FINANCE BILL.

HC Deb 13 December 1911 vol 32 cc2379-446

Motion made, and Question proposed, "That the Bill be now read the third time."—[Mr. Lloyd George.]

Mr. AUSTEN CHAMBERLAIN

The House is not in the mood for listening to lengthy speeches at this stage of the Bill and at this period of the Session, and I intend to occupy only a short space of time. Under the circumstances in which we find ourselves, and considering the conditions we have had to work under during the last few days, it has been impossible for me to equip myself with the material required for a proper survey of our financial position or even to go through such material as I had ready to hand. What I am going to say will, therefore, be of a general character. I do not propose to go into any details in regard to our financial legislation, but I cannot allow this Bill to finally leave the House without entering on behalf of the Opposition—I think I might also say on behalf of a great number of hon. Members on the other side of the House, although I have no title to speak for them—the strongest protest in my power against the course which the Government have taken, not for the first time, in regard to the Finance Bill of the year. For many years the chief pride of the Liberal party was the finance of Mr. Gladstone. In Mr. Gladstone's view economy and retrenchment were the first of all the obligations of a Chancellor of the Exchequer, whatever the risk to his own popularity or the popularity of his party. Mr. Gladstone recognised no higher duty in the House of Commons than that it should keep a jealous and watchful control over the taxation and expenditure of the country. If Mr. Gladstone could revisit the scene of our activities what would he say of his successor in title? I do not think there is a canon of Gladstonian finance to which the Government has not been false, and certainly no Government could treat finance with greater levity than they have done.

Just look at the history of the past few years! We had in 1909 a Budget of extreme importance. It was discussed at very considerable length in this House. I make no complaint of the way in which it was treated, though we were often obliged to discuss very important questions in the early hours of all-night sittings, and even into what we habitually call the morning of the next day. That Bill was not accepted in another place, and a General Election took place upon it. During that election every Liberal platform reverberated with condemnation of the House of Lords for the inconvenience, the confusion, and the injury which they had inflicted on the country by hanging up the financial provisions of the year.

What happened in the following year? That Bill, as the result of the election, went through in the early months of 1918. The Budget Resolutions and the Budget Statement of the Chancellor of the Exchequer of 1910 itself were not presented to the House until the middle of July was passed. No attempt was made to proceed with the further consideration of that Budget until the Autumn Session, and it was not taken up again until a stringent Guillotine Resolution had been passed rendering anything like adequate discussion absolutely impossible, and a Resolution of such a character that in fact the Opposition declined to take part in a discussion which had become absolutely farcical. The Government, confronted last year with the contradiction between their practice and their platform speeches, pleaded that the circumstances of last year were wholly exceptional, that they had to pass two Finance Bills within one year, that the Coronation had intervened in the middle of the period which is ordinarily allotted to the Session, and that all these circumstances had made it impossible for them to treat finance in the normal way; and they pleaded to be excused on account of the abnormal circumstances of the year. I did not think their excuses were sufficient, but I am bound to admit they had some force behind them.

Now we come to the present year. In the present year there were no abnormal circumstances. There was no carrying over from the previous year of a previous Finance Bill. The finance of the year was normal. Yet the Government made no effort to introduce the Finance Bill at the usual time, and, having introduced the Bill, they again postponed it to the Autumn Session for all its further stages; and, not only so, but they reserved the most important of those stages for almost the last business of this prolonged Session, and actually for three successive days in the week before Christmas. What control can the House of Commons have of the finance of the country when its opportunities of considering that finance are of that limited character, and are postponed to that period of the year? It renders our control of finance an absolute farce. It deprives the country of redress for grievances, it deprives the House of Commons of its power effectively to criticise or to control the action of the Government, and it reduces the financial legislation, just as by similar actions they have reduced other legislation, to the position of being not the work of the House of Commons, but the decree of the Government registered by an automatic vote of the House of Commons. I could illustrate the ill effects of this in many ways. I will content myself with one illustration, for the details of which I am indebted to my hon. Friend the Member for the Ayr Burghs (Sir G. Younger), who had a new Clause down for consideration on the present Bill which we were unable to deal with at all on the Committee stage, because we had only one day for the whole of that stage, and which, on the Repot stage, was not reached till one o'clock in the morning, when the Chancellor of the Exchequer was absent from the House. As I have mentioned the absence of the Chancellor of the Exchequer, I hope he will permit me to say that I recognise, as we all do, that the labours which he has had to undergo have been enormous, and I think we may congratulate him that he sustains them with extraordinary vigour. I am not complaining that he is idle—far from it—but I do complain that owing to the way in which Government business is transacted it is impossible for the Chancellor of the Exchequer to give that attention to finance and that attendance on the Finance Bill in the House of Commons which every one of his predecessors made it their first duty to give.

4.0 P.M.

I have never known Finance Bills discussed so largely in the absence of the Chancellor of the Exchequer. He has been very ably seconded by his colleagues. In these days you never know what Minister will be in charge of the Finance Bill. At one moment it is the Under-Secretary for the Home Office, at another it is the First Lord of the Admiralty, and sometimes it was the Secretary of State for War, and then the Government generally got into a muddle, and took it out of military hands. Sometimes it is one or other of the Law Officers, and frequently the presence of a Law Officer is really essential, as, indeed, it was essential last night, though, owing to the ill-health of the Solicitor-General, we were deprived of his assistance when it would have been very valuable. Whatever be the competence of these Gentlemen, whether connected with the Treasury or whether drawn in from other Departments, to deal with the Finance Bill, they have not the authority or the freedom of action of the Chancellor of the Exchequer himself, and anyone who has followed, as it has been my duty to do pretty closely—I think I may say very closely—the discussions of these Finance Bills, knows how much the House suffers when the Chancellor of the Exchequer himself is not present. Again and again we have had cases where we were confident that if we had had the Minister really responsible for the Bill, with the real authority to deal with the Bill, present in the House, he would have been convinced by the arguments adduced that there was a case with which he ought to deal, and I am bound to say the Chancellor of the Exchequer, when he is so convinced, has shown very considerable readiness to accept Amendments to his measures. No other Minister, however able, has the same authority. He acts on instructions left him by the Chancellor of the Exchequer before the Chancellor of the Exchequer has heard the Debate, and he sits there making the best case he can, shutting his ears as far as possible to the arguments that he cannot answer, and holding the ground which the Chancellor of the Exchequer has told him to occupy, like the general of a besieged fortress, with the knowledge that if he can only sit tight and not give way for a time, presently the operation of the guillotine, or the pressure of an arrangement to conclude the Debate within a certain limit, will force the House to divide, and he will be relieved of all further trouble. What is the effect of that on the interests of all classes of tax payers, or even of individual taxpayers? I said I would give one instance. My hon. Friend the Member for Ayr Burghs (Sir G. Younger) had last night on the Paper a new Clause dealing with the case of a free tenant of a public-house, and the offering to him the same opportunity for transfer ring to his landlord a part of the increased taxation which is accorded to the tied tenant when his landlord is a brewer. What is the history of that Amendment? It was put down on the Committee stage of the right hon. Gentleman's 1909 Budget. It was reached at a very late stage of that Committee, and, when the right hon. Gentleman was getting tired, and he told my hon. Friend that there was a good deal in it—I am not giving his exact words, of course—but at any rate he received the idea sympathetically, and he asked my hon. Friend to postpone it, with the promise——

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

Was that last year?

Mr. AUSTEN CHAMBERLAIN

It was on the original 1909 Budget. The right hon. Gentleman's promise was that it should have consideration, with a desire to accept it if possible; but, owing to a technicality in the exact form of the Amendment, when it was reached on the Report stage it was found to be out of order. My hon. Friend had waived his opportunity of pressing it on the Committee stage on the assurance of the Chancellor of the Exchequer that, at a later stage, it would be considered in no hostile spirit, and then he was deprived of his opportunity of bringing it on at that later stage. Last year the Budget was put off till November, and he again had no opportunity of raising it. He desired to raise it this year. He got no opportunity in Committee, and it did not come on till one o'clock this morning on the Report stage. Then the Chancellor of the Exchequer was not in the House, and my hon. Friend came to the conclusion that it was both useless and impossible to press it. I have said nothing about the working of the particular Clause. That is obviously a matter for legal advice, but I am fully confident that neither the Government nor the House meant a free tenant to be in a worse position than a tied tenant, and, if Parliament had been sitting at a normal time, and if there had been a fair chance of discussing the Amendment, I believe it would, with the full consent of the right hon. Gentleman, have been embodied in the Bill. When we are pressed with our financial legislation, and when the Government force the House to proceed with it, the most reasonable propositions get no chance of fair consideration, and the subject of the Crown is deprived of his right of redress.

The evil is really more serious. It is too serious and widespread to be rested on a single Amendment. The Budget of 1909 introduced entirely new principles of taxation and most complicated administrative machinery. The House has never had an adequate opportunity, since those proposals passed into law, of discussing their practical working. From time to time we have debated them in a more or less limited fashion, but often our grievances have been raised in the absence of the Chancellor of the Exchequer and in the presence of the Financial Secretary, who usually gives, as he did last night, certain replies. The first answer is that general charges are no good, and that you must support your attack by particular instances. Then if we give particular instances we are told it is useless to bring them forward, as obviously it is impossible to reply to them in the course of the Debate. I do not say that either answer is wholly unreasonable, but I do say that just in proportion as they are reasonable there is an obligation on the Government to give us reasonable opportunity for bringing these matters up. We not only require that there shall be such opportunity of discussion at reasonable periods as will enable the Government to investigate the charges which we make, but we require also that there shall be such reasonable opportunities as will enable us to examine the answers which the Government give and to recur to the matter if we think it necessary. I do not think the Chancellor of the Exchequer needs reminding that our recent experience shows how important these things are. We have, in spite of all these difficulties, brought certain cases repeatedly before the House. There is the famous Richmond case, and nothing but the persistency with which we brought that case before the House has enabled the merits of that case to be tried. If it had not been for the action of this House the merits of that case would never have been tried. It was the pressure we brought to bear that enabled the case to be brought before the Courts.

Mr. LLOYD GEORGE

Are you referring to the Highbury case?

Mr. AUSTEN CHAMBERLAIN

No, that illustrates another matter. May I say I am much obliged to the right hon. Gentleman for the concession he made in the Richmond case. We made an allegation which the Government required time to answer. I think we made our allegations on three occasions at long intervals, and it was on the third occasion that the Government were induced to give their answer. We made some further inquiry, which showed that the answer supplied to the Government was either inaccurate or misleading, and the Chancellor of the Exchequer, acting on that information, undertook an inquiry. We only know the disciplinary result of that inquiry, but apparently it was clear there was ground for our complaint that the information supplied to the Government was not satisfactory. The second instance was of course of a very peculiar and serious character—one happily very rare. In most of these cases there is no allegation that any official is trying to do anything but his duty, or is knowingly doing otherwise than his duty. They have to administer most complicated and difficult matters and one of our principal criticisms against the Act was the complication and difficulty of doing what these officials are directed to do. It really is a refusal of justice to the subject when, after an Act is in operation the House of Commons is prevented, in this way, from having a complete review of the result of its working. I have asked before now, as I propose again to ask, that, having regard to the result of the Act in cases which we have been able to follow up by repeated references to them in this House, the Government should agree to an independent inquiry into the working of valuations under the Act. If they would do so, while I do not suppose it would change their views as to the merits of their taxation, it would lead probably to a large modification of the machinery by which it is enforced. I am certain that before such an inquiry, competently conducted, it can be shown that such a case as my hon. and gallant Friend the Member for Chelmsford (Mr. Pretyman)—to whom the greatest credit in this matter is due for the time, attention and ability with which he has pursued the subject'—such a case as he has brought before the House, although they are treated as exceptional, are really of frequent occurrence under our present system.

Passing from the right, as I consider, of the House of Commons to review at its leisure the effects of so novel a piece of legislation as the Budget of 1909, and to review them in the light of acquired experience, I come to another question of at least equal importance. We have had no opportunity for three years of a real discussion on the financial situation of the nation. No one on either side of the House will pretend that that financial situation to-day is so satisfactory that we should habitually affirm the Act now in sittings intermitted over a space of three days. Members of the House interested in financial matters do not need to be told that among persons of authority, belonging to both parties, and many men who have never taken any active part in political party life, especially when they have been associated with the public service, there is great uneasiness as to the financial position in which we stand, and there is still greater uneasiness at the position into which we are drifting. It used to be the boast of the Liberal party that they stood for retrenchment. That was their boast up to the moment when they got into office. It continued to be their claim down to the election of 1906. But from the time they got into office retrenchment went by the board. Expenditure has gone up by leaps and bounds, and we are now passing the Third Reading of the biggest Budget the country has ever had to consider, with the certainty that the measures already taken will cause the Budget to put not a limit to our expenditure, but to be a starting point for fresh expenditure. The Chancellor of the Exchequer will perhaps forgive me if I recall to the memory of this House a speech which he made on the 25th July, 1904, in which he said that the chances of the Chancellor of the Exchequer were, after all, very few. I believe the right hon. Gentleman is one of those who habitually advises us not to prophesy. He has been a successful prophet in his time. He said: Chancellors of the Exchequer are, after all, very human. …. The old tradition of Chancellors of Exchequer was to reduce taxation. The line of new Chancellors of Exchequer is to say 'Look at my term of office! My predecessor put on five millions; I will put on fifteen millions. My little finger shall be thicker than his loin.'

Mr. LLOYD GEORGE

That was about you.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman says it was about me. But about who is it now? De te fabula narratur. I was engaged in liquidating the liabilities of a great war. I was confronted with very particular demands at the moment for the Navy. The main feature of the two years for which I was responsible was that we were still liquidating the expense of that great war. It is not for that purpose that the Chancellor of the Exchequer has put on his £15,000,000. I think it was much more than £15,000,000, but I have not got the exact figure in my mind. But the right hon. Gentleman has outdone himself; he has surpassed his own prophecy; he is not putting this on to wipe out past expenditure or to reduce the outstanding liabilities of the country.

Mr. LLOYD GEORGE

It was enormous on the Navy.

Mr. AUSTEN CHAMBERLAIN

I think I have already mentioned that the Chancellor of the Exchequer had to meet a tremendous demand on the part of the Navy. Let me say at once, if there be any question about it, that I do not blame the Chancellor of the Exchequer for his expenditure on the Navy, and if anybody has blamed him for it, I should hope that the events of this year will have taught that person to be cautious in the future But, of course, it is not only necessary expenditure of that kind for our self-preservation that has been incurred by the Government. They have largely increased the liabilities in connection with their measures for social reform. They have even largely increased the liabilities of the State in connection with the enormous addition to the Civil Service, under circumstances of patronage which are a bad reversion to a bad tradition, and they have not even met the full liabilities which they themselves were creating. At what time is this being done? It is being done at a time when all our taxes stand at a high level; all of them without exception. It is being done simultaneously with a reduction in the provision for the reduction of debt, at a moment when Consols stand lower than they have ever stood in our time, and when the credit of Consols is so affected that their recovery is a matter of doubt and uncertainty, and the whole position of the Consol market is one that causes the gravest anxiety to all concerned in it—to the financial authorities in the City of London, and not less, I venture to say, to the Chancellor of the Exchequer himself, when he has to consider, as a Chancellor of the Exchequer always has to do, even in times of profound peace, what reserves are available for him if he were called upon for a sudden expansion of revenue owing to a breach of the peace occurring in Europe, whether we ourselves were immediately engaged in it or not.

The Chancellor of the Exchequer, in another speech, which I will not quote verbatim unless he wishes it, spoke of the financial resources which had carried us through the great Napoleonic wars. He said that we fought then, not with lead, but with money; that our financial resources were what beat down our opponents in Europe; and then he went on to say that we ought to carefully guard the same reserves and see that we were in a good financial position, so that if an hour of trial came Britain might give the same good account of herself as in the past. Again, that was in 1904, when the Chancellor of the Exchequer's observations were theories that flowed from, him lightly and involved him in no immediate responsibility. But now he is in a position to give effect to them. It is more urgent that they should be given effect to now than it was even in 1904. He said that we were squandering the reserves, and that the Chancellor of the Exchequer, who declined to face the situation courageously, was not one who took a patriotic view of his duty to the country. I venture to say that when the Chancellor of the Exchequer goes out of office his record will have been written by himself in anticipation. What is the position? The Chancellor of the Exchequer has reduced the Sinking Fund. The Sinking Fund is one part of the country's reserves for a great emergency. The two great immediate financial reserves on which Chancellors of the Exchequer have relied on the outbreak of war have been the suspension of the Sinking Fund, which at once places several millions of revenue at their disposal, and the increase of the Income Tax, which can be done immediately, provided the Income Tax was kept at a moderate figure before. I think the Government themselves, when in Opposition, gave expression to a pious belief that an Income Tax of a shilling was too high. I think they have made it certain that the average of the Income Tax can never go below that figure. It stands to-day at 1s. 2d. without the Super-tax. The Sinking Fund is reduced. Both the great financial reserves are rendered less efficacious, and that at a time when the credit of the State for the purposes of borrowing is lower than it has ever been within our memory.

I think that is a grave situation. I think it is one to which the attention of the House of Commons ought to have been given, as it has been occupying the attention of those competent to express an opinion upon it outside, and I regret that during the last, three years, by the direct action of the Government, the House of Commons should have been deprived of any opportunity of doing its duty by the country in the review of National Finance. I believe the Government have accomplished one thing which no other Government has hitherto been able to accomplish. They have interested the country in the procedure of the House of Commons. Hitherto I have never known meetings in the country concerned about Closure Resolutions, Guillotine by compartments, or any other manner of procedure of that kind. It is by the action of the Government on another Bill that they have brought home to vast masses of the people, in a way they have never understood it before, how that directly affects their interests and shuts them out from the tribunal of the House of Commons. Once having had their attention drawn to this matter, they will note every instance of the same kind, and they will take note that by the Guillotine and postponement last year, and by the absolutely unparalleled postponement of the Budget this year, and by the pressure the Government have put upon us in regard to other matters, that they have made it absolutely impossible that the House of Commons should do its duty to its constituents by taking a proper financial review of the year. I believe that the Government themselves will find that their own hands are weakened, and that they are deprived of useful advice and guidance by refusing to competent people in the House of Commons the opportunity of discussing those questions which the Chancellor of the Exchequer ought to be the first to desire them to have. I only say in conclusion, that the worst of procedure of this kind is that it tends to perpetuate itself. Those who have supported the Government in the methods which they have adopted will one day change places and sit on this side of the House. They may then have Budget proposals produced to them which they do not like, and of a complicated and elaborate character, which they may think will require a great deal of discussion. It is not for me to foreshadow what a Unionist Government producing such proposals might think proper to do in regard to them. But if they want precedents for the suppression of Debate, they will find it in the action of the present Government, and if Gentlemen who now support them make an appeal for time, those Gentlemen will be ruled out of court by a simple reference to their action in the present House of Commons.

Mr. SNOWDEN

I do not intend to follow the right hon. Gentleman in the protest he has made against the way in which discussion of the Finance Bill has been curtailed by the Government this year. I must confess that I listened to his concluding sentences with a good deal of disappointment. He had made such a powerful case against the Government that I quite anticipated that he would devote his peroration to a declaration that, when the day does come when he and his party cross the floor, the House of Commons would get back to the good old days and be provided with ample time and opportunity for a full discussion of all financial proposals. My Parliamentary experience is not a very lengthy one, but I do not think I shall be far wrong if I were to say that the right hon. Gentleman will not find the first precedent for the curtailment of discussion in this House in the Parliamentary records of the last six years. I think Parliamentary precedents can be found during the time that the right hon. Gentleman and his party occupied the seat of power. I rise mainly to offer a few observations on behalf of myself and my party upon the Finance Bill, and on the general question which is raised by the Finance Bill. I would venture to say that we do not quarrel with the fact that this Budget, according to the statement just made to the House, proposes to raise the largest amount of Revenue on record. We do not object to a big Budget, but we do object to a good many of the purposes to which the Revenue which is to be raised by this Budget is going to be put. The right hon. Gentleman who just sat down devoted a considerable part of the middle of his speech to a criticism of the increased taxation within the last few years, and I was waiting with a good deal of interest to discover the particular items of expenditure to which he objected. We got no information, however, upon that matter whatever. The two items which account almost wholly for the increase in expenditure are the increase on the Navy and old age pensions. The right hon. Gentleman expressed his approval of the increase in the Navy Votes, and he urged no word of objection to the increase which was necessary for the purposes of old age pensions. He did make a passing reference to the increase in Civil Service expenditure by the creation of a number of official posts. He was very careful not to give us the amount of the increase due to this cause. I think an investigation of the facts will show that that accounts for a very infinitesimal amount of the total increase in the expenditure during the last few years.

Mr. AUSTEN CHAMBERLAIN

It amounts to £500,000.

Mr. SNOWDEN

What is £500,000 in our expenditure? We have nearly £13,000,000 increase in the Navy expenditure in the last few years, and there is £13,000,000 for old age pensions—£26,000,000 on these items alone. Therefore an increase in the expenditure of £500,000 for the purpose of carrying out some of the social reforms——

Mr. AUSTEN CHAMBERLAIN

And paying Members of Parliament.

Mr. SNOWDEN

That is £200,000, which is less than a hundredth part of the increased expenditure comprised in the items to which I have just referred. I do object very strongly to some part of the increased expenditure which has accrued during the last few years. I protest with all the strength of my feeling against the increase of £13,000,000 which has taken place in the Navy expenditure. This Government came into office six years ago pledged to economy, and instead of redeeming their platform promises, we have had the expenditure on the Navy going to a higher figure than it has ever reached before in the history of this country. Leaving out of consideration what we have raised by non-tax revenue—that is, the income from the Post Office—the amount of revenue to be raised by taxation is about £152,000,000, and of this just about two-thirds, or to be precise £96,500,000, is required for the Army and Navy and the payment of interest on the National Debt. That is to say, £96,500,000 is to be raised by taxation this year for fighting purposes—past, present, and future. This represents £10 a year, or 4s. a week, for each family in the country for fighting purposes alone. I recognise that as long as the present ideas which dominate political opinion in this country in regard to armaments continue we cannot have large measures of social reform and at the same time large expenditure for naval and military purposes. Therefore those with whom I am associated—and I believe in expressing this opinion we are expressing the views and wishes of a considerable number of Members who sit on this side of the House—want to see this enormous expenditure upon armaments reduced in order that the taxable capacity of the country may be devoted to much more profitable purposes in building up the manhood and intelligence of the nation.

I want to voice the dissatisfaction of my colleagues at the incidence of a very large proportion of the taxation which is to be raised under this Finance Bill. We hold that revenue from taxation may be imposed for two purposes. It may be and must be imposed for the purpose of meeting necessary expenditure, but the instruments of taxation may be used also for the purpose of bringing about a better distribution of wealth, and we should like to see the instrument of finance used much more effectually than it is at present to accomplish the latter of these purposes. I quite admit that the Chancellor of the Exchequer two years ago did make a new departure upon those lines, but I have read with a good deal of regret speeches made in the country and in this House since that Budget was passed, from which I gather that he has become weary of welldoing, and that so long as he occupies his present responsible position he is not prepared to impose additional taxation on the country for the purpose of carrying out much needed social reforms. All I can say is—and I hope the right hon. Gentleman will understand that if I say it frankly, I say it far more in sorrow than in anger—that if he is not prepared to pursue the path he entered upon two years ago, then we as Socialists have no further use for his services. In laying down the principle that taxation may be used for the purpose of redressing the inequalities of wealth, I venture to think that I am laying down no new principle. It is an established principle in English finance and in English law that property must be called upon to the extent of the amount of that property to meet what the community regard as necessary social purposes. There have been in the past many occasions on which very heavy taxation has been levied and very heavy rates have been imposed locally in times of great public need. There have been occasions, and I think it is possible to find an instance in the present time, where the rate for Poor Law purposes has exceeded 10s. in the £.

We would like to see a number of principles accepted and embodied in our financial proposals and in our financial system. In the first place, we would like it to be recognised that it should be the aim of our finance to secure socially created wealth for social purposes; and, secondly, we would like the instrument of taxation to be used deliberately for the purpose of preventing the retention of large fortunes in individual hands. In the third place—and we are not alone in believing in this canon of national taxation—we think it should be levied in accordance with ability to pay, and in proportion to the benefit which each individual gains from the law and the State. A further proposal we would lay down would be this, that there should be no taxation of poverty. It is very largely socially created. That contention was admitted by the Leader of the Opposition during the Budget Debates two or three years ago. Indeed, so far as I could understand the attitude of the right hon. Gentleman at that time, he really had no objection at all to the Land Taxes of the Budget, except that he did object at the singling out for taxation of one special form of socially created wealth. I understood that he was not only willing, but anxious to apply the same principle to other forms of socially created wealth, whatever form that wealth may take. I think it is now time to think that the weapon of taxation may be used for the purpose of preventing the retention of large fortunes in individual hands. We hold that the existence of the idle rich class is the greatest curse there could be in a community. I have support for that contention in what was stated by an eminent political economist, the late Professor Cairns, who, in dealing with some disputed questions of political economy, said it could not be too often stated that no public advantage whatever arises from the existence of a rich idle class. He said that the wealth they spend may employ labour, but the wealth they spend upon themselves does nothing except to keep alive their own unprofitable lives, and the sooner they take their places as drones in the hive the better for the community at large. That is the position which we take.

We object to our present methods of taxation. I find that under the Finance Bill, which we are now asked to pass, of the £152,000,000 of revenue which is to be raised no less than £69,500,000 is to be raised by indirect taxation. I have on many occasions endeavoured to get to know from the representatives of the Treasury whether they regard stamps as direct or indirect taxation, but I have not been able to ascertain. Therefore I have left the £9,000,000 of revenue derived from stamps outside my figures of direct and indirect taxation. I am glad to be able to admit that during the last twenty years there has been a tendency, though a slow tendency, in the right direction, but even now the amount to be raised by indirect taxation represents over two-fifths of the total revenue of the country. The proportion still is far too high, and I would like to call the attention of the Chancellor of the Exchequer to one other fact, namely, that this Government have not reduced indirect taxation since they came into office in 1906. They have reduced the Tea Duty and the Sugar Duty.

Mr. LLOYD GEORGE

We repealed the Coal Tax.

Mr. SNOWDEN

The right hon. Gentleman reminds me that they took off the Export Duty on coal. May I remind him that he increased indirect taxation largely in the increases of the duties on tobacco and liquor. I am inclined to think that the figures which I will give in a moment support my contention that the Government have raised indirect taxation by an amount equal to the reduction made on the two or three items I have mentioned. I find that although these reductions in indirect taxation have taken place, the amount which the Chancellor of the Exchequer expects this year from indirect taxation is larger than in the financial year for which his Government were first responsible. We had an extremely interesting speech from the right hon. Gentleman in the Debate on the Tea Duty. He there showed that he had learned all the tricks of the politician. [An HON. MEMBER: "He knew them to begin with."] The hon. Member says he knew them to begin with. He was born so. One might be inclined to believe that when one sees the agility with which he uses all these political weapons. He expressed the view—I do not say the wish—that it might be desirable to impose direct taxation in the form of Income Tax by way of replacing the loss of revenue through the abolition of some form of indirect taxation. He expressed himself as being sympathetic to the proposal to reduce the Income Tax minimum to £45 or £50 a year, and then he finally stands on this ground, that he did not think it would be a popular thing to do. I am afraid that the question of the popularity of the tax——

Mr. LLOYD GEORGE

I must put the hon. Gentleman right. I gave two reasons—one was that it was politically impracticable, and the other was that it was administratively impracticable.

Mr. SNOWDEN

I am dealing with the political impracticability. I am afraid that in the past this question of party interests has influenced the action of Chancellors of the Exchequer far more than the question of the justice of taxation. I have referred to the enormous amount of indirect taxation which was levied from the time of Waterloo up to about twenty years ago. In my opinion there were two reasons for that. First of all these, political reasons; and, second, because those who had control of the national finance had found it much easier to obtain the money in this way from the pockets of the people, and much more convenient than to take it out of their own pockets. William Pitt more than one hundred years ago, in speaking of the proposals to impose an Income Tax of 7 per cent. on small incomes, said that if you levy a direct tax of 7 per cent. on the people you will produce a bloody revolution. But there is a way in which you can tax the last bite from their mouth without ever causing a murmur against heavy taxation, and that is by taxing a large number of articles in daily use. The tax will then pass on to the price of the article, and people will grumble about high prices, but they will never know that these high prices are caused by war taxation. That was the policy that was adopted from 1815 to about twenty years ago, and we have not even yet to a very great extent got rid of that very pernicious system of taxation.

Indirect taxation is a violation of every just and every sound principle of taxation. It does not tax a citizen according to his ability to pay, neither does it tax anyone according to the benefit he gets from the protection of the law. Indirect taxes are liable to evasion, and are evaded to a great extent. For instance, a person who has an income just below the limit of £160 a year could, if so disposed, avoid paying a single penny contribution to the national revenue. He need only not smoke, not drink, and not take sugar, as a very large number of people do not. He need not drink tea—and we know that a large number of people do not drink tea—and he need not take cocoa or coffee, and he will then not contribute a single penny to the taxation of the country, although his income may be just under £160 a year. The fact that it is possible to do that under a system of indirect taxation condemns that system. An indirect tax takes a great deal more out of the pockets of the taxpayers than it brings into the Exchequer. One of the hon. Members for Edinburgh made a most interesting and valuable speech on the Tea Duty two or three days ago. He said that a tax of 5d. in the pound represents something like 8s. 4d. of the whole price of tea. The Tea Tax takes a great deal more than 5d. per lb. from the consumer. I do not think I exaggerate if I say that the amount paid By the tea consumer is certainly not less than 6d. per lb., because there are profits levied on every transaction, not only on the original cost of the tea, but also on the duty which has been paid.

The Chancellor of the Exchequer said the other day in this speech to which I have referred that he never had any sympathy with those who suggested that a certain section of the community should be relieved altogether from taxation. I maintain that the State has no right to tax any man until it has provided that man with at least the means of satisfying his physical needs. In putting forward that contention I have the authority of John Stuart Mill. We all know what he says, and, generally speaking, if we have not a higher standard of living to-day we have a great deal more unsatisfied aspirations on the part of the working people than they had in the days of John Stuart Mill. He said that the State had no right to tax anything below £50 a year. Assuming that that is just sufficient to provide the bare necessities of physical existence, why should the working classes not pay taxation? One reason I have already given. I will give another: because the working class pay the greater part of the taxation which is nominally paid by the rich class. An idle man, whether he be duke or anything else, is living at the expense of those who work. Therefore, if the working classes, I mean the poorer working classes, were exempted from taxation altogether it could not even then be maintained that they were not contributing to the up-keep of the country, because it is by a toll on their labour that the great bulk of the taxation has been raised. The rents of the landlords and the dividends of shareholders represent tribute which has been levied upon the working people. I do not suppose that I shall carry the House with me in the statement which I am about to make, but I would ask hon. Members to think about it. I am prepared to maintain that a great mass of the working people of this country would be better off if they had not the protection of law. I will tell you what I mean. Law makes them poor. It is by law that the landlord levies his tribute; it is by law that the capitalist takes his dividend; it is by law and the protection of law that the classes keep the masses poor. If there were no law—I am not advocating the abrogation of law—do not let me be misunderstood. If we had not law we should have anarchy. But under a condition of anarchy the strongest of the working people I am quite sure would be much better off than they are to-day. I would ask hon. Members to think about it and not to make up their mind at once.

It is maintained that the taxation which is paid by the working people is only on certain articles. Those who urge that objection seem to lose sight of the very reason why this indirect taxation is imposed. It is imposed because the working people do consume the articles which are taxed. If the working people ceased to consume tea, tobacco, or liquor, then the taxation would be imposed on some of the articles which were consumed by the working people. It is said that the working man ought to pay these taxes because it gives him a sense of citizenship and gives him an interest in looking after the expenditure of the country. That is just what indirect taxation does not do. Nothing has struck me more in addressing public meetings in the country on the question of taxation than the general ignorance as to the amount of indirect taxation which is paid in this country. Very often when I have been addressing meetings of thousands of men I have asked if there was any man at that meeting who could tell me what was the duty on tobacco or tea, and rarely indeed among all these people have I been able to get an answer to that simple question. There is one very strong fact. An indictment against indirect taxation does not make the taxpayer aware of what he is contributing to the expenditure of the country. What we need is not tinkering with fiscal reform, but wholesale reform. If the right hon. Gentleman wants to immortalise himself still more, may I suggest a great work which is waiting for his energy, ability and determination, and that is the complete overhauling of the financial system of the country.

Eighteen months ago he said that whoever stood at that desk this year, presenting the Financial Statement, would have to deal with the relations between local and national taxation. I understand that a Committee is sitting, inquiring into this matter, and I hope, therefore, that next year the Chancellor of the Exchequer will be in a position to redeem his deferred promise. That will provide an excellent opportunity for doing what I now suggest—that is, overhauling the whole of our system of taxation. What I would further suggest is this: that he should abolish all indirect taxation except taxes upon liquor and possibly upon tobacco. I do not think it would be desirable to abolish liquor taxes for two reasons. First of all, because I believe that taxation upon liquor helps in the promotion of temperance; and, in the second place, owing to the fact that the liquor traffic is a monopoly, and if the taxes were removed I think it would be simply a further endowment of the trade. But in regard to tobacco, I think that the duties are too high, and that something should be done to reduce the duty on the working man's tobacco. I recognise the impossibility of carrying out the suggestion made by the right hon. Gentleman the Member for East Worcestershire the other day in regard to the Tea Duty, that it should be an ad valorem duty. I do not believe it is possible to do that either in regard to tea or tobacco.

Mr. AUSTEN CHAMBERLAIN

I was considering the suggestion, but not making it.

Mr. SNOWDEN

But still it is very unjust that the workman on his tobacco should pay 500 or 600 per cent., while the rich man's cigar only pays 50 per cent. There is a number of smaller taxes, legacies from the old days, which ought to be swept away, such as, for instance, taxes on auctioneers, house agents, and hackney carriages and the like. [An HON. MEMBER: "And solicitors."] Yes, these taxes are simply protective. They are a bad legacy of the old vicious days of Protection. I think that no delay should take place in removing the tax on hackney carriages, the owners of which, in the case of horse-driven carriages, have to enter into such severe competition with the motor cars. I want also to put in a word for the abolition of Inhabited House Duty. Owing to the increase of rates in urban centres in recent years this has become a very burdensome tax indeed. It is really a tax upon public health, and, owing to the variation of rents as between different parts of the country, the incidence of the tax is most unfair. For instance, a man will get a house in a town in the north at a rate which does not make him liable for Inhabited House Duty. But suppose he comes to London. Then he has to pay a rent which brings him within the Inhabited House Duty though he has not more accommodation, and it is really a tax upon a family, because a man with a family very often has to take a large house, on which Inhabited House Duty has to be paid, on account of the largeness of his family. It is simply a vicious form of Income Tax, and instead of raising revenue by means of Inhabited House Duty, it would be far juster if the Chancellor of the Exchequer were to endeavour to get compensating revenue by increasing the Income Tax, because by taxing a man's income he would be taxing a man according to his ability to pay. Then I suggest that the Chancellor of the Exchequer should sweep away all the taxation on food. For fifty years or more the Radical party has been pledged to the abolition of taxes upon food. Ten million pounds of taxation upon food represents an Income Tax of 5d. in the £ upon food. The indirect taxation of £69,500,000, to which I have referred, represents £7 per family, and that, in the case of a man with an income of £1 a week, represents an Income Tax of 2s. 8d. in the £. I am quite sure the Chancellor of the Exchequer would not attempt to justify that. He cannot justify it. No one can justify it. Therefore it is his duty to do what lies in his power to remove such an injustice as that. A man with an income of £1 a week pays in indirect taxation 2s. 8d. in the £. A family with an income of £5,000 a year pays in indirect taxation only a ¼d. in the £. That family will, of course, pay other taxes. They will pay Super-tax, which amounts to 1s. 8d. in the £, and they will pay other taxes. But, taking the taxation which a family with £5,000 a year pays, it does not amount to the same poundage as the Income Tax which is levied upon a man with a large family whose total income is less than £1 a week. I want to make a strong plea for the urgency of an alteration in the system of taxation which perpetuates such things as that.

5.0 P.M.

May I make a suggestion as to the way to get new revenue? I was very much disappointed to hear the Chancellor of the Exchequer the other afternoon suggest that the only way in which he could get compensating revenue for the abolition of the £6,000,000 for Tea Duty was by going down to an Income Tax upon incomes, perhaps, of £45 or £50 a year. May I suggest that that is the wrong way. What he should do is to go up. This is my principle of taxation, to take as much as you possibly can from the top and never to go down at all, not one step, until you have robbed all the hen-roosts at the top, and there are plenty of them still there. We have had the right hon. Gentleman's Budget in operation now for nearly two years, but I see no signs anywhere of any falling away in the ostentatious display of wealth on the part of the rich. The Chancellor of the Exchequer said, in one of his public speeches in support of the Bill, that there was a pleasanter road for the poor through fields of waving corn. The fields of waving corn may be there, but if the working people attempt to reap that corn they will still be put into prison as trespassers and stealers. The waving corn is not theirs. I see, as yet, no sign of latent poverty on the part of the rich. There are more motor cars, and more luxurious motor cars, in the streets than there were two years ago when the right hon. Gentleman introduced his Budget. I still read in the records of auction sales that thousands of pounds are being given for a few inches of canvas and hundreds of pounds are being given for a few ounces of silver. The rich are still rich. There is plenty there still, not only to meet the £6,000,000 of revenue from the repeal of the Tea Duty, but to abolish the whole of this £69,500,000 of taxation. The working people cannot afford it. The rich can. The working people are getting poorer. The rich are getting richer. In the last eleven years the wages of the working people, according to the Board of Trade returns, has risen by an average of 2d. a week. There has been during the same period an increase—I can give the House facts which would justify my placing the figure far higher—of not less than 2s. 6d. in the £ in the cost of living. Therefore the working people to-day are 2s. 4d. in the £ poorer than they were eleven years ago. The rich are getting richer every day. They are getting enormously richer. They are getting shamefully rich. They are getting dangerously rich, and it is the duty of the Chancellor of the Exchequer not only to finance his scheme of social reform by the taxation of the rich but to do what he can by using the instrument of taxation to lessen the great social curse of an idle rich class. The right hon. Gentleman (Mr. Austen Chamberlain) stated the other day that he welcomes enthusiastically the suggestion of the Chancellor of the Exchequer that we should extend taxation downwards. That is a good old Tory doctrine. Let the poor pay all, and let the rich escape. That is the real motive of the Tariff Reform agitation. The real motive of the Tariff Reform agitation——

Mr. SPEAKER

There is nothing about Tariff Reform. We are now discussing the Third Reading of this Finance Bill. I have given the hon. Member a great deal of latitude. I hope he will not enter upon that topic.

Mr. SNOWDEN

I did not intend to filter upon the general question of Tariff Reform, I was only going to point out its relation to the question of taxation.

Mr. SPEAKER

That, of course, will lead to replies, and those will lead to rejoinders, and those will lead to surrejoinders, and those will lead to rebutters, and those will lead to surrebutters, and in that way we shall be involved in an interminable discussion upon a matter which is not connected in any way whatever with the Bill we are now discussing.

Mr. SNOWDEN

I remember an occasion two years ago when an hon. Member opposite interposed a long speech on the question of Tariff Reform, and a point of Order was raised by one of my colleagues, and it was ruled in order.

Mr. SPEAKER

On the Third Reading of the Finance Bill?

Mr. SNOWDEN

On the Third Reading of the Finance Bill.

Mr. SPEAKER

On the Second Reading possibly, but not on the Third Reading.

Mr. SNOWDEN

It is suggested as a means of raising revenue that taxes should be placed upon luxuries consumed by the rich. Why place taxes upon luxuries consumed by the rich? They would have to pay them, and therefore why not pay them by means of an Income Tax? It would save a lot of trouble. I am altogether opposed to such nonsensical proposals as raising revenue by means of taxing amusements, football matches, and the like. We want to tax a man according to his means to pay, and the one means by which we can accurately find out what a man's power to pay is, is the amount of his income. May I say one word with reference to the Land Taxes. We supported the Land Taxes of the Budget, but I did so with no great amount of enthusiasm because I do not believe the method that is proposed here, or which is confirmed by this Finance Bill, is the best method of getting at the unearned increment of land. It is a slow, a cumbersome, an irritating and a costly method, and it is a method by which we shall never get hold of the landlord and be able to take from him the whole of the unearned increment that he has appropriated. A far better plan of getting unearned increment for social purposes is to buy the land up root and branch, fully compensating the present holders, and then the whole of the future increment will accrue to the community. I would make a further suggestion. The Chancellor of the Exchequer is turning everywhere to obtain revenue for increased national expenditure. May I give him a hint of another source of revenue which is waiting to be appropriated, and that is the nationalisation of the railways of the country. I find a report has just been presented from the British Consul at Frankfort. He there points out that the German Exchequer receives a very considerable revenue each year from the profits of the State railway system, and if the Government were to follow the example of Germany in this respect it is extremely likely, nay, certain, that in three years' time there will be, as there is in the case of the Post Office, a very considerable revenue available for the purpose of national expenditure. I conclude as I began, by expressing my regret that more opportunity has not been given to the House of Commons during this Session to deal adequately with these proposals. The way in which the Bill has been delayed till the very end of the Session is only one further instance of the degradation of Parliament in these later days. Parliament has ceased to be a deliberative assembly, and if such examples as this will only bring to the country a sense of the seriousness of the position in which Parliament now is, then perhaps the present experiences will not have been altogether in vain.

Mr. JOYNSON-HICKS

I do not propose to follow the hon. Member through the whole of the essay he has just delivered, I believe perfectly sincerely, on what he considers the right principles of taxation. I have always been brought up in the canon of Gladstonian finance, that finance should be used for financial purposes, and not to injure political opponents or to effect a complete alteration in the distribution of wealth. That alteration may or may not be desirable, but it is not either right or justifiable, particularly when we have so very little opportunity for debating Budgets, that Budgets should be used for altering the entire canons of the distribution of wealth.

I am bound to say I was very much interested and pleased to hear from the hon. Member for Blackburn that he has no further use for his very apt pupil the Chancellor of the Exchequer. Two years ago the Chancellor of the Exchequer was the somewhat favourite pupil of the hon. Member for Blackburn. The right hon. Gentleman's Budget of 1909 was founded, I think the hon. Member will agree with me, very largely on a small red-covered book; but it is the hon. Member for Blackburn who has now become the pupil, and the Chancellor of the Exchequer, his master, is extending the views of the hon. Member for Blackburn in a Socialist direction through the agency of finance. The hon. Member complained that £96,000,000 is devoted to fighting purposes, but I am prepared to see a considerable increase upon the £96,000,000 without the slightest misgiving, because the working classes, by reason of this taxation, are enabled to work. If that: taxation were not present, and if the Army and Navy of Great Britain were not kept up to such a pitch as to fit it to protect our shores, the condition of the working classes would be very different under a German Government than under the present free Constitution of Great Britain. There was, however, one point on which I entirely agreed with the hon. Member for Blackburn, and it was where he spoke, I will not say of the degradation of the House of Commons, but, at all events, of the degradation of the Budget, the great financial measure of the year, which used to be brought in early, and, certainly under Liberal administration, always was one of the principal measures of the year. It was brought in for Second Reading just before the adjournment in August, and it was rushed through last night and the night before, in the small hours of the morning, without any possible means of debating the various financial proposals of the Government. We have only one more day at the end of the Session for the Third Reading.

What is to happen next year? The hon. Member for Blackburn suggested a whole scheme of finance to the Chancellor of the Exchequer. I am not quite sure that the Chancellor of the Exchequer will have time for it. What are we likely to get next year for discussion? There will be the ordinary Budget, there will be Home Rule, there will be Welsh Disestablishment, Manhood Suffrage, possibly Adult Suffrage, and all these measures will take up the time of the House of Commons. What possible opportunity will there be for the House of Commons to exercise its inalienable right to discuss the financial measures of the year and exercise its proper control over Government finance? In 1909, I am prepared to admit we 'had ample opportunity to discuss the "big, bold Budget," which has lost its electioneering value. We are unable to find out anything about its working except by question and answer in this House. I think we are entitled in full Debate to an explanation from the Chancellor of the Exchequer as to whether the Budget of 1909, with the Land Clauses, is really having the effect on the finance of the country which he led us to expect. The right hon. Gentleman made very great promises in 1909 with regard to the effect which these Land Taxes would have upon the revenue of the country, but, like most of the promises of the Chancellor of the Exchequer, they are not going to be fulfilled. I wish, if I may, to compliment my right hon. Friend the Member for Worcestershire on his speech with regard to the general finance and general expenditure of the present Government. This Government of retrenchment and economy, ever since it came into office, has constantly added to taxation. The present Prime Minister, in 1907, when the Government had been in power a year, said in this House:— I count with confidence on further economies in expenditure. But where are those economics since 1907? The Prime Minister (then Chancellor of the Exchequer) Budgeted for £153,000,000, and this year the Budget is for £181,000,000. We have passed legislation this year which, next year and the following year, will undoubtedly increase expenditure. A well-known Member of this House, but now no longer a Member, told me the other day of the joy which Lord Randolph Churchill felt when the Liberal party put itself in the hands of the Opposition on the occasion of Mr. Childer's propounding the Budget for £100,000,000. Lord Randolph Churchill thought it a startling rise in national expenditure, and delivered a speech cutting up the Liberal party, the party of economy. I wonder what he would have said to-day; I wonder what the feeling of his son, the First Lord of the Admiralty, must be, as a Member of a Liberal and economical Government, in face of a Budget for £181,000,000. [An HON. MEMBER: "What are you complaining about?"] I will tell the hon. Member in a moment what I am complaining about. I am not complaining about the purposes on which this money is expended, but I do complain that the Liberal party, which professes to be the party of economy and retrenchment, should be the party to place these huge taxes one after another on the shoulders of the taxpayers. The Publication Department of the Liberal party in 1904 issued a leaflet in which they stated that the last Budget of Liberal Government, in 1895, was for £93,000,000, and the leaflet pointed out that the increase of the Tory Budget before 1905 was forty-five millions sterling, mostly on the Army and Navy. What did that mean? It meant clearly that the Liberal party, if they again came back to power, would make it their object to cut the Tory Budget down to the Liberal figure of £93,000,000, or as near it as possible. If that was not the meaning of the leaflet, why was it issued? Why did they go to the country and say that their Budget was £93,000,000, and that the Conservatives had increased the total by forty-five millions. They put the figures by way of contrast, in order that there might be an expectation that they would reduce the Tory Budget to somewhere about the level of the Budget of 1895. But they have gone on adding to the total amount of the Budget. It took the Tory Government ten years to increase the expenditure by thirty-four millions, and during that ten years they paid for a very great war. But the Liberals, in five years, and without any war, have increased the expenditure by forty-one millions, and it is now up to £181,000,000. My right hon. Friend the Member for East Worcestershire says it is the highest figure at which the Budget of this country has ever stood—certainly the highest in time of peace.

I submit that the Liberal party has no right for a single day longer to pose as the party of economy when they bring in Budgets year after year, until the total reached is £181,000,000, and, when it is perfectly clear, with the obligations into which they have entered in regard to old age pensions, and under the Insurance Bill, to fulfil, there must be a Budget for nearly £200,000,000 yearly. There can be no possible doubt about that. The Chancellor of the Exchequer led us in 1909 to believe that the Land Taxes were going to pay for old age pensions, and partly for "Dreadnoughts." I do not think he said that in this House; I think it was stated in one of those speeches in which he lets off steam a little more perhaps than he is wont to do in this House, and he complained bitterly that the landowner class would not spare even a halfpenny for old age pensions. Old age pensions cost between £12,000,000 and £13,000,000 a year. The Land Taxes produce nothing like £13,000,000 a year, and they produce nothing to pay for old age pensions, leaving out the question altogether of "Dreadnoughts." Last year the Chancellor of the Exchequer said these taxes were going to produce "appreciable revenue." In 1910 the receipts in the case of Increment Duty is "insignificant," the Reversion Duty is insignificant, and the Undeveloped Land Duty was little over £1,000. That is the Inland Revenue Report for 1910, and even up to September of this year the Land Taxes have only produced the sum of £20,000. If the old age pensioners had been called upon to wait for their pensions until the Land Taxes produced sufficient money to pay them, I think they would have gone without their pensions for a good many years to come. A great deal more money has to be found. During the last five years—and this is perhaps the most serious point of view to which I want to call the attention of the Chancellor of the Exchequer, because I believe the Prime Minister looked upon it really as an advantage—during the last five years the income brought into Great Britain from investments abroad has increased by £27,000,000 a year. This has occurred during the period a Radical Government has had control of the affairs of this country. During the previous five years the increase was only £6,000,000.

During the last five years capital sums must have been sent abroad to the extent of over £500,000,000 sterling. If it is an advantage to send capital abroad, to what extent is it to be of advantage to send that capital abroad? If it is an advantage, as the Prime Minister put it then would it be an advantage to send abroad, say, £5,000,000,000? [An HON. MEMBER: "HOW did it go?"] What does it matter how it went? It has gone, and, if I may say so, it has gone outside the clutches of hon. and right hon. Gentlemen opposite. But from the point of view of the finance of this country, I deplore it as much as any Chancellor of the Exchequer can deplore it. If this money had been retained in England it could have been employed in fruitful commerce and in useful manufactures here; it would have all created income here, and paid taxation, thus reducing the very heavy burdens which have been put upon us by right hon. Gentlemen opposite. An eminent Liberal financier, Lord Welby, who certainly should have the respect of hon. Gentlemen opposite, only last month said that he was extremely alarmed at the present rate of public expenditure. Is it surprising that capitalists in England should seek to place their securities and savings abroad? Is there anything to prevent this drain going on? There will probably be an increase of expenditure upon the Navy, and we hear rumours of a Navy Loan. What effect will that have on the price of Consols? We hear that next year there is going to be Home Rule for Ireland. What effect will that have upon the price of Consols? The last Home Rule Bill in 1893 was followed in the first fortnight by a fall in Irish Land Stock of nearly £2,000,000 sterling. What would be the effect of the passing of a Home Rule measure next year upon Irish Land Stock? Would any of these measures be likely to raise the price of Consols?

Wherever you go in the City of London you will find the same anxiety owing to the constant and persistent fall in the price of the premier security of the world. Banks cannot go on for ever writing down out of profits their holdings, and their very large holdings, in Consols. The Government themselves are enormous holders of Consols as trustees for the public in the Post Office Savings Bank and in the Trustee Savings Bank. I believe there is in those two banks funds amounting to £221,000,000 sterling. What is the value of those investments at the present day, investments which have been made by the Government largely in Consols on a falling market during the last thirty years? I wonder how much of that is in Consols and Irish Land Stock, and how much of it could be produced in cash from the funds of the Post Office and the Trustee Savings Bank if a run were made upon them? I know the Consolidated Fund is liable. [An HON. MEMBER: "For the interest."] But if a demand were made upon the Post Office Savings Bank by the depositor as runs have been made on other banks, I wonder what the position would be? I say that the position would be bad, and very largely bad as a result of the finances of the present Government. The only answer that we have ever got from the Chancellor of the Exchequer with regard to the fall in the price of Consols is the answer which the vulgar small boys on the street make, "You're another!" In other words, the only answer he can give to us when we point out that Consols are steadily falling is that they fell while the Conservative party was in office. That is the kind of remark which goes down very well on a Limehouse platform, but not the kind of remark which Mr. Gladstone would have made when he was Chancellor of the Exchequer and had regard for the finances and responsibilities of this country. When we ask the Chancellor of the Exchequer what steps he is taking to restore the credit of the country and to prevent this constant fall in the price of our premier security, it is no answer to us to say, "While I admit it has gone down seriously, it went down equally when you were in office."

An HON. MEMBER

What was your answer?

Mr. JOYNSON-HICKS

Our answer undoubtedly was that it went down ten points while we were in office owing to the reduction of a half per cent. in the interest. That clearly accounted for a fall of 10 per cent. The next answer was that it was undoubtedly caused to a great extent by the Boer War. That I think is perfectly clear. But there is all the difference in the world between a fall from a high price to a moderate price and a fall from a moderate price to a desperately low price. Those two things are absolutely incomparable. The right hon. Gentleman goes on still further creating a depreciation in Consols by his attacks upon the Sinking Fund. Savings instead of being applied as they should be from year to year in the reduction of the National Debt are no longer expended in that way. This year a sum of £3,250,000 which ought to be given to the Old Sinking Fund has been diverted and taken to other purposes. In the Budget speech of 1907 the Prime Minister stated that the reduction of debt was "one of the permanent duties of the Government." I wonder what the Prime Minister himself now thinks of the acts of the Chancellor of the Exchequer in neglecting that permanent duty and making this further raid on the Sinking Fund. I would like to deal with a few figures which show the very serious position of the fall in Consols and the fall in English securities relatively to the fall in other securities. If hon. Members opposite and the Chancellor of the Exchequer were able to say, "It is perfectly true, that Consols have fallen since we came into office in 1905 on top of the very considerable fall that had taken place in previous years, but at the same time foreign securities have fallen in like ratio," then I should have been prepared to say to him that he had made out a very considerable answer, and an answer, at all events, that would need considerable discussion on our part before we could blame him for this fall in the price of Consols. In 1905 Consols stood at 87½. I am taking the lowest figure in each year. To-day Consols are 76⅝, so that they have fallen about 10½ points. German Three per cent. Stock has fallen in the same period from 86¾ to 81, or 5¾, which is half the fall in Consols. French Three per cent. Rentes fell from 97 to 94. [An HON. MEMBER: "What is the rate of interest?"] What does it matter? It makes not the slightest difference at all what the stock is yielding. The point is the actual fall in proportion of values between Germany and this country.

Mr. CRAWSHAY-WILLIAMS

The hon. Member has said that our stock has fallen desperately low. If our yield is less than theirs what is theirs when ours is desperately low?

Mr. JOYNSON-HICKS

The hon. Member who has the advantage of having a red box beside him, does not realise the point. The point I am trying to make is that the credit of a country determines the rise or fall in the price of the premier security. That, I think, is perfectly clear. [An HON. MEMBER: "No, no."] What does?

Sir F. BANBURY

Is not the rate of interest dependent on the credit?

Mr. JOYNSON-HICKS

During the last six years my point is that the premier security of Great Britain, whatever the rate of interest payable upon it, has fallen 11 points, while the premier German security has fallen only 5½ points, and the premier security of France has fallen only 3 points. If you were able to tell me that the premier security of France had also fallen 11 points that would answer my argument, but when you have one security which falls 11 points, and the other only falls 3, that can only be because the credit of one country has fallen to the extent of 11 points and the credit of the other country only by 3. I should also like to take the very finest gilt-edged securities that we know outside our Government Stock. The Great Western Railway debentures during this same period of Radical finance have fallen from 124 to 110, the North Western 95 to 83, and the Midland 77 to 68. There you have different rates of interest, but the diminution in value is about the same. That answers the point which the hon. Member attempted to make against me regarding the difference in the rate of interest between Germany and Great Britain. Our other stock for which we are responsible, India Stock, has also fallen. The Three per Cent. India Stock, not 2½ per cent., has fallen from 94½ to 79. That, I think, is a better answer even than the debenture stocks of railways. French Three per Cents, fell from 97 to 94, and India Three per Cents., for which this Government is responsible, have fallen from 94 to 79. How can the hon. Member explain that, if the credit of Great Britain is as good as the credit of France?

There are other securities of other countries which have not fallen at all, and securities of countries which we were wont to consider twenty years ago as far inferior in their financial position to Great Britain, places like the Argentine, where their bonds have gone up by 4 per cent. Japan and Russia had a very serious war, more serious even than we had in 1899. After their war, instead of their premier securities continuing to go steadily down, down, down as ours have done, the Japanese securities during the last six years, the period of Radical finance, have gone up by 12 per cent., and the Russian securities have gone up by 18 per cent. I put it to the House that the Chancellor of the Exchequer has got something to answer with regard to this continued and constant fall in the credit of Great Britain as shown, and I submit shown conclusively, by the price of our premier securities as against the fact that the premier securities of other countries have gone down slightly, and that the premier securities of Japan and Russia have gone up considerably. If they had all gone down equally, my argument would be faced, but as we have gone down more, I submit that the only possible conclusion to be drawn is that it is on account of the insecurity which financiers have and with which everybody is regarding, not merely the finances of the Radical Government today, but as to what we may expect in the near future.

Mr. CRAWSHAY-WILLIAMS

I do not think the hon. Member can have it both ways. When we were discussing the fall in securities under a Conservative Government he said it was the depth to which the stock fell which was important, but when we were discussing the depth of the German drop he said it was the amount of the fall that mattered.

Mr. JOYNSON-HICKS

I never said that.

Mr. CRAWSHAY-WILLIAMS

I understood the hon. Member to say that it was the amount of the drop, and not the yield. He cannot have it both ways. As regards the drop while the Conservatives were in office, he said apparently that a large drop did not matter as long as it was not to a considerable depth. That was what I understood him to say in answer to a remark. He explained as the two reasons which accounted for the drop during the Conservative tenure of office, the Boer war and the rate of interest. I think he was perfectly right, but he omitted to supply another very great reason indeed for the drop in the price of Consols, which was the extension of trustee securities to Colonial stock. Everyone knows perfectly well that that probably has more to do with the drop in Consols than anything else, and it is a cause which has not yet spent itself, but which will go on. I do not think anybody supposes that Consols can revive to the level at which they stood before the extension of trustee stock to Colonial securities. I do not think anyone who wishes to be fair on this subject can omit to take that great item into account, and I do not think that anyone who takes the position of Consols at present, with their yield of about 3 per cent., can deny that our credit is still the best in the world.

Mr. C. T. MILLS

I wish to speak as to the way in which the Chancellor of the Exchequer is proposing to dispose of the surplus with which he has to deal in this Budget, and also as to the general provisions he is making for the reduction of debt. I do not raise the point as to the disposal of the surplus because I object to the objects upon which the Government propose to spend the major portion of it. I admit that these are necessary and desirable things, but I very strongly object to the sources from which the Chancellor of the Exchequer has drawn the money to pay for sanatoria, road development, and so on. I agree that it is the Chancellor of the Exchequer's business to raise the money required to meet the expenditure which this House has sanctioned, but I contend that it is also his business to see that that money is not raised at the expense of the national credit. If the Chancellor of the Exchequer finds that the revenue for which he is budgeting is not sufficient to meet the expenditure which he has to face, I suppose it is his duty either to propose some fresh scheme of taxation or to suggest some possible economies. It is easy to suggest some economies which could be effected. For instance, the Chancellor of the Exchequer might think fit to reduce some of the enormous army of Civil servants which the Government have created, or he might have postponed the payment of salaries to Members of Parliament for a few years, although I do not suppose that that would be quite a popular policy in this House. The Chancellor of the Exchequer wishes to say, on the other hand, that, thanks to the fiscal system which we enjoy, backed up by his financial genius, it is quite possible for the Government to raise £1,500,000 for sanatoria, £1,500,000 for development grants, and other sums, without imposing any extra taxation upon the people. Therefore, he has decided to apply money to these objects which ought by rights to go to the reduction of debt. He takes this course, I suppose, because he thinks that the country will not bother to inquire where he finds the money, so long as they do not have to provide it themselves at the moment in extra taxation. But I think it can be shown that this is a very dangerous policy, and also that in the long run it will probably injure most the very people whom it is now sought to relieve.

I would ask the House to consider very seriously the financial position of the country, especially in the light of the international crisis through which we have just passed. The Government are never tired of taking great credit to themselves for the enormous amount of debt reduction that they have effected since they have been in office. They quite forget to tell the country that a great deal of that debt reduction has been involuntary, owing to some £1,000,000 a year being automatically reduced by the falling in of terminable annuities. It is quite true that the Government found the National Debt standing at £743,000,000 on 31st March, 1906, and that on 31st March, 1911, it stood at £685,000,000, a reduction of £58,000,000; but it ought to be remembered that the large increase of debt between the years 1900 and 1903 was due to a special cause—a cause which we all hope will not recur for a very long time, namely, a great war. It would be fair, if we wanted to get an adequate view of our financial situation, that we should take as our standard of comparison the Debt, not as it stood at the end of the South African War, but as it stood in the year 1899 before the war. On 31st March, 1899, the National Debt stood at £628,000,000—that is to say, £57,000,000 less than it is at this moment. Nobody can say when we may not be called upon to meet an equal or an even greater strain on our resources. Surely, therefore, the Government of the day should make it their object to reduce the Debt, at all events to what I might call the peace level, before they take steps to retard the automatic reduction of our capital liabilities. I do not think they ought to rest content with having reduced the Debt by £58,000,000 while it is still £57,000,000 above the level which I have indicated. I quite realise that you cannot pay for a great war like the South African War in a few years, and the Government may well take up the attitude that they could not have made greater progress in paying off the Debt than they have actually done. But if they make that contention, I think it is instructive to see what steps the present Chancellor of the Exchequer has taken in the direction of putting our national finances and our national credit on a sound basis.

To start with, the right hon. Gentleman has probably added more to the actual and contingent liabilities of the country than any previous occupant of his high office in time of peace. At the same time—and this is the point to which I wish to draw the attention of the House—while he has increased the liabilities, he has made no adequate provision whatever to put the national credit in a state to withstand this increased strain upon it. In the year 1909, in the people's Budget, he reduced the sum voted for the service of the debt by £3,500,000—from £28,000,000 to £24,500,000. That is to say, he applied £1,500,000 less to that object than was so applied in the year 1898–9, although the debt at that moment was £57,000,000 less than in 1909. The excuse which the Chancellor of the Exchequer made for taking this step, which I think it may fairly be said created consternation all over the City of London, was that he had effected such an enormous reduction in the debt. Surely he had better have waited until the debt stood at what I call a normal level before taking the very exceptional step of reducing the amount voted for the service of the debt, and therefore of reducing the New Sinking Fund. He took this step when the reduction of the debt could most easily have been accomplished; that is to say, Consols were standing at such a low level that any money applied to the reduction of debt in 1909, when Consols stood at 84, would naturally have had far greater effect in reducing the total of our liabilities than in the year 1898, when Consols stood at 110. But he did more than this. He took the hanging up of the Budget of 1909–10 as an excuse to take £2,500,000 from the New Sinking Fund and to use it to meet the ordinary expenditure of the year. That is to say, having reduced the amount which he had put to the service of the debt by £3,500,000, he further reduced the New Sinking Fund by £2,500,000 in order to meet the current expenditure of the year.

The Chancellor of the Exchequer may say that owing to the action of the Lords this action was a necessity in the existing circumstances. I do not propose to argue that point, but I think the House will admit that, at any rate, having made this raid on the New Sinking Fund, he ought to have made it a first charge upon the revenue of the following year to pay back to that Sinking Fund the money which he had borrowed from it in the previous year. He did nothing of the kind, as a matter of fact, although he tried in his Budget statement to make it appear as though he did I think the Chancellor of the Exchequer's handling of the situation would have done great credit to the chairman of a rather second-rate company trying to explain away to a meeting of shareholders some financial sleight-of-hand. The Chancellor of the Exchequer misled both the country and the House on this matter. I do not think it was very difficult for him to do so, because the majority of the people in the country are so under the spell of his oratory that they have come to look upon such minor matters as Sinking Funds, Consols, and national credit as very dull and prosaic details in comparison with the great gains which has been so ably advocated by the hon. Member for Blackburn (Mr. Snowden) of robbing the hen-roosts. The real action which the Chancellor of the Exchequer took to repay the £2,500,000 of the Sinking Fund was something as follows: He had a surplus of some £5,500,000 to dispose of in the present Budget. I maintain that in the present state of our finances the whole of that surplus should undoubtedly have been applied to the Old Sinking Fund for the reduction of debt. He intends to apply none of that money whatever to the Old Sinking Fund, although I quite agree he has apparently made it clear in his Budget statement that he is going to do so; £3,250,000 he is spending in various ways, and £2,500,000 he is putting aside to pay back the debt which he borrowed from the New Sinking Fund for the year 1909–10. Although he refers to this £2,500,000 as if he were putting it to the Old Sinking Fund, he will not say he is doing anything of the sort. He is paying back the debt to the New Sinking Fund of 1909, not out of the revenue of the following year, but out of the surplus of the year 1910, which should have gone to the reduction of debt anyhow, quite apart from any action that he may have taken in the previous year. Instead of repaying the debt out of revenue, he has done it out of the surplus of the year. Having committed one financial crime in the year 1909 he proposes to make atonement for it by committing another of a similar character.

Further, fearing that the surplus for this year might be so big that he might be compelled by very shame to apply some of it to debt reduction, he has, as far as I can make out from the figures, robbed the Old Sinking Fund of a further sum of from £2,000,000 to £3,000,000 by the delay which he caused in the collection of Income Tax and Super-tax. Therefore, he has taken this large sum to use as income in the year 1911 instead of letting it go to swell the surplus with which we are dealing now. Therefore we can see the total efforts of the Chancellor of the Exchequer to reduce this enormous debt, which might well have appalled a less courageous Minister. He has reduced the amount for the service of the debt by £3,500,000. He has taken £2,500,000 from the Sinking Fund to meet new expenditure. He is going to pay back £2,000,000 of this, and he is going to find that sum by robbing the Old Sinking Fund. Therefore I think one can calculate that the total effort of the Chancellor of the Exchequer towards the reduction of debt and the strengthening of our national credit is that he has applied at least £10,000,000 less to the reduction of debt during the time, he has been, in office than would have been the case if a more prudent and sound financial policy had been adopted. I think it is rather a serious thing when it is done by a Minister of the Government that is pledged to economy, and by a Member of a Government which under a former Chancellor of the Exchequer—the present Prime Minister—had taken very efficient steps towards the reduction of our capital liabilities. We have heard something this afternoon about the fall in the price of Consols. There are some people who affect great alarm at the fall in these securities. The Chancellor of the Exchequer is not one of them. Perhaps it would be better for the safety of the country if he had been. A great deal has been said by the hon. Gentleman the Member for Leicester and others to the effect that the fall of Consols was attributable to the fact that other securities have been opened to trustee investment. I quite admit that, and that Consols must have fallen from the high position which they held in the year 1898 and onwards. There are an enormous number of securities now for investment of undoubted safety, paying 3 and 4 per cent., in which you can invest trustee funds. Therefore Consols must fall.

The bottom of the whole question is that the price of Consols must in the long run depend upon the activity of the Government. If the Government is not going to give a proper and adequate support to Consols, no scheme which can be devised can possibly bring them up to their proper level, and put the credit of the country in the safe condition from the point of view of national needs. I should like the House to consider this fall in the price of Consols, taken in regard to the possibility of a national crisis, and the possibility of the Government having to go into the market and borrow a very large sum of money.

6.0 P.M.

During the summer, we are told, we passed through a very great crisis. Fortunately that crisis passed off well. Supposing it had not. Supposing that at this moment we had been engaged in the terrible ordeal of a European war. The Government, I suppose, would have had to borrow a considerable sum. Consols at the moment I refer to stood at about 77. I do not think there is any man, whatever experience he may have had in the City, who can possibly tell to what depths Consols might not have fallen if the Government had had to raise a big loan. I quite agree, of course, that if the Government had a large wave of popular enthusiasm behind them the money would have been found at a cheaper rate than perhaps mere financial considerations would dictate. Even so, this money could not possibly have been raised except at a most ghastly cost, which would mean extra taxation for the people of this country. If we had had a crisis of this sort the people who at present do not care for or study the finances of the country would—if they had to pay extra taxation—have done so. They would perhaps then have realised the reckless financial policy that the right hon. Gentleman is pursuing. There is one aspect of Consols which has not been alluded to to-night, which is, to my mind, far more serious than their low-ness of price. That is the weakness of the market. After all, though I admit that a low price is a serious thing for individuals, for the State the weakness of a market is a far more important consideration. It was our boast a few years ago that Consols were not only the best security in the whole world, but that they were also almost as negotiable as a Bank of England note. Nobody can say that about Consols at this moment.

We used to say that you could go into the Consol market and sell half a million or a million of Consols without it having any serious effect upon the price. Anyone who knows anything about the city knows very well that now you cannot sell a hundred thousand without causing a very serious depression. What then would be the result if you went into the market to borrow £50,000,000? Nobody can tell what the price might be under those conditions. What is the reason for this weakness in our premier security? It seems to me that it has come about something like this: Owing to the policy of the Chancellor of the Exchequer which I have tried to outline in regard to the Sinking Fund; owing to the speeches of himself and of his supporters, and the blatant way they have gone about the country saying that anything which the Government wished to do could be paid for, "there is no difficulty about that." These things have depressed credit and depressed the price of Consols. They have brought Consols down so low that the great banks, the great financial institutions, and the great insurance companies have spent hundreds of thousands in writing down their Government securities. This is a process which has brought ruin to at least two of our great banks. These were not the banks of the great railways, and the great capitalists; they were essentially banks which catered for poor men, and therefore could not be run on strictly proper financial principles. These banks were ruined, and other institutions had to spend very large sums in writing down Government, securities. Finally, I think they got tired of this process and sold out, and put the money to reserve into foreign Government securities, and short-term Exchequer Bonds and Treasury Bills, which the Chancellor of the Exchequer has issued in such prodigious quantities.

What is the result of this? You have not got big holders of large blocks of Consols; therefore Consols are weakly held, and not so capable as they were of meeting any great national strain which might be put upon them. I do not think that even the Chancellor's policy of debt reduction would be so bad if he had left the taxation of the country at a level at which it could easily be raised in case of a national crisis. I do not think that is the case, as I think it must be admitted, in spite of the remarks of the hon. Gentleman the Member for Blackburn, that our Income Tax, which used to be regarded as our standby in case of war, is at present at a war level. Further, the Death Duties are now at a figure at which I think it can be shown that they constitute a serious national debt. I am not speaking as a politician. I am speaking on behalf of those who have to live under the effects of these things.

My hon. Friend the Member for Brentford has said something of the effect of these Death Duties in driving capital abroad. I think it is interesting to know that between 1893 and 1899 identified incomes from abroad increased by 8 per cent. From 1905 to 1910 identified incomes increased by 41 per cent. The fact of the increase shows a capital sum invested abroad of £680,000,000, or a capital equal to the total capital liabilities of the State. We know that the Prime Minister thinks this efflux of capital abroad is a good thing. I quite admit that it is a very good thing if we can satisfy ourselves that it is only surplus capital. If the Chancellor of the Exchequer can show me that I am quite ready to say that his finance is excellent. But can anybody say so who looks at the state of the labour market, who knows the difficulty which there is in raising money for industrial undertakings at home, and—what is a far more serious difficulty—in raising money to expand existing industries? Reviewing these facts, will anyone tell me that a large part of that £680,000,000 could not well be employed in many of the industries of this country? When you see, with this difficulty, foreign loans coming out every day; loans of many millions being subscribed, one, two, and three times over, can anybody say that the policy of the Chancellor of the Exchequer is right [HON. MEMBERS: "What is the price of these loans?" "What interests do they pay?"] I quite agree that the interest very often of the foreign loans is higher—[HON. MEMBERS: "Hear, hear"]—quite so, but I am one of those old-fashioned people who think that the credit of this country ought to make up, as it used to do, for the increase of price which the foreign investment has to give.

There are two further reasons to which I venture to say the present price of Consols are due. There are the high Death Duties, which themselves constitute a serious national debt. The raising of the Death Duties to their present enormous sum tends further to depreciate our premier security, because every year it means that very large sums have to be taken out of Consols and paid over to the Chancellor of the Exchequer. I think everybody will admit that the Death Duties are a tax upon capital to the amount of £20,000,000 a year or more. How can the industries of this country continue to be successfully carried on if such an enormous annual sum is taken away from the capital upon which they depend? The only justification for this capital tax is that the money derived from it should be expended, not as income, but in reducing the capital liabilities of this country. To show that the Chancellor of the Exchequer has not quite followed out this maxim, I think that certain figures may be of interest to the House. As I have said, the Chancellor of the Exchequer, in the People's Budget, raided the New Sinking Fund for the reduction of debt by three and a-half millions. At the same time, so far as I can gather, he also increased the Death Duties by about four millions. That is to say, he reduced the amount which he could annually set aside to repay the capital liabilities of the State by three and a half millions, and increased the capital taxation by an almost exactly similar sum. I quite agree that prudent finance is not a very good text for the sermons which the Chancellor of the Exchequer likes to preach. I quite admit that lavish expenditure is a far more vote-catching proposition.

Raids upon the Sinking Fund people do not feel at the moment, whereas they would feel, and in all probability would resent, any extra taxation. But surely the Chancellor of the Exchequer must realise the terrible risk he is running in case this country should ever have a very serious drain upon our national finances. It seems to me of great importance that a great country should be run in good times so as to make some provision for bad times. The Chancellor of the Exchequer has followed exactly the opposite policy. In time of peace his taxation is on a war level, and in a time of prosperity he is taking money to finance his various legislative schemes which should be used to strengthen our financial position. At this moment he has got the opportunity of earning the gratitude of future generations by a prudent financial policy. Instead of that he is taking the directly opposite course. Ever since he has held his present high position he has been engaged in mortgaging the future financial stability of this country. This policy may be successful for a moment, and it may obtain for him very great temporary popularity. The right hon. Gentleman furnishes the electorate with such sensational legislation that they have no time for such details as have been mentioned to-night. The time may come when our financial stability will be a question of life or death to us. Then I believe the people will realise the meaning of this reckless policy. The popularity that the Chancellor of the Exchequer has got now will be as nothing to the unpopularity which will come upon him then, because, in order to help his party to gain a party triumph, he has neglected the first duty of anyone in his position—that is, to see that, in spite of all temptation, he should keep the finances of this country and the national credit committed to his charge in a strong and sound position.

Mr. M'CURDY

I am sure hon. Members on this side of the House will agree with a very great deal which was said by the hon. Gentleman the Member for Blackburn (Mr. Snowden) in the speech which he has delivered this afternoon. We feel just as much as the hon. Member does the desirability from every point of view of decreasing the expenditure which is forced upon the Government in late years. We appreciate the sincerity of conviction and singleness of purpose with which the hon. Member has placed before this House some startling measures of finance which he would recommend in the interests of the working classes. We on these benches differ with the hon. Gentleman's methods, but we agree entirely with his objects. No doubt if the hon. Member for Blackburn had control over the finances of this country he would budget in a manner much more startling and sensational than the Chancellor of the Exchequer, but perhaps the result would not be so lasting. We also are endeavouring to raise and improve the social position of the working classes of this country, but by steps we believe to be more sure and certain. There was only one thing in the speech of the hon. Member for Blackburn to which I object. I was sorry to hear him giving a somewhat summary notice to quit to the Chancellor of the Exchequer, and I assure the Chancellor of the Exchequer that his services are very much appreciated, and I hope the hon. Member for Blackburn may see his way to reconsider his position.

I rose really for the purpose of asking the Chancellor of the Exchequer to consider the position of new Members of this House like myself with regard to the Finance Bill, the Third Reading of which we are now discussing. It was said by the right hon. Gentleman the Member for East Worcester (Mr. Austen Chamberlain), I think with perfect truth, that the Budget of 1909 was a Budget which involved on tirely new principles of taxation, and which purported to carry out these principles by very complicated machinery. So far as Members like myself, who only entered the House of Commons in the first days of 1910, are concerned, we have had up to the present time no opportunity of any full discussion of these very difficult problems and this very complicated machinery. When we entered the House of Commons in January, 1910, the Budget was not a subject which we felt free to discuss on the ordinary lines of party politics. The Budget was then the very bone of our contention with the House of Lords, and our contention was that it was a House of Commons Budget, right or wrong, and we were not going to weaken our constitutional attack against the House of Lords by any unnecessary discussion of the Budget at that time. The next opportunity that arose was when we had to deal with the Revenue Bill, and at that time we all deplored the fact that the Chancellor of the Exchequer was absent, and that his absence robbed that discussion of much of its reality.

Now for the third time this Finance Bill comes up, and in three days the whole matter is disposed of. Some twenty-five or thirty pages of Amendments have to be disposed of in that time, and it is not physically possible for all or even a small part of them to be adequately discussed, and the only thing that surprised me about it is that the right hon. Gentleman the Member for East Worcester should have thought he has a right to get up and to complain in this matter. My complaint is far more against right hon. Gentlemen opposite than against the Members of His Majesty's Government. What we are suffering from and what this House is suffering from is the absence of an Opposition. It is the duty of an Opposition to obtain from the Government of the day adequate time to discuss matters of this kind, and for the right hon. Gentleman the Member for East Worcester to get up and solemnly, and with great indignation, complain of the conduct of the Government in not giving proper time for the discussion of this Finance Bill is very extraordinary in view of the fact that to the astonishment of private Members on both sides of the House, we discovered two days ago that this limiting of the Debate was, to use an expression which I hope is not un-parliamentary, a job arranged between the right hon. Gentleman the Member for East Worcester and the Government. [HON. MEMBERS: "No, no."] Hon. Members say "No, no," but I am merely repeating what was said in the House a little time ago, namely, that the discussion of this Finance Bill and this Budget was settled by agreement between the representatives of the Front Benches on each side, and that being so, I say, so far as the right hon. Gentleman the Member for East Worcester is concerned, he has no right to complain. We were not parties to the matter, and I therefore ask the Chancellor of the Exchequer to consider the fact that, so far as Members of his own side are concerned, as well as Members upon the other side of the House, there is a genuine anxiety lest there may prove to be defects in the complicated machinery set up by the Finance Act of 1909.

Some of us feel anxiety as to whether the Clauses of that Act, so difficult to construe, really carry out the intentions of the authors of that Act as expressed upon the floor of this House in the Debates of 1909 and also on the platforms in the country. Some of us feel serious doubt as to whether their complicated machinery, when brought fully into play, will work quite fairly, as the draftsmen hoped they would work. Reference was made to-day to the Richmond case, and we are under some anxiety as to whether the Richmond case may not be the precursor of a number of Richmond cases that may arise if the machinery is not overhauled. We must bear in mind, with regard to the Richmond case, that it must have come with great surprise to find that a house purchased for £500, and upon which £100 was spent, and valued for Estate Duty for £500, when sold for that sum could be made subject to Increment Duty amounting to the entire annual rent. If that is so, there is some ground for anxiety as to whether the Clauses of the Act out of which a result of that kind is possible may not lead to similar undesirable and indefensible results in other cases when they are more widely applied. Upon this point I want hon. Members of this side to remember that at present there have been very few cases in which the whole transaction as regards the collection of Increment Duty has been carried through under the Act. I believe I am right in saying that according to the latest information available not more than £2,000 has been collected for Increment Value Duty, and, if in that small collection there are one or two cases calculated to give us pause, a strong case is made out for some investigation into this machinery before it is applied on a wholesale scale.

One other point on which we should have an opportunity given us for discussing the Budget, and that is to see whether it is not possible to simplify the provisions of the Act, because it must be admitted by all of us that it is desirable that the taxpayers of this country not only should pay taxes which are fair and just, but that they should, if they so desire, be in a position to satisfy themselves upon that scare. I do not think many Members on this side realise how extraordinarily complicated is the machinery set up under this Act for the purpose of assessing Increment Value Taxes. Do hon. Members realise that in order to determine what amount of duty is payable, say, upon that Richmond house, which sold for £500, no less than thirteen distinct valuations, each requiring expert knowledge, have to be made under the Act, and that when the thirteen valuations have been made then an arbitrary figure is called in to make up the formula upon which the tax is collected? These are points on which I support the plea of the right hon. Gentleman the Member for East Worcester that the Chancellor of the Exchequer should at the earliest convenient time give us a full opportunity of looking into the working of the machinery of this Act. There is one other ground, and a very strong one, upon which I do appeal to Members on this side of the House. I think it was John Stuart Mill who laid down the proposition that unearned increment, not as to 20 per cent. but as to 100 per cent., belonged to the community, to whose growth enterprise and expenditure unearned increment is due. A tax on unearned increment scientifically ascertained, beyond any doubt or cavil, is a tax that is capable of expansion in time of need without injustice to anyone. An Income Tax of 4s. in the £ upon casual profits masquerading under the name of an Increment Tax is a very unsound basis indeed upon which anyone may hope to build for future Budgets, and it is because I desire to see the basis of these Land Taxes, and, above all, of these Increment Taxes, made so broad and certain that they never shall be overturned by future Governments, and because I desire to see them made especially capable of bearing the burdens of any additional taxation which for the purposes of social reform it may be necessary to put upon them, that I desire this Act should be overhauled, and if there are defects let us get them removed while it is in our power and make the Act the perfect instrument which its authors intended it to be.

Mr. PRETYMAN

I think we all listened with very great interest to the speech delivered by the hon. Gentleman opposite. I cannot help contrasting his practical condemnation of Unearned Increment Duty as it exists with his commendation of that duty in its theoretical application as to all unearned increment. I do not think anybody in this House upon either side would object to a tax on unearned increment if such a tax were possible to be obtained on all kinds of property. But that is not practical, and the hon. Gentleman's speech proves it. Here we have, as the result of the united and collected wisdom of this House expended day and night for many months an effort to impose a fair Increment Value Duty upon land which was the one object hon. Members opposite invariably held out as quite different to everything else, and as likely to give us all we could obtain; and the hon. Gentleman opposite, with all his enthusiasm for the Chancellor of the Exchequer and all his enthusiasm for Increment Value Duty, finds himself compelled as a practical man to get up and condemn the result of our labours root and branch. I am speaking upon matters within my own knowledge when I say that he is not alone in that opinion. I do not believe that there is one practical man on the opposite side of the House supporting the Liberal party who understands and knows the effect of the working of this taxation who will not be ready to get up and use the same kind of language as the hon. Member opposite has used. After all, if this House were a debating society, then, I think, such theories of taxation as those advanced by the hon. Member for Blackburn (Mr. Snowden) would be of the greatest value. But we are not a debating society, although I am not quite so sure that we are not becoming a debating society in some sense; but, at any rate, our duty is not to be a debating society, because we have upon us the responsibility of placing actual practical burdens upon the people of this country. Surely it is not our duty to the country to impose taxation which is nothing more nor less than an experiment as a kind of test whether the theories of the hon. Member for Blackburn will work or not in practice. That is all this means. The Chancellor of the Exchequer will not get up and say that these Land Taxes are the considered proposals of the permanent officials of this country, who are the right hon. Gentleman's responsible advisers. Will the right hon. Gentleman tell us that they really represent the considered, thought out, practical policy of practical men, practical in the sense of their knowledge of the management of land or of finance. They are neither one nor the other. These taxes are simply an attempt to carry out in practice the impossible theories of the hon. Member for Blackburn and his Friends, and where we blame the Chancellor of the Exchequer is that he has imposed upon this country this experiment, which like all experiments, should be tried in the first case on a small scale.

The result of imposing this experiment is the revelation which we have had an opportunity of studying in the recent report of the Commisioners of Inland Revenue. Let us for a moment examine what has been the realised results of this experiment. The first thing was the issue of Form IV. We have the figures in the Report of the Commissioners of Inland Revenue showing that the cost of issuing Form IV. was £174,000. That is the first item on the debit side. The valuation upon which this revenue is to be based and the cost of its collection have involved, according to the latest information from the Treasury Bench, the appointment of 2,300 officials at a cost of £325,000 a year. That is item No. 2. In addition to that there are other considerable sums for attendant expenses, and these items amount altogether to something exceeding £500,000 of direct expenditure out of the taxation levied on all other kinds of property for the purpose of carrying out this experiment. That is only the beginning of the cost. What is the position of the individuals who are threatened with this form of taxation? All those who have been served with Form IV., of which 10,500,000 have been issued, have either been obliged to let the thing go or take their chance with results which have been pretty well exposed in Debate. In every case where an owner considered it his duty to examine the effect of the service of this Form he has had to employ professional advice, for which he has had to pay. There is the enormous cost of professional advice directly caused to owners of property in this way. One case came to my notice of an estate in bankruptcy where the trustee in bankruptcy had to go before a judge in chambers and had to obtain an order on that estate in bankruptcy to incur an expenditure of £200 in order to obtain professional advice to enable him to fill up Form IV. May I ask the Chancellor of the Exchequer when he replies to tell us what course the Government propose to take in that respect. The next item of expenditure is the largest of all, and it has been incurred as a consequence of the realisation of the Chancellor of the Exchequer's expressed hopes that this legislation would cheapen land. Nothing was more eagerly put forward from the benches opposite than the golden hope uttered on Radical platforms that the land of the country was to be cheapened. Consols have been cheapened, and land has been cheapened, but it is reserved for the Chancellor of the Exchequer and his Friends to boast of having cheapened land. What has been cheapened by this taxation is mainly the small house property of this country, which has fallen in value something like 20 per cent., as far as we can judge by the mere passing of this Act.

Mr. KELLAWAY

Hear, hear.

Mr. PRETYMAN

The hon. Gentleman opposite cheers that statement.

Mr. KELLAWAY

Certainly I do. I will cheer anything that will lower rents.

Mr. PRETYMAN

The hon. Member cannot believe, and it seems to pass his comprehension, that you can at one and the same time pass legislation so vicious that it will reduce the value of the land and at the same time increase rents. That is practically the effect of this legislation. You have cheapened the land, and the hon. Member opposite admits it. Land has had its value reduced. Look at the effect of these proposals on house property and the building trade. Building is largely done upon credit, and anybody who wants to borrow money now to develop land or acquire property has to pay 1 per cent. more for the money. The whole structure of land development is carried out upon credit. Let me show the hon. Member opposite how his hopes will fail of realisation. Land has been cheapened, and what has happened? Houses are worth less to the present owner because he has got to pay this burden, partly of taxation, partly of attendant expenses, and partly of depreciation. It simply means that a part of the value of this property has been transferred to the State and a part has been wasted. But the general effect remains the same, as far as the rent is concerned. The occupier will still have to pay the same, only part of what he pays as rent will not go to the owner as before, but it will go in two directions—partly to the State and partly in waste. The building operations of the speculative builder have been stopped by the passage of this legislation, for he can no longer profitably borrow money for purposes of building development. What happens? The speculative builder disappears from the scene, and only those houses are built which are actually required. Hon. Gentlemen opposite often talk about the effect of a tariff upon the consumer, but this Bill is a triff upon the building trade. It is a duty upon everybody who builds a house. In this case who represents the consumer? Why the person who occupies the house. The next stage will be that the speculative builder will reopen his operations when rents have sufficiently gone up to restore to him the profits which he formerly made. That is an unbroken chain of absolute argument as to what must happen. Therefore the hon. Gentleman opposite may be very proud that he and his Friends have invented a method of taxation which can cheapen or injure land. If the hon. Gentleman wants to cheapen things he can do it by injuring them. If you want to cheapen horses you only need to lame them, and then they will not be worth much to anybody. You may cheapen land, Consols, or anything else in this way. There is nothing to boast about in it, and it is reserved for the hon. Member opposite and his Friends to be-proud of such action. The consequences of it are loss to the present owner, loss to the future owner, and loss to the community from every point of view from which you put it. I think I have now fairly completed my case on the debit side, and I think I have shown that the cost of this form of experimental taxation is rather a heavy one.

Let us come now to the credit side. The actual result on the credit side is £15,900. I suppose I cannot omit from this calculation a good many thousands or hundreds of thousands of misguided votes which have come to the hon. Gentlemen opposite. I do not know whether that may be taken on the credit side, but on the financial side there is no more than £15,900. When that is pointed out the answer given to us is, "Wait a minute, we are going to get a basis of taxation by this valuation which is going to be of enormous future value. We are going upon this to graft a new system of rates and taxes from which all the money required by the citizens of this country for social reform is going to be drawn." Let us examine that a little more closely. An interesting figure was given in answer to a question stating that of the completed valuations no less than 36,300 are minus quantities. I do not want to enter into the Debate which took place yesterday upon the question of a minus quantity except from this point of view, that I think the ingenuity of hon. Members below the Gangway and the Chancellor of the Exchequer will be taxed to explain to the House how rates and taxes are going to be obtained by a system of assessment of a minus quantity. If such an immense proportion of the assessments which this form of valuation is going to produce are minus quantities it is quite obvious that as a future basis of taxation it is worse than useless. Let us examine this question from another point of view. When a valuation is to form a basis for future rating or taxation it must be levied on all property upon an even basis.

Let us see whether that takes place in this case. Let me give just two instances, not single cases of this or that house, but cases governing immense areas of property and affecting the whole character of valuation. Let us go to Lancashire and take small house property in Lancashire. It will be found that an immense proportion of it is let on two systems. Part of it is let on what is called the chief rent system, where the freehold is vested in the householder, and a mere annual charge is paid to the ground landlord. It is a perpetual tenure in which the freehold of the property, nominally, vests in the householder. You have another class of property, also covering a great area in Lancashire. It is let on 999 years' leases, and, technically, the freehold vests in the ground landlord, and the 999 years' charge is a ground rent. Under this remarkable piece of legislation the rent charged is a deduction, and the ground rent is not. What happens? Let us take the case of an ordinary block of houses in a town, and let us suppose the full site value of those houses is, on the average, £100. Suppose those houses are let on a chief rent tenure, and suppose that chief rent to be £5 per house. It is quite a common case. That, at twenty years' purchase, is £100. That is a deduction from the full site value, and it brings out the assessable site value of those houses at nothing. Then lake another block of exactly similar houses paying rent for 999 years instead of for ever. There there is not a deduction, and you have the assessable site value brought out at £100. How are you going to find a basis of taxation to cover Lancashire when you have houses exactly similar in every respect in appearance in value and in the annual charge made, and when in one case the assessable site value is brought out at £100 and in the other case at nothing?

Mr. WEDGWOOD

By taking the full site value.

Mr. PRETYMAN

That is a new proposal. If you are going to take the full site value, why do you go to all this expense to arrive at the assessable site value? Let us take the county of Lincoln. You have in the county of Lincoln three areas practically covering the whole of the county. You have the northern half of the county where the agricultural land is divided by quick-set hedges; you have another portion of the county where it is divided by stone walls; and you have the fen district, where the fields are divided by dykes. Under this system you value all agricultural land, and where there are quick-set hedges there is a reduction, but where there are stone walls and dykes there is no deduction at all. Therefore, you have in one county agricultural land valued at a lower figure than all the rest because it is divided by quick-set hedges instead of by stone walls and dykes, which, as a matter of fact, are much more expensive to construct. This assessment or valuation as a sound basis of future taxation or rates really falls to the ground. There is another reason upon which I need not enlarge,' and that is the under-valuation which has taken place. That under-valuation has been general. In some cases there may have been over-valuation. The valuation itself is unreliable, it is discredited, and there is not a single soul in the country who thinks it is of any importance to him except hon. Gentlemen opposite, who are living in a fool's paradise and who look correspondingly happy. There is really nothing more remarkable than the change in the attitude of the Liberal party on this question. About two years ago, when this legislation was in the hey-day of its promise, we had it on every Radical platform, and we had nearly enough of it in this House, but now it is put back to the very last day of the Session, and we hear little or nothing about it on Liberal platforms. [An HON. MEMBER: "YOU will hear of it again."] I am sure the reception of hon. Gentlemen who support these Land Taxes will not be quite as favourable as it has been in the past. People are beginning now to find out the practical result, and the ruined builder and the harassed householder will not receive hon. Gentlemen quite so favourably as when they talked of the rich, refreshing fruit which was about to fall to them.

I will say one word as to the effect of the recent decision of the Courts as to Forms IV. and VIII. Forms IV. and VIII. have been in their present form condemned by the Courts, and I think we have a right to ask the right hon. Gentleman what course he proposes to take in regard to them. Perhaps he will tell us now whether he has made up his mind whether he will pay the cost of the plaintiffs in those two eases. I think he has now had sufficient time to tell us. He knows perfectly well that the form in which those actions had to be brought technically exempts the Crown from the payments of the costs. He told us at the time he should not shelter himself under that technicality, and I know perfectly well he will deal with the matter in a fair spirit. I do not press the matter upon him except to ask him whether he has made up his mind whether he will appeal or not. Of course, if he has not made up his mind, he cannot give us an answer, but I hope by now he has been able to do so. What is the position at present in that matter? Supposing the action taken by the Valuation Department had been taken by a private individual, what would be the position of the injured party? Under a threat of a fine of £50, a demand was made for certain information with all the authority of a Government Department behind it. It is now declared by the Courts that threat was invalid, and that the information need not have been supplied.

What is the remedy of the subject that has been so treated? Had he been so treated by a private individual—I speak under reserve, because I am not a lawyer, and I may be corrected if I am wrong—he would have had a right to proceed against the individual who had injured him, and to obtain damages. I mean where he could show injury. In cases where he could show he had been damaged by that action he would have had a right to claim that those damages should be refunded to him. He cannot do so against the Crown, because of the theory that the Crown can do no wrong. Take the case I quoted just now, the case of a trustee in bankruptcy who, in order to fill up Form IV., had to go to a judge in chambers to obtain an order to spend £200. Had that action been taken by a private individual, an action for damages would have lain, and he would have been able to have got the money refunded to him. At any rate, I think there would have been a primâ facie case, but, on the theory that the Crown can do no wrong, no action will lie. I do think the right hon. Gentleman is morally bound to put those individuals who have been put to this expense and to this trouble and from whom information has been wrongly obtained in this position. He ought to return those forms where the information has been illegally obtained under threat, and he ought to refund to the individual any expense he has been put to in giving that information. Perhaps he will tell us what action he proposes to take.

I wish to make one more point with regard to this matter of taxing land, and it is on a more general basis. Surely this House, or any legislative body, imposing taxation must realise if you are going to impose taxation on any particular form of property; it ought to be property which is increasing in value, and which will have an additional growing capacity to bear the burden placed upon it. Is that the case in regard to land? Here we have the very illuminating Report of the Commissioners of Inland Revenue, and there are three tables in their report to which I would like to call the attention of the House. The first is on page 35, where details are given of the gross capital value of property subject to Death Duties, and the particular class of property on which these duties fall is building land. It is a very remarkable fact that in the first five years of the years which are here given—the last ten years from 1900 down to 1910–11—the average value of building land upon which Death Duties was paid was about £1,500,000. It began to drop even before this Act was passed. The Liberal Government had been in office three years, and it shared the general fall in credit of all kinds of security. All kinds of securities, except foreign investments, had naturally fallen. There is a very obvious reason for that, and I can hardly add anything to the admirable speech of my hon. Friend the Member for Uxbridge (Mr. Mills). Home securities and Consols used to fetch more in proportion to their yield, because of their additional security; and the achievement of the right hon. Gentleman apposite is that he has reduced the security of those investments to at least on a par level with other investments abroad yielding a larger interest. The security which has felt that influence more than any other kind of security is the land of this country, and, of course, its value has been correspondingly depreciated. Its value has gone down from £1,500,000 to only £772,828 last year. That is not definite proof. I do not want to take it any further than the figures go, because Death Duties do vary in quantity in different years, but where you have a general and continuous fall of this character it, at any rate, points to a considerable decline. Let me go to another figure even more remarkable. On page 107 you will find a distribution of gross profits of Income Tax as between land, houses, and other kinds of property, and you will find that between 1900 and the present time the capital value of land in this country assessed for Income Tax fell from £52,636,000 to £51,910,000.

Mr. WEDGWOOD

Is that agricultural land?

7.0 P.M.

Mr. PRETYMAN

No, all land apart from houses, and yet the hon. Member and his Friends proposes that shall bear the whole of the taxation—it is to be taken off the houses—when you have a wasting and declining value which has fallen from £52,000,000 to the figure I have stated. When you contrast with them the table calculated by my hon. Friend behind me as to the way in which foreign investments in the same period have increased from sixty millions sterling to ninety-three millions sterling I think you will see which is the more proper subject for taxation in this country. Here you have land falling in value throughout the country and saddled with an undue share of the rates and taxes which have to be borne, while the enormously increasing body of foreign investments does not touch that burden with the tip of its fingers. In conclusion, I should like to say one word on the speech of the hon. Member for Blackburn (Mr. Snowden). The hon. Member objected to indirect taxation on the ground that no man who had no more than was necessary for his daily existence ought to be taxed. I agree with that, and I think the whole House also agrees. There is no desire to tax any man who has no more than sufficient for his daily existence. But then the hon. Member went on to add that direct taxation fell upon him as well, because however much it might be nominally levied on the richer classes a large proportion must inevitably fall on the poorer classes. May I point out how it is that a man who has no more than enough for his existence pays the direct taxation which falls upon him. He pays it in rent. Take the rent of a small house in a town at 8s. per week. Four shillings of that represents the burden which falls on the occupier of that house, and not more than 4s. out of the 8s. will go to the man who has provided the house for him.

I venture to say a more objectionable form of taxation than that is impossible, so far as regards a man who has no more than enough for his existence. I say that for two reasons. In the first place, he docs not know he is paying any more than he does in indirect taxation, and perhaps not quite so much, because he knows that the indirect taxation goes to the State. But in the other case he is told by many politicians that it is all rent, and that it is being taken by the greedy landlords, therefore this individual who has no more than sufficient for his existence is paying nominally 8s. a week as rent, but 4s. of it is really a national burden which is placed on his back. He is the prey of politicians who are full of theory, but who do not really understand practice. He falls an easy prey to them, and he votes for measures which only increase the burden that comes upon himself. My second reason is that the burden is absolutely inelastic. I consider that the burden which falls upon a poor man should have elasticity. He is liable to ups and downs, and when he has a set back it should be possible for him by some little self denial to tide over his difficulties and get on to the up-grade again. But unfortunately he has an inelastic rent.

Sir A. MARKHAM

How is the 4s. made up?

Mr. PRETYMAN

Rates and taxes paid out of the rent. When your rates amount to 10s. or 12s. in the £ I do not think that the 4s. estimate is very far out. It is the poor man who pays the 4s., and he has to pay it to the uttermost farthing or his wife and family will lose the roof from over their heads. There is no elasticity in any shape or form. It is the worst form of taxation that can be imposed on a poor man. I maintain that this form of taxation, which is nominally a tax on the rich, is really on the rent of the house in which the poor man lives, and you are placing the burden not on the rich man who apparently bears it, but on the poor man who cannot afford it, and you are putting it in the very worst form in which it can be possibly placed on him. That is my main objection to this form of taxation which has fortunately become a little less popular than it was. On national grounds, and for the good of those who occupy small houses—the main portion of the population of this country—I shall not rest until this form of taxation is erased from the Statute Book.

Mr. LLOYD GEORGE

First of all I should like to say I hope the hon. Gentle man the Member for Chelmsford (Mr. Pretyman) did not imagine that I was complaining of the length at which he was addressing the House. No one in the House has a better right to speak on the Land Taxes, and, however radically I may differ from his views, I am bound to admit he has taken a good deal of trouble over the question and has a right to express his opinions here on the subject. He concluded his speech with a very remarkable and far-reaching doctrine. As I understood it his theory is that any tax you put on the landlord has eventually to be paid by the tenant. If that is the case the sooner we introduce legislation to make that impossible the better. The hon. Gentleman surely does not mean to suggest that Schedule A falls on the tenant. That is a Property Tax. It is paid by the landlord, and by the Act of Parliament which imposes it it is expressly indicated it should not be deducted from the tenant or exacted from him in any form. I should be very surprised to hear that it is borne by the tenant at the present moment. I agree that the apparent incidence of taxation is not always the real incidence.

I should like to say one word, before I come to broader arguments, on the question of Form IV. The hon. Gentleman has fallen into an error into which a good many critics have fallen, when he assumes that the decision of the Court, or rather the effect of that decision is to render Form IV. invalid. That was not the decision of the Court at all. The Court decided two points. The first was that—I am putting it roughly—where you served your notice at such a time that you could not comply with the demand contained in Form IV. to supply the information within thirty days it was invalid. If it was dated the 9th August, and stated that, within thirty days certain information must be supplied subject to a penalty of £50, and if the notice was served on the 13th and could not be complied with in the time, then it became invalid. That is what happened in that individual case. The notice was dated the 9th August; it was not served until some days later; it was impossible for it to be complied with, and, therefore, it was declared invalid. But that has nothing to do with the validity of the form itself. It ought never to have been served days after the date which appeared on the face of it. That question I shall have to bear in mind when I come to a decision, which the Treasury will have to come to, as to costs.

The second decision was this, that where the occupier is also the owner there is no right to ask him what the annual value of the property is. But that is a question which is put in every form which is filled up, I believe, under the Metropolitan Assessments Act. It has been filled up by every owner and occupier in London for the last thirty or forty years. It was put into this form, but it has been decided by the Court that there is no right to ask for the information where the owner is also the occupier. The only question that really went to the root of the validity of Form IV. was decided by the Court in favour of the Crown. Therefore the assumption that it is decided that Form IV. was invalid is absolutely inaccurate. I come now to the question put to me with regard to costs. I understand the Law Officers of the Crown are now considering whether or not there shall be an appeal, and this I will say at once, that if the Law Officers decide not to appeal I certainly think the Crown ought to bear the costs.

Mr. CASSEL

In both eases?

Mr. LLOYD GEORGE

I certainly think the Crown should be in the same position as other parties and bear the costs of the successful litigant, and if it is decided not to appeal I, as Chancellor of the Exchequer, will give my decisions in that direction. But the hon. Gentleman went on to talk about damages. Really there were no damages in that case. What happens? Form IV. had to be filled up by the party it referred to, and he deemed it necessary to go to the Court in order to get instructions how to fill it up. The only thing that happens will be that a Form IV. properly dated and omitting just that one question out of, I forget how many, will be served on him, and he will still have to go to the Court in exactly the same sort of way. He will not be damnified in the slightest degree. I do not think there is a case for damages. There is a case to ask the Crown to pay the costs if we decide not to proceed with the appeal. So much for the question of Form IV.

I now come to the general questions raised by the hon. Gentleman on the provisions of the Land Act. The case he made was also made very ably by my hon. and learned Friend the Member for Northampton (Mr. M'Curdy). It was a case for simplification. I wonder whether the hon. Gentleman realises quite what his plea amounts to. Of course my hon. Friend the Member for Newcastle-under-Lyme (Mr. Wedgwood) never ceased to warn me that every concession made in the course of the Budget Debate in response to the eloquent appeal of the hon. Member for Chelmsford would result in complicating our taxation instead of simplifying it. I must say that this is true. Yet the hon. Gentleman claims advantage from his own wrong-doing. First he appealed to me to make concessions, and he put his claim in such a very appealing way and tone that I could not resist him. Concession after concession was made, and there is not one of those concessions which has not caused us trouble, and which has not complicated the machinery. What is still more, much of it has had the effect of delaying the collection of taxes. I will only point out one case to prove that. It is in connection with the concession made with regard to the Undeveloped Land Tax. It was agreed that until agricultural tenancies had come to an end we were not to start the Undeveloped Land Tax. We were not to do so, at any rate, until twelve months' notice had expired. That period will not be reached until some time next year. Most of the land is either land upon which £100 has been spent in making roads, curbs, and drains, or it is land which is used for agricultural purposes, and the concession meant that until the year had expired the taxes were not to be collected. The hon. Gentleman, having wrung that concession out of the Government, now turns round and says, "See the result of your Land Taxes." It is hardly fair to me, but it is a very solemn warning to me and to every succeeding Chancellor of the Exchequer with too soft a heart to resist the appeals of the hon. Gentleman in future. That is why at the present moment we are not collecting, even when we have the valuations completed, our income in respect of the halfpenny tax, simply because these tenancies have not expired, and we are therefore not in a position until next year to begin to get at the effect, as it were, of this Undeveloped Land Tax.

I come to the second point. There is the difficulty with regard to the unearned increment. The hon. Gentleman says, "What have you got out of it?" With regard to the unearned increment, we made it perfectly clear that, in our judgment, it was a tax which you would not get much from for years to come, because you were beginning with a datum line. I can quote from a speech delivered by the Prime Minister in regard to valuation in which he emphatically stated that, with regard to the whole of the Land Taxes, for a year or two the yield would be comparatively small, and that we were simply laying down a basis of taxation for the future. I have two quotations from the Prime Minister pointing that out, and he justified it by reference to what Mr. Gladstone did in connection with the Succession Duty. Mr. Gladstone introduced the Succession Duty in 1853, and he pointed out that very little could be expected from it in the course of the first year, and that he was simply laying the foundation of a tax that would be productive in future. What happened there? Mr. Gladstone's expectations were falsified. For the first year or two he did not get half as much as he expected. But what has happened since? It has been one of the most productive taxes in this country. The same thing applies to our taxes. Here, again, the hon. Gentleman has taken advantage of a concession. With the Increment Value Duty you begin with a datum line. You say the value of land at such and such a date is, say, £100; if it is sold at £110 there is an increment of £10. The fault that we have not got much in rests a great deal with what the hon. Gentleman got out of the Government. He got a concession that the increment should only begin after you have added 10 per cent. on to the increase, so that you have to wait, not merely for an increase in the value, but until you have an increase which is over that 10 per cent. What is the result? That for the first year, or the first two or three years, you cannot expect to get much out of your Increment Duty.

I put the right hon. Gentleman for East Worcestershire (Mr. Austen Chamberlain) to a test last year. The Government, in the Bill of 1909, gave half the Land Taxes to the municipalities. Last year they gave them £300,000 a year certain, instead of a prospective half of £600,000. What did the right hon. Gentleman say? He said, "Don't you do it, you are selling your birthright for a mess of pottage. This is a bad bargain. You take my advice. You stick to your half of the Land Taxes." And I agreed with him. It was very sound advice. Let him get any municipality in the kingdom to say now that they will commute their portion of the Land Taxes for half a million or even a million for the next ten years. I doubt whether he will be able to effect that bargain. Certainly, if you try to buy out their rights altogether, they would not look at it for a moment. He knows perfectly well, in spite of all his criticism, in spite of the fact that in the first years we cannot hope to get much—the valuation is incomplete, you must allow the value of land to develop—that this is a basis of a taxation that is going to be very productive, not merely to the revenue of the municipalities, but to the Imperial Exchequer as well. It has turned out to be successful in Germany. I have a great hope of the increase in the value of land in spite of it, rather than in the somewhat dubious prophecies of the hon. Member for Chelmsford. He says "you will ruin the building trade. There is nothing being done in the building trade. The speculative building trade is at an end, and you will get no building of houses at all except as there is a demand." I am not so sure that it is altogether a bad thing that you should make your supply fit your demand. But it is very remarkable that the building trade should be destroyed and that the unemployment in the building trade has gone down. I will give figures for that. When the Budget of 1909 was I brought in, the building trade was very bad. The unemployment then was something like 10 per cent. From the moment the Budget was brought in, with the hopes that it contained, the unemployment steadily went down, until in October of this year it was only 3.1 per cent., instead of being 10 per cent., as in 1909.

Mr. AUSTEN CHAMBERLAIN

Has the right hon. Gentleman got the total figures of the numbers employed? There is a very great reduction.

Mr. LLOYD GEORGE

I notice that the figures of the Board of Trade are always quite good enough to quote if they show an increase in unemployment, but the moment there is a decrease in unemployment these figures are no good at all. Then the only figures which are fit to be quoted are those of the Tariff Reform League. [An HON. MEMBER: "The 'Daily Mail.' "] I remember perfectly well how the figures were quoted at that time. It is not merely the figures of unemployment, but if the right hon. Gentleman will look at the monthly reports of the Board of Trade, obtained not merely from the trade unions but from the leading firms and the labour correspondents throughout the country in these various trades, he will find that they show a steady improvement year after year since then in the building trade. All this talk about the Budget having ruined the building trade has no foundation whatever, except in the imagination of the Land Union. So much for all that. In spite of all that has been said, anyone listening to the hon. Member for Chelmsford would imagine that the whole machinery of land valuation had broken down, and that there was no hope at all except in the abolition or, in what I should prefer, simplification as was suggested by my hon. Friend and upon which I hope the hon. Member for Chelmsford will ponder. Really, I believe that the Land Union is in league with the Single Tax Union. I believe there is a secret treaty between the hon. Member for Newcastle-under-Lyme (Mr. Wedgwood) and the hon. Member for Chelmsford. I cannot explain it upon any other basis. The hon. Member for Chelmsford is really working for simplification as hard as he can, and when he achieves it, the Chancellor of the Exchequer of that day will have to bring in a Bill for the simplification of the Land Taxes and the restoration of the much simpler and much more effective original proposals that the Government put before the House of Commons. That will be part, of the triumph of the Land Union.

In spite of all these complications, what has happened? We only began our valuation work this year. Of course the Budget was late through no fault of ours. I do not want to enter into that controversial matter. You had first of all to employ your men and your clerks, and you had to organise the whole machinery. You had to circulate millions of forms, you had to get in the replies to those forms. The machinery of valuation really only began about twelve months ago. What has happened? We have already had provisional valuations made and served upon the parties in 1,500,000 cases. How many appeals have we had? Only eight-six. These are not with regard to large properties. Since the eighty-six appeals were served, twenty-five of them have already been withdrawn. That does not really look as if it were a great cumbrous machine that had hopelessly broken down. That is the beginning of the valuation. Year by year it will be accelerated. There will be a simplification. The machinery will, of course, be improved, and I hope some of the criticisms the hon. Member for Chelmsford has been making for some time will bear fruit, and that we shall be able to accelerate collection and improve the efficiency of this valuation machinery. It would be unfair to him not to express my gratitude to him for the assistance he has given me. I do not believe that the valuation will be completed much later than the period indicated by the Prime Minister when he introduced the valuation proposals in the Budget of 1909. When it is accomplished it will be a very great piece of work. It will be of enormous value, not merely for the taxation we imposed under the Budget of 1909–10, but for the reconsideration of the problem of local as well as Imperial taxation. I say that, to whoever has to deal with that problem, whether it is the right hon. Gentlemen opposite or ourselves.

You cannot ignore the enormous task which is being accomplished by these valuers. Of course, when you have a gigantic task of this kind, when you have to value some 10,000,000 items, naturally you get here and there a case which is not a very satisfactory one. Is that not true of every business? How can you get 10,000,000 transactions put through without any breakdown, without somebody perpetrating a mistake, or serving a notice two days after time, or putting something in he ought not to? That would be as much as asking that the three or four hundred valuers should be superhuman. The progress that has been made I think is very satisfactory when all the circumstances are taken into account. It is said "it has cost you three or four hundred thouand pounds a year. Look at what you are getting out of it." Is that a fair way to put it? A valuation is something which is made and done with until you come round to the next valuation. I believe that the last valuation of the whole of the kingdom was made about 700 years ago. This is a valuation which I think will last for some time, although I do not say it will last so long as that. But it will last for some years. It is surely a capital expenditure, and it is not fair to say "it is costing you three or four hundred thousand pounds and you are getting nothing out of it." It is costing £2,000,000 to have done with it, It is well worth the money, whatever the settlement of local taxation is going to be. What was the difficulty which the right hon. Gentleman the Member for the Strand Division (Mr. Walter Long) saw when he came to consider the question of local taxation? His difficulty was one entirely of re-valuation. This is the only country in the world where you have not got something in the nature of a national survey, and even if you had not got these taxes emanating from it, it would be absolutely necessary to have a valuation of this kind in order to know exactly what your position is.

That is all I have to say about the Land Taxes, except as to the way they bear upon the Estate Duties. Official valuation makes a difference of between £400,000 and £500,000 a year to the Estate Duties, and that you have an efficient staff of valuers who can check the valuation. I can give some very remarkable figures as to what it really means in some cases. I have a long list of cases here. This is the sort of thing that we never could have checked before. I will give two cases where the valuation has gone up from 25 per cent. to 136 per cent. In one case the original value, as given by the owner, is £73,926. Valuers were sent down from the valuation staff and checked it, and, finally, I think it was agreed upon at £175,000—an increase of £101,000. That is an increase of 163 per cent. In the next case there was an increase of 185 per cent. in the valuation, so that it is already beginning to bear fruit. We have received in the increased income from the Death Duties alone, without altering any principles of valuation, more than the cost of the valuation, although it is a capital expenditure. As I pointed out, that is no injustice to the men who have to pay, but quite the reverse. The injustice was to the men who gave honest returns. They paid to the full, but those who did not return the full value were getting off their fair share, and whenever there is a deficiency the honest men have to make it up.

The right hon. Gentleman (Mr. Austen Chamberlain) suggested that the time has come for an inquiry. I am not closing my mind to the question of an inquiry. You must have an inquiry sooner or later. This is quite a new proposal. It is a new method of taxation. The valuation of the whole of the land of this country is a very important matter, and it is perfectly fair that there should be an inquiry. You do not want an inquiry which will take the valuers away from their duties at too early a stage. I am not now arguing against an immediate inquiry, but I should like to consider whether it would not be better to go on a little longer, until you have settled a few increment value cases and others, before you institute an inquiry. I think an inquiry would be very useful. I am not going to predict what would happen except to say that I am not so sure that the hon. Member (Mr. Pretyman) will be very happy at this inquiry having been granted, because, unless I am mistaken, the inquiry will be very largely on the lines suggested by the hon. Member (Mr. Chiozza Money). If anything, it will point to the direction of what he called simplification rather than the direction of further complicating the matter by the sort of concessions which have been indicated.

Mr. AUSTEN CHAMBERLAIN

We will risk the result. What we want to know is whether the valuation is just.

Mr. LLOYD GEORGE

That is very important. It is of first-class importance that you should have a valuation which will command the general confidence of the community. I do not mean merely the partisans on either side. You ought to have a valuation which will satisfy the general sense of fair play and justice. That is very important, and it is desirable at a fairly early stage to have an inquiry into the way in which the valuation has proceeded. The hon. Member (Mr. Mills) made a very interesting speech, which gave great satisfaction even to those who could not accept his criticism, and even to the victim of his criticisms, because it was an admirable speech exceedingly well delivered. His theory was that Consols had gone down very largely because we were not paying off debt. This criticism has been heard so often that I suppose hon. Gentlemen must believe it. This year we are providing £10,500,000 for the payment of debt. When did the right hon. Gentleman ever do that? If he will only compare the record of the Government of which he was a member—there were no doubt difficulties—he will find they cannot compare with the effort made by the present Government to reduce debt. Let us take the period preceding the South African War. The Unionist Government redeemed debt by £5,850,000 a year. That is the net reduction. During the four years from 1899 to 1902–3 they raised for war purposes £162,000,000, and they raised for capital liabilities £5,000,000 a year. They redeemed only £5,300,000, so that, apart from the war debt, they added during these four years almost £1,000,000 to the debt of this country. During the last three years of office the Unionist Government made a net reduction of only £3,100,000 a year. Let us look at this Government, which I am told is putting down the price of Consols by not paying off debt. During the five years which the present Government has been in office they have made a net reduction of £11,300,000 a year. In all, up to November of this year, they had paid off debt to the amount of £75,000,000, and before the end of this financial year that will have come to £80,000,000 altogether. I am not asking the right hon. Gentleman whether his Government did anything of the kind because they simply put it up, but I ask him to name any Government of modern times that has ever reduced the indebtedness of the country by anything approaching that figure. Whatever the hon. Gentleman's views may be about the reduction of Consols, at any rate they have nothing whatever to do with the fact that we are not redeeming debt. In regard to the Old Sinking Fund, we have done very much better. Listening to hon. Members you might assume that they had always used the Old Sinking Fund to pay off debt. As a matter of fact, they have had 74 per cent. of the Old Sinking Fund applied to other purposes. We have applied 80 per cent. of it for the purpose of reducing debt, so that, even on these figures, our efforts compare very favourably with those of the right hon. Gentleman and his Friends.

Then the right hon. Gentleman came to another point on which I sympathised with everything he said, and I am sure he will not disagree with one thing I say. He quoted some speeches I made below the Gangway when I criticised him, and he says now I am in a position to carry out economies. The Chancellor of the Exchequer is not in a position to carry out economies. There is only one body which can carry out economies, and that is the House of Commons. The Chancellor of the Exchequer may make an effort, he may fight for economy, but there is only one body which can achieve economy, and that is the House of Commons, and the House of Commons does not. During recent years the pressure of the House of Commons has been rather in favour of expenditure than of economy. The right hon. Gentleman said our expenditure had gone up. So it has. But I thought the answer of the hon. Member (Mr. Snowden) was complete. How has it gone up? It is really no use talking about the increase of the Civil Service. It may or may not be right, it may or may not be extravagant, but that is a comparatively small portion of the increased expenditure. It would not have been necessary for the Chancellor of the Exchequer to put on a single tax, however trivial, in order to meet the increase in the cost of the Civil Service. The increase in expenditure has been in two directions, social reform and armaments, and they are pretty equally divided. I ask the right hon. Gentleman where he would economise? It is no use saying to the Chancellor of the Exchequer, "Look at the state of the finances when you came to the Exchequer, and you will see you are now spending £20,000,000 or £30,000,000 more than you were spending then." That is not the point. I am not spending a penny piece more than the House of Commons not merely sanctioned, but pressed upon me, and all I have done here is to try and persuade the House of Commons not to spend more.

On the Old Age Pensions Bill the only fight was to prevent the House of Commons as a whole adding £14,000,000 here, £500,000 there, and even £20,000,000 in a lump. That was the proposal to bring down the age from seventy to sixty-live, and I had to fight it, not always with very much help from the right hon. Gentleman, though he did better than his Friends, because he has an old rooted sense of responsibility from having been a Chancellor of the Exchequer. When we came to the Insurance Bill, I never bad a proposal from any Member on either side to reduce the contribution of the State, though I can remember fifty or one hundred which would increase the liability of the State, and one of the very last Divisions we had was one for taking off a penny. The hon. Member (Mr. Snowden) is consistent. He believes in taxes on principle. That comes from his training. I remember perfectly well when it was pro posed to take a penny off the workman's contribution. Everyone knew what that meant. They knew that the Government could not face the bankruptcy of the scheme, and that they would have to get it out of the national coffers, and hon. Members opposite voted for it, although they knew they were adding almost another penny to the Income Tax. What is the good of talking to the Chancellor of the Exchequer under these conditions, when he has been trying for months to keep down expenditure? I think I am entitled to ask the right hon. Gentleman and hon. Members behind him which of these items of expenditure would they get rid of.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman specifically challenges me again. I tell him that my complaint is in regard to two measures of legislation of which he has spoken. I am not one of those who have urged the Chancellor of the Exchequer to increase the cost to the State of the Insurance Bill. My criticisms of that Bill were of a different kind. What I urged upon the Government was that the old age pension scheme should have been a contributory scheme. That would have lessened the burden on the State. The other side of my criticism was that at the time they were introducing the new burden of old age pensions they had no right to be abolishing taxes.

Mr. LLOYD GEORGE

Surely not abolishing taxes does not diminish the burden on the State. Let me meet the other point. The right hon. Gentleman says, in regard to old age pensions, "I suggested that you should bring in a contributory scheme." Let us see what that means. If old age pensions had been given under a contributory system, it would not have been 4d. I would have had to ask the workman to contribute but 8d., and it would not have been 3d. I would have had to ask the employers to contribute, but probably 5d. When I asked for contributions of 4d. and 3d. what help did I get from the right hon. Gentleman opposite? If I did not get much help from him when I asked for 4d. and 3d., I think that is an indication that if I had accepted his suggestion it would have ended in disaster, which hon. and right hon. Gentlemen opposite would have helped to negotiate. It could not have been done. If you had got the old age pensions scheme on a contributory basis it would not have got any further, because of the amount of the contribution. You could not have increased it. The contributory scheme of insurance we brought in is an effort made by me to prevent increased charges on the State, and it is an enormous effort, but the reception it has got from those who pressed it upon us does not encourage Chancellors of the Exchequer to repeat it. Therefore, although I fully agree with him that national expenditure ought to be faced and seriously considered by Members on both sides of the House, it is not enough to say that the Government should resist schemes which impose new burdens on the State. You must also have an Opposition to resist the temptation to take advantage of the action of the Government in following that unpopular course. Economy is not popular. It is a very difficult thing to effect. Wherever you attempt to cut down expenditure, you first of all come across interests in the country, and you have to resist demands which are popular. It can only be done by something in the nature of House of Commons examination. The House as a whole must look into the national expenditure to see that it is reduced where it is extravagant, to see that the money is only spent where you get full value for it, and also to see that the policy of the country is of a character that does not render an increase inevitable.

Question, "That the Bill be now read the third time," put, and agreed to.

Bill read the third time, and passed.