TEA.

HC Deb 22 April 1913 vol 52 cc282-322

Motion made, and Question proposed, "That the Customs Duty charged on tea until the first day of July, nineteen hundred and thirteen, shall be charged as from that date until the first day of July, nineteen hundred and fourteen, that is to say:—

Tea, the pound … … … Fivepence;

and it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of any Act of the present Session relating to the provisional collection of taxes."

Mr. AUSTEN CHAMBERLAIN

I imagine that most Members of the House will be glad to postpone serious examination of the Chancellor of the Exchequer's Statement until they have had a little time to consider it, and I should be very glad to take that step too if it did not seem to me too great a breach with precedent and too large a departure from the custom of my predecessors. The right hon. Gentleman must, I think, be congratulated on having seen his way to finance the huge expenditure of the current year without any additional taxation. How great was the dread on his own side that he would have to impose additional taxation. I think the loudness and length of the cheers which greeted his final announcement of a small surplus were adequate to show. I want to ask the House to examine one or two of the figures and the prospects which the Chancellor of the Exchequer held out to us, but I must say first a word on the subject of the new procedure which he announced. I am not surprised altogether to hear it, but I am not quite certain that, as it must clearly have been in his mind last week and the week before that such new procedure would be necessary, the House ought not to have been taken into his confidence before it had parted with what I hope I may call by an unofficial short title, the Bowles Bill, because really the announcement which he has made has a very material bearing upon the effect of the Amendment moved by my Noble Friend (Lord Hugh Cecil) and accepted by the Government. I pointed out then that we were trying to hustle the Chancellor, and the end of it might be that the Chancellor would hustle us. He has chosen a slightly different method, but it is not more satisfactory to the House, and certainly not more satisfactory to those who moved or supported the Amendment of my Noble Friend. The net result of the Bowles action will be that the Chancellor will divide his proposals in future into two, and that what the Chancellor wants done will have to be done in the early portion of the Session, but that the opportunity of private Members to raise the question in which they are interested will be, not the middle of the Session or even, as of old, the early part of the Session, but, as clearly indicated by the Chancellor, during the last weeks of the Session, when the loquacity, and even the zeal, of hon. Members may be expected to slacken after their fatigue, and when we hope to get through the second Bill, the Revenue Bill, with less nocturnal exertion on the part of himself and his supporters than might be the case earlier in the Session. He has really taken the butter out of the dog's mouth. Last week many of my hon. Friends—not my shrewd and suspicious Friend the hon. Baronet (Sir F. Banbury)—thought they had obtained a valuable concession from the Chancellor. To-day by his announcement he has robbed the concession of the major portion of its value.

I make one further observation in regard to his statement of debt. The Chancellor of the Exchequer would be a magnificent writer of a prospectus for any company. Nothing that the company could lay to its credit, by hook or by crook, would be left out of a prospectus which the Chancellor might prepare. He is not content to take what the Government have done for the reduction of debt up to the present time. He is not even warned by the fact that he himself has several times interfered with the natural course of debt reduction. Not content with taking the figures up to the present, he carries it forward to this time next year, and, assuming that nothing extraordinary has happened and that his virtue will not again be tempted, he tells us what the figure will be. You will observe that he takes in at the initial stages the balance which they inherited from their predecessors for the reduction of debt, and he forestalls the balance which, should they go out, they will hand over to their successors. I only mention that because I think it is characteristic of the Chancellor's extraordinarily sanguine methods of statement when dealing with the performances of himself and his Friends.

I turn now to the realised results of last year. He said that in framing these Estimates he had taken an optimistic view and that the results had justified him. On this occasion last year I told him he had underestimated. I very wisely, as the result has shown, excluded Customs, but I said he had underestimated on Excise, and so he has done by £300,000, and, speaking generally, I said that the Chancellor's Estimates were low rather than high. So they are. But they present some features of interest. I think, for the first time, the Estate Duties have disappointed his expectations. Hitherto they have always done even better than he expected. This year they have fallen, by a very small amount in comparison with such huge figures—only £200,000—below his Estimate, but it is the first year in which, on that particular item, however sanguine he has been, he has not got more than he expected. I hope it is only an accident and that it is not the beginning of a change. Customs disappointed him. Even after listening to his statement I am still a little puzzled that Customs and Excise did not move together. They did not move together in the previous year, and I am not quite sure what is the process which is at work which causes the two to move irregularly instead of, as you would expect, in the same direction, together up or together down. The Chancellor of the Exchequer did not tell us much about, the Land Value Duties in his last year's speech. Last year, as always hitherto, they disappointed his expectations. He only estimated for £545,000, and they brought him in £90,000 less than he estimated. He spoke in another portion of his speech with pride of the results of the Budget Taxes of 1909. Their fiscal results have been certainly extraordinary. Perhaps other results have been not less satisfactory to him, for the peculiar feature of the Budget of that year was that it contained two sets of taxes. One set of taxes was intended to get money and the other was intended to get votes. The votes came in at once. The taxes are coming in by degrees, but the Chancellor of the Exchequer and the Committee will observe that the taxes which were most strongly fought by him, and to which the greatest objection both in principle and in machinery was entertained, are the taxes which have only brought in votes and have never brought in money. I wish the Chancellor of the Exchequer would bring up the receipts of the Land Taxes, and the estimated receipts from the same taxes next year. I will be content if he will circulate the statement with the Votes. There is only one of them which has hitherto brought in any money that is worth talking about, and that is the Mineral lights Duty. That, of course, is not a Land Duty. The originally proposed Mineral Eights Duty was on exactly the same basis as the Undeveloped Land Duty. It was to tax minerals which you were not getting in order to encourage you to get them, but before we ever got to grips with it in the House the Chancellor of the Exchequer repented. That poor little lamb he slaughtered with his own hand, and he substituted for it, not a land value comparable to any of his other Land Values or Land Duties, but a Supertax on incomes derived from minerals. That ought not to be grouped with the Land Value Duties. It ought to come under the head of Income Tax and Supertax, for it is in all but legal name an additional duty on income, and it is the only one of the so-called land values which up to this date has produced any money worth talking about at all. The rest of them—it is now four years after their enactment—are still annually costing us infinitely more than they have produced in the whole of the years for which they have been levied.

The only other duty of last year to which I desire to call attention is the receipts from stamps. They were extraordinarily satisfactory. Stamps, I know from my own experience, and from watching the Estimates for many years, are a very difficult revenue to forecast. For many years they disappointed the authorities at the Inland Revenue and the Chancellor of the Exchequer very severely. This year there has been an extraordinarily good revenue. The Chan- cellor of the Exchequer says that they are the best possible indications of the state of trade. I should scarcely have thought that he could have said that, at any rate, without qualification. No doubt some of them directly represent the prosperity and the activity, or the reverse, of trade, but others which I think must have been not a little productive in the last twelve months represent the activity of Stock Exchange transactions.

Mr. LLOYD GEORGE

They are down.

Mr. AUSTEN CHAMBERLAIN

I am astonished to hear it. I do not know whether the right hon. Gentleman would be willing to give us the details of those figures too. They certainly would be very interesting. I think that concludes all I want to say about the revenue of last year. The right hon. Gentleman the Chancellor of the Exchequer then passed to the balances. I confess that even now I am not perfectly certain that I understand what has happened in regard to the balances, but I think I am right in stating that the following transaction has taken place. Last year there were subtracted from the sums which would normally have gone to the Old Sinking Fund for the redemption of debt £500,000 for Uganda, and £1,000,000 for the Navy. The Chancellor of the Exchequer temporarily placed those in balances until they should be needed for those purposes, but instead of using the £1,500,000 for those purposes, he has taken another £1,500,000 from the surplus revenue of the year just concluded, and provided for Uganda and the Navy out of the surplus revenue of the last year. If that is the transaction, what is the effect upon debt redemption? If you take £1,500,000 in the year before last from the Old Sinking Fund for the purpose of financing Uganda and the Navy, and instead of using that money so deducted from the Old Sinking Fund you take another £1,500,000 from the surplus of this year, which in its turn ought to have gone to the Old Sinking Fund in redemption of debt, then in those two years you have robbed the Old Sinking Fund not of £1,500,000, of which the House approved, but £3,000,000.

The FINANCIAL SECRETARY to the TREASURY (Mr. Masterman)

It is only £1,500,000.

Mr. AUSTEN CHAMBERLAIN

Twice over you have taken it from the redemption of debt.

Mr. LLOYD GEORGE

Really the right hon. Gentleman treats it as if it were £3,000,000. His criticism is a sound one as far as it refers to the £1,500,000, but he has counted it twice over. Let me point it out. Supposing you had not voted that £1,500,000 last year out of the Sinking Fund, what would have happened would have been that you would have had to find it out of revenue this year in a Supplementary Estimate. The complaint of the right hon. Gentleman is that I did not use that £1,500,000. I agree to that extent his criticism is perfectly germane, but he is counting it twice over.

Mr. AUSTEN CHAMBERLAIN

No, Sir. The Chancellor of the Exchequer has only spent £1,500,000 on Uganda and the Navy, but twice he has deducted £1,500,000 from the money which would have gone to the Old Sinking Fund. Instead of spending £1,500,000 he has robbed the Sinking Fund of £3,000,000 [HON. MEMBERS: "No," and "Yes."] First he took £1,500,000 from the Sinking Fund the year before last. He deducted that sum, which otherwise would have had to go to the Sinking Fund, and instead of using that £1,500,000 for the purpose for which he had taken it, he voted £1,500,000 for that purpose out of the surplus revenue of last year. But supposing he had not used the £1,500,000 out of the surplus revenue, the surplus of last year would have been not £200,000, as it was, but £1,700,000, and that £1,700,000 would have gone to the redemption of debt instead of £200,000. Although you have only spent the money once, twice over you have deducted it from the reduction of debt.

Mr. MASTERMAN

It is in the Exchequer Balances.

Mr. AUSTEN CHAMBERLAIN

It is in Exchequer Balances instead of having been used to redeem debt. Now I ask, not having used it for the purpose for which it was voted, are you going to use it for the redemption of debt? Are you going to put it back for its proper purpose? If you now devote it to the reduction of debt, then I agree that the debt redemption will have suffered only by the amount of £1,500,000, as originally intended. If you do not, then the net result is that in the two years £3,000,000 less debt has been paid off than would have been paid off if the normal action of the Sinking Fund had been allowed to take place, and £1,500,000 less than the House actually intended.

I come now to expenditure. The Chancellor of the Exchequer's comparison with fifty years ago was interesting. I am not quite certain what was the object of the particular reference to the fears of Napoleonic France at that time, or of the reference to Mr. Gladstone's speech. Mr. Gladstone, we now know, thought that Lord Palmerston was wrong, and he thought so so strongly that he wrote out his resignation. He wrote it out so often that I think we have it on record in Queen Victoria's correspondence that Lord Palmerston said he had a drawer full of Mr. Gladstone's resignations. Does the Chancellor of the Exchequer wish the Committee to infer that that is what has been taking place recently? That might explain why the First Lord of the Admiralty will count one "Dreadnought" twice over, or why the Secretary of State for War has not made more adequate preparations, or preparations more consonant with the principles laid down by the Prime Minister himself.

For my part, though I think it is useful from time to time to have a comparison with past expenditure to see in what direction our expenditure has gone, I heartily agree with what the Chancellor said as regards armaments. That is an expenditure beyond our power to control. It is an expenditure fixed by circumstances which we cannot control, and in regard to which cheese-paring is the worst of all possible attempts at economy. It is not a question of a little less. It is a question of providing for safety, and nothing less than safety is any use at all. When the Chancellor of the Exchequer comes to the growth of our Civil expenditure, I confess the large figures there which are within our control, or at one time or another have been distinctly within our control, are matter for serious reflection. They have very largely now passed out of our control, whether you look at education, old age pensions, or insurance. Take education. I have no doubt it is true to say, as the Chancellor of the Exchequer did say, that whatever changes may be made you will not make education less costly to the taxpayer or to the ratepayer, but I think we all of us feel that a good deal of money has been wasted—has been at least applied less usefully than it might be, and is still so applied. When we see this huge increase of expenditure, and know how it grows automatically year by year by the mere growth of population, as well as in the demand for improvement and extension, there is certainly a case for scrutinising carefully all the existing demands upon our purse under that head. When you turn to the newer social reforms, such as old age pensions and insurance, there the growth of expenditure has been incomparably more rapid and alarming, and I really cannot pass a Budget Statement which refers to these subjects without commenting on the extraordinary inability of the Government to forecast at all the expenditure which they were inviting the House of Commons and the country to undertake.

Old age pensions, which were to cost about £6,000,000, are costing £12,000,000 or £13,000,000. [HON. MEMBERS: "Hear, hear."] You cheer that as if it were really a good thing, but it is not. I think the smallest portion of that increase above the Estimates is due to the increased benefit received by the individual recipient. The major portion of the increase is an error in the Estimate, and I am afraid that the same thing is true very largely of the Insurance Act. No doubt the Chancellor may say that it is partly due to the House of Commons, that the House of Commons insisted upon his scheme being amended in one respect or the other. Of course it had to be. His scheme could not be left as he introduced it, but the Estimate as I remember presented by the actuaries employed on behalf of the Government was that the cost would be about £3,500,000, and the cost, the present year, is about £6,500,000. One observation, a repetition of what has been said on previous occasions both by my right hon. Friend the Leader of the Opposition and myself. I do think that this points to the undesirability of putting the Treasury in charge of great spending measures. A Department which is dealing with great social reforms of this kind needs some check upon it and when you set the Treasury to check itself, all I can say is that it is lamentably less successful than when it applies its brains and intelligence to checking the other Departments. I rather hope that the Government will consider whether it cannot wholly sever the administration of the Insurance Act from the Treasury and put this Act under the administration of another Government Department, and allow the Treasury to revert to its proper position, not as a spending department but as a financial department which will be a guardian and a check against extrava- gance, because it is the office which in the first place can concentrate in itself all the departments and can compare the urgency of one with that of the other; and, in the second place, because it is the office on which falls the unpleasant duty of finding the money which is to pay for all these things.

I turn now for a few moments to the Estimates for the coming year. I should certainly say that on this occasion the Chancellor of the Exchequer has underestimated stamps. If his present anticipations are at all correct, if, as he is hopeful, European and international affairs pass steadily into smoother waters and trade is as prosperous and as good and the harvest as fortunate as he thinks likely, then I think that his Estimate for stamps is too low, because, even if the Stock Exchange was not very active last year, it is likely to be very active in those particular transactions which produce revenue to the State, as soon as peace is declared and the danger of extension of war is removed. Of the rest of his Estimates I do not like to speak with confidence. He has access to information and advice which are not open to me, but I am struck by some of the things which he did not say, and some of the things which, he did say. In the first place, he took credit in the coming year for the effect of the good harvest of the past year. I should have thought that the effect of that had already been seen, and that it had in the main passed away, and that what the revenue of the coming year depended on was the harvest of this year much more than that of last year. As to what the harvest of this year may be, neither he nor I can venture to prophesy. Of trade prospects in general he spoke more sanguinely than I should care to do. I hope that he is right, but I confess that as far as I can judge, I do not think that it is quite safe to base an estimate upon an extension of the boom, and, as I understood him to calculate, a very considerable extension of the boom which we have enjoyed. He dwelt with some complacency on the figures of our trade and our employment, and gave us statistics as to trades of all kinds, which are a matter for satisfaction.

But there is another side to the picture which is not so satisfactory. After all, he himself said that one of the reasons for which he calculates that the boom has not yet exhausted itself is that wholesale prices have not risen to what he calls the normal boom level. I am under the impression that in this boom prices were very slow to rise, and that during a considerable portion of the time our returns looked as if we were extremely prosperous. It is true that there has been a very large business, but the business was done on a very much narrower margin of profit than was usual in the past in times of similar booms. I think that that has been changed recently. Of course I know that in the case of contracts entered into recently prices have been very much better, but if prices had been as profitable as the Chancellor thinks, how does he account for the fact that wages have not risen appreciably and had hardly begun to rise until within the last few months? And was there ever a boom in our history, big or small—certainly there was never one comparable to this which we have just been enjoying—in which the wage-earning classes have not had their share of the increased prosperity in a general increase in wages? This time the absence of that general increase is the more marked and the more deplorable because the prices of the main articles of the household budget have been steadily and largely rising. I think that that gives some cause for reflection as to the character of the boom which we have enjoyed. Let me say at once that I think that there is one factor which in any examination of the wages question it is only fair to state, and which must always be borne in mind.

Parliament has been putting increased burdens upon the manufacturers for the sake, of their workers. Where the workpeople have not got any increased wage, it must not be assumed that, apart from the rise in prices, they have had no advantage, because though they have not got in in meal, they have had it in malt. They have had it under the series of Acts by which we have protected their life and limb and taken pains to secure their comfort and make provision for them during accident, old age, or sickness; and, of course, all those Acts in greater or less measure have added to the cost of production and to the charges which the employer has to bear. The Chancellor took a comparison with the years of the Boer war, I think, in regard to the amount of unemployment. Of course we get more light as to the value of the unemployment figures from the inquiries into production which the Board of Trade have been making during recent years, and we see that the figures on which we have been accustomed to rely are very incomplete, and that, at any given moment, as was indeed anticipated by all who have given any attention to the subject, the figures which we have used, namely, the figures returned by certain of the large trade unions, are very much less than the average of the country. But, of course, in the argument for the purpose of comparison you can test one against the other. But the Chancellor of the Exchequer did not quite make the comparison fair with the time of the Boer war. He said that unemployment was lower now than at any time since then, and that that was so in spite of the fact that great numbers of Reservists had been called away from their normal peace duty to the war in South Africa and their places had been filled by men who otherwise would have been unemployed. I think that we had about 300,000 men in South Africa as a maximum, though I have not been able to verify the figures.

An HON. MEMBER

Four-hundred thousand.

Mr. AUSTEN CHAMBERLAIN

Never 400,000 at one time from this country. There were the Colonial contingents and the South African Force in the field, and I think, taking the full figure, that there were never more than 300,000 people at any one time who had gone from this country. How many of them were Reservists taken from civil employment?

Mr. LLOYD GEORGE

I did not confine my statement merely to them. I also said that in addition to that a large number of men were employed on war material, transport and other work in connection with the war.

Mr. AUSTEN CHAMBERLAIN

That, of course, was true then and is true now. People very often neglect the amount which the Government itself does or can do to promote a boom in trade. Take the engineering trade, for instance. How much depends on what we vote for new construction in the Navy? I do not say that that is a reason for voting a larger construction than the defence of the country requires, but when you are obliged to vote a larger construction, as we have been, that makes the shipbuilding and engineering trade very busy, and I think it is as busy in this time of peace as ever it was during the South African war. But I would point out that when we make the fullest allowance for the number of Reservists called out and sent away to the war in South Africa, it is nothing like the number of emigrants who, in this boom year, have left our shores under no compulsion of a call of duty.

Mr. PRINGLE

It is always so.

Mr. AUSTEN CHAMBERLAIN

It is quite a mistake to think that in boom years emigration must rise. If the hon. Member will consult the figures he will find that that is so. In those years the emigration was 71,000 and 72,000. This year and the year before it was 265,000, and no conclusion can be drawn from any statistics as to unemployed, with any safety or security, until you set side by side with your emigration statistics the tremendous numbers who have gone from our shores in recent years in a heavily increasing proportion to our British Dominions over the sea, or, at any rate, have left us and been subtracted from the labour market here. In regard to the general revenue of this year, I am afraid that an examination of the figures will show that they are rather less satisfactory than the Chancellor of the Exchequer expects, or would lead one to believe. I could not, of course, following the Chancellor of the Exchequer's statement, separate throughout the whole of the revenue the items which are due to normal growth and the items due to special circumstances. But I was struck with some of the distinctions which he made. Take, for instance, Customs. He estimates an additional yield of £1,117,000 for the whole year, and on Excise £856,000—together, just a little under £2,000,000 of increase. But of that £2,000,000 of increase, how much is normal? Supposing the same circumstances of prosperity continue, how much might you expect to get again? Only about £500,000. One and a half millions, he said, was abnormal, due to forestalment or to special circumstances. So again, I think, with some other taxes that he mentioned. From Land Values Duty, for instance, the revenue for this year is not normal revenue; it is a revenue swollen by the fact that this year they hope to collect for the first time three years' taxes in many cases. It is not, therefore, the normal revenue of the year. I do not know whether the Chancellor of the Exchequer gave us sufficient figures to distinguish what he would consider the normal revenue for the year, apart from the revenue he would consider as due to the preceding year.

6.0 P.M.

One thing, I think, is clear, that it would not be sufficient to balance expenditure, and that is not a pleasant outlook for the future. Look where one will, one sees no chance of the reduction, but if one looks in many places one sees the certainty of additional expenditure. Even without any fresh extravagance on the part of the House of Commons, the normal or necessary growth consequent upon the measures we have already passed, will continue to swell our expenditure. Our Budget this year is very nearly £200,000,000. After an enormous addition, I think stated at £25,500,000, we have just managed, with good fortune, and by having a good deal of arrears of taxation to collect, to struggle through this year without any increase. I wonder if the Chancellor of the Exchequer has asked himself, if he is responsible, whether he will be able to get through another year without an increase. I wonder what, in his heart of hearts, he thinks are the prospects which he is leaving to his successor in future years. One thing, I think, is clear, that our expenditure is growing faster than our revenue, even with these huge additions, and the measures which the Government are responsible for passing, coupled with the increased cost of national defence, will disturb the growth of revenue which we will derive from the taxes he has imposed. I should be only too glad if I were a false prophet in this matter, but I confess that I view with anxiety—as I have said before and as I venture to repeat now—the manner in which, in these good times of abounding trade and with an expanding revenue, we are spending every penny that we get, mortgaging every penny of future increase that we can foresee, while in the good times which we are enjoying we are creating no reserve for the bad times which we may have to pass through.

Mr. JAMES PARKER

I desire to make a few remarks about the statement of the Chancellor of the Exchequer, and I must confess that I cannot wax very enthusiastic over it. It is quite true that during the time he has been at the Exchequer he and his predecessor have wiped off the sum of £90,000,000 from the National Debt. But when the right hon. Gentleman addressed the House he said that there was no chance of a reduction of expenditure during the coming year. For myself I am not anxious to see a reduction of certain expenditure, but I think we who sit on these benches believe that there is plenty of opportunity for the reduction of ex- penditure in other directions, to the benefit of the nation and to the credit of the country all over the world. The right hon. Gentleman, in his statement, told us that we are living in exceptionally prosperous times; that trade was never so great as at the present time, and he pointed out how the revenue has been growing by leaps and bounds. He gave us a certain number of figures, which will be very useful, I can assure him, to my friends who sit on these benches when they speak in the country on the question of poverty and the problems relating thereto. The statement which the Chancellor of the Exchequer has given to us this afternoon in relation to the amount of money which has been paid in Death Duties is instructive. He told us, in regard to the Estate Duties which came within his purview during the past year, that of the sum, £276,000,000, one-third was owned by 192 persons; so far as one-half was concerned, by 1,300 persons; and two-thirds of the total of £276,000,000 was owned by 4,000 persons. The next statement the Chancellor of the Exchequer took, preliminary to his Budget, was that there were about 360,000 persons whose estates were so small that it was not worth while for anybody to make a return. I put to the Chancellor of the Exchequer and hon. Gentlemen opposite whether that is the best civilisation has to show, with a Budget reaching to nearly £200,000,000? Is that the best civilisation has to show, that out of 360,000 or 370,000 people who died in the course of the year, 4,000 of them got this enormous advantage, from the financial point of view, out of the civilisation which this country has set up? I submit that this cannot be regarded as satisfactory—at least from the point of view of those of us who sit on these particular benches.

I desire to refer to some of the amounts which are embodied in the Budget which the Chancellor has put before us. The right hon. Gentleman made a comparison between the present year and 1861—about fifty years ago. He pointed out that of £195,640,000, the sum of £74,544,000 has been spent on armaments. He pointed out that fifty years ago there was a time scare. It was not the Germans then, it was the French, of whom fear was sufficiently strong. I suppose, to impress upon the then Chancellor of the Exchequer the necessity of increasing taxation in order to build some of those wonderful towers that have never been used, and which are to be found on the South Coast of England. And we are now similarly wasting the taxpayers' money, I firmly and sincerely believe, in building unnecessary "Dreadnoughts." Fifty years ago, out of a total of £70,000,000, the sum of £28,000,000 and some odd thousand pounds was used for the purpose of armaments. This year, out of the total Budget sum of over £195,000,000, practically two-fifths of the entire expenditure of the nation is on armaments. Among the good things which the Chancellor of the Exchequer has done since he has held his present office I would like to see him, in the remaining years during which he may occupy that position, stand up at that box and put up some fight against attempts not only from the other side, but sometimes from this side of the House, to increase this enormous expenditure on armaments.

We want money increasingly for social reforms. It is wanted in connection with the housing problem, in connection with the problems poverty presents in many of its phases; it is wanted in connection with the welfare of the children, whose parents, working for miserable wages, find it impossible to pay the small contribution that is wanted for their education; and it is needed certainly in some of the districts such as that which I have the honour to represent. Enough money ought to be obtained from these very sources to which I have referred—those who are reaping these enormous rewards from the prosperity of the nation. Therefore I trust the Chancellor will apply his mind to checking the expenditure upon armaments. I should like the House to look at this question, not only from the financial, but from the ethical point of view. It may not be competent for me to speak in this way to the House, but that does not concern me. That which I have to state I want to state here and now. I cannot understand how we Gentlemen, coming here and listening to prayers, and saying that we believe the doctrine of the Prince of Peace, praying each day that all our works may be continued and ended under God, should be spending £70,000,000 or £80,000,000 for the purpose of that which we call defence, but which, at least, has as little to do with civilisation as anything possibly can have. It does not mean civilisation, and it must, if persisted in, send us back to a condition of barbarism as bad as that which existed in the jungle before civilisation came along. Therefore, I am opposed root and branch to the enormous and extravagant expenditure upon armaments which we have to-day. I come now to the way in which the taxes are raised. I agree that the proportion of indirect taxation to-day is less than it was at the time when some of us came to this House six or seven years ago. I do not know whether that is because we are here or not, and possibly that would be too egotistical to say, but at least the fact remains. Even to-day, however, the total amount of indirect taxes amounts, I think, to something like £72,000,000.

The Chancellor of the Exchequer has told us that he cannot do anything to reduce the Tea and Sugar Duties this year. Why not? I can give him a reason why he should reduce them, and let me say I do not object to pay my share. I have known what it was to work for £1 per week and pay indirect taxes, and I know the difference to-day. It would be a good deal easier for me to pay £10 extra in taxation to-day than to pay 10d. at the time to which I refer, and I am not a very rich man. It is our duty to take the taxes off the poor who cannot afford to pay and impose them on the shoulders of those who can afford to pay. I am looking for the day when the Chancellor of the Exchequer will remove the whole of these three taxes, even if he has to put a very small direct tax upon each unit in the State. This indirect form of taxation in the shape of Tea Duties and that kind of thing is to my mind the very worst form of taxation that you can have. I had hopes that on this occasion we might have seen one of those ideals realised that the Chancellor of the Exchequer and the party with which he is identified have been preaching now for thirty years, namely, a free breakfast table. So long as our taxes are imposed on the food of the people, so long do those of us who believe in Free Trade, not only from the economic but all points of view, provide a weapon to be used against us. If it be a bad thing to put taxes on other things, such as wearing apparel or raw material and manufactured products, it is also a bad thing to impose taxes on food. I do not know what my party may do with those taxes when it comes to a vote. They are politicians like everybody else, and they have to be affected by the circumstances, not only in connection with the Budget, but with regard to all other legislation. But, speaking for myself, I say this at least, what I may do this year I do not know, but I am satisfied that after this year I will give no more votes for food taxes in this House so long as I remain a Member.

Sir F. BANBURY

We may be in next year.

Mr. PARKER

And you may not. Whether you are or not, I do not know that the hon. Baronet would be an enthusiast for removing taxes from the food of the people. But whether you are in, or whoever is in, the time has come when it is the duty of the Chancellor of the Exchequer, at any rate of a Liberal Government, to remove those taxes entirely and to put the taxes on the shoulders of those people who can afford to pay.

Mr. SANDERSON

I listened with much interest to the speech we have just heard. I am bound to say that the hon. Member and myself are actuated by the same motives in many respects, but it is just in the way of arriving at a result that we differ. For instance, he told us he was most anxious to see peace preserved, and he drew attention to the Prayers which were uttered in this House every day. Then he proceeded to say that after those Prayers we go and vote £70,000,000 in connection with armaments. I answer him that we do so for the express purpose of seeing that peace is preserved. If you did not incur that expenditure, then in all probability the result would be that you would lose your chance of peace and have to spend a great deal more than the £70,000,000. Just in the same way the hon. Member has referred to the desirability of taking off the duties on tea and sugar. I am with him entirely, but as long as you have the fiscal system which the present Government persists in you will never be able to do so. I have listened during the time I have been in this House, time after time, to appeals made by hon. Members below the Gangway opposite to the Chancellor of the Exchequer to remove those taxes, but he cannot do so. The proof of the pudding is in the eating of it, and although I have no doubt he is most desirous to do so he cannot, and until you rearrange your fiscal system you will never see your taxes taken off tea.

Mr. PARKER

Where does the hon. Member propose to put them?

Mr. SANDERSON

I am not prepared at present to unfold my Budget, but if he will put me in the position of Chancellor of the Exchequer I shall be very happy to oblige the hon. Member There is one point I wish particularly to refer to, and that is with regard to what I would call the Land Value Duties I know this is a subject which has been raised in this House many times, but I think it is such an important matter that we cannot raise it too often The right hon. Gentleman (Mr. A. Chamberlain), who spoke after the Chancellor of the Exchequer, drew attention to the fact that only one of these so-called Land Value Duties is really producing any revenue at all, and that is the Mineral Rights Duty. That is not a Land Value Duty, but is really an extension of Income Tax, because it is levied upon the income which is received by the person who receives the royalty, and therefore it is quite improper to call it a Land Value Duty. I want hon. Members to look at this matter from another point of view. I am not really speaking now from a party point of view, and I think this point is really worthy of our consideration. The one great objection to the Land Value Duties is the enormous cost to which the country is being put in making the valuation. With regard to the only one of these duties which is really producing any revenue, namely, the Mineral Eights Duty, there is not valuation required at all. The valuation expenses have amounted in two years to something like £680,000—that is excluding all the legal expenses and all the stationery expenses, which must be enormous, and so, shall we say, £700,000? The whole of that £700,000 must be allocated to the three Land Value Duties proper, namely, the Unearned Increment Tax, the Undeveloped Land Tax, and the Reversion Duty. The Chancellor of the Exchequer, I think, estimated that in respect of those duties in two years there would be produced £550,000, and do hon. Members really remember that they have produced £60,000?

Thus in respect of those three duties for which the valuations have to be made they are, roughly speaking, producing one-tenth part of what they cost. Really is it not absurd that you should have such taxes as those continued? The axiom is that a tax, unless it is revenue-producing, ought not to be continued. I think it was Mr. Gladstone who said something to this effect: That every tax was an annoyance and worry to the taxpayer, and the only justification for its imposition was that it produced revenue. If you get, as you have in this case, the undeniable fact that in two years the duties produced something like a tenth part of what they cost, then I submit that in all common sense those taxes ought to be dropped at once. The cost I have spoken of, £700,000, is that to the Exchequer. I am told—and I believe this is correct, though I cannot vouch myself for the figures—that up to September, 1912, there had been something like 400,000 valuations, or, to put it strictly accurately, 400,000 occasions upon which valuations had to be made. I quite agree there is a difference, but the last statement is the correct one. I think it has been estimated that there was £1 expense for each occasion as a proper and reasonable amount on the individual, so that you have got £400,000 in that way. Therefore you have these taxes, which are only producing a tenth of what they cost to the Exchequer, with this very large sum also on the individual. The defence is that the valuation has helped in respect of other matters. For instance, I think the Chancellor of the Exchequer said the Death Duties have gone up in consequence of the improved valuation. That will not do for the Chancellor of the Exchequer, because it was, I think, in October, 1909, before the Budget came into force, that he was, quite rightly, taking credit to himself that one of the first things he had looked to was to reorganise the Valuation Department. That was done before the Budget came into force, and on that occasion he said:— This reorganisation has made a difference in Death Duties, and a very substantial portion of the £1,300,000 is attributable to the fact that we have got an efficient Valuation Department. The point, therefore, is that he had got an efficient Valuation Department before the Budget was passed and before the machinery which was set up under the Budget with all the valuers came into force, so that that defence does not do. His other defence which has been put forward is, "Oh, you must look to the future." That is all very well, but when we find that the Chancellor of the Exchequer has been so wrong in the past, why should we assume that he is going to be right in the future? We have found that when he said his taxes were going to produce in two years £550,000 that they produced £60,000, and why then should we assume that he is going to be any more right in the future. Of course, it is not common sense to expect us to do so. For the four years during which this system has been in force you will find, roughly speaking, that the cost has been going up year by year. It started at something like £480,000 in 1910–1911. That went up to £531,000 for 1912–1913, and I believe it is to be a sum of £630,000 for 1913–1914. Thus in four years the Exchequer has spent something like £2,000,000 in the cost of those taxes. Therefore it must be remembered that in future, when you are calculating what will be produced, you have to set against it the interest on £2,000,000, which will mean some £60,000 a year. What possible reason is there for continuing these taxes, which, I submit, are wholly untenable? They cannot be justified by the revenue they produce; they are admittedly causing a tremendous amount of annoyance, and no one can deny that the cost of collecting them is simply enormous.

These taxes are going further than this House ever expected them to go. Cases have been discussed several times, therefore I will not go into details now. We have heard quite recently about builders who get "fortuitous windfalls," as they are called. A man has bought a piece of land and built a house; he has used his skill and capital, and has then been taxed upon his profits. That is what it really came to. It was called a fortuitous windfall, although there was no increase in the value of the land in any shape or form. People are being taxed in respect of something which was never intended when the Budget passed. If these duties are to be continued, why should they be limited to land? Why are they not to be applied to all sorts of fortuitous windfalls? Why are they not to be extended to other kinds of speculation? I do not wish to say anything objectionable, but it must be obvious to everybody that there are other transactions in connection with which fortuitous windfalls arise besides those connected with the land. An hon. Member opposite said recently that landowners are a class of people who do more for the community amongst whom they live than any other class in the country. Yet these are the people whom you are bothering, taxing, and annoying to an unlimited extent. Other people may speculate in other directions and make fortuitous windfalls, but they are not called upon to pay 20 per cent. upon those windfalls. I submit that if these taxes are to be continued they ought not to be limited to the land.

Mr. LOUGH

I think that the somewhat discontented speech to which we have just listened is due more to the part of the House from which it came than to any want of amiability on the part of the hon. Member himself. We always listen to the hon. Member with the greatest pleasure, and I am sure that on some other occasion, when we get to the details of the Finance Bill, his remarks, so far as there is any substance in them, will be duly considered. But the present is a somewhat different occasion. We are surveying the large field which the Chancellor of the Exchequer opened out before us. When the right hon. Member for East Worcestershire (Mr. Austen Chamberlain) was speaking, I could not help thinking of the extreme difficulty into which the Opposition have been suddenly plunged. If any impartial stranger were regarding our proceedings, he would marvel at any speeches of complaint being made on this occasion. It was only because of the double dose of original sin with which the Opposition is afflicted that such speeches have been made. They cannot believe that anything good can ever proceed from the Treasury Bench under the present Government. Although we get a simple story—simple almost to the level of dullness—they commence the old game of attack, attack, attack, and when no ground of attack is presented they lay hold of some small grumble which has been put forward frequently before. I do not think that the attitude of the Opposition with regard to the statement made this afternoon will be reflected in the country.

It is no use concealing the fact that we approached our business this afternoon with a considerable degree of apprehension. We knew that the country was faced with a vast expenditure of £195,000,000, a sum that would make all our old Chancellors of the Exchequer shudder. We knew also that there was a deficit of six or seven millions. I am sure that that uncomfortable feeling was shared as much by hon. Gentlemen opposite as by Members on this side. But what has happened? A complete transformation scene has taken place. The Chancellor of the Exchequer has come forward and made a speech admirable in every way—on account of its brevity, its picturesqueness, and its lucidity—by which all the alarm that we, and the nation to a great extent, felt, has been removed. We have had put before us one of the most hopeful stories ever presented by a Chancellor of the Exchequer. No new taxes have been imposed, although we all thought there might be; nor have there been any of those larger expedients from which we shrink with so much horror, but which might have had to be adopted in order to make the revenue balance. Not only that, but we have had such a story of national expansion—expansion of revenue, expansion in trade, benefits that all classes have enjoyed—such as has never been presented to this House before. On an occasion like the present I think the Chancellor of the Exchequer ought to be dealt with somewhat apart from party politics. I have often said that when speaking from the other side of the House. We are not always engaged in party conflict, and if ever there was an occasion on which party feeling might be laid aside it is when we have to consider the picturesque and extraordinary statement which the Chancellor of the Exchequer has laid before us. I think it was a very happy thought on the part of my right hon. Friend, when considering the question of the growth of expenditure, to make a contrast with the position fifty years ago. We hear constantly about the extraordinary growth of expenditure, but nobody could listen to the Chancellor of the Exchequer this afternoon without feeling that many of the items included in the Budget are somewhat fictitious if regarded as evidences of the growth of expenditure. For instance, the £25,000,000 expenditure in connection with the Post Office can hardly be described as national expenditure from the point of view of the burden of taxation, because a large profit is received from it, and we have on the other side £28,000,000 or £29,000,000 coming in. If we took off that single item, it would make the figures look very different.

The part of the contrast upon which I looked with the greatest alarm, and which my right hon. Friend treated with the greatest gravity, was that connected with the growth of expenditure on armaments. The whole House is unanimous in deploring it. We never hear a Chancellor of the Exchequer make his Budget statement without his saying that this expenditure should cause a feeling of alarm not only in our Parliament, but in every country in the world. But my right hon. Friend made one observation against which I desire to protest. This is really the only critical remark I have to make. He said that the expenditure on armaments was a matter beyond our control. I do not want to be disrespectful, but that sounds to me almost like nonsense. All expenditure is controlled by somebody, and that is true of this expenditure on armaments. What did my right hon. Friend mean? He meant that it was controlled by other Powers. But he does not exempt us altogether from being one of the Powers. It may be said that the expenditure is controlled perhaps by six Powers, perhaps by five, perhaps by four, perhaps by three. If it be true that it is controlled by three or four Powers, then at least one-third or one-fourth of the control rests with us. We cannot wash our hands of all responsibility for this great outlay. We have to take our share. For my part, I always think that this assembly is so powerful and can speak with so much influence in the affairs of the world that, if we set a better example in this matter, if we did more to curb this expenditure, it would have a far better effect on the expenditure of other nations, and finally on the prosperity of our own country, than our continuous increase of expenditure tends to have. The Chancellor of the Exchequer spoke of the growth of the wealth of the country, and the growth of population going hand in hand with the increase of the burden of taxation. I never hear a remark like that without remembering that that is not the case all through the United Kingdom. All that my right hon. Friend said is quite true with regard to Great Britain. We should never forget, however, that we have another island, Ireland, in which the increase of taxation has been nearly as great as in Great Britain, but where there has been a great decrease and not an increase of population. If we made a comparison with fifty years ago in regard to the two islands separately, we should get a very different picture. Another occasion in connection with these Debates will perhaps be more opportune for going into that question.

Another statement which I think the House must have received with great satisfaction, is that we are to have the Budget divided into two Bills in the future. That was the old system; in fact, there were often more than two Bills. Anyone who has studied the matter, as I have been accustomed to do for many years, will feel that the way in which we have endeavoured to deal with the Budget in recent years has been almost impracticable, and that it was quite impracticable to continue it any longer. I am glad that we shall dispose of the taxes for the revenue of the year in a very short time, and that then we shall have another Bill, the Revenue Bill, in connection with which any Amendments can be dealt with. I have some Amendments to bring forward which I should like an opportunity of discussing. When the right hon. Gentleman opposite was Chancellor of the Exchequer, I was much more successful in getting an occasional Amendment of the Budget than I am now. We are supposed to be obstructing the Government even when we mention something connected with a business about which we know something, and if we bring forward an Amendment, we are told that there is really not time for it, that the situation is too grave, and so on. We will not be told that any longer, because we will have the simple fact. If it is to be discussed late at night, which was the only fault the right hon. Gentleman found in the procedure—

Mr. AUSTEN CHAMBERLAIN

Late in the Session!

Mr. LOUGH

Well, late in the Session, but I would rather have it discussed late in the Session or late at night, than not have it discussed at all. What I have found is that it is very hard to get an opportunity for these improvements in our procedure connected with finance. It is specially bard for loyal supporters of the Government like myself, because we do not want to give trouble, and we are troubled between our conscience on the one hand, and our loyalty to our party on the other. The Chancellor of the Exchequer mentioned one point of amendment in his speech, which I think ought to be considered, and I am going to put in a word for it now as a preparation for hon. Members later. A new Clause was imported into the Budget in the Finance Bill of, I believe, two years ago, which deprived the country and the citizen of the opportunity enjoyed since the Income Tax was imposed of either paying on one year's profits or the profits of three years. There was at one time an opportunity of choosing between the two systems.

That was filched away in one of those late Bills—of two years ago—under the sort of pressure I have described. It was one of the greatest blows at the rights of the citizen in regard to taxation. Let me point out one case, and that is in relation to businesses which have declined. Ninety-eight per cent. of the trade of the country is now done by limited companies. Many of them at times make very large profits, and if when profits are declining the three years' system is adopted, you cheat the taxpayer, when you consider that ten years ago the profits of a particular country may have been a hundred thousand pounds, and may have dropped to £10,000. We ought to have time at any rate to discuss these things. Constantly there are points brought up out of business experience, and we ought to have the opportunity of bringing in these small Amendments which are entirely removed from any question of party. If we cannot effect great reforms we might be able to effect some very useful small reforms in this way. For this reason I welcome this change in procedure under which a second Bill will be introduced. We are much too reluctant to adopt changes of that kind in the House. I think we will find a great advantage in opportunities of this kind. But I did not get up to mention these Amendments, but generally to indicate approval of the whole statement. I have only one criticism to suggest, and I am surprised that the right hon. Gentleman the Member for East Worcestershire did not mention it. I am afraid the statement was a little too optimistic. It is almost too good to be true. [HON. MEMBERS: "Hear, hear."] I do not want too much applause from the other side. [Laughter.] The right hon. Gentleman may have meant to say it, but he spoke under very great difficulty, and the only thing that he did say with regard to the Increment Duties was that they might have been estimated higher.

Mr. AUSTEN CHAMBERLAIN

I think the right hon. Gentleman will find that in my next sentence I did say that, generally speaking, the statement was too optimistic.

Mr. LOUGH

Perhaps so. The right hon. Gentleman made a most interesting speech, and I had the greatest sympathy for him. I never heard him perform his ordinary duty in this House under circumstances of greater difficulty. Taking everything into account he did exceedingly well. The Budget Statement seems almost too good to be true. There was not even one sturdy Liberal that I spoke to beforehand who did not think the screw would have to be tightened a little more than we liked if we were to get through. There has been no tightening of the screw, no new tax, the future is suggested as satisfactory. I think we ought to congratulate ourselves upon the proceedings this after- noon. We should all congratulate the country and the Chancellor of the Exchequer, that on the high authority which he always takes on these occasions he has been able to put before this House, the country, and the world such a hopeful statement of the future.

Mr. SAMUEL ROBERTS

There is one thing I think we ought to congratulate the Chancellor of the Exchequer upon, and that is that there is no fresh taxation. How that result has come about is another matter altogether. I can only trust that the anticipations of the Chancellor of the Exchequer may prove correct. He told us that he has consulted the very best authorities he could on the question of trade in the future. No doubt he has; but supposing their answer had been different! Supposing their answers had been adverse to him in this matter of trade prospects! Supposing they had said that we were going to have a worse time, and that the Near Eastern question was going to be a serious matter! Where would the right hon. Gentleman have been then? He would have had to come down for fresh taxation. I trust that his forecast of trade will be fulfilled, or he will find himself, if he is still Chancellor this time next year, with a deficit. We have to-day to congratulate ourselves that the Chancellor has been able to give us the statement that he has, and to come out on the right side with £185,000 to the good. The Chancellor made a comparison with expenditure now and expenditure fifty years ago. Half a century is a long time. I would rather like to make a comparison with years a little nearer. Take two years, the year before the Boer war—there was a great increase owing to the Boer war—and the last year for which the Unionist Government were responsible, namely, 1905–6. If you take those two years, you will find that you have an increase now over 1899 of £71,000,000, or 58 per cent., and if you take the second period, 1905–6, you have an increase of £38,000,000, or 20 per cent. The right hon. Gentleman went on to quote some words of Mr. Gladstone in 1861. I have got another quotation from a speech in 1861 of the same right hon. Gentleman which is extremely pertinent to the present position of our increase of national expenditure. Mr. Gladstone said:— I am deeply convinced that all excess in the public expenditure beyond the legitimate wants of the country is not only a pecuniary waste …. but a great political and, above all, a great moral evil. It is characteristic, Sir, of the mischiefs which arise from financial prodigality— These are the words that I want to draw the attention of hon. Members to— that they creep onwards with a noiseless and a stealthy step; that they commonly remain unseen and unfelt until they have reached a magnitude absolutely overwhelming. I believe if Mr. Gladstone were living now he would look upon the present position as very serious. I remember reading that when the expenditure of the country amounted to £90,000,000 the right hon. Gentleman was horrified. The expenditure did remain at or about £90,000,000 for a considerable period. I find that in the Unionist years, 1886–1892, the national expenditure kept about £90,000,000, which shows that if care is taken it can be kept down. That is only twenty years ago. In that time the expenditure has more than doubled. Let me say a word as to how this increase arises, because we all know that it is principally upon the Civil Service Departments. If you take into consideration the moneys which were raised by loans by the Unionist Government for armaments, and put that in as an item of expenditure—which it ought to be really, as it was an item of expenditure—you will find that the total spent on the Army and Navy in the last year of the Unionist Government was only about £1,500,000 less than now. So that you have this fact, that the great increase has occurred in the Civil Service accounts. We all know the large items for insurance, old age pensions, and education. The land valuation, which my right hon. Friend behind me spoke about, is absolutely a dead loss at present. What it may be in the future we do not know. All the minor Departments of the Civil Service show increases, which shows the general tendency as Mr. Gladstone called it, of the spirit of expenditure.

I would like to say a word about the Income Tax, which I have not spoken about in this Committee before. It is one which I contend is a burden upon the whole country, not only on the richer part of the population, but also on the poorer. As we know, Income Tax was introduced by Pitt as a war tax at the time of Napoleon in 1799. It was taken off after the war, in 1814 I think, but reintroduced by Peel. All through its history the Income Tax has been regarded as a war tax, and now in my opinion, it is not a war tax any longer, but a constant tax. It has become a permanent tax and is liable to be raised by the Government of the day at any moment. The Income Tax payers are not a large body. I think they number about 1,200,000 altogether, and the larger portion of these people have incomes under £700. Taking the Income Tax payers as a whole, they are a law-abiding, patient lot of people. They have no organisation or combination like other classes, or people that speak for them in this House. Turgot, the famous French Minister, defined taxation as The art of plucking the goose without making it cry out. 7.0 P.M.

That is what the Chancellor of the Exchequer is doing in regard to the Income Tax payer. The goose collectively cannot, cry out, though, if it did cry out, I very much doubt, owing to there being no organisation, that as a body the Income Tax payers could make themselves felt. I contend that these people being taxed principally for the purposes of the war are entitled now to some relief. It is a tax that filters down from the bearer to the people below. The question of Income Tax does not stop at persons who pay the tax. It goes down underneath on to industry and wages. I was reading a book by the celebrated modern economist, Sedgwick, a short time ago, and he contends that the burden of taxation generally seldom remains where it is first imposed, and Mr. Leckey, who was a very valued member of this House, in his book points out that there is no truth in political economy more certain than that heavy taxation upon capital which starves industry and employment, falls most heavily upon the poor. That was the opinion of the present Prime Minister when he was Chancellor of the Exchequer. I remember his first Budget speech in 1906, when he said:— It is the burden upon the trade of the country which in the long run affects not only profits but wages, and which helps to destroy, or at any rate to contract, the most readily available reserve upon which the State can draw in sudden and unforeseen emergencies. That leads me to another point. We all know that Income Tax is an engine of immense power as one of our national reserves. If you keep it at a high rate in normal times, you cannot use it in a way you would like when a national emergency comes. It is the same with the Sinking Fund. The charge upon the Sinking Fund was lowered from £28,000,000 to £24,500,000. A sinking fund for the purposes of sudden emergency ought to be kept high in order that you can reduce it and use that sinking fund in case it is wanted for national emergency. Therefore, you want the Sinking Fund high, and the Income Tax low as two great national reserves. I put a question to the Chancellor of the Exchequer the other day, asking him how the taxation of the country was divided between direct and indirect taxes, and his reply was that during the financial year direct taxes amounted to 57.61 per cent. and indirect taxes to 42.38 per cent., and it works out at a taxation per head of £3 8s. 2d. If you look at our great rivals—France, Germany, and the United States—you will find a very different system. They get the bulk of their revenue from indirect taxes. I find from the official reports in France and Germany for last year that the percentage from direct taxes in France is as low as 16.4, and that in Germany it is not much higher, amounting to 19.18, and the whole amount in Germany for every national expenditure, apart from the various States, only amount to £1 4s. 4d. per head of the whole population. In France it is more, and amounts to £3 14s. 5d. In the United States, as everybody knows, they get nearly half of their revenue from Customs Duties, and the whole taxation of the United States only amounts to 30s. per head. In connection with this, I should like to mention a point with regard to the proposed change—I do not think it will be out of order—for raising revenue in the United States. Some people in this country think that the change owing to the last Presidential election is going to lead to a great revolution in the way the United States raise their taxes. That is not so. It is not the opinion of the leaders of political life in the United States, and it is not the opinion of President Woodrow Wilson. He has edited a book containing the speeches he made during the Presidential campaign. I do not know whether hon. Members have seen it, but it is a very interesting book, and there is a passage as to what in his judgment ought to be the alteration of the tariffs of the United States; that there should be lowering of the tariffs and the abolition of monopoly and privilege, and not the doing away with Protection. He says:— The Federal Government has chosen to maintain itself chiefly on indirect instead of direct taxation. I dare say we shall never see a time when it can alter that policy in any substantial degree and there is no democrat of thoroughness that I ever met who contemplates a programme of Free Trade. It is the opinion of the new President of the United States that their policy is not going to be a policy of Free Trade, it is not going to abandon getting revenue from indirect taxes; it is simply to be a lowering of the very high tariff they have at present; to give small people a chance; to do away with monopoly. I beg to thank the Committee very much for having given me their attention, and I want to add my voice to the congratulations that have been offered to the right hon. Gentleman on the Financial Statement he has given us.

Sir ALFRED MOND

I do not wish to follow the hon. Gentleman who has just spoken in his statements with regard to the United States. I am afraid I would not be in order if I followed him at length, because there are many quotations that I could make in answer to him from President Wilson's speeches; but I would like to point out in regard to the percentage of direct to indirect taxation in the various countries which he quoted that in Germany, for instance, you must add to the direct taxation the very heavy Income Tax in Prussia, and unless you add these figures to the Imperial taxation you cannot get any comparative basis. A great many of our services, in fact most of them, like education and local government services, are all State charges here, and it is impossible to compare the taxation of the two countries by taking the German Imperial taxation, which is practically confined entirely to the army and navy expenditure, and resting on that to arrive at any kind of a conclusion. I could not quite follow what the hon. Member's idea was as to what basis we are to raise our taxation from. He wanted a higher Sinking Fund and a lower Income Tax. If these methods of revenue are gone, I do not see what his basis is for raising a large amount of revenue on any fiscal system.

Mr. S. ROBERTS

I would not be in order in going into the question of Tariff Reform.

Sir A. MOND

I do not want to go into it, but any hon. Member who likes to go into the question would come to one conclusion: that a tax, for instance, on manufactured goods, whether a good or bad equivalent, would only produce a small revenue and would not enable a Chancellor of the Exchequer to reduce the Income Tax very materially. I do not think any Chancellor of the Exchequer would get revenue from it compared to our Income Tax. All the other countries of the world are going the other way. France and Germany have a heavy Income Tax. If the hon. Member had read an article which appeared the other day he would see that the opinion of many financiers in Germany is that they have come more and more to regard direct taxation for the purposes of raising the amount of capital they need. The United States is taking the same view in respect to taxation. It is a fallacy to imagine there is no Income Tax in the United States. There is the corporation taxes and the taxes upon limited liability companies, and there are heavy land taxes in all the States throughout the American Confederation. There, again, you compare merely the services of the United States Federal Government, which are very small, with our services, which we have to render here, and that leads to an entirely fallacious result. I think the Chancellor of the Exchequer is to be congratulated on the mildness with which his Budget is received. I think he is also to be congratulated on the elasticity of his calculations of revenue. Of course he has information which no private Member can possibly claim to criticise. I have found, on the whole, that the authorities that advise the Chancellor of the Exchequer have an almost uncanny machinery by which they can estimate so closely what the revenue is going to be. I think that, on the whole, the Chancellor of the Exchequer may fairly look forward to a very good year of business, assuming there are no foreign complications. There is no doubt that the lifting of the shadow of foreign complications on the horizon of the world's financial fields will be a very great incentive to new enterprise all over the world.

I was rather surprised that the right hon. Gentleman did not expect he would get any more money from stamps, because it is notorious that a very large number of company flotations have been held over for something like six months in the City of London owing to foreign complications, and that there will be a very large number of issues made which will increase the amount of stamps as soon as the international situation improves, as we may expect, in a short time. There is one thing I regret, and always will continue to regret as long as it exists, and that is that the right hon. Gentleman gave no indication whatever of his intention to abolish the Sugar Tax. The hon. Gentleman who spoke last spoke of the Income Tax as a war tax. For many years the Income Tax has become an important part of our financial structure, but the Sugar Tax was imposed deliberately as a war tax, and only as a war tax.

Mr. AUSTEN CHAMBERLAIN

No, no. When Lord St. Aldwyn imposed that and other taxes he expressly stated that he did not propose them merely to finance the war, but because he thought it necessary to widen the area of our taxation.

Sir A. MOND

I was under the impression it was certainly imposed to deal with the expenditure caused by the war at the time, and I am sure it was never intended to remain as a permanent part of our taxation; but whether it was intended or not, I think it ought not to be kept on. It is the most indefensible tax of any that exist in the whole of our system of taxation. After all, sugar is not only a prime necessity of food, particularly for children, but physiologists have come to the conclusion that a plentiful supply of sugar is of the very greatest importance to the growing child. We do not want any tax that makes the feeding of our children in any way more expensive. On the contrary, we want to improve their physical condition. Besides this, sugar is a raw material for a very large industry which has suffered by the imposition of this tax. To put a tax on an important food which at the same time is a raw material seems to me to be most indefensible, more especially in view of the relatively small amount which the Sugar Tax brings in. Surely this amount could be found in other ways. I do not see why we should place £12,000,000 to the National Debt and at the same time ask the working classes to pay a tax upon a necessary article of food. I think it is far more important that our children should get their food as cheaply as possible than that the National Debt should stand at a few millions less. There are many other ways of obtaining an equivalent revenue for that which is produced by the Sugar Tax. Our Income Tax is really a kind of hotch-potch unscientific classification. We want a more reasonable graduation of the Income Tax, and then it would easily produce the amount required to do away with the Sugar Tax. I am not sure that we have not gone too far in the direction of exemptions.

We have been told that the reason the lower limit of exemption has not been adopted is because it is impossible on account of the cost of collection. I was discussing this matter with a high official of a foreign Government, and I asked him, "How do you manage to collect the Income Tax on incomes as low as £45 a year?" He replied, "They are all engaged in some kind of employment, and we get the returns from their employers." I do not advocate that we should go as low as £45 a year in regard to exemptions, but I am sure that £160 is unreasonably high, and we have cut off in this way a large field of taxation if properly graduated. I do not think our Income Tax is too high. I see statements made in the newspapers that the Income Tax is 1s. 2d. in the £, but as a matter of fact it is nothing of the kind. Earned income is only taxed at 9d. in the £, but if you take those incomes under £700 a year, it comes to a lower figure still. I think we ought to deal with our Income Tax by percentages instead of by the present cumbrous method. Whatever method is adopted I feel convinced that the Sugar Tax is a great blot, more especially on a party which sets its face against taxes on food and raw materials. We ought not to be satisfied until we see the Sugar Tax taken off altogether, and I hope the Chancellor of the Exchequer will consider this point next year if he does not deal with it this year, because his mind is capable of conjuring up a few more millions of revenue without any grave dislocation of our national system of taxation. I do not think the right hon. Gentleman has derived the amount from the Super-tax which he ought to have received, and I have an impression that there must be a large number of people escaping the payment of that tax, because the figure seems so small relating to the number of people who are supposed to be in receipt of £5,000 a year. I think there is a leakage there which I hope the Treasury will find some opportunity of filling up. One hon. Member has alluded to the Land Duties. I would like to ask, How can the hon. Member expect an Increment Tax to bring in a large amount when there has not been time for the increment to accrue? When the same kind of taxation was undertaken in Germany they put the valuation twenty years earlier than their tax, and therefore they had twenty years to go upon. The yield of the Increment Tax is bound to remain small until you have had a period long enough for the tax to develop. Therefore the statement that these duties will never increase could only be true if we came to the conclusion that the land valuation of this country is always to remain the same.

There are other matters, such as the Increment Duty on property belonging to corporations which is only assessed at intervals, and which has never yet come in at all. Altogether I think it is much too early to judge of the yield of the Land Taxes or to base any calculations upon the expenditure which has been incurred. Anyone who has had experience of valuation knows that the setting up of the machinery is very expensive, but when the valuation has once been made, the keeping up of the machinery is a relatively inexpensive matter. We are really not spending an annual amount but laying down a capital sum, and in a business you would charge this money to the development account and not to the revenue account, because later on your expenditure would diminish and your expenditure increase. I still have confidence that these taxes will be more valuable as time goes on, and I have hopes that this valuation may serve a far more useful purpose than the taxes already introduced. I am certain that whatever party is in power, I do not think anybody will ever go back on the principles laid down in the Budget of 1909–10. Those principles have vindicated themselves, although we have been told that Free Trade finance was bankrupt, and that we could not go on without adopting a different system. We have been able to find more money for social needs without departing from the principles of finance which Chancellors of the Exchequer from time immemorial, or at any rate for many generations, have brought before this House. I think the right hon. Gentleman is to be congratulated upon his Budget, and I am sure that the whole country will be delighted to find that, while other nations under a different system have been struggling to maintain their financial equilibrium, poor Free Trade England has been able to find all the money we required upon the simple financial lines we have followed so long and so successfully.

Mr. WORTHINGTON-EVANS

The hon. Baronet the Member for Swansea, finished his speech with the assertion that we were this year following the lines we have found so successful in the past. I presume that he meant by that we were paying this year's expenses out of this year's revenue. The right hon. Gentleman the Member for Islington (Mr. Lough), who delighted the Committee with a speech which showed that he was beaming with happiness because there were no new taxes, congratulated the Chancellor of the Exchequer on the fact that he had been able to raise the necessary money this year without tampering with the Sinking Fund. It is upon that point that I wish to put a question to the Chancellor of the Exchequer. If I understood the right hon. Gentleman's figures, he finds that he has to raise, in addition to last year's revenue, something like £6,830,000, and the taxes which he expects to increase in their yield would amount to £7,200,000. He said that there were other deductions to be made amounting to £1,200,000, showing that the net increase of taxation would be about £6,000,000. But the increase of expenditure is £6,800,000, and those hon. Members of the Committee who will be congratulating themselves and the Chancellor of the Exchequer upon meeting the expenditure out of revenue, will notice if these figures are correct that a sum of £850,000 is not going to be found out of the revenue of the year, but is being obtained from another source. Therefore the estimate of income and expenditure does not balance. Far from the increased yield of the taxes being sufficient for the increased expenditure, you have an actual deficiency of £950,000.

How is that converted into a small surplus of £150,000? It is very simple. There was a surplus last year of £1,000,000, or actually £1,500,000, and the Chancellor of the Exchequer helps himself to £1,000,000 out of that surplus and brings it into this year as if it were revenue of this year. There is no other explanation, as far as I can understand. Without going into detail, I may point out that last year there was set aside £500,000 for Uganda and £1,000,000 for the Navy, which was placed temporarily to the Exchequer balances for the purpose of being drawn upon if required. There is no doubt about that, because in this House the Chancellor of the Exchequer, on the 24th June, dealing with the contingencies for which the whole £6,500,000 was held up, said that all the contingencies except the naval one had disappeared, and he did not require any part of the £6,500,000 except the £1,000,000 for the naval contingency, and he stated that he had a new object to which he wished to devote £500,000, and that was Uganda. Instead of using the £1,500,000 for those purposes, the revenue for last year was so abundant that the money was paid out of the surplus revenue of last year, and therefore that sum which was set aside remains in the Exchequer balances The Chancellor of the Exchequer now says, "I have got a large naval expenditure this year so I will help myself to £1,000,000 out of that £1,500,000 to deal with the Navy this year." He is paying some of the ordinary expenditure of this year by using a sum of money which was freed owing to the abounding prosperity of last year, and he is not paying the expenditure of this year out of the revenue of this year. Therefore, it will not do for the Chancellor of the Exchequer to say, "As I did not spend that £1,000,000 for naval purposes last year, and as that is carried forward to some extent this year, therefore I feel quite entitled to use it for this year." In dealing with this on 24th June, 1912, and speaking therefore of last year's accounts, he said:— This year the additional sum for which my right hon. Friend will ask will not exceed £1,000,000, but further heavy claims will fall in subsequent years as a result of the programme which he finds it necessary to outline."—[OFFICIAL REPORT, 24th June, 1912, col. 50, Vol. XL.] That particular £1,000,000 was for last year's expenditure. He knew then that there would be heavy naval expenditure in this year, and obviously and necessarily, if he is going to follow the principles which have hitherto governed Chancellors of the Exchequer, he has got to prepare for the expenditure of this year, known in advance as it was, and make the income of this year sufficient to pay for the expenditure of this year. Hon. Members have been congratulating the Chancellor of the Exchequer and themselves, so glad are they to escape from the fear of taxation which has overhung them, but, if they do congratulate the Chancellor of the Exchequer, let them do it knowing that he is not balancing his income and expenditure, except by resorting to a saving from last year and bringing it in as if it were income for this year, and that after having stretched the income to its utmost, for in the sums which are included as income of this year there is certainly £1,000,000 at least of arrears of taxation which is non-recurrent so far as the year is concerned. There are perhaps two other taxes which may exceed his expectations. The Stamp Duties, as my right hon. Friend the Member for East Worcestershire (Mr. Austen Chamberlain) stated, seem likely to exceed his expectations, and, for myself, I believe the Death Duties may quite likely improve, because the last quarter of the year has been considerably affected by the low price of securities and probably also by the unwillingness by those administering estates to realise estates for the purpose of paying duty during the lowness of gilt-edged securities. If there is no further war trouble, and if gilt-edged securities rise in consequence, those sort of hesitations and postponements are not likely to affect this year to the same extent. At any rate, valuations of estates coming under review this year ought to be better. We may therefore expect to find some relief from Death Duties. Giving the Chancellor of the Exchequer those two, which he has not claimed for himself, he will be bound to admit that he could not have balanced his accounts at all unless he had brought in as income of this year at least £1,000,000 of arrears which do not belong to this year really, although they do technically. I do not complain of his bringing those arrears into this year; he obviously is entitled to do so, but nevertheless they are not income arising in this year. They come from a previous year. Even then he could not have balanced if he had not borrowed £850,000 from the surplus of last year.

Mr. LLOYD GEORGE

I beg to move, "That the Chairman do now report Progress, and ask leave to sit again."

The hon. and learned Gentleman is always ingenious, but there is one statement he has made which is not quite accurate. He says that the income and expenditure of the year do not balance, and that we have had to go elsewhere for money in order to make up the deficiency; but, as a matter of fact, the £1,000,000 required by the First Lord of the Admiralty is not properly expenditure of this year at all. It is true that there is a good deal which has to be met this year, but it is not really expenditure of this year, and, inasmuch as it is expenditure of the past year, it is perfectly legitimate and proper that the income of the past year should meet it.

Mr. WORTHINGTON-EVANS

Has that ever been done before?

Mr. LLOYD GEORGE

The hon. Gentleman will not expect me to reply to that question without inquiry, but it is done in every other business in the world. He talks about it only technically belonging to this year, but what is technical is that you should have to go through all this process in order to do it. In any other business 31st March does not carry the consequences which it does in our national finances. I dare say you balance at the end of the year in order to see what is your position, but you carry forward both income and expenditure, and it is purely a book-keeping transaction. We are taking this £1,000,000 out of the year when the expenditure was incurred in order to meet it in the year when the expenditure has to be discharged. That is all. As far as the real expenditure of the year is concerned, the income is adequate to meet it. We are only taking £1,000,000 to meet expenditure which is proper to the year when the £1,000,000 was received. That is exactly the position, and I am sure that the hon. and learned Gentleman will recognise it is so. That is what happens in every other business in the world except ours. I have always felt that the consequences of 31st March were carried very much too far, and that our rules were infinitely too rigorous. I am not at all sure that the rules which apply to 31st March should not be reconsidered. I am not at all sure that they do not very often lead to increased expenditure of the Departments. You have the Departments with certain sums of money voted to them, and they know that if they do not spend them by the end of the year they have got to go back. I do not say that they constantly apply their minds to spending them, but there is not the same incitement to apply their minds not to spending them that there would be if they knew the money by some arrangement would be carried forward. I am sure in many cases that would lead to economy and to greater efficiency in the Departments. I have only one other point I wish to make, because I propose to follow the course this year, and to move that we report Progress at the end of my speech. This year I cannot carry the Resolution to the point of acceptance by the House, because under the Provisional Collection of Taxes Bill it is necessary that there should be a declaration that the Resolution should have statutory effect, and, inasmuch as that Bill has not yet received the Royal Assent, it would be idle for me to move a Resolution of that kind in anticipation of that event. Therefore I shall have to move to report Progress, and then on Monday next, when the Debate comes on, I shall move a Resolution in a form in which I hope it will be carried by the House.

Mr. T. M. HEALY

Is there any precedent for that course?

Mr. LLOYD GEORGE

There is no precedent for this course so far as the Resolution is concerned, but there has been an adjournment very early on Budget night, and I hope my hon. and learned Friend will see his way to agree to that which I think will be for the general convenience of the House. I hope it will not interfere with anything he has got to say on the matter when we come to the Debate on Monday next.

Mr. DAVID MASON

Will that be a general Debate?

Mr. LLOYD GEORGE

Yes, it will be a Debate on the whole of the proposals. Although one or other of the Resolutions will be taken, the Debate will not be confined to the subject matter of the Resolution, but will range over the whole of the financial proposals which have been placed before the Committee by me to-night. I think my hon. and learned Friend will see that it will be better that hon. Members should speak after they have had the full statement before them, and have had due time to consider what the effect of the proposals will be. The right hon. Gentleman (Mr. Austen Chamberlain) will probably commence the discussion on Monday—that is the usual course, and will then elaborate his criticisms. I think it is better that I should postpone my general reply to him until then. There is only one observation on his speech that I should like to challenge now. It might otherwise be misleading. It is with reference to the effect of the trade prosperity upon wages. He rather suggested that the wage-earning classes had not shared in the general prosperity by a rise in wages. Last year the rise in wages was £131,611 per week, and that affected 1,724,000 workpeople. That does not include railway servants and seamen, both of whom received considerable rises in wages last year as the right hon. Gentleman knows very well. The figure, therefore, is really higher that the one I have given. This year there has been a further increase of £64,000, which is more than double the increase of the first three months of last year, and that affects very nearly 1,000,000 workpeople. I am far from suggesting that the workpeople have had their fair share, but they have undoubtedly had a very considerable share of the prosperity that other classes of the community have enjoyed. I do not think it will be desirable for me to enter into any of the other questions which have been raised in the course of the discussion, and I shall therefore now conclude by moving that we report Progress and ask leave to sit again.

Mr. T. M. HEALY

In the unusual circumstances of the case, and as the right hon. Gentleman admits that the course he is taking is unprecedented and as I gather that we shall have full opportunity of presenting our special view, I shall not oppose the Resolution, the only result of which will be that we shall have an early adjournment.

Mr. AUSTEN CHAMBERLAIN

May I ask, Sir, formally, for your ruling? I know the Chair very properly desires, as a general rule, that, when an arrangement continuing a general discussion is arrived at between the two sides of the House, it should be submitted to and receive the approval of the Chair, and that it should not be assumed that what is binding on us is binding on the Chair. I am not quite certain whether it is necessary to consult you on this occasion because no Resolution has been carried to-night, and I therefore presume that we shall continue with a discussion of the same Resolution on Monday.

Mr. LLOYD GEORGE

I am not sure about that.

Mr. AUSTEN CHAMBERLAIN

May I ask whether you will concur in the arrangement suggested by the Chancellor of the Exchequer, that, whatever is the first Resolution proposed on Monday, the Committee shall be entitled to continue the general discussion which we have only just begun to-day?

The CHAIRMAN

I am glad that the right hon. Gentleman has raised that question. It is most desirable that arrangements of this kind should be confirmed publicly. I have no difficulty in saying that whatever Resolution is taken first on Monday, it may be the subject of a general Debate on the whole statement made by the Chancellor of the Exchequer.

Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.

Committee report Progress; to sit again To-morrow (Wednesday).

The remaining Orders were read and postponed.