Admittedly the old duties were too small, but surely to increase the burden on a man by 500 per cent, is too much. I believe the only arrangement acceptable both to the country and to the trade would be to base the Licence Duties on a percentage of the sales.

4.0 P. M.

Mr. PRETYMAN

I think the last portion of the speech of the hon. Member for West Aberdeenshire will convince the Committee that the pursuit of morality by methods of taxation leads one on to a rather thorny path. As long as the Chancellor of the Exchequer adheres to finance which imposes taxes for the purpose of raising revenue he will find it comparatively easy to place his burden equally on those who are paying the tax. But the moment he leaves that path and branches out into a course by which he hopes to reform a section of the population by taxing other people, he will find himself landed into difficulties, and the illustrations cited by the last speaker go far to show that the right hon. Gentleman has been totally unable to attain his object. I should like to go further than the hon. Member, and to dot the "i' s" and cross the "t' s" of his speech with regard to the liquor taxes, and particularly in reference to the Whisky Duty. That tax was originally imposed with a purely revenue object. It failed entirely to achieve that purpose, and thereupon credit is claimed that the tax has produced a good effect morally. I think the right hon. Gentleman the Member for the Spen Valley used the expression that its justification was its moral effect, and that, too, is the attitude of other hon. Members opposite, as well as of the Chancellor of the Exchequer.

Surely, however, if morality be required for the benefit of the community, the community ought to pay for it. What is the attitude which the community takes under the guidance of the Chancellor of the Exchequer? The State enters into a partnership with the trade and shares profits with it, as about one-half of the profits of the trade go into the pockets of the State. The State thinks that there should be some morality introduced into the business, and it says to its partner, "Let us make a sacrifice in the cause of morality," and the cost of the sacrifice to the State is another half million of revenue and the share of the trade is that it shall be taxed out of existence.

That is the absolute and concrete position taken up by the Government, and the right hon. Gentleman admitted that in his Budget speech, because he referred to the fact quite casually that houses were to be closed on account of this new taxation. That is to say, that the persons who were earning their living in these houses are to be taxed out of existence. We also know very well that certain breweries and distilleries have been taxed out of existence. I do not think we on this side of the House are any the less anxious for temperance than hon. Members opposite, but I do not think we should consider it fair to attain a national object, however good—and there is no better object than that of temperance—to place the burden upon one small section of the community which is actually in partnership with the State and to raise that burden to the point which involves that they alone should make the whole sacrifice of which the nation has the benefit, but makes no sacrifice for it. Who else makes any sacrifice? [An HON. MEMBER: "The public."] What sacrifice does the public make? The State gets half a million of revenue, and according to the right hon. Gentleman the public gains in spending power, in temperance, and in health. He makes the claim that drunkenness has been reduced by this taxation, and the whole of his claim is, not that the public have made a sacrifice, but that the public have gained. The whole sacrifice falls upon one limited class, and my contention is, not that the right hon. Gentleman has failed in securing some measure of temperance—that is a matter which it would be difficult to prove one way or another—but I contend that whether he has done it or not, his success has been attained by the sacrifice of one section of the community. The right hon. Gentleman gets the cash, and he claims credit as well. He puts himself and his friends on a pinnacle of morality, and the trade have to make the whole of the sacrifice, and then are looked down upon as well.

That is the attitude of the right hon. Gentleman and the party opposite. In what way do the right hon. Gentleman and his friends, who advocate these taxes, suffer? They have never touched the burden with their little finger, and they bear nothing. This Budget is supposed to distribute taxation equally over all classes of the community, but I will ask the right hon. Gentleman what extra burden—what pennyworth of extra burden —is placed upon a man, a supporter of the right hon. Gentleman, in a Nonconformist chapel in Wales who does not smoke tobacco? Perhaps I may assume that he is one of those who have been cured of the habit by this Budget, and that being so, what does he contribute? [An HON. MEMBER: "Sugar and tea."] The right hon. Gentleman has not increased the duties on tea and sugar, and I was asking, what has he to bear by this Budget, which is to attain social reform by means of a burden which is to be distributed equally upon all classes of the community? I ask, what share of that extra burden imposed by this Budget does an individual in that position contribute? [An HON. MEMBER: "Land Taxes."] That will depend upon how much land he has; but I am assuming he has no land. A very large class of the community does not own land, and does not drink whisky, and does not smoke tobacco. And what do they pay under this Budget? Not a farthing. It is very easy to get up and be moral at other people's expense. I am sorry to do anything to reduce the self-satisfaction which shone in the right hon. Gentleman's Budget speech. My point in regard to this form of taxation is that it benefits all sections of the community at large at the expense of a certain small section whose votes do not go for the Radical party, but are mostly given against it. That is my view. I should not have made that remark except that I think the Committee will agree with me that the Chancellor of the Exchequer's speech, in introducing the Budget, was very unusual.

It is not usual to introduce political considerations into the discussion of the financial proposals of the year, and I think it is obvious that the Chancellor of the Exchequer set an example. His speech was more like a political manifesto than any Budget speech which I have heard delivered in this House, or of which, so far as I am aware, there has been any record. However, I will pass from that. What was the general claim which the Chancellor of the Exchequer made? He claimed that as the result—not as the result, but in spite of, his last Budget, which had been so vigorously and violently attacked— there was a general trade revival in this country. What does that mean? It means this: To the extent to which there is a trade revival, that it is part of a general trade revival throughout the whole world, common to all countries alike under whatever fiscal system they may happen to be, and, so far as we can judge, our share of it is not greater than that of other people —in fact, it is rather less. Surely the right hon. Gentleman overrates his own power for mischief if he suggests that the effect of his Budget should be that this country should have no part in the general prosperity common all over the world. We have made no such claim as that, and I do not think the right hon. Gentleman puts his claim very high if he puts it no higher than that. With regard to other countries, I am sure I think the right hon. Gentleman's attitude was not, to say the least of it, a very polite one. He plumed himself on having made both ends meet. He adopted rather the attitude of the Pharisee. He did not say, but he implied, that he thanked God that we were not as other nations. [Hon. MEMBERS: "Hear, hear."] I am glad to hear those cheers. That is the attitude of mind of the righteous party, I know, and I know it gives great satisfaction to themselves, but it does not tend to our popularity with the world at large. The right hon. Gentleman's expression was quite of a piece with those cheers. He referred to other nations generally as "lumbering along with their burdens and with their deficits from one futile financial expedient to another." That, again, is the attitude of the party which is always right while everybody else in the world is always wrong.

I think that we in this country would not be at all averse to show the deficits which those other nations are subject to if we might be let off with their burdens. [HON. MEMBERS: "Oh!"] Yes, I repeat that. Will any hon. or right hon. Gentleman on that side of the House suggest to me that the burden of taxation in this country is not greater per head, and greatly greater per head, than in any of those other countries to which the Chancellor of the Exchequer referred. His comparison is valueless, unless he compares the weight of the burden of taxation in this country with the weight of the taxation there. [An HON. MEMBER: "There is the wealth of the two countries."] The wealth of the country is not a test at all, because if the burden is in proportion to the wealth of the country, surely this must apply. If the wealth of the country is greater than the wealth of another country, then equal taxation will produce a larger revenue. If you are living, not on your extra rate of burden, but on your greater wealth, it means that you are put under a heavier rate of taxation than other countries, or that you are obtaining a larger revenue than you require. Is that our position? It is not our position that the rate of taxation in this country is not heavier than in other countries. Is that the right hon. Gentleman's contention? If so, I hope he will show us in what other country the burden per head of taxation is greater. There is no country in the world which has to bear such a great burden per head as we in this country. The Chancellor of the Exchequer's sole test financially on the success of his methods is the test of Dr. Sangrado: "How much blood he can draw out of the patient." But surely that is only a partial figure. You have not only to inquire as to the amount of your revenue, but the means by which this revenue is obtained, and the burden falls upon those from whom it is drawn. I do not profess to have absolutely complete information—in fact, my information is only partial—but I shall be glad to be corrected, if I am wrong, when I suggest that under no financial proposals in any other country of the world has any Finance Minister or Chancellor of the Exchequer admitted that he has been obliged to start out to tax a class of taxpayers out of existence. I should suggest that you must be driven into a corner before you start out to tax people out of existence, and on that I think it is pertinent to say that at one and the same time to pose and plume yourself upon the general prosperity of the country, the improvement of trade, the ease with which revenue can be raised from increasing wealth, and then to admit that under these conditions you are starting out to tax certain classes out of existence appears to me to be a position which is impossible from the point of view of sound finance.

I think we may apply another test. There was a very able, interesting, and useful speech from this point of view, made by the hon. Member for Blackburn (Mr. Snowden), who quoted some very valuable figures to show that the sum assessable to the Income Tax in this country was constantly increasing, the trade returns of this country were constantly increasing, and that at one and the same time wages were decreasing, and he made a great point of that to the Chancellor of the Exchequer. I doubt if it is possible to find a greater condemnation of our fiscal system than is afforded by those figures. Let us again take a comparison with other countries. In comparing wages, wealth, taxation, progress, and industry between one country and another you are comparing a moving condition and not a stationary condition, and the question is not whether the wage here to-day is exactly equal or greater or less than the wage of some workman in Germany or America to-day. You are studying progress or decline, and you have to examine the rate at which you are advancing as compared with other countries, and whether you are in an advancing or a declining period of trade, progress, or industry. It does not require figures to show that the incomes of our great trade rivals, whose fiscal system is different from ours, have increased, their wealth has increased, and their trade figures of imports and exports have increased equally with our own. But would the further statement of the hon. Member (Mr. Snowden) about this country be true there? Have their wages decreased? [An HON. MEMBER: "Yes, taking into consideration the cost of living."] I did not mention the cost of living. The Chancellor of the Exchequer is an example to his own side. Whenever an argument is put forward which he finds some difficulty in meeting ho can always evade it by raising up some side issue. I do not think the point raised by the hon. Member is of the slightest value, because the cost of living has increased in this country as well as in others. There is no doubt whatever about it. But even if it had not it does not affect my point. My point is that wages in other countries, whose wealth has increased, whose assessment for income has increased, have also increased.

The hon. Member, after careful study of the question, puts forward figures to show that in this country alone of the great trade countries in the world wealth increases but wages decrease. Why is that? Where is the difference between us and those other countries except in our fiscal system? It can be directly proved. This is not one of those speculative questions, where you may argue for ever between post hoc and propter hoc. The connection is perfectly plain and perfectly obvious. Why does capital benefit under our present conditions when labour does not equally benefit? For the simple reason that capital has the whole world to go to. Capital is not injured by our present fiscal system. You can increase your income by investment abroad, and without the employment of British labour. That is the obvious deduction to be drawn from the hon. Member's figures, that in this country labour does not get the employment it ought in proportion to the income, the expenditure, and the wealth of the country. What is the remedy in the right hon. Gentleman's Budget? Unemployment is on both sides of the House a subject constantly in our thoughts, and constantly upon our tongues, and we are both anxious to deal with it. The Chancellor of the Exchequer proposes to tax incomes at a higher rate than they have ever been taxed before. Taking Income Tax, Super-tax, and Death Duties together, there is now a higher rate of tax upon fixed incomes than there has ever been before. That money is to be used for social reform and partly to give State doles to workmen who are not employed because it is obtained by the use of foreign labour instead of British. I am sure the right hon. Gentleman will have the sympathy of everyone on this side of the House so far as his desire goes to relieve the hardships and troubles suffered by workmen who are unable to obtain employment, but our criticism upon this is that your remedy, good as it may be for the individual employé, is liable to aggravate the disease by causing more unemployment. It is constantly tending to cause further investment abroad, and less employment at home, which again has to be remedied by further taxes. It is a vicious circle in which money is invested abroad, and British labour is not employed, and unemployed labour has to be relieved by excessive taxation upon money which is made by foreign investment. That system surely cannot be a sound one, and the right hon. Gentleman himself must be aware that it is a process which can have no end.

I want to come to one or two particular points in the right hon. Gentleman's speech. I am speaking now mainly on the question of the revenue which he proposes to obtain by this Budget, and the methods by which he will obtain it. In regard to Death Duties, the right hon. Gentleman said he hoped to obtain an increased yield by improved methods of valuation, and that that process had already begun, and was having excellent results. I do not know what the Chancellor of the Exchequer considers to be "improved methods of valuation," but information reaches me as to what those methods are, and perhaps the Committee will judge for itself whether they are an improvement on the old ones or not. I have the actual letters of a case which occurred in the North of England where a man died who owned a house which had cost him, including the site, £570. It was fourteen years old. It was returned by the executors for Death Duties at a valuation of £500. After the valuation had been sent in the successor of the deceased received a visitor, who said, "I have come to ask whether you will sell your house." He said, "I am not particularly anxious to sell it, but I might sell it at a price." The visitor asked, "Will you take £700 for it?" The inhabitant said, "Oh, dear, no; I have been offered £750 for it." "Will you take £8001" "Yes, I will take £800." "Oh," said the visitor, "now we are coming to business. I am a valuer for the Department of Inland Revenue." Upon that came a letter from the Inland Revenue, claiming duty on £800. Is that a method which commends itself to hon. Gentlemen opposite? I do not defend the owner for saying he had been offered £750, but he is put in that position by what the French call an agent provocateur. What is the position of a man who is asked by a stranger whether he will sell something which he had not thought of selling? Does he not invariably ask a higher price than he would under other circumstances? Is it a fair, dignified, or proper method? These are the improved methods of valuation, to send agents of Somerset House, who pretend that they want to buy people's property, and then claim upon it at an enhanced figure. I should not smile if I were in the right hon. Gentleman's position. I do not know whether those methods are approved of by him.

Mr. LLOYD GEORGE

Can the right hon. Gentleman give me the name?

Mr. PRETYMAN

The case occurred at Hartlepool. The solicitors are Messrs. Fryer and Webb, 18, Scarborough Street, West Hartlepool.

Mr. LLOYD GEORGE

The name of the estate?

Mr. PRETYMAN

The estate is that of Robert P. Lund, deceased. I have taken great pains to verify the case before I raised it in the House, and I have copies of the letters which actually passed. I will give another case. This is only one which has been sent to me in correspondence, and I have not been able to verify it, but I have every reason to believe the facts to be absolutely as stated. It is a case of a ground-rent at Brighton let at £235, and valued for Death Duties at £3,025. For no reason, so far as I am aware, the Revenue Department claim £3,575. The owner, by way of showing his bona fides, is desirous of selling the property. He puts it up to auction, with a reserve upon it of £3,025, the figure at which he had return it for Death Duties, and fails to obtain a single bid. He cannot get in the open market the figure which he has put down for Death Duties, but still the claim is persisted in by the Inland Revenue authorities. These methods are nothing less than extortion. It is no laughing matter for those who are concerned. Complaints are general all over the country of the new methods, the improved methods, of valuation which the right hon. Gentleman has adopted. Surely he must be aware that in cases of death property is not always saleable, and the principle of the administration of Death Duties up to now—and it is a reasonable and fair principle—is that property which passes at the death, if it is forced upon the market, will never fetch the full value which it might obtain if it waited for a favourable opportunity. You cannot expect to assess Death Duties at the full value which the property might obtain if the owner waited for a favourable opportunity and sold it when the market was at the best point to suit him. The Revenue Departments must exercise a little discretion and a little mercy. They take their tone from the right hon. Gentleman. Why is this attitude adopted now? It is adopted—and there can be no doubt about it, because the Chancellor of the Exchequer has openly told us in this House what his views are on this subject-—because he has given orders to the Revenue authorities to screw up the valuation, or what he calls improve the valuation. I protest against it, and I tell him he is causing undue hardship. He is putting a burden upon people, and many cases have been brought to my notice. I do ask the right hon. Gentleman to give instructions to the Revenue authorities to exercise a little more discretion, not to send agents provocateurs, and not to raise the Death Duties in an undue proportion.

There is a point in relation to the question of the revenue from the Land Taxes to which I wish to call attention. The Chancellor of the Exchequer in his Budget statement estimates his total receipts from the Land Taxes at £600,000. But we have a little more light thrown upon that by his Budget speech. In that speech the Chancellor of the Exchequer gives the figures-£350,000 for Mineral Duty—that is, the duty on royalty or its equivalent. That is included in his total of £600,000. Therefore the total revenue which he expects to obtain from all the Land Taxes other than Mineral Duty is £250,000 in the current financial year. We have had a Supplementary Estimate recently presented to the House of no less than £480,000 for the cost during the year of the staff which is to collect this £250,000. The Committee will observe that in raising the Mineral Duty no valuation is required; it is purely additional Income Tax and nothing else. The whole of the cost of valuation is for the purpose of obtaining the £250,000 revenue, but that is not nearly all, because this half-million which is to be the cost to the State is a great deal less than a moiety of the cost to the taxpayers. Every individual who receives one of these notices has got to take legal advice as to how he will deal with it, and if the cost to the individual who is brought into contact with this new Department is added to the cost of the Department itself, I am putting the figures far below the mark when I state that the total cost to the taxpayers will be in this current year considerably over £1,000,000, and there will be endless trouble, anxiety, and expense to raise the estimated £250,000. If my figures are wrong, the Chancellor of the Exchequer will correct me, but I have taken them from his own statement.

I want to ask a question on this matter. I have here what purports to be an advance copy of the valuation forms which are to issue from Somerset House, and it is stated here that these forms are to go out on 1st August, and are to be returnable in one month. This appears to be an official document, and I believe it has been issued to solicitors, and is perfectly genuine. I think the Chancellor of the Exchequer will see that as a matter of administration anything more unfortunate or more irksome to those concerned than to send out forms like this on 1st August, returnable, subject to a penalty of £50, within one month, could hardly be conceived. The 1st of August is the time when everyone is hoping for a little rest and holiday, and it is unfortunate that he should find himself faced on that day with one of these universal forms. I do not say that it is going to be done, and I hope the Chancellor of the Exchequer will tell the Committee whether he is going to send out the forms on that date. I wish to know also, on whatever date they are sent out, if it is to be done universally, because I am sure the Committee will agree with me that nothing could be more unfair or improper than that the Treasury and the Chancellor of the Exchequer should arrogate to themselves the power of selecting particular individuals to whom they are to send forms returnable in one month. I am sure the Chancellor of the Exchequer will admit that it would be a most improper course, and that not a single form should be sent out until all the forms are ready to be sent out at the same time. Of course an individual may be missed by accident, but so far as information is available, every individual subject to valuation in respect of these Land Taxes should have his valuation form simultaneously despatched. I hope the Chancellor of the Exchequer will satisfy the Committee on that point. If it is his intention to ask that these forms should be returnable within one month, I would suggest to him that he should modify the request and make it at least three months before they are returnable. I do not ask him to defer the date of sending them out for this reason. He is well aware that there are a large number of cases of sales where delay and difficulty are caused owing to the non-completion of the valuation.

Mr. LLOYD GEORGE

indicated dissent.

Mr. PRETYMAN

I do not want to quarrel over words, but there is inconvenience. The question of the Increment Value Duty cannot always be settled when the purchase is negotiated.

Mr. LLOYD GEORGE

What has the purchaser to do with it?

Mr. PRETYMAN

I did not say purchaser. I merely made a general statement that inconvenience and trouble are caused because the amount of the Increment Value Duty cannot be settled in every case. I maintain it. Trustees and innumerable other people responsible for dealing with money cannot deal with it until they know whether they are responsible for Increment Value Duty or not. Therefore the sooner the forms are out the better in order that all those subject to that difficulty may be able to return them at the earliest possible moment and have the Increment Duty settled. But in the case of the general public where no sale has yet occurred, and where the individuals are put to the greatest trouble and inconvenience in filling up these complicated forms—there are pages of questions which are very difficult to answer— is it a right or fair method of administration to throw at the head of every individual in this country this form just as he is starting for his holidays on 1st August? [Laughter.] Hon. Members laugh, but I would ask: Are they not to have holidays? I think 1st August is the universal date for people who are not above taking holidays. I doubt whether a month is sufficient time to allow for making the return in the case of a large estate, because a return has to be made for every separate occupation. I imagine that means that where a field or area is divided into forty allotments forty returns have got to be made. I hope the Chancellor of the Exchequer will enlighten us on that point. It involves immense clerical labour, and it is a severe penalty on those individuals who own land and who have endeavoured to sub-divide it amongst small holders. If you have a few large farms on an estate you will soon be able to fill up the forms, but if you have fields broken up into small allotments and occupied by a lot of small holders, then you will have an innumerable bundle of forms to fill up, and you will be put to endless trouble and expense. I feel that this Debate is really only a continuation, after a short interlude, of the Debates we had last Session. This may be called a humdrum Budget by some hon. Members. I suppose there are hon. Members opposite who would consider any Budget humdrum which did not propose some fresh measure of spoliation. In that sense I suppose we must be thankful for small mercies when a Radical Chancellor of the Exchequer brings in a Budget by which nobody finds himself deprived of something he previously thought was his own. But, after all, I look upon this year's Budget and last year's Budget as really one Budget. The right hon. Gentleman rightly claimed that his Budget was revolutionary.

Mr. LLOYD GEORGE

indicated dissent.

Mr. PRETYMAN

The right hon. Gentleman may not have used that expression himself, but the hon. Member for Blackburn (Mr. Snowden) used it. I do not think the right hon. Gentleman will deny it. If he does, he will lose a great deal of the credit he has got. I do not think I am going too far when I say that he himself called it unusual, and that his supporters in the country consider it revolutionary. I do not think we disagree with them, but revolutionary Budgets cannot be brought in and have their full effect and value in a few months. Even the right hon. Gentleman and his party require a little time to develop their policy, and this is merely a stage in the development of the Budget introduced last year. We at that time discussed in detail many of its provisions, and I think the right hon. Gentleman owes us a debt of gratitude for a great deal of information we gave him regarding matters not in his Budget when he introduced it. We do not desire now to enter further on the discussion of any matter of detail. We did our best last Session 'to lop off from the measure the cruder and more unjust parts of what we believed were crude and unjust proposals in themselves, and we do not abate one jot of our protest. Our attitude now is that we adhere to every sentiment uttered last year, and we now await the judgment of the country upon these proposals.

Mr. WEDGWOOD

Hear, hear.

Mr. PRETYMAN

The hon. Member for Newcastle-under-Lyme sees through a pair of spectacles of his own.

Mr. WEDGWOOD

So does the country.

Mr. PRETYMAN

The hon. Member has a hobby, and he cannot ride anything else. I have no doubt, therefore, that whatever happens he will be satisfied provided that the Land Taxes remain. But we are awaiting the opinion of the hundreds and thousands of people who find themselves put to trouble and expense in respect of the Increment Value Duty claimed from them, and who will have to judge the Budget not by what its authors claim for it, not by the exemptions on which they fondly believed they could rest, but on the actual results which are seen when they get their valuation papers, and when they go to the Liberal agent or candidate who told them they were exempt. When they show him their papers they will say, "You told me friendly societies were exempt, and you told me small holders were exempt. I am a member of a friendly society and I am a small holder, and I have to pay the taxes in both cases." And I think the support of those persons which was obtained by those promises will not be continued to the party opposite at the next General Election. We are content to leave the issue on that basis, and I think that when the country has assimilated the real results, the wasteful results, the enormous extravagance, and the enormous expenditure of pounds to get shillings, this method of taxation, which is quite foreign to any financial scheme ever introduced into any country in the world, will pass into the limbo of things that have been, never to be disinterred.

Sir CHARLES DILKE

The hon. Member who has just spoken is certainly one of those who, with great force and perfect consistency, have represented a certain school upon the subject of these Land Taxes. I am not going to discuss them this afternoon, because although I agree with him that these Debates are a continuation of our Debates of last year, and of the General Election itself only an interlude in those Debates, yet in deference to those who have as much right as I have to take part in this Debate, and owing to the shortness of the day, I propose to con fine myself almost entirely to one point in connection with which it is necessary to ask for further explanations. One word only upon the general question that arose in the hon. Gentleman's speech. He complained that the working classes, as I understood him, did not pay their extra taxation under this Budget—

Mr. PRETYMAN

Surely the right hon. Gentleman would not suggest that the working classes as a body are supporters of the Government?

Sir CHARLES DILKE

Then the portion of the working classes who support the Labour party and the Liberal party— is that it?

Mr. PRETYMAN

I said those of the supporters of the right hon. Gentleman who do not happen to smoke tobacco or drink whisky.

Sir CHARLES DILKE

That is not it. That was one of the statements, but there was a more general statement. There was the question of extra taxation. I am not raising it on this occasion for polemical purposes, but the mere fact that quite apart from the tremendous increase in the Tobacco Duty, which does impose a heavy Income Tax upon the poorest working classes, the mere leaving of the Tea Duty at the point at which it stands, and leaving the Sugar Duty without reduction, means that we are continuing very much to our electoral detriment an enormous taxation, an enormous Income Tax, upon the poorest people of this country. It strikes especially the poorest people in the rural districts, and strikes in some cases with peculiar hardship, as in Ireland, and is in a sense an extra tax under this Budget. For who can doubt with a party coming in with such an overwhelming majority to this House, with the support of the Labour party and the Irish party on such questions, that those taxes ought to have been reduced, and that they would have been reduced but for the feeling that the working classes ought to contribute or think they ought, a large proportion towards this enormous Budget. It was not, I imagine, the belief that the Sugar Duty ought to remain at all, or that the Tea Duty ought to remain at its present enormous figure, which is far higher than it is elsewhere, as taxes in this Budget, that made my right hon. Friend (Mr. Lloyd George) leave them there this year. The reason was probably that he felt that the working classes were prepared to-pay their share towards the social reform programme, and even very largely towards the naval programme, which was before the country, and he probably thought that he would be stronger in fighting that Budget through as an honest Budget if he left in that enormous taxation, which otherwise, he would have lessened or removed.

Having said those few words by way of preface, I want to turn to a side of the Budget which I think I ought to refer to, because I have pressed those matters forward upon my right hon. Friend, and, therefore, on behalf of those in whose name I spoke, I shall try to make this matter clear, or, at all events, try to make clear what his position is. The last speaker suggested that there was no money in the new Land Taxes. There is a. great deal of money in the taxes of which I spoke just now, which press heavily on the poor, and the fact that there is a great deal of money in them was the most powerful weapon in the campaign which some of us had to fight in all our rural parishes in order to keep the majority which we have in them. The fact that these taxes are so heavy was the most powerful argument used against us there. We heard nothing about Land Taxes in those parishes, and there were no leaflets upon the subject. There was nothing discussed except beer, tea, and tobacco, and masses of leaflets dealing with tobacco alone. We heard of nothing except about the overwhelming indirect taxation inflicted upon the poor. There was no reference to the Land Taxes of which the hon. Member complains, in these leaflets. I have collections of all the leaflets, and he will find that every leaflet in the rural parish which I have in my mind was almost entirely upon those points. So far as they were not Tariff Reform leaflets or Protectionist proposals, they were entirely on tea, tobacco, and beer. We are told there is no money in the Land Taxes. As regards this year, the question of the money raised under this head bears very closely upon the matter upon which I wish to say a word. As regards the future, it may or may not bear upon it. The Chancellor of the Exchequer, of course, is very often looked upon by us as a daughter of the horse leech, but in the Bible, I believe, there were two daughters of the horse leech, and he looks upon the rating authority as a daughter of the horse leech. Apart from the merits, I think the House generally will agree that anything like a promise should be kept, and my case is that the daughter of the horse leech who sits here has made a very distinct promise to a sister on the subject and has not kept it. That is how the matter appears to me. The promise was twofold, and it is replaced now by that very vague and general promise which has been made so often that I think there is hardly anyone in this House who is not a little bit ashamed of it. The general settlement of the question between the Imperial authority and the local authority has been promised in the self-same words since 1883 or 1884, and that promise has been renewed in every year.

Mr. WEDGWOOD

Valuation makes a difference.

Sir CHARLES DILKE

I know that, but you have not got that valuation. I am not differing as to who is in fault, but I only mean that it is not much of a promise to the local authorities and that they do not see the prospect of a realisation of the promise which has been made so frequently. Of course, valuation is the first difficulty, as everyone knows who is aware of what is involved in the question of what is agricultural land, and the separation of agricultural land from building land in the accounts of unions, affecting, as they do, the relations between county and county, with the result that all those grants which are made at the present moment are so different in different parishes, a fact which makes a 4 to? difference in parishes which are identical. There is nothing approaching a uniform basis of valuation at the present moment throughout the country. That difficulty, of course, is an enormous one, but a promise is a promise as regards the future. As regards the past, of course, these Land Taxes were formerly promised to the local authorities, who were the persons who started the agitation for them. It was a Glasgow movement. As regards the facilities of getting the tax and as regards the nature of the tax, I believe that while there is money in it any way there would be more money in it, and with greater facility of getting it had it been a local tax. Here are the promises. They are of two kinds. There is the promise which was given a few months ago about giving half—a promise which was made in this House in very strong words indeed by my right hon. Friend—the proceeds of all these Land Duties to the local authorities for the relief of local rates. Of course, that has been affected by our accepting for this year the replacing of the whisky money deficit by the allocation to that deficit of that fund.

Mr. CHARLES BATHURST

Is that the same half?

5.0 P. M.

Sir CHARLES DILKE

That is the question I am asking. I am familiar with the question my hon. Friend put on Monday to the Secretary to the Treasury on that point, and the answer, I confess, was not very clear, but it was assumed in the speech of the late Chancellor of the Exchequer, with which he opened this Debate. He put it clearly, and it will require a reply upon that portion of the case. The other branch of the promise is, of course, that which has been reopened this last week in the Budget speech of my right hon. Friend. He promised, we thought, not in 1909, but in 1908, in very definite terms, as to financially relieving the rates. He claimed credit from the local authorities for so doing by taking off their hands the pauper old age pensioners.

Mr. LLOYD GEORGE

No, not in 1908.

Sir CHARLES DILKE

Not in Cabinet Minister's addresses and pamphlets of the Liberal Publication Department?

Mr. LLOYD GEORGE

I am dealing with what I said in the House of Commons. My right hon. Friend is referring to what occurred in the course of Debate.

Sir CHARLES DILKE

No.

Mr. LLOYD GEORGE

I made it clear in the Budget speech of 1908. In the course of the Debates on the Old Age Pensions Bill, in reference to an Amendment moved by the hon. Member for Shropshire, who proposed this very plan, I said then that in my judgment that was the way in which it ought to be dealt with. Lord Robert Cecil proposed a similar plan and I said then that I thought it the only way it could be dealt with. I simply restated last year in my Budget speech the position I took up most definitely when I promised to get rid of the pauper disqualification, and I think I said the same to a small deputation which I received, and at which I think my right hon. Friend was present.

Sir CHARLES DILKE

I will trust to my right hon. Friend's general recollection of what took place between him and myself last year. I said the promise was made the year before, but he says he recorded it last year. His colleagues put it in their election addresses and the Liberal Publication Department put it in their leaflets; but, taking what he said last year, I ask him fairly, as man to man, does he think I was able to make out—I may be specially ignorant of the subject, although I ought not to be; I have had to deal with it from both ends—does he think I was able to make out a case? He says he said he was to be met by some contribution from the local authorities. I am going to put myself frankly in his hands. When he spoke of wanting to make some contribution towards the cost of old age paupers to the local authorities he said, "I am negotiating with the local authorities." That is according to "The Times" report. According to the Official Report he says, "My right hon. Friend the President of the Local Government Board is to negotiate." I do not think he said so. I think it is wrong. What did he mean by these, negotiations? What was the contribution the Local Government Board was to offer? I pressed him to state. "Was it going to be half-and-half, like the Land Taxes? He said "something of the kind," but I did not understand it—I do not think the Committee understood it—and the local authorities did not understand it. I failed, after the utmost trouble, to find a trace of the negotiations of which he speaks. Might I press my right hon. Friend, as there is a real grievance, that there has been some recession from the plans made? I press him to tell us what these negotiations were? What contribution was asked for, and in what form was it to be made? No doubt we must have some opportunity of discussing it as regards the future, which is more important in the long run as regards the Land Taxes than anything this year can be; but, as regards the old-age paupers' arrangements, which may be made in the negotiation which may have already taken place, these must affect not only the present year, "but the future, and we must press as to what ultimate form it is going to take. There is an unfortunate fault in the report of the Budget speech on this point. My right hon. Friend is reported in the Official Report as saying:— The President of the Local Government Board and I had entered into some negotiations with a view to effecting an arrangement which would enable us to add a contribution to the rates next year and wipe out the pauper disqualification. That, I think, must be wrong. In "The Times" he is reported as saying:— Last year, I said we were negotiating with the local authorities with a view to effecting an arrangement which would have enabled us, with the aid of a contribution from the rates, to wipe out the pauper disqualification. These two reports are different, and I do not quite know what they mean. They both appear to point to some sort of negotiations, but as to some contribution from the rates none is specified. What we fear is that the arrangement is to be one which will throw this entire cost on the rates, which we have been told in many election addresses they were to have been relieved from. The Liberal party have been promising, and the Prime Minister, who has just come in, is familiar with his own promise, so often quoted, on the subject of fresh sources of funds from which to meet the demands of new social legislation. My hon. Friend (Mr. Wedgwood) suggested that the Labour party, in passing a resolution with that view in end, were animated by a desire to catch votes. I think in this House we had better avoid that interjection, or, rather generalise it, and make it universal. I believe the real opinion each Member is that there is no Member of the House, except himself, who does not catch votes by means not absolutely defensible. I will exempt my hon. Friend if he likes in my own place. But there is, quite apart from any desire to catch votes, a great deal to be said from the view of the promise that was made by every Labour Member, every Liberal, and many Conservatives, that something in the nature of these Land Duties would form a source of future revenue to the local authorities out of which to meet these enormous charges, which are really Imperial, and are constantly being thrown upon them. I am sure my hon. Friend (Mr. Wedgwood) agrees that the spirit of that Resolution, which was to some extent censured by him, is really the spirit in which we have promised fresh sources from which these really Imperial services may be met—such as the feeding of children. He will also agree that we have not kept that promise up to the present time. We ought, at all events, to prepare how we are going to keep it in the future. My right hon. Friend the Chancellor of the Exchequer last year accepted the spirit of that view. He renewed the promise of the Prime Minister on the subject, and he stated that, in giving away about half of the Land Duties, that it had always been his view that the local authority had an indisputable claim to a portion of the Land Value Duties. Therefore it was that he proposed to divide these duties equally with the local authorities- Now he was thanked for that. After having received these thanks, and two or three months had gone by, we thanked him again for the same money. He made a fresh gift to us of what he already had given, but I understand only as regards this year. The whisky money having fallen short, he came forward and offered to pay it out of that which he had already given, and had already been thanked for. The case was put most admirably by the late Chancellor of the Exchequer in his speech the other day. Here is the way in which it was put in a memorandum by the county of the Division which I have the honour to represent: There has been a serious falling off of 30 per cent, in the residue. A promise has been made of a Grant in Aid of this deficiency. That Grant to be paid out of the moiety of the proceeds of the new Duty on Land Values, which had already been appropriated to local authorities, so that the local authorities will have to bear the burden of the loss of revenue. As I put it, he has been twice thanked for this matter, and although we raised no objection to same, it makes us nervous about the future, as it is not likely that the immediate settlement which he again promised will be brought about so speedily as to affect the finance of the following year. As regards the other matter, I will conclude by stating that I have done my very best to obtain the views of those who are likely to understand the proposal that is made. The point that it introduces variation between different districts was raised by the Irish Members in the course of Debate. It is extremely technical, and I will not keep the House by attempting to describe it, in which attempt I should probably fail, but I will give the words as I have received them from the highest authorities I can consult on the subject. They say:— They do not quite understand what the proposal of the Chancellor of the Exchequer really is, or how long any contribution from the guardians is to be continued. Moreover the principle of giving the relief varies considerably in the different Unions, it seems very desirable that further information should be obtained during the Debate from the Chancellor of the Exchequer. In other words, they do not understand, and I am quite sure the right hon. Gentleman will feel that it is desirable the matter should be made clear after—I will not say the pledge, if he does not like that—but after what he said last year. Every Liberal candidate, and many Members of the Government, put in their addresses that there was to be relief of the rates, and it is desirable to make the matter clear and to prevent anything like a charge of breach of faith. It was not a technical pledge which was given, but there was a substantial belief generally entertained in reference to the matter which should be made clear. The words employed were these:— There will be a relief to our rates by the pensioning of those over seventy who have been a charge on the poor rate, and that will be taken out of the Treasury. We cannot see the relief in regard to this particular point in the proposal now made. The statements which were made in regard to the matter were very definite. I have a leaflet of the Liberal Publication Department, in which it says:— The cost of the new pensions to the Treasury will be £2,850.000, and the ratepayers will be saved about £1,620,000 by the new arrangement. I cannot see that they are so saved, and I think that it is, at all events, a matter which I could not do otherwise than bring before the House, as it so happens those promises were made to me in Debate.

Mr. CATOR

I trust the House will pardon me for taking part, even if only for a few minutes, in this Debate. It is the first speech that I have delivered in this House, and I am sure that hon. Members on both sides will realise that to me it is an ordeal, particularly when one has to follow such an old Member as the right hon. Baronet the Member for the Forest of Dean (Sir C. Dilke). I could not help being struck last Thursday when the Chancellor of the Exchequer was making his Budget speech. His whole atmosphere was permeated by an airy optimism. It is possible that an airy optimism may be better than an organised despondency, which the right hon. Gentleman seems to think is the heritage which has come down to those who sit on this side of the House. But be that as it may, he drew an extremely roseate picture of the state of trade and of the position of the country generally and of the reasons which made him think that the demands he makes on the national purse would be met very readily indeed. He concluded by stating that his estimated surplus would be no less than £861,000. The hon. Member for Chelmsford (Mr. Pretyman) has already mentioned that one might almost treat the Budget of this year and the Budget of last year as one and the same. At any rate, the Chancellor of the Exchequer has sown under the old Budget, and he intends to reap under this one. It would, of course, be presumptuous in a Member like myself to attempt to grapple with the various problems which this Budget raises, but one cannot help feeling that there are certain risks in treating taxes which are only on paper as if they were already solid money. There are, of course, salient features which strike even a novice like myself, and one is inclined to think that the whole Budget is one which may be described as containing castles in the air. One point to which I wish to refer is in regard to the Spirit Duty. At one moment the Chancellor of the Exchequer confesses himself a discredited prophet, and in the next breath he consoles himself by informing us that he is at any rate a temperance reformer. It seems to me that not even Cabinet Ministers can eat their cake, even the moral cake, and have it; it cannot be consumed both ways. I confess I always imagined that the aim of a Budget was to raise revenue, but this Budget seems to destroy it. The Chancellor of the Exchequer fails to collect the money from this particular duty, yet he boasts that this very failure constitutes him an apostle of temperance. The contention on this side of the House last year always was that the real reason for the duty on spirits was not so much to get revenue as to wreak vengeance upon a class of persons who were engaged in a calling which was obnoxious to right hon. Gentlemen and hon. Gentlemen on the other side of the House.

We were told that we were wrong, but I cannot help feeling that the tone of the right hon. Gentleman's speech last week, and the results of his experiments in this direction, confirm us in the opinion we then held, and that after all we were not so wrong in holding that retribution was his object more than the ends of finance. The right hon. Gentleman quoted the practices of the trade to show us that, after all, things were not so bad. We were told that there were two courses open to the trade which were adopted for a time. One was to raise the price, and the other to cut down the measure. But there are two other courses open to the trade, and I fear that one or the other will be adopted. One will be that the trade may unhappily find it necessary to close their places and works—a course which has already been adopted in one conspicuous instance in Dublin, where it must mean the throwing out of employment of a large number of the population, men who depend on the distillery trade and its various subsidiary trades. The second course, it seems to me, is that they will be tempted to sell an inferior article at the same price. I believe if that course be generally adopted we shall find that not only the health of the nation but the sobriety of the nation will suffer. I alluded at the beginning of my speech to the airy optimism which seems to pervade the ideas of the Chancellor of the Exchequer. We are told, and we are delighted to hear, that the trade outlook is extremely good, and that the crops show every sign all over the world of being extremely abundant. But we all know nature is proverbially fickle, and whatever the crops may prove to be—and we all trust they will be good—yet on this point I will quote what is said by the correspondent of "The Times" at Toronto, in the issue of that journal dated the 28th of June. He says:— The hot weather is threatening serious injury to the crops in the Western Provinces. As yet the damage is not great except in the old settled districts, where the land has been cultivated for many years. Saskatchewan was greatly assisted by rains ten days ago, but moisture is again needed. This applies also to Alberta, where the winter wheat in some districts will be a total loss. There is an agitation in the wheat market at Winnipeg, but timely rains may save the situation. We are told that other nations are in the trough of "financial despondency." One is America and the other Germany. In the latter country the labour and social conditions show general prosperity, while in America the average income per head is far higher than in this country. The case of Germany has been cited in various ways during the last few months, and I would call the attention of hon. Members to a pamphlet lately issued, and which is open to anyone to read, in regard to the labour and social conditions which now prevail in Germany. The reports which that pamphlet contains I believe to be quite unprejudiced, having been made by men of all sorts and shades of political opinion; and we have every reason to conclude that they are reliable. I now come to the question of the Death Duties, which were so much discussed last year. They seem to me to constitute one more sandy foundation on which the Chancellor of the Exchequer is building his revenue. Last year, we are told, was an especially fatal year for millionaires, and it is an ill wind that blows nobody any good. The Chancellor of the Exchequer now appears to be in the position of an heir-expectant, stepping, if not into dead men's shoes, at any rate into their shekels. He seems to count on the high fatality of last year being maintained; perhaps he calculates on the mortal depression caused by Radical legislation terminating the lives of aged plutocrats. The supply, however, is not inexhaustible, and the more that die off the fewer will be left to pay Super-tax. Be that as it may, it is the fact that the Death Duties totalled for twenty years £500,000,000. I mention that point to show what a serious drain that is to the capital of the country. Surely that is the very worst form of taxation if carried to excess. If all these speculations come off we are told that there will be a sum of £861,000. The Chancellor of the Exchequer has told us how this money will be devoted, but is it not possible that that money which he proposes to allocate may not be available when the time comes? A paper which is very widely read at the present time by hon. Gentlemen on the other side of the House, the "Nation," in its current number thinks fit to doubt whether the Chancellor of the Exchequer may be able to allocate the money in the directions he is proposing. The "Nation says:— But the future is necessarily speculative. The world's crop which now looks so well might come to disaster through bad harvesting weather, frost in Canada, locusts in Argentina, drought in Australia, rain in Europe. Again, the fair political weather might be broken by a storm of war, and we are disposed to qualify the Chancellor's hopes of being able to provide for invalidity and unemployment pensions next year. What if Mr. McKenna and the Admiralty impound the whole increment of the Budget and something more? If the Chancellor is again overruled on this head his large and bold scheme of social amelioration will suffer shipwreck, and the Radicals will learn once more that jingoism is fatal to reform. It seems to come to a point, as has been mentioned in one of our local issues of the Press, to be a question of doles versus "Dreadnoughts," and that the only question is which is to come first. There is a large section of the population who believe that doles should come before "Dreadnoughts." It is such an obvious fact that it is unnecessary to labour the point that we do not wish, of course, to build "Dreadnoughts" from any motives of boastfulness or pride, but because we believe that by making this country really strong in the future we shall then be in a better position to provide for the wants of our fellow creatures. The temptation, no doubt, is very great at the moment to a great proportion of the electorate to look upon material advantages for themselves, and not to take the long view which may really be necessary instead of letting to-morrow take care of itself. Time was when the Liberal party regarded economy as a very valuable possession, and when thrift was considered of vital importance. Thrift now seems to have given place to drift. It is notorious that there are fat years and lean years, and I think that in our fat years it would be wiser to look after the needs of the Sinking Fund. I would ask whether it is wise to lay out every penny of our income? I venture to hope that the party to which I belong will continue to rely rather on cautious methods of a businesslike nature. To do otherwise might lead to popularity at the moment, but I really believe that in the end the common-sense of the English people will prevail, and that we on this side of the House shall receive the confidence and the gratitude of the people.

The PRIME MINISTER (Mr. Asquith)

The hon. Member who has just sat down has, if he will allow me to say so, made an interesting speech, and we shall look forward with expectation to his future participation in our Debates. If I do not follow him over some part of the ground which he has covered, it is because I do not wish in any way to anticipate the general review which at a later stage the Chancellor of the Exchequer will no doubt make to the able criticisms made in the Debates. I intervene only for two or three moments to make, if I may, one or two observations of a more general character suggested by the remarks that have fallen from preceding speakers. This Budget, as has been pointed out more than once, is, indeed, in one respect, at any rate, unique in the experience of all of us who are now living in that it makes no change, either by way of extension or by way of reduction, in the existing taxation of the country. The reason why the Government adopt that course is obvious. Last year we had a Budget which made many changes in taxation, modifying old taxes and introducing new ones. The proposals contained in that Budget were subjected to a Parliamentary review, unexampled in length and in minuteness, extending over many months of the summer and the autumn. The Budget, too, was a prominent topic at the General Election at the beginning of this year, and once more came to a general review before the new House of Commons, and only received a short time ago the assent both of this House and of the House of Lords. That in itself would seem to be more than sufficient ground for maintaining things for another year as they are. Further, as we know in regard to many of the new taxes, the machinery for their assessment and collection has either not yet been completely set up or is in such an early stage of working that we have no experience that would enable us as yet to pronounce with anything like authority or confidence upon the justice of the anticipations which have been put forward by my right hon. Friend.

Therefore in what I am going to say I shall deal with only two points of a more general character, namely, the indictment which has been preferred more than once in the course of these discussions against our finances, first, on the ground, the alleged ground, of an excessive growth of national expenditure, and next upon the ground, or the alleged ground, that we have made insufficient provision for the reduction of the national liabilities. As regards the first point, that of expenditure, my object really is to put clearly before the Committee, if I can, what are the actual facts. I take first of all our expenditure on the Army and on the Navy, the defensive forces of the country, and I would compare the Estimates of the present year of actual expenditure on those two Services with that for the two financial years 1904–5, the last year in which our predecessors were in office, and 1905–6, for the Estimates of which they were mainly and substantially responsible. Take the Navy first. In 1904–5, if you add, as you must for this purpose, dealing with the expenditure of the year, to the sum on the Estimates the amount raised by loan, the actual expenditure in that year on the Navy was £42,000,000. Upon the Army in the same year, adopting the same method of calculation, the expenditure was £33,600,000.

Mr. AUSTEN CHAMBERLAIN

When the right hon. Gentleman adds what is called capital expenditure which is raised out of borrowed money to the expenditure of the year, does he, on the same principle, deduct the interest paid?

The PRIME MINISTER

I am going to deal with that which is an elementary fact, and I will give the deductions subsequently. The aggregate total expenditure of that year (1904–5) for the two Services was £75,600,000. You must deduct from that the interest on the repayment of principal and capital, a sum of £1,300,000, which reduces the total expenditure of that financial year for the two Services to £74,300,000. If you adopt a similar process of calculation for the year 1905–6 you will see that there is a very large reduction. In that year the expenditure on the Navy was £35,500,000, and on the Army £30,050,000, a total of £65,600,000. From that, again, you must deduct £2,000,000 interest on the reduction of principal and capital, bringing the total expenditure on the two Services for the year to £63,600,000. I take the Estimates for the present year. What are they? For the Navy, £40,600,000, and nothing raised in the shape of loans, the whole expenditure being in the Estimates. For the Army, £27,750,000 and £100,000 raised by loan. That amounts for the two Services in the Estimates of the present year to £68,450,000, from which you have to deduct, as in the former case, repayment for interest and principal amounting to £2,500,000, which brings out the total of £66,000,000. Let me repeat the figures. They are, with the proper additions and subtractions:—

1904–5	£74,300,000
1905–6	£63,600,000
1910–11	£66,000,000

In other words, the Estimates for the present year are £8,000,000 less, compared with the actual expenditure in 1904–5, and they show an addition of £2,500,000 over the expenditure of 1905–6. When we come to the Navy Estimates, we find that they are up by £5,000,000 this year, and the Committee will see that that not only accounts for twice the whole of the difference but for the whole of the increase in the two Services. These are the figures with regard to the Army and the Navy.

Let me deal in a similar manner with the Civil Services. As there is very little difference between the years 1904–5 and 1905–6, for the sake of simplicity I will take 1905–6. There is no doubt a very large and marked increase in the expenditure in the course of those years upon what I call the Civil Services. Take, first, education. I am dealing with the three principal Grants for public education, mainly elementary education. In 1905–6 those Grants amounted in round figures to £16,000,000; in 1910–11 they amounted to £18,000,000, a growth of £2,000,000, which is to a very large extent an automatic growth due to increase of population, and, at any rate, a growth which I do not believe any Member, in whatever quarter of the House he may sit, will dispute to have been necessary in the best interests of the children of this country. I come next to what are rather vaguely called in our national accounts, "Other Civil Services." There has been there a rise from £12,500,000 to £15,000,000, but it is very desirable in regard to that that a rather more careful analysis should be made than is commonly the case. Nearly £1,000,000 of the increase may be accounted for in this way: Labour Exchanges, £225,000; and Ireland, the Cinderella of the British household, out of the extra £2,500,000 has no less than £700,000 for herself; universities and colleges, £163,000; agricultural and technical instruction, £224,000; and the Irish Land Commission, £300,000. If I were to go to the smaller items the Committee would find that this very large increase in the aggregate cost of what is called the Civil Service is due, in part I agree, to increase in staff, but in still larger degree to the necessity of meeting demands pressed upon the executive Government from every quarter of the House. Those are demands which no Government has yet found itself able to resist, and demands which I believe to be founded in reason. For instance, I am not complaining of the Irish items. I do not think the money has been misspent. But the demands are pressed with ever increasing urgency from every quarter of the United Kingdom, and they are urged on the Government of the day with not the least importunity by those who on the platform are apostles of economy. That is a fact which, if I may venture to say so, some lion. Members on both sides of the House might bear in mind when next they raise the flag of economy in the constituencies. It is the House of Commons and not the Government of the day which yields reluctantly to pressure put upon it by its followers and its opponents and from every quarter of the House—I say deliberately it is the House of Commons which is directly responsible for nine-tenths of this increase in the civil expenditure of the country. I now come to another matter which makes an enormous difference in the expenditure of 1910–11 as compared with 1905–6, namely, old age pensions, which are estimated this year to cost something like £9,500,000. I do not want to go back to past controversies. It is now common ground that the man who suggests that it would be possible under any conceivable circumstances for any party or any Government in this country to lay a sacrilegious hand or even a finger on old age pensions is a man who is not deserving of credence. [OPPOSITION cheers.] Yes, but you cannot have it both ways. If you recognise that this system of old age pensions which the late Parliament built up rests upon an impregnable foundation which cannot be curtailed or mutilated in the future, but is, as everyone knows, going to be developed and extended, I hope within reasonable and moderate limits—if you once recognise that that is the common doctrine of both parties in the State,, you cannot in logic or in reason or in justice complain of this item being added to the national expenditure. I may add an item, comparatively small, compared with the figures with which I have been dealing, of £1,500,000, which my right hon. Friend is appropriating to the Development Fund. In consequence of the legislation of last year, the really un-contentious legislation, so far as the character and the extent of the expenditure are concerned, that amount is going to be applied to development purposes. I think when these figures are borne in mind, I may justly say that this increase, enormous as I admit it to be, in the Civil expenditure of the country, is an increase which it does not really lie in the mouth of any party or section of the House to incriminate, unless they are prepared to go back—which I do not believe any are—on the advances made in the last four or five years as regards education, old age pensions, and other items of social reform.

The only other topic upon which I wish to say two or three words is the second of the two general allegations brought against us—namely, that we have dealt, half-heartedly or ineffectively with the liabilities of the country. The figures for last year are complicated, as everyone knows, by the temporary borrowings, due to the rejection of, or the delay in passing, the Budget. At one moment in the month of April they reached their maximum amount of £28,000,000; on 1st April this year, at the beginning of the financial year, I think I am right in saying that the amount outstanding for those temporary borrowings was £21,000,000. That amount ought to be left out of account, as it is not part of the permanent debt of the country, is gradually disappearing, and in a short time will be completely wiped out, and we shall only have to remember that it cost the Exchequer, in the shape of interest, a sum of about £400,000. Leaving that temporarily disturbing factor out of the account, let us see how we stand in regard to the reduction of debt. I agree with the right hon. Gentleman opposite (Mr. A. Chamberlain) that we ought to keep the deadweight debt clear from the other capital liabilities of the country, because many of the latter have sinking funds of their own, but for the deadweight debt we have to provide out of the taxation of the year. The deadweight debt is one which some people say is not represented by visible assets other than the Suez Canal shares, but which I have always said is represented by the most considerable asset in the whole world, namely, the British Empire. I do not say the money has always been wisely expended; I believe a great deal of it has not; but it is by means of this debt that the Empire has been to a large extent built up and maintained. Therefore it is not quite fair to treat it as if it had all been blown away in powder and shot, and had nothing left to represent it. That, however, is a parenthesis, and I do not wish to raise unnecessarily controversial points. The deadweight debt amounted, on 1st April, 1905, to £755,000,000; and on 1st April, 1906, owing to very large reductions made by the right hon. Gentleman opposite, to £743,000,000. On 1st April, 1909, before the disturbance in the late financial year, it had been reduced to £703,000,000; and on 1st April, 1910, if you eliminate the temporary borrowings of £21,000,000 which will disappear, it was £692,000,000. In other words, in the year it had been reduced, roughly speaking, by £10,000,000. I will say in a moment how. If you look to the other capital liabilities, they were, on 1st April, 1906, £46,000,000, and on 1st April, 1910, £49,000,000; but for the first time in the history of these capital liabilities, a history of something like twenty years, there was in the last financial year not an increase, but a decrease in the capital amount. Between 1st April, 1909, and 1st April, 1910, these liabilities were reduced by no less than £2,000,000. Therefore you have a total reduction of the gross aggregate capital liabilities of the country in the financial year which has just come to an end, of £12,500,000. The larger part of that undoubtedly was provided by the operation of the Sinking Fund of previous years, but of that £12,500,000, substantially, in round figures, £6,000,000 was provided out of the revenue of the year.

Then how do we stand in regard to the year upon which we have now entered, and for which my right hon. Friend has made provision in this Budget? This year, with a fixed debt charge of £24,500,000, which the right hon. Gentleman opposite, the other night, described as inadequate, there will be available £6,500,000—a new Sinking Fund of £4,000,000, and the capital portion of the terminable annuities, part of the dead-weight debt, £2,500,000. The capital portion of the terminable annuities borne on Votes in respect of other capital liabilities has risen to £2,500,000. Therefore the total amount made available out of the revenue of the year for the repayment of principal will be £9,000,000. I do not think that that can be regarded as an unsatisfactory result. No one has ever urged with more persistency than I have the importance of the duty of making provision against debt. I was happy when the Chancellor of the Exchequer, in having an expanding revenue, and in some respects in enjoying unexpected savings in expenditure, and I was able to make a very large provision for that purpose. But I think it is a matter of legitimate satisfaction, and it ought to be a common satisfaction to people of all parties and in all quarters of the country, that,' although in common with the other great nations of the world we are being exposed to a concurrent increase in two classes of burden—the burden of national defence, and the burden of social reform— yet we alone among the great countries of the world are able, side by side with making what we believe to be adequate provision for both of those purposes, we are able so largely to reduce the capital liabilities of the country. That is the claim which, under this head, I beg to put forward for our finance, and while I admit there are criticisms both of this or that item of expenditure, and of this or that item of proposed taxation, I have thought it well to put these facts briefly before the Committee in order that they may come, as I hope they will, to the same conclusion as that at which we have arrived, namely, that for all the essential purposes of maintaining our national defences and providing for the real needs of the great masses of the people, our system of finance has weathered the storm, and has proved itself seaworthy and capable of carrying the country to the desired haven.

6.0 P.M.

Mr. AUSTEN CHAMBERLAIN

I had no intention of taking part in this Debate when I entered the House to-day. I thought I should have had the pleasure of hearing from the Chancellor of the Exchequer a reply to the inquiries which I and others have pressed, and I still quite understand that before the Debate closes we shall have some observations from the right hon. Gentleman. But I feel obliged to ask for the indulgence of the Committee for the few moments in order to make one or two observations on the speech that the right hon. Gentleman the Prime Minister has just addressed to the House. I labour under the disadvantage of having had no knowledge of the Prime Minister's intention to deal with these matters. I make no complaint of that, but I have not got my figures with me. It certainly would not have been unusual for the Chancellor of the Exchequer to have included in his Budget statement some short comparison such as the Prime Minister has now made. This is a kind of postscript to the Budget, and my observations, I hope, will be regarded as a postscript to my reply. In the first place, as regards the Prime Minister's comparison of expenditure, I do not think he mentioned one of the most serious increases for which this Government is responsible. That is the enormous increase in the number of officials and the consequent enormous increase in their salaries and their allowances.

The PRIME MINISTER

That is included in the "Other Civil Services" I mentioned.

Mr. AUSTEN CHAMBERLAIN

Did the right hon. Gentleman include the increase in the Revenue Vote?

The PRIME MINISTER

No.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman dropped out a million. It escaped the right hon. Gentleman's notice, but these are really rather important items where he makes a comparison of the kind he did. Then he made a comparison of the Army and Navy expenditure. I do not think that that comparison was fair to his predecessor, or really puts the House in possession of the facts. In the present year all the expenditure is ordinary expenditure which may be expected to occur, with the possible expenditure of one big work, Rosyth. When created, it does not need to be recreated; you only have to maintain it. The expenditure on that account, though very large, is a very small figure in the Estimates for this year. But in the previous year, or the previous two years, which the right hon. Gentleman took for comparison, very large sums were being spent upon permanent work—sums, therefore, which it is not necessary to repro- duce year after year. The right hon. Gentleman and his Government have the advantage of that expenditure. They have the barracks we built3 both for soldiers and for sailors, and the docks we built. I think it would have been much more fair to take the expenditure as it stood with the interest on the capital outstanding, instead of doing as the right hon. Gentleman did, deducting the interest and adding the capital. These works were works planned for the Navy or the Army for a long series of years to come. It is not possible, when great schemes of work of that kind have to be carried out to meet them all out of the present revenue of the year. It would not be fair either to that generation of taxpayers. It is perfectly fair to spread the charge over a series of years. It is not fair—and I enter my caveat against it at once—to the earlier years to treat as peculiar annual expenditure which was incurred in those years, but was incurred, not merely for those years, but for the benefit of future years. I speak subject to correction, because I have not had an opportunity of verifying the figures, but I think in the first year, certainly in the second year, there was a large charge, as I said the other day, of £1,000,000 or £1,500,000 for the re-armament of the Artillery. That might have fallen in the right hon. Gentleman's years, instead of ours. One thing that was certain was that when it became due it was the business of the Government of the day to carry it out with the greatest expedition. It fell in the last of our years, which was the first of the right hon. Gentleman's.

The PRIME MINISTER

When I was Chancellor of the Exchequer I was still paying.

Mr. AUSTEN CHAMBERLAIN

It fell into the last of our years so that the right hon. Gentleman paid for it in the year in which he succeeded. But it is not a question of who was paying for it, all I am calling attention to is that the earlier year which the right hon. Gentleman takes for comparison with the present had this abnormal £1,500,000 expenditure, and it is not therefore comparable with a year when there is no abnormal expenditure. So much for the expenditure side.

Now I want to say one word as to what the Prime Minister has said with regard to the debt. I recognise that a very large sum has been devoted in recent years to the reduction of the debt. I think we may all congratulate ourselves upon it. I do not begrudge the right hon. Gentleman the satisfaction which he legitimately feels in having contributed to pay off a great deal of the debt. I think, however, he must not put his claims too high, because really except for his own convenience in the Budget he has added nothing to the provision made by his predecessor. He has had some fat years. Except for £500,000 in one year, and £1,000,000 in another, given with one hand and subtracted with the other, added to the new Sinking Fund and deducted from the old Sinking Fund, the right hon. Gentleman did nothing beyond what his predecessor did. It is true that the right hon. Gentleman did twice hold over a surplus in preparation for payment of old age pensions in order that he might have a "nest egg"— that was the phrase used—to start with. While he held that sum in suspense it went to the Sinking Fund, but in each of these years of the new Sinking Fund he withdrew from the old Sinking Fund very nearly the equivalent of that which he added to the new Sinking Fund.

The PRIME MINISTER

made an observation which could not be heard by the Reporters.

Mr. AUSTEN CHAMBERLAIN

Well, we both speak from memory, but I venture to stake my recollection against that of the right hon. Gentleman. In the first year he took £500,000, and in the second year—

The PRIME MINISTER

There was no question of old age pensions in the first year.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman's claim is that in one year he added £500,000 to the new Sinking Fund, but in that year he deducted £500,000 from the old Sinking Fund—

The PRIME MINISTER

dissented.

Mr. AUSTEN CHAMBERLAIN

With a view to old age pensions. Therefore, I say, whatever credit is due to him it is credit for maintaining what his predecessors had established, and not for adding anything, though, of course, he had much better and fatter years to deal with than his predecessors had. My next observation is that in the comparison which he has made I think he has taken credit for more than he has done. Has he allowed for the depletion of the Exchequer balances of last year? I do not think he has. They stood at £6,350,000 at the beginning of the year. They were reduced to £2,831,000 at the end of it.

The PRIME MINISTER

They will be restored.

Mr. AUSTEN CHAMBERLAIN

They have not been restored yet.

The PRIME MINISTER

They certainly will be restored.

Mr. LLOYD GEORGE

As a matter of fact they have been restored since the beginning of the year.

Mr. AUSTEN CHAMBERLAIN

Out of the arrears of the revenue of last year.

Mr. LLOYD GEORGE

assented.

Mr. AUSTEN CHAMBERLAIN

The next thing I wish to say is a word with regard to my attitude towards the reduction of fixed debt charge. As the fixed charge works automatically you increase the amount which goes to the reduction of the debt. As the Sinking Fund has been at work during five or six years since we went out of office it has only in those years become more effective for the purpose of reducing the debt without any increased exertion on the part of the taxpayer or any increased effort on the part of the Government. I want to say a word about the further reduction by half a million. In itself that reduction is not a very big thing. But it is a big thing! It is a serious thing to touch the fixed debt charge at all. The reducing of it to £24,500,000 I am bound to admit is not in itself a very big thing. What I object to is treating this as if it were a matter of no consequence—taking what was admittedly a merely temporary expedient and making it permanent. The Financial Secretary, in replying to me the other day, said that I was under a misapprehension in supposing that it had ever been intended to be other than temporary, because the original Budget contained words which would have made it permanent. Of course, it is so. In the original Budget were words which would have made the £25,000,000 permanent. But in the month of November the Chancellor of the Exchequer said: "Owing to the concessions I have made—I have given away half a million—I must get that sum; therefore I propose to substitute £24,500,000 for £25,000,000." The House, weary, jaded, and tired of the Budget— as well it might be—did not reply: "As you are going to make that £25,000,000 £24,500,000 you must alter the words which follow." But it was not presented to us at that time by the Chancellor of the Exchequer as a permanent proposal. It was submitted to the House and to the country merely as a temporary expedient, forced upon the Chancellor of the Exchequer by the time of the year at which we had arrived. Everybody interested in the subject on either side of the House understood that the Chancellor of the Exchequer would restore that half a million the moment he had the opportunity of readjusting his finance. That is why I complain. My complaint's not so much of the actual difference between £25,000,000 and £24,500,000 as it is of the adoption of the easiest methods—the gliding into the way of not paying off debt whenever it is convenient, and when it would be inconvenient to take the old course. It was against that I protested the other day, and against that I protest still, in spite of what the Chancellor of the Exchequer has said.

Mr. ROWNTREE

I wish to say a few words, Mr. Emmott, upon a subject that not only quenches the thirst of the wayfarer, but serves also to whet the political appetite of several. Despite that fact, I know that in rising to address the House for the first time, I can claim the indulgence of hon. Members opposite as well as those on this side, because there is no feature that strikes the new Member more than the invariable courtesy of all sections of the House of Commons towards political opponents. My object in rising is to support as heartily as I can those Members who have urged upon the Chancellor of the Exchequer the desirability of abolishing the duty on cocoa. I have no right to speak for the whole trade—members of that trade as of every other trade are divided in politics—but I think I am right in saying that most, or at any rate many probably doing the largest volume of trade in this country, have declared themselves in favour of the abolition of this duty. I should like to say a few words on the subject as a manufacturer of cocoa. I will try to do so without being too technical, and I will certainly try and not give away any trade secrets. I believe that the effect of the protective character of some of these duties has been very greatly exaggerated. The question divides itself into two parts—the duty on cocoa and the duty on chocolate.

With regard to cocoa, the present trade in England consists almost entirely of pure cocoa powder, and we find that 2 lbs. of raw cocoa will produce 1lb. of pure cocoa powder, the difference being due to the loss in manufacture. We pay a duty of 1d. per pound on raw cocoa. The foreign merchant pays a duty of 2d. per pound on the prepared article he imports into this country, and that counterbalances the duty which the home manufacturer has paid. That is a general statement of the basis of the figures of our own business, but I admit that there may be variations and that variations depend very largely upon the amount of what is known as cocoa butter, which is extracted from the raw material. I admit also that if manufacturers, instead of selling pure cocoa made it very largely a mixture of other things, then the present duties are protective in character. I think everyone recognises it is fair that we should try and understand the question when so much is being said about it. It is true that a certain proportion of the loss in manufacture is a valuable article of commerce known as cocoa butter, and that a duty of 1d. per. lb. is levied on cocoa butter coming into this country. It might be argued on this account cocoa powder is protected, but to show how trifling that is, the duty received from cocoa butter yields to the Treasury less than £4,000 a year. In the case of chocolate, I have always admitted that the British manufacturer is protected, the amount of protection varying according to the proportion of the dutiable ingredients, cocoa and sugar, employed in the manufacture. But we must remember that the Treasury and the Customs have recognised this element of protection, and they have stated to the English manufacturer, "we will allow you no drawback on the cocoa contained in cocoa and chocolate which you export abroad because of the advantage they have admitted we have with regard to the manufacture of chocolate." The result of this is that supposing these duties were taken off, there might be a certain advantage to some firms, but that is a very different statement to what we have heard upon the platforms in the past few years.

But look at it from the commercial side for a moment. The English manufacturer who desires to export cocoa to other countries—there are preferential rates I admit in one or two; I think there is in regard to South Africa and Canada—is handicapped to the extent of about 12½ per cent, compared with his Dutch com- petitor, and the English manufacturer wishing to export chocolate may have to pay, I think, up to 5 per cent, more than his Dutch or Swiss competitor. [An HON. MEMBER: "Why?"] Because the Customs allows no drawback on the cocoa or chocolate exported abroad, and the reason they do not allow it is because they admit we have a certain advantage with regard to chocolate coming into this country. Speaking for myself and for other manufacturers as well, if we are asked what is the remedy, we reply perfectly frankly, "Give us Free Trade." There is no mistake about it, that is what we want, and that is what I ask the Chancellor of the Exchequer to give us. Abolish the duty upon raw cocoa altogether, and along with that abolish the duty on cocoa and chocolate coming into this country. [An HON. MEMBER: "They have built up a trade under the present system."] There are several, unfortunately, who have not been able to build up a trade.

I should like to add a word in agreement with the remark I heard from an Hon. Member behind me, that we should also like the Chancellor of the Exchequer to take off the remainder of the duty upon sugar imposed by the late Conservative Government—I frankly admit at a time of special strain—and which has been a serious handicap to every user of sugar as a raw material. If we want an excellent description in a very few words we come, as we so often do, to the Prime Minister. He says that that tax has a double vice; that it was a duty upon food and a duty upon raw material as well. If the Chancellor of the Exchequer could agree to the two propositions I have just made, I believe they will be very popular in this House. I believe that many Members opposite, as they have shown in recent days, would agree to the suggestions I have made. I am sure every Member upon this side of the House would agree to them, and in the country it would be taken as a definite step by the Liberal party in the reduction of taxes upon the food of the people. I very much hope, indeed, that as far as cocoa is concerned the Chancellor of the Exchequer will yield to the request made to him by so many Members of the House. If for any reason he cannot, and I trust that that supposition is entirely wrong, I hope he will give favour to the other proposition made by some Members. If the Chancellor of the Exchequer cannot do what I think would be the right thing, I hope he will remove the duty on cocoa butter, imposed in 1896 by a Conservative Government, and which only yields £4,000 a year; that he will adjust the duties upon manufactured chocolates, and that he will allow English manufacturers a drawback on what they export. [An HON. MEMBER: "Tariff Reform."] An hon. Gentleman opposite says that is Tariff Reform. I am a Tariff Reformer, but in the sense of the Tariff Reformer in America, who wants the lessening or the abolishing of Tariffs. We were reminded the other night in this House that the Tariff Reform League had issued a poster. It was not a picture one, but it was certainly illustrative. It charged the present Government with taxing foreign chocolates in the last two years for the benefit of some of their supporters in the Press. I think a more unfair charge was never made. I would remind the Committee that this Government have only up to now continued duties which have been levied with slight change by every successive Government since 1853. I go further, and I say that both Messrs. Cadbury and my own firm have publicly again and again asked for the duties to be abolished. I have pressed it upon the Chancellor myself both before I was a Member and since I have been a Member of this House. All mention is avoided in the poster of the fact that English manufacturers are allowed no drawback on the cocoa exported, which the Treasury have looked upon as somewhat counterbalancing the gain to the English manufacturer for the high scale of duties levied on foreign chocolates.

The chocolate duty illustrates in a small way the enormous difficulty of levying a really scientific tariff. Here is an article containing ingredients in varying proportions upon which different rates of duty are levied and one of which wastes considerably in the process of manufacture. A somewhat elaborate scale of import duties will have to be imposed to get rid of the taint of Protection which will at the same time not put the home manufacturer in a worse position than his foreign competitor. It is not impossible, but it will not be an altogether simple matter. I do not believe when the chocolate duty was reduced to its present figure it was intended to be protective in effect. At that time, in 1853, the duty upon sugar was 17s. 4d. per cwt., and it was subsequently raised to a higher figure than the duty upon chocolate. My sympathy would go out to the statesman who would have to frame a scientific tariff giving a protection of 10 per cent, to British manufacturers upon all that great array of manufactured articles of present day commerce. He would have to consider for each article the number, kind, and proportion of materials of which it is composed- He would have to take into account the wastage in the process of manufacture, a wastage that would vary for different materials and that would change with improvements in industry that are always going on. The task would be more difficult if the final rate of duty should vary according to the country of origin.

I should like to say one or two words on two different aspects of the Budget. I am sure we shall all, irrespective of party, rejoice with the Chancellor at the prospects of better times and at his view of the buoyancy of revenue. I think we may also congratulate him upon the admission the right hon. Gentleman (Mr. Austen Chamberlain) has just made, that during his term of office and of the preceding Chancellor they have enjoyed fat times. That does not altogether tally with what some of us have heard in the country outside. We are right in congratulating ourselves that probably no other nation could have achieved the financial success that the Chancellor has done in overcoming his deficit of last year, and yet amongst thoughtful people in different nations there is uneasiness as to where these enormous Budgets are leading us. The Foreign Secretary (Sir E. Grey), speaking in this House fifteen months ago in support, I believe, of the Navy Estimates, used these very striking words:— Half of the national revenue of the great countries in Europe is being spent on what are, after all, preparations to kill each other. Surely the extent to which this expenditure has grown becomes a satire and a reflection upon civilisation. Not in our generation perhaps, but, if it goes on at the rate at which it has recently increased, sooner or later, I believe, it will submerge civilisation. Sooner or later, if it goes on at this rate, it must lead to national bankruptcy. Those are solemn words coming from the Secretary of State for Foreign Affairs, and we know perfectly well that even during the past year we have left undone things that we should like to have done. The great scheme of insurance for unemployment and invalidity, insuring 2,500,000 workmen against unemployment and 13,000,000 workmen and workwomen against sickness and premature breakdown of the breadwinner, has had to be passed over. A question like the payment of Members has had to be postponed—a very important question if you are to maintain the independence of men in this House and if you are going to get the best men in, irrespective of how much they are worth and of how much they can get from party organisations. Why have we had to leave these things undone? Because of this enormous naval expenditure. Surely we want to recognise that there are dangers within the Empire as well as dangers without. I have been struck since I came into this House with the universal view almost of the great social reforms that are needed. I have always admitted that the country is grateful, or should be grateful, to the right hon. Member for West Birmingham (Mr. Joseph Chamberlain) for attracting public attention and public thought to many of the burning social questions affecting the welfare of the people in this country. The Report of the Physical Deterioration Committee of 1904 did a great deal in that directon. The Committee was appointed to investigate why it was that 50 per cent, of the recruits applying for positions in the Army were sent down because they were physically unfit. The Report of the Poor Law Commission has again drawn our attention in very vivid colours to these affairs at home. May I just refer to a sentence in the Majority Report, where the members say:— These laborious investigations prove the existence in our midst of a class whose condition and environment are a discredit and a peril to the community. Then they go on to say:— No country, however rich, can permanently hold its own in the race of international competition if hampered by an increasing load of this dead-weight, or can successfully perform the role of sovereignty beyond the seas if a proportion of its own folk at home are sinking below the civilisation of its subject races abroad. I want, in conclusion, to make a strong appeal to the Government and to responsible statesmen opposite to see if they cannot, in the next few years, agree upon something that is practical and acceptable to the sober thought of this country to in some way limit these enormous armaments which are preventing us getting the money we want for social reform. There is not a Member of this House but has been struck in recent times by the extraordinary demonstration of love and affection to the late King as a Peacemaker. Nations seem to have been knit together by a common loss, and I do think if statesmen accept the view that was put forward by the Foreign Secretary, it is surely time they should try to come to some agreement whereby this terrible condition of affairs can be overcome. It is not for me now to suggest how it can be done. There are many who think there are dangers when the Front Benches come together in a conference to try and come to an agreement, but on this question, if there is to be an agreement amongst nations, there must be an agreement amongst statesmen in this nation first of all, and I do earnestly trust that this House, full of men on both sides who are keen for social reform, will lend their weight and influence in trying to encourage their statesmen in some way or other to try and turn their faces to the light, so that instead of having this recurring enormous Vote for armaments year by year we may look forward in days to come to seeing some reduction which will help us with those schemes of social reform which we desire to see carried out.

Mr. GRETTON

I will not detain the House many moments, especially in view of the fact, as has already been suggested to-day, that the Debate now proceeding has proved but a repetition of the Budget Debates of last year. The hon. Member who has just sat down, and on whose speech I venture to offer my congratulations, appealed to the Chancellor of the Exchequer to give back another portion of his taxation, I think he could not have heard the powerful appeal made by the right hon. Baronet the Member for the Forest of Dean, who claimed that the £300,000 balance which the Chancellor of the Exchequer is budgeting for in the present year has already been promised to the local authorities, and that the right hon. Gentleman must have forgotten the pledge he had given. Personally, I do not see how the Chancellor of the Exchequer is going to escape from that pledge without coming into violent collision with the local authorities and with the ratepayers, to whom those local authorities are responsible. I can speak with the greatest confidence and assurance with regard to large rural districts in this country, which are looking for the relief promised them in view of the deficiency of the whisky money, that they are also expecting the pledge the right hon. Gentleman made, that some further contribution should be given in relief of the rates by the present Budget, shall be given effect to. I want to ask the right hon. Gentleman if he can explain to the House what he intends to do with regard to the promised relief to the local rates from the Land Tax? He says he is not going to tax agricultural land. But he is going to pay the great expense of valuation, and a vast number of valuers will be appointed, apparently, to inquire into land values not in urban districts only. Evidently he is going to provide for the relief of agricultural rates out of the taxes which he proposes to impose on town lands. But will the urban authorities be satisfied that a large proportion of the revenue which is earmarked to themselves shall be diverted to the rural districts? I venture to think that they will look very closely into the proceedings of the Chancellor of the Exchequer and see that they are not deprived of that relief under the proposals which he is now laying before the country. If more evidence is required of the domestic difficulties which face the party opposite I think it is to be found in the complaint which has been advanced that it is the House of Commons which drives the Prime Minister and his colleagues into increased expenditure. The Prime Minister himself said to-day that it was the House of Commons that was responsible for the enormously increased expenditure, and he tried to lead the Committee to understand that he and his colleagues, if left to their own devices, would have been more economical, and that, consequently, this enormous Budget would never have been proposed. But he must have forgotten that the responsible Ministers of the Crown alone propose the Estimates to the House, and they need put nothing in those Estimates of which they do not approve. The Estimates are the work of the Ministers of the day, and not of the House of Commons. No private Member has power to propose any increase of taxation. He can only move to reduce the burden which Ministers propose to place on the people of this country.

I perfectly recognise it is quite useless to appeal to the present Government to alter the principle of the taxes upon licences. There has not been a great deal said in these Debates this year on the question of licences, but I hope the Committee and the Government will not conclude from that that there is any kind of meek acceptance of this burden. Hon. Members on this side of the House and the licensed trade outside have not in any way withdrawn their opposition to these taxes, and the Government must not assume that, now they are face to face with the burden, they find it easier to bear it than they anticipated. In fact, the contrary is the case, and these taxes do press severely and most heavily both upon individuals and upon brewery companies. Everything we prophesied with regard to their inequality and their disastrous and ruinous nature is being fully realised now that the taxes have actually to be paid. But I know it is quite useless to appeal to the Chancellor of the Exchequer to contemplate in this Budget any reduction of this taxation. He is determined to tax the licensed trade. He wants to make it suffer. But I do wish to bring before him one or two anomalies which, if he will deal with them, may make it easier for him to collect the revenue which he expects. I believe that these taxes will bring in a larger amount of revenue than the right hon. Gentleman budgeted for last year. The taxes have extended over nine months, but during seven months of that period the Budget was in the greatest doubt. No one knew whether it was going through or not, and it actually did not pass into law until the end of April last. Licences were not dropped in anticipation of a Budget which a very large number of people thought was not going to pass at all, even after this House of Commons had been elected. Indeed, it was only at the last moment that the Government were able to get the majority which put them in a position to obtain the assent of the House of Commons to it. Owing to that fact many licences which otherwise would probably have been dropped were continued, and the owners have to pay for the period which has already expired. The Government, I believe, estimated that something like 25 to 30 per cent. of the licences in this country would be lost as the result of their Budget. That could not happen in the year which has just passed, and the number of licences dropped up to date has been very small indeed. As regards the coming year also the Chancellor of the Exchequer may get a larger revenue from licences than he has anticipated, for the reason that a large number of persons in the licensed trade are convinced that these taxes are so inequitable, so monstrous, and so unjust that even this Government cannot contemplate continuing them for more than one year, while at the worst there is going to be a General Election, and it is worth while seeing what the result of that election may be.

I want to call the attention of the Chancellor of the Exchequer to the very great inconvenience—I might almost call it scandal—arising from the way in which these taxes are now being collected, owing to the hasty and hurried methods which have had to be adopted. It is not the fault of the officials. I am not blaming them for one moment. It is the fault of this House, and the fault of the Government. The Chancellor of the Exchequer made much, I believe, in his Budget speech, of the fact that the Scotch licence holders are paying the Licence Duties more promptly than the English licence holders. But the position is this: The Scotch Licence Duties fall due and have to be paid by 30th May, while the English Licence Duties do not fall due until 30th June, so that at the time the right hon. Gentleman made his Budget speech the new English Licence Duties had not fallen due at all. As a matter of fact, the demand papers for the English duties in many cases have not yet been received. They have been issued for those licences which are estimated to be of the annual value of £500 and upwards, but in at any rate two districts in the Metropolis no notice papers for licence duties on the lower scale have been issued. In other cases the licence holder only received the paper on 4th July, and he was told that unless he paid the duty on that day the authorities will come down, shut up his premises, and prevent him from continuing his trade. It is a great hardship that he is not allowed any time to look into the matter. The duty is a new one, and there is great doubt in many cases as to what is its proper amount. The licence holder has no chance, owing to this very short notice—fourteen days' grace at least ought to be allowed—he has no chance whatever to look into the nature of the demand, for he is practically told that the money must be paid on the spot. He cannot even ascertain if any of the options which are allowed under the Act apply to him. Unfortunately, the officials are obliged to take the course of which I am complaining. They are not to blame. But the burden on the taxpayer is increased at the same time to an enormous extent and in many cases it has amounted almost to extortion. I think I may appeal to the Chancellor of the Exchequer at any rate to have a little mercy for these licence holders, and to give instructions that some grace and some latitude shall be allowed them, in order that they may ascertain what their liabilities really are, and that they may examine into the nature of the demand made upon them.

7.0 P.M.

There is another matter in relation to these Licence Duties in regard to which I wish to associate myself with the remarks made earlier this afternoon by the hon. Member for West Aberdeenshire. That hon. Member complained of the great hardship caused by these Licence Duties on the smaller class of hotel. I support his complaint. Many hon. Members on this side of the House urged this point most strongly during the Debates last year. The hardship is particularly felt in the case of these small hotels, because the owner of the licence often happens to have spent much money in providing accommodation on the property which he owns. If he had not spent the money on buildings there would not have been the large amount of accommodation which he has about him in connection with his licensed trade, and he would have less expenditure for the same trade, and he would have paid a very much lower licence fee. In many parts of the country the licensing benches have demanded that the licensed premises should be improved, and many thousands of pounds have, in addition, been spent without demand or pressure from outside in improving and enlarging licensed premises, the licensees having endeavoured to meet the demands made upon them by the public in regard to the supply of food, tea, and other matters not connected with alcoholic drink. As I say, a large amount of improvement has been carried out, and it has been generally supervised by magistrates, who were determined that what are called in these cases "drinking facilities" should not be extended. What is the result now? Why, that all this capital expenditure is taxed, and the owner is taxed on the money which he laid out to meet a public demand, and often to satisfy the local authority. If he had not made this expenditure, his licence would cost him very much less, and it would cost him less for maintenance and local rates and charges upon his house, and for the purpose of the sale of alcoholic drink he would have had a more valuable property. That is the result which ill-considered and hasty legislation has produced in this country upon the owners of licensed premises who endeavoured to improve their property. It is true that the right hon. Gentleman is saying now that he is going to alter all that; he is going to have a valuation, and when a valuation list has been prepared all these matters will be put right. That may be so, but when will this valuation take place, and does anybody know how it is to be made? Has a. single valuation yet been made and completed, and have they yet been able to give the Excise instructions as to how these valuations are to be conducted I The licensees have the greatest difficulty in knowing how these valuations are to be: made, and when you consider that there exist 130,000 licences in this country, to talk of a valuation list being prepared in the immediate future in order to get rid of this very serious, grave, and overwhelming anomaly is to talk without knowledge of the real facts of the case. I would urge upon the consideration of the Government whether, in dealing with their Budget this year, they will not be able to make some allowance or deduction in regard to the building value of the premises so that only the licence is charged for under the Budget, and not the value of the expenditure which has been made to improve the premises owing to the demand of the local authorities or otherwise. The whole case in regard to these licences is, I believe, a monstrous scandal, and it is a case of revenge upon a certain number of those whom the Government believe to be their political opponents. I know that the Government think that they have in this House a majority to defend these proposals, which, after all, have no ground in justice and equity, and must end in destroying the source upon which they are relying for a large part of their revenue.

Mr. BOTTOMLEY

I do not propose to follow the hon. Member in urging any further appeal to the Government to extend either consideration or justice to the trade in whose interests he has made his application, because I think it is common ground now that the Government having more or less admitted the futility of repressive legislation in regard to licensing matters has declared for the new policy of taxing the trade out of existence. As to the merits of the policy it is not the time to speak, and I simply make the observation that in view of the approach of another election it seems to me to be bad electioneering tactics, and is likely to recoil with very great injury upon the party which adopts it. Nor do I think any words that fell from me would assist the hon. Member for York (Mr. Rowntree) in that appeal which he made to the Government just now to remove the protective duties from cocoa, chocolate, and cocoa butter, I am sure lie was earnest in his appeal, but, of course, there are cynics who would observe that when you have built up a great industrial undertaking by the aid of protective tariffs it is not a particularly generous thing to suddenly ask the Government to do away with the ladder by which you have ascended the scale of prosperity. I do not impeach the sincerity of the hon. Member, but I simply say his request has come somewhat late in the day. I have always noticed in these Budget discussions that in the period which follows the Budget statement and precedes the introduction of the Finance Bill the discussion is as futile as it is discursive, and I shall attempt to confine myself to making practical suggestions which occur to me for the benefit of the Chancellor of the Exchequer. To-night I do not propose to enter into the interesting controversy as to whether this particular party or the one on the other side of the House is more responsible for the increased burden of the country than the other. To my mind it is six to one and half a dozen to the other, and I think the man in the street has begun to realise this fact, and that in regard to a matter of this kind there is a general consensus of opinion outside the House that the Budget should consist of business proposals, free from all moralisings and things of that kind, and should be restricted to the one single subject of how best to raise the revenue in order to meet the necessities of the country.

What does trouble me is this. Does the Government now wish the House and the country to understand that within the limits of our present system of taxation it sees its way by the operation of the existing taxes and by the development of that machinery which has been set up to meet not only the present but the prospective financial requirements of the nation? Strictly speaking, the Post Office items are not expenditure at all; but we have £150,000,000 of money to raise yearly, in regard to which the Prime Minister explained the items which make up that huge total. I have in my possession a little handbill which was extensively used during the General Election before last, in which we were urged to point out to our constituencies the fact that the Tory Government had added £50,000,000 during the then past ten years to the national Budget, which we pledged ourselves to restore to the old level. It is common ground that we cannot do it. It it common ground that the items have got to go on and be added to year by year, with the result that we shall soon be facing a Budget approximating to £200,000,000. The hon. Member for Blackburn (Mr. Snowden) looks forward with me to the time when it will be £300,000,000, and what I want to know is this, whether the Government, without resorting to any methods of Tariff Reform, really pledges itself to this, that we can under the operation of our present fiscal system and our present system of taxation meet that inevitable demand which will be made upon us in the future? I am not going to be tempted into the discussion of Tariff Reform. In a sentence, the view I take of it is this, that whatever be its merits from the point of view of stimulating and assisting home industries and manufactures—as to which every business man cannot entertain an atom of doubt within reasonable and businesslike limits—whatever may be the merits of the system of Tariff Reform from the point of view of assisting home manufactures and preventing the decay of those industries, as a revenue-producing instrument it requires a great deal of consideration in order to satisfy one of its efficacy. Therefore, looking within our present system, I am going again to run the risk of wearying the Chancellor of the Exchequer by putting one or two humble proposals to him without arguing their merits and asking if he will seriously consider them.

What is the position of the Chancellor of the Exchequer at this moment? We talk about high finance and the methods of others in high places have been impeached as being immoral and corrupt, but the fact is there, that the Chancellor of the Exchequer says in effect: "I have not really any scientific data to guide me as to what my income will be next year, but I assume that owing to the spread of temperance or a certain large number of millionaires dying, as they did last year, or some equally scientific hypothesis of that kind—I assume I shall get so much more from the Death Duties. Also assuming that the trade boom which appears in England continues I ought to get so much more, and assuming this, that, and the other, I may get a surplus, and now, as a sound financier, I proceed to spend it." That is the doctrine of the Budget, and we have been seriously sitting here in the past few days, thanking the Government for the great assistance which it has given to us, and thanking them for their great contributions to social reform, based on a hypothetical income as to which there is, admittedly, no guarantee that if all these assumptions turn out wrong, the Chancellor of the Exchequer will not come forward and say, "It is quite true that my taxes have not fructified, my Whisky Tax has come to nothing, but," says the Chancellor of the Exchequer, with that humility which is his great characteristic, "it is true that, in the light of subsequent events, I am a very poor Chancellor of the Exchequer, but I am a great social reformer." I am one of those who think that morals and social reform should be divorced from Budget propositions. I lay it down, without hesitation, as incontrovertible that not only the principal, but the sole, duty of the Chancellor of the Exchequer is to find revenue. If as an incident it makes for moral or social reform, or anything else of that kind, so much the better. But these things, like the mountains of Wales on the platform of Queen's Hall, have no place in the Budget whatsoever, and the Chancellor of the Exchequer must not have regard to them when he gives us this hypothetical income. What I propose to do is to offer him once again, in the capacity of an amateur moneyspinner, a large revenue which is consistent with the strictest doctrines of so-called Free Trade and with our financial system, ready to hand for production. But, first of all, I will say one word as to our expenditure. We talk almost instinctively of income and not of expenditure, but I have to suggest to the Government that if they will not arm their Public Accounts Committee with the power to give it to some body of business men in this House, forming a Committee—never mind their morals, but mind their business experience—the less morality the better—I mean morality in the professional and Parliamentary sense—but let them be armed with powers as a Committee of this House, to visit the public spending Departments of the State and report to this House from time to time whether those Departments are overmanned, whether they are efficient, and whether economy prevails in them, and to say that a Committee of that sort would not do good is very much to my mind to put an affront on the dignity and intelligence of this House. I do not see why some such institution as that could not be brought about which would rivet our attention not only on the question of getting something in, but of saving some of the expenditure which is ever increasing- I now want to come to one or two suggestions of my own, and press them upon the Chancellor of the Exchequer. First of all, I am as heretical in regard to the Sinking Fund as I am in regard to many other shibboleths of party and finance. I call the Sinking Fund a stupid thing. For a nation with the assets the Prime Minister reminded us of the other day to be bothering itself about applying £6,000,000 or £7,000,000 a year in these times to the reduction of the National Debt is an act of fatuity. There is no justification for it, and there is no need for it. There is no sounder finance in the world than that of letting other people pay your debts. I am one of those who have no sympathy with posterity at all, and there is no reason why this naval expenditure should not be put upon the shoulders of posterity. Are you going seriously to suggest that it is to be an everlasting feature of civilised life and government that the great nations of the earth are to be eternally vieing with each other as to the possession of the greater means of destruction and of war? It is a blasphemy upon the doctrine of civilisation, and if you believe that a wave of sanity will some day come over the world, and that we shall recognise, if only from the very point of view of the horrible realities of modern warfare, that the thing is doomed and destined to be almost nonexistent, are not you entitled to say that this vast naval expenditure is for the benefit of the permanent Empire, and for the benefit of posterity, and are you not entitled, by loan or in some other way, to say that you will shift that burden on to the shoulders of those for whose benefit it is incurred? The service of the National Debt involves £18,000,000 a year. Why on earth do we want another £6,000,000 or £7,000,000 written off? Have we or have we not assets to cover it? Are we as a nation solvent? If we are, why not leave the loan outstanding? Our National Debt is less than that of France, and our security is much greater. Our National Debt is ridiculously small, and I suggest to the Members of the Labour party that they should keep their eye first of all on the £6,000,000 or £7,000,000 which are going automatically now to the payment off of debt which does not call for repayment, and, in addition, that they should abolish that stupid thing the old Sinking Fund, which takes any realised surplus of the year, and that if the Chancellor of the Exchequer, owing to a boom or to good management and public economy, can come to the House with a few millions of surplus in his hands, that surplus should be handed over for the general benefit of the community, and not placed in the old Sinking Fund.

The Chancellor of the Exchequer, in dealing with his Licensing Duties and Whisky Duties, has taken comfort in the fact that, though they have been non-productive of revenue, they have been most active as agents for social reform. There has never been a better financial proposition than the one I am about to place before the Chancellor of the Exchequer. He draws some two or three millions a year from Stamp Duties relating to Stock Exchange transactions. He is a Member of a Government which sets its face against gambling. Three-fourths of all the transactions of all the Stock Exchanges of the country are gambling transactions, and nothing else. Throughout the whole of the recent rubber and oil booms not one share in a hundred thousand of those which have been purchased has been purchased with the idea of investment or even of being taken up. A man who buys £100 worth of stock has to pay a Transfer Duty of 10s. per cent., and that brings in a very large amount of money. My proposal is to make that duty, which is now called a transfer stamp, payable on the contract for the purchase of the stock instead of upon the transfer, and you then get an additional Transfer Duty upon every Stock Exchange transaction, whether it be of a speculative or an investing character. The law assumes that every purchase is a boná fide one. The Solicitor-General will tell you that if a man buys?,000 rubber shares only because he thinks they are going up in price and never intends to pay for them, but to sell them again, the law will say that is a time bargain which cannot be enforced. The man goes through the farce of buying, and the broker gives him a contract, and when he sells he pays no duty whatever. The boná fide investor is the only man who is penalised. If you will only make the present Transfer Duty payable on the contract to purchase instead of upon the transfer, you will automatically bring millions into the Exchequer. The right hon. Gentleman said a year ago it might have the effect of stopping a lot of this business. A lot of what business? A lot of gambling business. The Chancellor of the Exchequer cannot refuse it on that ground. If the tax should fail to produce much revenue and should operate in the way he suggests, then, as in the case of the Whisky Duty, he can come to us a year hence and say, "It is true, misled by the more or less hon. Member for South Hackney, I have not got much revenue, but although the revenue has failed I am a great social reformer, and I have very much put down gambling on the Stock Exchange."

For three years in succession I have introduced a Bill dealing with dormant balances and unclaimed securities in the hands of the banks. Does the Chancellor of the Exchequer tell me now, in the light of his further inquiries, that he adheres to his original answer that there is only £600,000 of such money lying in banks? One member of the Bankers' Institute has stated that in six banks, to his knowledge, there are £15,000,000. There are private banks in this country whose colossal buildings have grown out of these unclaimed balances, and whose vaults are groaning with wealth, literally crowded with unclaimed securities. Australia and Canada, and other countries who are trying this experiment, have got anything from £100,000 to £500,000 in the course of the first year, and surely we have a great hoard waiting for us if we care to tap it. The second answer the Chancellor of the Exchequer gave me after he had consulted further was that this might disorganise the whole of the banking business in this country. That is a sorry compliment to the banking business—that it rests upon the foundation of misappropriated property. Again I pressed the Chancellor of the Exchequer as to where he got his information from, and of course he said the bankers. He consulted the bankers as to whether or not they would like to give up this property which does not belong to them. The next time he is concerned with a Licensing Bill perhaps he will consult the publicans and the brewers as to whether they would like further attacks upon their business, and will consult landowners as to Increment Duty and matters of that kind. The Bill has been approved by a huge majority, and there is ever-accumulating evidence in its favour. I have obtained a Return, which I have patiently waited for, of the amounts disclosed in our various Colonies and possessions, and I ask the Chancellor of the Exchequer to favourably consider an idea which once he got into his mind of giving us a Committee to inquire into the whole subject. My Bill can easily stand over. If he does so, by this time next year, when he makes his Budget statement, he will tender me hearty thanks for having put him on to a hoard of £50,000,000 to £100,000,000—there is no exaggeration in the figures—which is not the property of the bankers who at present hold it. We have a Public Trustee Department for the custody of such funds as this, holding them in trust for the rightful owners, or in the meantime for the State.

These are the two main proposals I throw out. The idea of taxing high-priced theatre tickets, and of graduated receipt stamps, and other proposals of that kind, which most civilised countries adopt, may or may not gradually penetrate the mind of the Chancellor of the Exchequer. There is only one other matter which I wish to refer to, and which I have again and again pressed upon him, and that is to tax the other gambling instincts of the people in the shape of racing and betting, and all the allied callings or industries associated with them. You cannot get rid of gambling, so you may just as well tax it, and on the principle that you are taxing the licensed trade out of existence tax gambling out of existence, and tax horse-racing and betting out of existence, if you can. I read a newspaper to-day in which the views of a lot of Members of this House had been obtained as to these proposals. I was edified by some. One hon. Member (Mr. Watt) said, "By all means tax bookmakers; they are all Tories, and it cannot do the Radical party any harm." Another hon. Member (Mr. Nield) said, "Horror! Tax betting and racing! The next thing you will have to do will be to call for a return of bookmakers' profits, and bring them into the Income Tax." He did not know, as the Chancellor knows too well, that we do that now. If a man puts in a plea for an abatement of the Income Tax because he made his money in betting and horse-racing, the Chancellor says, "Not a bit. I do not care how you made your money. No questions asked as long as the Government stands in." I ask you to follow the example of France, Germany, and our Colonies, and get into the Exchequer some of those millions which all those countries do from the gambling proclivities of the people. Let those moral reformers who are horrified at the existence of such an institution take comfort in the fact that you may succeed in taxing them out of existence, but in the meantime get revenue. These rough-and-ready suggestions I throw out at this early stage of our discussion, not with the remotest hope that the Chancellor will pay them any serious attention this week. But I hope he will pay me the usual compliment, and say they will receive his earliest consideration — a very small crumb of personal comfort, but it does me a little good in my Constituency. I think that is the very least return I am entitled to ask for all the trouble I have taken to discover these untapped sources of wealth.

EARL of KERRY

The hon. Member (Mr. Bottomley) said he thought a sharper line should be drawn between finance and morality. I shall be glad if that view is accepted. I should like to ask the Chancellor of the Exchequer a question in regard to the Spirit Duty. It is admitted that the tax has been so far a financial failure, although the right hon. Gentleman gave us rather unconvincing calculations designed to show that it is going to bring him in £500,000. I think, to use a vulgar expression, most of the stuffing has been knocked out of that statement by the hon. Member for East Mayo (Mr. Dillon). I think nothing has yet been said to disprove the hon. Member's argument, but I have no doubt that the Chancellor of the Exchequer will have something further to say on the subject to-night. But while it is admitted that the tax has been a financial failure, we are transferred to that higher ground, which is held to afford not only an ample justification for the tax, but even to put it into the category of a crime against society if the tax were repealed. Let us assume that the tax has the face value given to it by the right hon. Gentleman of £500,000, and also that it has had the temperance effects which are attributed to the measure. I would like to ask the right hon. Gentleman where he draws the line between finance and philanthropy. Supposing it were clearly proved that this tax was not likely to bring in £500,000, and that it resulted in an equilibrium, or a loss of £500,000, would it still be supported by the Chancellor of the Exchequer? I do not think that is an altogether unreasonable question to ask, because if the right hon. Gentleman has not got in his mind the intention to abide by some definite line between these two great departments of finance and philanthrophy, I do not think there is anyone else in the country who will be able to guide him on that point and persuade him to take up a firm attitude under the pressure of demands for further expenditure. The right hon. Gentleman, in his speech last Thursday, told us that there were certain advantages in bringing in the Budget late. Apparently his Government has come to the conclusion, or been forced to the conclusion, that there are also advantages in passing the Budget late. The right hon. Gentleman has definitely told us that this Budget is not going to be passed until the end of November or the beginning of December this year.

It is rather interesting to note the changes of opinion which have come over the Government on this question as to the date of passing the Budget. I remember that at this time last year, when it was thought that the Budget was being discussed at undue length, it was said by Members of the Government and their supporters that there would be considerable dangers in deferring its final passing to the end of the year, though I admit that in the end the Government gave us ample time subsequently to discuss it. Then we came to December, when events occurred in another place deferring the passing of the Budget until the country had been consulted upon it. If it was bad to defer the passing of the Budget until the end of December, how much worse was it to defer it to February or March! We heard a great outcry against that. It was said it would he a national disaster, and nothing less, but when we came to February, and thought it was to be reintroduced then, it was no longer a bad thing, but a very good thing to defer it to the end of April or the beginning of May. Now, when we have this new Budget introduced very late, it is apparently an act of statesmanship to put it off another six months. The argument for the advisability of putting off the last Budget until the end of April was, I think, that it was expedient that the Government should maintain their grip on finance as against the House of Lords. The argument for similarly putting off the present Budget is, it appears to me, that the Nationalist party may maintain their grip on the Government. The Government expressed themselves very much alarmed by the precedent which it was alleged the House of Lords were creating in referring the Budget to the electors of this country. Well, they seem, in so far as that precedent involves delay, to be very ready now to accept it and act upon it. I do not suppose that anyone will doubt that, unless there had been these delays over the last Budget, and unless the people of the country had got accustomed to the idea of delay, any Government which gratuitously put off the passing of a Budget from now to the end of the year would have had a very strong feeling against it, and its members would not have been considered worthy to hold their offices.

I am not sure that the Chancellor of the Exchequer has not been able also to extract another advantage from the fact that last year's Budget was not passed until so late, for it has enabled him, so far as I can see, to establish a sort of system of permutations and combinations between this year's Budget and last year's Budget. He has carried over from the one to the other what is apparently a deficit, but is really what he called in his speech of the "nature of a surplus" He is, therefore, able to use that surplus for this year and produce this "nature of a surplus" as a real live surplus of £800,000 for the current year's account, in that way it seems to me that one year's surplus is made to do duty for two years. I do not think there can be any doubt that, if last year's Budget had been passed in the ordinary course, it would have shown a surplus of something over £2,000,000, which would have had to go back whence it came, namely, into the Sinking Fund, and this year there would have been instead of a surplus a deficit. I ask hon. Members to remember that if that had been so, it would have put the Chancellor of the Exchequer in a very awkward position, and he would have been under the necessity of either further taxing the food of the people or of tightening up the taxes he imposed last year. Although some of us suspected him of the intention of tightening up the taxes of last year, I am sure he himself would have been 10th to do it in the year following last year's Budget, thereby fulfilling some of the prophecies which were made on these benches as to his intention. Therefore he has been saved from an awkward dilemma by the fact that last year's Budget was passed so late. I think he ought to show some gratitude to those in another place who enabled him to get these advantages out of the position. I think there are very few people who really regard this Budget as a humdrum and unsensational Budget, although it has been so-called by some. In spite of the Prime Minister's assurances and the dissection of the figures he gave us, we are bound to look with alarm at the tremendous increase in the rate of the growth of our national expenditure which has averaged nearly £10,000,000 in the last three years, with every prospect, as the Chancellor of the Exchequer told us on Thursday last, of that increase continuing. That must give pause to anyone who looks ahead and considers what may be required in the future. I think that not the least disquieting feature of the situation is that neither this year nor last year had we a note of warning from the Chancellor of the Exchequer of the dangers of this vast expenditure. The right hon. Gentleman referred only to one part of it, namely, that connected with the Navy. But we have never had from him any warning as to our total outlay. He seemed rather to glory in the immense sums we are able to expend. I think everyone expects that there should be from the Chancellor of the Exchequer some warning given of the dangers of national extravagance on occasions when expenditure has reached such a high pitch as it has done at the present moment.

Sir JOSEPH WALTON

Last year I had the pleasure of warmly congratulating the Chancellor of the Exchequer upon the introduction of his epoch-making Budget, which in an infinitely greater degree than ever before introduced the true principle of taxation, namely, that every man should be taxed according to his ability to pay. I still more congratulate the Chancellor of the Exchequer to-night, inasmuch as he has stood to his guns in the Budget now under consideration and has not abandoned that true principle. Regret has been expressed in the course of the Debate that the Whisky Tax has not produced the addition to the national revenue which was anticipated last year by the Chancellor of the Exchequer, but personally I cannot but feel profound satisfaction that tax has led to a diminution in the consumption of whisky of 10,000,000 gallons. I believe that any loss in revenue will be infinitely compensated by the increase in the material, moral, and physical well-being of the people of this country which will result from this large diminution in the consumption of spirits. It will enhance the prosperity of large numbers of people, and will enable them to have greater spending powers in regard to food and everything that is needed to clothe them and for the better furnishing of their homes. In that way it will bring to many of the industries of the country a greater demand for what they represent and produce in other directions revenue compensating for that which has been lost by the diminution in the consumption of whisky.

There is no question that the inclusion in this Budget of such an enormous amount of armaments is a matter that must be very disquieting to those who have hoped that with the spread of civilisation and of Christianity there would grow up between the nations of the earth more of the true spirit of the brotherhood of man which would lead to some mutual agreement between the great civilised nations for the reduction of armaments. Infinite credit is due to the efforts that were made by a Member of this House, when he was Prime Minister, the late Sir Henry Campbell-Bannerman, in this direction at The Hague Conference and otherwise; and I can only regret that they were not more fruitful of results. But I feel certain His Majesty's present Government are as keenly desirous that this waste upon armaments, which is such a financial burden upon the civilised nations of the world, ought, if possible, to be reduced so as to free our Government to push forward more rapidly those great schemes of social reform which are of such infinite importance to the well-being of the people of this country. Personally I should have been glad, indeed, if His Majesty's Government had been somewhat less influenced by the scaremongers in regard to naval expenditure. I should have been pleased, indeed, if, instead of an increase of £5,000,000 this year in our Naval Estimates, the amount had been £2,500,000. Though I yield to no one in my desire that we should have an adequate naval force for the defence of the British Empire, yet I believe that if His Majesty's Government had increased the Naval Estimates by, say, only £2,500,000 instead of £5,000,000, and thus put themselves in a position to initiate at an earlier date great schemes of insurance against unemployment and invalidity and sickness, that would have been welcomed by the great majority of the people if this country. But we can and do congratulate the Chancellor of the Exchequer on the fact that he is able, by his financial provisions, to anticipate that before the end of the year which this Budget is to cover he will be able to bring before the House a scheme carrying out insurance against unemployment and invalidity. No social reform that we have ever had to consider in this country can have such far-reaching influence in removing from the homes of millions of our people that dread of the future by loss of employment by the breaking down of health and other misfortunes.

Included in the enormously increased expenditure of this country it is satisfactory to know that so large a proportion of the increase is being devoted to old age pensions. Not only that, but that at the end of this year we shall have the pauper disqualification for old age pensions also removed, and that there will be 270,000 additional aged poor in this country, just as deserving as those who are now receiving their 5s. per week through the Post Office, who will also participate in this great boon. Coming to other branches of the increased expenditure, that on education is not in any way to be deplored, because of all the money included in our national expenditure there is no better spent money than the money spent upon national education. The enormous increase altogether in a very few years from a Budget of £100,000,000 to a Budget of £172,000,000 must give us pause as to how the further social reform in front of us is to be carried out unless you can reduce the expenditure on armaments so that the burden may not become almost greater than the nation can bear. But in reference to the social reforms which we have recently carried in this House, and in those which we have immediately in front of us to tackle, one can say that great though the burden may be that that has been placed upon the rich by the extra financial revenue that we gain under the Budget of last year and that of this year, yet it is well worth the while of those who are able to bear those burdens to bear them willingly for the sake of the great benefit and the great increase in happiness and prosperity that will come as a result to the great mass of the people of this country.

Mr. GEORGE TERRELL

I wish to make a very few remarks in connection with the Income Tax, to show that the question of the three years' average should be reconsidered. It has been stated on many occasions that it applies oppressively, that in times of good trade the tax is unduly light, and in times of bad trade it is exceedingly oppressive. I have been enabled to get hold of a few illustrations of how it hits companies, which I venture to think are of some interest. Of course, one cannot get the general illustrations which are available to the Chancellor of the Exchequer. It is only open to the private Member, with the help of friends, to get a few instances, and they are certainly of peculiar interest. I have got the case of a company which had been going through the periods of good trade and bad trade, and in a good year, when it was doing well—that was the year 1907—the Income Tax was only 5d. in the £ on the dividend that was divided; but when it came to a bad year, in 1908, when trade had fallen oil', the Income Tax was as much as 2s. 7d. in the £, and in 1909, when trade was exceedingly bad, the Income Tax was as much as 3s. 2d. in the £. I cannot help thinking that it is a matter which requires consideration because it is oppressive to be taxed at a heavy rate when everyone is struggling to make both ends meet. It has another aspect which is also of interest, and that is the proportion which in a manufacturing concern the Income Tax bears to the wages. In a good year when there was a great deal of employment in this particular company it amounted to only 1½ per cent., but during the first six months of the present year I find it amounted to 8 per cent., that it was equal to an 8 per cent, tax on the wages which that particular company was paying. I obtained another illustration of a company which was an English company, but which carried on business abroad, and it was taxed for Income Tax in this country. The company had been in existence only a few years. During that period it had divided in dividend only £2,000, and yet by the operation of the three years' average it had paid no less than £630 Income Tax, which I think is equal to nearly 6s. 6d. in the pound. Of course, when a tax is levied in that form, you run the risk of killing the goose that lays the golden eggs, because it is quite possible for the proprietors of that concern to transfer the registration abroad, and by that means escape the whole tax which otherwise they have to bear here. I do hope in this year when the Chancellor has a surplus that some effort will be made at any rate in the direction of inquiring into this system to see whether it is not fairer and better to levy the taxation on the profits in every year rather than on the fictitious profit which you get in consequence of taking the average.

8.0 P.M.

Sir ARCHIBALD WILLIAMSON

I need make no apology to the Committee for saying a few words to-night on a subject of the Budget which very much affects the interests of my Constituents. The part of the country I have the honour to represent is perhaps more largely interested than any other, unless it be the neighbouring county of Banffshire, in distilling whisky. Last year the additional tax on spirits was recommended to this House as a means of raising a considerable increase in revenue. That was proved to be a disappointment, and we are now told that while it has not raised the expected revenue, it is justified morally in reducing the drinking by our people. I have the honour to represent a constituency where whisky is largely distilled, but, at the same time, I have done a. good deal before I entered this House in temperance work. Therefore my interests and those of the distillers are perhaps antagonistic. Moreover, the distillers are by no means my political supporters. I have, however, to point out to the Committee that if this tax is to be justified on moral grounds, if it is to bring about a diminution of drinking, then it ought certainly to be applied to all the country, and not to Scotland only. Scotland and Ireland, at any rate, have suffered chiefly by any injury that has been done to their distilling trade, and if the policy is a good policy—and so far as I am concerned personally I should welcome any policy which reduces intemperance—I maintain that justice, ought to be done by adopting the policy all round. You cannot stop at spirits when you embark upon such a policy. The logical thing to do is to increase also the duty on wine and beer, and so reduce the consumption of these articles. If this particular policy is good for Scotland it is also good for England, and I would like to understand whether it is now the policy of the Government that all sorts of intoxicating liquors are to be raised in cost by an increase of duty, and thereby justice secured to all parts of the kingdom? I do not object so much to the raising of the cost of the liquor; my point is that it falls unfairly within Scotland itself. There are two kinds of spirits distilled. There is the spirit which is distilled from raw grain and there is the malt whisky distilled chiefly in the Highland districts. My complaint is that this tax falls, first of all, on one or two parts of the country and then falls upon a part of Scotland which is least able to bear it. In the part of the country I represent numerous distilleries are now closed. We are not now talking of Kinahans and so on; I speak of the distilleries which have been making a profit until recently. There is no denying the fact that numerous distilleries have been closed. There is no denying the fact also that the farmer's barley has fallen in price. There is no denying the further fact that trade in the shops and railways of all kinds in the community has shown a decline. Not only that, but the distilleries are now applying for a reduction in rates owing to the fact that they have been closed or that they are doing a diminished amount of business, and in justice they will get that reduction. Therefore the people in the districts will have to pay higher rates. My object is to show that we have by this policy put a burden on one part of the country which is least able to bear it—the Highlands of Scotland—I mean the only industry except fishing in that part of the country. After all, farming is largely dependent on the distilleries. It is an unfair duty upon Scotland, inasmuch as it falls upon a district where the dearer malt whisky is made, and, owing to the raised prices, the cheaper and raw grain whisky is purchased. The practical point is that we have got this duty raised and there is no hope that it will be altered. But there is one means by which the Government can mitigate the hardship so far as the North of Scotland is concerned. I think they could do so if they would graduate the duty according to the age of the spirits. By so doing a larger quantity of malt whisky would enter into the blends than at present. I hope it is not too late to give effect to that proposal in the present Budget. It would have a twofold result. It would lead to a better class of intoxicant being sold which would be less fiery and do less harm and tend towards temperance to that extent. The second result would be that you would still keep and maintain in the Highlands an industry upon which the people of the Highlands so largely depend.

Dr. HILLIER

The right hon. Gentleman in introducing his Budget used many interesting, some picturesque, and some, I think, amazing arguments in support of that Budget. Many of these arguments will cause a considerable degree of surprise, not merely to our foreign friends, but to the majority of business men in this country. As an illustration of what I refer to, I will take that statement in which the right hon. Gentleman said that five of the great nations during the past year had been labouring in the trough of financial distress. Among these nations he included Germany and the United States. I should like to ask the right hon. Gentleman what is this trough from which apparently we have emerged, but in which these two great nations are still in great financial distress? What are the facts with regard to the various countries? We have a very much smaller population than either of these two countries; we have a very much larger National Debt than either of them; we are more highly taxed per head of the population; and when you turn to such a significant thing as emigration you find that, whereas Germany at one time, perhaps, sent more emigrants to new countries than any other country in Europe, to-day the rate of emigration from that country relatively to the population is just one-tenth of what has been going on from British shores. In the face of these facts I venture to ask why we should be said to have emerged from the trough of financial distress and these two great countries be regarded as still suffering in it? Notwithstanding that the Chancellor of the Exchequer has chosen to be exuberantly optimistic about this Budget, he says, though he has dropped £5,000,000 in the matter of Excise, he has gained more than a moral equivalent in the matter of temperance. That sort of argument rather reminds me of the man who returned from a country fair boasting that what he had lost in the swings he had got back in the roundabouts. I will go this far, if the heavy Whisky Duties have had the effect of diminishing the amount of intoxication in this country, as a medical man and as a Member of this House I frankly confess I rejoice to have that assurance. I will admit that I think there is some justice in the argument of the right hon. Gentleman when he says that in framing a Budget a Chancellor of the Exchequer should not feel obliged merely to consider finance, but I do say that if it be legitimate, wise and expedient to so frame a Budget as to promote and encourage a domestic virtue, it certainly is legitimate to so frame a Budget as to further the Imperial symmetrical development of a great empire, and also to further national and industrial prosperity. It is worthy of some consideration that Germany delibe- rately adopted this principle in introducing her Zollverein or Customs Duty after years of controversy about the relative merits of Free Trade and Tariff Reform. If she decided that it was right and expedient to introduce this Zollverein policy she did so to accomplish two great ends. One of them was to use it, as it were, as a federal instrument for the purpose of knitting together the various states within that great empire. The other, which I hope will commend itself to hon. Members opposite, was undoubtedly to expand the area of Free Trade between the various states of Germany within the Empire. [Cheers.] I am glad that meets with the approval of hon. Members opposite. I think myself that it was a very laudable object. It had the effect of abolishing the Customs Duty between the various states of that empire, and it undoubtedly expanded the area of Free Trade within that empire. What I would say is that the time has come when we too, within the British Empire, should endeavour to widen the area at least of freer trade than we have. That would, if hon. Members would consider the matter impartially, be accomplished by a policy of preference. [Laughter.] I notice hon. Members laugh, but I must challenge them to dispute that view. What would be the effect of having this policy of preference? What has been the effect up to the present moment, even so far as that policy has been carried out? We have seen the Colonies lowering their tariffs in favour of this country as against foreign countries, with the result that the trade between the Mother Country and her Colonies has been so much freer. In the same way, if that policy be continued, trade will be made still freer in the future. I cannot hope that for the moment we can look forward to establishing Free Trade in the Empire, but we can undoubtedly—

The CHAIRMAN

The hon. Member is really getting rather remote from the subject in discussing Free Trade.

Dr. HILLIER

I am sorry, but I was discussing the system of finance enshrined in this Budget. If I am out of order I regret it.

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.