INCOME TAX COLLECTION.

HC Deb 11 May 1911 vol 25 cc1391-453

Motion made, and Question proposed, "That a sum, not exceeding £79,738, be granted to His Majesty, to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1912, for the Salaries and other Expenses in the Department of His Majesty's Treasury and Subordinate Departments, including Expenses in respect of Advances under the Light Railways Act, 1896."

NOTE.—£26,000 has been voted on account.

Sir FREDERICK BANBURY

I rise to move to reduce the Vote by £1,000 in respect of the salary of the Chancellor of the Exchequer. I think attention ought to be called to the action of the Treasury in seeking to evade an Act of Parliament, and, by so doing, to deprive the Sinking Fund of certain sums of money which, in the ordinary course of events, should have gone to that Fund. In order to point out to the Committee the extreme gravity of the action taken by the Chancellor of the Exchequer, I may read an extract from the Act of 1875 which has been infringed. Chapter 45, Section 4, says:— The Treasury shall within fifteen days after the expiration of every financial year prepare an account of the public income and expenditure of the United Kingdom according to the actual receipt and issue of moneys in the Exchequer account in the Bank of England and the Bank of Ireland during the said financial year, which shall show either the surplus of such income or the excess of such expenditure during the said year. Then it goes on to say:— A copy of such account certified by the Controller and Auditor-General shall be laid before the House of Commons within one month after the expiration of the financial year, if Parliament be then sitting, And so on. The importance of that Section is that it ensures that there shall be a correct estimate made of the income and expenditure of the year. If that Section is evaded, as I hope to be able to show it has been, the result would be that if, unfortunately, we should have an unscrupulous Chancellor of the Exchequer—I have no wish in saying that to make personal insinuations against anyone—it would be in his power to over-estimate the expenditure of the year, and by so doing to secure for himself a considerable surplus at the end of a financial year. That surplus would not go to the Sinking Fund, as is intended by this Act, but would remain in his power and enable him to bring in a Bill to do certain things under the pretence that they would not cost money, which the House would not have sanctioned if they knew that afterwards these things would mean the imposition of fresh taxation; or it would enable him towards the close of a Parliament to bring in a measure which would not impose taxation, but would give certain bribes to certain classes of the community with the money obtained in this improper manner from the previous financial year.

Our predecessors in this House, and the predecessors of the right hon. Gentleman in the office which he now holds, attached great importance to this provision, and evidently if they had considered that there was going to be any juggling by which taxpayers were requested to postpone their payments in a given year in order to produce a sum of money which will not be accounted for in the return to be prepared by the Controller and Auditor-General at the end of the financial year, they would have made some provision by which money due in one year which was not collected until the next should still be devoted to the purposes of the Sinking Fund. In those days it was never contemplated that such action would be taken. Consequently there is a loophole in the Act which has enabled the course which I have indicated to be taken. If I am correct in what I have stated—and I happen to be supported in this view by eminent financial authorities who are Radicals, and who even stood within the last few years as Radical candidates—everyone must condemn in the most emphatic manner the action of the Treasury in sending round to the railway companies, and so evading paying into the Sinking Fund as they should have done. The attention of the House of Commons was first called to this fact by a question which I put to the Financial Secretary to the Treasury on 3rd April last. I asked him "whether he can explain the action of the Inland Revenue in sending round to the offices of the railway companies and suggesting that that portion of the Income Tax due by them in March should not be paid, but held over until April?" His answer was: "I much regret that owing to the mistake of a subordinate officer certain railway companies which are usually asked to pay on 30th March taxes not due under the Special Taxes Management Act until 20th March were this year asked to defer payment till April. The instructions to the chairman of the Board were to receive payment on 30th March."—[OFFICIAL REPORT, Monday, 3rd April, 1911, col. 1815.]

It is to be noticed that the right hon. Gentleman made no denial that these things had been done. He only said that it was owing to the mistake of a subordinate officer. On 6th April the right hon. Gentleman was asked some further questions upon this subject. The hon. Member for Yarmouth (Mr. Fell) asked what instructions were issued to the collectors of Income Tax during the month of March. The right hon. Gentleman said that the collectors of Income Tax are not under the control of the Treasury at all in this matter. And then he went on to say that he knew of no Government official in the House of Commons who was responsible for the action of the district commissioners. Now, the Tax Revenue Act of 1880, shows that the statement made by the right hon. Gentleman and the Financial Secretary to the Treasury was incorrect, because that Act, in chapter 19, Section 13, provides that the Board shall have all necessary powers and authority, and the collectors of Inland Revenue, surveyors, and all other officers or persons who shall be employed in the execution of such Act, or any Tax Acts, shall observe and follow the orders, instructions, and directions of the Board, and in the definition Clause Board is defined to mean the Commissioners of Inland Revenue for the time being, or any two of them.

4.0 P.M.

Therefore it was evident that the right hon. Gentleman in giving that answer was making a statement which was incorrect, and, without wishing to make any personal charge against him, I cannot help saying that all the information which we have been able to extract from him was like taking a tooth from the mouth of a patient. We had to extract it from him with the utmost difficulty, and it gave us the impression—I do not know whether I am wrong in saying so—that the right hon. Gentleman did not wish to impart information, and that he was doing his best to answer the questions in a manner and in a way which would not give the information which we, as Members of the House of Commons, were entitled to have from him. I will now for a moment deal with the answer given by the right hon. Gentleman on the 3rd April. He said the mistake was that of a subordinate official, but my Noble Friend the Member for South Kensington (Lord Claud Hamilton), who I am glad to see in his place, as chairman of the Great Eastern, Railway Company, through the officials of that railway, has shown me a letter which he received from this subordinate official, who called upon the accountant of the railway company, and who I find is Mr. Grasemann. I have looked up in Boyle's Court Guide, and I find that Mr. Grasemann is one of the six Special Commissioners of the Inland Revenue; he has a salary of between £800 and £1,000—a salary very similar in amount to that which Sir Ernest Soares is going to have. Can anybody say that Mr. Grasemann is a subordinate official? That is not my idea of a subordinate official—a gentleman who is one of the six Special Commissioners of the Inland Revenue. I put down a question later, and so did my Noble Friend the Member for South Kensington, but they unfortunately could not be addressed to the Chancellor of the Exchequer, who then, to my regret, owing to ill-health, was unable to be present, and consequently we only got a written answer.

That written answer my Noble Friend has kept at my request, and I believe still has it. It was to the effect that the request was made to Mr. Grasemann by the Chairman of the Inland Revenue—that is, Sir Robert Chalmers. Now we come to this—that the request was made by Sir Robert Chalmers to Mr. Grasemann, who certainly cannot be called a subordinate official. I hope the Committee will bear that in mind, because when we get a little further—namely, to April 20th—some further questions were asked, and the Financial Secretary to the Treasury said:— It is a little difficult to explain to the House how the official misunderstood his orders. I am not surprised at that. I think that is the first candid admission we had from the right hon. Gentleman. The instructions, as I understand, given orally were that payments due by these Companies should be paid on or by the 30th March. For some reason or other the officials misunderstood that and chose to consider that as meaning April."—[OFFICIAL REPORT, 20th April, 1911, col. 1025]. Here we have Sir Robert Chalmers and Mr. Grasemann, and Sir Robert said to Mr. Grasemann, "Will you go to the eight principal railway companies in London and inform them that they need not pay the Income Tax due on the 20th March until later in March?" Mr. Grasemann—misunderstanding the instructions—these having been given orally, takes March to mean early in April. I cannot conceive how, even if it was one office boy telling another, that such a misunderstanding should have arisen, and certainly not in the case of two such eminent gentlemen as Sir Robert Chalmers and Mr. Grasemann. My hon. Friend (Mr. JoynsonHicks) asked a question as to how the Chairman of the Board of Inland Revenue had found that his instructions were misunderstood. The right hon. Gentleman the Financial Secretary (Mr. Hobhouse) said:— The first I learned of it, and I believe the first news the Chairman of the Board of Inland Revenue had of it, was the question put to me by the hon. Baronet, the Member for the City of London."—[OFFICIAL REPORT, 20th April, 1911, col. 1026]. I put that question on the 3rd April, and how on earth the Chairman of the Board of Inland Revenue, if he did not know of the matter until he saw my question, could give instructions orally to Mr. Grasemann to go and collect the tax on the 30th March I do not understand. That seems to me one of the most extraordinary answers in one of the most complicated incidents that have ever arisen during the time I have had the honour of a seat in this House. Later on a question was asked as to which of the railway companies this request was addressed, and we were informed that it was made to the eight great railway companies in London. I do not think I need quote from the OFFICIAL REPORT, because I am sure what I have said will be taken as accurate, but if there should be any doubt I can afterwards give the quotations. I asked a question as to why these eight railway companies were chosen, and I was told by the Financial Secretary that they were in London, and that it was so very much easier to send round to them an oral communication than to write. I asked why it was not possible to send to a company like the North Eastern Railway Company, one of the chief companies, and I was told that they would have had to write in that case. It seemed to be thought that there was no use in communicating unless communication was made orally. An oral message is rather difficult to prove as to whether or not it has been given correctly or correctly understood; but if you send a letter there you have the matter in black and white, and if any question arises upon it, then it is a little difficult, what shall I say, to wriggle out of the fact of instructions which have been given in black and white. But to show that the Department over which the Chancellor of the Exchequer presides with so much ability, has not altogether lost the use of the pen, I may mention that a letter was sent through the post to my Noble Friend, the Member for South Kensington, who has been of very great use in this matter. The letter was sent to the company, of which he is the chairman, and it was dated 6th or 7th March, I forget which. I asked my Noble Friend to take particular care of that letter, because I look upon it as an extremely valuable document. He did so, and gave it to the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain), who, unfortunately, is not present at the moment; but he has got it in his pocket, and no doubt he will be able to produce it later on. The letter was directed to the Great Eastern Railway Company, and the effect of it was—"please pay your tax due on 20th March as soon as possible." There you have a written letter to the company requesting them to comply with the law. Within two or three days after the railway company of which my Noble Friend is chairman had received that written communication, showing that the art of using a pen had not been lost in the Treasury, there appeared Mr. Grasemann, who orally said:—

"Oh, do not you take any notice of that you pay your Income Tax in April." I really do not know how that statement is going to be got over, because every word that I have said is absolutely correct. I have here an answer of the Financial Secretary, given on 24th April, and he says:— The eight Railway Companies referred to were approached as being the largest and most important companies, and therefore the largest payers of the tax, which, as I have repeatedly explained to the House, was intended to be collected on the 30th March."—[OFFICIAL REPORT, 24th April, 1911, col. 1333.] I have taken the precaution to read the newspapers, especially those which contained anything about the collection of Income Taxes, and I quote from the "Morning Post" of 29th April a statement by Mr. Hobhouse, Financial Secretary to the Treasury, speaking at Bristol last night, to the effect that he defended the Government, and said that he had received his share of criticism, but he did not know that it had done him much harm. Instructions were given to the Inland Revenue officials to intimate to certain great railways companies that their Income Tax should be paid by 30th March, but this had been extended to 3rd or 4th April instead of 30th March, and instead of an extension of ten days it became fourteen days. In one of the answers given by the right hon. Gentleman he said that if need be, and if they needed relief, he would extend this period to the railway companies. The railway companies did not need any relief; their share of the tax amounted to £680,000, and the extension of the period of collection from ten days to fourteen days would afford no relief to anybody, even if they were hard up. The right hon. Gentleman said that true a certain amount of revenue, something like half-a-million—afterwards found to be £680,000—was every penny of it collected in 1911. The Chancellor of the Exchequer also made a speech in defence of his action, or rather he did not make a speech, but he was interviewed by a representative of the "Daily Chronicle" on 19th April. Before I read the very interesting interview between the Chancellor of the Exchequer and the reporter of the "Daily Chronicle," may I point out to the Committee that the original defence put forward by the Financial Secretary to the Treasury was that he regarded it as a mistake which had been made. Now just see what the "Daily Chronicle" says:— What the Treasury and Board of Inland Revenue have done is simply to revert to the practice of former years, a practice first deviated from by Mr. Austen Chamberlain, who was Chancellor of the Exchequer at the time, when pressure was applied in the collection of the tax. As far as that goes, of course, one has not got the power of obtaining information from the Treasury which is possessed by the right hon. Gentleman; therefore, I do not know whether or not this has never been done before, but even if it has been done before I would point out to the right hon. Gentleman that two blacks do not make a white. If this had even been done, I do not care by whom, I should have been equally against it, whether it had been by a Unionist Chancellor of the Exchequer or a Conservative Chancellor of the Exchequer. I may say that my right hon. Friend the Member for East Worcestershire assured me that it had never been done before, and he also stated that the last paragraph of this statement is not correct. The original defence of the Treasury was that this was a mistake which they much regretted. There is not snuck regret about the Chancellor of the Exchequer, in his interview in the "Daily Chronicle":— We were not in the same need of money in the first three months of this year, and there was no squeezing process. That is an admission of all we have said. "There was no squeezing process." Why? Because they were not in need of money. The Treasury are supposed to be the watchdogs who control the whole finances of the Empire. When I point out that the total amounts to some £183,000,000 it will be seen that it is more than ever necessary that the control of the financial business of the country should be in careful and capable hands, who will endeavour to do their utmost to preserve the old traditions of this House, by which this House kept a hand upon the expenditure of the country. If the Treasury is to come forward and seek to evade an Act of Parliament because they are not in need of money, and therefore do not press for it, then I say goodbye to this House or any Committee of this House having any control for the future over the expenditure of this vast amount of money. The right hon. Gentleman in that interview, goes on:— Another strong reason why pressure was not applied— Again admitting that pressure was not applied— was the fact that most of the Income Tax for 1909–10 was only obtaiued in Jane of last year. It would indeed have been a hardship to have recourse to pressure to compel payment of a heavy Income Tax twice in a period of less than nine months. Every company, and I believe I am correctly speaking in saying every private individual, begins the year on 1st January and ends it on 31st December. What would it matter to them if they had paid a heavy Income Tax in June, 1910, and paid again in the following year—say on 25th March or 4th April Where would the hardship be? It would be once in the same year, but the difference of the question of fourteen days at the outside. If we take the year as beginning on 1st April and ending again on 1st April, that will bring two payments into that year. And if two payments were avoided in that year, then two payments must come again in the succeeding year, or this process must go on ad infinitum. I venture to say that no more frivolous pretext could be put forward than that the right hon. Gentleman in doing this was mitigating hardship. This was not done in the case of the smaller Income Tax people, because I have letters here pointing out that very rigorous treatment was meted out to them. To the very big companies it did not make the slightest difference whether they paid a fortnight earlier or later. To the Chancellor of the Exchequer it did make a difference, because a large sum of money, amounting to £683,000, came into this year. That means that the Sinking Fund was deprived of that sum and that the Chancellor of the Exchequer was enabled to have £680,000 for future purposes which, if he had carried out the law properly, he would not have had. The Chancellor of the Exchequer, in that interview, further said:— They They are angry because they think the arrears of Income Tax from the past financial year will enable me in my new Budget to meet heavy additional expenditure this year without laying on any fresh taxes. I say that that is an admission of everything. It is an admission that the Act has been evaded; it is an admission that it has been evaded with the very idea that I was certain that it had been evaded for, namely, to use the money which ought to go to the reduction of the National Debt for new purposes which are coming on in the following year, and for which the right hon. Gentleman does not want to put new taxation on for fear it might make them a little unpopular. This means that for the first time, or certainly the second time, but I believe the first time, in the history of this great Empire one of the leading Members of the Cabinet has departed from the old traditions of the House and has evaded an Act of Parliament in order to enable him to make his legislation look a little better. If this House and this country is to be governed in that way for the future there is no knowing to what depths we may descend. It would be perfectly impossible for this Committee to control the finances of the country. It will be in the hands of the Cabinet, and if it were represented by an unscrupulous Chancellor of the Exchequer he might play "Old Harry" with the income of the country.

In 1909 the right hon. Gentleman the Chancellor of the Exchequer brought in a Budget, and I remember him telling us that he was going to abolish the old Sinking Fund. I rose as soon as the right hon. Gentleman sat down and pointed out the very serious effect that would have upon the finances of the country. Owing to the great outcry that took place in the City amongst people of all political opinions, and in this House amongst all financial Members, the right hon. Gentleman abandoned that proposal. Thus in 1909 the right hon. Gentleman sought to do certain things by legislation, and the House refused to sanction that legislation. Now, by an Administrative Act, he has done what the House refused to allow him to do. I venture to say that if the right hon. Gentleman the Member for East Worcester had been sitting on the opposite side, and if the right hon. Gentleman the Chancellor of the Exchequer had been sitting in his old seat, this Committee would have rung with the denunciations in eloquent tones which the right hon. Gentleman the Chancellor of the Exchequer would have hurled upon Members opposite. I am sorry that this task has fallen upon such a very humble individual as myself, but I can assure the Committee that I have brought this forward not from any party motive. I hope hon. Members will believe me when I say so, and when I tell them that I have brought this forward because I believe honestly and sincerely that unless this sort of thing is checked that the old purity which for the last one hundred years characterised the dealings of our Ministers and of this House with finance will be abandoned, and that we shall open the doors to methods which during the past 150 years have never taken place here, but may possibly have taken place in Spanish-American Republics, and to which only I can liken the man⅓uvres of the right hon. Gentleman.

Mr. STEEL - MAITLAND

I rise to second what my hon. Friend the Member for the City of London has said. The whole story is really perfectly plain. It merely means that in order to be quite sure to have money enough to finance the current financial year, the Chancellor of the Exchequer has pilfered the old Sinking Fund of the year that has just closed. It is really a story that is common enough in High Courts of Justice just as in High Courts of Parliament. It means that when one little financial peccadillo proved exceedingly attractive the individual person whose conduct is in question was led on to another. In this case last year the Chancellor of the Exchequer, having robbed the new Sinking Fund more or less legitimately, is now led on to rob the old Sinking Fund more or less illegitimately. As a matter of fact the whole story and the facts are about as plain as any story could be. The motive for what has been done is admitted when extracted by question and answer from the Financial Secretary to the Treasury, and, lastly, the facts are clear from the figures to the Income Tax itself so far as they are coming in for the year under consideration at this minute.

When any administrative fault of this kind has been committed, a point which is really worthy the consideration of the Committee is the way in which the defence breaks down. If there has been straightforward action the defence is easy and straightforward. In this case there is the extraordinarily edifying phenomenon of the way in which one explanation is given by the Secretary to the Treasury and another by the Chancellor of the Exchequer, both, if I may say so, quite absurd in themselves, and destroying one another as well. The explanation given by the Secretary to the Treasury is of one kind, and the explanation given by the Chancellor of the Exchequer is totally different and wholly incompatible with the first. In the first place, when the thing was being done the whole object of the one was to cover it up and, if I may say so, the whole attitude of the other was to brazen it out. It is what we expect and admire from the right hon. Gentleman. The whole attitude of the Secretary to the Treasury in this House was to say 'really there has been no delay; you are making a great fuss about nothing; there is nothing extraordinary in the action of this year, and, in fact, the Income Tax has been collected with quite amazing rapidity.' He has made many statements of that kind. When he was asked by the hon. Member for Cambridge University whether any directions had been given to the collectors to delay the collection of the Income Tax, he replied, "I have no knowledge of it at all." Further, he states that "the demand notes for 1910–11 were actually issued, with few exceptions, by the end of January," showing what speed there had been and that "there was no alteration in any way of the usual practice of sending out Income Tax demands in the usual time." The whole attitude of the Secretary to the Treasury was that there had been no delay of any sort or kind. Then we come to the Chancellor of the Exchequer, and in that celebrated interview published in the "Daily Chronicle," not only does the Chancellor of the Exchequer admit that there has been delay, but he gloried in it—an attitude entirely different from the Secretary to the Treasury:— What the Treasury and Board of Inland Revenue have done is simply to revert to the practice of former years … We were not in the same need of money, and therefore there was no squeezing process. What, I think, the Committee would like to know is which is their defence? Is it true there was no delay, or is it true there was delay and that it was a highly proper and laudable action. Again the Secretary of the Treasury minimised it. He said that it was an entirely local affair. The collection of the Income Tax, assessment and collection, is a matter for the localities, and with which the Exchequer and the Board of Inland Revenue have really nothing to do. Or suppose they have anything to do with it, it is done by a subordinate officer, and so far as it has been done by a subordinate officer then at any rate it is a departmental affair. He would be the last, he said, to shirk his responsibility, but if it is just a Departmental matter the real responsibility lies on the head of the Department, and they themselves have no real responsibility for it at all. Then we turn to the opinion of the Chancellor of the Exchequer. The right hon. Gentleman said:— Nothing will give me greater pleasure than to have an opportunity of defending my policy in the matter. The Chancellor nods assent. We regret and he regrets that the Secretary for the Treasury is not here. Will he defend his colleague's policy in this matter? Perhaps the right hon. Gentleman will give some explanation of the two, because not only are the two defences incompatible, but each when examined by itself breaks down absolutely and hopelessly. Take the line on which the Secretary to the Treasury went. His whole policy was to cover the matter up, to say that they were not responsible, and that, after all, there was no undue delay. How far do the facts bear out the Secretary to the Treasury? Take, first of all, the question of responsibility. We had the whole general rigmarole about the Income Tax being a local matter. The right hon. Gentleman said:— I may explain that the Income Tax is, both in its assessment and in its collection, exclusively a local tax. Those are the words of the Secretary to the Treasury. I am afraid the Chancellor of the Exchequer was taking a little credit which was not due to himself when he said that it was his policy. The statement of the Secretary to the Treasury is that Income Tax is exclusively a local tax, both in its assessment and in its collection. How far do the facts bear out that statement? So far as the revenue from foreign investments goes, which now amounts to about one-eighth of the revenue on which Income Tax is collected, and about 8 per cent. of the whole revenue assessed to Income Tax, you have a special officer of the Inland Revenue to inspect these matters. Yet we are told that it is exclusively a local tax. I am afraid the Secretary to the Treasury is not very well versed in the facts of his own Department. He seems to think—judging from his answers—that there are just a few towns in the kingdom in which the collection of Income Tax and its assessment is not exclusively local.

I made it a point to get some of the "few" towns which were just exceptions to the general rule. They include Birmingham, Liverpool, Manchester, Bradford, Bristol, Leeds, Sheffield, Newcastle, Wolverhampton, Cardiff, Portsmouth—nearly all the big towns in the country, except London. And yet we are told that in its assessment and in its collection the Income Tax is exclusively a local tax! Then take the special point of the railway companies. The hon. Member for Yarmouth (Mr. Fell) asked:— Is it suggested that the Income Tax collectors are acting on their own initiative in postponing the collection of these cheques in regard to the railway companies? The Secretary to the Treasury replied:— The collectors of Income Tax are not under the control of the Treasury at all in this matter. Then we turn to the Income Tax Act:— No assessments shall be made under this Act by the Commissioners for general purposes in respect of the annual value or profits and gains arising from any railway, but in lieu thereof every such assessment shall be made by the Commissioners for special purposes. The Commissioners for special purposes, as the right hon. Gentleman should have known, are appointed by the Treasury. The Inland Revenue Commissioners themselves are Special Commissioners, and the Board's own officers collect all the assessments made by the Special Commissioners. And after all this we are told that the collectors of Income Tax are not under the control of the Treasury at all in this matter. Was ever such a preposterous defence put forward? We all wish the Secretary to the Treasury could have been here to explain it. Perhaps the Chancellor of the Exchequer will make the explanation for him. We have the definite statement in regard to the railway companies that the collectors of Income Tax are not under the control of the Treasury at all in this matter; we have also the definite statement of the Act of Parliament; and the facts in each case are directly contrary to the statement of the Secretary to the Treasury. Take one other point. The whole attitude of the Secretary to the Treasury was, first of all, to prove that they were not responsible; secondly, to show that there was no great delay; and, thirdly, that, payment was delayed over 1st April, at any rate the margin of time was a small one. Therefore the date on which the Income Tax from the railways should have been paid was all important in the matter. Turn to the right hon. Gentleman's answer:— It is the case that railway companies are bound to pay their tax at some date subsequent to 20th March. Then turn to the Taxes Management Act:— Railway companies in England or Ireland shall pay the duty of Income Tax under Schedule D by four quarterly payments, namely, on or before 20th June, for the first quarterly payment, on or before the 20th day of September, December, and March in each year, for the second, third, and fourth quarterly payments respectively. As a matter of fact, they pay half-yearly, instead of quarterly. But the date is "on or before 20th March." Perhaps the Chancellor of the Exchequer will explain the Secretary to the Treasury's answer that the railway companies are bound to pay their tax at some date subsequent to the 20th March. If there is a difference between the Chancellor of the Exchequer and his colleague, it is the difference between covering it up and brazening it out. We come, in fact, from Joseph Surface to his brother Charles. I hope I am correct in assuming that the statements printed in connection with the interview in Wales are tolerably accurate. On a previous occasion when I quoted a report from a newspaper, ill-luck had dogged the Chancellor's footsteps, and he had been inaccurately reported. I do not wish to do him injustice again, and I hope the report is not inaccurate this time. But it is possible that the "couple of fragrant cigars" with which he regaled the interviewer may have caused some inaccuracy in the report. To use a phrase of the Chancellor of the Exchequer, "for pompousness, pretentiousness, and futility" few arguments have exceeded those put forward in regard to this same Income Tax collection in the interview in the "Daily Chronicle." Here is the Chancellor of the Exchequer's account of the matter, and it is entirely different from that of his colleague. In the first place, he reverted to the practice of former years…in not having a squeezing process. I thought he took virtue to himself in his last Budget speech for having continued and extended that squeezing process. He goes on to state that— It was a practice first deviated from by Mr. Austen Chamberlain, who, when he was at the Exchequer, finding one year that he needed money, got pressure applied in the collection of the tax. I hope circumstances will admit of the right hon. Member for East Worcestershire's being here. In his absence I may say I do not believe there is one single grain of foundation whatsoever for the Chancellor of the Exchequer's statement, and I hope he will withdraw it. I was in the Treasury at the time, and knew what was going on. The Chancellor of the Exchequer, before he made that remark, could have consulted the officials who were there at the time. I believe there is not a single grain of fact in the statement that when the tax was collected rather mere closely shortness of money was in any way responsible for it. Another point to be remembered in this connection is that, even if the collection was then somewhat accelerated, it is one thing to accelerate the collection in order to keep the law, and another thing to delay it in order to break the law. If you accelerate the collection you get the money in as far as possible within the limits by which it ought legally to be paid. In the present case the delay has resulted in causing the law to be broken. Then comes the point of hardship to the taxpayer. My hon. Friend has already quoted the remark about rigorous pressure to compel payment of a heavy Income Tax twice in a period of less than nine months. Does the Chancellor of the Exchequer think that any single taxpayer would have been at all the worse off if the payment of Income Tax by the railway companies have been expedited? The people who would have suffered by the rigorous pressure were the poor unfortunates up in Glasgow, who were distrained upon at the same instant. The Chancellor of the Exchequer is generous to the poor and just to all, but he cannot claim that in this particular action—which was his policy, for which he is going to take all credit—he was protecting the poor, seeing that the smaller Income Tax payer was being distrained upon while the railway companies were being allowed to postpone payment, although no shareholder in the railway company would benefit thereby. The whole thing is really plain. But when the Chancellor of the Exchequer, later on, chooses to ascribe motives, and to say that— From the partisan point of view their anger may be natural, but do not let there be any pretence on the part of these critics of a genuine public interest or concern for the taxpayer. Surely he might take a little of that ascription of motive, and apply it elsewhere in this connection. It is so like the ordinary delinquent in a court of justice, who thinks that anybody who discusses his action has a personal or a party animus against him. The reason we object to this practice is, in the first place, that it is extraordinarily bad financing. If there is one good principle of financing it is that when you make large commitments for the future you should make provision for those commitments at the earliest possible date, instead of hypothecating the future without knowing how you are going to find the money. Already the existing financial year is being swollen by arrears from last year. If there was any sound finance in the Chancellor's policy, for which he is going to take full credit, it ought to have been rather to have discounted the fact of those arrears by providing more money by extra taxation, if need be, than by robbing the Old Sinking Fund in order for one year at least to carry on without recourse to taxation. Indeed this is one of the cases where it is far better for the Chancellor of the Exchequer to be just than generous.

There is, however, yet one point that lies deeper still—the jerrymandering the whole public administration. It is all of one piece—the whole of the things we have been listening to lately. First hon. Gentlemen opposite job their friends into a place. Perhaps if one should feel some sympathy with the Chancellor of the Exchequer for one moment, it is that he has got at the head of the Inland Revenue a public official who has been trained in the Civil Service, and who, without question, does not like maladministration. However, that defect may soon be remedied. If the present Government should be in office when a new chairman of the Board of Inland Revenue is appointed, then, no doubt, they will appoint someone whose legal knowledge, acquired during eleven years' retirement from business, will give him a peculiar fitness for the post; or somebody like the other gentleman whose commercial ignorance admirably unfitted him for being a member of the Indian Council. Let us have done with these things. When there are new quantities of officials for new work being appointed, and new administrative departments being formed, the Chancellor of the Exchequer or the Government should, before all things, have been zealous to ensure, first of all, that all members of the Civil Service should have every reason to be contented and loyal; and, secondly, that the public should have every reason to rest assured that nothing was done to interfere with the proper administration of a great Government office.

Mr. FELL

May I add a few remarks to what has been said to show what the effect of these arrangements which have been made by the Chancellor of the Exchequer will have on the Budget which he is going to introduce next Tuesday. When that Budget is introduced, and we are informed of the estimate of the receipts for the present year, we shall know that those Estimates are wrong. We shall know that the Budget is to a large extent fictitious; that the balance which will be shown is not correct; that £680,000 included in that Budget is money which does not belong to that Budget, but belongs to the old Sinking Fund. It will be wrongly included in the Budget. It is not a fact that £680,000 of that Budget only will be wrong. It is estimated, in addition to this sum which is confessed—which has been dragged out from the Treasury Bench as the amount which was not collected and which ought to have been collected—it is estimated by ordinary current opinion that instead of £680,000 the amount that has not been collected is upwards of £2,000,000. When you consider that our Budget may be incorrect to the extent of £2,000,000, then I say it is a sad day. I do not think such a thing has ever happened before, that the Budget should not be looked upon as a real, straightforward statement of the accounts of the country, but as accounts which have been jerrymandered for some purpose with which we are not now concerned.

Six hundred and eighty thousand pounds was not collected from the railway companies. There are many other companies, and others to which the same verbal—I will not say instruction, but hints, were given that their cheques for payment for Income Tax were not desired, or were not wanted. I myself know of one case where there was a cheque for £600 ready to be signed on the 30th March. This was in the City of London. However, when the collector called he said it would be perfectly satisfactory if the cheque was handed over in time for the next Board meeting on April 2nd. If we know cases of this sort within our own knowledge, what must be the total sum altogether? Therefore, I think, we shall not be very far wrong if we put at £2,000,000 the sum which, instead of being collected and brought into the fund, will go to swell the balance-sheet of the present year. It is very difficult to explain to ordinary people how it is that the Government can do such things, because in ordinary finance the sums which are due at the end of a particular time credit is taken for them when the accounts are drawn up, and the sums are shown as being an asset of the company, subject to any small loss that there may be upon collection. It is not so with the Government. Many people do not understand that the Government only take credit for certain sums which they have received up to 31st March—that these large sums held over are not taken into account. This gives the Chancellor of the Exchequer an enormous power which is not given to the treasurers of any other institution.

The only reason I can give for the Government's course of action is that that might be adopted in the case of one of the automatic machine companies. If one of these companies desired to make a balance sheet such as the Chancellor of the Exchequer is going to make for us next week they would collect the money from their boxes all over the country up to the eleventh month; they would not collect for the last month. The accounts naturally would show a less sum than would have been the case for a year, because there would only be eleven months' receipts, and they would show largely diminished profits. The next year thirteen months' receipts would be taken into account—the twelve current months and the month of the preceding year. That is what the Chancellor is going to do. But would that be thought honest finance by any company? It is not finance which should be approved by this House of Commons, or by any country which wishes to maintain the high principles which we have always had. If we had collected the thirteen months' income, the balance should have gone to the reduction of the National Debt. It was a wise provision of our forefathers when they decided that all moneys over at the end of the year should go to the reduction of the National Debt.

I believe the composition of the Commissioners of the National Debt comes up on this Vote. The composition of that body was framed for the very purpose of meeting or obviating, or tending to obviate, such a case as has arisen at the present time. By the Act that appoints these Commissioners, certain other gentlemen are appointed to assist them, men of the highest and most independent position. There is Mr. Speaker, the Master of the Rolls, the Governor of the Bank of England, and two or three others of unimpeachable position. These are appointed for the purpose of preventing the Chancellor of the Exchequer doing such as he has done this year. By some means or other for years past these Commissioners have not met, and it appears now that the work of the Commissioners is entirely and absolutely done alone by the Chancellor of the Exchequer. A quorum is three Commissioners, but the Chancellor acts alone and gets the minutes signed by two other Commissioners. From what I have read of the Act, and I have read it very carefully, I do not think that this action can be in any way justified. The action of the Chancellor is not finance. It may be that people are hypnotised, perhaps, at the present time, but I think we shall wake up. I think the country is waking up, because immense interest is being taken on the subject of the National Debt, and the failure of the Chancellor of the Exchequer to collect the money to which I have referred. More interest is being taken in the matter than perhaps the Chancellor of the Exchequer thinks, and people are beginning to find out that the administration of the country and the administration of our finances is not in safe hands.

Mr. JOYNSON-HICKS

The hon. Gentleman who has just sat down is perfectly correct when he says that more interest is being taken in this matter. I can assure the Committee that I have had more letters on this subject since the various questions were asked in the House than on any political matter during the last few months. I do think that it would have been only fair to the Committee that the Chancellor of the Exchequer, or some one on his behalf, should have earlier answered what I consider the unanswerable speeches of my hon. Friend the Member for the City of London (Sir F. Banbury) and the hon. Gentleman the Member for East Birmingham (Mr. Steel-Maitland), because until we know which horse the Chancellor is going to ride it is a little-difficult for us on this side of the House lo complete our accusations against the Government. It is perfectly clear that the Chancellor of the Exchequer will have to throw over either the interview with the "Daily Chronicle" or his subordinate in this House. What we really want to know is which he is going to throw over? Whether the answers given in this House from time to time and week after week by the right hon. Gentleman the Financial Secretary for the Treasury (Mr. Hob-house) were correct, or whether the interview in the "Daily Chronicle" was correct? In other words, whether the Chancellor is really going to take upon himself the whole responsibility for this action, whether he is going to say to the Com- mittee to-day that this action was done under his own inspiration and with his own sanction, or whether he is going to adopt—I do not know whether the word "subterfuge" is unparliamentary, or whether it would be too harsh—whether he is going to give the excuse adopted by the Financial Secretary right through, namely, that this mistake was that of a subordinate official.

5.0 P.M.

It may be right or it may be wrong that this money should be saved from the Sinking Fund for the Budget of this year. That I do not propose to argue. What I do suggest is that, right or wrong, it is this House that ought to decide. It is the law which ought to decide, and not the Chancellor of the Exchequer by the mere statement under his own hand. It is perfectly clear—the law was amply laid down by the hon. Gentleman the Member for the City of London—that under the law this money ought by right to go to the Old Sinking Fund. We all know that the Chancellor of the Exchequer tried last year to make a raid upon the Sinking Fund. Having received the rebuff he did, he, above all men, should have been careful about tampering with the Old Sinking Fund this year. It is open to us to say that the Chancellor of the Exchequer knew the House objected to a raid upon the Sinking Fund, and that he knew that if he came to the House and asked permission to take this money from the Old Sinking Fund for the current year, the House, acting upon its previous decision of last year, would say "No." Instead of that the Chancellor of the Exchequer took it upon himself by what, I am afraid, I must call this subterfuge to take the money out of the old Sinking Fund unknown to the House, and I think the House will agree that if my hon. Friend the Member for the City of London (Sir F. Banbury) and the Noble Lord (Lord Claud Hamilton) had not been connected with railways and had not had this matter brought to their personal cognisance we never would have had any knowledge of it, and no one would know that at least £800,000 would have been gained by the Chancellor this year rather than have gone to the reduction of the National Debt.

There is another more important point, which is this. The House of Commons is entitled to place the most absolute reliance upon answers given by Ministers to questions put to them. I am not going to suggest for one moment that the Secretary to the Treasury deliberately misled the House of Commons, but either that was the case or the Treasury officials misled him in the answers they supplied to him. Knowing the Treasury officials at Somerset House, and having been connected with them for many years passed, I can hardly believe it possible that they could have supplied answers to the right hon. Gentleman that were not accurate, and unless they did that the right hon. Gentleman himself must have been the man who misled the House. I am not going over again all the questions and answers given, but I want to call the attention of the Committee to one portion of an answer given to a question by my hon. Friend the Member for the City on 3rd April. The Financial Secretary to the Treasury said:— The instructions of the Chairman of the Board of Inland Revenue were to receive payment on the 30th March. Now who gave those instructions? The Chancellor of the Exchequer is the only person who could give instruction to the Chairman to the Board of Inland Revenue, and we learn it was his orders not to collect the money until after the 30th March. Then whose order was it that was given to the Chairman of the Board to receive payment on the 30th. Was it the order of the Chancellor of the Exchequer, or was it the order of the Financial Secretary? And was the order to receive payment on the 30th March given at the same time that the Chancellor had it in his mind not to receive payment until after the 31st March? On the 10th April we get an account of the unfortunate subordinate official, who we are told was really responsible for the mistake having been made. We have heard who this subordinate official was. A very remarkable answer was given on the 20th April in a reply to a supplementary question which I put to the right hon. Gentleman the Secretary to the Treasury. My question was:— When and how did the Chairman of the Board of Inland Revenue find his instructions were misunderstood? The history of the case up to this was that dual instructions apparently were given, one by the Chancellor of the Exchequer, putting the thing off until after the 31st March so that the money would come into the new year, and the other, instructions, given by somebody at present unknown, presumably Sir Robert Chalmers, to collect the money on the 30th March. Who sent the subordinate official to collect the money on the 30th March. I wonder if the subordinate official knew when he was sent to collect the money that the Chancellor, who is really his official head, wanted it kept back until after the 31st March. Then the case was made that in these extraordinary interviews with the railway company, that a man in Mr. Grasemann's position, with £800 a year, misunderstood the instructions of his own Chairman, and that in these interviews he told the railway company not to pay until after the 31st March. I then asked in this House when did the Chairman of the Board of Inland Revenue find out that his instructions were disobeyed, and the Secretary to the Treasury answered:— The first I learned of it, and I believe the first news the Chairman of the Board of Inland Revenue had of it, was the question put to me by the hon. Baronet, the Member for the City of London."—[OFFICIAL REPORT, 20th April, 1911, col. 1026.] Surely we are entitled to have some more clear and definite answer from the Chancellor of the Exchequer with regard to these extraordinary series of passings to and fro between subordinate officials and the Chairman to the. Board of Inland Revenue as to who really made the mistake, and as to when the Chairman really knew, because if the Chairman of the Board of Inland Revenue only found out on 3rd April—that was the date when the question was first, asked by my hon. Friend the Member for the City—that a mistake had been made, and the collection postponed, how was it that the Chancellor of the Exchequer did not say to his own Chairman, "By the by, are you keeping this payment back in accordance with my policy?" There is a very considerable degree of explanation required from somebody in regard to these matters.

I want to add a further small point, not yet mentioned in the course of this Debate. Not merely have the Government postponed the collection of money, but they have been paying money out in unduly large quantities during the March of this year. Everybody knows that people entitled to repayment of Income Tax have to send in claims for that purpose. I had to do with a great many in my time. These claims are most carefully examined by the officials at Somerset House, and they raise every question they can possibly raise and rightly raise, because they are parting with Government money before they admit their claims, and it is not until every question is disposed of that they send you back the repayment of Income Tax. I have now in my hand a document headed "Important Notice." This important notice was despatched to no less than 7,500 Income-Tax repayment claimants in the month of March this year. It reads:— In forwarding the enclosed order in repayment of an Income Tax claim, the Secretary to the Board of Inland Revenue desires to state that the examination of the claim has not been fully completed— Rather an unusual form of notice to those of us who have any experience of trying to get money hack from the Treasury. It is not like getting a tooth out of an hon. Member; it is more like getting butter out of a dog's throat— but in order to avoid the delay which would ensue at this period of the year if repayment were deferred. Why at this particular period of the year, is the Treasury to return Income Tax without proper examination in order to avoid undue delay, and without the same examination and queries? Why are 7,500 people, much to their delight, to get their money back in order to avoid unreasonable delay which would ensue at this period of the year? I asked a question in this House as to the meaning of this, and I was told it is an old form in use before, and that it is constantly used. I pursued my question a little further, and I asked how many of these repayments were made in the previous year. Do you generally return 7,500 repayments in March? Oh! dear no! Six hundred and fifty were made in March last year. I have not yet had the privilege of receiving the Chancellor's answer to my question as to other years. But I think the House will find that the average number of repayments made without examination in March for a period of years passed is not more than 500. Yet this year, when they do not want to collect Income Tax from the big railway companies the Treasury, at the same time, are repaying as much Income Tax as they possibly can in order, as I submit, to swell the amount of money taken from the old Sinking Fund and devoted to purposes of this year. I submit we have made an unanswerable case, and that it will need all the ingenuity which we know the Chancellor of the Exchequer possesses in an unrivalled degree to explain the very serious discrepancies, not merely between his statement in the "Daily Chronicle" and the statements made in this House, but between the actual answers to questions which Ministers themselves gave from day to day and week to week in this House.

Mr. NEWDEGATE

I only rise for a moment because a complaint was sent to me from one of those people who have to pay Property Tax near Birmingham. With the permission of the Committee I will read the letter:— Dear Sir,—I have noticed the question in the House of Commons relating to the collection of taxes, and thought perhaps you might like to hear my experience. I have not yet received any demand note for the Property Tax due here in January, and which I always deduct from the rent due Lady-day. Accordingly, about the 25th March I wrote to the collector of taxes and suggested he had overlooked me in some way, and asking him to let me have the demand note at once, so that I could settle it and take it out of the rent due. A few days later a man called here with my letter in his hand, and said 'in reference to this letter I ant instructed to call and tell you that the matter will be attended to.' I have not heard anything more about it in any way, and paid the rent without being able to deduct it. I have the permission of my correspondent., who is a well-known man in Birming ham (Mr. Thomas Tanner, of 19, Easy Row, Birmingham) to publish his letter. I put down a question to the Secretary to the Treasury, and he said he did not know that there had been any delay in the collection of this tax, but if I would acquaint him with any case he would be glad to make inquiries. I told the right hon. Gentleman across the floor of the House that I would give him details, and, having done so, I got a letter from the Chancellor of the Exchequer in which, while he acknowledged what I complained of might have happened in one case, he had no knowledge that it had happened to any great extent. Since I put that question I have received a good many letters on the subject, and I have been told that generally in Birmingham there has been very great delay in collecting this tax. The reason my original correspondent wrote was that tradesmen, when they pay their rent like to deduct the Property Tax, and they are put to great inconvenience if they cannot do so. I have a letter from another person in the same neighbourhood who has forwarded me a demand note, which is headed as follows:— Income Tax and House Duty for the year commencing 6th April, 1910. Land Tax for the year commencing 25th March, 1910. Payable on or before 1st January, 1911. Although this was payable on that date, up to 20th April, on which date this note which I have in my hand was issued to another correspondent of mine, this tax had not been called for. It is not for me to enter into the merits of the collection of this tax, because that has been ably dealt with by other speakers. But on behalf of the people who pay the tax I may say—although I believe the last thing the Chancellor of the Exchequer would do would be to put small people to any great inconvenience—by issuing instructions that there is to be a delay, he has caused very great inconvenience. It cannot be said that this is a local matter. I have another letter, but I am not going to give the name of this correspondent, because he has written me a private letter. He points out that all the collectors in the Birmingham centre are appointed by the Board of Inland Revenue, under whose instructions and warrant they act. Those appointments, he says, were handed over to the Board of Inland Revenue many years ago. I also received a letter from another gentleman connected with the collection of revenue in the Midlands in which he said that at the present moment the collectors of revenue in that part of England are very much overworked. He stated that some of them had to work sixteen hours a day, including Sunday, and they have had a very hard time of it indeed. We have had a very large number of permanent officials appointed all over the country, and if so many extra officials have been appointed surely in the collection of revenue we ought to have the necessary number of officials in order that the revenue may be collected at the proper time. I am quite sure that the House is waiting anxiously for any explanation which the Chancellor of the Exchequer can give, but I say with all earnestness it is a scandal that this tax should not be collected at the present time, and it will be a greater scandal to the taxpayers of this country if any loss is caused by this tax not being collected at the proper time.

Mr. DAVID MASON

I am glad that this question has been raised, not from a party point of view, but in the interests of sound finance, which we on this side of the House are equally as enthusiastic and devoted supporters of as hon. Members on the other side of the House. Quite apart altogether from whatever the Chancellor of the Exchequer may say later on, I feel that so far as the facts are within our knowledge, and judging from the public interview, to which reference has been made, which was published in the "Daily Chronicle," we must go on those facts, it seems to me that every honest man must dissociate himself from and condemn wholly and entirely the action of the Treasury in this matter. It may interest the Committee if I briefly refer to the statutory Acts which apply to the Sinking Fund. The old Sinking Fund was first proposed by Sir Robert Walpole in the year 1716 for the purpose of redeeming the debt due to the Bank of England. The new Sinking Fund was established in 1875. It has been temporarily raided from time to time by various Chancellors of the Exchequer, including the present Chancellor of the Exchequer. It is provided that when there is a surplus it should go to the National Debt Commissioners, to be devoted to the reduction of debt. The full charge in the new Sinking Fund, I believe, amounts to £28,000,000, but the main fact we have to deal with is that the surplus over and above the expenditure ought, under statutory declaration, automatically to go to the reduction of debt. As to what the actual figures really were, I should like to ask a question. Will the Chancellor of the Exchequer tell us this afternoon what is the exact amount which has been held back or retarded in the collection? I saw one statement to the effect that in one week of this financial year in April £3,393,000 was collected, as against £179,000 during the same period in the previous year. Even allowing for the Super-tax, there is ample evidence there that there was a distinct retarding of the collection of Income Tax. The right hon. Gentleman, in the interview to which reference has been made, explained that the Government were averse to bringing pressure to bear because two Income Taxes had been collected so closely together. But that is not the question. The Chancellor of the Exchequer gave us to understand that the Treasury were not pressed for money, as if that was any justification for doing that which was illegal and which I submit is unsound finance. Why is it unsound? I do not know whether hon. Members observed the speech made by Lord Morley at the annual dinner of the Association of English Country Bankers and the Central Association of Bankers, held at the Whitehall Rooms on the 10th instant, in which he said:— It was well worth considering whether the economic credit of this country was not as important an element in all those great conditions of natural strength, prosperity, and future aggrandisement as any of the political issues that now exercised us. I think the Committee will agree with me that had this money been collected in the usual way, and had it gone to swell the surplus to be devoted to the automatic reduction of debt that would have improved our national credit. That lies at the very root of all social reform. If our credit is improved, and the price of Con-sols increase, it would have an effect upon the lending credit of every bank through- out the country. Credit lies at the root of all our trade and commerce. We hear a great deal about the new finance, but you cannot alter economic laws because their principles are eternal. You cannot make money by any other way than by honest toil, and you cannot pay debts if you do not save money to repay them. If you swell your surplus and increase the amount devoted to the Sinking Fund you will improve your credit, reduce your debt, and improve your strength; and should we happen to be at war nothing could be more potent than the improvement of your credit in addition to the provision of adequate defensive forces. Apart from the illegality, I dissociate myself, as I have no doubt many other hon. Members do from this unsound argument that the country is being benefited by such action. On the contrary, the country is being hurt, and the Consol holder has a case against the Treasury because his security has been tampered with. If you reduce debt in any concern the security of the remaining holders of stock is increased. I say in this case the Treasury has been guilty of tampering with the security of the Consol holder. Every holder of Consols has a case against the Treasury for unduly and dishonestly tampering with his security. It is not at all a pleasant duty to stand here and attack a Minister belonging to one's own party, but after all we have a public duty to perform, and that is to maintain the high traditions of Parliament. If we are true to the great traditions which Peel, Gladstone, and other upholders of true finance established, we shall be doing right not only for ourselves, but for the immediate future of this country.

Mr. HARMOOD-BANNER

There has been a customary procedure as regards the receipts up to the 31st January. I know that in Liverpool, when you have got a large amount in the hands of collectors of Income Tax which you do not want for the purposes of the year, you tell them they need not pay it in. Whilst I am no apologist at all for any explanations given by the Secretary to the Treasury, I think more or less they were influenced by the fact that he had not got his chief present, and he was unable to make that free concession as regards financial manipulation which can be used in the case of the annual receipts and payments. We must all admit that this is a point which frequently comes up, and the real reason is that our dealings are upon the basis of cash receipts and expenditure, and not on the basis of double entry, which is income and expenditure. Where you take it on the receipt side as regards cash receipts you can always manipulate it. On the other hand you can always keep back a considerable amount of payments so as to make the accounts to the end of the twelve months period more or less agree with the requirements.

There is a permanent official looking after these proceedings, and that permanent official has the interests of the nation very much at heart. We know what he did in 1909 when the Budget was on the tapis. It was then considered unnecessary for any payment to be made in regard to the duties on sugar, tea, and whiskey, and merchants and others were induced to pay their duty. Hon. Members opposite at that time desired to encourage confusion in order to persuade the people to believe in their attack on the House of Lords, but that confusion was not created. The nation at large was extremely indebted to the officials of the Government for the way in which they persuaded traders to pay, and thus avoided the financial confusion which would otherwise have arisen. I take it this is very much the case here. The officials of the Government thought it would be very nice to have a balance for next year, and I have no doubt we should find, if we inquired into it, that not only did they prevent the railway companies and others paying their tax, but they also left large balances in the hands of the various collectors, in order that they might have a big balance to deal with this year. That is shown by the fact that the receipts for April were considerably over £5,000,000, whereas the receipts for the corresponding month of last year were about £2,000,000. This year, therefore, the Government find a nice additional sum in April to meet their expenditure. That is not owing to the Government, nor is it owing to the Financial Secretary to the Treasury; it is owing to one of the little foresights for which we are indebted to the Treasury. The Treasury did not wish to issue new Exchequer Bills, and they wished to pay off old Exchequer Bills without renewal. They knew they had to look after the nation's finances, and to see they were properly protected, and there was plenty of money to go on with without incurring fresh debt, so they did this nice little piece of busness. It certainly makes the finances of this year turn out well, but it is hardly in accordance with what we might expect from the Chancellor of the Exchequer if he was aware of it.

It is absolutely impossible to avoid this manipulation unless you alter the way in which you keep your accounts, and keep them in double entry instead of in cash receipts and expenditure. You are always preaching to the municipalities that they should do it, and I am glad to be able to preach back to the Treasury, and tell them to go and do likewise. There is no reason why the arrears should not be equally utilised for the purpose of redeeming debt. They are part of the income for the year, and part of the taxation imposed for the year, and they ought to be utilised for the purpose of redeeming debt. Instead of that you throw yourselves into the hands of the Treasury. We are usually indebted to the Treasury for the able way in which they manage our finances, but it is beyond human conscience to say, when they know the money you will require in April for the purposes of your expenditure and you do not want to incur fresh debt, that they should not manage a very nice little financial juggle such as this for the purpose of giving you a big balance with which to start the year. That, I believe, is the absolute explanation. It has always been done, and it will be done again whatever party is in power. It is a rotten system; it defrauds the Sinking Fund, and it is contrary to good finance. I hope this Debate, if it does nothing else, will impress upon the Treasury the necessity of keeping their books according to what any competent accountant would advise, by double entry.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

The hon. Gentleman who has just sat down is a very able authority on financial subjects. He has had considerable experience, and I think by common consent he is about the best financial adviser the great city of Liverpool has ever had. I shall have occasion to refer later in the course of my observations to the very pertinent and valuable suggestions which he made. Before I come to that, I wish to deal with the charge brought against the Treasury and the Inland Revenue in connection with the retardation of the Income-tax collection. What is the case made against us? It is that we have deliberately delayed the collection of the Income Tax in order, as my hon. Friend suggested, to dishonestly rob, the Sinking Fund and avoid new taxation this year.

Mr. DAVID MASON

I am very sorry to interrupt the right hon. Gentleman, but I did not suggest he had done that. I said it amounted to that.

Mr. LLOYD GEORGE

The hon. Gentlemen is much too subtle for me.

Mr. DAVID MASON

Pardon me, there is a great distinction.

Mr. LLOYD GEORGE

I will take that as the proposition which has been laid down. I only want to state fairly what the case is I have got to meet. Let us see what the position is and what are the facts. In 1909 I produced a Budget which, for reasons I need not enter into because they are not relevant, I was not able to get through that year, and therefore the Income Tax for that year was completely thrown out of gear, and for other reasons I need not enter into because they are irrelevant. I did not get the Budget of 1909 through until the end of April last year. I had about £30,000,000 of Income Tax in arrear, and I could not commence collecting it until May, 1910. In the ordinary course, it would have been collected months before that, and I had to begin to collect the Income Tax for 1909 before I began the ordinary operation for the year for the collection of the Income Tax for 1910–11. When I introduced my Budget in 1910—I think it was in April—I knew I had to take that into account, and I consulted the officials of the Inland Revenue and the officials of the Treasury as to what revenue I should be able to collect in the course of the year. I was advised I could not without extreme pressure collect the ordinary Income Tax within £2,000,000 in the course of the year. Is that at all surprising? I had first of all to set up absolutely new machinery for collecting a new tax, the Super-tax, and Income Tax, to get returns, and in addition to that I had to collect an extra 2d. for the Income Tax. I do not think anyone would say it was unreasonable to anticipate I should be £2,000,000 in arrear under those circumstances. I am not sure it was challenged in the House at the time.

Mr. BONAR LAW

Yes, it was.

Mr. LLOYD GEORGE

The opinion of the Treasury, at any rate, was that I would not be able to collect within £4,000,000. I accepted the more moderate view that I could collect within £2,000,000. What has happened? Two or three hon. Gentlemen opposite have said: "You have offered an explanation which is absolutely inconsistent with the explanation of your colleague." I have not. My explanation is in reference purely and simply to the bulk of the Income Tax, which I failed to collect. It has no reference to the railway companies. I will come later on to the railway companies, which I think are a matter of £500,000 or £600,000.

Sir F. BANBURY

£680,000.

Mr. LLOYD GEORGE

I am referring now to purely normal arrears, excluding railway companies. My Budget policy for the year involved a delay in the collection of £2,000,000 of the ordinary Income Tax. There is no concealment about that. I told the House in April of last year that would be the position. When a gentleman called upon me somewhere down in the country, I referred to my Budget and showed that was the policy, and that I could not collect that Income Tax without extreme pressure. There are circumstances under which that pressure would have been perfectly justified. Supposing the financial needs were such that we really needed every penny of the money, I think we should have been justified in putting pressure in order to get all the Income Tax we possibly could—even the arrears which I anticipated—into our possession. But there were no financial needs of that kind, and therefore all I did was to carry out the Budget policy of 1909, and the Income Tax—apart from the railway companies—which we collected balances within a penny according to the forecast I gave to the House as far back as April last year. So much for the ordinary Income Tax, and for the statement that there was any inconsistency in what was said by my right hon. Friend and the statement which I made to the interviewer.

Now we come to the question of what happened to the railway companies. It was certainly no part of my policy, no part of my anticipation, and no part of my forecast, and the statement made by my right hon. Friend at this box is the absolute fact. What happened? In the case of the railway companies the money is collected on the 20th March. It is supposed to be collected in four instalments, and those who talk about the law being defied, let them bear in mind that up to the present the law has been defied in that respect. It ought to be collected in two instalments. The railway Companies do not pay the first instalment till December, though they ought to pay considerably earlier than that, and they pay the second on 20th March. That is how the law has been interpreted, not by me, but by every Chancellor of the Exchequer in the past. On the 20th March the second instalment falls due. An hon. Gentleman opposite, in my absence, said he was under the impression that we were two millions in arrears with the railway companies. As a matter of fact, the House has discovered it is only £650,000.

Mr. FELL

I did not say £2,000,000 in arrears with the railway companies. I said that was the total estimate for all companies.

Mr. LLOYD GEORGE

Not merely the railway companies. Very good. Then there is nothing in that point. The second instalment is due on the 20th March, and you have got altogether eleven days in which to collect it. The instructions in regard to it were given by Sir Robert Chalmers. The Treasury had nothing to do with it. We issued no instructions of any sort or kind. It was Sir Robert Chalmers who directed that the money was to be in by the 30th March. The Gentleman who undertook the function of collecting the money did not collect it until the 11th April. In that he undoubtedly was wrong. It was not merely a mistake; it was a wrong interpretation of his instructions. He did what he ought not to have done. That is all that has happened. I have a statement from the Chairman of the Inland Revenue on the subject, and he said he knew absolutely nothing about it. It may be suggested that this only accounts for £650,000. One might imagine that we kept back millions bf money in order to deprive the Old Sinking Fund of what ought to have gone into it.

What are the facts? It was anticipated at the beginning of the year we would be four millions in arrear, in view of the fact that the whole machinery of tax collection had been thrown out of gear by the exceptional circumstances of the last two Budgets. With regard to the collection from the railway companies there was a mistake. It is a mistake that ought not to occur again. It is a mistake that no Inland Revenue officer should be in a position to make. What happened? The companies pay in December and in March. In Scotland they pay on the 1st January. The hon. Baronet the Member for the City of London has stated that the Noble Lord who brought forward this question has done great service in this matter by calling attention to an anomaly and an injustice and to something which might dislocate the finances of the Treasury and by pointing out the temptations to which an unscrupulous Chancellor of the Exchequer might be subjected. It is the intention of the Government to make that impossible in the future, and they propose to do so by putting the English railway companies in exactly the same position as the Scottish companies.

Mr. WATT

Why not put the Scottish companies in the same position as the English?

Mr. LLOYD GEORGE

I was anxious for this Debate, and I think I am justified in saying that it has been exceedingly useful, inasmuch as it has enabled us to see clearly the perils of the present position whereby the railway companies are allowed to pay at the last moment, and something might happen which might prevent our getting the money in the course of the financial year. We should make that impossible, and we propose to do it in the future, by making the payment due a little earlier.

Mr. PRETYMAN

What will the country think of it?

Mr. LLOYD GEORGE

Really, why should not the railway companies pay their Income Tax in the same way as any other person in this country?

Sir F. BANBURY

Nobody objects.

Mr. PRETYMAN

The suggestion to my mind was that the country would think it was done out of revenge, and not out of policy.

Mr. LLOYD GEORGE

Well, it seems impossible to meet some hon. Gentlemen either way. If you do not collect until April they suggest there is something dishonest. On the other hand, if you make sure of the collection before April, then you are a vindictive person. It is really quite impossible to please hon. Gentlemen. I come now to the question which I assume is at the very root of this matter. The hon. Baronet the Member for the City of London brought this subject forward not to attack the Government. Oh, no! He disclaimed that, and I am bound to accept his disclaimer. I am sure it is the last thing he had in his mind. He has done it as Member for the City of London. He has done it as one who is very concerned about our finances. He is especially concerned about the Sinking Fund. I wonder when the hon. Baronet's great zeal for the Old Sinking Fund began. He supported a Government which for ten years had surpluses, and which never, during the whole of that ten years, paid a single penny to the Old Sinking Fund. Where then was this full-blooded champion of the Old Sinking Fund I was rather curious this morning to read some of his speeches. He did not speak quite so often in those days, for he then generally confined himself to the dinner-hour, in order to help his colleagues to fill their own Sinking Fund. I remember that at that time the late Sir William Harcourt was constantly attacking the late Government because they paid nothing to the Old Sinking Fund. The right hon. Gentleman said all the things which have been said so eloquently by the hon. Baronet to-day about the importance of reducing the National Debt, and how important it was that every possible penny should be paid into the Sinking Fund. But the hon. Baronet supported every Motion to deprive the Old Sinking Fund of every penny of surplus, and he gave his reasons for so doing. This is one of them which he put forward when he defended the action of the late Government. Then he said:— Is it an advantage to do away altogether with the National Debt? I say distinctly it is not.

Sir F. BANBURY

I am sorry to interrupt the right hon. Gentleman.

Mr. LLOYD GEORGE

Not at all.

Sir F. BANBURY

I wish to point out that the right hon. Gentleman is misrepresenting my action. I said, at the time he is referring to, that it was not advisable to do away entirely with the National Debt, that is in an open manner with a New Sinking Fund and not the Old Sinking Fund, and not in a manner which is hidden from the House and is contrary to statute. The two things are absolutely different. My speech related to an open proposal made by the Chancellor of the Exchequer to reduce the amount of the New Sinking Fund to a certain extent. I acquiesced in it, the position of the country being what it was at that time. But that is an entirely different thing to altering the Sinking Fund, without the knowledge and consent of the House of Commons. I never in my life suggested that money which ought to go to the Old Sinking Fund should go to other purposes. I may point out to the right hon. Gentleman that the repayment of debt—

Mr. LLOYD GEORGE

I do not object to the hon. Baronet's interruption, but I think he is going beyond the limits of a personal explanation. The position at the beginning was this: That it was important to put every possible penny into the Old Sinking Fund, and that to simply use it for the purposes of relief of taxation in any way was very wrong. The hon. Baronet asked:— What good purpose does the National Debt serve. It provides sound investments for certain people. Therefore I hold that provided the debt does not press unduly on the resources of the people, it is extremely advantageous to have a National Debt. The hon. Baronet at that time was defending the Government for not paying money over to the Old Sinking Fund.

Sir F. BANBURY

The New Sinking Fund.

Mr. LLOYD GEORGE

The hon. Baronet is wrong. The proposal then was to use the surplus, to take it away from the Old Sinking Fund and to put it into Naval loans. That was the proposal. The hon. Baronet calls it the New Sinking Fund. I say it was the old Sinking Fund. Now he objects, and he is apparently still of the same opinion so long as this thing is done by a Conservative Government. Let me show what we have done with the Old Sinking Fund—I really would like the attention of hon Members to this, seeing that they have challenged me to defend my action, and seeing that we are attacked on the ground that we have taken away money from the Old Sinking Fund—I say that this is the last Government that can be attacked on the ground of not having dealt faithfully with the Old Sinking Fund. The Conservative Government did not pay a single penny to the Old Sinking Fund. What have we paid? During the three years the Prime Minister held the office which I have now the honour to fill he paid over £11,000,000 into the old Sinking Fund. We have reduced the debt of this country during the five years we have been in office by £55,918,000.

What did our predecessors do? I will leave out the War Accounts, but if you take purely normal years during the whole of the ten years they were in office they reduced the debt by £22,000,000. We have done more in five years than they did in the whole of their ten years; we have done almost three times as much. In addition to that they really increased the indebtedness of this country by £140,000,000, and these Gentlemen, who never had a word to say about the old Sinking Fund when they were in office, paid off debts at the rate of only £2,000,000 a year, even when there was no war. What have we done? The last two years have been very difficult years, and the difficulties have not been of our creation. Yet even during those last two years, when I have had difficulty with my Budget, when I have had difficulty even with the collection of Income Tax, we have paid £17,450,000 off the National Debt. Something was said about certain persons being brazen. I do not know what quality that requires. But for Gentlemen who never paid a penny into the old Sinking Fund to taunt those who paid £11,000,000 into it, and for those who increased the debt by £140,000,000 to taunt those who reduced it by £55,000,000, and who are making arrangements to reduce it still further, I wonder what quality that is. [An HON. MEMBER: "Brass."]

6.0 P.M.

I am glad to see that the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) is present, because I am about to refer to what he said, and I will tell him exactly in what respect it is erroneous. In the interview to which reference has been made I said that even if we were two millions in arrear, it was purely reverting to the position, so far as Income Tax collection is concerned, which obtained before the right hon. Gentleman came into office. In addition to that, I said that there was great pressure which had been brought to bear on the Income Tax payers in that year—exceptional pressure—and I said it was in order to relieve the financial needs of the right hon. Gentleman. I will give a correct account of the transaction.

Mr. AUSTEN CHAMBERLAIN

I have the interview here, and I will read what the reporter says the right hon. Gentleman said, and it differs from what he now says.

Mr. LLOYD GEORGE

It has been read already. I do not think there will be any quarrel between the right hon. Gentleman and myself, because I will read what the right hon. Gentleman said in his Budget speech in 1905. He said:— I have made no allowance at all for increased efficiency of collection which has been going on for some years. As a matter of fact it was in that year that it began to make any impression upon the balances. The right hon. Gentleman continued:— but which undoubtedly was largely stimulated by the new instructions issued by the Board of Inland Revenue to the collectors in the month of November last. For the present, I confine myself to the statement that those instructions were issued by the Board of Inland Revenue in the exercise of their ordinary discretion, without any regard to the circumstances of this particular year, and without any hint or suggestion from me. I accept those statements. The right hon. Gentleman went on to say:— I am, of course, absolutely responsible for them, and take the whole responsibility, but having regard to what has been said and suggested outside, I think the Committee ought to know that these instructions were not the result of pressure by a needy Chancellor, but of the ordinary action of the Board of Inland Revenue in pursuance of a policy which they have long been following. The right hon. Gentleman says he did not give the instructions, and, of course, I accept any statement made by him, and I can quite see that it is in accordance with what would have happened. It is what the Inland Revenue does, and rightly the responsibility must be theirs as regards the collection of the revenue, and the idea that the Chancellor of the Exchequer is continually giving instructions to collect this or retard the collection of that or other matters is really not in accordance with the facts. I quote this statement as indicating clearly the position, and I accept absolutely the explanation which was given, but if the right hon. Gentleman will look back at what happened on that occasion he will find that during that year and the preceding year the quickening process bad made a very great impression upon arrears. In 1902–3 the arrears on 31st Marcia were six millions odd, in the following year they were only £3,860,000, and the reduction continued in the succeeding years, until at last the figure comes down to £3,700,000. I agree with the right hon. Gentleman that the process had begun beforehand, but that was a policy which was started undoubtedly when the Exchequer was undoubtedly hard pressed.

Mr. AUSTEN CHAMBERLAIN

I beg the right hon. Gentleman's pardon. In the first place, the policy, whatever it was, was in accordance with law. The law said the money ought to have been collected, and the Commissioners were trying to collect it. That is a very different thing to instructions being given not to collect that which the law says ought to be collected. I protest against the allegation that the instructions of which the right hon. Gentleman spoke in 1905 were the result of the special necessities of the Chancellor of the Exchequer in a particular year. That was not so. They were issued in accordance with a settled policy steadily pursued. It is perfectly true that in the years to which the Chancellor of the Exchequer refers the Commissioners of Inland Revenue took extra severe action, but it was not a year of exceptional necessity, for in it I handed over a surplus of £1,500,000 to the old Sinking Fund, to which the Chancellor said our Government never paid a penny.

Mr. LLOYD GEORGE

The year I am referring to is not the year to which the right hon. Gentleman has referred. The year of great pressure was 1903–4. Does anyone doubt that that was a year of great pressure? The war was over, the expenditure of the war was still continuing, and it was a year of very great pressure. I am bringing no charge against any of my predecessors for doing a perfectly right thing. If they could avoid increasing taxation by putting on a little pressure to secure collection before 31st March. They were perfectly within their rights in doing so, and it is absurd to bring charges of dishonesty in regard to collection in reference to a question of adjustment between one year's finance and another. We know that £6,000,000 of arrears fell to £3,860,000. What does that mean? It means that there had been enormous pressure brought to bear in order to collect the tax. The process did not begin with the right hon. Gentleman. It began with the Chancellor of the Exchequer responsible at, the time, either Lord St. Aldwyn or Mr. Ritchie, and the drop really began in 1900–01. Then pressure was brought to bear, and Income Tax was collected with much greater sternness and severity in that year and the year which followed than in any preceding year. That is all I have to say about that. Coming to the general question of policy, the hon. Member for Liverpool, who has great financial experience, suggested that the bookkeeping arrangements of the Treasury were not all that could be desired. I agree that some of the methods are archaic, but still the old Sinking Fund has not been dropped. What would happen if I found myself in financial stress owing to the fact that there was extraordinary naval expenditure this year in connection with building of ships? Does anyone suppose that for the purpose of meeting a financial exigency of that kind if he had £5,000,000 or £6,000,000 to spare he would pay it into the old Sinking Fund and then impose new taxes? Would any Chancellor of the Exchequer do that? The hon. Member for East Birmingham, whose main object seemed to be to make himself very offensive—and I must congratulate him on his natural gifts in that respect—began to lecture upon the principles of finance. If the hon. Member had been Chancellor of the Exchequer, would he have paid £7,000,000 into the old Sinking Fund and impose taxes for a single year to meet special exigencies?

Mr. STEEL-MAITLAND

As the Chancellor of the Exchequer has asked me personally, I would say that so far as it is a continuing burden year after year, then, of course, one should put on taxation.

Mr. LLOYD GEORGE

I am very glad to hear that. It is the first time that that, principle has been enunciated on that side of the House, because when we had a burden imposed by the Naval Works Act they always resorted to borrowing, and it was only when the Prime Minister became Chancellor of the Exchequer that he began to pay current expenditure out of revenue. That is the whole position. I told the House in April last year that £2,000,000 of arrears were anticipated. There was nothing surreptitious about it, and I stated that we should be £2,000,000 in arrears because we could not get the machinery in operation without breaking it. So far as the railways are concerned I say that the course of action is wrong. It should not have been done, and I will take good care it is not done again. In regard to the old Sinking Fund I shall have paid in £11,000,000 against £1,500,000 of the right hon. Gentleman.

Mr. AUSTEN CHAMBERLAIN

I said I paid in £1,500,000 in one year.

Mr. LLOYD GEORGE

I have already given my figures, and the right hon. Gentleman says as far as he was concerned he paid in £1,500,000, but Lord St. Aldwyn never paid in £1,000,000.

Mr. AUSTEN CHAMBERLAIN

I did not say it was £1,500,000 as far as I was concerned. It would not be true to say that, and the Prime Minister acknowledged that he got a handsome surplus from me.

Mr. LLOYD GEORGE

When the Prime Minister got a surplus he paid it into the Old Sinking Fund. But, at any rate, the charge cannot be brought fairly against this Government that they have not made every effort, every fair effort, every legitimate effort, to reduce debt and consequently I say the case of the hon. Baronet has absolutely failed.

Mr. BONAR LAW

I confess that I have listened with the greatest possible surprise to the speech of the right hon. Gentleman. An hon. Friend of mine behind me, in an earlier part of this Debate, spoke of someone who had written to him and complained about collecting Income Tax, and he told us that his profession was that of a picture restorer. We know from past experience that the profession of the right hon. Gentleman is that of a reputation restorer, and we can judge by the nature of the speech to which we have listened that this picture is past being restored. The right hon. Gentleman has not taken so little interest in this matter as to be ignorant entirely of the whole point. He would practically lead us to believe that he did not in the least understand what the charge was which was made against him. What is his position? He is like a man who is accused of felony, and who gets up and tries to prove that he did not commit murder. That is precisely the defence which the Chancellor of the Exchequer has made.

What is the position? We do not in the least accuse the right hon. Gentleman of having done something from a bad motive or something which he could not defend. We accuse him, not mainly because he is taking away money from the Sinking Fund, but because he is taking it away surreptitiously instead of coming to the House of Commons and asking their consent to the course he proposes to take. What was really the meaning of all the talk about paying off debt and of what my right hon. Friend (Mr. Austen Chamberlain) had done in speeding up the collection of Income Tax? What had it to do with it? Does he, with his experience as Chancellor of the Exchequer, pretend that it was not a good thing to try to increase the rapidity with which the tax was collected, or, on the other hand, when he tells us, going back to the old history and always getting the familiar cheer, that we did not put money into the Sinking Fund but used it to pay off naval loans? He does not pause for a moment, however relevant it was to his discourse, to tell us that this virtuous Government, of which he is Chancellor of the Exchequer, refuses to use money of that kind for naval defence, but is using it to-day to build Government offices in precisely the same way. As another illustration of the peculiar methods of defence of the right hon. Gentleman, he came to deal with English railways and he made the remark, in that peculiar tone which we all recognise as meaning sarcasm, that he was deeply grateful to the Noble Lord (Lord Claud Hamilton), and he would take care that a mistake of this kind was not made in future. He made it in a tone of voice which everyone recognised, and there was laughter on those Benches. Is there any man in the House who doubts that what my hon. Friend says Was true, that it was meant to imply "we will punish them"?

What is the difference between the fault of which the Chancellor of the Exchequer is accused and the fault for which he has tried to defend himself? It may be a perfectly legitimate thing to use this extra money to meet the coming year's finance. I do not deny that for a moment. I say with him, that if, by means of this extra money, much more than was anticipated last year, you can avoid putting on taxation this year to meet your expenses, and you will not need to put on taxation in the future because it will go on, it is a businesslike arrangement which everyone would make. But even from the point of view of a businesslike arrangement that depends on what the Budget statement is, and we cannot judge whether it is good business till we see it. If he is only using it to meet exceptional expenditure for this year, such as the Insurance Bill, to which I wish all success, when he knows that in the following year there will be greater expense and more taxation will be required, then it is not good business, but very bad business. It is not providing as you go along, but trusting, Micawber like, to what will turn up in the future. We cannot judge whether it is good business or had. That, however, is not the point.

The point is that in our belief—and in saying this I am expressing the opinion of all the predecessors of the right hon. Gentleman and, I believe, of ever man who has ever been engaged in large business transactions—the one thing that you have to guard against is irregularity in the manner in which your accounts are kept, and nothing is more fatal to any country than to adapt for one year, whatever the motive, a method of keeping accounts which is in itself unsound and which is bound to lead to worse results in the future. What happens inevitably is that you make these irregular arrangements for this year on motives which, to the man in the street, you can perfectly defend. Next year there is a temptation to do something of the same kind, not with quite such good motives, and you adopt the precedent which you set with a good motive till you get into a system of finance which is so irregular that you cannot be sure that the finances of the country are properly carried out.

In saying that, I am not a believer in red tape any more than the right hon. Gentleman, but I will say this, speaking as I always do with business analogies in my mind, that there is nothing worse for a firm engaged in business of any kind than to have red tape in the way in which you conduct the business. But every business man knows that the one part of your business operations in which you ought to have red tape is the keeping of accounts, and that there shall be no irregularity even in ordinary business transactions. It is far more true of national finance, and everyone who has studied the career of Mr. Gladstone knows—at least, this is my opinion—that the greatest service which he rendered to finance in this country was not his Budgets, but the efforts which he made to get our financial arrangements put in a good position, to make them intelligible, and to keep them always in the same form. Our complaint against the Chancellor of the Exchequer is that, for the sake of an object, however good, he has departed from that principle. He has used a method of getting money into next year which breaks all our financial traditions, and, what is more, he could, without the least difficulty, have secured the same result by coming to the House of Commons and openly demanding that that arrangement should be made.

I do not think really a better illustration of the necessity of a certain amount—I would not say of red tape, but of regularity in the form of these things could be found than the way in which all this business from first to last has been met in the House of Commons. The Chancellor of the Exchequer himself stated, dealing with his own interview, that he never referred to the railway companies at all. Of course I accept his statement, but it only proves how little attention he was giving to the business of his office in his absence. The question which was put to him by the interviewer was: "Has your attention been called to the questions in the House of Commons?" And it is in relation to that question that he gives the answer which has been quoted by my hon. Friend. Not one of these questions referred to anything else except this: that the Government had deliberately gone to great companies and said to them: "Do not pay your Income Tax when it is due, but pay it later," and they did it verbally at the request of officials in the Government Department. Nothing will show more clearly the danger of starting lines, of that kind than the tortuous method by which it has been defended all through. I am sorry the Secretary to the Treasury is not here. I certainly would not like to attack a man in his absence, and I am not attacking him. What makes it far worse than any question of an individual man is that these questions and answers were not in the main supplementary. The answers were prepared in the Treasury, and no one who will listen to the statement I am going to make can doubt for a single moment that they were prepared in order to conceal from the House of Commons what actually occurred. Let me take these questions one by one. First, the Secretary to the Treasury said it was a mistake of a subordinate official. We do not usually mean by that the head of a department. Further inquiries showed that this subordinate official was Sir Robert Chalmers, the head of the Board of Inland Revenue. [HON. MEMBERS: "No."] There is no doubt of it. In another question it was admitted that it was the result of a mistake in instructions given by Sir Robert Chalmers to someone else. The right hon. Gentleman told us that Income Tax was collected by local bodies. As a matter of fact, local bodies have absolutely nothing whatever to do with the collection of Income Tax from railway companies. It is done entirely by the Board of Inland Revenue. They alone have authority over it, and yet in answer to a question he told us the Board of Inland Revenue had nothing whatever to do with it.

Mr. LLOYD GEORGE

I do not think the hon. Gentleman is doing my right hon. Friend justice. He tells me the official referred to is Sir Robert Chalmers. I am perfectly certain it was not Sir Robert Chalmers. In the second place, he says my right hon. Friend referred to the local collection of Income Tax. I think he might read the question with reference to which my right hon. Friend gave that answer.

Mr. BONAR LAW

I will be quite frank. I have taken my information with regard to Sir Robert Chalmers from a speech of the hon. Baronet (Sir F. Banbury). What I understood him to say was that the gentleman who went to the railway companies giving these oral instructions was Mr. Grasemann, but that subsequent inquiry showed that the whole thing had been due to a mistake in orally delivering a message between Sir Robert Chalmers and Mr. Grasernann.

Mr. LLOYD GEORGE

This is rather an important matter. Sir Robert Chalmers's statement is that he gave instructions for the money to be collected by 30th March.

Mr. AUSTEN CHAMBERLAIN

Why did he give such instructions?

Mr. LLOYD GEORGE

Please allow me to confine myself to this one point. He gave express instructions that the money was to be brought in before 30th March, and the responsibility for the blunder is not his in the slightest degree, and I happen to know that the official himself acknowledges that fully.

Mr. BONAR LAW

I at once accept that. It does not in the least affect the argument. I have been perfectly frank in admitting that I got my information from the speech of my hon. Friend, but even admitting that it was entirely a mistake and that it was the other official, Mr. Grasemann, who obtains a salary of £800 or £1,000, I say that to describe him as a subordinate official was obviously misleading the House of Commons. The next curious result which came out in these questions was this. The Secretary to the Treasury was giving an explanation, and this was his explanation. He said that someone in the Treasury gave an instruction—

Mr. LLOYD GEORGE

What is the date?

Mr. BONAR LAW

The right hon. Gentleman can get the date for himself. The Secretary to the Treasury was explaining how the mistake had arisen. He stated that the head of the Board of Inland Revenue said to somebody—whose name was not given, but apparently it was Mr. Grasemann—"You are to go to the railway companies and tell them that they do not need to pay until 30th March," and by some curious misunderstanding which I have no doubt the official could explain if we had him before us, he said to the railway companies, "Please do not pay until April comes in." Here is a question that has never been answered, and perhaps the right hon. Gentleman will answer it now. Why was it that an instruction of this kind was necessary at all? Why should the Inland Revenue have gone to the railway companies, and said, "You need not pay until 30th March"? Was there any conceivable object in it? Was it out of compassion for the railway companies? Does the right hon. Gentleman pretend that it was because it was such a great hardship to make them pay twice in one year, while at the same time, when he was sending to the railway companies not to pay, his officers were calling on smaller people throughout the country and squeezing out of them all the payments he could get Then the last of these curious and tortuous answers to which I will refer is this. The Secretary to the Treasury was asked a question, and in reply he said:— It is the case that the railway companies are bound to pay their taxes at some date subsequent to 20th March. The reason he gave that answer was that there were only ten days left before the close of the financial year. As a matter of fact, what the railway companies are bound to do is that they must pay after 20th March, and not that they need not pay until after that date. I do not think anyone who listened to the speeches which gave full details of these answers, or who read the interview with the right hon. Gentleman, can doubt that the whole policy of the Department was to try to get this money by administrative action behind the House of Commons when he had it in his power to come openly to the House of Commons and ask for it.

Sir RANDOLF BAKER

I think as the Chancellor of the Exchequer has openly thrown over one of his officials, it does not matter which he has thrown over. The right hon. Gentleman admits that what was done was a wrong action. May I ask a plain question? Will the £600,000 which he has annexed from last year's Sinking Fund now be repaid when it is admitted that it has been carried into this year illegally? Will the Chancellor of the Exchequer pay the money back, to be devoted to the Sinking Fund for the reduction of debt? The right hon. Gentleman apparently does not seem disposed to take the course which on every principle of honesty he ought to take. It appears to me that if an ordinary company were to issue a balance-sheet which did not truthfully represent the state of the company, the directors would be charged with producing a forged balance-sheet. What can the right hon. Gentleman expect but that we shall say, when he produces his Budget next week, that he is producing a fraudulent balance-sheet? If he takes money which was illegally and fraudulently collected this year instead of last year, he is making out a balance-sheet which is not true in fact. If the directors of a company were to do the same sort of thing they would be put in prison for it. What else has been done in connection with the finances of the country? It has been done, not as in the case of a company for the purpose of buying shares, but for the purpose of buying votes. That is the object of the action at the present time of the Treasury.

What appears to me to be the most serious aspect of the whole thing is the continuous throwing over of subordinate officials on the part of the present Government. This is not the time to go into the matter, but I would remind the Committee of what happened recently in connection with the Board of Education. We see the same thing now in connection with the Treasury. There was another curious mistake in connection with the question of assessing the profits on milk in Hertfordshire. Again, it was stated that an unfortunate mistake was made by a subordinate official. I wish to ask how long the permanent officials are going to go on striving to do their best if they are to be thrown over by those who ought to be held responsible for what is clone in Government offices? If permanent officials are going to be thrown over, you cannot expect them to give the same loyal service as they have given in the past. Surely it is only fair that the Chancellor of the Exchequer should follow the course which was taken by the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) when he was in the same office. He took entire responsibility for what was done on the part of his subordinates. Has the same responsibility been taken by the Chancellor of the Exchequer or by the President of the Board of Education? I think what has happened shows that an entire change is coming about between the holders of high official positions in the country and the permanent officials. Surely when right hon. Gentlemen on the Treasury Bench are being paid large salaries and getting all the honour and glory for what is going on in their offices, they ought to accept full and absolute responsibility, and not throw over the permanent officials.

Mr. LLOYD GEORGE

I asked the hon. Gentleman (Mr. Bonar Law) to be good enough to read the answer which my right hon. Friend (Mr. Hobhouse) gave, because he was charged with prevarication, shifting, and shuffling. The hon. Gentleman admitted that the position of Sir Robert Chalmers was made quite clear. I have been able to get the question which was put to my right hon. Friend. It was pointed out to me that the reply which my right hon. Friend had given referred to the collection of Income Tax in the case of the railway companies. This is the question and answer:— Sir Frederick Banbury asked the Secretary to the Treasury if he can state the amount of Income Tax (including Super-tax and Schedules A and D) uncollected on 31st March; also the percentage of Income Tax of every description uncollected on 31st March, 1905, 31st March, 1906, and 31st March, 1911? Mr. Hobhouse: The amount of Income Tax uncollected on the 31st ultimo cannot be given even approximately at present. The percentages of tax uncollected on the 31st of March, 1905 and 1906, could be given, but would involve some considerable research, and as the corresponding figure for 31st March, 1911, is not available the hon. Baronet will probably not think it worth while to have the figures for the earlier years worked out."—[OFFICIAL REPORT, 18th April, 1911, col. 612.]

Mr. BONAR LAW

May I interrupt the right hon. Gentleman? I do accept that answer, but it looked to me like a supplementary question. Is the Chancellor of the Exchequer sure it is the same question?

Mr. LLOYD GEORGE

Yes, it is.

Mr. BONAR LAW

I am sure it is not.

Mr. LLOYD GEORGE

Then comes a supplementary question by Sir Frederick Banbury, as follows:—

"Sir F. Banbury: May I ask the right hon. Gentleman whether he will kindly give me an answer to those questions on which he has information, and to which he can give a reply; and may I also ask how it is that it is unknown what portion of the Income Tax is collected, provided that demand notes have been sent in regarding the payment of the money?"

That has reference to Income Tax of every description.

Mr. BONAR LAW

I have nothing to do with that.

Mr. LLOYD GEORGE

I am reading not an extract, but the whole of the question. I am reading from the OFFICIAL REPORT of 18th April, 1911. That referred to Income Tax of every description, and I put it to the Committee that when a charge is made against a Member of this House, which the hon. Member cannot substantiate by the facts, I think it would have been more worthy of his position in this House if he had withdrawn the statement altogether.

Mr. BONAR LAW

I think the right hon. Gentleman, before this fatherly advice was given, might have waited until I proved what I said. In the interruption I stated that the right hon. Gentleman was not referring to the question to which I alluded at all. He quoted the report of an answer given on 18th April. The question to which I refer was asked on 6th April. It was put, not by Sir Frederick Banbury, but by Mr. Fell. This is the question exactly as I read it:— Mr. Fell: Is it suggested that Income Tax collectors are acting on their own initiative in postponing the collection of these cheques? Mr. Hobhouse: The collectors of Income Tax are not under the control of the Treasury at all in this matter."—[OFFICIAL REPORT, 6th April, 1911, col 2424.]

Mr. AUSTEN CHAMBERLAIN

Does not the right hon. Gentleman think that an apology is called for in this matter?

Mr. WEDGWOOD

I would like to ask the hon. Gentleman opposite to produce the question which elicited the first answer which he read to the House. That is the one upon which this charge against the Treasury is based. It seems to me that the whole of the hon. Gentleman's speech, and, indeed, the general attack made to-day has been in the nature of a personal attack on various Members of the Government and Civil Servants. There has been an attack at some length upon Sir Robert Chalmers. There are no big principles to go for. The Parliament Bill is out of the way, and we now come to personal attacks. What was the personal attack upon Sir Robert Chalmers? It was an attack upon the Government for answering questions from the Treasury in such a form as to mislead the House. At any rate, our Government do allow their Under-Secretaries to answer supplementary questions.

The CHAIRMAN

This is really quite irrelevant.

Mr. WEDGWOOD

In that case I have really nothing more to say.

Mr. LLOYD GEORGE

I think that the hon. Gentleman (Mr. Bonar Law) if he had read the question first would not have made the statements which he has made. This is a question by Mr. Fell asking— What instructions were, issued to the collectors of Income Tax during the month Of March; if such instructions were to urge the collection of Income Tax before the close of the financial year, and afterward to delay such collection and to allow the payment to stand over until the early days of April; and if cheques for the payment of Income Tax were offered to the collectors on 30th and 31st March, and the collectors said they did not want them until 4th April? That had absolutely nothing to do with the railway companies, and the suggestion that the tax was not to be collected from them until the month of April. The hon. Gentleman evidently had something else in his mind. This question does not make a single allusion from beginning to end to the railway companies. I have read it quite carefully, and it asks in general terms. The right hon. Gentleman (Mr. Austere Chamberlain) asked me to jump up and apologise for something before I had an opportunity of reading it. I think he might have asked his colleague (Mr. Bonar Law) to read the question first. It is exactly the same with regard to this answer. The question of the hon. Member for Yarmouth was in the most general terms, and the right hon. Gentleman (Mr. Hobhouse) in reply, says: "I am informed that no instructions were issued," and during the whole of the subsequent discussion there was not a word said about railway companies. And I do not believe that the hon. Member (Mr. Fell) had railway companies mainly in his mind. He was referring to other cases as well, and he made it quite clear that he was referring to general instructions, and said that under those general instructions two millions of money were retained; and when I said to-day he was referring to railway companies, he got up and said, "I am not referring to railway companies. I am referring to other companies. The moment he said that, I looked to the hon. Member (Mr. Bonar Law) to apologise for what had been said, and I think he might have done so.

Mr. BONAR LAW

I can assure the Committee that if I thought I was wrong in this matter I should not hesitate for a moment to give the apology for which he has asked me. I had not done more than take the answer which was given me as a quotation by an hon. Friend behind when I spoke. But when I rose last I had carefully read both question and supplementary questions, and I am absolutely certain that they referred to railway companies and nothing else. And I will convince the House that it is so. The right hon. Gentleman read only the beginning of the question dealing with Income Tax, which was general, and then, according to the report, Mr. Fell came to the point, which was dealt with in all the supplementary questions, and asked:— And if cheques for the payment of Income Tax were offered to the collectors on 30th and 31st March, and the collectors said they did not want them until 4th April? That reference bears exactly on the question which had been put two days before in regard to railways. I am perfectly certain that these Gentlemen opposite who are interrupting me now will, if they take the trouble to read the Report privately, see that I am perfectly right. Here is what Mr. Hobhouse said in reply:— I am informed that no instructions were issued to the collectors of Income Tax during the month of March, and consequently the second and third parts of the question do not arise. If the hon. Member will be so good as to put down a question with regard to any specific case of the nature indicated in the concluding part of his question, I will inquire into it. Then Mr. Fell asked:— Is it suggested that Income Tax collectors are acting on their own initiative in postponing the collection of these cheques? These cheques refer to the last paragraph in this question, which refers to a question in regard to railways put two days previously. There is not the slightest doubt about it. If hon. Members would look into the question they would be more slow in coming to any other conclusion. Then in answer to Mr. Fell's second question Mr. Hobhouse said:— The collectors of income Tax are not under the control of the Treasury at all in this matter."— [OFFICIAL REPORT, Thursday, 6th April, 1911.]

Mr. LLOYD GEORGE

There is no doubt at all that this question is a general question. The hon. Gentleman himself admits that the first part of the question is general in its character. He simply says that the latter part of the question refers to railway companies. If that is the case it is very remarkable that in the whole of this cross-questioning of the Government not a word was said about it. May I also put it to the hon. Gentleman, if it meant the railway companies, the cases which had been referred to previously, why did my right hon. Friend (Mr. Hobhouse) say that if a question were put down with regard to any specific case he would take care to inquire into it? Those cases had already been given to him. Why did not the hon. Gentleman (Mr. Fell) say: "You have got them; I am referring to railway companies?" As a matter of fact he did not. He was referring to the very cases referred to to-night. I thought he was referring to railway companies. He said: "No, I am referring to other companies where there were two millions involved." This is not the only question which the hon. Gentleman has put about them. He has put several cases not about railway cases. He suggested to me that cheques had been collected and held over until after the end of the financial year. That is what the hon. Gentleman had in his mind, and I still say that it is very unfair on the part of the hon. Member (Mr. Bonar Law) to suggest that questions were not read by hon. Members on this side of the House when clearly he had not read them himself. He went through the process of reading them, and he read the answers first and the questions afterwards, and I think really—and I leave this with absolute confidence to the House—that it would have been fairer of the hon. Member if he had withdrawn the charge.

Mr. CLEMENT EDWARDS

On a point of Order. The hon. Member (Mr. Bonar Law) stated that the supplementary question to the first question put on 6th April had reference to some questions that had been put on 4th April. [HON. MEMBERS: "3rd April."] On 4th April there is no such question; perhaps he would give the question?

The CHAIRMAN

That is not a point of Order at all.

7.0 P.M.

Mr. J. M. ROBERTSON

From the point of view of the private Member, this question is not solely one between hon. and right hon. Gentlemen on the two Front Benches. But so far as it is, it has been pretty well thrashed out and pretty well cleared up, saving so far as apologies are not forthcoming. The issue for us is quite different. It was really put in the speech for the hon. Member for Bootle. I followed the Debate very closely. His case culminated in the last few minutes of his speech. So far as I understood him it was that the Chancellor of the Exchequer had been manipulating the revenue so that a certain amount of money was carried forward, which was in itself not a wrong thing to do, but was a thing for which he ought to come to the House to obtain proper authority. And the evidence given, so far as I gathered, by the hon. Member for Bootle to show that there was this manipulation was finally summed up in this whole case of the railway companies. He asked why were the railway companies approached at all? In the ordinary course they would have paid by the 20th, and we were told that they got the cheques by the 30th. Then there has been manipulation. Yet, in the same sentence, the hon. Member said, "You are relieving the railway companies while you are distraining and putting pressure on income Tax payers through the rest of the country." If the collection of Income Tax has actually been speeded up through the rest of the country, what becomes of the case that we are letting the railway companies off in order to keep the money tied up? I am concentrating myself entirely on the case as given by the hon. Member. On his own showing his case breaks down. Whatever may be the explanation as to the railway companies, it is only a sum of £600,000, and he himself assured us that the Government were hastening the collection of the tax in all other quarters. But that would deprive them of a much larger sum than £600,000. So that in the very act of establishing his proof that the Government were piling money up in one direction, he gave an assurance that they were piling money out in another. The main case—apart from the personal case of questions and answers—of the hon. Member for the Bootle Division (Mr. Bonar Law) has absolutely broken down.

Mr. SAMUEL ROBERTS

A question was raised on this side as to money which had been received by the Chancellor of the Exchequer at the wrong period, and he was asked whether that money would be restored to the Old Sinking Fund. I myself put a supplementary question asking the right hon. Gentleman whether there would be a restoration of this money to the Old Sinking Fund, and his answer was that I have no power to alter it. I submit that the Chancellor of the Exchequer must have the power. If money has been received at the wrong period surely the right hon. Gentleman must have the power to order the restoration of that money to the Old Sinking Fund for the purpose of paying off the old National Debt. I think we ought to have an answer to that question.

Sir EDWIN CORNWALL

I think hon. Gentlemen on the other side of the House must be very hard up for political ammunition when they make an attack of this kind upon the Members of the Government with regard to a matter of this description. We all know that the questions and answers and discussions which have taken place on this subject largely raged around the payment of Income Tax by railway companies, however other Income Tax payers may have come under consideration. It has been clearly proved to-day that the amount of money the railway companies have to pay in Income Tax was not a sum which justified the enormous fuss that has been made, nor the attack made upon the Chancellor of the Exchequer and the Financial Secretary to the Treasury. I think that attack unnecessary, and it seems to me unworthy almost of the time and attention of the House of Commons. The attack has utterly failed with regard to the Chancellor of the Exchequer and his officials. It is quite clear that the Government had no motive for the course which they have taken, and I would point out to hon. and right hon. Gentlemen opposite that it would have been quite easy for the Government to come down to the House if they wanted to allocate the surplus money from the taxation of last year, and stated that they wanted it for the services of this year. Therefore the Government had no motive in what they did, and I cannot for the life of me understand how in the world hon. and right hon. Gentlemen opposite can get up so much excitement inside and outside this House, on a matter of this kind, in order to attack the Government. I did not get up so much to say this, however, as to draw attention to a rather serious aspect of the subject. I think if hon. Gentlemen had not made this matter one for an attack on Ministers, and had discussed the question of the relationship between this House and the Income Tax payer they would have been employing their time and ours more usefully. I think this discussion has brought out a very serious condition of things. Hon. Members opposite have been trying to make political capital out of the Chancellor of the Exchequer, and on that ground I say they were entirely wrong, and that they have failed to use their opportunity in regard to a question which ought to be dealt with.

The Chancellor of the Exchequer has made a frank and open statement here today of what has occurred, and I do not want to make any charge or attack upon any permanent official. Sir Robert Chalmers has been mentioned. I do not want to make any attack on Sir Robert Chalmers, or any other official in the Inland Revenue. I think that the statement of the Chancellor of the Exchequer perfectly cleared himself, the Financial Secretary to the Treasury, and Members of the Government, who have only followed the usual course of all Ministers. Yet I do think that the statement made by the Chancellor of the Exchequer as to the action taken by the permanent officials is a very serious one. It proves that the taxpayer is not controlled according to Acts of Parliament, or by the acts of this House, but that he is controlled absolutely according to the rules of the permanent officials. The Chancellor of the Exchequer admits that Sir Robert Chalmers gave instructions to a subordinate that the railway companies were not to pay their Income Tax until 30th March. If the railway companies were not to pay until 30th March, that meant that the money would not come in until April, because I presume the companies pay by cheque. I make no charge against the Government; the charge against the Government has absolutely broken down. But since I have been in this House I have been very much concerned at the way the power of public officials is growing in this country. This is not a party question; both parties in this House are guilty of the same thing. We are always doing lip service to the idea that we ought to have devolution, that this House ought to have more control, and that the local authorities ought to have more control; but directly we come to legislation, whatever form it takes, it always gives more power to the public officials and more power to the Departments. In the statement made by the Chancellor of the Exchequer, we have only another instance of the Holmes circular, only another instance of permanent officials and State Departments getting the whole control of the administration.

It is absolutely impossible for the Chancellor of the Exchequer, or any other Minister, as shown by the right hon. Gentleman to-day, or for any party, to keep control of and in touch with, these permanent officials. I think this is a lesson of which the House should take note, and that we ought to take some steps to give this House more control. Ministers have not the time, and I do not see how they can have the time. I do not see why this House should not some day secure more control of our public officials in carrying out their duties, which largely and seriously affect the people of this country. It was rather to make these two points that I have risen on this occasion. First of all, I think the attack on the position of the Government has absolutely broken down, and that the statement made by the Chancellor of the Exchequer was perfectly clear and frank. He told us exactly what has happened, hiding nothing. We as Members of the House, when we are considering Bills which we are asked to pass, should ask ourselves whether the time has not come that this House should form some committee or some organisation of Members of Parliament in regard to these matters. After all, we have to explain them to our constituents when we are tackled with regard to them. It is not altogether a matter of sitting as Ministers on that Bench or ex-Ministers sitting on the other Bench, because what we, as Members, have to ask ourselves is, why so much power is given to public officials? Let this House secure some control of permanent officials and public Departments, and then we will not hear so much of what public officials are allowed to do independent of Ministers, whether at the Board of Education, the Treasury, the Home Office, the Board of Trade, or whatever the Departments may be.

Mr. AUSTEN CHAMBERLAIN

The hon. Gentleman who has just sat down desires to impress upon the Committee two points. In the first place, he found fault with my hon. Friends on this side because they had turned this Debate, or it is alleged they have turned this Debate, into an attack on the Government, whereas the hon. Gentleman said we should have directed our criticisms and denunciations against the permanent officials.

Sir E. CORNWALL

That is the last thing I should wish to say. What I said was against the system which Governments of all parties have followed for many, many years. I should be very sorry indeed in this House to begin an attack on the permanent officials.

Mr. AUSTEN CHAMBERLAIN

I am very glad to hear the hon. Gentleman say that.

Sir E. CORNWALL

It is a very great distinction on my part.

Mr. AUSTEN CHAMBERLAIN

I am not quite certain of the distinction, or its meaning, but that no doubt is my fault. I am quite certain that any Member of this House of experience in these matters is anxious to preserve the Civil Service quite apart from party differences, party debates, and party discussion in this House, and that the wcrst service we can do to the country and its permanent interests is to drag unnecessarily the permanent officials into our discussion. If they have appeared here to-day it is because the Government have adopted a rather unusual course. Usually the Government deal with the public officials in private, and in public take responsibility for what they have done. Anyone who has been a Minister probably remembers the occasion on which he has stood at that box to debate and to accept responsibility for something which may have been done without his knowledge, and about which he may have spoken very strongly to the official who was responsible for it. If the permanent officials have appeared in our Debates to-day it is because the Government have introduced those permanent officials into their answers and sheltered themselves behind the permanent officials instead of taking the usual measure of responsibility. It may occur that an official cannot and ought not to be defended, and the Minister, after speaking to him privately, may in the House repudiate responsibility for his action, undertaking that it shall not occur again. I do not want to put too high the duty of Ministers to defend their subordinates or to shield the permanent officials, nor do I wish to say that there is never a case where the permanent official's action may not be included. But I think, if it has to be done, it should be possible that his name should not appear in our Debates. What has been the conduct of the Government on this occasion? They did not repudiate that first. Their action has been wholly inconsistent. The hon. Gentleman who has just spoken is convinced that there is no fault to be found with the Government. That conviction on his part would carry more weight to my mind if I thought he brought an impartial mind to the consideration of this matter. He is convinced that the Government have shown that they have an absolutely clean record in the matter, but their defence has been wholly inconsistent. The Secretary to the Treasury says that a subordinate official made an unfortunate blunder. The Chancellor of the Exchequer, confiding, as he usually and habitually does, his views on important political topics, not to the House of Commons even when he is able to attend, as on this occasion he was not, but to some wandering member of the Press, who pursues him to Wales, or to Brighton, or to the Continent, tells that reporter that everything that has been done is right, and that all that has been done is to return to the old and sounder practice which to serve his own "nefarious "ends was not followed by the hon. Member for Worcester when he was Chancellor of the Exchequer. I will read the quotation as the Chancellor disputes my word.

Mr. LLOYD GEORGE

No, no.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman shook his head. He said he never said so. Let me read what he did say, or what the reporter makes him say. If the Chancellor of the Exchequer says the reporter is not wholly accurate, of course I accept it. I will only say that that line of defence emphasises the inconvenience and impropriety of a high official of the Government making his public announcements by way of interview with a reporter whose memory is not sufficiently good, or whose shorthand is not sufficiently accurate to give us the real words of the Chancellor of the Exchequer.

Mr. LLOYD GEORGE

I do not repudiate it.

Mr. AUSTEN CHAMBERLAIN

Then what I said is true. The Chancellor of the Exchequer in the first instance defended everything that had been done. He spoke of what the Treasury and the Board of Inland Revenue had done, but he said nothing about what a subordinate official had done. He said what the Treasury and Board of Inland Revenue— have done is simply to revert to the practice of former years, the practice first deviated from by myself when I was Chancellor of the Exchequer. The right hon. Gentleman has admitted that he was mistaken in his reference to me, and that part of the subject I need not pursue. I am utterly unable to say how often the right hon. Gentleman was interviewed in other papers which I do not happen to read, and as a matter of fact this only came into my hand by accident. When first invited to speak on the subject, he says that the action is the action of the Treasury and the Board of Inland Revenue, that is to say, his own, that it is a proper action, and that it is a reversion to an old practice. In his "conclusive and frank defence" in the House of Commons, to use the words of the hon. Member who spoke last, he said, "something occurred which I think ought not to have occurred," and he says he will take care it does not occur again. Which explanation is the one we are to believe? I will take whichever explanation the right hon. Gentleman chooses to give; but the two are incompatible.

Mr. LLOYD GEORGE

I do not think the right hon. Gentleman can have fully understood. It is just possible that those words may be very wide. I was referring to the two millions to which I referred in my Budget statement, and I referred to it as my policy for the year included the delay in the collection of Income Tax. I knew I should be two millions short; I was referring to that; I certainly had not got in my mind the railway companies. I agree I ought to have added something to the interview, but I did not see it before it went to the Press, and, in fact, I do not know but that the first time I saw it was in the newspaper. I do not repudiate it. If I had seen it I would have made it perfectly clear that the £800,000 was not included. I knew perfectly well the defence of the right hon. Gentleman the Secretary to the Treasury in that respect. I was alluding purely to the larger delay, the delay in the two millions; that was what I had in my mind.

Mr. AUSTEN CHAMBERLAIN

The right hon. Gentleman is equally unfortunate in this explanation. I drew Mr. Lloyd George's attention to the assaults that are being directed against him in the Conservative Press and by Opposition speakers in Parliament, in reference to the alleged retardation in the collection of Income Tax for the past financial year. What were those attacks in the Unionist Press and in Parliament? They were in reference to the request to the railway companies. I am satisfied with the attitude which the Chancellor of the Exchequer now takes up that the thing is improper that if money which would naturally go into the Old Sinking Fund is to be diverted from it, it is to be done by legislation or by Act of this House, or by Resolution, as the circumstances of the case may admit, and that it is not to be done by the surreptitious instrument of any executive instruction to officials not to carry out their duty according to law. That is the position now laid down by the Chancellor of the Exchequer for the future guidance of himself and the officials in the matter. That is a satisfactory position. I want to ask the Chancellor of the Exchequer two questions. I want to invite him, first of all, to make some extended inquiry into the payment into the Exchequer by collectors of Income Tax of the sums which they received. The questions and answers in regard to the railway companies have elicited a good deal. A good many communications have come to many of us in all parts of the House. I have been the recipient of some, and I have reason to think that in some cases the cheques paid and drawn for the payment of Income Tax have been held over for very considerable periods by collectors.

Mr. LLOYD GEORGE

Can the right hon. Gentleman give me some cases?

Mr. AUSTEN CHAMBERLAIN

I am not quite certain that I can, and I certainly cannot across the floor of the House. These cases come as those things usually do with the request not to mention names. I think if the right hon. Gentleman will make inquiries he will find that the practice has been more widespread than it should be, and that it ought to be stopped. I say no more about it. I want to ask two questions: Why did the Chairman of the Board of Inland Revenue think it necessary to issue any particular instructions to Mr. Grasemann this year at all, and why were those instructions verbal instructions instead of the ordinary written minute which is not capable of this kind of misunderstanding, and which leaves a record behind, a very important matter in all such things as this. In the second place, why did the Treasury issue instructions to the Chairman of the Board of Inland Revenue? That I think is not a usual proceeding.

Mr. LLOYD GEORGE

What instructions?

Mr. AUSTEN CHAMBERLAIN

I quote from the OFFICIAL REPORT, 3rd April, column 1815, Mr. Hobhouse, in reply to a question put by the hon. Baronet the Member for the City, said:— The instructions to the Chairman of the Board were to receive payment on 30th March. Why did the Treasury interfere in that way with the chairman of the board, and why did the chairman of the board interfere with Mr. Grasemann?

Mr. LLOYD GEORGE

I certainly gave no instructions to the Board, and I frankly, say now I do not know what my right hon. Friend had in his mind here. I am perfectly certain no instructions were issued by the Treasury to the chairman of the board on the subject at all. I rather think there must be a misprint here, and that the words— Instructions to the Chairman, Must be— Instructions by the Chairman. And the reason I say so is that the right hon. Gentleman the Secretary to the Treasury referred repeatedly to that before, and that the instructions by the chairman of the board were that they were to be collected by 30th March. I find now that no instructions of any kind were issued by the Treasury, and this must refer to instructions by the chairman. The answer given by my right hon. Friend was that the money of the company should be paid on or by 30th March. That was an instruction for the money to come in before the end of the financial year, because the previous financial year there were considerable arrears, and the chairman of the board wanted to make it perfectly clear that he wanted the money in before 30th March, so as to get it into the financial year. That is the ex-

planation given by the chairman of the board on that particular instruction, so that the word "to" must be a misprint for the word "by."

Question put, "That Item A (Salaries, Wages and Allowances) be reduced by a sum of £1,000."

The Committee divided: Ayes, 149; Noes, 214.

Division No. 237.]	AYES.	[7.30 p.m.
Abraham, Rt. Hon. William (Rhonoda)	Foster, Philip Staveley	Mount, William Arthur
Anstruther-Gray, Major William	Frewen, Moreton	Neville, Reginald J. N.
Arkwright, John Stanhope	Gibbs, George Abraham	Newman, John R. P.
Ashley, Wilfrid W.	Gilmour, Captain John	Newton, Harry Kottingham
Astor, Waldorf	Grant, J. A.	Norton-Griffiths, J.
Bagot, Lieut.-Colonel J.	Gretton, John	O'Grady, James
Baird, John Lawrence	Guinness, Hon. Walter Edward	O'Neill, Hon. A. E. B. (Antrim, Mid)
Baker, Sir Randall L. (Dorset, N.)	Gwynne, R. S (Sussex, Eastbourne)	Ormsby-Gore, Hon. Wiliam
Balcarres, Lord	Hall, D. B. (Isle of Wight)	Pease, Herbert Pike (Darlington)
Baldwin, Stanley	Hamilton, Lord C. J. (Kensington)	Peel, Hon. W. R. W. (Taunton)
Balfour, Rt. Hon. A. J. (City, Lond.)	Hamilton, Marquess of (Londonderry)	Pole-Carew, Sir R.
Banbury, Sir Frederick George	Hardle, J. Keir (Merthyr Tydvil)	Pretyman, Ernest George
Baring, Maj. Hon. Guy V. (Winchester)	Hardy, Laurence	Quilter, W. E. C.
Barlow, Montague (Salford, South)	Helmsley, Viscount	Roberts, S. (Sheffield, Ecclesall)
Barnston, H.	Henderson, Major H. (Berkshire)	Royds, Edmund
Barrie, H. T. (Londonderry, N.)	Hill, Sir Clement L.	Rutherford, Wm. (W. Derby)
Bathurst, Charles (Wilts, Wilton)	Hills, John Waller	Salter, Arthur Clavell
Benn, Arthur Shirley (Plymouth)	Hill-Wood, Samuel	Samuel, Sir Harry (Norwood)
Benn, Ion Hamilton (Greenwich)	Hohler, Gerald Fitzroy	Sanders, Robert Arthur
Bentinck, Lord Henry Cavendish	Horne, William E. (Surrey, Guildford)	Scott, Leslie (Liverpool, Exchange)
Bigland, Alfred	Houston, Robert Paterson	Smith, Harold (Warrington)
Boyle, W. Lewis (Norfolk, Mid)	Hume-Williams, William Ellis	Snowden, Philip
Burn, Colonel C. R.	Hunter, Sir Charles Rodk. (Bath)	Spear, John Ward
Butcher, John George	Ingleby, Holcombe	Stanier, Beville
Carlile, Edward Hildred	Jowett, Frederick William	Stanley, Hon. G. F. (Preston)
Cator, John	Kerr-Smiley, Peter Kerr	Starkey, John Ralph
Cecil, Evelyn (Aston Manor)	Keswick, William	Steel-Maitland, A. D.
Cecil, Lord Hugh (Oxford University)	Kimber, Sir Henry	Stewart, Gershom
Chaloner, Col. R. G. W.	King, Sir Henry Seymour (Hull)	Strauss, Arthur (Paddington, North)
Chamberlain, Rt. Hon. J. A. (Worcr.)	Kinloch-Cooke, Sir Clement	Swift, Rigby
Chaplin, Rt. Hon. Henry	Knight, Captain Eric Ayshford	Talbot, Lord Edmund
Clive, Captain Percy Archer	Lansbury, George	Terrell, George (Wilts, N.W.)
Clynes, John R.	Law, Andrew Boner (Bootle, Lancs.)	Terrell, Henry (Gloucester)
Cooper, Richard Ashmole	Lewisham, Viscount	Thompson, Robert (Belfast, North)
Craig, Charles Curtis (Antrim, S.)	Locker-Lampson, G. (Salisbury)	Thomson, W. Mitchell- (Down, N.)
Craig, Captain James (Down, E.)	Locker-Lampson, O. (Ramsey)	Thynne, Lord Alexander
Craig, Norman (Kent, Thanet)	Lockwood, Rt. Hon. Lieut.-Col. A. R.	Touche, George Alexander
Crack, Sir Henry	Long, Rt. Hon. Walter	Tryon, Captain George Clement
Crichton-Stuart, Lord Ninlan	Lonsdale, John Brownlee	Walrond, Hon. Lionel
Croft, Henry Page	Lowe, Sir F. W. (Birm., Edgbaston)	Wheler, Granville C. H.
Dairymple, Viscount	Lyttelton, Rt. Hon. A. (S. Geo. Han. S.)	White, Major G. D. (Lancs., Southport)
Dixon, Charles Harvey	Lyttelton, Hon J. C. (Droitwich)	Willoughby, Major Hon. Claude
Douglas, Rt. Hon. A. Akers-	MacCaw, Wm. J. MacGeagh	Wolmer, Viscount
Duke, Henry Edward	Mackinder, Halford J.	Wood, John (Stalybridge)
Eyres-Monsell, Bolton M.	Macmaster, Donald	Worthington-Evans, L.
Falle, Bertram Godfrey	Magnus, Sir Philip	Yate, Col. C. E.
Fell, Arthur	Mason, David M. (Coventry)	Younger, George
Finlay, Sir Robert	Mason, James F. (Windsor)
Fisher, William Hayes	Mills, Hon. Charles Thomas	TELLERS FOR THE AYES.—Sir A.
Fletcher, John Samuel (Hampstead)	Moore, William	Acland-Hood and Viscount Valentia.
Forster, Henry William	Morrison-Bell, Major A. C. (Honiton)
NOES.
Abraham, William (Dublin Harbour)	Beck, Arthur Cecil	Cawley, Sir Frederick (Prestwich)
Acland, Francis Dyke	Benn, W. (Tower Hamlets, S. Geo.)	Cawley, H. T. (Lancs., Heywood)
Adamson, William	Bethell Sir J. H.	Clough, William
Addison, Dr. C.	Birrell, Rt. Hon. Augustine	Condon, Thomas Joseph
Allen, A. A. (Dumbartonshire)	Brady, Patrick Joseph	Corbett, A. Cameron
Asquith, Rt. Hon. Herbert Henry	Brunner, John F. L.	Cornwall, Sir Edwin A.
Baker, H. T. (Accrington)	Bryce, J. Annan	Cotton, William Francis
Baker, Joseph Allen (Finsbury, E.)	Burns, Rt. Hon. John	Cowan, W. H.
Balfour, Sir Robert (Lanark)	Burt, Rt. Hon. Thomas	Crawshay-Williams, Eliot
Barlow, Sir John Emmott (Somerset)	Buxton, Noel (Norfolk, N.)	Crean, Eugene
Barry, Redmond John (Tyrone, N.)	Byles, William Pollard	Crooks, William
Beale, W. P.	Cameron, Robert	Crumley, Patrick
Beauchamp, Edward	Carr-Gomm, H. W.	Davies, David (Montgomery Co.)
Davies, Timothy (Lincs., Louth)	Jones, Edgar (Merthyr Tydvll)	Raffan, Peter Wilson
Davies, M. Vaughan- (Cardigan)	Jones, William (Carnarvonshire)	Rainy, Adam Rolland
Dawes, J. A.	Joyce, Michael	Rea, Rt. Hon. Russell (South Shields)
Delany, William	Keating, Matthew	Rea, Walter Russell (Scarborough)
Denman, Hon. R. D.	Kellaway, Frederick George	Reddy, Michael
Devlin, Joseph	Kelly, Edward	Rendall, Athelstan
Donelan, Captain A.	Kennedy, Vincent Paul	Richardson, Albion (Peckham)
Doris, William	Kilbride, Denis	Richardson, Thomas (Whitehaven)
Duffy, William J.	Kimber, Sir Henry	Roberts, Charles H. (Lincoln)
Duncan, C. (Barrow-in-Furness)	King, J. (Somerset, N.)	Roberts, George H. (Norwich)
Duncan, J. Hastings (York, Otley)	Lambert, George (Devon, S. Melton)	Robertson, Sir G. Scott (Bradford)
Edwards, Clement (Glamorgan, E.)	Lambert, Richard (Wilts, Cricklade)	Robertson, John M. (Tyneside)
Edwards, Enoch (Hanley)	Law, Hugh A. (Donegal, West)	Roche, Augustine (Louth)
Edwards, Sir Francis (Radnor)	Lawson, Sir W. (Cumb'rid.,Cockerm'th)	Rose, Sir Charles Day
Edwards, John Hugh (Glamorgan, Mid)	Levy, Sir Maurice	Rowlands, James
Essex, Richard Walter	Lewis, John Herbert	Rowntree, Arnold
Esslemont, George Birnie	Lundon, Thomas	Runciman, Rt. Hon. Walter
Falconer, James	Lyell, Charles Henry	Samuel, J. (Stockton-on-Tees)
Farrell, James Patrick	Macdonald, J. R. (Leicester)	Scanlan, Thomas
Fenwick, Charles	Macdonald, J. M. (Falkirk Burghs)	Schwann, Rt. Hon. Sir Charles E.
Ferens, Thomas Robinson	McGhee, Richard	Seely, Col. Rt. Hon. J. E. B.
Ffrench, Peter	Maclean, Donald	Sheehy, David
Fitzgibbon, John	Macnamara, Dr. Thomas J.	Shortt, Edward
Flavin, Michael Joseph	MacVeagh, Jeremiah	Simon, Sir John Alisebrook
Furness, Stephen	M'Callum, John M.	Smith, Albert (Lancs., Clitheroe)
Gelder, Sir W. A.	M'Curdy, Charles Albert	Smyth, Thomas F. (Leitrim, S.)
George, Rt. Hon. D. Lloyd	M'Kean, John	Strachey, Sir Edward
Gibson, Sir James Puckering	McKenna, Rt. Hon. Reginald	Strauss, Edward A. (Southwark, West)
Gill, A. H.	M'Laren, F. W. S. (Lincs., Spalding)	Taylor, John W. (Durham)
Goddard, Sir Daniel Ford	M'Micking, Major Gilbert	Taylor, Theodore C. (Radcliffe)
Goldstone, Frank	Masterman, C. F. G.	Tennant, Harold John
Greenwood, Granville G. (Peterborough)	Meagher, Michael	Thomas, J. H. (Derby)
Grey, Rt. Hon. Sir Edward	Meehan, Francis E. (Leitrim, N.)	Toulmin, George
Griffith, Ellis Jones	Molloy, Michael	Trevelyan, Charles Philips
Guest, Hon. Frederick E. (Dorset, E.)	Money, L. G. Chiozza	Verney, Sir Harry
Hackett, John	Montagu, Hon. E. S.	Ward, John (Stoke-upon-Trent)
Harcourt, Rt. Hon. L (Rossendale)	Morton, Alpheus Cleophas	Ward, W. Dudley (Southampton)
Harcourt, Robert V. (Montrose)	Murray, Capt. Hon. Arthur C.	Wardle, George J.
Harvey, A. G. C. (Rochdale)	Needham, Christopher T.	Wason, John Cathcart (Orkney)
Harvey, T. E. (Leeds, W.)	Nicholson, Charles N. (Doncaster)	Watt, Henry A.
Harvey, W. E. (Derbyshire, N.E.)	Nolan, Joseph	Wedgwood, Josiah C.
Haslam, Lewis (Monmouth)	Norman, Sir Henry	White, Sir George (Norfolk)
Havelock-Allan, Sir Henry	Norton, Captain Cecil W.	White, Sir Luke (York, E.R.)
Haworth, Arthur A.	O'Brien, Patrick (Kilkenny)	White, Patrick (Meath, North)
Hayden, John Patrick	O'Connor, John (Kildare, N.)	Whitehouse, John Howard
Henderson, Arthur (Durham)	O'Doherty, Philip	Whittaker, Rt. Hon. Sir Thomas P.
Henry, Sir Charles S.	O'Dowd, John	Whyte, A. F.
Herbert, Col. Sir Ivor	O'Shee, James John	Wilkle, Alexander
Higham, John Sharp	Parker, James (Halifax)	Williams, John (Glamorgan)
Hinds, John	Pearce, William (Limehouse)	Williams, Liewelyn (Carmarthen)
Hodge, John	Pease, Rt. Hon. Joseph A. (Rotherham)	Wilson, Hon. G. G. (Hull, W.)
Holt, Richard Durning	Phillips, John (Longford, S.)	Wilson, John (Durham, Mid)
Hope, John Deans (Haddington)	Pickersgill, Edward Hare	Wilson, J. W. (Worcestershire, N.)
Horne, C. Silvester (Ipswich)	Pirie, Duncan Vernon	Wilson, W. T. (Westhoughton)
Howard, Hon. Geoffrey	Pointer, Joseph	Young, Samuel (Cavan, E.)
Hudson, Walter	Power, Patrick Joseph
Hughes, Spencer Leigh	Price, C. E. (Edinburgh, Central)
Isaacs, Sir Rufus Daniel	Price, Sir R. J. (Norfolk, E.)	TELLERS FOR THE NOES.—Master
Jardine, Sir John (Roxburghshire)	Pringle, William M. R.	of Elibank and Mr. Gulland.
John, Edward Thomas	Radford, George Heynes