HC Deb 02 April 1912 vol 36 cc1076-130

I beg to move, "That the Customs Duty charged on Tea until the first day of July, nineteen hundred and twelve, shall be charged as from that date until the first day of July, nineteen hundred and thirteen, that is to say:— Tea, the pound Fivepence.


The Chancellor of the Exchequer, not content with the task which is usually sufficient for a man of introducing and defending his own Budget, has been good enough, in his concluding observations, to make a speech for me, uttered at some future time, if ever again I have the honour to hold the office which he holds. I hope that, if ever I do make that speech, it will be better grounded than the speech of the right hon. Gentleman. I confess that, to listen to the right hon. Gentleman as he speaks to-day, one would believe that now in this year, for the first time, his Budget of 1909 was really at work, and that now therefore the country was enjoying a prosperity which it has never enjoyed before. I think that the right hon. Gentleman has made exactly the same remark in every preceding year, because within a week after the Budget was introduced he called upon the House to bear witness to its beneficent effect upon the price of Consols. Somehow no one had informed him that the Government broker had just been buying Consols, and Consols are not mentioned to-day except among the many commodities which we may hope to see cheaper under the present efficient administration. After all, that is not the serious side of the right hon. Gentleman's statement, and I should not on this occasion be right in taking the time of the Committee in going into that matter. By far the most important features of this statement were the forecasts of the year on which we have just entered, and the proposal which he has made to the House in regard to the Old Sinking Fund. Before I come to either of these matters I wish to run through some minor details in regard to some of which I have some comments to make, while in regard to others I wish to ask for further information. I think it would be of great interest to the Committee and to the country at largo if the Chancellor of the Exchequer would break up the figures of Customs and Excise and give us on a printed Paper, which might be prepared during the Recess, or presented soon after we reassemble, a statement of the yield of the various taxes under Customs and Excise over a period of five or six years, or any period he likes.


What period would you like?


Five or six years would be sufficient for my purposes, but if for any reason, on examining the figures, the Chancellor of the Exchequer thought that to take that particular period would be inaccurate, I should be satisfied to take eight or ten years, or anything that would make a fair comparison. But, as he is well aware, it has been the custom very commonly for Chancellors of the Exchequer in the past to go into detailed figures in regard to these different articles of consumption, and they are all of importance in forming an opinion, both as to the habits of the country, as to the capacity of our taxes, and in preparing Estimates for the ensuing year. On the figures which he has given, I am bold enough to say at once that he has put Excise for the coming year too low. I admit that the growth of Excise, unaccompanied by any similar growth in Customs during the past year, is very extraordinary and takes me by surprise. I admit that there is an explanation to be adduced in the case of sugar. I do not think that partial explanations, such as shortage of crop in these articles, or a less production of tea, really account for the great discrepancy between the relative movement of the Customs and Excise. I wonder whether both the right hon. Gentleman, and perhaps I myself to an even greater extent, have not been wrong in regard to the normal stocks of spirits and perhaps Excise generally held by the dealers. I myself held very strongly, and I think that the Chancellor of the Exchequer held, though there would be some repletion of stocks after the disturbance of the Budget of 1909 was over, that they would not go back to anything like their former level. I wonder whether they have not increased beyond his expectations, and mine?


They are down considerably, even now, this year.


The stocks in the hands of dealers. I admit that the extent of the new duty, indicating apparently an increased consumption, takes me by surprise, and I wish that the Chancellor of the Exchequer could give us a further explanation of it. It is, after all, a very speculative matter, no doubt, but I find it difficult to believe that the explanation which the Chancellor of the Exchequer offers by any means explains the whole of that growth. He says that the working men last year had, for the first time in many years, begun to enjoy an increased spending power, but is that really so? Was it due so much previously to a contraction in the spending power of the working man as to the different choice of what he should spend his earnings on? A marked feature was the way in which the money that he used to spend on alcoholic drinks, and so on was spent in other forms of enjoyment: in travel, excursions, taking a holiday with his family, and so on. I do not believe that that process has been checked. I think that it has gone on continuously during last year, certainly during the summer season of the year, and that it is only now being affected in the Easter holidays by the industrial strike. But, on the other hand, I cannot believe that the general budgets of the working classes, for the necessities of life, are, as the Chancellor of the Exchequer's statement would lead us to suppose, lower than what they were in 1904, 1905, and 1906. 1904–5, I think, was the year when I first called attention to this movement, which has been a permanent movement, whereas previously it had been thought to be only a temporary movement. Trade was not at all bad in 1905; but, taking that year and the three years following, I do not think it is true to say that the margin of the working classes for expenditure on luxuries has been increased, as compared with any of those years, in the year which has just ended, by reason of a drop in the prices of the necessaries of existence. Whatever the explanation is, I think the Chancellor of the Exchequer's explanation really will not bear examination.

I would like to ask also for further details as to Post Office services. Whether he chooses to give them in making his replies this evening or circulate them as a printed Paper they will come out, I suppose; but it is of some importance to us that we should have the expenditure as well as receipts broken up among the different Departments of the Postal service, so that when considering the Post Office Vote, when very large demands for new expenditure are apt to be made on the Government, we may know where we are making money or where we are losing money, and whether we are continuing to secure from the great telephone business which we have just taken over profits comparable with those which they produced under private management. I attach great importance to that. I think that it is right when we embark so much of the State's capital in a great service of that kind we should obtain from the State a contribution in aid of taxes and of these services. I am wholly opposed to the idea of making these services barely self-supporting and not exacting from the Post Office a revenue in relief of that which we expect to get from what is usually called direct taxation or taxation on commodities. For those purposes I shall be glad if the Chancellor of the Exchequer will give us further information about the prospects of the current year, assuming that they are not altogether overclouded by further industrial disturbances. I think that the Chancellor of the Exchequer is right in making a sanguine forecast. For my part I am inclined to be more sanguine than he. I speak with less responsibility. I speak with less information, and perhaps it is very rash of me, when there is no necessity for me to prophesy at all, to venture into the realm of what is necessarily speculation, but I do think that in his estimate he has rather under-estimated the revenue which may be expected to be received from this source than over-estimated it. I am assuming the basis for calculation which he himself has taken that the present industrial dispute is rapidly drawing to a close. I do not feel it is desirable for the moment to enter into a discussion of that matter, but assuming that which the Chancellor of the Exchequer has chosen after consideration to adopt as the basis of his calculations, and assuming that the industrial position is not again disturbed on a large scale, then I think, speaking generally, that the Chancellor of the Exchequer's Estimates are low rather than high. I now turn to the contrast which the Chancellor of the Exchequer drew between the present position and the position three years ago. Then he said he was faced with the biggest deficit on record; now he had the greatest realised surplus, and he was able to provide for a greatly increased and ever-growing expenditure without any new taxation. His statement that he had got the largest realised surplus on record was largely cheered by hon. Gentlemen on his own side. I do not think the Chancellor of the Exchequer has quite the same satisfaction about it himself. It is partly due to mistaken Estimates for which he is responsible; it is partly due to mistaken Estimates for which his colleagues are responsible.

The FIRST LORD of the ADMIRALTY (Mr. Churchill)

was understood to dissent.


I do not understand the First Lord of the Admiralty, who hastens to contradict. Does he choose himself to disclaim responsibility for the Estimates in his Department?


was understood to say: The circumstances connected with the excess in the Estimates could not be foreseen.


Were they mistaken Estimates; were the Estimates correct or were they not? They were not. That is the only statement I am making. There is a certain amount of satisfaction, a great deal of satisfaction to be got when your Estimates of revenue are exceeded because of an unforeseen and unforeseeable increase of prosperity in the country, but there is no satisfaction to be taken from the fact that you have raised money for a particular purpose in order to obtain particular services in return, and then, when you have not been able to obtain those services, the money remains in your pocket. That is what has happened in regard to about half this surplus. Owing to circumstances outside the control of the Admiralty—I do not in the least wish to say, I should be very far from saying that there has been a deliberate delay in the programme, in order to make a record for the Chancellor of the Exchequer— such a thought never crossed my mind, of course, but owing to circumstances which were not foreseen, and which were in themselves regrettable, we have not got for the Navy what we intended to have, what was placed before us as the minimum which we ought to have. Because we have not got it the money is not spent, the surplus is realised, but the liability remains for future years. When it comes to the rest of the Chancellor of the Exchequer's congratulations I think there is something to be abated from them when you examine what they are and out of what they arise. Did anybody ever pretend that he was not going to get a great deal of money from the taxes which he proposed in 1909–10?


Oh, yes.


I think not. To some of the most remunerative of the taxes then imposed for the first time no objection in principle was raised on this side of the House, and, indeed, the remarkable thing about the Budget of 1909–10, after three years' experience of it, is that the taxes about which the battle waged fiercest, for which the Chancellor of the Exchequer contended most strongly, to which he attached the greatest importance, which really were the children of his own particular love—from those taxes we have derived revenue in subsequent years utterly negligible on a balance sheet so huge as ours, and which have caused an expenditure far exceeding the revenue in amount. Surely nowadays the Chancellor of the Exchequer will no longer pretend that these taxes are or were ever meant to be, in their present form, and as approved by the House of Commons, a great fiscal machine. No such claim is made for them now.


Yes, certainly.


On the contrary.


The right hon. Gentleman may take his own view. I still claim that the Increment Duty will produce a very, very considerable amount.


Hope springs eternal in the Chancellor of the Exchequer's breast. All we can say is that the right hon. Gentleman has estimated the revenue derived from this duty and the other Land Taxes as several times on a constantly decreasing scale, and that it has never come up to any of his Estimates. I think I am justified in saying that the real merit of the taxation in the eyes of the Chancellor of the Exchequer, as in the eyes of his most earnest supporters below the Gangway, is the possibilities that lie behind it. After all, as the Chancellor of the Exchequer said to-day, so little did he think of the tax that he gladly made a present of half of it to the local authorities. With delightful ingenuity, he, who has bragged of the relief he has given to the local authorities, has said, "Was it likely that I should expect to get much from that when I really gave away half of it to the local authorities. Do you think that I am the kind of man to give away half a tax if it has any money in it? Those of us who know the Chancellor of the Exchequer will readily respond with the negative answer which he expected from us. That is not the value of the tax. Its value lies in the valuation which was introduced as the necessary basis of the tax, and which is now becoming the justification of the Budget. Is it worth while to spend millions in getting a small revenue, because at the cost of these millions and on the excuse of these taxes you get a really trustworthy survey of the land values of the country on which you can in future base a reform of your local taxation, and at the same time from which you can draw boundless resources for the Treasury? Let me say, in the first place, that if the valuation were perfect and if you on that valuation raised fresh taxes in relief of the rates, you would not have dealt with or touched the great inequality of our present rating system. The great inequality of our present rating system is the unequal treatment of realty and personalty, and the more you put on to your new valuation in relief of local rates the more you are taxing realty, or at least you are only shifting the burden from one form of realty to another form; but you are not doing what has been the object and idea acknowledged by every reformer of local taxation, that of bringing in personalty to shire the burdens which now fall with undue weight upon realty.

In this valuation, I think I am correct in saying a fanciful valuation, you are valuing something which in nine cases out of ten never comes into the market, and which never can come into the market. Your tax is levied on no definite basis of fact, but on a balance of speculative opinion as to probabilities and possibilities—on what some arbitrator may conclude as being the most, reasonable means between the unreasonable speculations of expert witnesses employed on either side. Is that a hopeful basis for raising large Bums of money? We have urged upon the Chancellor again and again that the basis which he chose for his taxation was not a suitable basis for a workable system; and I think that everything that has happened in the fixing of these values has tended to confirm and justify the opinion that we expressed. The matter becomes of increased importance when the Chancellor of the Exchequer, following the hon. Member for Newcastle-under-Lyme (Mr. Wedgwood), and the hon. Member for Blackburn (Mr. Snowden), and other pioneers of these forms of taxation, points to these as his great resource against future needs, and it becomes urgent to verify the accuracy of the valuations which are being made— to test their accuracy and to see how the thing is being done. Last year the Chancellor of the Exchequer—I think it was in the month of December, on the Third Reading, at all events, it was very late in the Session—agreed that we ought to have an inquiry into the character of the valuations that have been made at an early date, but he did not think the time had come then, and he thought that such an inquiry might produce results very unpalatable to us. I do not inquire whether the results are going to be unpalatable to individuals or not; I do not inquire whether they are going, as a whole, to prove the case of one party or not; but I do say that when such importance is given to the valuation by the Chancellor of the Exchequer, and when on it depends the amount of taxation payable by countless people throughout the country, it is of great importance that we should know whether the valuation is one that ought to command our respect, whether it has been satisfactorily carried out, and whether in fact the conditions of the law which regulate the way in which it is carried out, are such as can be fulfilled satisfactorily in practice.

I would invite the Chancellor of the Exchequer now, and without further delay, to appoint this Commission of Inquiry. I call it a Commission of Inquiry, but I do not want to bind myself or the Chancellor to the exact terms I use in describing it. I do not want a Committee of this House, which is not the tribunal to judge of the matter. I want people with sufficient knowledge, or sufficient general experience, to judge clearly and fairly on the evidence that is produced before them— a tribunal that will command respect, that will speak with authority, that will pronounce an unbiassed verdict, and give all of us that light by which we can walk in future. As to the exact form of inquiry, we may very well leave that to the Chancellor of the Exchequer, if he will give us the inquiry itself in a practical, judicial and unbiassed spirit. I come now to what is the real outstanding feature of the Chancellor of the Exchequer's Budget. His proposal, as I understand it, is that the whole surplus which, according to the ordinary law of the land, should have gone to the redemption of the Debt, is to be held in suspense in the Exchequer balances to meet the demands upon him in the course of the year, and if there be any balance over, after the abnormal and exceptional demands in the course of the year, it is to be appropriated as the House should see fit a year hence. I heard that statement with great regret. To begin with, I think that the basis which the Chancellor of the Exchequer built upon was wholly insufficient to maintain such a super-structure. The Chancellor says that this surplus is partly created by the failure of the Admiralty to spend the money which it was expected to spend. Yes, but press that to its fullest extent and all that the Chancellor can claim on that account would be half his surplus and no more, as that which he might properly divert from the redemption of debt, owing to the under-expenditure on the Navy. He says that the Admiralty under-spent by something like £3,000,000. [HON. MEMBERS: "A million and a half."] I am putting it too high. The Admiralty under-spent a million and a half, of which they will spend in this year only about half, or £600,000 exactly. He does not want the money to find that £600,000, he is going to find that out of taxes, he is holding six millions and a half, and his justification is a million and a half which was not spent last year, and of which £600,000 is going to be spent this year. The argument is wholly insufficient to support the action which he bases upon it.


It was certainly not my most serious reason. I referred to the contingency which the First Lord of the Admiralty made as clear as it should be made clear.


I am glad the right hon. Gentleman has reminded me of that matter, but I must deal with the question in sections. As far as the under-expenditure last year was concerned, only £600,000 of that is going to be met this year. It is an entirely novel principle to hold over any part of your realised surplus to meet non-expenditure in a previous year by the Departments concerned. It is destructive of the whole basis of your finance. There never will be an Old Sinking Fund again if that becomes the settled practice of this House. Again and again Departments have begged to have this latitude allowed to them. I venture to say, speaking not without a rather diversified experience both in spending Departments and at the Treasury, that if you are going to allow the Departments to keep their unexpended balances to spend in the next year in addition to the sums that would be normally voted for that year, you will find your expenditure growing more and more than ever in spite of you. It is the greatest check against over-estimating, and it is one of the few checks you really have in the Departments like the Admiralty and War Offices that if they over-estimate they shall not have the benefit. If you are going to teach them that if they only over-estimate enough and cause a heavy enough surplus you will let them have that money, then you are going to strike a great blow at accurate estimating and proper control over the expenditure of the country.

I come to the second question. The right hon. Gentleman said that he is holding this over not merely to provide against the under-expenditure of last year, but also for the contingencies foreshadowed by the First Lord of the Admiralty. I am the last man to complain either of the provision which the First Lord foreshadowed or of the determination of the Government, and the Chancellor of the Exchequer that if that provision be required it shall be forthcoming, and as much shall be forthcoming as is needed. But I cannot reconcile the statement which the First Lord of the Admiralty made with the provision which the Chancellor of the Exchequer is making. The sum of £6,000,000 seems to me something altogether beyond any sum that could be con- ceivably required on the Estimates of this year, in addition to those which are already before the House on the basis laid down by the First Lord himself. That is the second item which justified the Chancellor of the Exchequer, in his own estimation, in holding back this sum. If he might plead with any show of reason that it justified him in holding back part of it, it does not justify him in holding back the whole of it. Although he may say, if it is not all wanted a year hence it shall still go to the Old Sinking Fund, I distrust these bills on futurity. Once money has been intercepted the Chancellor of the Exchequer, or other people for him, will be ready enough to find other purposes to which the money may go if it is not required for the Navy, without its being allowed to be spent in paying our debts, a task which is never pleasant to any of us, and never much loved by this House in particular.

I venture to say that the moment the Chancellor has chosen for diverting this money from the Sinking Fund is a singularly unfortunate moment. The Chancellor of the Exchequer has had difficult years to face. Nobody doubts that, but the deficit was largely the Government's own creation. It was partly a deficit which no one could have prevented, but undoubtedly there was a deficit which they might have prevented and which, in stead of preventing, they did everything to increase. At the very moment that the Government introduced their old age pensions they took off half the Sugar Duty. When you are proposing £9,000,000 additional expenditure and when you admit you have not revenue to meet it, is that the moment to take off your duty? That is reckless, spendthrift finance. It is not a fiscal policy of any school; it is pure vote-catching on the part of the Government. We admit that the present Chancellor of the Exchequer had at once to fill a gap in taxation which his predecessor had made. He had to pay for his predecessor's fancies as well as his own, and he had a very difficult financial task. I do not think he will say that in the various raids which he has made on the Sinking Fund that he has had any very severe criticism from this side of the House. I think he has perhaps had less criticism than he ought to have had. I am not at all certain, if I could put myself back to where I was when he took £3,000,000 away from the fixed Debt charge, that I would repeat the statement that I then made that I was not surprised and that I thought it not an immoderate thing to do. My hon. Friend behind me (Sir F. Banbury) has the peculiar happiness of being alone in his virtue and wisdom.

I recognised at that time the difficulties of the Chancellor's position, and I assumed that when he got through those difficulties he would try and restore some part of the provision which he had taken away from the National Debt, and that, at any rate, he would not have raided it further. Now he is making it a stated practice, and when he has got the opportunity with a great realised surplus to make a great effect in the reduction of debt, and when he has the opportunity to produce a marked effect on the national credit and the price of Consols, he has thrown that opportunity to the winds. The Chancellor of the Exchequer talks a great deal about the amount of debt that is really due. He must remember that today it stands higher than it did before the war. On 31st March, 1899, it was £628,000,000, and the figures last published, those of last year, disclosed that it was £685,000,000. There has been some reduction during the current year, which has not yet appeared in the new Returns, but the debt stands higher than at the time of the war. Not only that, but the price of Consols stand infinitely lower. I am not going at this moment into a subject which we have frequently debated without coming any closer together on it, namely, the cause of the reduction in the price of Consols or the extent to which the Government are answerable for that, but I do say that the low price of Consols is extraordinarily favourable to their redemption, because for every million devoted to the purpose you extinguish so much more debt than if the price were higher. I say, also, that the low price makes it peculiarly obligatory on the Government to use all the endeavours in its power to raise the credit of the country. The Chancellor of the Exchequer is doing nothing of the kind; he is utterly regardless about the credit, of the country, as far as I can see. I deplore and I blame the choice which the Chancellor of the Exchequer has made of the way to treat the realised surplus of this year. It will have a bad effect on the market, a market already sufficiently depressed, where the only big buyer in these days is the Government itself. The price of Consols has a depressing effect on the other British Government securities and on the borrowing power of the Government.

6.0 P.M.

When the Chancellor of the Exchequer speaks with a solemnity with which he did to-day about the possibilities of the future, a solemnity and responsibility which, I think, formed at least as happy a contrast with his speeches of three years ago as the revenue of to-day does with the revenue of that time, when he speaks with such seriousness and responsibility about the prospects of the future, I beg him to remember that one of the elements of our strength is our reserves for use in such emergencies, and that he is the particular guardian of those reserves. I beg him even now at this last hour to show some sense of his responsibility in that respect, and to reconsider the proposal which he has laid before the Committee to take away the whole of the realised surplus from its proper and legal application to the redemption of debt. The Chancellor of the Exchequer makes no changes in taxation on the estimates of expenditure and revenue which he has laid before us. He sees his way almost exactly to balance expenditure and revenue. A Budget which otherwise has no features of special interest, and I do not know that the Budget speech had many, is rendered singular, and I think singular for evil, by this proposal of the Chancellor. For my part, I shall certainly resist this appeal, although I did not resist his earlier appeals.


I should have been very glad if the Budget statement had been of a nature enabling me to say something encouraging and complimentary to the right hon. Gentleman, but I must confess that we have very little either to criticise or to praise. It is a simple statement, satisfactory from many points of view, of the national accounts, but one which in some respects will cause disappointment. The chief honour of a Chancellor of the Exchequer is in taking off taxes and in reducing burdens. However much you may boast about the success of the taxes that you put on, the nation will never be so grateful to the man who puts on taxes as to one who takes them off. I have been a good deal puzzled—and my state of mind has not been cleared at all by the speech of the right hon. Member for East Worcestershire (Mr. Austen Chamberlain)—by the reasons given for absorbing the whole of the surplus. The right hon. Gentleman opposite dealt with those reasons, but he did not make the matter any clearer. The first reason given by the Chancellor of the Exchequer was the £1,600,000 short expenditure on the Navy. What does my right hon. Friend mean by alluding to that in this connection? He says that he is adding the surplus to the Exchequer Balances because of that short expenditure. Does that mean that the £1,600,000 is to be expended this year, and that the money is to be taken from the Exchequer Balances? If not, it has no meaning. But surely it does not mean that, because we have had Estimates presented to us, and to a certain extent passed, in regard to naval expenditure, embodying the fresh £600,000, which is the only portion of that short expenditure which is to be incurred this year. Having regard to that fact, this short expenditure on the Navy should not have been mentioned at all, as it does not affect the matter, and the Chancellor of the Exchequer does not propose to spend a single shilling of this particular money in making good that short expenditure, if there was any. Personally, I do not wish him to spend it; but I will allude to that point in a moment.

The Budget statement was really not a fresh statement at all. We had not much comment on the figures of the year. We had rather a retrospect of the three years, and the old story of the Budget of 1909 was retold once more. My right hon. Friend can easily carry that course of argument a little too far. He spoke of the splendid trade we have had, the great prosperity of last year, the growing trade of 1909–10 as compared with that of 1908. He spoke of it as if it had been caused by the Budget of 1909. He went almost too far. We cannot have had the splendid trade and the great national progress simply be-cause heavy taxes were laid on. All the distance to which the argument can be pushed is that, owing to other causes, such as the great recuperative force of the nation, we were able to carry on our trade in spite of the heavy taxation. That is as far as the argument can be carried. It is rather a pity that we should have had the Chancellor of the Exchequer at once asking the people to bear this extra burden of £20,000,000 or £22,000,000, and then telling them that it has increased their wages, improved trade, and increased the prosperity of the nation. I think it is rather a questionable argument if it is pushed to that extent. However, some of my hon. Friends say that the Chancellor of the Exchequer did not go that far. I am willing to accept their statement, but there is a danger of pushing the matter too far.


The Chancellor of the Exchequer never suggested such a tiling.


With regard to the Budget of 1909, there was one aspect to which the Chancellor of the Exchequer referred at some length. He spoke of having had a very large deficit to deal with in 1909. A full half of that deficit was created by the Government itself. A vast part of the increased taxation went in new expenditure on the Navy. That is really the subject about which I rose to speak.


The other side do not cheer that.


It is their policy to make expenditure on the Navy, but it was our Chancellor of the Exchequer who did it. That is what grieves me about it. There never was a Chancellor of the Exchequer who, as far as his past record went, was as much pledged not to increase expenditure on armaments as my right hon. Friend, and yet he has increased the expenditure more than any other Chancellor of the Exchequer in this country has ever done. My hon. Friend says that the hon. Members opposite do not cheer that statement. Of course not, and for good reasons. It is not the policy of the Liberal party: it is the policy of the Tory party. A large portion of these heavy burdens has been incurred by my right hon. Friends, because, in regard to expenditure on the Navy, they made themselves the instruments, not of the party which put them into power, but of the party which sits opposite. My right hon. Friend alluded also to the slight decrease in Navy expenditure, and said he was disappointed about it. He had good reason to be disappointed. The decrease is only £303,000, while the increase in three years is £13,000,000. That is most deplorable, and it is a matter to which we are justified in calling attention, because of the ominous remarks made by my right hon. Friend. He spoke even more confidently, and more definitely than the First Lord of the Admiralty about possible increased expenditure on the Navy this year. He stated that he was keeping the money for that, and then he spoke of the prospect of a great increase next year. I protest against these remarks at this early stage. I see no necessity for them. If we were to ask why this expenditure has to be made, my right hon. Friend would say that it is not because of any disturbance in the world's peace, but because of panics that are being created, perhaps in this country, perhaps in foreign countries. But that is a point on which my right hon. Friend himself is not free from blame, and I believe that many of his colleagues contribute their part to making the very difficulties which he has to meet at so much pain and cost to the nation. I believe that the speech of my right hon. Friend to the bankers last July did a great deal to create a panic. I believe that the speech of the First Lord of the Admiralty at Glasgow recently, which was conceived in a very different tone from his speech in this House, did something to create a panic. If we go back three years, as the Chancellor of the Exchequer has done, what was the reason for the great increase in 1909? I have said it before, and I repeat, that it was because of the panic statements made from the Treasury Bench with regard to the Navies that would be built. Three years have passed, and those fleets have mostly proved to be phantom ships; not half the ships on which those Estimates were based were built. But although the ships were not built, the Estimates remained, and we are told that we shall have more and more expenditure for these reasons. I consider it most deplorable.

The worst aspect of the matter is that it illustrates the fact that the nation has become powerless in this matter. Here is a Government supported by a combination of parties—the Irish party, the Labour party, and the Liberal party. I venture to say that the only party of those three in which any substantial support is found for this policy of increased expenditure on armaments is the Liberal party, and probably not more than 20 per cent. of that party are at the back of this expenditure. Yet we are told in the Budget speech—it is its chief feature—that the expenditure may be heavier this year and heavier still next year. Perhaps this is not the time to discuss the question at any length. I deplore very much that my right hon. Friend should have said so much about it. It is these innuendoes, and the solemn statements from the bench opposite, that they quite approve and know the serious nature of the position, that cause the trouble. All the nations of the world have their ears open. That is what makes the difficulty with which we are struggling. I think we might have been spared it on the present occasion. If we conducted these matters more soberly, and said less about these panics and alarms, and about what other nations are doing, we would be able on an occasion like this to use the vast resources which the prosperity of the country has put at our disposal to reduce taxation. I am sorry that on this occasion it was not possible to do anything of that kind. However, we must congratulate ourselves that there is no increase of taxation. The large sums devoted to the purposes of the Insurance Act— from which great benefit has accrued, and I believe will accrue, to the country—are found in the Budget without any increased taxation. So that, if we have not much to compliment ourselves upon, there is not much to be very sorry about either.

On the whole I think everybody ought to be pleased that the Chancellor of the Exchequer was able to take such a rosy view of the future in regard to trade. I think the Estimates are again too low. We are probably working for a big surplus next year. That sort of thing may be carried too far. I could not understand the process by which, although a big increase in consumption both of spirits and of beer is estimated for, there is an anticipated decrease in the revenue from those sources. The Estimates are possibly too conservative all round. But that is a good fault. It will perhaps give us a large surplus next year which we may be able to use even more wisely than the surplus is being used this year. I think there is room for the criticism of the right hon. Member for East Worcestershire. I know that if a Conservative Chancellor of the Exchequer had made away with a vast surplus like the surplus of this year, without applying a penny of it to the reduction of debt or any other particularly useful purpose, and if we had been sitting on the other side, we would have had a few words to say about it. But it is not for us to utter those criticisms. Taking the whole statement, apart from the dark threat of increased naval expenditure, which I hope will not be realised, it is one on which the country can congratulate itself, and I think we ought to be pleased that the Chancellor of the Exchequer was able to make it to-day.


I think that everybody who takes an interest in the stability of our national credit must have been somewhat appalled to hear of the action which the Chancellor of the Exchequer proposes to take with regard to the surplus of over 6½ millions which he so greatly prided himself on having obtained this year. The right hon. Gentleman told us that he was going to put this surplus to a Suspense Account, in order to provide for certain possible contingencies, such as increases in naval expenditure and the incalculable effects of the mining strike. I do not feel competent to criticise the justice of the calculation that the Chancellor of the Exchequer has made, but I would say, as to keeping this money in order to provide against the strike, that it may be quite possible, if we foretold the result of this strike, that it may be such a dislocation of trade and such a dislocation of the rates of exchange between this country and other countries as to cause something in the nature of a financial panic. If that, unfortunately, comes to pass, surely it would be very much better to strengthen the Consol market and our reserves by putting this great sum of money to the reduction of debt. If we feel it incumbent upon ourselves to make some reserve that reserve seems to me should be made by a reduction of expenditure rather than by reducing the amount of money which we are going to put to debt.

With regard to the extra expenditure that may possibly be required for the Navy, I would say that if this money is wanted it would certainly be more cheaply raised by the issue of Exchequer Bonds, or any short-dated issues of that sort, than by adopting the very extravagant method which the Chancellor of the Exchequer has foreshadowed. He is getting Consols at a very low price. This is an opportunity which ought not to be missed of applying this very large surplus to the reduction of debt. The Chancellor of the Exchequer read to the Committee a very interesting letter of Sir William Harcourt, which he took to be some justification of the method of his action with regard to this surplus. Sir William Harcourt said that he thought it would be sufficient if the Government maintained the New Sinking Fund and the terminable annuities. But he wrote that letter in 1896! At that time the amount voted for the service of the Debt was £25,000,000, as against £24,500,000 now. He had to find £6,400,000 to meet terminable annuities, whereas the present Chancellor of the Exchequer has only got to meet a little over £3,000,000. Therefore the provision that the Unionist Government of the day required to make that reduction of debt was infinitely larger than the provision that the present Chancellor of the Exchequer is proposing to make. During the past few months a great deal has been written and said by very competent authorities of all shades of political opinions about the depreciation in Consols. I think it is such a serious matter, especially in face of the statement which the Chancellor made about the reduction of debt, that we are justified in drawing the attention of the Government to it once again. The Government, I know, during the past year, by making Consols transferable by deed in the ordinary way, instead of making the public sign books at the bank, have done something to show that they realise that the present weakness of the Consol market and the low price of stock does constitute a matter of very severe import.

I do not wish to criticise the measure which the Chancellor, or the Government, have adopted. I do not desire to speak as to its advantages or its obvious disadvantages. But I think everybody will admit that it is only a palliative. It is not now going to the real root of the matter, and attacking the real causes of the present depression of our premier security. What is the attitude of the Chancellor of the Exchequer on this subject? He deplores the falling Consols, but he is perfectly satisfied that this fall is due to causes which are peculiar to Consols and Government securities, and is due to causes for which the Government of the day has no responsibility whatever; further, that this depression shows no weakening in our national credit. That is a most dangerous position to take up, as it completely ignores and shows inability to grasp really the serious nature of the problem before us. It is obvious that the present price of Consols must be a very great national, danger, must weaken our power of defence in any crisis, whether military or commercial. The vital question, as I shall try to show this evening, is that this depression of Consols cannot be taken as a mere isolated phenomenon, but it is a sign of the general unsatisfactory tendency of our national credit.

I am not one of those people—they exist, I believe, mostly in the imagination of the Chancellor of the Exchequer—who believe and try to prove that this country is bankrupt, and that our national credit is shattered. I am proud to think that our credit, in spite of the Chancellor of the Exchequer, is still the strongest in the world. I am proud to think that the people of London are the bankers of the world, and that half the commercial transactions of the civilised world are based upon British credit. A great position like this does bring with it very great responsibility. We must remember that the maintenance of our credit is an absolute necessity to the material prosperity of the inhabitants of this great Empire. When we consider that all our trade rivals are jealous of our financial superiority, and that we have built this enormous structure of credit on a comparatively insignificant foundation of gold, I think we are justified in urging the Government to do all they possibly can to take every measure which they possibly can devise, to see that this credit of ours is maintained and preserved in the future as it has been in the past. What I want to show is, that although British credit is still the strongest in the world during the last few years it has undoubtedly tended to lose the pre-eminence which it once had. That is to say British credit, measured by the price of Consols, which are generally taken to be the barometer of our credit, has tended to depreciate to a greater extent than that of leading foreign nations.

Let us compare the prices of Consols—I know the comparison has been made before, and I apologise to the Committee for making it again—with the price of the premier securities of other first-class Powers. I only take the first-class Powers in this connection, because it is, of course, desirable, as far as possible, to compare like with like. The comparison of our securities with the securities of small countries such as Switzerland would very much help my argument. Yet clearly the comparative smallness of that debt and the consequent difference in the market would vitiate any comparison. Between 1906 and 1911, taking the highest price in each year, we find that Prussian Three per Cents, have dropped 3¾ points, that Prussian Three-and-a-Half per Cents, dropped 5¼ points, that German Imperial Three per Cents. dropped 4 points, and that French Three per Cent. Rentes dropped 2 points. During this period British Consols had dropped 9 points. That shows that the fall in Consols during the period under review has been from one and a half to nearly five times as great as that in the similar securities of other countries. Objection may be made that all these securities which I have been comparing bear a different rate of interest, and that Consols pay by far the lowest rate of interest. As during the past few years people generally have tended to demand a higher rate of interest for their money it is obvious, it is urged, that the fall of Consols would be greater than in the securities I have referred to. I quite admit the justice of that argument. I think that a far fairer comparison can be made on the basis of the yield per cent., again taking the highest figures of the years under review. In 1906 Consols paid £2 14s. 9d. per cent. In 1911 Consols paid £3 0s. 9d. per cent., or an increase in the yield of 6s. per cent. During the same period German Imperial Three per Cents, showed an increased yield of 3s. 2d., Prussian Three per Cents, of 3s. 1d., Prussian Three-and-a-Half per Cents, of 3s. 10d., and French Three per Cent. Rentes of only 1s. 2d. This therefore shows that the increment yield of Consols has been on the same basis from one and a half to nearly five times as great as the increased yield of similar securities in other countries. Both methods of comparison must lead us to the same conclusion, namely, that our credit is not so superior to the credit of our trading rivals as it was some years ago.

Let me put it in another way. In 1906 people were content to invest money in Consols, getting only £2 14s. 6d., considering that the better security made it a better investment than, say, French Rentes, which paid £3 0s. 4d. The ratio between the credit of these two countries has changed to such an extent that now the investor requires a yield of £3 0s. 9d. to tempt him to invest in Consols, while a yield of £3 1s. 6d. is sufficient to induce him to invest in French Rentes. In 1906 the investor was content to receive 5s. 7d. less on Consols than on French Rentes, because he thought the security was so much better. The conclusion is that the security of the two nations is about the same. I do not think that a panic conclusion. I do not think the Chancellor of the Exchequer would call it an unpatriotic attempt to depreciate British credit. I am sure that nobody deplores the fact more than I do, but I think it must be obvious that our credit is tending to lose that preeminence which is essential to us if we are going to maintain the prosperity of the people of this country and of the Empire.

If we turn to an examination of, say, the debenture stocks of our great railways —I do not intend to weary the House with figures now—we find it is the same story: a gradual depreciation in their price. There is one point of interest which I would like to draw the attention of the House to. Perhaps the best test, that we can apply to the stability and well-being of the national credit is to see whether the investor is equally ready to invest his money in his own country or whether in increasing numbers the people prefer to invest their money abroad. The Chancellor of the Exchequer said this afternoon, I think, that "capitalists have never shown greater activity in investment." I quite agree. Unfortunately this activity has not been confined to the United Kingdom. It has largely taken place in other and foreign countries. We find that between 1905 and 1910 the incomes from abroad increased by £20,000,000, represented, roughly, capital invested abroad of about £500,000,000. The Prime Minister has a theory that it is a sign of the prosperity of a country that it should have a large amount of surplus wealth available for foreign investment; wealth which it does not require to invest in home industries. I quite agree with that.

What he and his supporters have taken for granted is that this large increase of income from capital invested abroad represents an increase in the surplus capital of this country, and that therefore it is a sign of the increasing prosperity of this country. I imagine if I can show that this increase of capital invested abroad is not in proportion to the increase of wealth of this country—that is to say, that it is not an increase in our surplus wealth— I am sure that hon. Members will be quite ready to agree with me that the Prime Minister's theory does not apply in that case; and that so far from it being a sign of prosperity it is a sign that the British investor has become afraid of investing his money in Home Securities. Perhaps I shall do well to make that point. In 1905 identified incomes from British Government Securities, from businesses, occupations, and professions in this country amounted to £481,000,000. The incomes from abroad amounted to £73,000,000. If we assume that in 1905 this theory of the Prime Minister was correct and that this £73,000,000 did represent income from surplus capital which was not wanted at home, we must then come to see how this theory fits with the year 1910, for between those years this £73,000,000 had increased to £93,000,000, or 26.2 per cent. Obviously, if that £93,000,000 represented income from surplus capital, the incomes of British investors from businesses, occupations, professions, etc., in this country must have increased by a more or less similar rate. We find on the contrary, whereas incomes from abroad during that period increased by 26.2 per cent., incomes at home only increase by 6.8 per cent. The hon. Gentleman the Member for Stoke may deride these figures, but I venture to say—


What is the actual increase apart from percentages?


I think I have already given the Committee the actual increase, the increase in incomes from abroad rose from £73,000,000 to £91,000,000.


And the incomes at home?


I am afraid I have not got the actual figures of that increase. I think this shows that even if the capital invested abroad were surplus capital it is certainly obvious that the large increase of capital invested abroad up to 1910 has not been kept pace with by the increase from incomes invested in this country. I think that shows that our national prosperity has not increased, but that the investor has become shy of investing his money in this country and has invested it abroad. It may be interesting to note that in the period between 1894 and 1899, when the Unionist Government were responsible for the finances of the country, this process was almost entirely reversed, and income increased by 21 per cent. for investments at home, while income from capital investment abroad increased by only 11 per cent. I maintain, on the face of these figures and the testimony of business men all over the country, it is impossible to say that our national credit stands as high to-day as it did five years ago. I do not think we shall make this fact any better by shutting our eyes to it, and I think what we ought to do is to see that the Government adopts some method of improving our finances.


Will the hon. Gentleman tell us what is the figure for 1898 instead of 1899. 1899 was the first year of the war.


I have not got that figure. I think the Government ought to take some steps to try and meet this state of affairs. We may inquire what has the Government, who are responsible, done to improve this situation? My right hon. Friend the Leader of the Opposition made a strong attack at the Albert Hall some months ago upon the financial policy of the Chancellor of the Exchequer, and the Chancellor of the Exchequer soon after summoned a meeting of his own supporters in the city one Saturday afternoon, and tried to make an elaborate answer to my right hon. Friend's attack. His reply amounted simply to a tu quoque. He said if the policy of the Government was bad the policy of their predecessors was a great deal worse. I do not think that is true, but I do not intend to argue the point. But even if it is true our credit will not be preserved by the Chancellor of the Exchequer trying to score debating points against his opponent. Has the Chancellor of the Exchequer done anything during his term of office to raise the price of Consols and strengthen our financial credit? It seems to me his actions have all tended in a completely different direction. Since he took office he reduced the sum set aside for the reduction of debt by £3,500,000. He took £2,500,000 from the Sinking Fund in 1909–10, and in 1910–11 he raided the Old Sinking Fund to the extent of £3,000,000, and now in his present Budget he is proposing to take away from the reduction of debt the whole of the £6,000,000 surplus which ought to apply to the Old Sinking Fund. This policy is bad enough, but it would not be so bad if joined to a moderate system of taxation. We find that from 1905 to 1911 the revenue has increased by 19 per cent., and at the same time the Income Tax has increased by 41 per cent. and the Death Duties by 45 per cent. May I remind the Committee that these Death Duties are a direct tax upon capital, and are paid largely by sales from Consols. I do not think anybody can call this a policy of strengthening Consols or our national credit. With such a system of debt reduction and such a scheme of taxation joined with the policy of reckless extravagance, is it any wonder that our credit is not so well thought of both at home and abroad as it used to be? The Chancellor of the Exchequer seems to have no financial policy which can have an effect in improving Consols or our credit. Speaking in the city he said:— Consols have fallen. True! But all Government securities throughout the Continent of Europe have fallen. and it is only our amateurs in finance who would ever dream of attributing that to Budgets. It is a matter for looking into. It is a matter for grave consideration. I venture to disagree with the Chancellor of the Exchequer. I have shown that Consols have fallen in this country to a greater extent than similar securities in other countries, and I maintain that Budgets, in so far as they represent the financial policy of the Government, do have a very great effect upon Consols, and through them upon our national credit. The Chancellor of the Exchequer attempted this afternoon to take great credit to himself for the prosperity and strength to our resources which the Budget of 1909–10 brought. One could take instances if necessary to show the effect Budgets can have upon the price of Consols. The present Prime Minister, when Chancellor of the Exchequer, undoubtedly did not offer so much refreshing fruit to the people of this country as his successor, but I do not think anybody would deny that he did make adequate preparation for the reduction of debt, and did pursue, on the whole, a wise financial policy. What was the result? The result was that for the first time for many years during the present Prime Minister's term of office as Chancellor of the Exchequer Consols actually appreciated in value; somebody may say that was in a time of cheap money. No doubt it was, but since we have had the present Chancellor of the Exchequer, there have been periods of cheap money, but the price of Consols continues steadily to fall, and other investments also. In the last Budget of the Prime Minister as Chancellor, in 1908, he said:— I do not hesitate to say, I am entitled to say, that the time has come in the various interests we have to safeguard and promote and in connection with finance and the reduction we shall have made in March next, to justify a review of the situation. He was talking of the £28,000,000 he had set aside annually for the reduction of debt. The present Chancellor of the Exchequer was quick to act upon that hint. He reviewed the situation to some purpose, and reduced the £28,000,000 to £24,500,000, and the result of that review has been a steady depreciation in the price of Consols. It seems to me a vital question to ask what steps the Chancellor of the Exchequer and the Government have taken to stop this fall m Consols. Most people are ready to admit it is a danger. The Chancellor of the Exchequer, when speaking in the City, said:— There were a hundred thousand different theories for keeping up the price of those securities, They may be right, but very nearly all of them have been open to the same charge that they are only methods of tinkering with the matter. They are trying to increase the price of Consols without attempting to go to the real root cause. It seems to me that the remedy is quite easy, though it may be rather difficult for the Chancellor of the Exchequer to undertake. He is always in the position of a chairman of a company at a shareholders' meeting refusing to grant increased dividends to the shareholders until the debts of the company are paid off. It seems to me the Chancellor of the Exchequer should immediately, and I regret he has not done it in this Budget, increased the sum allotted to the service of the Debt from £24,500,000 to £25,000,000, and ultimately to £28,000,000, as the present Prime Minister did, and I would also say he ought to be extremely careful that all surplus revenue should be applied every year to the Old Sinking Fund. These two suggestions amount to this, that the Chancellor of the Exchequer should give up his financial policy entirely and should revert to the more serviceable policy of his predecessors.

There is another minor suggestion that I venture respectfully to make to the Government for dealing with this problem, and that is, that they should apply as much as possible of the sum they have for redemption of debt to the Funded Debt as opposed to the Unfunded Debt. I am also aware that as the old Funded Debt is our first line of defence, it is good finance and sound policy that we should pay that debt as soon as possible, but I think the present relative positions of the Funded and Unfunded Debt would justify the Chancellor of the Exchequer in departing somewhat from this rule, at all events for a short time. On the 31st March, 1911, the Unfunded Debt stood at £40,000,000, whereas the Funded Debt stood at £610,000,000. I am only giving the figures up to the 31st March. Of course, we all know that that figure of £40,000,000 is now largely reduced, because the Government have been redeeming "Treasuries" during the last few months, and I think I am right in saying that that figure would be reduced now by about £7,400,000. At all events there is a large discrepancy between £40,000,000 and £610,000,000. Between the years 1905 and 1911 I think £23,000,000 of Funded Debt was paid off, whereas only £25,000,000 of Unfunded Debt has been paid off.

I have tried to show that the depreciation of Consols is a serious matter, far more serious to us than any other nation in the world. Seeing the unique financial position occupied by the City of London, and seeing that our position as a nation largely depends upon the maintenance of our credit, I have ventured to make one or two suggestions to the Chancellor of the Exchequer as to how that credit and the price of Consols should be maintained. I do not deny my suggestions are obvious, and I do not for a moment claim that they are original, but I am perfectly convinced that it is only by reverting to some such plan as I have outlined and converting our financial policy from one of reckless expenditure and taxation into one of prudent regard for the payment of debt that we shall be able to put our finances in the position of standing any strain put upon them and keeping our British credit up to the unfeigned admiration of the world.


I would like to say in regard to what the lion. Member opposite has said, that in my opinion the fall in the price of Consols and Government Stock is largely due to the fact that we are spending such an enormous amount of money on things that can bring us in no return at all. Probably the investor who has money to invest is not prepared to put it into our securities when such an extraordinary amount is being spent on those services which can never bring in any adequate return. I listened to the speech of the Chancellor of the Exchequer with somewhat mixed feelings. There were parts of the right hon. Gentleman's statement which were pleasurable, or should be to all of us in this House. The fact that we had got a surplus of £6,500,000 or over, the fact that it was not necessary to increase taxation or impose new taxation, these things in themselves are very satisfactory. There were other points in his statement which were by no means satisfactory. Some of us who sit on these benches think the time has come when some of the existing taxes, which fall so heavily on the class to which I belong, should be removed altogether from our scheme of taxation. We say that the proportion of taxation which the working classes of this country are called upon to pay under the existing scheme of taxation is altogether in excess of the sum they should be called upon to pay, taking into account the small portion of the nation's income which they receive for their labour.

The Chancellor of the Exchequer told us that this had been a year of large profits, and he went on to suggest that if we took the old idea that the workers come in for half of those profits, they would represent a sum of £40,000,000. I do not suppose he knows how much the workers have got of that particular amount, but putting it by the side of another statement which the right hon. Gentleman made it does not look as if they got a very large proportion of those profits, because he said that out of 400,000 deaths in this country, 7,000 of those who had left estates had left three-fourths of the total wealth of the 400,000. Therefore I submit that, judging by the amount of wealthy estates becoming subject to taxation under the Estate Duty, the proportion which the workers are getting of this increased wealth is by no means what it ought to be. With respect to the new taxes, as the Chancellor of the Exchequer calls his Budget taxes of 1909, I agree with the conclusion of the Opposition, though from a very different point of view. Apart from the Increment Tax, it is true that the Land Taxes have not brought in a very large amount of money. There is no disputing that fact, and the amount is less than some of us anticipated when we walked into the Lobby to support those taxes. We did not expect a large amount from particular taxes levied, as they were bound to be levied, in this particular form.

We did not regard that as the greatest thing of this Budget, and we do not do so to-day. We believe that the valuation of the land was the greatest thing we obtained out of that Budget, and we believe some Chancellors of the Exchequer, perhaps the present one, may some day have sufficient courage to put a single tax on all land values, to fall equally on all the land of the country, and then he will receive a larger amount than he is receiving to-day. The Increment Tax cannot bring in a large amount of money yet. I think the Chancellor of the Exchequer was a good deal too generous to the Opposition of that day, and he gave away too much, and many of us voted against the right hon. Gentleman's concessions in regard to the Land Taxes. The fact that he allowed an increase of 10 per cent. before any Increment Tax arises is a concession which ought never to have been made. Some of us would go further and say, not only ought we to have 20 per cent. of that increment in the value of land in and about our large towns and cities, but we desire to have the whole 100 per cent., and we are not afraid of saying so, because it belongs to the people, it was created by the people, and to the people it should go. By putting a definite tax on all land, whether agricultural or sporting land, even if the right hon. Gentleman considers it necessary, after imposing that tax, to give back something to relieve agriculture, if he placed the tax equally over all the land he would not need all that elaborate arrangement under the Budget for collecting his tax, and we should see the real value of a system of land taxation. Therefore I look forward to a taxation of land values which will bring us in a good deal more than what we obtain out of the present Budget.

There are some direct taxes which do not fall upon the working classes, to which. I personally take a considerable objection. You may say, "Well, you voted for the Budget with them in," and that is quite true, but I claim that apart from the taxes on alcoholic liquors, where the object is not only to produce revenue, but where it is imposed in the interests of the health of the people, and the same applies to a certain extent in the case of tobacco; apart from those taxes, I am opposed to all other forms of indirect taxation, and I believe in taxation being levied directly upon the people. The working classes of this country to-day pay more than their fair share of taxation in proportion to the amount of income they receive, and the taxation of the working classes of this, country is three times as much as that imposed upon the rich in proportion to their income. The amount may not appear three times as large, but if you happen to be in the position of being an Income Tax payer you will know what I mean, and I know which position I prefer to occupy. I prefer to be in the position of an Income Tax payer to that of a man earning £1 per week, paying taxes upon sugar and tea and the necessities of life. I know the proportion of my income which is taxed to-day is less than the proportion taxed when I was working as an unskilled labourer before coming into this House.

Any system of taxation, whether it is the system of the Chancellor of the Exchequer which for revenue purposes imposes taxes on articles of consumption, which are necessaries of life, or whether it be the system of hon. Gentlemen opposite, who wish to tax everything that we eat, drink, and wear, all those systems, from my point of view, are to the disadvantage of the working classes, while a system of direct taxation is certainly to their advantage. Some of us were looking for a reduction in our taxes. I think the Sugar Tax might very well have gone in this particular Budget, because it is a tax not only upon the breakfast table but upon many industries. It is a tax upon an industry which in my own town employs from 1,000 to 1,500 people, and any tax upon what may be regarded as a raw material must be deleterious to industries. For these reasons I should like to have seen the Sugar Tax abolished, because I regard it as a direct tax upon industry. I re-echo the words spoken by the hon. Member for one of the Divisions of Islington with regard to the amount of money provided for the upkeep of the Navy for the forthcoming year. Each day we come into this House we listen to the prayers of the Chaplain at that table, that the blessing of God may rest upon all our efforts each day, and to-day we have asked the blessing of God to rest upon our efforts in building battleships and making provision for the Navy at a cost of some £44,000,000 a year. I confess I cannot reconcile the two things. I cannot understand the worship of the Prince of Peace and the whispering of prayers in His name, and in the very same Session pass a Budget which is to provide £44,000,000, the object of which, if it is ever to be used for the purpose intended, is to blow the souls of our fellow creatures into eternity. [An HON. MEMBER: "To defend our homes."]

7.0 P.M.

I think it is entirely wrong to spend such a large sum for this particular purpose, but I do not suppose anything that I shall say is likely to alter the opinion of this House. I know perfectly well the Chancellor of the Exchequer will always be supported from the benches opposite when he is proposing large additions to the Navy, and I also know that every working man, woman and child, who is working in these islands, will have to provide during the coming year something like 30s. for the purpose of providing the necessary money for the Navy. Working men will have to find one week's earnings out of the fifty-two to provide money for the Navy, because that is the only way to provide it, for as John Ruskin said, there are only three ways of providing money, that is working for it, begging it, or stealing it. I submit the workers of this country are called upon to devote one week's wages out of fifty-two towards providing the money for the Navy, in fact it is nearly equal to one week for every living person, and if you take it at 5s. per family it amounts to four weeks' revenue. You may tell me that it is necessary to spend all this money to protect your hearths and homes, but my home needs no defence against the Germans, because no Continental Power is desirous of taking anything I have. It is the vested interests with which I have nothing in common, and with which the class I am connected with have nothing in common, that these great navies are built up to protect. It is because I believe they are wrong I shall vote against such Votes on every occasion I have the opportunity, and when I can vote clearly upon that question and upon that question alone. I am glad it is true to say to-day we have had a prosperous year. I am glad we can look forward to good trade for the coming year, and I trust the capitalists will take note of the last words in the speech of the Chancellor of tie Exchequer. He said the future depends upon whether capital is prepared to share its lot with labour. There are two ways of sharing. You can share £100 by giving another person £2 and keeping £98 for yourself, or you can share by treating labour fairly and freely. Much labour unrest as we have had during the past year, that labour unrest will still go on unless those exploiting labour are prepared to see that labour gets its fair share of the increasing prosperity of the nation. If those responsible for our great industries see that is carried out, the Chancellor of the Exchequer may rest assured that there will be no agitation either on the part of hon. Members who sit below the Gangway or anyone else. If the capitalists treat labour fairly and give it a fair share of the increasing prosperity of the nation, the Chancellor of the Exchequer will realise his hopes, and he may look forward to as happy a year as he has prophesied.


The great majority of this House and of the country do not share the sentiments which the hon. Member who has just sat down has expressed with regard to the Navy. We hold that the Navy is simply for defensive purposes and not for aggression. That has been laid down over and over again, and, however much we may regret the expenditure, it is absolutely necessary for our national existence. Of course, the hon. Member is entitled to his own opinion, but I venture to say that opinion is against the opinion of the vast majority of our countrymen. The Chancellor of the Exchequer had a comparatively easy task this afternoon. His Budget, with a prosperous year, has rolled him in money at a great rate, the result being that he has an estimated revenue for the next year of £187,189,000, which is more than the revenue of last year based on the same taxation. I only hope the Estimates of the right hon. Gentleman are not too rosy. He gave us a very rosy picture of what he considered will be the prosperity of the country during the next twelve months, but, owing to this deplorable coal strike, it is impossible for anyone to say what are the prospects of trade during the present year. The nation is held up at the present moment. Every class and every industry are feeling this terrible strike, and we do not know at the present moment whether we are going to get out of it immediately or not. I sincerely hope it may be so, but at the present time the decision seems to be in doubt. Even when the coal trade does get started again it is impossible to tell how long it will be before the other industries are able to recover their former prosperity.

It is quite evident the Chancellor of the Exchequer had no taxes he could remit with a surplus of only £804,000, taking the estimate of expenditure and revenue for the next twelve months. We do not realise, as one year passes and another comes, the rate at which we are increasing our expenditure in all departments. I make out that our national expenditure during the last five years has increased by £35,000,000, and we do not know where the expenditure is going to cease. The feature of the Budget is no doubt the proposed unusual disposal of the realised surplus of £6,500,000. According to law, that surplus ought to go to the Old Sinking Fund to pay off debt, but unfortunately Chancellors of the Exchequer—I do not say the right hon. Gentleman is the only offender—do raid this fund from, time to time. I say that when the fixed charge has been reduced from £28,000,000 to £24,500,000 it is not the time to raid the Old Sinking Fund. We were told by the right hon. Gentleman he thought it was necessary to keep this fund in hand in a Suspense Account—that is what it comes to—to provide against the contingencies which the First Lord of the Admiralty, in his able speech the other day, feared might arrive. I quite agree that those contingencies, if they do happen —and we all hope they will not—will have to be met, but, in my opinion, the proper way to meet them is by a Supplementary Estimate and not by taking this money into a Suspense Account, to be withdrawn, I take it, at the option of the Chancellor of the Exchequer. I should very much like him, in his reply, to state on what authority he would take that money from the Suspense Account in case he needs it. Would he bring it before this House? He certainly ought not to take it without the leave of the House. We should like an answer from the right hon. Gentleman, saying whether we shall have an opportunity of debating that point should unfortunately the necessity arise.

I put down item by item the figures, as the right hon. Gentleman went through them, and on the same taxation they amount altogether to an estimated revenue for the next year of about £187,000,000. The items are practically about the same as last year. Some of them are increases and some of them decreases. I am afraid, however, all these items will more or less be affected by the present deplorable strike. The Chancellor of the Exchequer only dealt with the Excise. He said articles, such as tea and tobacco will be affected, but I maintain all these items will more or less be affected, unless the trade of the country should fortunately survive this deplorable blow which it has sustained. The Dead Weight Debt on April 1st last year amounted to £685,000,000, about the same as it was twenty years ago. Notwithstanding that payments have been made, it increased so much owing to the Boer war that the Dead Weight Debt is practically the same as it was twenty years ago, and it is £57,000,000 more than it was at the time of the Boer war. When we have a state of things of that kind, surely it is not the time we ought to take money which should go to the Old Sinking Fund. The New Sinking Fund which was reduced two years ago to £24,500,000 was fixed by Sir Stafford North-cote in 1875 at £28,000,000 a year. The reason he gave at that time was that the, amounts which had been devoted to the payment of debt previous to the year 1860 had never been less than £28,000,000, and he thought that was the least sum which ought to be paid each year. The Committee must remember that the whole of the fixed Charge does not go to the payment of debt. It is only the balance after the interest has been paid. This year, for instance, the amount which the Chancellor of the Exchequer estimates will be repayment of capital is £7,167,000, but the inside Fixed Debt Charge, interest and management, is the large sum of £17,532,000, so that, after all, the amount which we are paying off is very little indeed.

Mention has been made of Consols. The thing which would bring up the price of Consols more than anything would be to increase the amount purchased every year by way of the Sinking Fund. Nothing would do it more, and, if the Chancellor of the Exchequer could see his way to go a step further, and to say that after a fixed period of years Consols should be repayable at par, the effect on the market would be enormous. I do not know why Consols should be dealt with in a way different from other loans. Local authorities and corporations borrow money, and this House insists on that money being repaid after a certain period of years. Some of those periods are as short as thirty years. The Chancellor of the Exchequer borrows money, and there is no condition as to when it shall be repaid. Consols are simply an annuity going on for an indefinite time. Certainly, if we could have some arrangement by which after a period they could be repaid at par, a very great gain would be effected. I must say one word upon a tax which has not been mentioned this afternoon. I suppose it has not been mentioned, because the Committee has almost given up hope of reduction. I speak of the Income Tax. An Income Tax at 1s. 2d. in the £ in a time of peace, with no apparent prospect of any reduction, is, I maintain, a danger to the State. It is a war rate. It was a rate of 1s. 2d. during the Crimean war in 1854, and during the Boer war in 1902. During the last seventy or eighty years the rate has, on very few occasions, been more than 1s. 2d. It was Is. 4d. in the year 1855, and 1s. 3d. in 1902–3, and it was raised, as the Committee know, by my right hon. Friend the Member for East Worcestershire, when he was Chancellor of the Exchequer, at the time of the Boer war. He regretted doing so. I think he will remember his Budget statement in 1904, when he was raising the Income Tax. He said:— I say for myself that, in my opinion, it is the Income Tax payer who will have first claim to relief, and I hope the sacrifice I am now asking of him will not endure for long. It was a tax put on as a temporary war tax, and the right hon. Gentleman gave the pledge, as Chancellor of the Exchequer, that the Income Tax payer should have the first claim to relief when the Treasury was able to give it. But this Income Tax has gone on and on, and now, I am afraid, those who pay it have got into this state of mind that they do not see any prospect of having it cut down. We know what is the opinion of the Prime Minister in regard to Income Tax. When he was Chancellor of the Exchequer he said:— I do not hesitate to associate myself with the declarations of more than one of my predecessors that an Income Tax at a uniform rate of 1s. in the £. in time of peace, is impossible to justify and difficult to defend. It is a burden on trade which, in the long run affects not only profits but wages. We all know the opinion of the late Mr. Gladstone, that great financier, who described this tax as— a demoralising and dangerous one, vexatious to trade and industries, but at the same time an engine of gigantic power to be used for national emergency. We have two great resources of national reserve. What are they? First, there is the Income Tax, which, in order that it may be a reserve, must be kept at a low rate. If you keep a uniformly high Income Tax you cannot get a reserve income to fall back upon in case you wait it. Therefore you must keep it low. But you must keep your fixed charges for the Sinking Fund high. These are the two great national reserves, and unless you do these two things there will be no reserve. I am glad to see the Chancellor of the Exchequer has returned to his place. I should like to repeat that I listened to his Estimates for the coming year with interest, but with anxiety. I am afraid that he has estimated too rosily. I fear, when this strike is over, it will be found that his Estimates, in view of the terrible national calamity we are suffering under, are too rosy. Of course, it is impossible for the right hon. Gentleman to estimate what the financial result to the country will be of the present deplorable condition of things. We all hope that his prophecies may prove true, and that the trade both of this country and of the world, may be so strong that it will survive the blow dealt it. But if it does not survive the blow the Estimates of the right hon. Gentleman will not be realised, and we may have a Budget of a very different character twelve months hence. But I hope the Chancellor of the Exchequer next year, if he is in office, will be able to bring forward a financial statement equally satisfactory.


The hon. Member who has just sat down has exhibited a great deal of alarm with regard to the progress of the Income Tax, and he used an expression, which I have often heard before, that the Income Tax is a reserve which should not be trenched upon in time of peace. As a matter of fact, I should like to ask the hon. Gentleman, if he agrees with the expenditure which the House has decided upon, and which the party with which he is associated has at every point endeavoured to increase, upon whose shoulders he would place the burden of this expenditure?


It is not my office to offer suggestions of that kind. That is a matter for the Chancellor of the Exchequer.


The hon. Member declares that the Income Tax is too great a burden to place upon certain shoulders. If that be the case, upon whose shoulders is it to be placed? The money must be got from somewhere. It can only be got out of the aggregate income of the country, and if the hon. Gentleman complains that my right hon. Friend has selected certain persons who cannot bear the burden he certainly ought to tell us upon whose shoulders he would place it. Destructive criticism is not of much use in a matter of this kind. For instance, on an unearned increment of £5,000 can it be said that a tax of 1s. 2d. in the £ is too great a burden for the owner of that income to bear? What is true about the finances of every country? You have to get public income out of private income, and you have to get the public income out of the aggregate income of the country. You have to make up your mind in what proportion you can adjust it, with the least amount of inconvenience, amongst the various classes in the country. My right hon. Friend, as I think, has very wisely adjusted the burden so that it falls conveniently upon shoulders able to bear it. But the hon. Member opposite has not told us what methods he would substitute for the methods of the Chancellor of the Exchequer.

I turn to his remarks upon Consols. We have had a very interesting speech from the hon. Member for Uxbridge (Mr. Mills) upon the same subject. But, while he dealt with some of the causes which have undoubtedly affected the price of Consols, he has not reminded the Committee that there is one very great cause for which his party was certainly responsible, and that is the widening of the scope of Trustee Investments. I have discussed this matter with many people. I have no desire to express dogmatic opinions of my own, but I do suggest to the House that, the period when the change was made was a very unfortunate time, as events proved, for the credit of Consols, and for this reason—the world was then approaching a period in which new countries were going to undergo a very rapid and accelerated degree of development—new countries, fortunately for the British Empire, among the most fertile and the best naturally-found countries in the world. They were approaching a period when they would be desirous of obtaining capital, and it was at that period we threw open Trustee Investments to the stocks of these new countries. At the same time we also threw upon the markets a very large amount of gilt-edged stocks of our own here; therefore it had a double effect upon the price of Consols. It may be said that the amount of the calls upon these stocks by trustees desirous to invest in any year would not be such as to seriously affect the price, but if anybody studies the subject of prices they will know that the effect upon them of an additional call, or of an additional supply to meet a definite call is out of all proportion to the amount of that addition. In the case of Trustee Securities, although it might seem on the face of it that the amount of call was not large enough to produce such an effect, as a matter of fact the effect has been out of all proportion to the amount of call, in the same way as it is with other commodities.


My point is that the effect in regard to Trustee Investments has worn off by now.


No, it is a continuing call. It is an increasing call. This is a very serious subject. I do not want to be dogmatic or to attribute too much to any particular cause. But I do regard this as one of our chief difficulties, and it is for this House to decide whether it should allow this cause to continue. While we have duties to our Colonies we have also duties to ourselves. With regard to the remarks made as to the amount of foreign investments, I must say I do not altogether share the optimistic views of the Prime Minister. I behave both in regard to capital and to men, the head and front of an Empire such as we are, it is our duty to offer to supply a certain surplus to our oversea Dominions. It is good both for them and for ourselves. When we are dealing with emigration of men or of capital I represent to the Committee it is obviously a matter of degree, and I suggest the time has arrived when we ought seriously to consider whether Colonial investments have not reached a point dangerous to the country in this sense. At the present time British North America, Africa, and Australasia each have about £400,000,000 of British capital, and that amount cannot pass for investment in those new countries without taking with it men who might be employed here. If we turn to the emigration figures what do we find? We find that last year the number of emigrants reached 260,000, a total never reached before, and when we turn to the figures of the present year—I may point out that the figures for last year were unprecedented —they are cast into the shade by the latest figures. In February the total was larger than ever before, and it looks as if we were going to emigrate in the course of this year 300,000 of the best of our stock at the time when we are, so to speak, jingling our money in our pockets. I would venture to remind the House and the Chancellor of the Exchequer, that our future depends on present happenings with regard to our population, and if this emigration continues, while our birth rate falls, we shall not get any increment yield out of our Land Duties.

I would like to remind the Committee what has happened in regard to wages during the last ten years. Here, may I say, that there is no need for a recondite explanation why it is that a fall in the consumption of alcohol occurred until last year, and why it is that in last year the consumption again rose. Not only did the consumption of alcohol rise last year, but there was also a rise in the Savings Bank deposits. The working classes had not only made money to spend upon drink, but they had more money to save, and they saved it. These facts correspond to a very interesting series of facts. What are those facts? They are these: Since 1900, in spite of the increased trade and the increased volume of investments, real wages have fallen. That is to say, that money wages were practically stationary in those ten years. The Board of Trade takes an index number based upon the rates of wages in the building trade, the engineering trade, agriculture, mining, and textiles, and takes the index number of 100 for the year 1900. We find that in 1910, ten years later, it was still 100, and that in the meantime it had fallen as low as 97 and risen as high as 102, so that in those ten years wages were almost stationary. In the same period we find that the retail cost of food in London, according to the consumption of a working-class family, rose by 10 per cent., so that while the cost of food went up 10 per cent. in those ten years money wages were practically stationary. The consequence was that the working classes had less to spend. It is true that in those years the rich were growing richer and the poor poorer. That is a statistical fact which cannot be denied. What were the increased profits in those ten years? In the ten years the gross assessments for Income Tax rose from about £800,000,000 to over £1,000,000,000.

We need not be surprised if in that period the consumption of alcohol fell off. Last year, fortunately for the country as well as for the working classes, wages took an upward turn. We had a large number of labour troubles, and we had a considerable increase in wages, and consequently we had additions to the Post Office Savings Bank deposits, to the consumption of goods, and, amongst other things, we had an increased consumption of alcohol. Those who are inclined to cast stones at the working classes because there was an increased consumption of alcohol should remember that there was also the largest increase in Post Office deposits since 1897. I think we can find a parallel to that series of facts in the trade Returns. If they are examined we find there was a much larger increase in exports than in imports, and, although imports did increase, they did not increase so much as exports. When we remember that prices were going up, we see that imports were much more stationary than they should have been during that period, pointing really to a stationary character of consumption, which is not very agreeable. A great deal has been said with regard to the method adopted by my right hon. Friend the Chancellor of the Exchequer in dealing with the surplus of the past financial year. It is true that the course is unusual, but so are the circumstances. Indeed, the circumstances are very unusual. It was pointed out by the last speaker that we cannot be quite certain— few of us would like to prophesy—as to the course of trade and revenue in the next year. My right hon. Friend has made certain Estimates. I hope they may be fulfilled, but, at any rate, no one can speak with confidence. We do not know what is to be the end of the present trouble, or what may be the effects upon the trade of the country of dearer coal for two, four, or six months. These circumstances are exceptional.

My right hon. Friend, in proposing to carry this sum to a sort of special reserve, is doing a thing which could only be regarded as common sense. My right hon. Friend does not propose to play ducks and drakes with the money behind the backs of the House of Commons. I assume if any of that sum is required, whether it be for special circumstances in connection with the labour troubles or whether it be for the Navy, Supplementary Estimates will have to be presented to the House. If my right hon. Friend takes the course I suppose he would take, of coming to the House with Supplementary Estimates, it entirely disproves the arguments used by the last speaker. There is only one other remark with which I desire to trouble the Committee. It is that we have had illustrated during the last two years a theory I ventured to put before the House on a former occasion, namely, that if a country arranges its taxation with due regard to the ability of the citizens to bear taxation, then this will happen, that if that country, as is our country, is a progressive country, the national dividend of which is increasing year by year, then this fairly arranged taxation will yield an increasing revenue from year to year. That is what has happened as the consequence of the Budget of my right hon. Friend. We have seen him meet a deficit, we have seen unusual circumstances arise, and in spite of those unusual circumstances we have seen that the taxation has easily borne the burdens placed upon it. If we could get rid of some of the follies which are still attached to it, I am one of those who confidently believe that an annual Budget discussion will almost become unnecessary. Let me explain what I mean.

The national dividend, taxed according to the ability to bear it of each citizen, would yield an increasing revenue. It is for the country to decide what amount out of this ought to be spent upon the various services, and the real crux of argument would not then be the method of raising taxation, but would rather be what amount of money Parliament should decide ought to be spent on the various services. We should then get rid of the old wrangles and those unhappy divisions of those interested in tea, or sugar, or other commodities, wondering whether a tax was going to be put on this, or taken off the other. We should no longer have taxes used that would bear especially upon any particular industry, and we should raise our revenue according to the means of each citizen. That we can do by getting rid of Budget discussions as they have been understood in the past. The discussion would then settle upon this: what ought the country to spend upon certain necessaries, what can the country afford, and what ought it to afford, and these might be proper discussions, and might even be fuller than they are now. Having got rid of the question of what is the proper expenditure in relation to the national dividend, if our system of taxation is fair, it is merely a matter of adding a percentage to or deducting a percentage from Estimates already made. It is towards that desirable end that we are certainly moving, and I think every other country will move. Let it be remembered that we-are not the only country that levies a, graduated Income Tax, or that levies Death Duties, or contemplates levying them. In the German States a graduated Income Tax is not only used for national purposes, but for local purposes also, and while the last speaker thought the wealthy people of this country were hardly done by, if he will compare the taxation paid by a merchant in London, added to the local rates, with the taxation paid by a similar merchant in Berlin, added to his local income tax, he will find that it is the merchant in Berlin who has to bear the heavier burden. Not only is his national income tax levied according to his ability to pay but his local income tax is similarly levied.

As to Death Duties, either Germany will have to make recourse to Death Duties, or she will have to give up those visions she cherishes so confidently. Therefore, those-who think that because our expenditure has increased in late years we shall sink in the scale of nations, have their eyes too much fixed upon their own country. While it is true that public expenditure has increased in this country, it has also increased in other countries. Although I have not in my mind the exact proportions, I am sure it will be found upon examination that these other countries have increased their expenditure at least as-rapidly as we have. We have seen no evidence that they are suffering from it. On the contrary we have seen that the world as a whole, and not only our own country, has never made such progress. That is one of the most remarkable phenomena in modern history. There is every sign of its continuation. That very acceleration of progress has been a concomitant of increased public expenditure. I do not welcome every item in that public expenditure. Everybody deplores expenditure on armaments, but in every country, including our own, the expenditure has not been confined to expenditure on armaments. In every country there has been a great and growing expenditure upon social progress. For instance, in Germany, I believe, it is estimated that in the course of a year or two the expenditure on social insurance will reach something like £60,000,000 a year. I believe that Germany has largely benefited by this expenditure. I do not therefore regret the increase in our public expenditure as something which makes for the degradation of the country. Rather I choose to regard it, and I ask the Committee to regard it, as an investment that will bring back in time to come not merely larger profits, and better wages for labourers, but a nation strengthened in each of its parts.


I do not propose to follow the hon. Gentleman who has just spoken, but I wish to join in the protest made from this side of the Committee in regard to the way in which the surplus of £6,000,000 has been dealt with by the Chancellor of the Exchequer. I, in common with many, think that if the money had been put into the Old Sinking Fund it would have done a great deal to create that feeling of confidence in financial circles which does not exist to-day. I think we ought to have the support of a part of the Labour party, because I believe that recently, owing to the lamentable strike, they have had to realise a certain amount of their invested funds, and it must have been a disappointment to them to find out that on the funds which they invested years ago, and which produced a higher rate then than they do now, they have had to suffer a substantial loss. I should like to ask the Chancellor of the Exchequer a question. He mentioned in the course of his speech that one-fifth of the valuations were now completed. I should be glad if, when he comes to reply, he will tell us whether he means by that that this one-fifth of the whole valuations are completed in the sense that the Government have sent in their valuations, that they have been agreed to by those to whom they have been sent; or whether he means that provisional valuations have been sent in, and that the matter has not been definitely settled, because in many cases undoubtedly a considerable time will elapse before the provisional valuations are settled, and it seems hardly correct to say that one-fifth of the valuations are complete except in the sense I put forward. I have risen to ask the Chancellor's attention to one special subject in which I have been rather interested, and that is the Excise Duties on home-grown tobacco. A certain section of Members of the House are very anxious to be enabled to grow tobacco in England —coarse sorts of tobacco for purely agricultural purposes—with the object of extracting nicotine, the wash that we get from nicotine being so valuable. I brought the subject to the attention of the right hon. Gentleman (Mr. Hobhouse) and the right hon. Gentleman (Mr. Mck[...]nnon Wood). Neither of those Gentlemen is now Secretary to the Treasury, so I have to come again to the right hon. Gentleman and ask him to reconsider this question. I asked him last December whether the Government chemist would assist those who are trying to produce this denaturent. I mention the matter so that the right hon. Gentleman might ask the Government chemist if he thinks fit to deal with the matter, and to do something in the Finance Bill to give us what we want. It is not a question of any loss of revenue to him, but it is a question which, if it can be arranged, will undoubtedly supply what is largely wanted by many agriculturists—namely, a very high-class scientific wash. The only outstanding difficulty is that the Government chemist has not yet been able to give time to consider the question and to give a reply to those who are working with him at Wye College and elsewhere as to the exact value of the denaturent we propose. Though it may not seem a big question, it is a very vital point that we should be able to have the benefit of home-grown tobacco, and we are only too keen to show the right hon. Gentleman that we only want it for agricultural purposes. If the production of nicotine is a monopoly in the hands of a very few the price will be practically prohibitive for those who want to buy it for the purpose I have indicated, and if he can see his way to enable us to grow it here he will have conferred a great benefit on the agricultural community.


I ask leave to confirm with the Chancellor of the Exchequer, in your presence, Sir, and subject to your consent, the arrangement which was made with the Prime Minister across the Table earlier in the day. It is of course, customary that we should have a second day for the general discussion, and it is convenient for the Government that we should take that on a separate Resolution. Perhaps the Chancellor of the Exchequer would tell us what Resolutions he wants to take to-night and on what Resolutions he proposes that we should have the second day's general discussion which the Prime Minister promised us, and when the Chancellor of the Exchequer has given us that information perhaps we might hear that it meets with your approval, and, in accordance with the practice for many years, that you would permit the general discussion to be reopened upon another Resolution than the one now before the Committee.


It is customary to have a general Debate upon the whole of the Budget proposals upon some one Resolution and to range beyond the mere subject matter of the Resolution over the whole proposals of the Budget. I understand there have been some negotiations proceeding as to the Resolutions which are to be taken to-night, and the Resolution to be postponed for the purpose of a general discussion. The suggestion was that the first three Resolutions should be taken, and that the general Debate should be on the fourth Resolution, which is the amendment of the law.


I think it would be reasonable to ask that we should keep the Old Sinking Fund Resolution as the one for further discussion. I do not think there is ever any discussion on the one for amending the law at large, for the Chancellor always explains that if the Committee objects to that he will withdraw it, and the only result would be to deprive hon. Members of any opportunity of moving Amendments. The Sinking Fund Resolution has a marked importance of its own, and I think the House would like to have it for the general discussion, and would also like to have an opportunity of discussing it on its own merits.


I think that is very reasonable, and it is desirable that that should be the subject matter of the Debate. I therefore suggest that we should take the first two Resolutions and the last, and that the third should be postponed.


May we have your consent, Sir, to that arrangement?

The CHAIRMAN (Mr. Whitley)

Yes, certainly.


The right hon. Gentleman (Mr. Lough) suggested during the earlier part of the discussion that the Chancellor in his Budget statement had made the claim that the Budget of 1909 was the cause of our present good trade. I did not understand, and I repudiated the suggestion at the time, that the Chancellor had made any claim of that description. I understood his position to be that during the great Budget Debates in 1909 the Opposition were continually declaring that if the Budget ever became law trade would decay and commerce would practically evaporate, and, in the words of Lord Rosebery, that it would really mean the end of everything. I understood that the speech to-day was merely an illustration that none of these prophecies had come true, and, as a matter of fact, that the Budget had not injured trade; and any Budget that really carried out the object of fitting the burden to the back would probably assist trade rather than prevent it from developing. The right hon. Gentleman also criticised the Chancellor for that, when he was in opposition he was always in favour of retrenchment as far as the fighting forces of the country were concerned; and he pointed the finger of reproach at him as if he were himself responsible for the extra expense, amounting, I think, to some £12,000,000 or £13,000,000 a year, that has resulted from circumstances over which I suggest the Chancellor has no control. I can scarcely understand the position of some hon. Members who oppose expenditure on the Navy. I could understand the position of a man who was against war altogether, and who said that, under no circumstances, should men fight, and who voted against every preparation for war. I can understand that as being a logical position, trusting, as he suggests, to the ethics which rule nations for defending one's interests and preventing one having injustice done to him; but that peculiar phase of economy that is represented by the right hon. Gentleman I cannot understand for the life of me.

8.0 P.M.

He began by suggesting that the Navy is absolutely necessary. If the Navy is necessary. what is it necessary for? I suppose it is necessary really to defend the country, and it is a moral certainty that if you spend a brass farthing on the Navy that is not absolutely effective for the purpose for which the Navy is intended, namely, to defend the country against any possible attack by its enemies; all you spend on the Navy is so much waste, and is worse than if you had never spent anything at all. Therefore I should certainly like some of my Friends on this side of the House to give me an illustration of what kind of Navy it is that they require. I notice that nearly all these Gentlemen begin by professing to admit that a Navy is necessary, and once that is admitted it seems to me that the whole case is gone. I do not know that if hon. Gentlemen opposite ever come on this side and come forward with great scare programmes, I shall support them, but certainly, if it is anything within reason, such as is suggested now, or even extraordinary expenditure, it would meet with my approval if the state of affairs looked as if it were necessary. Whichever side I am on, it is a moral certainty that I shall always support those who are responsible for the efficiency of this branch of the fighting service. My hon. Friend (Mr. Parker), one of the best Friends I have in the House, said that, so far as he was concerned, he had no interests in this country to protect. I dare say he is as wealthy as I am, and I have the salary which the Chancellor gives me, and I have very little more. I should think that as long as I was a member of a great country like this life was not worth living while there was a prospect of an invader putting his foot on the soil of the country; therefore I cannot understand the position taken up by some hon. Members. I have delivered speeches, I dare say, regarding the Army which seemed to contradict what I am saying now, but that is an entirely different thing altogether. I look upon the Army as more for maintaining order in our own territory, I fear a great Army because I fear that if the Jingoes ever get into power they might use it for the purpose of aggression in other people's territory. But I have no fear of the Navy being used for that purpose at all. It is necessary for an island kingdom like ours, and the criticisms passed upon it to-night are criticisms which I cannot understand. Once you agree to spend 2d. for an old tub for the Navy you have given the whole case away, because it is useless to supply it unless it is useful for the purpose intended. I should like our Friends to tell us what their position is in this matter. They criticise our position, but they never state their own. Therefore, if there are any hon. Members who are going to criticise the provision made for the Navy in the Budget, I hope they will show us what they would put in its place if they were in the position of the Chancellor of the Exchequer.

There was one point which I could not quite follow in the speeches of the hon. Member for Uxbridge (Mr. Mills) and the hon. Member opposite (Mr. Wheler). The Chancellor of the Exchequer is, I understand, putting aside the surplus. I should have liked to see the surplus used in many ways. For example, we might have commenced the benefits of the Insurance Bill as from 15th July. I think that would have been favourably received by the class to which I belong, although perhaps not by the class to which hon. Members opposite belong. I cannot understand why the hon. Members objected to the surplus being put aside for special contingencies. I do not suppose it will be touched without discussion in this House unless some serious emergency should arise, in which case I dare say the Government would run the risk of using it. I would do so if I were in the Executive if I thought the national interests were involved. I cannot understand why the hon. Members suggest that it should be used for b[...]lstering up in some way the finances of the country—to support Consol holders. I much prefer it to be used for purposes which we know definitely rather than for purposes of bond holders or anybody else. I think the Chancellor of the Exchequer has done the right thing in relation to this matter. One cannot see much sunshine ahead in relation to the business for which this money is to be specially devoted. It is possible that instead of the economists having their way, a considerable increase of expenditure will be necessary before we get through this financial year.

The hon. Member for the Ecclesall Division of Sheffield (Mr. S. Roberts) stated it was deplorable that the Income Tax should stand at the present time at 1s. 2d. in the £. He said that was on a war footing. I do not understand this talk about reserves, and this, that, and the other. I daresay it is all right if one deals with high finance, but if I hand over the surplus to the Chancellor of the Exchequer for Governmental purposes or spend it on a trip to the Continent, it seems to me that so far as the reserves of the nation are concerned, it would not matter in the slightest degree. As a matter of fact if the surplus is devoted to putting finance in a proper condition and the defences of the country on a sound footing, I should think these are the best purposes it could be devoted to. As to the Income Tax, the hon. Member said that we were promised that there should be some relief, if even a reduction to 1s. If I understood the Budget of 1909 aright, earned incomes up to £3,000 had the tax reduced one-fourth, 9d. being charged instead of 1s., so that those with incomes earned in professions by doctors, architects, and others, got a certain amount of relief from the present Government which is so abused for having increased the Income Tax in time of peace. It should never be forgotten that that abatement was allowed. Then as regards the Super-tax which is imposed on incomes of £5,000 and over, if you mean that it should be reduced, let us understand your position. I am not going to shed crocodile tears over gentlemen who are called upon to pay 1s. 8d. in the £ on incomes over £5,000. Those who have means should be called upon to pay in proportion to their means. Considering how much indirect taxation working men pay for the upkeep of the Government of the country, surely people who are wealthy should not grumble at the amount they have to pay, especially in view of the greater advantage they get from the Government and from the stability of the State as compared with working men. I do not think that is the line of argument to proceed upon. As to the Navy, I would ask hon. Gentlemen not to criticise the proposals of the experts who are continuously to the best of their ability putting the defences of the country in a sound condition, unless they admit first of all that defences of any kind are unnecessary. If they are necessary, let them tell us what their views are on the subject. It is easy to criticise or complain of what other people do. The question is—what would you put in the place of what is proposed?


I would like to refer to what the hon. Member for East North-ants (Mr. Chiozza Money) said with regard to wages paid. The Chancellor of the Exchequer in his statement said he estimated the increase in wages was roughly £14,000,000. The hon. Member for Leicester (Mr. Ramsay Macdonald) in a debate earlier in the Session distinctly made the statement that the actual cash paid to all the members of trade unions now registered, showed a decrease as compared with ten years ago of £57,000. The Member for East North-ants rather confirmed that. I wish to point out that there is a considerable divergence of opinion there. It may be that the Chancellor of the Exchequer was right, because over and above the wages paid to the members of trade unions, there is an enormous amount of wages paid to others. In that way, I admit, that up to the present time, or up to the time of the commencement of the strike, there was a great volume of wages paid to unskilled workers. In that way the contradiction of what the hon. Member for Leicester said by what the Chancellor of the Exchequer said to-night, may be more or less apparent. I am rather glad that the subject of the adjourned Debate will be on the question as to how the £6,500,000 surplus should be expended. I am rather pleased it has been deferred for twelve months for this reason. To my mind the weak point of our finance in this country is that we have failed to do what every insurance company, every banker, and every large manufacturer does, and that is, to gradually build up a reserve fund. I would suggest to the Chancellor of the Exchequer that here is an opportunity when we might make a beginning from the national point of view in building up a reserve fund. He has at present £6,500,000 over and above expenditure. When one looks at the financial position of other nations, such as France, the United States and Russia, we see that gradually they have accumulated reserves in gold of enormous amounts. That, from the national point of view, means stability of credit, and it means safety, I had almost said, in times of national emergency. I do not hesitate to say that the fact that there was £300,000,000 in gold in Prance acted as an enormous lever in the prevention of hostilities last summer.

We as a nation—the largest nation in our commercial relations of any nation in the world—must build up a reserve fund in some form or other. There are several ways nationally that we might think of building up a reserve fund. I would suggest that it is possible we might even make it on a wider basis than a national fund. I would like the idea considered carefully whether it could not be an Empire Reserve Fund—not merely a reserve fund built up out of moneys voted by this Parliament, but out of moneys voted by the Parliaments of all our sister States. Considering the enormous amount of money called for, year after year, for the Navy and the Army, if we could devise some well thought out scheme for starting such a reserve fund in times of peace with such a surplus as we have had this year, it might be possible to go on adding to that reserve fund, and we should be in a much stronger position. Another reason why I am so anxious that some Empire Reserve Fund should be built up is this: As I sat here night after night listening to the Debates on the Estimates for the Army and the Navy I was deeply impressed by the fact that the wages now paid to our soldiers and sailors are utterly inadequate. I did not feel that it was possible for any Member of the House to rise and propose an increase of pay, but I think an increase could possibly be given if we had a reserve fund built up—the capital to remain intact, and the interest on the Fund to be used for additional payments to our soldiers and sailors. I think that is an idea that would appeal to the people not only of this country but in all parts of the Empire. We know that vast fortunes have been made and will be made in this Empire, and that many men have built up these fortunes through the protection and safety under which they conducted their business, and that they will be willing to give during their lifetime, or to bequeath at their death, very considerable sums to an Empire Defence Fund, if such a thing existed, with the knowledge that the interest on that money would be devoted to improving the conditions and pay of the soldiers and sailors of this country who in the past have been the means of defence of this Empire.

On this ground I am pleased to note that this discussion will be continued to another evening. I do not know that it would be well to make a suggestion as to how that great Empire Defence Fund might be started. It might be well if His Majesty himself would become the President of it, and take it out of the hands of this Parliament to some extent, and invite the Premiers of all our self-governing and sister States to unite with him in suggestions as to how that fund might be formed. First call of all could be made upon the voluntary effort of the citizens of the Empire, and, having once begun in that way, then application could be made through the Premiers of our sister States and through our Chancellor of the Exchequer so as to build up a really immense Empire Defence Fund. I am so sanguine as to believe that inside ten years you would build up a fund of £300,000,000, and with the interest on that we could wipe out the disgraceful reflection on this country caused by the wretchedly small pay of our soldiers and sailors, and it would stand there as a possibility that an Executive might feel the need of in an emergency. It would stand there to establish the credit and stability of every trade in the Empire. If he felt that there was such a reserve fund standing to the credit of the Empire he would have a greater consciousness than ever that he could go forward with whatever enterprises he thought well, and in the end to that extent his position would become stronger than before. I know that a suggestion such as that His Majesty might take part in such an Empire movement is one which perhaps ought to be made with great reticence, but I do not forget that when he came back from one distant portion of the Empire he used these words: "Wake up, England!" and I have felt over and over again that the weakness of the fiscal position of this country is the fact that we have never had from the Chancellor of the Exchequer any suggestion as to building up a permanent reserve fund. I should be only too pleased if some such action could be taken, and when we meet again to discuss the further portion of this Budget, I trust that that idea may be further discussed.


During the course of this Debate several matters of considerable interest have presented themselves. It is a very comfortable thing to have a great big surplus like this following the wise fiscal system that has been adopted and as a continuous result of several years thereof. I think that the Chancellor of the Exchequer is to be congratulated on his prophecies and his performance, on his caution and his boldness. In dealing with the surplus, especially a big surplus like this, there is a natural desire on the part of many interests to get some fiscal gain. If I would urge one point which has been several times before the Chancellor of the Exchequer, it is that the recommendations that have been made as regards the calculations of the real incomes of insurance companies should receive careful attention at a time when money is so plentiful in the Exchequer as now. As many hon. Members know quite well what I refer to, I need not labour that point any further. On the question that was mooted as to whether some part of this £6,000,000 should be used to bolster up Consols, I agree with the hon. Member for Stoke, that no part thereof should be so used, because if once we begin to do so, the owners of gilt-edged securities and Colonial bonds of all sorts, especially those bearing 3 per cent. and 3½ per cent., will insist that those securities having gone down through no fault of their own, ought to be brought up by the action of the State. As the hon. Member for Stoke said, this money is being reserved for— the term used was—contingencies. The very word contingencies implies that certain events may or may not occur. All sides of the House will hope that nothing in the European situation will arise to require us to expend that money hastily. As regards the Navy, might I say that the annual expenditure has year by year increased largely. I, for one, would like to economise there. As has often been said, military and naval expenditure is really a question of our foreign policy. We have heard in this House of Lord Haldane's visit to Germany and we hope that that may prove fruitful so that this contingency may not occur. For over a century our relations with France, and during the thirty-three years that I was in the service of the Government of India our relations with Russia, were supposed to be inimical, but other events occurred and changes took place on the part of both countries and in our sentiments to them, and we are now on the most excellent terms with Russia and with France. Both those old bogeys have gone, and therefore by judicious foreign policy we may avoid this contingency that has loomed so seriously before us. With regard to Income Tax I have always been very jealous of keeping such figures on the fiscal paper in time of peace as 1s. 6d. and 1s. 2d.

We might have difficulty even with an overflowing and increasing commerce if the contingency of war were suddenly to occur. While, however, many unthankful taxpayers have had their Income Tax reduced from 1s. to 9d.—a matter which is not generally acknowledged as it ought to be—still, I think, the other figures are rather high, and are only to be tolerated as a burden on the capital of this country after what has been pointed out by the Chancellor of the Exchequer in his fine speech, namely, that commerce has been going up during the last few years with leaps and bounds. I do not doubt that very much of that prosperity is the result, as the right hon. Gentleman said, of the exportation of British capital to such countries as Canada, the Argentine Republic, the Indian Empire, and the Malay States, where often sums of money have gone in establishing indiarubber plantations; and, as economists from the time of Mill have pointed out, money sent out in that way blesses both the capitalists, who send it, the people who live on the wages, and the people of this country to whom the returns come back to be spent here in the shape of larger income. The development of commerce in this particular direction, how far it affects the flow of capital to those other regions, and the return got from it is evidenced very much by the number and the amount of the securities; and I do not doubt that is one of the reasons for the greatly increasing income of this country, and has enabled the taxpayers to stand what I think is a high form of taxation. While we rejoice at such prosperity all around us, with our system of Free Trade on which it depends —and we must preserve intact from the Opposition that great fortress of our commerce, that essential condition for the comfort of the people, as shown in the cheapness of those very necessities of life which come from those distant countries that I have named—while we rejoice in these things, it would be no doubt unwise of me to make any strong attack on these figures which I deprecate; but in course of time I should be extremely pleased if, with due allowance for the indirect taxpayers of a reduction, especially of the tax upon sugar, which forms one of the materials of so many industries in the United Kingdom, we could reduce the Income Tax for the benefit of the other class. Then, I think, we would have still greater reason to bless the Chancellor of the Exchequer and his new and different fiscal system.


Of all the Budget speeches to which I have listened for the last few years, I think that-of to-night gives us the least information, while containing a great deal of prophecy. I want to call particular attention to the Chancellor of the Exchequer's mode of dealing with the under-expenditure of last year. It is quite true that it was partly beyond the control of the spending departments, and I believe it is to be dealt with in future years. So far as the Chancellor of the Exchequer provides for that expenditure under the Sinking Fund there is no great objection to it. But he has held back the whole of the Sinking Fund for the year apparently for one purpose, and one purpose only, a perfectly legitimate one, namely, to supply the needs of the Navy which might occur in consequence of the under-expenditure of last year, and also to provide for the possible necessity of the extra expenditure to which reference was made by the First Lord of the Admiralty. But the Chancellor of the Exchequer was not quite distinct enough, not so distinct as some of us would like, in saying that the money is going to be ear-marked for the needs of the Navy. If it were possible for the six and a half millions to be used for other purposes than the Navy it would be extremely bad finance; it would give the Chancellor of the Exchequer the opportunity of setting right mistakes in his estimating, and he can hardly make a greater mistake than he did last year when he said that he had a surplus of six and a half millions. The practice of holding back the Sinking Fund for any need that might occur would help the Chancellor of the Exchequer in bad estimating. I hope the Chancellor of the Exchequer in his reply will be able to make quite clear that the six and a half millions is to be earmarked for the purpose of the Navy, and not to be diverted to other needs which may come up during the year.


I rise to answer one or two questions put during the Debate by hon. Gentlemen opposite. I was asked, first of all, as to the Estimate for the Land Tax for the present year. The total is £545,000, divided as follows:— Increment Tax, £30,000; Undeveloped Land Tax, £100,000; Reversion Duty, £125,000; and Mineral Rights Duty, £290,000; making the total I have given. I was asked by the right hon. Member for East Worcestershire (Mr. Austen Chamberlain) as to the division of the aggregate money of the three Post Office services. The aggregate amount is £29,175,000 estimated revenue. Of that, £20,275,000 is to come from the postal and packet services, £3,000,000 from the telegraph, and £5,900,000 from the telephone. I was asked as to the inquiry into the general system of valuation. At present there has been completed, as the Chancellor of the Exchequer stated, something like one-fifth of the whole valuation. My right hon. Friend asked me to say that he adheres to every statement he made last December as to the desirability of some sort of inquiry, and the only question is as to the time and method of the inquiry. He suggests whether it would not be better to leave the matter until rather more appeals have been decided and more valuants fixed, in order to see whether the particular methods advanced by the right hon. Gentleman opposite can be adopted. That is a matter for consideration, and perhaps some further attention may be given to it in the course of the Debate upon the Finance Bill.

A question was put as to the apparent discrepancy in connection with Excise. My right hon. Friend announced that he had Budgetted for an automatic increase for the first time for many years in beer and spirits, and at the same time he had Budgetted for a decrease in the revenue of about £680,000. These figures are not incompatible as a matter of fact, and I think my explanation will be quite clear. We have for the first time Budgetted for an automatic increase of 1½ per cent. increase in spirits, and 2 per cent. in beer. Against that we have to set off reductions from both sources of estimated revenue because of the coal strike. We consider it a substantial reduction, though the hon. Member for Sheffield thought it insufficient. In the case of Spirit Duty, also, £300,000 is due to excessive stock. A further factor to be considered is in the case of beer. We have to put the consumption of last year as against the consumption of this year, and we have he recognise that last year there was an abnormal consumption owing to the prolonged hot weather which we cannot expect this year. I think that is reckoned at something like £300,000; therefore, although we have allowed for an automatic increase in beer and spirits, we have to make deductions because of the strike, and because of the abnormal hot summer last year, which more than balance the estimated automatic increase, and the result is that the Estimate is less by £680,000. The last point I was asked about was as to the disposal of what the hon. Member for Sheffield called the Suspense Find— that is, the Exchequer Balance to which this six and a half millions will be paid. I can assure him, in the name of my right hon. Friend, that none of that money can be touched without the authority of Parliament or will be touched without the authority of Parliament. I think I have answered all the questions that have been definitely put.


Can the hon. Gentleman make any reference to the subject of the duty on tobacco?


I am afraid I cannot give any assurance now, but perhaps the hon. Gentleman would put a question or raise the matter on a subsequent stage.

Question put, and agreed to.

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