HC Deb 30 June 1910 vol 18 cc1127-30

I come to the various items of revenue. The first is the Customs. In estimating the revenue from Customs, I first come across the troublesome question of the Spirit Duty I think I had better deal with it before I reach the Excise. It is true that only a small proportion comes under the head of Customs, but the same principle applies to both. Therefore I shall deal at once with the question of spirits. Undoubtedly, last year we lost a good deal of revenue under this head. I have no doubt that a good deal was due to the fact of the extra duty of 3s. 9d. Our estimate was completely wrong—wrong by-millions—and the only thing I can say in defence is that I was nearer the mark than anybody else. I was nearer the mark than the trade itself. There was not a single trade organ—you might imagine they would know more about their business than I did—which did not denounce me for under-estimating the revenue. I was wrong. They were still further wrong. What were the causes? I think, before we-come to the spirit question, and as to whether we should retain the 3s. 9d. extra Spirit Duty or not, we had better, first of all, get the facts. There were three causes of depression in the spirit revenue. Two were temporary. One of them, I believe and hope, will be permanent. Let us take the two temporary causes to begin with. The first was forestalments. There was very considerable forestalment both in March and in April, in anticipation of a very probable increase in the Spirit Duty—which; was very well justified! Taking that forestalment on the 14s. 9d. basis, it accounts for a loss of £1,400,000 of revenue. Then there is the fact that the 3s. 9d. was not Chargéd at all in respect of—

Mr. AUSTEN CHAMBERLAIN

Would the Chancellor of the Exchequer make that calculation a little clearer to us? He says, "taking it on the 14s. 9d. basis." Is he assuming that the year lost 14s. 9d. on every gallon that was forestalled?

Mr. LLOYD GEORGE

No. What I am assuming is: that in respect of the March forestalment we lost 14s. 9d. I am assuming that in respect of not merely the forestalment in April, but also in respect of the whole month of April—from this point of view—we lost the extra 3s. 9d. That is the basis of the calculation. That is the first cause. It is purely temporary. These forestalments have to be made up this year, and therefore that is the cause which is removed when you come to calculate the possible revenue for this year. What is the second temporary cause? Depletion of reserves. The licence holders drew largely on their cellars. They lived on their cellars for some time. I know the hon. Gentleman the Member for Ayr (Mr. George Younger) in the course of discussion on this question pointed out that the trade had learnt a lesson. They find that they can live on very short stocks, and still conduct their business quite as efficiently—

Mr. GEORGE YOUNGER

No.

Mr. LLOYD GEORGE

Not so efficiently, probably; but the lesson they have learnt they will take advantage of in the future. I am assuming that. I think it is very likely they will not restock their cellars to the same extent; that they will not keep the same reserves as they used to do. But to the extent they lived on these reserves, they have to withdraw from bond this year a corresponding amount. Therefore that is a temporary cause. I hope. I have made that clear to the House. Now I come to far and away the largest, most important and substantial cause of the diminution, that is the diminished consumption. What accounted for that? I have made inquiry and found there was a variety of causes. Curiously enough the first is political. The Conservative was so angry that his whisky had been put up in price by a Radical Government that he declined to buy it. The extraordinary thing was that the Radical was equally angry with the publican for putting up the price to a figure which he thought was beyond what was justified, and he would not drink. So that both the Tory and the Radical consumption fell off. Part of that, I have no doubt, is temporary. This resentment will not last, but I must also say that people discovered they were much better off under diminished consumption, and they may decide to make it permanent. But the third cause was that the consumer undoubtedly found he could not pay the extra price, and therefore he cut down his consumption. I have had some very curious reports about the effect which that has had. A Birmingham publican reported that in the morning he used to sell a bottle of brandy with sodas. "Now," he says, "I sell all sodas and no brandy, with just a little whisky." He said that out of four customers now coming in, two are for beer and two for mineral waters. Now that is a change affecting the revenue.

The publicans discovered they could not put up the price; and they are divided about it. There are two great parties: there is the party which puts up the price, and there is the growing party—the party of the future as I believe—which cuts down the measure. They discovered that they could not do busi- ness by selling at a higher price. So now they have resorted to the other expedient of selling at the old price a smaller quantity. I think the old measure was something like a quarter of a gill. They have now cut it down to one-fifth, and they have done it rather cleverly, so I am assured. They use a measure which externally is exactly the same as the old one, but with a raised bottom. Well, now, that is very good for the publican, because it enables him to pay his extra, duty and to make a little profit, and it pleases the customer. I do not think he is at all conscious that he is drinking less, and there is nothing gives greater satisfaction to a man than to feel that as he is growing older he is able to drink exactly the same number of glasses and to carry it better. At any rate, between one cause and another there has been an enormous diminution in the quantity of spirits consumed in this country.

Comparing 1908–9 with this year, there would be a drop of 10,000,000 gallons in the consumption of spirits. I have considered this from two points of view. Of course, as Chancellor of the Exchequer, I have first of all to consider the effect upon the revenue. I do not think the Chancellor of the Exchequer is bound merely to consider that, and I think this is the view taken by the right hon. Gentleman sitting opposite—that is not his view certainly of fiscal reform—but, at any rate, he is bound to consider the revenue. Now what has been the effect upon the revenue? I should like the Committee just to follow the figures. There is an idea that we have lost money by it. We have not. Take the following: There was a steady, continuous diminution in the quantity of spirits consumed in this country. There was a drop of 5 per cent, between 1907–8 and 1908–9. Taking the true revenue of 1908–9—we must eliminate forestalments for that period—there was a drop of 5 per cent. If you assume for a moment that we had not touched the Whisky Duty, but kept it at 11s., and if you assume that the diminution, which had been steady and continuous for years at something like 3 per cent, per annum, would have gone on at the same rate in 1909 and 1910, what would have happened? If you put the revenue at 11s., and on that basis compare it with the revenue and diminution of consumption at 14s. 9d., we are at least £500,000 to the good. It has been a substantial gain to the revenue and not a loss.