BUDGET RESOLUTIONS (INCOME TAX AXD SUPER-TAX).— [Progress, 6th July.]

HC Deb 08 July 1910 vol 18 cc1925-2011

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.]

Sir J. D. REES

It is a poor heart that never rejoices, and though one may consider a man must be low down when he is grateful for not being taxed any more, that at a time when there are afloat most extraordinary rumours as to the total abolition of parental responsibility, I am glad myself to find that the Chancellor of the Exchequer proposes no new taxes. I have no intention of reviewing the taxes. My particular object in making these remarks is to give expression to a word or two on behalf of the tea planters, who have no friends in this House; the tea sellers, who have a few friends in this House; and the tea drinkers, who have many friends in this House. All of these will be delighted that there has been no extra taxation on tea. At the same time I do not think there is any need for extravagant gratitude in this matter. It would have been an outrage had the tax been raised. The hon. Baronet the Member for Barnsley (Sir Joseph Walton), whom I overheard pouring butter from a lordly dish on the head of the Government^ finds in everything the utmost reason for satisfaction. He does not seem affected by the growth of expenditure which, though we assume is inevitable, is nevertheless gigantic, and causes great apprehension in the mind of the hon. Member for King's Lynn (Mr. Gibson Bowles) and others. I feel that matter very much myself, but as it is in the hands of my hon. Friend, I will leave it there with all possible satisfaction. The right hon. Gentleman the Member for Islington (Mr. Lough) also referred to the tea question, but said he could not with decency make any very decided excursion into that subject. The reason that existed in his case does not exist in mine. I have no pecuniary interest in tea whatever, neither have I any desire to dash a dish of vinegar now and again over the head of the Chancellor of the Exchequer or any other Member of the Government. I think it is generally very desirable that something should be said in this House on behalf of tea, and although the duty at present is where it was last year, it still amounts to something like 66 per cent, of the average value, which is a very heavy tax on any industry. I see that five years ago it reached from 70 to 120 per cent., which was a terrific tax, and while I am very glad indeed to find I am speaking with the approval of hon. Gentlemen on the Labour Benches, which I always deserve and do not always get, I must point out to them that in my opinion not only the tea drinker but the tea seller and the tea companies and the tea planters working out in India are entitled to sympathetic consideration in this matter as well as those who drink tea all over the United Kingdom, and who should obtain that almost necessary of life at the cheapest possible price. I entertain that view very strongly. The right hon. Baronet the Member for the Forest of Dean (Sir Charles Dilke), if I understood him aright, gave credit to the Government for continuing to levy any indirect taxation. That is a desperately dangerous doctrine, and I do deprecate the arguments made in this House about direct and indirect taxation bearing necessarily a particular ratio to one another, all of which I believe to be based entirely upon the imagination of the hon. Gentleman who happens to speak or of some particular prophet to whom he happens to pin his faith. The opinion of those Gentlemen upon this thing is not worth very much.

There was a speech of the hon. Member for Blackburn (Mr. Snowden), which made a great impression on the House. I confess it made a great impression upon me. He reminded me of that other distinguished gentleman in the way in which he talked of millions and hundreds of millions, Marco Polo, who, when he came back from his travels, talked so much of the millions of people and money he saw, that they dropped his name of Polo and called him Signor Marco Millioni. The hon. Member seemed to think that thousands of millions ought to be spent upon those who support him in Parliament. His arguments seemed to me to be simply puerile, and to have no foundation of any sort or kind, or to be in any way connected, even remotely, with justice or reason. The hon. Member had the advantage of addressing a very full House, which is an advantage the Labour Members always possess, and they manage to make the utmost use of it. I maintain it is the duty of sober-minded and reasonable men who are, supposed to represent the common-sense of the community to utterly repudiate the sort of things the hon. Member for Blackburn advocated. The hon. Member wanted to nationalise the land. I do not know how many thousands of millions he would want for that, and then he would nationalise the railways. He entirely forgets what Mr. Gladstone said, "If you attempt to pay for them it is folly and if you do not pay for them it is robbery." The hon. Member for Blackburn has got far beyond all that. He said amongst other things that the local ratepayer and the national taxpayer are not the same person. Why are they not the same person? It is simply one man with two pockets. What sort of difference does it make out of which pocket you pay your money supposing you do pay it?

Sir ALFRED CRIPPS

Is the hon. Member aware that a penny on the rates only produces one-third of what a penny on the Income Tax produces, and therefore two-thirds of the property liable to Income Tax escapes local taxation altogether.

Sir J. D. REES

I am much obliged to the hon. and learned Member, but my point is simply this, that all the money that is paid comes out of one or other of the taxpayers' pockets. I am not upon the point of relative taxation; it is taxation, whether it is local or not. Then the hon. Member for Blackburn said again that good trade affects only 5 per cent, of the population of the United Kingdom. Is it conceivable that any experienced man could make such a statement as that? It is impossible to have good trade without it affecting every class of the population, as it is impossible to have bad trade without affecting every class. As I understood the hon. Member, his idea is that the profits of good trade should be divided according to his rule. No man would engage in business or invest his money upon the principle laid down by the hon. Member. The hon. and gallant Member for Chelmsford (Mr. Pretyman) took up the hon. Member's figures and quoted him as showing that the cost of living had not increased, and as having stated that wealth had enormously increased. That being the case, how can it be that the condition of matters has not improved? I think the fact that it has improved is indisputable, and I ask the hon. Member for Blackburn and his Friends with what standard are they comparing things. If the hon. Member has in his mind a part of the world where everybody is rich and where there are no poor people, he should tell us where it is. The masses of the people here are as well off as anywhere else, and it is rather disappointing to hear these idle standards put forward by imaginative economists and treated seriously by an assembly like this.

There is one other point which has been put forward with which I agree very much, and that is with regard to foreign labour. I would be frankly Protectionist in regard to British labour. There is no labour in the world to which I would give preference before it, and wherever British labour comes in competition with coloured labour, I frankly would give the preference to British. I would not carry my hospitality so far as to give the foreigner preference over the British worker. The fact is that finance fashioned on political considerations must be bad, and finance fashioned on Socialistic considerations must necessarily be foolish and disastrous. Hon. Members laugh, but a man who comes to this House daily from the City knows something about business, and it is rather amazing to hear problems treated in a manner which if a man adopted in the City he would find it impossible to get 30s. per week. It does seem to me a pity that speeches of that sort should be treated as if they were really serious attempts to deal with difficult economic problems. I find it my duty to very strongly deprecate the statement of the hon. Member for the Tyneside Division of Northumberland (Mr. J. M. Robertson): It is very obvious to anyone … that anything like useful social reconstruction, which would better the position of the working classes, is absolutely incompatible with the enormous increase of naval expenditure." [OFFICIAL REPORT. 30th June. 1910. col. 1211]. I am as much opposed to enormous increase in expenditure as anybody, but, as long as the British Empire is a successful going concern, the cost of its insurance must, like all other insurance, increase. It is absolutely inevitable, and to try and place the Navy as antagonistic to social reform is to adopt a dangerous doctrine and to do very ill service to our country. I deeply regret that any hon. Member should adopt that line. It is wholly unnecessary. One may be devoted for social reform, and yet be convinced, as I am, that social reform is absolutely useless and a thing of no good to anybody unless the country is Strong enough to maintain its position in the world, and to protect its reformed subjects.

I do not know if I rightly understood the Chancellor of the Exchequer to say that the Undevelopment Land Tax was only going to produce £140,000. It seems a small sum, and quite insufficient compensation for the disturbance. I presume it will become more. I was associated in the last Parliament with friends, some of whom have become Peers, some Governors, and some of whom have departed into an obscurity from which I hope they will soon emerge. They were, one and all, valuable Members of this House, and they and I advocated the exclusion of agricultural land which is now, I rejoice to say, one of the planks of the Government's land taxation policy. A great many landowners, through public spirit, give their parks and gardens to the use of the public. I really do not know whether he can do it or whether I am right in asking it, but I should like to ask the Chancellor of the Exchequer whether it is possible in the administration of these Land Taxes to prevent taxation upon these places becoming so heavy as to lead to their being built upon? I realise there must be houses for people, but I also realise it is important that these valuable spaces should be kept for the public rather than that they should be covered with rows of houses for the accommodation of the few. They are advantageous to all the occupiers of the houses, large and small, all round. It is of the utmost importance that they should be preserved in the interests of the public, and that the public-spirited owners of them should receive that encouragement which is due to them for their unselfish enjoyment of their great possessions. I am glad to think there are many such men in this country. I believe most of those who have great possessions make good use of them.

I should like to refer for a moment to the speech of the hon. Member for South Hackney (Mr. Bottomley). In the persistent and pertinacious execution of his self-imposed duty of protecting morality in this realm, he was pleased to make an attack in general upon the City. Why did he describe the buying and selling of shares as gambling? I demur to that. The buying and selling of shares is a very profitable business to the City. It brings people to London and leads to the circulation of capital. From every point of view it is good for the country, and I demur to its being described as gambling. The hon. Member always endeavours to make a practical and valuable suggestion, and he wanted to have the Stamp Duty of T; per cent, calculated upon every transfer, not only when the property is really registered—

Mr. BOTTOMLEY

On every contract.

Sir J. D. REES

The suggestion, of course, should be seriously received, but, supposing the Chancellor of the Exchequer were to adopt it he would lose in volume what he made in amount. It would discourage these transactions, and would lead to a drop in the volume of transfers for taxation, which would be greater than what the Chancellor would get by the higher rate in individual cases.

When the hon. Member introduced his Bill with regard to bank balances I felt it was desirable that someone should speak, and I did my best. I have here a letter from a bank in London, and it says:— It is true our house dates from the French Revolution, and we have a large number of books sealed and otherwise secured, but each year every box or package is checked with a view of seeing if it is connected with the name of someone who has been or is now a customer. This is on the point that, as the hon. Member suggests, the Chancellor of the Exchequer could get a large revenue by taking steps to acquire these bank balances. They say they impress upon their customers the desirability of their removal. They have had some boxes there seventy or eighty years, and they generally find they contain nothing of any value. Take a typical estate:— On the winding-up of an estate, we generally find the packages contain: the first, jewels; the second, plate; and the third, deeds and papers of no value. The first and second packages are invariably removed, but the third often remains on our hands. These boxes which remain on our hands are a great nuisance to us, occupying valuable space, and we should be much obliged to anyone who would take them away. We have our books searched every year, and, if an account continues dormant, we communicate with the persons whose names are on the accounts or their relatives, with the result that the money generally finds its way into the proper hands. After a time, where they are not taken over, we transfer them to a separate account, but the amount is generally so small that it by no means compensates for the trouble, expense and correspondence. I will not say more on that point, except that the hon. Member's idea of the amount of unclaimed balances is not only wrong but fantastic. To talk about millions on millions is an absolute dream. Of course, he may dream as much as anybody else, but he can no more prove that there are these millions available than I can prove that there is hardly anything there. I have given the information I have to the House. It comes from the highest source, and I most thoroughly believe it. In any case, I submit that what we want to do is not to encourage State interference between bankers and their clients but to keep it within the most rigid limits. We do not want this Socialistic intervention. I leave it there with the observation that I think such interference seriously affects the business of the country and the revenue of the Chancellor of the Exchequer.

Mr. BOTTOMLEY

Does the hon Member object to an inquiry on the subject?

Sir J. D. REES

Yes, I do. If the end in view is not a good one, I object to stirring up expectations and trouble by inquiry. There are so many inquiries pending that I really think it would be a good thing to stifle one or two. I pass on to the line taken by the right hon. Baronet the Member for the Forest of Dean the other day. He answered me in a most courteous manner when I interpolated a remark; indeed, there is no man to whom I listen with greater respect and admiration. In his speeches he is so anxious to protect the coloured races that he rather assumes that the white man is always unfair to the coloured man. That, too, appeared to be the assumption of the hon. Member for Newcastle-under-Lyme, whose speech was of such a nature that I felt bound to ask whether he suggested that every British man of business was a robber. I very much deprecate that attitude; it affects not only the Chancellor of the Exchequer's receipts, but also the national prosperity. The majority of our men of business abroad—I admit there are black sheep everywhere—but taken on the whole they are a highly honourable set of men, and the business prosperity of this country and the revenue of the Chancellor of the Exchequer is dependent on them to such an enormous extent that it is extremely inadvisable to say anything about them which would lead to an unfortunate impression.

A word was said in the course of one of the speeches of the Chancellor about the Suez Canal and the revenue received from the shares. I asked a question as to what would, in view of what the General Egyptian Assembly had done, for reasons which Sir Eldon Gorst had frankly explained in his Report—reasons based upon hatred pure and simple—of the British occupation, I asked what steps would be taken to intervene in the financial interests of this country. The Foreign Secretary replied that there was no reason for the intervention of the Government as far as British interests were concerned, and if they did use their influence it would be from the point of view of the interests of Egypt. I submit that there is no conflict between the interests of Egypt and of Britain in this matter, and if the Chancellor of the Exchequer can say what is going to be done I shall be grateful to him, as I am anxious to see this matter satisfactorily settled.

The right hon. Gentleman, in the course of his speech, referred to the booms that had been going on in the City; he said the rubber boom would soon be over, but that the oil boom would last. I only wish in passing to express the hope that he will not find this obiter dictum of his made use of by the financial tipsters. I will not ask the right hon. Gentleman what is the foundation for his knowledge on a subject as to which many of us would really like to have a little authentic information.

The right hon. Gentleman, in referring to the very satisfactory provision made for the Navy this year, said he hoped that saner views would prevail in the future, and that there would be a large reduction of expenditure. I do not see it in sight. I feel very deeply on this question, and I would like to quote to hon. Members who demur to my views an extremely appropriate speech by the Radical Prime Minister of the French Republic, one of the greatest men engaged in politics during the lifetime of any Member of this House. He was defending the Government programme for the increase of the Navy, and he declared that "France must maintain her sea and land forces at a satisfactory pitch of efficiency, in the interests of the peace of the world. Certain persons were ready to cry out, 'No more ships,' but they would be the first to complain when, in consequence, thousands of workmen were thrown out of employment." That has been the experience of Members for Dockyard constituencies in this country. This French Prime Minister went on to say, "he was convinced that the Chamber would make the necessary sacrifice in the interests of national defence, and he was convinced that they would always do it." I deeply regret that a Member of the other House should have made the speech reported in "The Times" to the effect that the maintenance of English supremacy on the seas must be denounced as the greatest of all evils, and that national independence did not deserve so much attention as the development of interdependence among nations. I cannot pass from that without expressing my profound disagreement and dissatisfaction with the sentiment expressed by Lord Courtney.

I next come to the Death Duties. I believe the Chancellor of the Exchequer estimated his revenue from these at something like £25,000,000, but we must not forget that these taxes press desperately heavy on those who have to pay them. All I would say to the Chancellor of the Exchequer is, that I am glad he is getting that revenue in, but I would observe that in considering this matter again he must take care not to raise the revenue to such an extent as to make a prudent man with a family hesitate to die at all, because this sort of taxation has nearly reached that pitch. When the right hon. Gentleman compared the finances of this country with those of foreign countries, greatly to our advantage, he said the people abroad were more heavily taxed than we were, but he did not take the opportunity of dwelling upon the fact that in France and the United States the Income Tax, which in this country in piping times of peace has reached its present enormous proportions, is non-existent. It is true that in some particular States of America it may be in force, but it is not so generally speaking.

In regard to the proposal which has been made that British women who marry aliens and who are left widows should be entitled to old age pensions, which would lead to a large increase of cost, I earnestly hope the Chancellor of the Exchequer will not accede to that suggestion. I questioned the Under-Secretary on that point, and I think the House disapproved of my doing so, thinking I was unduly insistent. I am sure I apologise to the House, but I feel very strongly on the matter. I do think that if a British woman has the bad taste to prefer an alien to a British man and marries him she should take him for better or worse, with or without a pension, and I do not see why the British taxpayer should provide pensions for the widows of aliens. There was also a question brought up about feeding children in holidays as well as during term time, and I should like to see them fed at all times. Those who have children themselves cannot possibly feel anything but pain if children in any country are not sufficiently fed. At the same time, I do think that if parents are relieved of the cost of feeding their children they will not regard it as their sacred duty in future to feed them in the same manner as they do at present. These proposals would involve a vast expenditure, and I think they were received by the Under-Secretary in a friendly spirit. I tried to get in a word of objection, because, I venture to think, there will be great difficulty about that matter. The Chancellor of the Exchequer asked Members to show him a saving, and I will give him one if he will take it. We could save in General Elections. They cost a great deal of money, involve loss of trade, and are most expensive and unpopular. When an election puts a Government in office the people expect a statesman to behave like a sportsman, and when he has got into the saddle they expect him to stick there. A great deal of criticism has been indulged in with regard to hon. and right hon. Gentlemen opposite for having stayed in office when they were there. I think they were perfectly right, and am far from thinking we should reduce the duration of Parliaments.

The CHAIRMAN

The hon. Member is giving himself much too great latitude.

Sir J. D. REES

I will not add any more, but I offer the Chancellor of the Exchequer a fair suggestion for economy, which I hope he will adopt.

Mr. LLOYD GEORGE

I am afraid it will be difficult within a reasonable period to cover the whole ground, but I will do my best to answer the most important criticisms and the questions which have been put to me. If I overlook any question, perhaps hon. Members will remind me. The hon. Member who has just sat down has protested generally against the Tea Duty being retained at its present high rate, and there are numerous claims for reduction, but hon. Members, I am perfectly certain, will appreciate that I am a Chancellor of the Exchequer with a deficit of £16,000,000, which this year by sheer increase of the total expenditure will come up to £21,000,000, and which very possibly next year may develop to something very much bigger from automatic increases of the Votes. Therefore this is hardly the time for considering the various claims made for the reduction of the Tea Duty, the Sugar Duty, and I may include the Cocoa Duty. I have, however, a word to say about the Cocoa Duty later on. Another question referred to by my hon. Friend is the Undeveloped Land Duty, which I said would this year produce £140,000. We can hardly expect that this year it would produce more, for this simple reason that the valuers up to the present have not yet started their preliminary work by way of investigation. It will be late in the year when the valuations are begun and you have to give notice of them; they are subject to appeal, and although I hope in the vast majority of cases they will be justified, at any rate it will be late in the year before we get revenue out of the tax. In the judgment of the Treasury this is a legitimate subject of taxation. I think that the yield of £140,000 for the first year is a fairly sanguine one, but it is by no means the end of the Undeveloped Land Tax. Let me also remind my hon. Friend that the valuation is not merely for the purpose of the Undeveloped Land Tax, but for the purpose of forming the basis for the Increment Duty, and I think any man who will look at its character must realise that is more likely to be a fruitful source of revenue in the future than any other of the land taxes.

The hon. Member pressed upon the Government the desirability of exempting from taxation private parks. I agree with him. There are many parks of that character which, as far as the user by the public is concerned, are really public parks, with this additional advantage that they are kept up by the private means of the owner and the public get the double advantage of having the use of these beautiful parks at the expense of the beneficence of the owner, who purely nominally treats them as his private property. I have always thought it not merely undesirable but ungrateful to take advantage of the conduct of these owners to use the parks and at the same time tax them to the full possibility as though they were used for other purposes. The worst thing that could happen to the public would be that they should be converted into building lots, where they are now used as open spaces for the benefit of the whole community. That is action on the part of private owners which ought to be encouraged and not discouraged, and in the last Finance Act there is a special provision to exempt the owners of parks of that kind from any of the Land Taxes which are imposed. If the hon. Gentleman can point out to me any particular in which there is a flaw in these provisions I will accept any Amendment which will make it absolutely clear that the owner of a private park who gives the use of it to the public shall not pay a penny in respect of the Undeveloped Land Tax.

Sir J. D. REES

Are they not subject to Undeveloped Land Tax in such cases?

Mr. LLOYD GEORGE

No.

Sir J. D. REES

There must be some misunderstanding.

Mr. LLOYD GEORGE

I should not think there is any misunderstanding at all. I cannot recall at the present moment what the words are, but I think on the whole the words used by my hon. Friend would cover every park of that character, and if he or his friends suggest any legitimate case where a park is really placed at the disposal of the public under reason- able conditions—of course, there must be reasonable conditions for the protection of the park—which has not been covered, I should be quite prepared to accept any Amendment which will fully protect them. But I think he will find that these cases are very adequately protected.

1.0 P.M.

I now hurry to answer the questions put by the right hon. Gentleman (Mr. Austen Chamberlain), who, I understand, is called upon to leave the House. I shall certainly not regard it as any lack of courtesy on his part to me or to the House, and on behalf of myself and my Friends, and I am sure I carry with me the House, I hope he will allow us to join in a message of congratulation to his distinguished relative on this auspicious occasion. The first question was with regard to the Tobacco Duty. He wanted to know what the decrease was last year. It was a little over 3,000,000 lbs. There are figures, but they are capable of explanation—forestalments and other matters have to be deducted—which amount to 6,000,000 lbs., but the real decrease was, I think, 3,100,000 lbs. There was a fairly considerable deduction last year—I forget what the percentage was—and I am only budgeting this year for an increase of 1.5 per cent, of that decrease, and every indication which we have at present shows that on the whole we are likely to realise that increase. The decrease is recovering.

The right hon. Gentleman's next question was with regard to the Death Duties. He wanted to know something about the increase which I budgeted for in the Death Duties. I can give him the actual figures. If he first takes the three years' average, which is the basis on which Chancellors of the Exchequer first make their estimate, he will find that that comes to £19,170,000. That is upon the basis of the old duties unaltered by the Budget of last year. The new duties were estimated to produce in the second year an increase of £6,220,000. The total will be £25,390,000. I have added to that in respect of improved trade and valuation £260,000. The total, therefore, will be £25,650,000. The increase this year in respect of new duties will in our estimate produce £3,470,000. The total for the two years is £6,220,000, of which £3,470,000 will be received this year.

The next question the right hon. Gentleman put to me was with regard to the arrears of Income Tax. I have estimated it on the assumption that £2,000,000 of ordinary Income Tax and about £1,000,000 of Super-tax, which would have been collected during the present year had it been a normal year, will be carried over to next year. We cannot collect it in time. The right hon. Gentleman rather challenges that as far as the ordinary Income Tax is concerned. I think he quite sees, with regard to the Super-tax, that the machinery will take some time to put into operation, and therefore it is very reasonable that we should expect delay in collection. With regard to the ordinary Income Tax, the trouble is this. Under ordinary conditions the officials would have got through their work of collection practically in April, and they would have been ready to prepare their assessments and collect information and generally take the preliminary steps in order to assess the Income Tax for this year. But the whole machinery of the Income Tax has been put out of gear owing to the fact that we were not able to collect two-thirds of the Income Tax of last year until a month after the expiration of the financial year, and men who would have been employed in the ordinary course in preparing the Income Tax of this year had to occupy themselves very largely with the superintendence and collection of the Income Tax of last year. I hope I am underestimating, but I do not think it will be safe for the Chancellor of the Exchequer under these conditions to assume that he will be able to collect the Income Tax this year exactly as if nothing had happened in the course of last year. Let me remind the right hon. Gentleman what has happened in the last few years, and I think he was very largely responsible for it. When he first came into the office the arrears of ordinary Income Tax carried forward to the next year came to something like £7,000,000. He did a good deal to improve the machinery of collection, and the arrears came down by very nearly £3,000,000. They dropped from £6,684,000 to £3,993,000. But up to that date there always used to be arrears of something like £7,000,000, which were carried over to the next year for collection. Now they have come down to something like £2,800,000. At least, they did before the last dislocation of machinery. All I am budgeting for now is that there will be probably an extra £2,000,000 of taxation. It will be considerably short of the arrears which the right hon. Gentleman had to cope with when he first came into office, and I congratulate him on having improved the machinery of Income Tax to that extent. At any rate, I do not think he would take upon himself the responsibility of adding that sum of £2,000,000 to the Estimates of the year, because the machinery is more or less thrown back three or four months. I could hardly expect the whole of that amount.

The hon. Member for Chelmsford (Mr. Pretyman) asked some questions with regard to the forms of valuation. I have looked into that matter. He did not complain of the forms being sent out at the beginning of August, but he expressed the view that if the forms are sent out then, we should not press unduly the owners of property to conclude their returns before the end of August. He may depend upon it that every possible indulgence will be granted in that respect. If the owners of property cannot supply the returns by the end of that month, I am sure the Inland Revenue officials would not be unreasonable in the matter by pressing them too hard. But there are many very simple cases where a man can make a return in twenty-four hours, and, if that is not done, it simply means he has got into the habit of putting things off. If you gave him six months to make the return, he would probably put it off until three days later. Therefore I think we should request that the return should be made by the date mentioned. If there are large properties where it is difficult to get the information together, and for some reason or other the agent finds it impossible to make the return by the end of August, I cannot imagine that there will be any difficulty in the matter. I hope that answer will be satisfactory to the hon. and gallant Gentleman. Reference was also made to the matter of valuation. I do think that no one who has ever been engaged at all in preparing these returns, or who has been engaged, as the right hon. Member for East Worcestershire (Mr. Austen Chamberlain) has been, in collecting revenue, can possibly complain of an effort being made to improve the methods of valuation for the purpose of checking these returns. They have very often been very loosely prepared. Every solicitor in the House knows perfectly well that in these valuations property is grossly undervalued. There has not been any check upon them, or, at all events, there has been very little check. There is now. The man who acts for a property looks round, and in the case of a property which may be worth £5,000 he says, "This is worth £1,500," and he signs the report and sends it in. I am certain that the revenue has lost hundreds and thousands of pounds owing to the slack methods of valuation. Within the last year we have strengthened the staff of valuers, and we have undertaken the responsibility of directly checking some of these valuations, though not all. But the system which has been adopted has the effect that no man knows that he will not be the person whose valuation will be checked, and therefore it has rather tightened up the whole of these returns.

I will give one or two cases. Here is an estate where the value was returned for Death Duties by the executor as £1,135. Well, the surveyor happened to know something about the property. He knew that was a gross underestimate. It was looked into and eventually by agreement, not as the result of any contention between the parties, the value of the estate was fixed at £8,500. Here is another case where the value was returned at £208,000 for Death Duties. The valuers agreed that the amount should be £280,000. In another case the value returned by the executor was £74,000, and eventually the parties agreed that the estate was worth £175,000. I could multiply the figures I have given in all these cases. Can anyone say that it is unreasonable when cases of that kind are in the knowledge of the Revenue officials-that special machinery should be set up for the purpose of checking these valuations? That has been done within the last year. As to the information asked in these returns, I have to say that we have looked into the matter carefully. There is no desire, I can assure the Committee, to charge a man more than it is actually fair he should pay in respect of the property. I am not going to shirk the cases which the hon. and gallant Gentleman mentioned in his speech, but I would point out at the same time that there are two-sides to this question. There are many men who would give absolutely honest returns. I am prepared to say that a majority would give honest returns. What does that mean? It means that those who give honest returns are bearing the burden of those who do not, because eventually the State has to find the money, and the whole revenue has to be readjusted if the honest man bears more than his own burden. That is not fair. All that is wanted is to insist that any valuation which is made should be a fair one. The hon. and gallant Gentleman gave two cases. I confess that I did not like the story when I heard it, and I was prepared to say that if the method he described was adopted by any man acting on behalf of the State it was a grossly undignified way of getting at the valuation. It is a very undignified thing to walk round and practice a sort of trick on a man. I thought the method described was one that ought to be discouraged. I have looked carefully into the cases and the story is not quite so bad as was put by the hon. Gentleman. I have the full story of the valuer. What really happened was this: The property was returned by the solicitor with a note that it was not to be sold. Immediately the surveyor in the district had some intuition about that property. He is a man in a very good position there, and a valuer of considerable experience. He knew from his general knowledge of the value of property in that neighbourhood that this particular property was grossly undervalued. Though the property was returned "Not to be sold," the first thing he saw when he went to the place was a placard outside, "To be sold. Apply next door." He went next door and asked whether the house was to be sold, and the reply was "Yes." He then asked, "What is the priced" That is not quite the same thing as the story told by the hon. and gallant Gentleman. The allegation was that he went there and offered a certain price. His statement is that he went there, and said, "What is the priced" and they said, "It is £850."

Mr. PRETYMAN

I did not say he offered a price. I said he asked what price it would be sold at.

Mr. LLOYD GEORGE

I think it is only fair to the valuer that we should follow this point out. I did not like the story as it appeared. This is the story as told by the. hon. Gentleman:— 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?'"—[OFFICIAL REPOUT. 6th July?910, col. 1648.] That is not his story. His story is that, he went and said, "I see that you have the house for sale. What price do you want for it?" and they said, "The price we want is £850." There is just this little difference. And knowing the neighbourhood, he said the value was grossly underestimated, and he stands by that, and gives cases of other places in the neighbourhood which fetched much bigger prices. At the same time, I do not like to see valuers representing the State doing a. thing which appears rather like a tricky business in order to put up the valuation, and I think, although his story is a much better one than that originally brought forward by the hon. Gentleman, yet on the whole those methods should not be pursued. As regards the Brighton case, I believe that the hon. Gentleman has been misinformed. The price put on by the executor was £2,000 odd.

Mr. PRETYMAN

The figures were £3,025 and £3,575.

Mr. LLOYD GEORGE

The Inland Revenue asked £3,575, and the parties agreed at £3,400. So I think that the hon. Gentleman has been misinformed. I have looked into the matter. I have got the correspondence here. I find that the parties actually agreed to fix it at £3,400.

Mr. PRETYMAN

I said, in stating this case, that I only had a letter on this point, and I repeat that before I say a word as to his statement, which appears to me to make the case a stronger one. In the case of a property which has been put up to auction with a reserve price of £3,025, and where there is no bid, the fact that the parties afterwards agreed emphasises my point, which is that under pressure a man of small property is obliged to agree; and I challenge entirely the assumption of the Chancellor of the Exchequer that the fact of agreement is any answer to the charge of undue pressure. I say that the fact of agreement emphasises the charge unless it can be proved that the value is a fair one, having regard to all the circumstances of the case.

Mr. LLOYD GEORGE

I agree that you may fix a value on a property, and you may find afterwards you cannot realise the figure at which even you yourself anticipated you would be able to dispose of it. But you cannot found a charge against a public Department upon the fact that you have not been able to realise a property at the figure which they thought might be expected. I think it is very probable that there are a great many valuations as to which you would not be able to get the full figure if you go to a public auction; but you are bound to claim what a valuer of experience in the neighbourhood says is a fair figure, and I defy the hon. Gentleman to find any other method of arriving at a value. Why should not the State be allowed to practice the same method of arriving at a valuation as anybody else? There is only one way of doing it, and that is by employing a man of experience to fix the amount. A man of experience goes and fixes the amount, and says it is worth £3,500. The parties agree on £3,400. It is true that the parties for some reason or another are unable to dispose of the property at £3,000, and it turns out that there was probably no market for it.

Mr. PRETYMAN

The independent valuer was Maples, who were employed originally to make the valuation. I think the Committee will agree with me that Maples are an unbiassed firm of general experience and practice in such matters, and the figure—£3,025—was the valuation submitted, not by the executors on their own authority, but on Maple's valuation. I would ask the right hon. Gentleman whether his valuation of £3,575 was made by an independent valuer, or whether it was made by one of these persons who are employed by him, according to his statement just made, in order to screw up these valuations?

Mr. LLOYD GEORGE

I do not really see why the hon. Gentleman should use the words "screw up."

Mr. PRETYMAN

I withdraw that.

Mr. LLOYD GEORGE

He, after all, has been in a public Department; all these officials are doing their duty to the State. They are not doing it on commission. They are just doing what they regard as their duty to the State. It is very difficult for a man to say even to within £100 what a thing is absolutely worth. They are doing their business, and I can give cases where these estimates have been grossly under value. He may give me cases where the estimate has been over value by £500. I will give him one where the estimate has been under value by £100,000. What can a Department do but send somebody, not to screw up the value, but to express an honest opinion as to his estimate of what the real value is. I think that that ought to be done for the protection of people who do give honest returns. So much for the question of valuation. I come now to the other questions on the Budget, and I must say, on the whole, I think that the criticisms have been very temperate, and I may say very mild, except in the Unionist Press, where the Budget has been received with a sort of wail of incoherent fury. They are extraordinarily angry because we have got a surplus, and they blame me for it. I am quite willing to accept that blame. But in this House criticism has been confined to two points. The first is the suggestion that we are financing the expenditure of this year out of the surplus of last year. My answer to that I have given twice already, and I can only repeat it, and I think it is conclusive. We have no responsibility for it. If we had been allowed to run our Budget in the ordinary course, it is perfectly true that the surplus of last year would have gone to the Sinking Fund. But we would have had a surplus of cur own for this year, and it would be a big one. We would have had the £2,000,000 Income Tax, the £1,000,000 Super-tax, and £150,000 extra from stamps, because we lost the whole of April. So far from having a surplus of £860,000 dependent upon the arrears of last year, we would have had a surplus of £1,200,000 dependent only on the revenue of this year. The second criticism is about the raiding of the Sinking Fund. Let me point out to the Committee once more what we are doing with regard to the reduction of debt. I would ask the Members of the Committee—and I do invite their special attention to this—to get a copy of the Return of the National Debt ordered by the House of Commons on 17th June, 1910, and I trust that not only every Member of the Committee, but every journalist who writes upon the Budget, will also do himself the credit of informing himself, first of all, as to what has been done with regard to the National Debt by getting the actual figures of this Return. Here you get, ever since 1875, the amount of the National Debt, the amount by which it has been reduced, the amount which goes to income, the amount which goes to reduction of capital liabilities, and, what is more important, the other capital liabilities created in the course of the year. Then you get your third statement, which gives the net reduction of the debt in the course of these years. What do you find? This year the provision for the reduction of the debt is higher by £2,000,000 than the highest reduction effected by the Unionist Parliament which preceded the present Parliament in any given year. It is a little over £7,000,000. We effect a reduction this year of £9,000,000 on the net liabilities of the country.

Sir FREDERICK BANBURY

Is that at all owing to the terminable annuities falling in?

Mr. LLOYD GEORGE

It is the same for both parties.

Mr. BONAR LAW

Has the right hon. Gentleman taken into account the permanent loans and the provision made for them in both cases?

Mr. LLOYD GEORGE

I am taking everything into account. Has the hon. Gentleman got the Return in his hand? If he looks at it he will find the net reduction of liabilities. Really, this is so important that I must ask the Committee to allow me to explain the exact position as to what happened during the last Administration. We shall hear a good deal more about it again, and therefore, if I may respectfully say so, it is very important that every Member of the House should thoroughly inform himself of all the facts. What happened during the late Unionist Administration? They fixed the reduction of the Sinking Fund, it may be, at a high figure, although they reduced it once or twice. But while with one hand they were nominally reducing the debt, with the other they were creating fresh debt. Take the last years of the Unionist Administration—1903 and 1904. In 1903 they reduced the debt by £3,800,000. In 1904, which was practically their last year, they reduced it by £8,600,000. But while they were reducing the debt by that amount they created a new debt of £11,750,000. What is the net result? It is that instead of reducing the debt by £8,000,000 they added to the debt £2,238,000. If the Committee will look at the Return for the following year they will find that the net reduction of the debt in the very first year of the Liberal Government was £7,700,000. In the second year it went up to £9,800,000, and in the third year it ran up to £16,838,000. Then it came down to £8,000,000 (exclusive of £6,000,000 carried forward into the following year), but always there has been a large net reduction of the debt—not an apparent reduction of the old-established debt and the creation of a new debt—which is a thoroughly dishonest way of dealing with it—but an absolute, straightforward reduction of the capital liabilities of the country. Last year, in spite of the financial confusion, we provided for reduction of capital liabilities, in addition to the £6,000,000 carried forward, a further £6,000,000, which is more than in most years of the Unionist Government, and this year we shall reduce the capital liabilities by £9,000,000.

What did the Unionist Government do? They began with the Sinking Fund on pretty much the same level. Then they started building, and they were always on the borrow. They were just like most people who are seized with the building mania—the worst and most extravagant mania that can seize any man. They got it, and they got it badly. They scattered useless buildings in every quarter of the globe, and there is not a latitude from Wei-hai-Wei to Buluwayo, where they have not got barracks. Most of them are abandoned now, and many of them are useless, worthless, and obsolete. And mounted upon this pedestal of derelict barracks they start lecturing us on the principles of sound finance. We all remember the story of Wei-hai-Wei, and the money that was spent there to no purpose. Then the huts on Salisbury Plain. Why they were ever built is as great a mystery as Stonehenge. South Africa—there you get the barracks in ruins, and I have no doubt that in a hundred years they will be an attraction to tourists, as the remnants of some heathen temple. That is all they are fit for. At Tidworth barracks were built for the 6th Army Corps, which never came into existence. And these expensive barracks, which cost—I forget the exact figure—some £150,000, or some trifle of that sort, when found to be unnecessary for these phantom warriors, were converted into Cavalry barracks, or something of that sort.

Viscount HELMSLEY

Are they not wanted?

Mr. LLOYD GEORGE

Not at all.

Viscount HELMSLEY

Then why are they used?

Mr. LLOYD GEORGE

We have got to make some use of them; but they were not wanted for the purpose for which they were built, but having got them we have to make some sort of use of them. Another case in which they built barracks was at Fermoy. Then they found they did not want them, so they converted them into a swimming bath. Here are these Gentlemen on that Bench, who, out of their swimming bath, point to Members of the Government and rail at the Prime Minister and myself, saying: "Behold, here are the real financiers." They squandered this money by millions all over the country, and then they come down here and say: "Here, you are not reducing the Sinking Fund; you are not paying off debt." As a matter of fact, what they did was simply to create debt all over the globe. They made themselves and the country ridiculous, and now they criticise a few salaries—[An HON. MEMBER: "Few?"]—a few salaries which are paid to extra officers for dispensing old age pensions. The Noble Lord goes down to his constituency and promises old age pensions all round.

Viscount HELMSLEY

I do not.

Mr. LLOYD GEORGE

He promises pensions to everybody all round, and then for years squanders the money on other purposes.

Viscount HELMSLEY

Will the rightlion. Gentleman—

Mr. LLOYD GEORGE

If the Noble Lord will allow me to finish the sentence, I will give way. Then after we have granted the pensions, those people who had squandered millions on barracks come here and say, "Are you daring to pay extra to the Excise officers for dispensing those pensions?" That is the sort of thing they do. [HON. MEMBEBS: "No, no."] I have seen the Supplementary Estimates, and I have seen the returns of those salaries and the salaries for the services of the pension officers, and those of the Labour Exchanges. Would hon. Members like to get rid of the Labour Exchanges, would they get up and say they do not want the old age pensions? The hon. Baronet the Member for the City (Sir F. Banbury) has been perfectly consistent, but he is only one. He has the absolute right to come here and denounce these salaries. He denounced the proposals, he denounced the old age pensions, I think, and he denounced the Labour Exchanges. He says now, and, quite consistently, "You are squandering money upon those salaries," but those who approved of those proposals have no right to come down now and say that we should not pay people to carry out that which is absolutely necessary.

Sir F. BANBURY

The right hon. Gentleman advised us to refer to a Return, and looking at it now I desire to ask a question in order to get information. I notice it puts the gross liabilities on the first day of the year 1909–10 at £754,121,000, and on the first day of the year 1910–11 as £762,463,000. There would be, therefore, an increase of £8,000,000. I do not draw any inference, but merely ask for information.

Mr. LLOYD GEORGE

That is the temporary borrowing for the purpose of getting over the difficulties of last year, but all that has been already wiped out, or more than wiped out. There is a real reduction. I can assure the hon. Baronet he has not got over anything there, but he was much too cautious a person to commit himself, and only asked for information. I come to the question of valuations. Valuation has been treated as if it was something on which there was a permanent charge at the rate of £500,000 per year. Valuation is a capital charge. You have got to pay for the whole of the valuation in the course of the next few years, and there is the end of the great valuation of the country. You have to value for cases of Increment Duty, but for that you will not have to spend £500,000 upon a great scheme of valuation. In fact it is a sort of charge that the late Government would have borrowed money for.

Viscount HELMSLEY

Have not at least 500 valuers been appointed for one year only?

Mr. LLOYD GEORGE

I did not say one year, I said it would take some years, and this very heavy expense is undoubtedly a temporary charge, because the valuation, I hope, will be complete in a few years. We gave our estimate last year, and I am still assured that, as to that estimate, we are prepared to adhere to it. As my right hon. Friend (Mr. Hob-house) reminds me, most of the valuers have been told they are doing only temporary work, and that the appointment is temporary. Anybody who knows anything about the incidence of local taxation in this country knows that a great valuation of this country is one of the most desirable things. I am perfectly certain when you come to consider the problem of local and Imperial taxation that a revaluation is essential, and there is no difference between the two sides of the House about that. The right hon. Gentleman the Member for the Strand (Mr. Walter Long) brought in a Bill, I think, which contained a proposal for re- valuation. It would have cost just as much as my scheme of revaluation, and I do not think, with all respect to the right hon. Gentleman, though he is a great authority on the subject, that it would answer the same purpose as mine would eventually, because mine separates the site value from the building value. The valuation will be of enormous value from the point of view of local taxation, as well as Imperial taxation, and it will be of still greater value in simplifying the transfer of land, because you will have for the first time a complete register of title throughout the country. That is in itself something which is permanent.

I come now to the question of cocoa. I am afraid the Committee will be pretty sick of cocoa by this time, but I am afraid I have got to say something about it. Something was said about a poster, and of all the disreputable posters I have seen this is the worst. The hon. Member for Dulwich (Mr. Bonar Law) is going to reply to me. He is a fair and I may say an honourable controversialist. He hits very hard; he is very keen, and he never gives away his own side. I ask him what he says about this poster. An hon. Member the other day interrupted the hon. Member for Blackburn (Mr. Snowden) and asked him would he point out where were the lies in the poster. I am going to do so. Exposed is the heading, and it goes on:— The Radical Government in their last two Budgets tax foreign chocolates to the extent of 3s. and 5s. to the £ for the benefit of the Radical proprietors of the Cocoa Trust Press which preaches Free Trade for others. If that means anything, and if you put it into the hands of anybody who knows nothing at all about it, they would say that the last two Budgets introduced for the first time taxes on chocolates.

Mr. PRETYMAN

rose—

Hon. MEMBERS

"Order, order!"

Mr. PRETYMAN

Why did you interrupt me on the same point?

Mr. LLOYD GEORGE

I know something about the two hon. Gentlemen as controversialists, and I think on the whole he can trust this case to the hon. Member for Dulwich. What does that mean? There is not a man, or take what you call the "man in the street," supposed to be uninformed who, on reading that, would not come to the conclusion that last year we proposed, for the first time, a protective duty on chocolates. That is the suggestion of falsehood- A protective duty on cocoa for the benefit of the Radical proprietors of the Cocoa Trust Press. If any man looking at this thing could imagine that this duty had been on for sixty years, that the right hon. Gentleman the Member for East Worcestershire had maintained it, that a Tory Government had maintained it, that when we had Protectionist Chancellors of the Exchequer they had done it, that it had been imposed, was first imposed, years and years ago, and that I had nothing whatever to do with it but accept it—then this poster would have been worthless. The only electioneering value of this is that it suggests a lie. Let them go down to any meeting and tell the real facts, but let them, first of all, clear their consciences of this falsehood.

Sir RANDOLPH BAKER

Chinese slavery.

Mr. LLOYD GEORGE

I do not think that is an answer. There is an hon. Member who seems to think that because somebody, in his judgment, said something which was a falsehood some years ago, he is justified in doing so, too.

Sir RANDOLPH BAKER

The Chancellor's words were that that was the most disgraceful poster which had ever been issued. I venture to suggest the poster on Chinese slaves, with its picture of men in chains, was worse.

Mr. DEPUTY-SPEAKER

That has nothing to do with the question under discussion.

Mr. LLOYD GEORGE

Even if you raked up all the posters of the past and proved that other people had done things equally discreditable, is that a justification in the mind of the hon. Gentleman of publishing what he knows to be untrue? I ask any man, and I am especially asking the hon. Member for Dulwich, because he is going to reply, I especially ask him, Does he justify that poster? I shall await his answer with great interest. There is one point about cocoa from the revenue point of view. As a matter of fact, if I were to withdraw this protective duty and put cocoa on the same terms as, let us say, biscuits or jam, or any products of that kind, I should lose £60,000 a year, and it would be a benefit to the cocoa manufacturers. They are not gaining by this protective duty for the simple reason that they have not got a drawback. That interferes with their foreign trade. There is nothing that would suit them better than for me to get up and say that I am going to put them on an absolutely Free Trade basis.

Viscount HELMSLEY

Does the right hon. Gentleman mean that the export trade is larger than the home trade?

Mr. LLOYD GEORGE

It would be. That is where the Noble Lord's theories muddle him. That is exactly where Tariff Reform hits business, because, and for the simple reason, that they are not in the same position to compete in the foreign market. If we gave them absolutely Free Trade terms and gave them a drawback, they would increase their export trade enormously.

Mr. WORTHINGTON-EVANS

Why not repeal it?

Mr. LLOYD GEORGE

I should like some more authoritative statement from the other side than that. If that is the appeal of the Opposition, we may do some business, but they do not want it. This leaflet is worth more to them than all the Cocoa Duties. All the cocoa manufacturers have pressed upon me to abolish this duty. The reason I cannot respond is that it would be very difficult to give away even £60,000 a year at the present moment. Nothing would please them better than that you you should take off this protective duty and give them a drawback on the same terms as any other trade. Now, that is a thing which, I think, will have to be considered.

I am sorry to detain the House, but there are one or two things which I must refer to. There is the question with regard to the half-tax on land. With regard to that, I am very glad to find that there is such a sanguine anticipation on the other side as to what this tax will produce. The Member for East Worcester said this tax may grow into millions, and that we are going to take back the half of the local authorities. Well, I do not think we ought to take that, except provisionally, to deal with the exigencies of the moment. Last year we had to do it merely in order to make up the deficiency in the Whisky Duty. We have to do the same thing this year, and we are losers to the extent of £100,000. I agree, the time will come when there will be a stop and the Exchequer will benefit. That is the moment when I think the local authorities ought to receive their half, but for the moment this is necessary in order to meet this deficiency in the Whisky Money. It is purely a provisional arrangement, and I think the House will accept it on that assumption.

I come now to a much more important question—the question of paupers. Here I must really appeal to the House to support the Government in the arrangement which has been made; otherwise it will be quite impossible for us to carry out the programme which we have deliberately set ourselves to carry out. The Committee may depend upon it that before we outlined this programme we carefully considered the means, and all we want is to cut out the coat according to the cloth. If the Committee insists upon our taking upon ourselves the whole burden for next year, the whole burden this year and next year, the whole burden of removing the pauper disqualification, I can assure them it will be impossible to start unemployed and invalidity insurance next year. After all, it is purely a question of figures and finance. We have carried out all our programme up to the present except unemployment and invalidity insurance. We can begin that next year if the Committee will support us in carrying out the programme which was laid down. I laid it down very clearly in the Budget statement last year, and that was based upon the statement which I had made the preceding year in reply to Amendments moved by the hon. Member for Oswestry and the Noble Lord who then sat for Marylebone—that the poor rate should contribute to the extent of its relief—at any rate, provisionally. Well, now, I agree it must be a provisional arrangement, for the simple reason that gradually the paupers will come on to the pension list, but automatically. There has been a good deal of relief of local rates at the present moment on that ground. I want to say this to the Committee. If the House insists upon putting the whole of this charge upon the Exchequer, what will happen? You will relieve the local rates to a very trivial extent, comparatively speaking, but you will ruin the schemes which the Government have for social amelioration. What does it mean? The whole of the £1,500,000 spread over the whole of the United Kingdom only comes to 1½.d in the £. A man who is rated on a basis of £50—I think 6s. 1½d. is the average rate for the United Kingdom—he will be relieved of that extra 1½d. That means he now pays £15 6s. 4d. If you put the whole of this 1½. on the Exchequer you will relieve him of the 6s. 4d. and leave him with the £15.

That is not relieving the pressure upon the ratepayer. It is simply throwing away a huge sum of money which, used by the Exchequer, would produce very valuable results. If you use it merely in throwing it to the bottom of the rates, sinking it out of sight, you will see nothing of it, and there will be no benefit to anybody. It will not merely postpone invalidity and unemployment insurance, but you will want that £1,500,000 to finance the first quarter of next year. That was my expectation. It would do more than that; it would starve that scheme when it comes into operation, because, after all, your scheme will depend upon the money you have in hand, and the amount of money you use to subsidise and to aid invalidity and unemployment insurance must depend upon the cash you have got. Whether the contribution is a liberal and a large one, or a small and a stinted one depends upon whether there is money in the Exchequer for the purpose. If these schemes are started they ought to be well started, started in such a way as to make them a real success, giving a real help to the workers, really helping them over the stile. You cannot do that if you are going to insist upon the Government dealing with the whole of this sum of money. Therefore, I Appeal to the Committee not to do it. You cannot put on fresh taxation year after year. The view that the Government took last year of the matter was this: "We will take stock of the whole of our liabilities now as far as we can look at the future." It is a mistake to go on imposing fresh taxation year after year, merely disturbing trade and industry. It is far better to have done with it at the moment for as far as you can see.

Therefore, I implore the Committee not to press the Government out of a position which is a thoroughly considered one, and not only that but to compel them to decide between the rival claims of local authorities. This is not the only demand for the reduction of local rates. I have had very heavy pressure from the education authorities. I am not sure it is not the most urgent one in one respect. It is certainly the most urgent claim, because there you are not just giving money, but you are getting some substantial return in improved education, and undoubtedly in some cases the education rate is very crushing. You cannot let £1,500,000 go to the Poor Law guardians unless you also gave money to education authorities, also towards police, and towards roads. You cannot eat your cake and have it too. You have got to consider, when this problem comes up for determination, which of these authorities you are going to deal with, which of these causes you consider to be the more urgent And, after all, are we not perfectly agreed that whichever party is in power, the problem of the Poor Law has to be reconsidered. We have had the reports of the Majority and the Minority, both of them recommending practically putting an end to the present boards of guardians. I believe the right hon. Gentleman the Leader of the Opposition is just as keen as anybody on this side of the House in favour of something being done on those lines. Is it desirable when you are on the point of dealing with this problem to hand over to this moribund body—a body which is on the point of disappearing—£1,500,000 of your money? It would be a mistake; it would be a blunder which might very well be a disaster in the solution of the great and urgent problem of the readjustment of local and Imperial taxation. I earnestly appeal to the Committee to stand by the really well-considered proposal of the Government, and for the moment, at any rate, to let the matter be where it is until the Government comes to consider the whole question.

2.0 P.M.

I cannot deal with the question of armaments, although it is such a very important matter. But I may say this one word. The right hon. Gentleman the Member for East Worcester (Mr. Austen Chamberlain) said it was not fair to go about making promises to poor men which you had no intention of redeeming. I emphatically agree with him. I know nothing more cruel in the history of politics in the last few years than the way the promise of old age pensions was held out for ten or fifteen years. The poor people of this country, generations of them, were passing away without seeing this promise redeemed. It was doubly cruel. If we were to follow that example and promise something for the poor and the distressed of this country which not merely we did not intend redeeming, but which we did not actually see our way to redeem in the immediate future, we should be guilty of an act which would be repudiated by every humane person in the world. It is because we can see our way that we promise what we do. It is because we cannot see our way to go beyond that that we refuse to promise it. We can see our way to starting a great scheme of invalidity insurance next year, and to finance it, to start it on fair and liberal terms. I trust the House will not press us to go beyond that for the moment until we see how these resources develop. I am glad to say that the new taxes show every tendency of being a fruitful and producing source of money, which will undoubtedly in the future enable us to finance, and to finance generously, this great scheme of social reform. I agree with the hon. Member for East Birmingham (Mr. Steel-Maitland) that the problem of invalidity insurance is in many respects more urgent than old age pensions. I said so last year. After all, when a man breaks down in the prime of life he has got the responsibility of a family upon him, and in addition to his own poverty he has got the anxiety of seeing suffering and starvation amongst those dearer to him than his own life. Therefore, to provide for this is, I think, a much more urgent call, and I think it can be done and it ought to be done. We have got our scheme prepared, but I ask the Committee, in considering all this, at all events to support Us against claims, good in themselves, pressed upon them by their constituents, with a good deal to be said for them, but which, if we agreed to them, would just break into our programme, induce us to fritter away our resources, and leave nothing to show at the end. I have had in the course of this Debate appeals which, if I responded to them, I should have to find another £10,000,000 of money.

Mr. BOTTOMLEY

Easily done.

Mr. LLOYD GEORGE

I know the hon. Member for South Hackney thinks he could raise the money.

Mr. BOTTOMLEY

Certainly.

Mr. LLOYD GEORGE

Well, I think he must find something better than his suggestions the other day. I have looked into them, and I think they are rather disappointing. I am very sorry to have to say so.

Mr. BOTTOMLEY

That is not the experience of other countries.

Mr. LLOYD GEORGE

I do not know any other country that has made much money out of the Stock Exchange. France tried it, and it nearly killed the Stock Exchange there. The result was that a good deal of money which otherwise would be employed in France on what my hon. Friend calls "gambling," but which is very often legitimate business—not always I agree—has been transferred to this country. Therefore, we cannot go very much further in that respect. We have put up the duties very considerably, I am glad to say, by arrangement with the Stock Exchange. The hon. Gentleman the Member for Blackburn (Mr. Snowden) made a speech, which was a most interesting one, and one which seems to have made a very great impression on hon. Members opposite. I think that is very significant. The hon. Member for Blackburn and the Tariff Reformers have two or three things in common. First, they are both equally interested in spreading discontent with the present system of things. They are both equally interested in demonstrating to the people that they must look to the State for redress. They are helping each other up to a certain point. Are hon. Gentlemen opposite quite sure, if they teach people to be disaffected and discontented with the present state of things, and teach them to look to the State for redress for these conditions, that it is all going to end in Tariff Reform? I know what they think Tariff Reform will produce. I will take them at their expectations—at least, the more intelligent ones. They know perfectly well that Tariff Reform, even if it realises the most sanguine anticipations of their own more responsible prophets, will not remove all the evils of the present economic system. You will still have distress, poverty; you will still have unemployment. You will then have to say to the workmen, "You must look to the State again." In Germany the propaganda has ended in creating 4,000,000 of Socialists. In the United States of America it has ended in what a very prominent lawyer, who is engaged rather in the interest of trusts, told me the other day was a deep hostility to all wealth; so much so that a letter from a millionaire to a candidate for any seat, constituency, or office was fatal to his chances of success. That is what your policy comes to. We on this side of the House are equally opposed to the Tariff Reform as well as, the Socialist contention that you can, by a violent and revolutionary interference with trade and industry, remove all the evils of the present system. On the contrary, our position is that by calling upon the more unfortunate citizens of society to make a reasonable sacrifice you can alleviate a good deal of the misery and wretchedness under which the people suffer. We believe that by a course of wise legislation, courageously, consistently and steadily pursued, you can eventually raise the industrial population of this country to a position of guaranteed abundance and leisure.

Mr. BONAR LAW

I was rather disappointed in the earlier part of the speech of the right hon. Gentleman. I was afraid we were going to have a speech of a type similar to those which we have previously heard from him. I was glad to find, however, before the right hon. Gentleman came to the end of his speech that he had got into his stride, and we have had the variety entertainment, if I may call it so, to which we are accustomed. It is, indeed, so much a variety entertainment that if I was to attempt to deal even with those parts of his speech which I happen to remember I do not know when my speech would come to an end. It did seem to me that of the variety there was nothing more strange, more striking, or more amusing than to hear the right hon. Gentleman, who was the author of the Lime-house, Newcastle, and some other speeches which I remember, inveighing against those who were preaching discontent. Before I deal with the more controversial points of the speech of the right hon. Gentleman there is one point at least to which I should like to refer in passing, because it has a practical bearing on the question of what he calls an improved system of valuation. With what the right hon. Gentleman said in reference to the remarks of my hon. and gallant Friend beside me in relation to agents provocateurs I entirely agree. He could not have said more than that he will discourage that particular method of raising the valuation. I am bound to say that the other case put by my hon. and gallant Friend does not seem to me to have been met in the same spirit by the right hon. Gentleman. I think the speech which he has made today, if it represents the instructions which are given to the valuers, will act most unfairly. The right hon. Gentleman said that the instructions were, "All you have to do is to get your valuer to take a fair valuation." Because, however, in fighting between two persons as to who was liable to the duty one ultimately accepts a value far higher than he ought to pay on, the right hon. Gentleman says: "You have no ground of complaint." That is certainly not so. In nine cases out of ten no man will go to law to avoid paying a tax of this kind. In this particular instance you had actual proof of the value of the property, inasmuch as it was put up for auction, and nobody offered to take it. I say, therefore, without hesitation—

Mr. LLOYD GEORGE

The hon. Gentleman says that the Inland Revenue had actual proof before the valuation was fixed and ascertained?

Mr. BONAR LAW

I have not read the letter, but as I understand it, it was practically at the same time. The letter does not make it perfectly plain. If it was not so, if the valuer had no means of knowing it had been put up for auction, part of the point I desire to make falls to the ground.

Mr. LLOYD GEORGE

I have the actual date I find. The valuation was in February. I am told the auction was in the subsequent June.

Mr. BONAR LAW

Then I quite admit that there may have been such a change as to take away the point of my argument. But the fact still remains that the valuers were sent by the Government. As public servants they have a direct interest in getting the highest amount of valuation they can. Therefore, the fact that a man makes an agreement rather than go to law is no proof that an undue valuation has not been made, and all I have to say about that is that the Government ought not to press the case too far. They ought only to try to get a fair valuation and nothing more.

In the closing part of his speech the right hon. Gentleman referred, by way of criticism, to our efforts in regard to old age pensions. That is the kind of taunt that is always made on the platform. I have always thought it especially unjust, and especially to my right hon. Friend the Member for West Birmingham (Mr. Joseph Chamberlain). What are the facts? The Member for West Birmingham succeeded in getting the Government to set up a Commission to examine into this question. They examined it, and they found the difficulties so great that they discouraged it. The right hon. Gentleman was not satisfied. He used his influence to get another Commission set up, and just at that time, when, in the ordinary course, with the knowledge we had, and with the impetus which the right hon. Gentleman gives to every subject in which he takes an interest, some- thing might be done, the South African War broke out, and there is no man who for a moment could pretend that from the time of the close of the South African War to our defeat at the General Election of?906 it would have been possible for us or any Government to have introduced old age pensions.

Mr. LLOYD GEORGE

You had three years.

Mr. BONAR LAW

The right hon. Gentleman says three years. Yes, but so clearly did the present Prime Minister appreciate the position that when he introduced the Old Age Pensions Act he pointed out that no man would have been justified in doing it until he had an opportunity of recovery after the war. Let me deal with another point put forward by the right hon. Gentleman. He claims that he and his Government are the virtuous heroes who are reducing debt, that our statements about the reduction of debt were all sham. Of course the right hon. Gentleman arrives at the conclusion by ignoring the system which was set up first by Sir William Harcourt, and which, at all events, had been attempted by previous Liberal Administrations, to treat certain naval and military works as something not necessarily to be paid in a particular year, but which might be reasonably spread over a number of years. He arrives at that conclusion by saying all that is nonsense, but what is it that he does? He and his Government now are living upon the works which have been created, and if we had not set them up it inevitably would have been necessary that this Government should spend the money on them, and they would, therefore, not have been able to make a reduction. The right hon. Gentleman, in making that point, omitted altogether to refer to the answer given by my right hon. Friend the Member for East Worcester (Mr. Austen Chamberlain). The Chancellor of the Exchequer calls it dishonest to spread these burdens over a certain number of years. It is dishonest to build barracks and great naval works, but this Government itself is doing it in regard to public offices. It is the highest finance to take money to build offices for the Board of Trade and other Government Departments, and spread the payment over a series of years, but it is dishonest finance if you do the same thing for the protection of national security.

I will now deal with the remarkable document which the right hon. Gentleman so dramatically threw across the Table of the House. He asks me do I consider this a fair pamphlet? Well, I have read it, and there is no statement in it which is not absolutely true. The right hon. Gentleman does not deny that, but he makes the claim that it suggests falsehood. I am going to make an admission. If this poster comes to anyone who is perfectly ignorant with everything connected with politics, and does not know that cocoa has been always and is now taxed, then there is a suggestion of falsehood, and it is undesirable, and I should be glad to see that posters like it were not circulated. I am quite ready to go as far as that. But what are we to say about the statement of the right hon. Gentleman that it is the most disgraceful poster he ever saw? It is not false; he does not pretend it is false; it deals with something which ought to be within the knowledge of the people to whom it is addressed. What are we to say of pamphlets and posters circulated in regard to a country like South Africa, where our people cannot, have the information, and where the statements are not suggestions of lies, but are deliberate lies in every sense of the word? I do not know whether it is worth while, but perhaps I had better say something more about this poster.

The right hon. Gentleman made a most extraordinary statement. He did not say that cocoa magnates are willing to have the Protection duty taken off. They have said that. But when people speak of our making a base use of this attack I would remind hon. Members of the Committee that the desire of these magnates is rather late. They have been using the great fortunes they made, in spite of the right hon. Gentleman, by means of Protection, in order to use their subsidised Press to prevent other trades enjoying the advantages which are enjoyed by them. These great Free Trade cocoa magnates now say they would like to see the duty taken off. We can understand that; they have made their fortunes, and, more than that, most of us have political convictions strong enough to make us willing to pay something for them, and when they find these things have gone into posters and is made a cause of objection to them politically they are willing the duty should be taken off. The right hon. Gentleman says they actually lost by the duty, but when he says that he makes a statement which none of them ever would have the face to make. He points out that they did not get a drawback. That is perfectly true, and it is a disadvantage, but if he had made the smallest inquiry he would find that 19–20ths, or at any rate 9–10ths of their trade is a home trade, in regard to which there is a protection duty varying from 20 to 50 per cent., which enables them to get the whole trade into their own hands; and to suggest that the duty is an actual injury to those people is a greater suggestio falsi than is contained in that poster.

The right hon. Gentleman said as many people have said that we have been mild in our criticism of the Budget. That is perfectly true, and, as I have always, I hope, done I shall carry on that tradition. There is reason for our mildness. There is nothing new in the Budget now. We cannot criticise it except by using arguments used over and over again, and with which the whole house is familiar. That is an operation which no self-respecting man would be willing to undertake if he could help it, and as a matter of fact the reason I am speaking here at all is on account of the extra day given for the Debate. We do not want to criticise it. We have another reason, and a more important one. These taxes have now passed out of the realm of speculation into that of real practice.

The hon. Member for North Louth, Mr. T. M. Healy, said the other day that we on this side of the House are in no hurry to see this Government driven from place. I have had no consultation with anybody else, but speaking only for myself I say that statement is perfectly true. I am convinced that every month that these taxes are felt will improve our chance at the next General Election, and will diminish the chances of the right hon. Gentleman opposite and his party. People are finding now, and will find increasingly, and to a greater extent what a difference there is between the rosy picture with which the benefits of these taxes were painted by the right hon. Gentleman and the grim reality of the burden which their imposition upon individuals and immense masses of the community of this country is. The Chancellor of the Exchequer also felt a difficulty. He does not like to be commonplace, we all recognise that, and as there was nothing in the proposals of the Budget to tickle the ears of the groundlings he had to make up for it in his Budget speech. The right hon. Gentleman has succeeded; he has succeeded better even than his best friends could expect. He passed, as far as I know, the whole of his political apprenticeship in opposition. That leaves its traces. Just as a man engaged in certain physical operations develops particular muscles out of all proportion to his general bodily strength, so the right hon. Gentleman has developed his fighting qualities to an extent which surpasses his other mental qualities. I do not say that, I am sure the Committee will understand, by way of disparagement. Quite the reverse; it is an expression of envy, if I may use the word where there is no malice connected with it. But a training solely in opposition, though itself all to the good so far as the development of fighting qualities is concerned is not altogether a complete advantage. Such a career develops also a freedom from a sense of responsibility which is not easy to get rid of when circumstances change, and I think that is a great characteristic of the present Government. All Governments in this country are more or less party Governments, but until the advent of the present Administration, there always has been a distinct difference between a party in office and a party in opposition. Once they have got into office, other Governments have realised that they have ceased to be the representatives of a party and have become the servants of the nation. Such an idea never seems to have crossed the mind of any single Member of His Majesty's Government. The main change, when, in 1906, they came into office, was that the central office of the Liberal party was transferred from the office, wherever it was, to Downing Street, and its operations have been carried on there ever since.

Mr. WILLIAM REDMOND

That is better than the House of Lords.

Mr. BONAR LAW

Better than the House of Lords from the point of view of the hon. Member, but whether he will think it better a little later I am not so sure. In everything the Government say or do, whether it is arranging the holding or not holding of an Autumn Session, or whether it is the making of a Budget speech, they have one thought only before their mind, and that is the effect on their electioneering prospects. If anyone wants a proof of this utter want of responsibility I would refer them to the remarks made by the Chancellor of the Exchequer about the Navy scare in his Budget speech. Nothing more amazing ever fell from any occupant of that bench. The right hon. Gentleman said:— The Navy scare, which has cost this country many millions, has been killed by the rubber boom. Who made that Navy scare? Was it the Stock Exchange? It was the Prime Minister, and that, I suppose, is one of the methods by which the right hon. Gentleman revenges himself for his defeat in the Cabinet when the question was then being fought. I remember reading a speech made in the country at that time by the hon. Member for Merthyr Tydvil (Mr. Keir Hardie), with which I entirely agree. He said:— It was not the Leader of the Opposition who created that scare; it was the Prime Minister, who came down to the House and made a speech which had created a feeling of alarm and uneasiness, such has had never been produced in this country by any speech in his whole previous experience. It is that scare which the right hon. Gentleman characterised in language which we all heard. He spoke just as if the wicked Tories were responsible for it and as if he had nothing whatever to do with this expenditure. I suppose he cannot have forgotten that next to the Prime Minister, if second even to the Prime Minister, the one man who is bound to see not a single penny is unnecessarily spent is the Chancellor of the Exchequer, and he speaks as if it were a matter that did not concern him. I must say—it is another proof of my admiration of the versatility of the right hon. Gentleman—that he does understand his followers. He knows their views are just as sincere as his own. He knows perfectly well, as we all know, the party which I see is not strongly represented this afternoon, the Little Navy party, the Peace party, or whatever they call themselves—at all events, they are the successors of the gentlemen whom the poor Czar Nicholas before he died cursed with all his soul for leading him into the Crimean War—he knows these gentlemen will allow the Government to spend anything they like on the Navy on one condition: that nothing is allowed to interfere with their making speeches on the subject, and on any subject, and that every now and then the Chancellor of the Exchequer should himself make a speech which shows precisely the same degree of statesmanship that characterises their own utterances.

I said the right hon. Gentleman, in spite of his difficulties, does make his Budget speeches interesting. He has advantages in doing that which have never been possessed by any previous Chancellor of the Exchequer. I remember my right hon. Friend the Leader of the Opposition (Mr. Balfour) saying in my hearing that the only man in his time who could deliver a speech dealing with abstract figures which interested the whole House from beginning to end was Mr. Gladstone. He said that, of course, before he had had the advantage of hearing the right hon. Gentleman as Chancellor of the Exchequer. I am sure he could not say it now. I do not believe Mr. Gladstone was half as interesting as the right hon. Gentleman. Their methods, of course, were a little different. Mr. Gladstone interested his audience by having such a complete grasp not only of the general principles, but of every detail of his subject, that whatever aspect he introduced his audience could not fail to see it clearly, and to see it as a whole. That is not quite the method of the right hon. Gentleman. His Budget speeches are simply the means of delivering an electioneering manifesto. He does, it is perfectly true, give us facts—well, let us call them facts—and figures—they are figures—but they are only incidental; they are not part of the real Budget speech. The right hon. Gentleman's facts have no value except as perorations, and he uses figures always as though they were adjectives.

In dealing with speeches like that which we have just heard and the Budget speech of the right hon. Gentleman, there is no use going into details. All we have got to do is to seize one or two of the salient points of the rhetoric of the right hon. Gentleman and subject them to a slight microscopic examination. In his Budget statement, as in his speech which we have heard this afternoon, the amazing feature was the abounding optimism of the right hon. Gentleman. It is a characteristic, not of Welshmen, but of Englishmen; it is characteristic of people who declare that all the wisdom will die with them. Never was there such an example of that as the right hon. Gentlemen gave in his Budget statement. "Look at us; other countries are nowhere; it is thanks to our having not only the best possible of all fiscal systems, but the only sound fiscal system; and, not less important, it is due to our having not only the best of all possible Governments, but the only Government of a free country, and the only Chancellor of the Exchequer who can fill that office." Let us test some of these arguments. The right hon. Gentleman spoke of the financial stress of the other four great Powers of the world. "They have all been in difficulties," he said, "we alone are not. They are labouring along, apparently on the verge of bankruptcy." Among the countries he thus referred to was the United States of America. I really am not going to deal with that; the whole contention was so obviously absurd that it is not worth arguing. But Germany was the great card on which the right hon. Gentleman relied, and he has no doubt about our superiority over Germany, from the financial point of view. He said they had borrowed money to meet their deficits, while we had been able to square our expenditure by our year's receipts. Has it not occurred to the right hon. Gentleman that that is a somewhat superficial way of looking at the matter, and that there are some other things to be taken into account beside the mere fact of borrowing? There was one mentioned some time ago by my hon. Friend the junior Member for the City of London (Sir F. Banbury), that if we are in such a fine position and Germany is in such a bad position, would one not expect the value of our national securities to be rising? What is the fact? Since the right hon. Gentleman undertook his present office the national securities of every one of these countries, including Germany, have risen—there is no doubt about that—while ours have suffered a very severe fall. Does not that seem to suggest that there must be something else to be taken into account besides borrowing to meet the deficit? I would suggest one thing, and that is the size of the National Debt of the different countries. Our National Debt amounts to between £700,000,000 and £800,000,000—it is over £700,000,000, taking our whole liabilities. The National Debt of the German Empire is between £200,000,000 and £300,000,000.

The FINANCIAL SECRETARY to the TREASURY (Mr. Hobhouse)

Since when?

Mr. BONAR LAW

If the right hon. Gentleman will have a little patience I will give him the facts he wants. Of course, there are the debts of the different States of the German Empire to be taken into account. These debts amount to over £600,000,000, so that, taking the two together, the debts of Germany are greater than ours, and reach between £800,000,000 and £900,000,000. But you have to consider what are the assets behind those debts. The right hon. Gentleman the Prime Minister pointed out that behind our debt we had the British Empire. Germany behind her debt has the German Empire. But it has also something else. It has liquid assets which can be sold in the market to-day. The German Imperial Debt is in a worse position with regard to that in so far as it has fewer assets compared with the States, but even with regard to the Imperial Debt the amount of revenue which is derived from their railways and other remunerative sources is put at something like two-thirds or three-quarters of the whole of the Imperial Debt in Germany. Look at the State debts. Prussia, being the largest of the German States, has the heaviest debt. It amounts to £361,000,000. Two or three years ago the Finance Minister of Prussia laid before the Prussian Parliament a balance sheet in which the assets possessed by the State were valued at the price at which, in his opinion, they could be sold on the market. The balance sheet showed that these assets would have have paid off the £361,000,000 of debt and would have left a balance of £900,000,000 in favour of the Prussian Government. If Germany chose to sell these undertakings, which can all be carried on by private enterprise—if she chose to sell them at market price—they would not only pay off the whole of her debts, but she would have had in hard cash a much larger sum than our total National Debt. Is not that a factor which should be taken into account in considering our financial position?

Look at another aspect. Look at the burden of taxation in the two countries-The right hon. Gentleman says that they cannot raise taxes, but if he will look at the figures which I am about to give him from a book on the subject, published by Dr. Friedrich Zahn, which I have seen referred to more than once in English publications, he will find that, taking direct taxation, the amount per head of population in the United Kingdom is over 18s., while in Germany it is just 8s. Therefore, as far as direct taxation is concerned, we are taxed to the extent of 10s. per head more than the German people. Turn to indirect taxation. Germany, be it remembered, is a country which is suffering from duties which are killing its industries, and must, we are told, destroy its trade. There the rate of indirect taxation is more than 20s. per head less than that which is levied on the people of the United Kingdom. So that, taking the two classes of taxation together, our people are taxed to the extent of 30s. per head more than the German people. The right hon. Gentleman the Financial Secretary to the Treasury dissents. What does he know about it?—

Mr. HOBHOUSE

I have seen the figures.

Mr. BONAR LAW

Then I am afraid he has not understood them. When the right hon. Gentleman has the means of showing that these figures are wrong, I shall be prepared to listen to him, but I am not prepared to accept his personal opinion as against that of people who have carefully studied the question. I repeat that their taxation is actually 30s. per head less than that of the United Kingdom.

Let me take that one fact, which should enable hon. Gentlemen opposite to understand more clearly what it means. Take one item. If the duty on tobacco were levied in Germany at the same rate that it is levied in the United Kingdom—assuming, of course, that the consumption did not fall off, which it would do to a certain extent—but if the consumption were the same and the duty on tobacco were equal in Germany and in this country, there would at once be an addition to the German revenue of over £15,000,000 a year, which would more than wipe out the whole of the deficit. These are facts which are to be taken into account in comparing the financial conditions of the two countries. Let me put another point. The right hon. Gentleman asks, Why do not they raise taxes so as to balance their deficit? He put the same question to my right hon. Friend the Member for East Worcestershire, and it would be a very pertinent question on the part of anybody who knew anything about the matter. But it is not very pertinent from anyone who knows nothing about it. The fact is, the reason why the German empire has difficulty in balancing its expenditure is that it depends so much upon a system of Home Rule.

They have to get the consent of the different States, and the States are still jealous of the power of the central Government. That is the sole difficulty, but the revenue is there at the moment it is wanted, and if the time ever comes when there is stress in Germany, these untaxed resources will give them the power of raising money in a manner which is not possessed by the United Kingdom. There is another matter which the right hon. Gentleman might have taken into acount. Let him remember that the German Navy has been, practically built up within ten years. The German Government have declared their explicit intention of building a navy, not necessarily as large as ours, but in the Bill actually presented to their Parliament they put it in this way: They want a navy strong enough to make any Power feel that they cannot enter into war with them with the certainty of defeating them. That means that they aim at a navy something approaching ours in strength. It has all been built up in the last ten years, and they are now spending a good deal more than what they spent ten years ago on the Navy. Is it such bad finance once you remember that when the navy has reached the standard which they desire, it will not require the same amount of expenditure:—is it such bad finance to say that a part of that expenditure should be spread over a number of years, and that the whole of it should not be borne in a particular year?

Our Government claim that they are meeting the expenditure, but let them remember that £25,000,000 out of our revenue is not derived from the income of the country. It is a slice of the revenue which is easily taken out of the capital of the country, and I ask anyone to consider whether, when they take away capital from the ordinary business of the country, it is not quite as dangerous as the natural proceeding of borrowing to meet an occasional debt incurred in the course of a particular year. That is all I will say about that beautiful, simple comparison which the right hon. Gentleman gave as to the superiority in financial matters of this country over all others. Let me come to another of his rhetorical touches as to what has been and what is proved by this Budget. This Budget, he says, kills Tariff Reform, and my right hon. Friend the Member for East Worcestershire was, he says, a Jeremiah who has found it out. What is the basis of all that? Because trade has improved; but no Tariff Reformer that I ever heard of has ever said that the effect of our fiscal system is that once we get into a depression there is anything that can prevent us from improving, no matter how the trade of the whole world has improved, and that we shall get no share. Nobody said that. If it was as bad as that I can assure the right hon. Gentleman there would be no arguing against it. Nobody makes that claim; but when the right hon. Gentleman claims that it is a proof of the benefit of our fiscal system, has it ever occurred to him to look at the statistics of other countries and see whether we are beating them.

Mr. LLOYD GEORGE

Yes, we are.

Mr. BONAR LAW

I would like to see the figures.

Mr. LLOYD GEORGE

I have the figures.

Mr. BONAR LAW

I will give him some to show that we are not. If he were to prove that we were beating them there would be something in it, but, as a matter of fact, comparing the figures last year when the improvement began, it is not so. I have not the figures for the first half of this year, they are not published.

Mr. LLOYD GEORGE

I have the figures.

Mr. BONAR LAW

No, you have not, They are not published.

Mr. LLOYD GEORGE

The hon. Gentleman is always assuming our ignorance in the most lavish way, but I can assure him that these figures have been published from the beginning of this year, and our exports for this year have beaten the exports of Germany so far as the first part of this year is concerned.

Mr. BONAR LAW

I have seen the figures which the right hon. Gentleman speaks of, and I have given a complete period, but I have said they were not finished for the first half of this year. I was giving the complete period, and if you take the figures which are complete I am within the mark in saying that the figures even of the external trade of Germany are as large—the percentage of increase is as large—

Mr. LLOYD GEORGE

The percentage?

Mr. BONAR LAW

I really did not think, whatever those behind him might have done, that the right hon. Gentleman would have made a point of that kind. We are talking about the improvement in trade in the two countries. Does he suggest that if the German external trade increases as rapidly in proportion as ours we have got to prove that the arrears of centuries have been made up in a single week? I say that, even taking the external trade, the improvement in Germany is as great as that of the United Kingdom. The German external trade, as in the case of this country, is a small part of their trade. Our home trade represents five-sixths, and if the right hon. Gentleman looks at the other figures of production, which are the test both of the home and the foreign trade, he will find that not only is our improvement not greater, but both in Germany and in the United States the improvement began sooner and extended further than has been the case in the United Kingdom. But I do not wish, although the right hon. Gentleman has given me every encouragement to do so, to make this a Tariff Reform Debate, but I do wish to look at the optimism with which the right hon. Gentleman referred to our trade prospects. This improvement from the point of view of the Budget and everything, including those social reforms of which he has spoken, is based upon his prognostications turning out correct. I have never heard of such amazing and, as far as I can judge, ill-founded optimism. He tells us that we are in a state of unbounded prosperity, that we are on the eve of the greatest boom that this country has ever seen. It may be true, but what ground has he for saying it? This is a subject I am interested in apart from politics, and I naturally follow the trade interests of the country and take every means in my power to read the commercial reports from the different districts to find what justification there is for such statements. Taking the cotton trade, which is our chief trade, a gentleman in Manchester, who is a leading expert in that trade, observed only a few months ago that it is still true that in the cotton trade we were leading the world in the short-time movement. [An HON. MEMBER: "On account of the shortness of cotton."] Whatever the reason is, it does not prove abounding prosperity to be leading the-world in the short-time movement. I turn next to the coal trade3 with which I have some connection. I find that the reports, week after week, tell the same story that the demand for coal is poor and the prices are stagnant.

I turn next to the iron and steel trade, with which I am myself familiar. In every district, in Middlesbrough, in Cumberland, and in Glasgow, exactly the same-reports appear in the commercial newspapers. Prices are sagging because-buyers are holding off. If you turn to the shipbuilding trade you will find, as I was-told by a shipowner in Glasgow, only a few weeks ago, that in spite of the rise-in the cost of steel, out of which ships are built, you can buy a steamer now at practically the lowest price which has ever been reached in this country. If you look at the returns of the shipping trade, on which, of course, the shipbuilding trade depends, leaving out of account the liners—I do not know much about them, but I can quite believe that those liners which depend on emigration are doing extremely well—there is not, I believe, a single shipowner in this country with a fleet of any size engaged in the ordinary tramp business who is earning a single penny of dividend at this moment. I do not say single steamers may not be doing it, but that any owner of a fleet of tramp steamers, taking them all over, will say that he is making a penny of profit at this time I do not for a moment believe. Here are the facts as apart from £he rosy picture of the right hon. Gentleman, and what makes it more striking is this. Of course, I admit there has been a great improvement compared with 1908, and what is more, in all these trades there is a very fair demand at this moment, but prices are sagging and the tone is dull for the simple reason that the people who are engaged in a trade in which their living depends on, correctly estimating the future, which the right hon. Gentleman can do without a moment's hesitation, take the other view and think they will gain by holding off because they expect things to get a little worse. If we turn from the capitalist's side of this question to the workman's side, what do we find? The right hon. Gentleman bases his whole case on the falling off of unemployment. It is perfectly true that there has been a great falling off in unemployment. It is only half what it was in 1908. But even taking the average of this year, the rate of unemployment as returned by the trade unions to the Board of Trade is just about the average of what it was during the ten years of the Unionist Administration before the present Government came into office, and it is twice as much as it is in Germany at present.

Mr. LLOYD GEORGE

No.

Mr. BONAR LAW

Why does the right hon. Gentleman say "No"? Has he looked at the figures?

Mr. LLOYD GEORGE

I have gone into them very carefully. There is nothing I went more carefully into than the whole question of unemployment in Germany. I am not going to assume that the hon. Gentleman is ignorant, and I think he ought to inform the House that the basis in Germany is totally different from the basis here. It is quite impossible to compare them. We might as well quote France, where the unemployment figures always look twice as big as ours; but the basis is different, and it would not be fair to quote them, and for the same reason it is not fair to quote the figures of Germany.

Mr. BONAR LAW

What I said was that the returns by the trade unions were twice as high in this country as in Germany. [An HON. MEMBER: "Nonsense."] I will deal with the point as to these figures not being comparable. What ground has the right hon. Gentleman for making that statement? I have given grounds for saying that they are. There is a difference between the way in which the figures are made out in Germany and in this country, and this is the difference. In this country only workmen are returned as unemployed who are receiving unemployed benefits, while in Germany all trade unionists are returned as unemployed whether they are receiving benefits or not.

Mr. LLOYD GEORGE

indicated dissent.

Mr. BONAR LAW

Let me read what appeared in the "Board of Trade Labour Gazette" on that subject in?906:— For the first time it was made clear to the persons furnishing the Return that all members out of work were to be included as unemployed, whether in receipt of unemployed benefit or not. Formerly a small proportion were returned on a different basis. 3.0 P.M.

The right hon. Gentleman says they are not doing it. That assumes, of course, which is quite possible, that the German returns are inaccurate, but what ground have we to assume that they are more inaccurate than ours? So far as information obtained from authentic sources gives us the opportunity of judging, the number of unemployed amongst trade unionists in this country is to-day twice the amount that it is in Germany. Then look at another aspect of it. What about wages? Taking again the figures which are given by the Board of Trade of the changes in wages—

Mr. LLOYD GEORGE

They are much higher than in Germany.

Mr. BONAR LAW

Taking the returns of the fall and rise in the Board of Trade "Labour Gazette," the level in this country is not now as high as it was ten years ago, and that in spite of the fact that during that period there has been an immense increase in the cost of living to the working classes in this country. The right hon. Gentleman says we are better than in Germany. He should give our Consuls instructions not to send such false reports, for one of our Consuls in Germany, in a report sent to his Government, made this statement—that though the cost of living in Germany had risen during the last ten years, the steady and continuous rise of wages in that country had more than counterbalanced the increase in the cost of living. There is a further test. At this moment, when we are enjoying this abounding prosperity, why is it that our people are pouring out of the country as if it were plague-stricken? Why is it that emigration is on a scale very nearly as large—I have not looked at the figures—as it has ever been in a time of abounding prosperity? Here, again, compare the position of that of Germany. Twenty years ago their emigrants were nearly as numerous as ours, and now there are practically none, and yet these people are pouring out of the country, and in every case they are hastening to countries which have not the advantage either of our blessed fiscal system or our heaven-born Chancellor of the Exchequer. I do not wish to be understood for a moment as saying that we may not be on the eve of a great trade revival. I should be very sorry to say anything of the kind. We may nr may not be, but I should be very sorry to venture to prophesy one way or the other. For the best years of my life I was engaged in a trade in which whether I made an income or not depended on whether or not I was able to make the kind of forecast which the Chancellor of the Exchequer makes so easily, and, in my opinion, nothing is more difficult than to forecast what the condition of trade is going to be. I hope we are on the eve of a great trade revival, but if I were trying with all my might to find out whether that is so or not, I should not look exclusively, or chiefly, at the statistics to be found in this country. I should turn, as I am certain every business man is turning to-day, to the reports of trade in Germany and in the United States, because we know that we no longer lead, and that our prosperity whatever it is, will be a reflex of the greater prosperity which is found in those other countries.

The last rhetorical flourish to which I shall refer is a cheap one. What a triumph this Budget is for Free Trade finance! J I have always tried, whether successfully or not, before attempting to meet the arguments of those from whom I differ, to understand their point of view. I have tried to do so in this case, and I find it somewhat difficult, but so far as I can make out this is the argument: "Here are we, a Government which has succeeded in spending more money than ever was spent by any previous Government. That is one of the triumphs of Free Trade finance. And we have succeeded in raising the money necessary to meet that expenditure. That is the other triumph of Free Trade finance." Well, let us look at the first triumph, namely, that the Government have succeeded in spending more money than was ever spent by any previous Government. Hon. Members opposite will remember that at the 1906 election no attack which was made upon our party was more persistent than the attack in regard to our extravagance, and that attack was based not on the fact that we were spending money wrongly—they did not attempt to do that except in regard to expenditure on armaments—but that we were spending too much money. Yet we have the Prime Minister coming down to this House two days ago, and delivering what I thought was an interesting speech. It was really a dramatic interposition in the Debate, it seemed to me. He made his speech just as dull as he possibly could, deliberately with the idea, I am perfectly certain, of trying to throw a little ballast into the balloon which belongs to the Chancellor of the Exchequer. What did the Prime Minister say to us? He said, "You talk of expenditure, but the House of Commons is quite as responsible for that as the Government. They are always pressing it upon us." Is that a new circumstance? Has that only happened when the Prime Minister entered upon his present office? Why did he not think of that in 1905 when he attacked us. I am certain if the right hon. Gentleman had had his own speeches at that time in his mind he would not have had the face to make that speech in the House of Commons. I looked into a lumber room in which I have cuttings from speeches which were made at that time, and the very first one I took up contained these words of the Prime Minister:— This vicious system of extravagant finance is not to be measured by the money it takes out of your pockets and mine, but it is a burden which presses on the springs of industry, because if people have to pay so much more every year than they were accustomed to spend, to that extent there is less money free as capital for the employment of labour, there is less money free for ordinary household expenditure, and in every direction the system is injurious to trade. It was the amount of the expenditure which the right hon. Gentleman condemned then. Here is another quotation:— Chancellors of Exchequer were, after all, very human. The old tradition of Chancellors of Exchequer was to reduce taxation. The line of new Chancellors was to say, 'Look at my term of office. My predecessor put on £5,000,00. I will put on £ 15,000,000. My little finger shall be thicker than their loin!' That was their claim to immortality. What a good prophet! But he did not realise that his prophecy was to apply to himself and the Chancellor of the Exchequer. The other position taken up by the Government is that they have got the money to meet this expenditure, and they claim that as a triumph of Free Trade finance. No economist has ever said that so long as there is wealth in the country Parliament, which has absolute power, will not be able to seize it and meet expenditure. Why, even in the time of King John, as hon. Members will remember from their school history, he balanced his expenditure, and one of the methods was to seize a wandering Jew in his dominions and put him in a dungeon until he was ransomed. That may be called an example of Free Trade finance. Nobody doubts that the Government can raise the money, but we have always said, and we say now more strongly than ever, that you cannot raise it except by putting burdens on the individual which are absolutely unjust and putting burdens on communities and trades which are bound to be ruinous in the long run to those interested.

I shall only refer to one other duty, namely, the Whisky Duty, as an example of the effect these taxes are having on the trade of this country. The defence which the Chancellor of the Exchequer made of that tax has placed our whole fiscal system on an entirely new basis. He practically admitted—I do not think he will deny it—that from the point of view of revenue the Exchequer has gained nothing by this increased duty, and that it would have been just as large if the duty had been left at the lower level. But he justified it on the ground of the social and moral advantages arising. I say that is an entirely new departure, and it is entirely inconsistent with what everybody has regarded as an axiom in honest taxation, and that is that you should not tax one set of people more severely than another set of people. Even if you admit that this duty has produced all those advantages which are claimed, I do not think there is any answer to the argument put by my hon. Friend the Member for Chelmsford (Mr. Pretyman) that if society is going to benefit in that way society ought to pay and not put the whole burden on a small section of the community. I am not prepared to go the length of saying chat, under no circumstances, are social advantages to be taken into account in a case of this kind. It was put in a Ministerial paper which I read this week in this way: "Suppose you found people were beginning to eat opium, would you not be justified in taxing that out of existence if you could?" I say at once that if I were responsible I should try to tax it out of existence, but I am bound to add that I should have some hesitation in doing even that if I found that all my colleagues-were themselves eaters of opium, and that the form in which they proposed to tax it out of existence was a form which would not touch the particular kind of opium they eat.

Hon. Members will, I hope, accept the statement that I really am interested in temperance. I consider drunkenness so great an evil that I should be very glad to see it removed even by methods I did not approve of, though I would not myself be responsible for them. But I do not for a moment believe that you are doing the smallest good to temperance by this form of taxation. Let me try to justify that statement. Hon. Members who were present in the late Parliament will remember that in the Debates in connection with the Licensing Duties there was one fact which was distinctly proved so far as figures could prove it, and that was that convictions for drunkenness over the whole country were greatest in those districts where there was the smallest number of public-houses. I remember the point was first raised by my hon. Friend the Member for Kingston (Mr. Cave), and to refresh my memory I looked up the speeches this morning.

The Postmaster-General stood up and replied. He did not deny that the figures taken by themselves did seem to prove that contention. He did, it is true, say that the circumstances of different towns should be taken into account, but he did not deny the general truth of the statement that convictions are in an inverse proportion to the number of public-houses. His defence was two-fold. He said, first, that the convictions for drunkenness are no proof of the amount of drunkenness. He said that the idiosyncrasies of individuals might make a difference of 10 or 20 per cent, in the convictions for drunkenness, and, therefore, you cannot apply it. That is the sole argument which the Chancellor of the Exchequer gives us in proof of the statement that this tax has diminished drunkenness. And even that argument is given in a very imperfect way. If he gave all the figures for the whole country spread over a considerable time we could examine them to see what is in them. He does not do anything of the kind. He gave one or two isolated figures—the figures of April for Glasgow as compared with March. Everyone knows that there is more drunkenness in the winter than in the summer, and that the comparison is absolutely valueless.

But, apart altogether from that, I say with the Postmaster-General that convictions for drunkenness are no proof of the amount of drunkenness. Then the Postmaster-General took another line. He said you cannot rely on those figures. You must take common-sense. His point was that if ninety public-houses are trying to sell drink you will sell more of it than with a smaller number. I say you have got in this case also to take common-sense and to think what the effect will be. Obviously the man who as a rule stops taking more alcohol is the man who has complete control over himself—the man who will take it as a luxury which he can give up if he wishes. But if you take the man with the drink craze I do not believe that there is a Member of this House who doubts that so long as that man has the money he will get the alcohol, and it is not he, but his wife and family, who will suffer, because to get the same quantity he has to pay more for it. There is no shadow of proof that this method in the slightest degree produces temperance. There is another way of testing it. There is not much difference in the effect on temperance between raising the price of alcohol and having a period of bad trade in which people have less money to spend upon alcohol. The result, I am sure everyone will admit, is precisely the same in these two cases. We all know that in periods of bad trade there is less consumption of alcohol than in years of good trade. It is quite true I am thankful to say that over a period of years there is a steady decline in the amont of alcohol consumed, but in the good years more is consumed, because there is more money. Precisely the same thing occurs here. You cannot with certainty make the smallest permanent improvement in the cause of temperance by so simple a method as the Chancellor of the Exchequer has adopted. And at what expense has he done it? Nobody denies it is at the expense of injuring, almost ruining, a trade, which, whether you like or not, is one of the most important trades in this country. It has caused a great loss of capital to the people who have their money invested in that trade. It has created an immense amount of unemployment among people who were employed in distilleries, and it has caused, indirectly, a far greater loss both of capital and of employment among those indirectly depending on that trade. So much is that the case, that I saw it stated—I do not vouch for it, because I have had no means of checking it—that one of the railways in the North of Scotland has actually suffered very largely in its profits on account of the dulness of the spirit trade and-the diminution of traffic. Surely the Chancellor of the Exchequer should make very certain, at least, that he is getting something more than a temporary cessation in the consumption of alcohol before he deliberately sets out to injure a trade upon which so many people in this country have to depend for their living. This applies especially, I think, to Ireland.

When the right hon. Gentleman glibly gives his figures about the £500,000 or £600,000 only added to the burden of Irish taxation—figures which are not accepted—he does not take into account the loss to Ireland through the injury and almost ruin of one of its leading industries. If he were to do that it would add very largely to the total. I thought one of the most interesting things in this Debate was the plaintive appeal of the hon. Member for East Mayo (Mr. Dillon) to the Government to reduce the Whisky Duty. I do not know whether it was more tragedy or comedy. The hon. and learned Member for Waterford (Mr. John Redmond) and his friends had it absolutely in their power three months ago to have this duty taken off, and they could have taken it off without interfering with any of those ulterior aims which they desire to promote. Everyone knows that the one thing which the occupants of that bench could not have stood would have been, after the rejection of the Budget by the House of Lords, not to pass a Budget of some kind when the new House of Commons came back. Of course, the Chancellor of the Exchequer would not admit that. But if the hon. Member for Waterford had said "That is our price," the right hon. Gentleman would have made the best of it. He would have come down, and I can imagine the speech which he would have made. He would have said, "It was an utter outrage to prolong this Budget and keep it back until now, but we are practical men and we are not above learning a lesson, even though it is wrongly taught. We find that this extra tax has not added to the revenue, and therefore I will take off the tax." That would have been the speech of the right hon. Gentleman. What is the position of the hon. Member for Mayo and his Friends in this case? I must say I enjoy it. During the earlier months of the discussion they kicked and cuffed and bullied the Government in a way that implied great fortitude on the part of the Government to submit to. They did not like it I am sure. The Chancellor of the Exchequer has assured the House that Chancellors are only human, and in that respect he is especially a Chancellor. Now he has got them in a cleft stick. They are absolutely and utterly powerless. They have, it is true, by way of saving their faces for a month or two longer, prolonged the thing until November, but when November comes, what can they do? Can they then say, "We are going to turn out the Government because of this ruinous tax which we did not vote against when it was passing the House of Commons"? If they take any such line they are simply delivering themselves, bound hand and foot, to the hon. Member for Cork (Mr. W. O'Brien) and the hon. Member for North Louth (Mr. T. M. Healy). The hon. Member for Waterford and his immediate Friends would not enjoy that position.

Mr. WILLIAM REDMOND

We are quite happy.

Mr. BONAR LAW

The hon. Member will see that I am about to refer to an hon. Member who has a much more caustic tongue than I have. There is not a Member of the House who would not like to hear the hon. Member for North Louth make a speech on such a situation. I shall try to imagine what he would say: "Look at these Molly Maguires. They are now going on bended knees to the Government, cap in hand, whining and begging them to take off the Whisky Duty to which the Government have committed themselves in such a way that no Government could possibly take it off, by saying that to do so would be a crime against society. They are now coming whining and begging the Government to take off the duty which three months ago they could have them- selves got off by holding up a little finger. And these are the men who call themselves leaders of the Irish race. They are not fit to lead an Irish cattle-drive." I am quite sure that the hon. Member for Waterford must himself feel that it requires a very long spoon, a longer spoon than he possesses, to sup with the Chancellor of the Exchequer.

Mr. GIBSON BOWLES

It is my habit to abstain from taking part in the Homeric conflicts between Members of the Front Benches when they hurl statistics at each other, missiles most tremendous, and, unfortunately, all of them hollow. It is really like a battle of flowers at Nice. We have not a serious conflict, for all the statistics used on both sides are so false in themselves, or require so much explanation, as to make them entirely devoid of value. I do not accept the statistics used by the Premier or Chancellor either with regard to the expenditure or with regard to the National Debt, but I desire to abstain at this moment from dealing with the general situation, as I have other work on hand. In the speech of the hon. Member for Dulwich (Mr. Bonar Law), his great complaint seemed to be that the Chancellor of the Exchequer enforced his doctrines and defended his Budget with some liveliness and some eloquence—a reproach which, I think, will not be retorted upon him. It was said by a great Conservative post:— As bees on flowers alighting cease to hum. So, coining into office, Whigs are dumb. The complaint of the Member for Dulwich is that the present party, when it comes into office, is not dumb. I understand, when he speaks of Members behind him, he refers to intolerant Tariff Reformers, who have driven from those benches almost everybody who is not dumb and nearly everyone who is not blind. It falls to me to move in this Committee seven Resolutions. They are all Amendments of very great substance, and all of them concerted with aggrieved taxpayers, and most of them with Income Tax experts. I really think it to be my duty to divide upon at least five out of the seven. The most important of my Amendments is that which stands first on the Paper, to insert, after the word "That," at the beginning of the Income Tax Resolution, the words "On and after the first day of December next." I admit at once that it is an unusual course to propose Amendments in Committee of Ways and Means; nevertheless, it is a course which has been taken many times in the history of this House. Indeed, in 1853, one Member was held to be perfectly in order in moving after the word "That" to insert words to the effect that the renewal and continuance of the Income Tax for seven years, with its extension to classes hitherto exempt, were alike unjust and impolitic. That Amendment was moved on 25th April, 1853. It was, as the Committee will observe, a very general and sweeping Amendment, which shattered the whole Resolution itself. I trust hon. Members will admire my modesty in that I do not propose to sweep away the whole thing, but only to amend it in consonance with what I think are the dictates of necessity and justice. I do not know what course Members on this side or the other side of the House will take. I act alone in this House, and I make no concert with anybody; I simply try to do my duty, as I conceive it, to my Constituents, and to the country at large, careless of the results to myself. In moving these Amendments to the Resolutions in Committee of Ways and Means, I trust the Committee will allow me to disclaim any desire to embarrass His Majesty's Government. Rather I would serve them, because my belief is that they have not fully considered the whole consequences of the course they propose to take with regard to this Resolution on Income Tax, and of the Bill which alone can turn it into an Act of Parliament. It arises thus. On Thursday last I asked the Prime Minister this:— Do I rightly understand that the Resolutions on the Tea Duty and the Income Tax, which are now the only remaining annual Resolutions, shall be carried now and remain in force as from nth April and last until November, although the Act still remains in abeyance? The Prime Minister: Yes." [OFFICIAL REPORT,:30th June, 1910, col. 1120.] He does intend that. Therefore, what is proposed is quite clear. We are to pass this Resolution. If that is so, not until November next, not for five months are we so much as to see the Bill, which will be required to be read a first time, a second time, and go through the other House and receive the Royal Assent before there is any lawful warrant to receive a single penny or halfpenny of the Income Tax. I submit to the Committee, and I submit to every honest man in this country, that this is a kind of situation that cannot be accepted without some attempt on the part of some person to remove it. I am only sorry that it has not fallen to abler hands than mine to make the attempt which I am bound to today. I am certainly not animated by animosity towards His Majesty's Government, with which I intend to act until hon. Members opposite at least give up their design of taxing food. Still less am I actuated by animosity towards the Income Tax. Indeed, I believe it is an ideal tax, and were it possible to have in the country a system of ideal finance, I believe that it would be best achieved by abolishing all other taxes whatever and making one single Income Tax applicable to all classes in their degree. I mention this to show that it is not the tax that is the cause of my objection, but it is because of my desire not to see it destroyed by lawless methods and unjust exactions that I bring forward my Resolution to-day. I would far rather have brought these Amendments, all of them Amendments of substance, forward in Committee on the Bill, but I am driven to take this course, unusual though it is, by the announcement that was made by the Prime Minister that we are not to have the Bill until November, while the taxes mentioned in the Resolution are to be levied as from 5th April without any Bill whatever. Why we are not to have a Bill, and why the usual course is not to be pursued of bringing in the Bill immediately the Resolutions are passed, and why there is not the usual request to abstain from Debates because we shall have the Bill immediately, why that course is taken I cannot for the life of me see. It is suggested-that hon. Gentlemen opposite from Ireland have been the cause of it. I am asked to believe that the hon. and learned Member for Water-ford (Mr. John Redmond) and the equally hon. and learned Member for North Louth (Mr. T. M. Healy) have conspired together in order to prevent His Majesty's Government from bringing in this Bill in the usual way immediately after the Resolutions. I know not how that may be, but what I do know is, and I scarcely think that the House or the people outside really realise it, we are practically asked now to pass a Resolution which, it is assumed, will give power to the Inland Revenue collectors of taxes to levy the Income Tax and to go on levying it until the month of November, when we may have the Bill which conceivably we may throw out, or which conceivably another place again may throw out. Let me say at once that to presume to levy Income Tax by sole virtue of a Resolution of this House is an unlawful act. I quote the greatest authority we have upon Parliamentary procedure and upon the law o£ Parliament and its effects—Sir Erskine May. He says:— It has been customary for the Government to levy the new duties, instead of the duties authorised by law, immediately the Resolutions for that purpose have been reported from a Committee, and agreed to by the House, or from the date expressed in such Resolution, though legal effect cannot be given to them by Statute for some weeks, and may ultimately be withheld by Parliament. It is obvious that this custom is not strictly legal. … Again he says:— If on the other hand a duty has been increased by a Resolution of the House, the Revenue officers demand the increased duty by virtue of a Treasury order, and will not permit the articles to be entered for consumption until it has been paid or security given for its payment. -For these official acts there is no legal authority at the time. We are asked by the passing of this Resolution, and in case it is passed without the Amendment which I propose, to authorise and to allow the Government to commit a series of the most illegal acts from now until November. Let the Committee observe it is not an idle question. Four-fifths of the Income Tax every year are levied indirectly, not by direct assessment, but by indirect assessment, and by the method of deduction. That method comes into operation at once. I gravely suspect, though not even as much as the Resolution has been passed, and although it is only now that the proposed rate of Income Tax is even declared, that the Inland Revenue have been deducting the Income Tax at a rate imagined by themselves, and without even a shadow of justification. The total Income Tax for next year would probably amount to £35,000,000; four-fifths of that amounts to £28,000,000, and that you are to levy during seven or eight months. A simple sum will show that the whole indirect duty involved is between £16,000,000 and £18,000,000. That, therefore, is really the problem before the Committee to-day. Is it prepared to authorise or to stand by and to see the act done, and to allow the Government to levy £16,000,000 or £18,000,000 of taxation without a shred of lawful authority by mere virtue of a Resolution, declared to be by every authority unlawful and insufficient for the purpose, found to be insufficient for the purpose, to the great distress of the Government last year, and avowed by the Government in the spring of this year to be insufficient for the purpose?

I think it rather scandalous, after the experience of last year, that the Committee should be seriously asked again to embark on so unlawful a course in a case not accidental or exceptional, as it was last year, but prepared and proposed with your eyes open. To my mind it is a very amazing thing that the proposal should be so much as made. I have explained that the amount which this Resolution affects, and which the Government will attempt to levy unless my Amendment or something corresponding to it is passed, amounts to the very large sum of from £16,000,000 to £18,000,000. There is another consideration. Income Tax was formerly one tax; now it is quite an infinite variety of taxes. The rates of Income Tax vary perhaps in a greater degree than that of any other tax ever put upon a suffering people. It is not one tax, it is many taxes, each one varying from the other and varying from a tax of eighty-seven-thousandths of a penny to something more nearly approximating to, but never quite reaching twenty pence in the pound. The effect of that is that one income of £161 pays fourteen pence all told, and another income of £161, if there be forty such sums together, pays not fourteen pence but 2,770 pence. One sum, in other words, pays 198 times as much as another similar sum. It is as though a man should say one apple costs a penny, but if it is one of forty each will cost you 198 pence. Observe I am not dealing with the merits of this enormous disproportion. I admit I am taking two extreme cases, but I think there are few people—and I am not sure that there could be anybody beyond the Secretary to the Treasury, who of course knows it—who would realise that there is that difference in charge and in rate as between one and 198. As I have said, I am not dealing with the merits of that scale, although my belief is that it will go far to impair the Income Tax, if not to destroy it.

My conviction is that now these taxes have begun to bite, whereas before they had only barked, the time is approaching when there will be a great claim—an irresistible claim—for an abandonment of this steep and most severe graduation and a return to a saner and more wholesome system. Be it observed that I do not say there should be no graduation. In finance all things are relative. Indeed, in most things all is relative and certainly in finance. A small, modest, moderate amount of graduation such as you have had in years past, although no doubt logically indefensible and financially injurious to the revenue, is not so injurious as to have any permanent or serious effect upon the tax. But when you increase the graduation as you have done, when you make the steps so steep and the differences so enormous as between one and 298, then you have entered upon a method of taxation which must injuriously affect it, and which will end in your getting not more tax, but less. That is my opinion. That is my conviction. That has been the experience of all taxes levied upon this system, and of all Chancellors of the Exchequer. My indictment of the Government, as the Committee will see, amounts to this, that they propose to pass this Resolution and immediately to begin to levy as from 5th April last every penny of the Income Tax which is leviable by deduction up to November next. It will not affect Schedule D, because the practice there, I believe, is only to assess the tax at about this time of the year, and not to begin to levy it until November or December, by which time it may be presumed that the Finance Bill will have been introduced into this House and perhaps passed.

The charge I bring, therefore, is really a very grave and serious one. It is that if this procedure which is foreshadowed—which is, indeed, intended to be adopted—is followed, His Majesty's Government will be engaging in an absolutely unlawful act, warranted by no law, warranted by no experience—on the contrary, condemned by the only experience we have ever had of demands of this sort—the experience of last year. If that be so, let the Committee consider what a serious example is given to the permanent officials, whose business it is to collect the revenue. These permanent officers are presumptuous enough already. Their zeal constantly outruns their discretion, and their rapacity beats both. The science of Income Tax and the knowledge of where it should fall, and what the exemptions are, is only to be obtained by a study of 250 Acts of Parliament. Naturally the professional tax collectors have almost a monopoly of the knowledge which is contained in those Acts, and they constantly come into this House and smuggle into Acts of Parliament Clauses repealing the alleviations that former Acts have given to the taxpayer. In that way they smuggled in and obtained the repeal of Section 133—a very important Section—of the Income Tax Act, 1842, which gave the taxpayer very considerable relief. In the same way they smuggled through the repeal of another alleviation Section—Section 6 I think it was—of the Income Tax Act of 1865 or 1866. Bnt, in addition to that, I have another very serious charge to bring against the Income Tax officials, and that is this: The Committee probably knows that by the Income Tax Act of 1842 every official Commissioner, and so forth, down to the merest clerks engaged in the assessment and levying of Income Tax, takes an oath of secrecy that he will not disclose particulars he becomes acquainted with in the course of the collection of Income Tax, except to a person bound by a similar oath. What is the fact? It is acknowledged—I procured an acknowledgment of it in a question—that habitually the Commissioners of Inland Revenue perform what I can only call a subornation of perjury. They go to the Income Tax Commissioners when they have any doubt about an Estate Duty return, and they suborn those Commissioners to perjure themselves, to break their oaths, by disclosing to the Estate Duty Office the particulars of Income Tax. It cannot be denied. It is admitted. But if it were denied, I know that the denial would not be well based, because I know myself a case which happened some years ago in which, when a return was brought in for Estate Duty the solicitor bringing in the return was sent back, the Estate. Duty Office consulted the Income Tax Commissioners, procured them to break their oaths by giving them particulars of the income of the man who had died and left the estate, and in consequence of the information thus obtained, insisted upon multiplying the original statement of the estate by 100, making it 100 times what it was. I think it is shocking to have a Government and a Government Department engaged in deliberately breaking the oaths that they have taken. If we ever do get the Bill in November, when we get into Committee upon it, I think I shall have to propose that these oaths, which seem to be so lightly forgotten, shall be renewed every year so as to keep the officials in memory of their obligation. At lovers' perjuries, They say Jove laughs. I do not think even Jove, who was a person of very lax morality, would laugh at the perjury of an Income Tax Commissioner or collector.

I can hardly blame the Commissioners of Inland Revenue. They are expected to wring the last halfpenny out of the taxpayer, and they do wring it. They go on wringing it by every method open to clever men. They terrorise the Income Tax payer. They frighten him into the belief that he is going to be thrown into the dungeons of Somerset House unless he pays more than they are entitled to. They habitually and consistently conceal from him all the alleviations in your 250 Acts that have been contrived for the relief of the Income Tax payer, and in this way they obtain and retain tens of thousands—I think I might almost say millions—of pounds of Income Tax which ought not to be paid, or which, if it has been paid, ought to be returned. In the case of companies where there are small shareholders with a few hundreds a year, they deduct the whole Income Tax from the dividend and rely upon the incapacity of the poor taxpayer to make that demand for a return which they surround in every sort of difficulty, and to my sorrow they bring this desirable tax into a contempt and odium which it does not deserve. One more remark. They terrorise the taxpayer. They conceal from him his rights. They suborn perjury—I cannot call it anything else—and they constantly get and as constantly retain Income Tax to which they are not entitled. But they are not infallible. Constantly, when they come before the courts and go to the House of Lords, it is found that they have made claims which they cannot substantiate. There have been many cases which I could cite to the Committee. Constantly these Commissioners are found not to be infallible. What an injury then that the Government should call upon them to break the law, and should themselves be a party to the breaking of the law! This really is a very grave question. We look to those high in authority, to those who hold positions in His Majesty's Government, to be the first to set an example of keeping the law and of observing the law. Now they are to begin to be breakers of the law—insolent, impudent, and overt breakers of the law. What an example it will be, not merely to the world in general, but to the Inland Revenue Commissioners, who are to be made their accomplices! I think it is an extremely grave matter. We have a small House and very thin Front Benches, but still the matter is of a most serious character. It means the assumption by His Majesty's Government and by the Inland Revenue Commissioners of a power which would be refused to the King himself. The great Bracton tells us: "The King has a superior in the law which makes him King." But if this Resolution is to be passed without the Bill, if the Inland Revenue Commissioners are to be slipped, with all their evil practices, on the unfortunate taxpayer without their exactions having any authority or pretence of authority of an Act of Parliament, then His Majesty's Government, making themselves the accomplices, will be claiming that which is denied to the King himself. They will be setting up this House as the sole and arbitrary authority in taxation; nay, as an authority above the law, and they will be inviting the Inland Revenue Commissioners to exercise a dispensing power over the law which was refused to the King himself, and which once caused the flight and deposition of a King. The matter is of great importance. Upon the decision which may be made this afternoon a precedent will arise, and I earnestly hope that I shall get support. Some support I shall get. Whether I shall get a teller to tell with me I do not know, but if I do I shall certainly go to a Division on this, by far the most important of all my Amendments, which is intended to prevent a monstrous infraction of the law and the levying of many millions of Income Tax without a shadow of legal authority.

4.0 P.M.

Mr. HOBHOUSE

If this Amendment was carried it is quite certain it would be impossible to collect the whole of the Income Tax for the coming year. That Income Tax is expected to yield a sum of about £39,500,000, of which already it will probably be impossible to collect some £2,000,000. Therefore if the Amendment was carried it would practically so disorganise the finances of the country that it would be impossible to repair them in the present financial year. My hon. Friend has said there is no warrant to collect these taxes. He has told the Committee that the Government were doing an illegal thing, and that they have no lawful authority behind them for the collection of this taxation. My hon. Friend is not acquainted with Section 30 of the Customs and Inland Revenue Act of?890, and in order that the matter may be quite clear to the Committee I propose to read the actual words of the Section, which says:—

"In order to ensure the collection in due time of any duties of Income Tax which may be granted for any year commencing on the sixth day of April, all such provisions contained in any Act relating to Income Tax as were in force on the preceding day shall have full force and effect with respect to the duties of Income Tax which may be so granted in the same manner as if the said duties had been actually granted by Act of Parliament, and the said provisions had been applied thereto by the Act."

That at once shows that the Government is entitled and is empowered under that Section to proceed with the charging of assessments. I am dealing only with the question of charging. My hon. Friend proposes to put that power of charging oft: until the first day of December. In order to show in what way the postponement of this date would absolutely wreck the taxes and the finances of the year, I will give the briefest possible description of the process of collecting the Income Tax. Take the case of Schedule A. The first person to serve the tax is the assessor, and under the direction of the District Commissioners of Income Tax, the assessors in April send out what are called the return forms. These return forms do not come back until some period approaching the end of May, and the assessor then, by means of these return forms and the Poor Law valuation, puts his value on the properties which come under the operation of Schedule A. He then sends his assessment to the surveyor of taxes, who again puts his value upon the property, and then they go to the Commissioners of Income Tax, who—and this is an important point—allow the assessments, and then give notice of appeal. The appeals from this process are not only all of them heard until the end of November, and when they all have been heard, the collectors receive the assessments and send out the demands to the taxpayers. The important date in all this is the date of allowance, which is really the date of charge. Therefore the allowance taking place about the middle of August or September, and the demand notes not being able to be sent out in consequence of the wide area covered all over the country by the operations of the tax collector, it is clear that you must have at least four months between the day of charge and the time the demand notes are sent out. If you fix the day of charge on 1st December, as my hon. Friend proposes, you could not send out your demand notes until after the financial year was over, and in that way the whole revenue derived from the Income Tax would have slipped through the hands of the Chancellor of Exchequer.

What is true of Schedule A is true also of Schedule D, and of all the other schedules. When my hon. Friend said, as he did at the beginning of his remarks, that he does not wish to sweep away the revenue, he is entirely ignorant of the fact that his proposal would in effect not only sweep away the Income Tax, but would wreck the finance of the year, and would bring the whole financial scheme of the Government to the ground. I cannot believe that is his intention, and I ask the Committee to reject his Amendment.

Mr. SANDERSON

I rise to support this Amendment. It seems to me that the case the hon. Gentleman the Member for King's Lynn has made out is a perfectly good one. I may first of all give the reasons which I have for supporting the Amendment. I understand that the Resolution under which a Tax has to be collected ought to be followed as quickly as possible by an Act which legalises it. That is all the more necessary with regard to such a tax as the Income Tax, having regard to the enormous amount of money which is collected by the Income Tax, and the great number of people who are affected by it. There might be some cases where it would be necessary to depart from the usual custom. The usual custom is, as I understand it—not having had a very long Parliamentary experience—to pass an Act which legalises this expenditure within a few weeks. Here we are proposing to postpone an Act which is going to legalise this for no less than four months. Why? As I said before, I can imagine that there might be some circumstances where it might be absolutely necessary. Is there the slightest possible necessity in this case? Not the least. If this is a right tax let it be legalised as soon as possible. If it is necessary for the finances of the country that we should have an Income Tax of 1s. 2d. in the £, and a Super-tax as well, let us legalise it as soon as possible. Everybody knows, I believe, what is the real reason why it is going to be put off until November. Not because it is not necessary, but because it is nothing more or less than a mere party manœuvre. When the right hon. Gentleman the Financial Secretary to the Treasury says that the hon. Gentleman who moved the Amendment will be disturbing the whole finances of the year, surely he should recognise that the Government themselves are responsible. I think I am right in saying that the hon. Gentleman who moved this Amendment would never be moving this Amendment unless the Finance Bill had been postponed until November. Who is responsible for the Finance Bill being postponed till November? The Government, of course. That is the reason why in his remarks just now he has made absolutely no answer at all to the Amendment, which I have the greatest possible pleasure in seconding. Why should not an Act be passed? The right hon. Gentleman has said that the finances of the year will be dislocated. If they are, the Government are responsible for it, and any difficulty

that might arise could be avoided by the Government bringing in the Finance Bill in the usual course. I think the arguments which have been put forward in support of this Amendment have not been answered in any way, and I shall very heartily support it as a protest against the Government using the Finance Bill for party purposes.

Question put, "That the words 'on and after the first day of December next,' be there inserted."

The Committee divided: Ayes, 83; Noes, 195.

Division No. 86.]	AYES.	[4.10 p.m.
Arkwright, John Stanhope	Gllmour, Captain J.	Morrison-Bell, Major A. C.
Bagot, Captain J.	Goldman, C. S.	Newdegate, F. A.
Baird, J. L.	Goldsmith, Frank	Nicholson, Wm. G. (Petersfield)
Baker, Sir R. L. (Dorset, N.)	Gordon, J.	Ormsby-Gore, Hon. William
Balcarres, Lord	Greene, W. R.	Peel, Hon. W. R. W. (Taunton)
Baldwin, Stanley	Gretton, John	Peto, Basil Edward
Banbury, Sir Frederick George	Gulnness, Hon. W. E.	Pollock, Ernest Murray
Barnston, H.	Gwynne, R. S. (Sussex, Eastbeurne)	Qullter, William Eley C.
Barrie, H. T. (Londonderry, N.)	Hambro, Angus Valdemar	Ridley, Samuel Forde
Bathurst, Hon. A. B. (Gloue., E.)	Healy, Timothy Michael (Louth, N.)	Ronaldshay, Earl of
Bathurst, Charles (Wilton)	Helmsley, Viscount	Rothschild, Lionel de
Beach, Hon. Michael Hugh Hioks	Hope, Harry (Bute)	Samuel, Sir Harry (Norweed)
Beckett, Hon. W. Gervase	Hope, James Fitzalan (Sheffield)	Sassoon, Sir Edward Albert
Bird, A.	Horne, W. E. (Surrey, Guildford)	Stanley, Hon. G. F. (Preston)
Boyle, W. L. (Norfolk, Mid)	Jackson, John A. (Whltehaven)	Steel-Maitland, A. D.
Boyton, J.	Kerr-Smiley, Peter	Stewart, Gershom (Ches., Wirral)
Brassey, H. L. C. (Northampton, N.)	Kinloch-Cooke, Sir Clement	Strauss, Arthur
Butcher, J. G. (York)	Lawson, Hon. Harry	Sykes, Alan John
Carllie, E. Hildred	Lloyd, G. A.	Talbot, Lord E.
Castlereagh, Viscount	Locker-Lampson, G. (Salisbury)	Walker, Col. W. H. (Lancashire)
Cautley, H. S.	Locker-Lampson, O. (Ramsay)	Warde, Col. C. E. (Kent, Mid)
Clay, Captain H. Spender	MacCaw, William J. MacGeagh	Watt, Henry A.
Cooper, R. A. (Walsall)	Macmaster, Donald	Wheler, Granville C. H.
Craik, Sir Henry	Mallaby-Deeley, Harry	Wood, John (Stalybridge)
Eyres-Monsell, Bolton M.	Mason, J. F.	Worthington-Evans, L. (Colchester)
Faber, George Deniton (Clapham)	Mills, Hon. Charles Thomas
Falie, B. G.	Mitchell, William Foot	TELLERS FOR THE AYES.—Mr;
Fell, Arthur	Morpeth, Viscount	Gibson Bowles and Mr. Sanderson.
Fletcher, J. S.	Morrison, Captain J. A.
NOES.
Abraham, William	Clancy, John Joseph	Gibson, Sir James P.
Adam, Major W. A.	Clough, William	Gill, A. H.
Addison, Dr. C.	Collins, G. P. (Greenock)	Glanville, H. J.
Agar-Robartes, Hon. T. C. R.	Collins, Stephen (Lambeth)	Goddard, Sir Daniel Ford
Agnew, George William	Collins, Sir Wm. J. (St. Paneras, W.)	Goulding, Edward Alfred
Alden, Percy	Compton-Rickett, Sir J.	Greenwood, G. G.
Allen, Charles P.	Corbett, A. Cameron (Glasgow)	Major Guest,
Ashton, Thomas Gair	Cornwall, Sir Edwin A.	Gwynn, Stephen Lucius (Galway)
Baker, H. T. (Accrington)	Cowan, W. H.	Hackett, J.
Baker, Joseph A. (Finsbury E.)	Craig, Herbert J. (Tynemouth)	Haldane, Rt. Hon. Richard B.
Balfour, Robert (Lanark)	Crawshay-Williams, Eliot	Hancock, J. G.
Barnes, G. N.	Crosfield, A. H.	Harcourt, Robert V. (Montrose)
Barran, Rowland Hirst (Leeds, N.)	Cullinan, J.	Hardie, J. Keir (Merythyr Tydvil).
Barry, Redmond J. (Tyrone, N.)	Davies, David (Montgomery Co.)	Harmsworth, R. L.
Benn, W. (Tower Hamlets, S. Geo.)	Davies, M. Vaughan-(Cardiganshire)	Harvey, A. G. C. (Rochdale)
Boyle, D. (Mayo, N.)	Dawes, J. A.	Harvey, T. E. (Leeds, W.)
Brady, P. J.	Delany, William	Havelock-Allan, Sir Henry
Brocklehurst, W. B.	Denman, Hon. Richard Douglas	Haworth, Arthur A.
Burke, E. Haviland-	Dillon, John	Hayward, Evan
Burns, Rt. Hon. John	Donelan, Captain A.	Hemmerde, Edward George
Buxton, Noel (Norfolk, N.)	Doris, W.	Henry, Charles S.
Buxton, Rt. Hon. Sydney C. (Poplar)	Duncan, C. (Barrow-in-Furness)	Higham, John Sharp
Byles, William Pollard	Duncan, J. Hastings (York, Otley)	Hills, J. W.
Cameron, Robert	Duncannon, Viscount	Hobhouse, Rt. Hon. Charlss E. H.
Cawley, Sir Frederick (Prestwich)	Dunn, A. Edward (Camborne)	Hogan, Michael
Cawley, Harold T. (Heywood)	Elibank, Master of	Holt, Richard Durning
Channing, Sir Francis Allston	Falconer, J.	Hooper, A. G.
Chapple, Dr. W. A.	George, Rt. Hon. David Lloyd	Horne, C. Silvester (Ipswich)
Howard, Hon. Geoffrey	Morgan, G. Hay (Cornwall)	Seddon, J.
Hunter, W. (Govan)	Morgan, J. Lloyd (Carmarthen)	Seely, Col., Rt. Hon. J. E. B.
Illingworth, Percy M.	Murray, Captain Hon. A. C.	Sherwell, Arthur James
Isaacs, Sir Rufus Daniel	Muspratt, M.	Smith, H. B. (Northampton)
Jones, Sir D. Brynmor (Swansea)	Nannetti, Joseph P.	Smyth, Thomas F. (Leitrim, S.)
Jones, Edgar (Merthyr Tydvil)	Neilson, Francis	Soares, Ernest J.
Jones, William (Carnarvonshire)	Nicholson, Charles N. (Doncaster)	Stanier, Beville
Jowett, F. W.	Nolan, Joseph	Strachey, Sir Edward
Joyce, Michael	Nugent, Sir Walter Richard	Summers, J. W.
Kerry, Earl of	Nuttall, Harry	Sutherland, J. E.
Kilbride, Denis	O'Brien, Patrick (Kilkenny)	Thomas, J. H. (Derby)
King, J. (Somerset, N.)	O'Connor, T. P. (Liverpool)	Thomson, W. Mitchell (Down, North)
Lardner, James Carrige Rushe	O'Dowd, John	Toulmin, George
Leach, Charles	Palmer, Godfrey Mark	Trevelyan, Charles Philips
Levy, Sir Maurice	Parker, James (Halifax)	Ure, Rt. Hon. Alexander
Lewis, John Herbert	Phillips, John (Longford, S.)	Verney, F. W.
Lockwood, Rt. Hon. Lt.-Col. A. R.	Plrie, Duncan V.	Vivian, Henry
Lundon, T.	Pointer, Joseph	Walker, H. De R. (Leicester)
Lyell, Charles Henry	Ponsonby, Arthur A. W. H.	Walsh, Stephen
Lynch, A. A.	Power, Patrick Joseph	Wardle, George J.
Macdonald, J. R. (Leicester)	Price, C. E. (Edinburgh, Central)	Warner, Sir Thomas Courtenay
Macdonald, J. M. (Falkirk Burghs)	Priestley, Sir W. E. B. (Bradford, E.)	Wason, Rt. Hon. E. (Clackmannan)
Macnamara, Dr. Thomas J.	Primrose, Hon. Nail Jamas	Wason, John Cathcart (Orkney)
MacNeill, John Gordon Swift	Pringle, William M. R.	Waterlow, D. S.
MacVeagh, Jeremiah	Radford, G. H.	Wedgwood, Josiah C.
M'Callum, John M.	Raffan, Peter Wilson	White, J. Dundas (Dumbartonshire)
M'Laren, Rt. Hon. Sir C. B. (Leics.)	Reddy, M.	White, Sir Luke (York, E.R.)
M'Laren, Walter S. B. (Ches., Crewe)	Redmond, John E. (Waterford)	Whyte, Alexander F. (Perth)
Mallet, Charles E.	Rees, Sir J. D.	Williams, P. (Middlesbrough)
Markham, Arthur Basil	Roberts, Charles H. (Lincoln)	Williams, Llewelyn (Carmarthen)
Meagher, Michael	Robertson, J. M. (Tyneside)	Wilson, John (Durham, Mid.)
Meehan, Francis E. (Leitrim, N.)	Robinson, S.	Wing, Thomas
Meehan, Patrick A. (Queen's Co.)	Roche, John (Galway, East)	Wortley, Rt. Hon. C. B. Stuart-
Menzies, Sir Walter	Roe, Sir Thomas	Young, W. (Perthshire, E.)
Millar, J. D.	Runciman, Rt. Hon. Walter	Yoxall, Sir James Henry
Molloy, M.	Samuel, Rt. Hon. H. L. (Cleveland)
Mond, Sir Alfred	Sandys, G. J. (Somerset, Wells)	TELLERS FOR THE NOES.—Mr.
Montagu, Hon. E. S.	Scott, A. H. (Ashton-under-Lyne)	Gulland and Mr. Dudley Ward.
Mooney, J. J.

Mr. GIBSON BOWLES

I beg to move, after the word "ten" ["the year beginning the sixth day of April, nineteen hundred and ten "], to insert the words "on income as defined by the Income Tax Acts after deduction there from of allowance for the depreciation of all capital employed consisting of wasting assets."

Of course, the Committee will understand that I do not wish to interfere with their Friday afternoon arrangements, and, although in reality I ought to take a Division on each one of my Amendments, I shall endeavour to meet the week-end views of hon. Members by shortening the matter as much as I can. My second Amendment is after "Income Tax' ["that Income Tax shall be charged"] to insert the words" in respect of the annual value of real property or the occupation thereof and upon profits or gains actually received or accruing during the calendar year immediately preceding the year of assessment."

There is a good deal to be said for that, but, as I would rather not take up the time of the Committee, I will not move it. I will move my third Amendment—after the word "ten" to insert the words "on income as defined by the Income Tax Acts after deduction there from of allowance for the depreciation of all capital employed consisting of wasting assets."

This is a most serious and substantial Amendment. I have had numerous representations from all parts of the country on this matter. The merits of the question, I think, are thoroughly understood. The object of the Amendment is to bring the statutory income of the taxpayer, which at present can only be ascertained by a correct knowledge of 250 Acts of Parliament, more in relation to his actual profits. At present no depreciation is permitted except for wear and tear of plant and machinery, that is wheels and tools, and the expression is interpreted in the narrowest sense. Although a gardener is allowed depreciation in respect of a spade, a music master is not allowed any depreciation in respect of a pianoforte, although it wears out probably much sooner than the music master himself; nor is any depreciation allowed in respect of any wasting assets, such as the value of patents, mixtures, licences, or other capital which wastes in making profit. Inasmuch as the Chancellor of the Exchequer considers that the ethical effect of a tax should be borne in mind, I shall expect his support to this modification, which must have the effect of making the Income Tax less unpopular to the taxpayer. Many-Members of the Committee may have observed that since I introduced my Amendments they have appeared in the newspapers—one of them the "Daily Telegraph." This Amendment, I believe, really requires no justification. It stands upon its own merits. When you are not getting income, but are paying out of capital, you are entitled to have that considered in the levying of the Income Tax. The question of wasting assets is one of the utmost importance. May I give one example to bring it home to the Committee? I own a house for which I paid £8,000. The ground rent is £5, and the Income Tax has to be paid in respect of that house on an assessment of £367 a year. I do not get a farthing of income from the house; on the contrary, my £8,000 are gradually disappearing into thin air. Nevertheless, I am called upon to pay on £367 a year as if it were income. You have a coat and boots, and they are continually wearing out. You cannot treat them as income. You cannot either treat a motor car as income, yet leaseholds are so treated. These are but small illustrations of a very important question. This question of wasting assets is one of intense importance, and I feel, therefore, I must divide the House upon this Amendment; but out of feeling for hon. Members who are anxious to get away, and who have rather had this Debate sprung upon them, I shall refrain from moving any of my other Amendments.

Mr. ERNEST POLLOCK

I wish to second. I agree that this question of wasting assets is a very important one; indeed, I do not think the Committee properly appreciate it. Income upon which Income Tax is charged is, of course, statutory income; but the way in which it is arrived at is by a complicated series of Statutes and a number of Rules which have been developed from time to time. The original Income Tax Act of 1806 was copied into the Act of 1842. Then we had the Act of 1853, which was supposed to be a temporary arrangement, but from that time the Chancellor of the Exchequer has gone on imposing Income Tax without going into this question of the real basis on which statutory income is to be calculated.

For a long period of time no deductions, or substantially no deductions, were allowed in respect of what are really financially known as capital output, but at last we have got a deduction allowed under the Act of 1878 in respect of repairs and machinery. That is worked on a basis very roughly, and a very narrow construction is given to the words "repairs and machinery"—far too narrow a construction from the financial point of view. Even more recently we have at last got it established that a deduction shall be allowed in regard to ships because they are a wasting asset. Four per cent, is allowed on their capital value, and therefore twenty-five years is taken as the life of a ship. But what is now allowed in respect of repairs and machinery and in respect of ships ought also to be allowed in regard to expenditure which is of a capital nature upon mines and minerals and other cases where there are wasting assets. The question depends upon judge-made law and the artificial rules which have been laid down. It has been held in a well known case that no deduction can be allowed for works in a mine which is worked out. Although that money is dead loss it is still to be subject to the Income Tax.

In another case, that of a company which worked a nitrate bed in Chili, they were not allowed to deduct the capital amount which they had paid for that portion of the bed which was worked out in the course of a year. The total sum which the company received in one year was £160,000, but in order to get that sum they had used up £40,000 of their capital; that is to say, they had used a portion of the nitrate bed which represented £40,000 in capital. For the purpose of deduction in respect to Income Tax they should have-been, I think, allowed a deduction in respect of so much of the cost of working the bed and in respect of the amount by which their estate had depreciated by reason of the fact that they had exhausted part of their actual mineral bed. Such are the rules made under the Income Tax that no deduction was allowed, and the company had to pay as if it were income on the whole £160,000 without any allowance for the £40,000 capital which was finally wasted. If a man had been working at cotton spinning, he would be allowed, before he made a profit, something for the prime cost of the raw material which he has used, but the licensees in the case of minerals, coal, gravel beds and nitrate beds are still taxed on their capital expenditure. Now that the Income Tax has become a permanent one, and bears so hardly as it does, an allowance should be made. I therefore support the demand of my hon. Friend to the full extent of my power that an allowance and deduction should be made in respect of the prime cost of the material which is used in the case of mining and mineral companies before they ascertain their profit which is to be divided among the shareholders. I know that some different considerations apply in respect of patents, copyrights, and leases, and I am not quite certain that the hon. Member is quite happy in taking the lease of his house as a case. I confine myself on this question of wasting asests to the case of minerals. It must be a surprise to any accountant or to any common-sense man to learn that in the case of minerals he will not be allowed any deduction for the prime cost of the material that he has used, and which is finally lost. He has to pay Income Tax on the gross profit, without any deduction at all. In the case of shops, and many other cases, we have established that some deduction should be allowed, and the Amendment is that we should also have a deduction allowed to the extent to which the capital has been finally wasted. There is a little more in it than the mere question of whether or not persons receive large dividends or not. If you are going to have a prudent system of finance you ought to ask persons who are engaged in business to allow a proper sum for depreciation of plant or material year by year. When you have a system under which no deduction is allowed you militate against a prudent system of finance being adopted by those engaged in financial operations where a large wastage of assets occurs.

Mr. MARKHAM

In mines full depreciation is allowed for all plant and all material that is used.

Mr. POLLOCK

But not for the coal that is taken from the coal-bed. To the extent to which you are putting down plant or repairs and so on a certain deduction would be allowed, but nothing for the coal. If you buy a nitrate bed or a gravel bed for £1,000, and if in the course of a year you have worked half of that bed, and you have used up £500 worth of your capital, you are taxed upon the whole sum that you have received before any deduction is made from your profits in respect of the gravel or the coal that you have worked. That is unsound finance. It is not prudent. It is not in accordance with the way in which commonsense men conduct their business, and I think it is high time that these rules were looked into again by those who are responsible for the Income Tax in order that we may have a more sensible system estab- lished now that the Income Tax has become a permanent tax. I desire to support my hon. Friend, particularly in the matter of coal and minerals, although on the question of leases, copyrights, patents, and other things I think there is a danger in asking that they should be treated on the same basis as we ask that minerals and true wasting assets should be dealt with.

Mr. LAWSON

The rules of the Inland Revenue as they are at present administered are nothing short of a curse to the trade and a menace to the industries of the country. They are so narrowly interpreted, and they are so insufficient in the amount allowed for depreciation of plant that they are really calculated to do all that is possible to obstruct enterprise and to prevent the improvements which are absolutely necessary if our industries are to be maintained at their proper standard of efficiency. The size of the scrap heap is a measure of the enterprise of the country. Every year it is becoming more plain that the life of the machine necessarily becomes shorter and shorter, and yet the allowances made by the officials of Inland Revenue for plant and machinery are kept at the same long term, of years as they have always been, and that term is so long that any man who shows enterprise in substituting new and better machinery for old is immensely penalised in the process. I will give the Committee one example. Take the case of boilers. There have been enormous improvements made in the character of the boilers used in different trades. We have got the tubular boiler, automatic stokers, and all the rest of it, and yet, according to the rules for which the right hon. Gentleman opposite is responsible, only something like 5 per cent, is allowed for depreciation in boilers, and in many cases the depreciation allowed is so small that manufacturers, and others engaged in my own trade, are prevented from substituting better boilers which would enable them to effect a great saving of coal and which would cheapen the whole cost of output. Is that a fair thing? Is it not calculated to put us at a great disadvantage as compared with other nations by penalising enterprise in such a way for wear and tear? I would like the right hon. Gentleman to make a fair allowance for depreciation. It would be of very great benefit to labour as well as to capital. It is really a necessity of the enormous progress and the quickened processes of our time. We hear that things are Americanised in these days. They are Americanised in the sense that every year there are improvements introduced into the processes of every trade which require changes which the rules administered by the Inland Revenue Department necessarily obstruct.

The truth is that the rules of the Inland Revenue are out of date. They go back to another epoch of industry and they are administered by the official mind as if nothing had changed. There is no change in the red tape methods of the Inland Revenue. There is no change in the mind -of the official, but there is an enormous change in the way in which both the manufacturer and his manager look at the signs of the times. They know, if they are to keep our industries up to the top note of efficiency, they are bound every year to introduce improvements which necessitate the scrapping of plant and machines. Why should not that be fairly recognised? Has not the time come when what is claimed to be a business Government should look at this thing from a business point of view? I do not know any part of the machinery of Government which requires more bringing into consonance with the enterprise of our age. If the right hon. Gentleman will consent to listen to any of those who are engaged in the practical processes of industry in all parts of the country, they will tell him that the rules in his Department are behind the time. I was talking only yesterday to a gentleman engaged in mining enterprise, and he told me that in regard to the plant and machinery of mines something like 3 per cent, is only allowed for depreciation. Whether that is so or not I do not know, but there are experts here who can speak with authority. I know as to many industries centred in and around the Metropolis that there is a marked insufficiency in the allowances made in regard to our means of commercial warfare and our means of commercial life, and I ask the right hon. Gentleman whether, as a consequence of the Amendment moved by my hon. Friend, he will not give the Committee an assurance that he and those concerned with him in the administration of the Inland Revenue will reconsider the whole position from the practical and the business man's point of view.

Mr. PETO

The hon. Member who seconded the Amendment (Mr. Pollock) dealt with the subject from the legal point of view and with great knowledge, and the hon. Member for Mile End (Mr. Lawson), I am glad to say, reinforced his argument from the point of view of a business man. I would like to do the same to a very small extent. The hon. Member for Mansfield (Mr. Markham), interrupting a previous speaker, said that adequate allowance was made for mining plant and machinery. In the case of a coal mine with a very long life before it, it may work out all right. These rules, I agree, are red tape rules, and applied to everything without discrimination, they may, on the average, work out fairly right with our great coal mines in England. But I have personal experience of a totally different kind in a mining industry, where a small sporadic deposit of mineral has got to be attacked or left alone; where a mine, or, if you like to call it so, a shaft, has to be sunk, and its outside life may be three or four years. Here you get the proof of this red tape system in having a maximum of 5 per cent, applied to something which has an outside life of five years. One feels that these wasting allowances are wholly inadequate. But I want to put it on a slightly wider ground than that. The hon. Member for Blackburn (Mr. Snowden) the other night was deploring the extraordinary discrepancy between the great increase in the income of the nation and the decrease in the wages of the people. I want to point out that this direct taxation, in which the so-called Income Tax occupies a principal place, has a great deal more to do with the state of affairs that the Member for Blackburn deplores than might appear on the surface. This Income Tax is not a tax upon income. It is a tax upon the earnings of every business and industry in the country, and if you go beyond that, as is done under the present system of administration, and insist, through the means of the Income Tax collector, on collecting on profits that have never been made, and never can be made, without making due allowance for wasting assets, then you are adding one more to what I consider the long list of handicaps and disabilities of trade and industry in this country. If that is so, it carries you a step further. The hon. Member for Blackburn, comparing the total income of the country with the diminished wages of the people, was not comparing like with like. The capital of the country is invested in other countries besides this. The wages whose decrease the hon. Member was de- ploring were the wages paid in this country. Therefore it make it more important that this Amendment should be passed, so that the disabilities and disadvantages which a person incurs when he invests capital employing labour in this country, employing English labour, should "be removed, and that the unfairness in the incidence of this direct taxation should be absolutely done away with by bringing the rules under which it is collected up to date and in accordance with modern conditions. I have much pleasure in supporting the Amendment.

Sir F. BANBURY

This is such a very important subject that I do not wish to let it pass without saying a word upon it, especially as the speeches made have been of such extreme interest. I do not wish to deal with the question of machinery raised by my hon. Friend, because I do not pretend to have any technical knowledge with regard to machinery. He has explained to us that there is some percentage allowed for depreciation of machinery. Probably it is not enough, and it ought to be looked into. But it touches other things as well. There are English companies who have made railways abroad. These railways revert to the State after a certain number of years, and the capital of these railways will then be spent, and the shareholders will get nothing. Unless that capital is restored to be employed again, enterprise will be crippled in this or any other country. Unless an attempt is made then to set aside out of revenue a sufficient sum to restore that capital, that capital disappears. What does the Chancellor of the Exchequer do? He says that if you take out of your income a certain sum of money, £50,000 or £100,000—it must mean large sums—to restore the original capital outlay, you have to pay Income Tax on the amount you put by. That is putting a premium upon doing what is not right; it is an incentive to directors of companies, as I am afraid they are inclined, to pay too high dividends. This is not a party question, and it does not involve any large expenditure, but the man who investigates the question carefully "will think that this tax ought not to be charged upon a sum put by for an object which everybody must admit is a proper one. In regard to mines, the hon. Gentleman opposite referred to the amount put by for depreciation of machinery. My hon. Friend pointed out that if to-morrow I were to invest a sum of £100,000 in a mine, and received 10 per cent, interest on the capital—I do not know what amount is received, it may be that it is larger—before I can declare it I must pay a sufficient sum to recoup the £100.000 in a term of years, otherwise I should be living on my capital, which is a thing nobody should do. What happens? I should have to pay Income Tax on the amount I put by. Therefore in an enormous industry like mines no encouragement is given by the State to the owners of these mines to take the proper precautionary step of putting aside, out of their profits, a sufficient sum to protect themselves against depreciation in their assets, which must come as certain as I am standing here. Last year I raised this question at the request of some of the leading firms in the City, and I also raised it in the year previous. Now it is raised again by the hon. Gentleman opposite, who is supporting the Government, who I hope will see their way to accepting the Amendment.

Mr. J. F. MASON

I think it will be generally admitted that the grievance which is raised by this Amendment is a very real one. The maintenance of our present system has been justified, not by any argument that it is sound in principle, but simply by the difficulty of calculating what is really income and what is really return of capital. Last year the Secretary to the Treasury in dealing with this very question defended his attitude by referring to the difficulty of making an alteration. In the case of companies it must be borne in mind that so-called income is really to a great extent a return of capital, and it pays Income Tax, though it is not really income at all. In the case of a company which no longer requires its capital, and repays a portion of it to the shareholders, I believe that returned capital does not pay Income Tax, and that, therefore, there is differentiation between those two cases, and that is to my mind wholly unjustifiable. The high return on such securities as, say, a gold mine is due solely to the fact that the gold mines are known to have a comparatively short life; so that when you get, say, 10 per cent., nobody imagines that that represents income, but knows it means income plus sinking fund, or, in other words, a return of capital. If that is the effect as regards the ordinary Income Tax, how much more is the grievance magnified now that you have to deal with a high ordinary Income Tax and a Super-tax. The effect of charging Income Tax on what is really capital may in a number of cases not only unduly swell the Super-tax, but bring a man up to the limit which is liable to the Super-tax.

The other kind of wasting security, which is a very hard case indeed, is the usual one of leases. We have cases of leases which are bought for a very short time to run, and on which the income is to a, very large extent really merely a replacement of the money paid for the lease. I have here some recent cases which clearly illustrate my argument. The first is the case of a lease which dates from 1865 for fifty years, and, therefore, expires in 1917. That lease was bought in the year 1889 for £2,250, and was sold this year, with only seven years to run, for £775. The rack rent in that case is £230, less ground rent of £50, making a net rent of £180. It is quite evident that in paying £775 for a seven years to run lease, which was to bring in £180, that more than £100 of that must be set aside by a prudent investor as sinking fund, and could not possibly be treated in any sense of the word as real income. It certainly seems hard that for the purpose of taxation in a case like that the income should be calculated on that basis, whereas in the case of certain companies, if such income was looked upon as divisible, it would be a fraud; while, on the other hand, if it is not considered for the purpose of taxation as income, it is equally committing a fraud. It seems that in those cases there must be two ways of calculating incomes, a course which cannot be justified, and I do not think will be justified other than by quoting the difficulties which stand in he way of any alteration. Last year the action was defended solely on the ground that it was impossible so late in the Session to make an alteration of the kind suggested.

But the right hon. Gentleman then made his defence on the ground of its being too late to make the alteration at that time of the Session. Now, at this time, when we are a long way from seeing the beginning of the Finance Bill, surely the right hon. Gentleman has every opportunity of introducing this alteration. We are now in the very preliminary stages of the question, and before the Finance Bill is introduced I am sure he will have an opportunity of fully considering the matter and seeing whether the difficulties, which I acknowledge stand in his way, cannot be easily overcome. But another defence that has been made was that any altera- tion as regards the application of this question to the Super-tax must necessarily apply also to the ordinary Income Tax. Of course, in justice it should, but I do not think there is any reason why, because a thing is acknowledged to be unjust but unavoidable in the case of one tax, it should be necessarily applied to the other j if means can be found to prevent it. I acknowledge that it is quite indefensible as regards the one thing or the other, but I would suggest to the right hon. Gentleman that, having now plenty of time before the introduction of the Finance Bill, it would be an excellent opportunity to thresh out in his own mind the whole question.

Mr. J. G. BUTCHER

This is a matter which vitally affects the whole community, not merely capitalists, but the wage earners, and it is quite obvious that on this Friday afternoon we cannot discuss this question as fully it ought to be discussed in the interests of the business community. I want to ask, Will the Government give us an opportunity for further considering the matter on Report? It is a matter which ought to have been discussed long ago. Perhaps they will give us their promise that they will give adequate opportunity of discussing it later.

Mr. HOBHOUSE

I think we have met the position very well on this subject, and I trust therefore that the hon. Gentleman will not press the point upon me that this. Debate should be continued.

Mr. BONAR LAW

That is not the point. We are perfectly ready to do what we can to assist an early termination, but this is really an important, an increasingly important, subject, and all that my hon. Friend wants is that the right hon. Gentleman should not put down this subject for discussion after 11 o'clock on the Report stage, and that we should have an opportunity of discussing it at a reasonable time.

5.0 P.M.

Mr. HOBHOUSE

It is difficult to speak about the disposal of time in the absence of my Leader. He, naturally, is absent on other business at this moment, but, so far as I have been able to consult my hon. Friend the Patronage Secretary, he is disposed to see what can be done on Report. But that must not be taken as a definite promise. I will see what can be done. I am very sorry upon a question of this sort to take first of all a minor objection to the Amendment of my hon. Friend behind me, but it shows in a very difficult and tech- nical subject like this what difficulties really lie in his suggestion, and how many are the pitfalls which are met by even so experienced a draftsman as my hon. Friend. I have had a search made into the Income Tax Acts, and there is no definition there of "income"; therefore, if we were to adopt the income as defined by the Income Tax Acts we should have no definition to go by at all. The Income Tax is charged not upon the aggregate income, but upon the individual profits and dividends which go to make up the whole of that income, and therefore to apply, as the hon. Member proposes to do, a deduction with respect to the whole aggregate income, it would have to be on the individual profit or dividend of each particular investor. But that, I admit, is a mere critical examination of the words under discussion, and I come to what is, after all, the real basis of the speech of the hon. Member for Windsor (Mr. Mason). The hon. Member, in what I venture to think was a most moderate and reasonable speech, laid stress upon the fact that I myself defended a similar proposal last year in a speech made upon the difficulties connected with the administration of the Income Tax Acts. I confess that to-day my attitude is very much the same as it was last year. Income Tax, after all, is an annual tax upon actual profits, and those profits depend upon the actual figures of receipt and expense. To go behind those figures of actual receipt and expense would entail an enormous amount of inquiry very difficult and costly and troublesome to make, and would entail an amount of inquiry into the proceedings of the concern which would really tax the most inquisitorial and the most strict investigator to arrive at what were the actual figures which ought to be properly deducted in order to satisfy the potential taxpayer. To illustrate again the difficulties of the subject, the hon. Member for Leamington (Mr. Pollock) differed from my hon. Friend behind me when it came to the question of leasehold properties, and he himself differed from the Mover of this Amendment who proposes that leaseholds should be included in the exemption clauses. The hon. Gentleman opposite thought they were unsuitable to be included.

Mr. POLLOCK

What I said was, that leaseholds, copyrights and patents fell into rather a different category, because they are always treated so, and different circumstances apply to them as would apply to wasting masses of capital in the sense which my hon. Friend means.

Mr. HOBHOUSE

That shows there are greater difficulties in approaching this subject than would appear at first sight. If there were different categories of these-wasting assets each of them would have to be classified by itself. To some deductions must be allowed, whilst others would have to be excluded. When it comes to-the question of machinery I confess I find myself in some agreement with the hon. Member for Mile End (Mr. Lawson), who asks that a wear-and-tear allowance should be made in the matter of machinery. If I recollect aright an allowance was made in respect of machinery for the first time in the Act of 1878. I think that allowance should be of a fair wear and tear character, and represent the life of the machinery, and I think under the administrative process of 1897 the allowance, which may have been at the rate of 3 per cent, mentioned by the hon. Gentleman, has been increased to a considerable extent, and he himself would be the first to admit that you cannot allow every class of machinery the same rate of allowance. It may be 3 per cent, in one case; it may have to be 10 per cent, in another. You cannot lay down a fixed scale to apply to all machinery alike, but you must allow for the nature and kind of machinery employed. When it comes to a case of a really fair wear-and-tear allowance I confess I find myself in agreement with the hon. Gentleman. Then the hon. Gentleman raised the question of wasting assets, which may be covered by these two distinctions—capital invested in the purchase of temporary sources of profit, or that of a character which is invested in the purchase of temporary interest in a permanent source of profit. There I find myself in disagreement with hon. Gentlemen opposite. If you purchase, as my hon. Friend behind me has purchased, a leasehold house, he has in respect of that house paid a less sum for it than he would have done if he had purchased a freehold. He has himself discounted his temporary leasehold interest in the house by the price which he has paid. I confess that I do not on that point sympathise as I do with the hon. Gentleman opposite in the matter of machinery. I agree that this subject should be considered. During the months which will intervene between this and the resumption of the Session in November I can assure the hon. Gentleman the Member for Windsor, so far as I am concerned, that I will bring this question seriously to the notice of my right hon. Friend the Chancellor of the Exchequer. I have an open mind—perhaps a mind more than half open—upon the subject of machinery. Though he cannot expect that I should accept this Amendment to-day, I assure 4iim that it shall receive the fullest consideration in the course of the next few months.

Mr. PRETYMAN

First, I would thank the right hon. Gentleman for his promise that this matter shall be considered. At the same time I think my hon. Friends will, if the hon. Gentleman opposite divides, go into the Lobby with him, because I cannot think that any of the actual reasons given by the right hon. Gentleman are very convincing. When the right hon. Gentleman suggests that an inquisitorial investigation is required and a great many categories will have to be examined into, I do not think that that explanation will hold water. It does not appear to be very difficult for the Government to make an inquisitorial investigation, and to go into a great many categories of property, when it is a question of getting money. The matter is one of fairness, because I do not think any hon. Gentleman on either side of the House will object to the principle of the Amendment proposed by the hon. Gentleman opposite. The only difficulty, if there is one, I take it from the speech of the right hon. Gentleman, is one of administration. I think it is very necessary and desirable that between now and the time when the matter comes up for Debate on the Budget, or the Finance Bill, that some definite proposal should be put before the House to remedy the very serious injustice with which this Amendment proposes to deal. I do not want to labour the point. It is only that the right hon. Gentleman has given no answer in regard to the depreciation of mines or other wasting securities. I take it that that was the part of the speech that he could not answer—because there is no answer in principle. The only answer the right hon. Gentleman professed to give was the difficulty of administration. No other answer was attempted. That being the only answer, I think it will be necessary to show that the difficulties of administration are insurmountable. If that can be shown to the satisfaction of the House, that is an answer. I do not believe they are insurmountable; and I am suspicious that the Chancellor of the Exchequer, in his anxiety to get money to meet a deficit, has not had time to go into this question as closely as he might have done. I hope he will do so, and that he will propose something which is to the satisfaction of the House and the country in this very important matter.

Mr. STEEL-MAITLAND

May I ask the Financial Secretary to the Treasury whether, if he obtains an opportunity for further discussion, it should not be limited to the one point of wasting securities in connection with Income Tax, but that other defects in the present Income Tax system, such as double taxation and the taxation of gross instead of net revenue, should be discussed also?

Mr. HOBHOUSE

The hon. Member made an appeal to me to have more time granted for the discussion of these Resolutions on the Report stage. No one, of course, but the Prime Minister can speak as to the disposal of the time of the House, but I heard it mentioned that the general wish of the House was to get to the end of this portion of the Session as soon as possible, and if demands are made for time for further discussion that general desire cannot be accomplished.

Mr. GIBSON BOWLES

I have been endeavouring to find reasons for not dividing on this Amendment, but though the right hon. Gentleman the Secretary to the Treasury has admitted the grievance, he has not promised the acceptance of my Amendment. He admitted that although there are 250 Income Tax Acts, there is no definition in any of these Acts of what each person is to be charged upon in respect of gains, profits and property. I think it is time we got some information in some consolidated Income Tax Act on the point, the essential and admittedly undefined object of the charge. The right hon. Gentleman has admitted that my contention is extremely well-founded, but as he gave no promise of the acceptance of my Amendment I must go to a Division.

Question put, "That the words 'on income as defined by the Income Tax Acts after deduction therefrom of allowance for the depreciation of all capital employed consisting of wasting assets' be there inserted."

The Committee divided; Ayes, 96; Noes, 167.

Division No. 87.]	AYES.	[5.10 p.m.
Adam, Major W. A.	Goldsmith, Frank	Nicholson, Wm. G. (Petersfield)
Baird, J. L.	Gordon, J.	Ormsby-Gore, Hon. William
Baker, Sir R. L. (Dorset, N.)	Gretton, John	Peel, Hon. W. R. W. (Taunton)
Balcarres, Lord	Guinness, Hon. W. E.	Peto, Basil Edward
Banbury, Sir Frederick George	Gwynne, R. S. (Sussex, Eastbourne)	Pretyman, E. G.
Barnston, H.	Hambro, Angus Valdemar	Quilter, William Eley C.
Barrie, H. T. (Londonderry, N.)	Hamilton, Marquess of (Londonderry)	Rice, Hon. Walter F.
Bathurst, Hon. A. B. (Glouc, E.)	Healy, Timothy Michael (Louth, N.)	Ridley, Samuel Forde
Bathurst, Charles (Wilton)	Hillier, Dr. A. P.	Rolleston, Sir John
Beckett, Hon. W. Gervase	Hills, J. W.	Ronaldshay, Earl of
Bentinck, Lord H. Cavendish-	Hope, Harry (Bute)	Sanderson, Lancelot
Boyle, W. L. (Norfolk, Mid.)	Houston, Robert Paterson	Sandys, G. J. (Somerset, Wells)
Boyton, J.	Hunt, Rowland	Stanier, Beville
Brassey, H. L. C. (N'thamptonshire, N.)	Kerry, Earl of	Stanley, Hon. G. F. (Preston)
Bryce, J. Annan	Keswick, William	Steel-Maitland, A. D.
Butcher, J. G. (York)	King, Sir Henry Seymour (Hull)	Stewart, Gershom (Ches., Wirral)
Campbell, Rt. Hon. J. H. M.	Kirkwood, J. H. M.	Stewart, Sir M'T. (Kirkcudbrightsh.)
Campion, W. R.	Law, Andrew Bonar (Dulwich)	Talbot, Lord E.
Carlile, E. Hildred	Lawson, Hon. Harry	Tryon, Capt. George Clement
Castlereagh, Viscount	Lee, Arthur H.	Walker, Col. W. H. (Lancashire)
Cautley, H. S.	Lloyd, G. A.	Warde, Col. C. E. (Kent, Mid.)
Chaloner, Colonel R. G. W.	Locker-Lampson, G. (Salisbury)	Waterlow, D. S.
Clay, Captain H. H. Spender	Lockwood, Rt. Hon. Lt.-Col. A. R.	Wheler, Granville C. H.
Cooper, R. A. (Walsall)	Lonsdale, John Brownlee	White, Major G. D. (Lanes., Southport)
Eyres-Monsell, B. M.	MacCaw, Wm. J. MacGeagh	Willoughby, Major Hon. Claude
Faber, George Denison (Clapham)	Mackinder, Halford J.	Wood, Hon. E. F. L. (Ripon)
Falle, B. G.	Macmaster, Donald	Wood, John (Stalybridge)
Fell, Arthur	M'Kean, John	Worthington-Evans, L.
Fitzroy, Hon. E. A.	Mason, J. F.	Wortley, Rt. Hon. C. B. Stuart-
Fletcher, J. S.	Mills, Hon. Charles Thomas
Gastrell, Major W. H.	Morpeth, Viscount	TELLERS FOR THE AYES.—Mr.
Gilmour, Captain J.	Morrison, Captain J. A.	Gibson Bowles and Mr. Pollock.
Goldman, C. S.	Morrison-Bell, Major A. C.

NOES.
Abraham, William	Duncan, J. Hastings, (York, Otley)	MacNeill, John Gordon Swift
Addison, Dr. C.	Elibank. Master of	MacVeagh, Jeremiah
Agar-Robartes, Hon. T. C. R.	Elverston, H.	M'Callum, John M.
Alden, Percy	Falconer, J.	M'Laren, Rt. Hon. Sir C. B. (Leices.)
Allen, Charles Peter	George, Rt. Hon. D. Lloyd	Mallet, Charles E.
Ashton, Thomas Gair	Gill, A. H.	Markham, Arthur Basil
Baker, H. T. (Accrington)	Greenwood, G. G.	Meagher, Michael
Baker, Joseph A. (Finsbury, E.)	Guest, Major	Meehan, Francis E. (Leitrim, N.)
Balfour, Robert (Lanark)	Gwynn, Stephen Lucius (Galway)	Meehan, Patrick A. (Queen's Co.)
Barnes, G. N.	Hackett, John	Menzies, Sir Walter
Barry, Redmond J. (Tyrone, N.)	Haldane, Rt. Hon. Richard B.	Millar, J. D.
Benn, W. (Tower Hamlets, St. Geo.)	Hancock, J. G.	Molloy, M.
Boyle, D. (Mayo, N.)	Harcourt, Rt. Hon. L. (Rosendale)	Montagu, Hon. E. S.
Brady, P. J.	Harcourt, Robert V. (Montrose)	Mooney, J. J.
Brocklehurst, W. B.	Hardie, J. Keir (Merthyr Tydvil)	Morgan, G. Hay (Cornwall)
Burns, Rt. Hon. John	Harmsworth, R. L.	Morgan, J. Lloyd (Carmarthen)
Buxton, Rt Hon. Sydney C. (Poplar)	Harvey, T. E. (Leeds, W.)	Morton, Alpheus Cleophas
Byles, Wiliam Pollard	Havelock-Allan, Sir Henry	Murray, Captain Hon. A. C.
Cameron, Robert	Hayward, Evan	Muspratt, M.
Carr-Gomm, H. W.	Hemmerde, Edward George	Nannetti. Joseph P.
Cawley, Harold T. (Heywood)	Henry, Charles S.	Nicholson, Charles N. (Doncaster)
Channing, Sir Francis Allston	Higham, John Sharp	Nolan, Joseph
Chapple, Dr. W. A.	Hobhouse, Rt. Hon. Charles E. H.	Nugent, Sir Walter
Clough, William	Hogan, Michael	Nuttall, Harry
Collins, G. P. (Greenock)	Holt, Richard Durning	O'Brien, Patrick (Kilkenny)
Collins, Stephen (Lambeth)	Horne, C. Silvester (Ipswich)	O'Connor, John (Kildare, N.)
Collins, Sir Wm. J. (St. Pancras, W.)	Howard, Hon. Geoffrey	O'Connor, T. P. (Liverpool)
Compton-Rickett, Sir J.	Hunter, W. (Govan)	O'Dowd, John
Corbett, A. Cameron (Glasgow)	Illingworth, Percy H.	O'Kelly, James (Roscommon, N.)
Cornwall, Sir Edwin A.	Isaacs, Sir Rufus Daniel	O'Malley, William
Craig, Herbert J. (Tynemouth)	Jones, Sir D. Brynmor (Swansea)	Palmer, Godfrey Mark
Crawshay-Williams, Eliot	Jones, Edgar (Merthyr Tydvil)	Parker, James (Halifax)
Crosfield, A. H.	Jones, William (Carnarvonshire)	Pearson, Weetman H. M.
Cullinan, J.	King J. (Somerset, N.)	Pirie, Duncan V.
Davies, M. Vaughan-(Cardiganshire)	Law, Hugh A. (Donegal, W.)	Pointer, Joseph
Dawes, J. A.	Leach, Charles	Pollard, Sir George H.
Delany, William	Lewis, John Herbert	Ponsonby, Arthur A. W. H.
Denman, Hon. Richard Douglas	Lundon, T.	Power, Patrick Joseph
Devlin, Joseph	Lyell, Charles Henry	Price, C. E. (Edinburgh, Central)
Dillon, John	Lynch, A. A.	Primrose, Hon. Neil James
Donelan, Captain A.	Macdonald, J. R. (Leicester)	Pilngle, William M. R.
Doris, W.	Macdonald, J. M. (Falkirk Burghs)	Raffan, Peter W.
Duncan, C. (Barrow-in-Furness)	Macnamara, Dr. Thomas J.	Reddy, M.

Rees, Sir J. D.	Smyth, Thomas F. (Leitrim, S.)	Wedgwood, Josiah C.
Roberts, Charles H. (Lincoln)	Soares, Ernest J.	White, J. Dundas (Dumbartonshire)
Robertson, J. M. (Tyneside)	Strachey, Sir Edward	White, Sir Luke (York, E.R.)
Robinson, S.	Summers, James Woolley	Whittaker, Rt. Hon. Sir Thomas P.
Roche, John (Galway, East)	Sutherland, J. E.	Whyte, Alexander F. (Perth)
Roe, Sir Thomas	Ure, Rt. Hon. Alexander	Williams, Llewelyn (Carmarthen)
Runciman, Rt. Hon. Walter	Verney, F. W.	Williamson, Sir A.
Samuel, Rt. Hon. H. L. (Cleveland)	Vivian, Henry	Wilson, John (Durham, Mid)
Schwann, Sir C. E.	Walker, H. De R. (Leicester)	Young, W. (Perthshire, E.)
Scott, A. H. (Ashton-under-Lyne)	Wardle, George J.	Yoxall, Sir James Henry
Seely, Col., Right Hon. J. E. B.	Warner, Sir Thomas Courtenay
Sheely, David	Wason, Rt. Hon. E. (Clackmannan)	TELLERS FOR THE NOES.—Mr
Sherwell, Arthur James	Wason, John Cathcart (Orkney)	Gulland and Mr. Dudley Ward.
Smith, H. B. (Northampton)	Watt, Henry A.

Mr. GIBSON BOWLES

With regard to my other Amendments, I think I can relieve the Committee of the time and trouble of entertaining them, especially as my right hon. Friend has promised opportunities for considering them on the Report stage. I may remark that he cannot help himself, it will be on that stage perfectly in order to move that the Resolutions be agreed with, disagreed with, postponed or recommitted to the Committee. But still, in consideration of the very handsome way in which he has endeavoured to meet me I shall not move any other Amendments.

Resolved, 1. "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."

Resolved, 2. "That it is expedient to amend the Law relating to the National Debt, Customs, and Inland Revenue, including Excise," put, and agreed to.

Resolutions to be reported upon Monday next (11th July); Committee to sit again upon Monday next

Whereupon Mr. DEPUTY-SPEAKER adjourned the House without Question put, in pursuance of Standing Order No. 3.

Adjourned at Twenty-five minutes after Five o'clock till Monday next, 11th July.