§ Three years ago when I stood at this box I was confronted with the largest deficit any Chancellor of the Exchequer has had to encounter in time of peace. It was a deficit that was serious in itself, but what made it still graver was the fact that we had certain commitments—they were not commitments of one party alone, but of all parties in the House—that indicated clearly a rapid growth in expenditure during the impending year. I therefore had to budget not merely for that particular year, but I had so to arrange the taxation that it should provide for the growing needs of the ensuing year. The proposals which I then submitted to Parliament were carried into law after I think probably the fiercest political conflict we have been engaged in since the days of the great Reform Bill, a conflict which deeply shook the Constitution and in the issue profoundly modified it. There were more than the usual number of prophecies of evil, and I think I may say they were characterised by more than the usual virulence. Those proposals have been in actual operation for three 1058 years. I think the time has come to review their working, and I propose to ask the indulgence of the House while I do so. I admit that three years do not provide a final test of the effect and influence of proposals of so far-reaching a character. Still, if one-tenth of the things said about those taxes was well-founded, at least there ought to have been some symptoms of the decay and destruction then predicted. Before you can judge whether taxes have answered their purposes you must, first of all, consider what those purposes were. That is necessary in order to arrive at any judgment as to their adequacy and fitness. A legend has grown up and has been assiduously cultivated that the purposes for which that Budget was designed to finance were of a revolutionary, Socialistic, and subversive character in themselves. [An HON. MEMBER: "Hear, hear."] There is still one hon. Gentleman in the House who believes it. [HON. MEMBERS: "More."] What were those purposes? There were three causes that created the deficit. The foremost of those causes was the increase in naval expenditure. The increase the first year was £10,000,000 from all these causes put together. The increase in the second year was £17,000,000, and the increase last year was £23,000,000. I am comparing the expenditure of each year with the expenditure for 1908. Those were the deficits that I had practically to make provision for in the Budget of 1909. Half of that deficit in each year was attributable to the increase in naval expenditure. I will just give to the Committee a few figures in order to show how naval expenditure suddenly sprung up in the year 1909. During the last three years of the Unionist Administration the programme of naval construction in the aggregate amounted to £29,000,000, and those were years of abnormal naval expenditure compared with the past. During the ensuing three years we were committed to an expenditure on naval construction of £23,000,000. Those were the first three years of Liberal administration. Now I come to the three years for the finance of which I have been responsible. During those three years our naval construction amounted to £45,000,000. In the year 1908 our naval programme was an £8,000,000 programme. In 1909 we were committed to a naval construction of £18,000,000—there was a leap from £8,000,000 to £18,000,000. That is the first, revolutionary purpose for which I had to find money, and I think I can say that I 1059 doubt whether the most suspicious member of the Anti-Socialist League could find a trace of Socialism in that purpose at any rate.
§ 4.0 P.M.
§ What was the next purpose. The next in point of expense was to find money for old age pensions. That was a purpose which was enshrined in the Unionist programme since the year 1895, enshrined like a fly in amber, not a live thing, but something to inquire about. That, therefore, I think, we can rule out as a Socialistic purpose. The next item in point of expense, until we come to the present year, was the Grant-in-Aid to local authorities to meet the exigencies of the new traction that had come suddenly clattering into our civilisation, the new motor traffic on the roads, involving an enormous expense to local authorities. The Treasury had to find Grants-in-Aid, and we found a substantial sum. I take it that is not a very revolutionary proposal. The next was to find money for the demands which came from all quarters of the House for agricultural development and reafforestation. The next was assistance to local authorities to help towards relieving the burden of the rates. And the last was the contribution towards National Insurance which was contained in the programme of every party except one—the Socialist party. I do not think that, on reconsideration, anyone can say that any one of those purposes could be justly stigmatised as being of a very revolutionary character. I would like to make one observation before I pass to the actual taxes. There is no item in that programme in respect of which the Opposition resisted contributions from the State. There is no item in the programme in respect of which the Opposition tried to cut down the contributions from the State. There is not a single item in that programme in respect of which the Opposition did not press the Government to increase the contributions from the State, and, if hon. Gentlemen opposite were prepared to shoulder their share of the financial responsibility, I should have congratulated them on their enterprise, because, undoubtedly, all these projects went to increase the national strength and efficiency. As to the national defences, any plan for improving the conditions and prospects of the people adds to their fitness and capacity for service. Anyone who knows the working classes knows perfectly well they 1060 live in a constant apprehension of stumbling into the pit of poverty, and all these projects for which the Budget of 1909 found the finance helped to remove an old fear and to substitute for it a new hope, and hope is the mainspring of efficiency. Those are the purposes for which the money was raised.
§ I now come to the actual taxes, and I shall then consider, having regard to the actual sums, how they have worked out. As they passed through the House of Commons there were some modifications. Those modifications had two effects. One was to reduce the yield, and the other was to postpone in certain cases fructification. That was notably the case with the Land Taxes. But I laid down four principles, and I shall ask the House to consider how those have been justified. The first was that the new taxes should meet, not merely the year's requirements, but should be of such an expansive character as to grow with the growing demands of the programme that I then sketched out, and which I have now summarised. The second principle was that all classes of the community in times of financial emergency should be called upon to contribute. The third was that, although all classes should be called upon to bear their share, the taxes should not enhance the cost of the necessaries of life for any class. And the last was that the taxes should be of such a character and should be so adjusted as not to interfere with the industry, and the trade, and the commerce, which are the sources of the wealth of this country. Now, how have they worked out in practice? The story of the first two years I have already told in this House. We met all the new increased expenditure; we devoted large sums of money towards reduction of debt; and we had a five million surplus, part of which was devoted to sanatoria purposes and to providing capital for the development of the resources of the Empire at home and abroad, with a substantial balance for reduction of debt. Now we reach the third year. The yield of these new taxes last year was £23,900,000. How is that money distributed? Eight millions of that money comes from what I call indulgencies and luxuries—intoxicating liquors, tobacco, motor cars. With regard to the rest, the 2d. that was then imposed upon unearned incomes and upon earned incomes of over £3,000 produced last year £4,000,000. The Super-tax of 6d. on incomes over £5,000 produced £3,000,000. Now I come to the Death 1061 Duties, and that is a very good illustration of the way in which the taxes have fallen. Last year the total number of deaths was 666,000 in the whole of the United Kingdom. The number of adults who died amounted to 441,000. The total property passing at death was £270,000,000. Half of the property belonged to 970 persons. The new duties began at £5,000. There was no increase up to that point. Three-fourths of the property that passed last year belonged to persons who owned £5,000 and over. The number of these persons last year was 7,000.
§ Sir F. BANBURYWhat, more than £5,000?
§ Mr. LLOYD GEORGEYes; I agree it is a very startling figure. I was struck with it, and I made further investigations. The total produced last year by the new duties was £6,300,000. I have just analysed the new duties and the new taxes showing how they fell, in order to demonstrate to the Committee that there was no tax there upon the necessaries of life, and to prove there was no tax there to interfere with trade, business, and commerce. [HON. MEMBERS: "Oh, oh."] I observe that is challenged. I now come to the fourth proposition I laid down, that these taxes should not be of such a character as to hamper and handicap business. What was the condition of trade in April, 1909, when the Budget was introduced? Unemployment had reached almost the highest figure it had attained for years in this country. We were passing through a period of profound depression. The very controversy we were engaged in—whether there was any foundation at all for the criticism or not—might have been expected to have had the effect of postponing any trade development. One or two of the criticisms upon the proposals of the Government were of a character to make people believe their property was in danger, that their investments were in danger. The majority of the property-owning class in this country, I think, profoundly believed it at the time. I believe they were sincerely frightened. So you had everything in those statements that would have the effect of retarding the development of trade, apart from any real foundation for them. What happened? In spite of all that, soon after the Budget was introduced, trade began to boom and unemployment began to diminish. It has gone on in an unbroken record of prosperity 1062 ever since, until unemployment before the strike had reached almost the lowest point it had ever touched in this country, an unbroken record of growing prosperity, expanding business, increasing profits, better employment. Our exports have increased by 20 per cent.; and, if the old saying is an accurate one, that half of that increase went in wages, you must have had an increase of £40,000,000 in the wages bill of this country. Both our home and our foreign trade were doing well. Wherever you looked before the strike, which is a purely temporary incident, you had growing bank deposits and an enormous increase in bankers' clearances, showing great trade activity; and, what [...] still more remarkable, the increase in bankers' clearances was not merely in London, which might mean only Stock Exchange transactions, but it was still more marked in the provinces, where they represent real business. Factories working full time and overtime, collieries at full pressure, ships that were lying idle three years ago at full work and with excellent freights, new tonnage added by the million, and, the surest test of all, increasing traffic receipts on our railways—that is the best answer to those who predicted ruin from the Budget of 1909. I am sure we must all without distinction of party feel glad, because he must be a poor patriot indeed who does not rejoice in the prosperity of his own country lest perchance the avowal of it might do some damage to the party to which he belongs.
I have no doubt I shall be asked, What about the Land Taxes? From the kind of statements which are being made, anyone might imagine that I had anticipated the Land Taxes would produce millions during the first few years, and that I relied on them as the mainstay of my financial provision for necessary reforms. It was quite the reverse. I made it perfectly clear that the tax which I put forward as the most productive, the Increment Tax, was a tax the productiveness of which must necessarily be postponed for a few years, and, as a matter of fact, Lord Rosebery, in his great attack on the Budget, referred to the Land Tax as "that violent onslaught on the land which is, according to the statements of it? promoters, to bring in little or nothing." That was said at the time. Indeed, for the first few years I agreed that half the revenue from them should be given to the local authorities. I could not, therefore, have felt dependent on the revenue from the receipts of the Land Taxes for the purposes of defraying the general charges 1063 which I saw in sight. They have been in operation two years. Last year I estimated the revenue at £700,000. They have realised £200,000 less than that, but that is less than 1 per cent, of the total additional revenue produced by the Budget. Let me point out that in the nature of things they cannot, for a few years, produce a large revenue. The valuation will not be complete for four or five years from the date of the Budget—I said so at the time—and you cannot levy the Undeveloped Land Tax until the valuation is complete. We have already valued one-fifth of the land of the Kingdom. I have no doubt at all that, preliminary difficulties having been overcome, and the staff having been increased, we shall value at a greatly accelerated pace, and at the end—well, within the three years I have mentioned—we shall have in this country what they have in every other civilised country, a great national survey of the land, which will be available for the purposes of the readjustment of local taxation, and which, I have no doubt, will be available for equally important public purposes of another character.
But even if the whole Undeveloped Land Duty came in I never put it higher than £300,000. The Reversion Duty I never put very high, and the Royalties I put at £350,000, and they again cannot go higher without putting more on them. Therefore these three taxes were never estimated to produce very much in the future. The three were estimated to produce less than a million sterling, and the only tax which I looked forward to as being of a very productive character was the Increment Duty. I am still of that opinion. But, in the very nature of things it is a tax which will yield revenue only in the future. Why? You tax upon the increment on the value as fixed in April, 1909, and you have to wait until the land increases in value from that date. There was an Amendment passed in Committee that there should be 10 per cent, on the top of that. You have, therefore, to wait not merely till the value of the land grows—and it is growing very rapidly in spite of the Land Taxes—you have to wait till it grows above the 10 per cent, which is added on. I have a test which I am prepared to put to those who contend that these taxes are not going to produce much money. We give a certain amount of money to the local authorities in composition for their right to one-half 1064 of the Land Taxes. I believe that bargain expires next year. If there is anyone in this Committee who believes that these taxes are not going to yield a real revenue in the future this is their opportunity. Are they prepared to release the Exchequer from the obligation which it is under to restore that half to the local authorities? If so, for how much? I am quite willing to make a bargain, and I have no doubt at all that, if it is done on the estimates placed on the Land Taxes on public platforms and in the House of Commons by their critics, the Exchequer is going to make a very good bargain indeed. I have reviewed the new taxes. I have told the House how much they have grown; how they have not merely come up to the anticipation of the Government in their yield, but have actually exceeded it; how they have met all the growing needs of the State from year to year, and have left us with a large surplus at the end of the third year—a surplus of £6,500,000, which would have been £7,000,000 had it not been for the great national strike.