BUDGET RESOLUTIONS: TEA DUTY.

HC Deb 28 April 1913 vol 52 cc825-945

Considered in Committee.—[Progress, 22nd April.]

[Mr. WHITLEY in the Chair.]

Tea.

Motion made, and Question proposed [22nd April], "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 … five pence,

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."—[The Chancellor of the Exchequer.]

Debate resumed.

The CHAIRMAN

With regard to the Debate to-day, I understand that there are some hon. Members who wish to discuss the question of the amendment of the law with respect to land valuation. It has been suggested by the Chancellor of the Exchequer that amendments of that character will be the subject of a second Bill this year. I myself see no difficulty in allowing the usual general discussion to take place to-day, but, of course, on the condition that we do not have a discussion at the same stage twice over. If that is agreeable to both sides of the House I am prepared to allow it.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

I suggested to the right hon. Gentleman opposite (Mr. Austen Chamberlain) that the best way of securing a Debate on that subject would be to regularise it by moving the Amendment, "That it is expedient to amend the law relating to the National Debt and Inland Revenue." If that were moved and taken, then undoubtedly, I submit, it would be perfectly relevant to discuss all these questions of amendment with regard to valuation. I shall have to withdraw the Resolution in its present form in consequence of the Provisional Collection of Taxes Bill having become an Act of Parliament.

Mr. T. M. HEALY

May I ask the Chancellor of the Exchequer whether it is proposed out of one Resolution to spring two Bills?

Mr. LLOYD GEORGE

No, there are three Resolutions. The two first are those upon which the Finance Bill will be founded, and there will be a second Bill which will contain general amendments of the law with regard to valuation, Income Tax, and other things.

Mr. T. M. HEALY

I wish to ask when it will be possible to raise the Irish question on this Budget. I understood when we assented to the Motion to report Progress the other night that it would be possible on this Tea Duty for us to discuss everything raised by the Chancellor's statement. I presume that arrangement will hold good.

The CHAIRMAN

I do not mean to say that to-day's Debate will be confined to the question of land valuation by any means, but only that there will be the usual wide discussion, although the three Resolutions will eventuate in two separate Bills.

Mr. T. M. HEALY

It is indifferent to us whether we take it to-day or to-morrow. All we claim is that we should be heard.

Mr. AUSTEN CHAMBERLAIN

The Chancellor of the Exchequer has alluded to communications which have passed between him and myself in an endeavour to arrive at an arrangement for the convenience of the whole Committee. If we were to have a general discussion comparable to that we have had in the past on the first Budget Resolution, you thought it was necessary in this case that the Resolution for the general amendment of the law on which the second or Revenue Bill will be founded should be taken at the same time as the two Resolutions on which the Finance Bill is founded. I expressed my concurrence in the convenience of doing that on the present occasion on behalf of my hon. Friends, but I venture to express the hope that you will preserve your own liberties and the liberties of the Chair generally in regard to our procedure in future years. The Chancellor of the Exchequer, for reasons he has explained to the House, has introduced a novel procedure in dealing with the Budget this year. I do not say it is entirely original, but, at any rate, it is different from that to which we have been accustomed in recent years. It is a little difficult for any of us to foresee exactly what the course of our Budget discussion in future years may be and what may be the most convenient way of taking the Resolutions or the discussion, but I venture to express the hope that something may fall from you before our discussion begins to-day that will preserve your liberty or the liberty of the Chair to rule apart from this precedent on future occasions if it should be found for the convenience of the House to do so.

Sir W. BYLES

May I ask you to explain to what extent this proposed discussion on land valuation will shut us out from a general criticism of the Budget?

The CHAIRMAN

I do not think anything I have said—certainly nothing that I have intended—will govern future procedure further than the very old and good principle that we should not have the same thing twice over at the same stage. On a future occasion the Resolution for amending the law might be deferred, but of course the Debate relative to that would consequently be also deferred. I think that would not in the least be prevented by that which is proposed to-day. In reply to the hon. Member for Salford (Sir W. Byles), under these conditions the Debate will have the full usual width on the second day of the Budget, and, although as I have said, I understand some hon. Members wish to devote themselves to the question of land valuation, that will not in any way restrict other hon. Members in their contributions to the discussion.

Mr. AUSTEN CHAMBERLAIN

May I say, in reference to the general course of the Debate, that I understand we are to have to-morrow devoted to the Budget as well as to-day?

Mr. LLOYD GEORGE

indicated assent.

Mr. AUSTEN CHAMBERLAIN

I understand further that, as long as we keep to the first Resolution which is put from the Chair, we may discuss any subject which is relevant to the Budget as a whole, either the Finance Act or the Revenue Act. I think it would probably be for the convenience of the Committee that we should keep before us to-morrow, as well as to-day, the first Resolution, so that we can have the two days for the general discussion with the greatest liberty to all Members of the House to raise what questions they like, and that we should leave detail Amendments until we get to the Bill itself.

The CHAIRMAN

Yes, on the understanding the three Resolutions will be taken at the close of to-morrow's proceedings.

Mr. MORRELL

May I ask whether your ruling as to the general discussion applies to to-morrow as well as to to-day?

The CHAIRMAN

I have just answered that question.

Mr. LLOYD GEORFE

Under the Provisional Collection of Taxes Bill it was necessary not merely to have a Resolution, but also a declaration in the Resolution "that it is expedient in the public interest that the Resolution shall have statutory effect." I propose to withdraw the Resolution as I moved it last week, because I moved it before the Bill had received the Royal Assent. I shall have to move it in a form to bring it within the purview of what is now an Act of Parliament.

Mr. T. M. HEALY

Will this in future be the stereotyped form?

Mr. LLOYD GEORGE

It is the statutory form now.

Motion, by leave, withdrawn.

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 … … five pence, and it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Mr. PRETYMAN

Taking advantage of your ruling, I propose to offer a few general observations upon the speech made by the Chancellor of the Exchequer last Wednesday, and then I also propose to address myself particularly to examining the result of Part I. of the Budget of 1909–10. I think the Committee will agree that there was a considerable difference between the matter and the manner of the Chancellor of Exchequer speech on Tuesday. The matter of the speech was extremely optimistic, but the manner was far more subdued than the right hon. Gentleman's Budget statements have usually been. Judging from his personal demeanour, I began to hope that the Chancellor of the Exchequer had really realised the situation into which his finance has placed us, and I was encouraged in that because I thought he seemed considerably impressed by the figures of £195,000,000 for which he was budgeting. But I am bound to say that in the course of his speech I had hoped to hear him deal with the situation from that point of view. I had hoped he would have really faced it, and have explained to the House what the real financial situation is, because it is not really expressed even by the figures of £195,000,000. To arrive at the real situation of our national expenditure one has not only to take that sum of £195,000,000, but you must add to it a sum which, if not already £20,000,000, will very shortly approximate that figure, in the form of direct contributions under the Insurance Act. It is inextricably mixed up with that part of the Insurance Act which is levied in the general taxation of the country, and, therefore, it is perfectly clear that in considering the weight of the financial burden on the people of this country that £20,000,000 is as necessary to be included as any part of the £195,000,000.

In addition to that, we have to consider, as part of the national expenditure, that portion of our national spending which falls at the present moment on local rates. I have here some figures given by the President of the Local Government Board recently to my hon. Friend the Member for the Wilton Division (Mr. C. Bathurst). They were for 1910–11, apparently the latest available date, and the situation is certainly worse since that date, so that it cannot be suggested that the figures in any way understate the position. The services are clearly of a national character. What are they? For police and police stations, £3,120,000 is paid out of the rates and £3,050,000 out of Exchequer Grants. Lunatics and lunatic asylums, £980,000 out of rates and £200,000 out of Exchequer Grants. Education, £14,260,000 out of rates, £13,330,000 out of Exchequer Grants; highways, £12,730,000 out of rates; £1,230,000 out of Exchequer Grants; Poor Law, £11,750,000 out of rates, and £2,500,000 out of Exchequer Grants; total, £42,650,000 out of rates and £20,260,000 out of Exchequer Grants. It is perfectly clear that a very large proportion of the £42,000,000 then payable—it now amounts probably to £45,000,000—at least, is for national purposes. It falls upon the local rates, but must be included in national expenditure, and a large proportion of it must eventually be budgeted for here by the Chancellor of the Exchequer. The demand for that has become insistent, and it cannot be much longer denied. In his Budget for 1909–10 the Chancellor of the Exchequer dealt with it as an urgent question, and he made promises to the local authorities which excited considerable hope in their hearts. In his Budget Statement last week, however, not one sentence was devoted to that subject.

Mr. LLOYD GEORGE

In my Budget Statement I specifically referred to the expenditure on roads and education.

Mr. PRETYMAN

The right hon. Gentleman may have referred to them, but I did not hear him say one word which held out any hope whatever of relief to the local authorities in respect of that expenditure, at the expense of the National Exchequer. On the contrary, we are led to expect there will be another Education Bill—it was mentioned in the Speech this year—and it is quite obvious that another Education Bill would mean further expenditure. So far from offering encouragement to the local authorities the whole trend, tone, and method of the Chancellor of the Exchequer's speech was in an opposite direction, and the question of the relief of rates was given a very serious set back for this reason. The one outstanding feature of the speech was that we are now spending up to the last penny of our income in a boom year. Where is relief to come from for any purpose without fresh taxation? The Chancellor of the Exchequer was evidently very loth to have fresh taxation. He told us, in another part of his speech, that the new taxes imposed only three years ago were now producing something like £27,000,000. It is rather a large order after imposing new taxation to the tune of £27,000,000 to come down and propose more taxation. The Chancellor of the Exchequer has gone to the utmost limit in stretching possibilities. There is to be a good harvest year, in order to realise his expectations; it is to be a good harvest throughout the world. There are to be no strikes, and no labour troubles. It is to be a boom year without a spot, and, as one of my hon. Friends suggests, it must be a hot summer, so that the consumption of liquor will be abnormal. The right hon. Gentleman suggested that one of the deficits in his revenue last year, which he hoped to make up this year, was due to the wet summer, and the assumption I naturally drew was that he expected this summer to be of a much warmer and pleasanter character, when the consumption of beer will be more considerable—a perfectly fair deduction to draw.

Mr. LLOYD GEORGE

It is as fair as most of your deductions.

4.0 P.M.

Mr. PRETYMAN

That is simply rude. If the right hon. Gentleman did not mean that, what did he mean? Taking all that into consideration, it is perfectly clear that the expectation that local rates will get any relief is again condemned to the Greek Kalends. Further than that, it is perfectly well known that more social reforms will be proposed, and when we are spending here up to the last penny the tendency—and it is one of the most regrettable things which this House is in the habit of doing—is to pass legislation which involves expenditure, and then instead of the Chancellor of the Exchequer meeting it—he has made the Treasury a great spending Department—he asks the House to throw the burden upon the local authorities. If there is to be more social legislation, it is perfectly clear it will be the local authorities who will have to pay for it, and not this House—at any rate during the current year. The real situation we have to face is that the right hon. Gentleman has budgeted for £195,000,000, including £27,000,000 of new taxes only three years old, that we are living up to the last penny of our income in a boom year, and that at the same time we have to face large future demands for social reforms and the relief of local rates. That is the real position, and I cannot regard it as a satisfactory one. The Chancellor of the Exchequer, when faced with criticism of this character, is always ready to fall back upon one plea—he never ceases to pride himself upon the amount of National Debt which he and his predecessor have paid off. I am sure the House has heard the details of that many times, and we know it by heart. He says he has reduced our capital liabilities, but in regard to the figures themselves he must have noticed—it was pointed out by my right hon. Friend the Member for East Worcestershire—that of the £102,000,000 which he claims to have paid off a considerable sum represented a surplus left over by his predecessor. I do not know whether he includes that as Debt which he and his predecessor have paid off. He also claims credit for the amount they hope to pay off during the current year. I know that figures can prove anything. I remember Sir John Fisher telling me that he asked his secretary on one occasion to bring him the figures on a certain subject, and the secretary's reply was, "I beg your pardon, Sir, but, before I fetch the figures, will you kindly tell me what you want to prove?" When the Chancellor of the Exchequer wants figures he takes care to provide an answer to that question. The Chancellor of the Exchequer dealt with the matter in a perfectly legitimate and proper form when he talked about reducing capital liability. What we have to look at is not how much our capital liability has been increased or reduced in one particular item, such as that of National Debt, but to what extent our capital liability has been increased or reduced over the whole area of national expenditure. That seems to be the only aspect from which we can fairly look at this matter. The Chancellor of the Exchequer has himself told us on a previous occasion that the capital liability to which the country will be committed through his own social legislation will amount to no less a sum than that which represents an annual income of £42,000,000. That is almost exactly double the whole service for the National Debt, so that the general result of the Chancellor of the Exchequer's action on the capital liability of this country is a reduction of £100,000,000 on the capital of the National Debt, and, taking his own figures, an increase in a corresponding annual liability of £42,000,000. I am afraid that even the reduction of £100,000,000 in the National Debt appears very trifling in respect of the enormous increase.

It may also be remarked that whereas the service of the National Debt and the liability upon the National Debt is a constantly diminishing quantity, the liability for social reform is an increasing quantity. [HON. MEMBERS: "Hear, hear."] Hon. Gentlemen opposite cheer that remark. Surely we have to divorce finance from sentiment in these matters. There is not a single individual in this Committee on either side who does not approve of the spending of money, when that money can be properly found with due regard to the requirements of the country for national defence and the capability of the country to pay the taxation. There is not a single individual who does not acclaim the expenditure of the utmost penny on social reform, but in addition to looking at the matter from the sentimental standpoint, and from our desire for social reform, is there not one week in the year when it is legitimate to count the cost? The object of hon. Gentlemen opposite is plain. The Chancellor of the Exchequer himself has challenged us over and over again to say to what item of this expenditure we object. That is the favourite gag or patter on such occasions. Surely you cannot be taken as objecting to the principle of old age pensions or to the principle of insurance when you ask the House of Commons to look at the total cost! The criticism is not whether old age pensions or insurance are in themselves desirable, but whether we can afford the total expenditure to which we are committed to-day and in the future, and, secondly, is the best value being obtained for the enormous sums of money to which we are committed. That is surely a legitimate criticism, and that is the point of view from which I approach it. I do not approach the matter as an opponent in principle of either old age pensions or insurance, but I do approach it as a financial critic of the enormous liabilities, present and future, to which this country is committed. We are bound, as those responsible for the finance of this country to carefully weigh this expenditure from two points of view, namely, whether we are obtaining the fullest value for these enormous sums of money, and on what basis of taxation the increased growing future commitments are going to be levied. The spirit in which the Chancellor of the Exchequer approaches these questions is not one which makes for stability or security. The spirit in which this legislation is proposed is far more dangerous to the country than even the expenditure itself. The Chancellor of the Exchequer leads the recipients of these Grants to believe that they do not pay towards them; that one man is to receive a benefit for which somebody else is to pay. That is a most dangerous spirit to introduce into legislation. The Chancellor of the Exchequer surely does not deny that. This is what he said at Newcastle:— Was it not a splendid thing to be able to choose the doctor whom you liked and have someone else to pay for him? The Chancellor of the Exchequer seems to think that he can sit on that bench in his capacity of Chancellor of the Exchequer and preach economy and compare his Budgets with those of Mr. Gladstone. Then he thinks he can shed his robes, go on the platform, assume the rôle of demagogue, and that the people will forget he is Chancellor of the Exchequer. He thinks that what he says as a demagogue does not count, and that it is only what he says here that counts. I assert that what he says as a demagogue in the country counts for very much more than what he says here. I am suspicious that it is the real man who spoke at Newcastle, and that his attitude here is assumed and forced to meet the requirements of an uncongenial situation. I greatly prefer the spirit of the speech of the hon. Member for Halifax (Mr. James Parker), who followed my right hon. Friend last week. The hon. Member made use of a very pregnant sentence. I do not know whether if was a considered sentence, or whether it represented the views of the party of which he is a Member. He was asking for the removal of indirect taxation, and particularly of the duties upon tea and sugar, which, he pointed out, fell very heavily upon the working classes of the community. The hon. Member said:— I am looking for the day when the Chancellor of the Exchequer will remove the whole of these three taxes— he meant the two taxes— even if he has to put a very small direct tax upon each unit in the State."—[OFFICIAL REPORT, 22nd April, 1913, col. 297.] That was a very remarkable sentence. I do not know whether it meant that a proposal was coming from below the Gangway opposite that direct taxation should be levied on every unit in the community in order that everybody in the community might realise their responsibility. If so, I am bound to say that the suggestion shows a greater realisation of the dangers of the situation than anything said in the speech of the Chancellor of the Exchequer. I wish to say a word upon the new proposal, which is one of great importance, namely, the proposal for dividing the Finance Bill. I understand that in future we are to have two Bills, one dealing with temporary taxes, and the other a Bill for amending any permanent taxation, which is to be in the form of a Revenue Bill. My comment upon that is that it is another stage in the process of adding to the power of the Cabinet and of depriving the House of Commons of its power over finance. May I say in regard to precedents that I am sure the Chancellor of the Exchequer and the Committee will agree the situation to-day is wholly different, and the conditions under which business is carried on to-day are so wholly different, that the conditions governing the precedent at the time the Finance Bill was properly subdivided cannot possibly regulate the proceedings to-day. There is a nominal precedent. The conditions to-day are so wholly different that the precedent cannot count for much. Hitherto the necessities of the Government have been the opportunities of the House. It is only when it is necessary for a Government to get a particular Bill through within a particular time that there is any opportunity for the House to discuss that Bill. The temporary taxes of the year are necessary to the Government, therefore the Finance Bill containing those temporary taxes must or ought to be introduced at a reasonable period of the Session, and an opportunity must be given to discuss it. But under the new conditions the part of finance which is the necessity of the Government, namely, the temporary taxes, will be segregated into a Bill by itself. That Bill will be more or less non-contentious, and it will be passed early in the Session by the necessities of the Government and by the terms of the Provisional Collection of Taxes Act, which has just become law. The Revenue Bill, even though it may contain Amendments which the Government desire to make, will not be vital to the Government or necessary to them, and apparently from the suggestion in the Chancellor of the Exchequer's speech that Revenue Bill can be taken at a later period of the Session. I know what happens to Bills which we are told are going to be taken early in the Session, but what will happen to Bills which we are told are only to be taken late in the Session I cannot imagine. The opportunities for criticising finance are going to be effected by the division into two Bills. We have not yet had a definite statement from the Chancellor of the Exchequer upon that point, therefore I hope he will deal with it in his reply, and that we shall receive proper opportunities for discussion on Revenue Bills. There is one matter arising out of that of which the House has a right to complain. We have been for the last fortnight discussing the Collection of Taxes Bill, and the Chancellor of the Exchequer must have known that all the time that Bill was under discussion he was about to make this proposal. This proposal had a most definite and important bearing upon the whole of these discussions and upon the nature of the Amendments which will be moved from this side of the House. The Chancellor of the Exchequer, instead of dealing openly with the House and telling them that he proposed to introduce—

Mr. LLOYD GEORGE

dissented.

Mr. PRETYMAN

We can hardly believe that the Chancellor of the Exchequer last week was unaware of his intention to divide the Finance Bill. We hall, of course, hear what he has to say upon it, but the way it presents itself to us is that he kept that card up his own sleeve, that he did not deal openly with this side of the House, and that he allowed the discussion to take place and Amendments to be moved here which would have been dealt with in a wholly different spirit if the whole situation had been known to every Member of the House. I want to say one word upon another subject, which the Chancellor of the Exchequer is never tired of trotting out in vindication of his own finance, and that is the Military and Naval Works Loan. The Chancellor of the Exchequer takes great credit to himself and his predecessor—

Mr. LLOYD GEORGE

My predecessor!

Mr. PRETYMAN

To the Prime Minister—for having transferred that expenditure from loans to the ordinary Votes. He tells us that the late Government borrowed money which ought to have been paid out of revenue. He tells us that we have borrowed money for all sorts of purposes.

Mr. LLOYD GEORGE

When?

Mr. PRETYMAN

This is the Chancellor of the Exchequer at the City Liberal Club.

Mr. LLOYD GEORGE

Oh!

Mr. PRETYMAN

That ejaculation is very interesting.

Mr. LLOYD GEORGE

I only thought the hon. Gentleman was referring to my Budget speech.

The CHAIRMAN

I suggest that there should be no interjections.

Mr. PRETYMAN

Perhaps the City Liberal Club is a sort of half-way house between Newcastle and this House. This is what he said at the City Liberal Club:— The late Conservative Government were in the habit of borrowing money for purposes that really ought to have been met out of current revenue. Mr. Asquith had properly changed that, and, instead of borrowing money for all kinds of purposes, he paid out of the current income of the year. It is a much more honest method. It is really remarkable how iteration convinces. Here the Chancellor of the Exchequer has iterated this kind of statement so frequently that hon. Gentlemen opposite imagine they have a splendid party cry. They have all swallowed it, and they all believe it. They have never taken the trouble to study the history of the question. They build party capital upon it with perfect good faith. I do not complain of that. It is the Chancellor of the Exchequer who knows and ought not to deceive them. What are the facts? This system was not inaugurated by a Unionist Government. It was inaugurated by Sir William Harcourt and a Liberal Government, and all that the Conservative Government did was to adopt the practice which Sir William Harcourt proposed from that Box as Chancellor of the Exchequer of a Liberal Government. There is more in it than that. What is the real inwardness of it? The real point is this: It is not a question of honesty or dishonesty. It is not a question of whether it is right or wrong to put money upon a loan or upon the Votes. The point is simply this. The reason why our Government maintained that system was because Consols were then much above par, and it was a better financial transaction rather than to raise new Consols at 112 to use the surplus which then existed. That was the position. Now I suppose the real fact is that it is because of the depression of securities under the present Government that it is a wiser financial transaction to spend the money out of Votes than to borrow it with Consols at 74. That is really the whole thing. Each Chancellor of the Exchequer, under the circumstances obtaining during his tenure of office, has dealt as he thought right, and I believe on sound lines, with the finance of the country in regard to that particular point.

An HON. MEMBER

What were Consols when the Unionists were in office? They were not 112.

Mr. PRETYMAN

They are now seventy-four. That is the whole position. The Chancellor of the Exchequer instanced Rosyth as a great capital asset. It is quite true that Rosyth is a great capital asset, and great and violent attacks were made in the House at the time of the purchase of Rosyth on account of the enormous expenditure upon it. We were told that an immense expenditure had been incurred, and that no less than £112,000 had been paid to the late Marquess of Linlithgow. That included mineral rights and the whole value of that large property, and since then the Government have sold the stone to a contractor out of one quarry upon the estate for £118,000. They have got the whole estate and £6,000 into the bargain. I do not know whether we shall hear any more complaints about that.

I desire now to leave the general question and come to Part I. of the People's Budget. It is very remarkable how little we hear about the People's Budget now-a-days from the other side of the House. There is a conspiracy of silence in regard to the People's Budget. The Liberal Press criticise it. There have been some very strong articles in the "Manchester Guardian" and in the "Daily Chronicle" upon the Lumsden case and what arises out of it, and the Liberal Press is now open to Liberal complaints of the results of Part I. of the People's Budget. Public bodies, such as the Architects and Surveyors' Institute and the Central Chamber of Agriculture, and non-political associations of builders, are all bitterly complaining of the results of the People's Budget. Recently hon. Members representing Wales have received memorials from their constituents. A memorial was recently sent from the Welsh quarrymen to certain Welsh Members complaining of the results upon them of the People's Budget. I want to know what good has this particular portion of the People's Budget done, and what good is it ever possibly going to do. We know a great deal of the harm that it has done. We know that it has done the gravest injury to the building trade; we know that it has done the gravest injury to small property owners; to allotment holders, and to market gardeners, and it is a huge expense and worry to all property owners. We had a figure given us the other day. No fewer than 550,000 occasional valuations had been made to raise some trivial £2,000 or £3,000 of Increment Value Duty, and in every one of these 550,000 occasions there is a fee of a guinea on getting the Increment Duty stamp affixed. But that is as nothing to the indirect expense and anxiety and worry and insecurity which is thrown upon property owners of every description. Then it is very costly to the State. The right hon. Gentleman has just sent me an answer to a question. The total yield of the Land Value Duties up to 31st March of this year was—Increment Value Duty, £23,000 odd; Reversion Duty, £70,000 odd; Undeveloped Land Duty, £129,000 odd; Mineral Rights Duty is included, but that is not Land Value Duty.

Mr. LLOYD GEORGE

Read the answer I have given.

Mr. PRETYMAN

I believe I am entitled to read as much or as little as I choose of the answer. It is stated here "Mineral Rights Duty, £1,234,000," but that is not Land Value Duty; it is Super-tax pure and simple. It is not based upon valuation; it has nothing to do with valuation. There was to be a Mineral Rights Duty upon undeveloped minerals. It was to be a means of bringing all the minerals of the country into work and penalising those who sat upon their minerals and refused to allow them to be worked for the benefit of the community. Without a word at that time the Chancellor of the Exchequer would do anything. Now he is beginning to be found out. He turned round and, without really practically any word of explanation or excuse, took the whole of the duty off the minerals which were not being worked and placed a Super-tax upon the minerals which were being worked. Really, a more extraordinary incident in our finance hardly exists. Then he claims this Super-tax on minerals, which is simply based on nothing else but the income which is being derived from worked minerals. He actually claims that and enters it as one of the Land Value Duties and as a duty connected with the valuation. Valuation has nothing whatever to do with it, good, bad, or indifferent. Surely even the Chancellor of the Exchequer, who has great courage when dealing with facts and figures, cannot profess to set the yield of the Mineral Rights Duty against the cost of the valuation, with which it has no more to do than the ordinary Income Tax. Therefore, though I have read that figure, it has nothing whatever to do with the question. The Reversion Duty does not depend upon valuation; there are only two, but we will give him the Reversion Duties. There is £23,000 Increment Duty, £70,000 Reversion Duty, and £129,000 Undeveloped Land Duty. The total cost of valuation, including the cost of collecting the duty, incidental services, and the cost of issuing Form IV., offices, stationery, up to the same date, has been £1,393,000. The total number of officials engaged in the land valuation office was 4,153, and the total figure of their annual salaries was £492,620, so that that represents the cost to the country. That is not much good up to the present, anyhow. It produces, as these figures prove, no revenue. It is the cause of endless and costly litigation, and how many years of litigation it will take to settle all the-points which this most complicated and intricate Statute raises passes my comprehension. New points arise every day, and the Revenue Department claim that no single case is a real precedent for others, and there must be obviously in every unit of valuation some feature in the unit itself, or the conditions under which it is developed, held, or owned, which will differentiate it from other units. Therefore, no case is accepted as a precedent, and in the case of a valuation every owner who makes a claim has either of these alternatives: he has either to accept it, whether he believes it is just or not, or fight it in a Court of Law. Another evil is that it has turned the Treasury into little else than a den of usurers. The Treasury officials are driven to seek for money under this Act, but surely the responsibility of the Treasury must be to assist the subject to the knowledge whether the claim is properly made out or not. I will give a case in point. Take the claim which was referred to in question and answer in this House—the, claim with respect to a Kennington Church site. The Kennington Road site was one set apart for a church. The Treasury has put a valuation upon it of £24 for Undeveloped Land Duty. Of course, they know perfectly well, or ought to know, that that site is subject to the restriction that it can only be used for a church. It is quite clear that it is rendered valueless for any general purpose, and no Land Duty can be levied upon it. That is the kind of thing that is going on all over the country, and I say that that is debasing the Treasury to a use which it never was used for before. It raises the rents of working-class houses, and obviously it must have that effect.

What can be said in favour of this system? I have listened attentively to all that has been said in defence of these taxes, and it boils itself down to two points. We are told that it increases the yield of the Death Duties, and then we are told that this Doomsday valuation is going to be of the greatest, use for some future purpose. I have heard no other defence of it than the two I have mentioned. In regard to the first—the increased yield of the Death Duties—my hon. Friend for one of the Divisions of Cumberland dealt with that point in the Debate last Wednesday, and pointed out, what I have pointed out here before, that in October, 1909, before this Act had been passed, the Chancellor of the Exchequer stated to the House that he had created a Valuation Department at Somerset House to deal with the Death Duties, and to bring the valuation of realty up to its proper point. The right hon. Gentleman claimed then that he had increased the Death Duties in the past year. In the year ending April, 1009, he said, he had increased the revenue from these duties by £1,300,000. There was nothing whatever in the Budget of 1909–10 which altered the method of valuation, except in respect of the twenty-five years' limit. Therefore, under the law as it stood after the passing of Sir William Harcourt's Budget in 1894, it was competent for the Treasury and their valuers to take the fullest precautions that the true value was obtained on every unit of realty in the country. The Chancellor of the Exchequer claimed that we were doing it then, and to come forward now, after the event, and say that this enormously costly valuation has resulted in the additional sum from Death Duties is really unfair, and misleading the House. Any additional yield from the Death Duties through better valuation could have been attained, and was being attained, before the Budget of 1909–10 was passed at all, and it cannot possibly be credited in any shape or form to the Valuation Department as at present constituted.

I come now to a point which is of the greatest importance, and that is the claim as to the great value of this valuation for future purposes. I shall deal rather fully with this point. Surely, if the valuation is to be worth anything, it must be reliable and uniform, or otherwise it cannot command general confidence. I hope to be able to show to the Committee that this valuation is neither reliable nor uniform. I will deal with it from the point of view, in the first place, of urban valuation; and secondly, of rural valuation. Surely, one of the most important items in any one of these valuations is the deductions which have to be made. Some of these deductions ought to be automatic, such, for example, as the one I referred to just now. The deductions are divided into two parts. There are the deductions under the earlier part of Section 25, which include those in respect of removal of buildings and trees, restrictive covenants, copyhold, tithe rent-charges, and so on. These are what may be called automatic deductions, and later on there are other deductions which the owner is entitled to claim for improvements he has made, goodwill, and matters of that description. In regard to the first, as I have suggested, there is a special responsibility on the Valuation Department to see that these automatic deductions are properly made, but they do nothing of the kind. They leave the owner to protect himself, and these automatic deductions are frequently not made in respect of such matters as leaseholds and restrictions. Another point which has some bearing on the question has reference to fixed charges. These are of two characters. There are the fixed charges of feus and chief rents, and there are what are practically fixed charges in respect of ground rents of 999 years. In the case of restrictions what happens is this: The owners who are well enough off to employ professional advice do claim these deductions, but small owners, who are numbered by thousands, who cannot employ professional advice, and who do not understand what "restrictions" mean for the purpose of deductions do not get the deductions made. The result is that you have one class of property with the deductions made on one basis, and another class with the deductions made on another basis. Therefore you have a total want of uniformity in the making of these deductions. When you come to fixed charges you have certain properties identical in character and no doubt identical in value, and in the matter of deductions different methods are followed. As to property where there is a 999 years' ground rent, that is not a deduction, and therefore you have on a small property a ground rent of £5 a year, but where it is shop property you will have a site value of £100, which is a higher unit than in the case of those where the smaller ground rent is in the nature of a chief rent or feu rent. The real weakness is that a statutory value is fixed by the Act after the mere lapse of sixty days.

You may divide the whole property in the country roughly into two categories. You have those units of valuation where the owners have objected, and those units of valuation where the owners have done nothing, and where the statutory value has been fixed merely by the lapse of sixty days. If it could be shown that the valuations originally made by the valuers were in fact reliable, and were as a rule unquestioned and accurate, and that when the owners of properties made objections, no alteration was made, then you would have a right to suggest that the valuation was uniform. But you find the fact is that there is hardly a single valuation—and really no case has come to my notice—where the value put on a property by the valuer has not been the subject of alteration where the owner has had professional advice. Many of the cases have been brought before the House. There was the case brought forward by Mr. Holmes Ivory, where a valuation of £20,000 was increased to £45,000. There was a case which, I think, was not brought before the House. It was one in which the hon. Member for one of the Divisions of Leicestershire two years ago had his attention called by certain property owners at Hinckley, who considered that their property had been grossly undervalued. They approached the hon. Member, who went to the Valuation Department on the subject, with the result that they altered all the valuations on the plea that the valuer who made them was not very well at the time they were made. There are tens of thousands of such valuation which have been made in other parts of the country, and we do not know whether all the valuers were in the best of health when they were made, but none of these have been altered, as in the case at Hinckley. Then we had the famous Richmond case, where a property was valued at £500 odd for Death Duties, and at £375 for land valuation. There was also a case at Chatham where one Government valuer valued land at £450, and another Government valuer came along and valued it for Undeveloped Land Duty at £845. We had the case at Wakefield, where two acres of land had put upon it a statutory valuation of £975. That land stood in the Government valuation at £975, but in the open market it was sold for £350 after several endeavours to sell it by private treaty. I do not know whether the House prefer the market value or the statutory value of £975. The Chancellor of the Exchequer told us in his Budget speech last week that he had been consulting business men as to the probabilities of trade in the coming year. I wish he would consult business men who know something about land before the Department make valuations of this character, because I think he will find that, in the opinion of business men, the market test is a better test than the statutory valuation put on land by officials of the Valuation Department. At Norwich there was a valuation amounting to £1,400, which was altered, after representation had been made by the owners, to £4,000. There was another case of property where the valuation was altered £100,000 in five hours. These cases could be multiplied ad libitum from the experience of every practical valuer. You have these things in thousands of valuations—I do not think that I should be wrong in saying millions—which are fixed simply by the lapse of the sixty days; and to say that those valuations fixed in this way, and on the basis which I have just mentioned, are to be the great Doomsday Book on which we are to base future taxation is not a proposal which would ever be made by a responsible Minister. Look at the effect of the test cases. Here are some score of test cases on important points before the Courts. When those test cases are decided the result will affect millions of valuations already made.

Mr. LLOYD GEORGE

indicated dissent.

Mr. PRETYMAN

They will all have to be altered. We have had the answer from the Chancellor of the Exchequer that if the decision in the test case affects others—

Mr. LLOYD GEORGE

Certainly, if it affects others.

Mr. PRETYMAN

That is what I mean. A large proportion of them must involve some alteration in the law, and the Valuation Department are now making the valuation, even in cases where the inferior Court has decided against them, as if those decisions had not been given, and they are still making them on their own basis, disregarding the decisions of the Referees and the Courts until the decision goes to a final issue in the House of Lords. How long that will take in all these cases I cannot say. Take, for instance, the Deptford case. The point at issue is very simple—whether any allowance should be made for land given up for roads where small properties are being built on land, part of which is occupied by houses and part of which has been given up by the owner for widening roads. The Referee in that case decided that an allowance is to be made for a piece of land which has been thrown into a road. That affects probably hundreds and thousands of valuations of small house property in every part of the country, but the Valuation Department are making no allowance for land given up for roads, holding to the policy that such allowance can only be given if the final decision in the case is in accordance with the decision of the Referee, and as it is probable that it will be decided that land given up for roads is to be the subject of allowance, all those hundreds of thousands of valuations are wrong and will have to be altered.

I come now to the special valuation of premises, which is a most serious matter. There are many large and important industrial establishments in this country which have expensive premises specially constructed for the purpose of the trade in which they are engaged. They have borrowed money upon the security of those premises. Those premises stand in their books at a given margin above the figure of cost. They are earning money upon that, and that is a perfectly legitimate and proper method of keeping accounts. What the Chancellor of the Exchequer says is that we ought to consider the value of the property as what it would fetch for a willing seller in the open market. But there are no willing buyers necessarily in the open market for special property of that description, and the view taken by the Valuation Department—and speaking as a plain man, I should say the correct view—is that you cannot attach a special value to property of that description. It is a very delicate and difficult subject to touch, but I may give one particular case when a property has always been standing at the value of £70,000, which has cost that money and is worth it, for the special purpose of the business, but yet is valued by the Valuation Department at £30,000. They say that if this property were put up in the open market by a willing seller, and there did not happen to be a special demand for this special purpose to which it has been applied, it probably would not fetch more than £30,000. Yet there would be the special value extending to £70,000, and the directors of the company are faced with the alternative either to ignore the Government valuation or to enter upon their books a valuation of £30,000 upon a property which is mortgaged for a much higher figure. The consequence is that that valuation is wholly unreliable. Here we are now in 1913 not half-way through a valuation which is already four years out of date. The valuers are now going about the country endeavouring to fix the value of property not at what it is worth to-day, but at what it was worth on the 30th April, 1909. It is really too good for "Alice in Wonderland."

I now come to rural valuation, which again is a most serious matter. In the first place we have in this unique Dooms-day Book, which is going to afford us such a uniform basis for future taxation, the site value of agricultural land estimated on a wholly different basis from the site value of urban land. Urban land, notwithstanding all the discrepancies, drawbacks, and inaccuracies to which I have referred, has, as the basis of the site value, that you are to deduct the whole of the value that is due to any improvement of any kind by the owner or his predecessors. You do not succeed in doing it, I dare say, but that is the principle on which the site value of agricultural land is supposed to be made. In the case of agricultural land, no such attempt is made. It gives a figure which has neither sense nor meaning to-day nor to-morrow. It is not the value to-day obviously, because you have stated frequently that on purely agricultural land no duty is to be charged. Therefore, so far as your present duties are concerned, you get nothing out of purely agricultural land. So far as the future is concerned, you get no sort of basis. For instance, you make a deduction in the case of rural land for the value of hedges and the value of trees, and a partial reduction for the value of building houses, on what is a most extraordinary principle. The value of the building is deducted but a certain amount of value is again added for value that might be due to buildings on somebody else's adjoining lands. That is a proposal beyond the rural mind altogether, and that is the principle on which this extraordinary figure is arrived at. You deduct for hedges and trees, and you do not deduct for stone walls, gates or sea walls, though they might have created the whole of the value.

For instance, in the Randall case, it was proved in evidence that the whole of the farm, which has been valued with the exception of a quarter of an acre, would have been destroyed by the sea if the sea wall were removed, yet not a penny of allowance is made for the sea wall. There is neither sense, or meaning, beginning nor end in it. It is obvious that a site value of that description can be of no future value as a basis for anything. If it has got no value for present taxation and no value as a basis for future taxation, why on earth are you going on spending the money making it? Then you have a very important item. We have asked the Chancellor of the Exchequer to-day whether tenant right is or is not included in the valuation by the Valuation Department, and there is no answer. The House will be amused at an extraordinary correspondence which has taken place on this point with the eminent firm of Messrs. Savill. They found, when they came to consider on behalf of clients the figures in regard to agricultural land, that it was very material to know whether tenant right, which is a very large item, was included. Tenant right includes all the manure on the land, the value of the feeding stock on the land, and many other, which come to a very large figure. Sometimes nearly half the value resides in the tenant in the form of tenant right and not with the landlord, and when they were considering a figure of valuation on behalf of their client they found that it was necessary to write to the Valuation Department and ask whether the figure included tenant right or did not include it. This matter arose, first, in regard to glasshouses which were used by a market gardener, and the first answer they received was from the chief valuer, Mr. Edgar Harper, who wrote on 20th January, 1913:— I have to acknowledge your letter of the 16th inst. and to inform you that it would appear correct to include glasshouses erected by a lessee in an estimate of total value—at least so long as they are due to remain part of the property. That seems rather important, and in reply Messrs, Savill wrote asking him whether that applied to all the other items of tenant right. They received no reply. They wrote a second time and received no reply. They wrote a third time and still received no reply. They wrote a fourth time, and after that they received this reply:— Your letters of the 23rd and 29th ult., and 4th and 8th inst., addressed to the Chief Valuer, having been referred to the Commissioners of Inland Revenue, I am directed to explain that, as you will no doubt appreciate, it would be inconvenient if they gave answers in general terms to questions relating to particular cases the full facts of which have not been before them. Each case will fail to be dealt with on its merits as the governing circumstances dictate, and I am accordingly to state that if you would furnish them with full particulars of any case in which the questions to which you refer have arisen, they will give the matter their consideration in the light of the facts which may be disclosed. On that Messrs. Savill began to ask questions on particular cases. In the case of the McIntosh estate, they wrote:— Referring to these provisional valuations, we shall be much obliged if you will kindly inform us whether the original total value or original gross value includes any sum representing the tenant right? This is the reply:— In reply to your letter of yesterday's date, the provisional valuations in respect of the above property were preferred and served in accordance with the provisions of Sections 25 and 26 of the Finance Act. 1910. They tried again, and they said:— We really want a plain answer to a plain question, as to whether in that particular case tenant right was included or not? This was the answer:— In reply to your letter of yesterday's date, if my letter of the 5th inst. does not give the information which you desire. I can only suggest that you would communicate with the Chief Valuer upon the question you raise. They then tried another case, and asked again the very specific question whether the value of the rhubarb was included in the total of gross value, and they received the reply:— In reply to your letter of the 18th inst., this valuation was made in accordance with Section 25 of the Finance Act of 1909–10, and your request for an alteration in such valuation is receiving attention at headquarters. Then they tried again, and asked in another case whether the provisional valuation included tenant right:— In reply to your letter, I have to state that the total value and the gross value are ascertained under the provisions of sections 25 and 26 of the Finance Act of 1909–10. 5.0 P.M.

There was a strong similarity between all these communications, and the rumour has reached me that a circular has been sent out from the central Valuation Department, advising the valuers not to attempt to answer these questions, but to give this stereotyped reply. Up to the present the Chancellor of the Exchequer has given equally evasive answers across the floor of the House. He told us that this was really a very difficult matter, because the custom varies in different parts of the country. Really, what that has got to do with it I fail to see! Surely, when there is a tenant right on any particular farm, all the valuer has got to do is to have that tenant right taken into consideration, and he is not concerned with the custom in other parts of the country, but is only concerned with the custom and tenant rights of that particular part of the country where the valuation is being made of a particular unit, and all he has to do is to consider it; but if the Chancellor of the Exchequer means the practice of the valuers differs, then where is this uniform valuation? The fact remains that up to now no answer whatever has been obtained, nor apparently can be obtained, as to whether the particular figure of the valuation served upon the owner of the land, and considered by his professional adviser, includes tenant right or not. That is not all. I did not speak unadvisedly when I referred to the base uses to which the Treasury is being put. There is a species of blackmailing going on in this matter of the Death Duties. When the Death Duty return has to be delivered, and the executors and trustees have agreed upon a figure as the value of the property, they are told that the account cannot be passed and settled unless they are prepared to agree that the same figure which they have accepted in regard to the Death Duties shall also be accepted for the total value under this valuation. That is a very improper proceeding. It is really nothing more nor less than blackmailing.

This question bears upon it, because it is perfectly clear that the principle of valuing an estate for Death Duties does not include tenant rights. Obviously, if I am any judge of the wording of this Act, my view is reinforced by another letter, from which I will quote:— In reply to your letter, I beg to inform you that the land was valued as if in the occupation of the owner. What does that mean? That means that the whole of the crops and tenant rights were credited to the owner. There you have a total being made which is to be the basis for the Death Duties in the future, and no wonder you get the Death Duties at so high a figure when you are charging them on property which is tenant right. So far that is the only basis of this great future Doomsday Book, which is to be the basis of future taxation, and it looks as if people were being charged Death Duties on property belonging to their tenants. It is perfectly clear you cannot accept that as the principle of agricultural valuation. How is it possible for any professional valuer or owner of land in any way to consider the figure which he has served upon him unless he gets a plain answer to the question as to whether it includes tenant right or it does not? I hope and trust that some person who receives the agricultural valuation will ask the question whether it includes tenant right or not, and if he does not receive a plain answer, then he should object to the valuation on the ground that it is improperly made, and until the answer is received he cannot possibly consider it or discuss it. Therefore it is quite obvious, so far as agricultural valuations are concerned, that the two reasons I have given—first of all, as to site value; and, secondly, the Question of tenant rights—are being wholly ignored, so that the agricultural valuations are more futile and useless than the urban valuations. I do not wish to repeat what I have already said, but I cannot help referring to the outcome of the Lumsden case, which has been debated two or three times, though the Chancellor of the Exchequer was not present on either of those occasions. I think he ought to have been present, because, as I venture to suggest, on one of those occasions his personal honour was really at stake.

The FINANCIAL SECRETARY to the TREASURY (Mr. Masterman)

It was a scandalous misquotation!

Mr. PRETYMAN

I will make the quotation again, and if the right hon. Gentleman can prove it is scandalous he had better do so. The quotation which I made was a letter from the Chancellor of the Exchequer signed "W. H. Clark," of the Treasury Chambers, and dated the 27th September, 1910, and written to the owner of a small house and property (Mr. Hodgson). The sentence which I quoted was this:— If, therefore, when you sell your property, the value of the bare land has not increased over the corresponding value on the 30th April, 1909, by an amount exceeding 10 per cent. of the latter value, Increment Value Duty would not be payable. Can anything be clearer than that?

Mr. MASTERMAN

I do not want to interrupt at all. The quotation which the hon. and gallant Gentleman made, and which I must confess puzzled me, is from a letter written by the Chancellor of the Exchequer to a prominent member of the Land Union. I read to the House at the time the context, and the context bore no trace of the construction which the hon. and gallant Gentleman put upon it, and everybody in the House realised that.

Mr. PRETYMAN

If the right hon. Gentleman will produce the letter he refers to, I shall be very glad to deal with it, but this is the letter which I produced, and which I now produce again. I will read the whole letter from beginning to end, and you will see if a word in it differs from the context.

"Treasury Chambers,

Whitehall, S. W.,

27th September, 1910.

Dear Sir,—With reference to your letter of the 20th inst., I am desired by the Chancellor of the Exchequer to explain that Increment Value Duty is a charge leviable on the excess of the site value of the land on the occasion for the collection of the duty, such as, for instance, the sale of the property, over the original site value as at the 30th April, 1909, and that duty is only chargeable when the excess amounts to more than 10 per cent. of the original site value. In arriving at the site value on each occasion the value of the building is eliminated. If, therefore, when you sell your property, the value of the bare land has not increased over the corresponding value on the 30th April, 1909, by an amount exceeding 10 per cent. of the latter value, Increment Value Duty would not be payable; but it is not of course possible to say in anticipation what increase might take place, and what duty consequently might be chargeable. I am to add that in arriving at the assessable site value of the land deduction may be made of any part of the total value which is proved to be directly attributable to works executed or expenditure of a capital nature incurred for the purpose of improving the land as building land, or for the purpose of any business, trade, or industry other than agriculture.

Yours faithfully,

(Signed) W. H. CLARK."

Mr. MASTERMAN

I do not want to interrupt the right hon. Gentleman, but the quotation I referred to and which I described as "scandalous" was from a letter to Mr. Edwin Evans, written by the Chancellor of the Exchequer, and either the Chancellor of the Exchequer or I will deal with that later on.

Mr. AUSTEN CHAMBERLAIN

May I ask you, Sir, whether it is in accordance with the courtesies of the House that the right hon. Gentleman should describe a quotation made by another hon. Member of the House as a "scandalous misquotation"?

The CHAIRMAN

It is certainly not a proper interruption, and it is one I have already deprecated to-day. It was made by the right hon. Member without rising in his place, and it is exactly those interruptions which lead to trouble. The right hon. Gentleman was referring to some past quotation, and I think it would be right that the interruption should be withdrawn.

Mr. MASTERMAN

After that suggestion, Sir, I, of course, entirely withdraw the interruption.

The CHAIRMAN

May I use the opportunity to again remind hon. Members that these interruptions, made by an hon. Member without using the proper form of the House and rising in his place, are the very things that most frequently cause difficulty. I hope hon. Members will bear that in mind, and discontinue the practice.

Mr. PRETYMAN

I am bound to say I have no recollection of the letter to which the right hon. Gentleman referred, but may I read from the letter which was written to the hon. Member for Tottenham:— On the contrary, unless the bare value of the land as land, apart from anything done to it in the meantime had risen, while the house is being constructed, he would not be taxed at all.

Mr. LLOYD GEORGE

That is the letter I think my right hon. Friend referred to, and it is not quite fair to quote the concluding sentence without reading the whole letter, in which the facts are stated, and when I come to deal with it I will show what it means.

Mr. PRETYMAN

I have got the whole letter here, and I will read it:—

"Treasury Chambers,

Whitehall, S. W.

28th October, 1909.

"My dear Alden,—I am greatly obliged to you for having called my attention to the pamphlet circulated by Mr. Edwin Evans in regard to the supposed effect which the Land Taxes contained in the Finance Bill may have upon the building trade. The alarm to which expression is given in this document seems to me entirely without foundation, and result only from a misapprehension of the provisions of the Bill. Indeed, as soon as the present period of uncertainty is over, the Budget, by causing land to be brought more quickly into development, can hardly fail to benefit the building trade as a whole. That has undoubtedly been the direct effect of taxes on undeveloped land wherever they have been applied. Let me now examine the concrete example given in Mr. Evans' pamphlet. I will quote it in his own words:—

	£	s.	d.
A building plot, of land, including the proportionate cost of roads and sewers, costs, say	70	0	0
Add interest, say 1½ years at 5 per cent., or roughly	5	10	0
Architect's, surveyor's, and agent's charges	7	10	0
Legal charges, conveyance, lease, Stamp Duties, etc.	10	10	0
Bonus to builder	20	0	0
Total cost	£113	10	0

Mr. Evans then proceeds to argue upon the assumption that the difference between the amount originally paid for the plot by the builder, including sums actually expended upon roads and sewers, that is £70, and the sum obtained for the sale of the ground rent, that is £123 15s., is the increment taxable under the Finance Bill.

This is of course a total misreading of the Bill in which we have taken the greatest care to safeguard all such cases. Under the Bill the taxable increment will be the difference between the value of the site, assuming it to be unbuilt on site at the date of the original valuation, and the like value on the date when the duty becomes chargeable. It is clear that a large part of the value of the so-colled ground rent is due to the fact that it is secured upon a site with a house upon it, and the price for which the ground rent is sold, though it provides material for estimating the increase, if any in the value of the site as a cleared site, is not in itself the measure of that value. In Mr. Evans' case, so far as I can judge from the data which he supplies, there is no increment of the kind which would be chargeable under the Finance Bill. On the contrary, the difference between the original site value of the land and the capital value of the ground rent would appear to be entirely attributable to the efforts of the builder. A case like this is fully provided for in the Bill. If the difference represents an increase of value attributable to the erection of the building, the increase would be deductible under Clause 25, Sub-section (2), which provides for the site value being ascertained on the assumption of the land being divested of buildings, and if the increase is attributable to works executed or expenditure of a capital nature incurred for the purpose of improving the value of the land as building land, it would be deductible under Sub-section (4) (a) of the same Clause, or it might be deductible partly under the one Sub-section and partly under the other. I may add that Mr. Evans makes no mention of the allowance equal to 10 per cent. of the original site value under Clause 3(4) of the Bill. As in this case there appears on examination to be no Increment Value taxable, I do not dwell upon the point except to indicate that in his account of the matter he has chosen to ignore it entirely.

I think I have made it clear that in a case such as this there is no reason for the apprehension expressed in the pamphlet that the builder would be taxed upon a value created entirely by his own enterprise and expenditure to an amount equal to or greater than the whole of his net profit upon the transaction. On the contrary, unless the bare value of the land as land, and apart from anything done to it in the meantime, had risen while the house was being constructed, he would not be taxed at all.

Yours faithfully.

(Signed) D. LLOYD GEORGE.

Percy Alden, Esq., M.P."

There is the whole letter, and the last sentence contains the pith of it; the rest of it is really verbiage. Read those two statements I have read in those two letters, and I ask any man, looking at them from a plain, unbiassed point of view, could he come to any other conclusion than that there was a direct pledge from the Chancellor of the Exchequer that Increment Value Duty would not be chargeable unless the value of the bare land as land had increased between the date of the original valuation and the occasion by more than 10 per cent. If the English language can bear any other meaning, then I cannot apprehend what it is. Contrast that with the answer given by the Chancellor of the Exchequer to a question recently put to him by the hon. Member for the Sleaford Division:—

The hon. Member for Sleaford (Mr. Royds) asked the Chancellor of the Exchequer whether in view of Mr. Justice Horridge's decision whereby payment of Increment Value Duty was directed to be made on a builder's profit, and, where there had admittedly been no rise in the value of the site, he would introduce legislation to indemnify owners of houses and land against liability for payment of Increment Value Duty in cases where there has been no rise in the value of the site since 30th April, 1909.

Mr. Lloyd George replied:— Payment of Increment Value Duty was due on the case referred to because the builder realised a price considerably in excess of the combined market value of the land and the building erected by him. In estimating the increment value, full allowance was made for the value of the house, including builder's profit, and the excess of price over value was in the nature of a fortuitous windfall which, under the Statute, is liable to taxation. I do not propose to introduce amending legislation.

Here is the definite statement made that no tax shall be charged except when the bare value of the land has increased, and yet the Chancellor of the Exchequer changes his mind, though he admits in this case—and he cannot do otherwise, because counsel for the Crown definitely admitted in Court, and the Chief Valuer admitted—that the value of this site had not altered or increased between the two dates by one farthing. Further, the counsel for the Crown admitted that this was a well-deserved and legitimate profit, and yet, in face of that, in the last Debate on this subject, we had the Financial Secretary to the Treasury getting up and talking about it as a monopoly profit. Thus, and I think this is unfortunate, before the Court we have one statement made by counsel for the Crown, made where it is subject to cross-examination and legal test, and then we have an exparte statement of a wholly different character as to the same circumstances in the House of Commons by a Minister of the Crown, who describes it as an unfair monopoly, while in the Court of Law it is described as a well-deserved profit. Those two things do not march together. Now the claim is put forward by the Chancellor of the Exchequer that he is entitled to charge 4s. in the £, in accordance with what are known as the White Paper instructions—those notorious White Paper instructions—on fortuitous windfalls when the value of the bare land has not increased. It may, or may not, be good policy to charge 4s. in the £ on fortuitous windfalls, but fortuitous windfalls are not the sole perquisite of those who are engaged in the building trade.

If the Chancellor of the Exchequer is setting out to tax fortuitous windfalls, let him make a fair proposal and take all fortuitous windfalls. Surely, if it is possible to make a pound in two or three days on the Stock Exchange, that is surely as much a fortuitous windfall as that of a man who engages in a legitimate trade in which he is employing British labour, and in which he is building houses, and in which he is doing some good, because in building the houses the man employs British labour. He builds houses for British working men to live in; on one house he makes a loss and on another he makes a profit, just as a man may go and invest in the Stock Exchange and may make on one transaction and lose on another transaction. The builder or the small property dealer or small property owner is to be charged 4s. in the £ every time he makes a profit, if part of that profit is to be regarded by Somerset House as a fortuitous windfall, whereas the man on the Stock Exchange who does nothing whatever but take advantage of a temporary rise in the price of this or that security and, as far as I can see, does no good to any individual but himself, and not always to himself, that individual is not to be charged, and that is not to be regarded as a fortuitous windfall, but as a legitimate profit. Surely I have the right to ask the House of Commons that this kind of legislation should be put an end to. Of course, on this particular occasion it is not possible to get a straight vote on this question, but I do hope before this Session ends there will be an opportunity for this House to give a straight vote on the question as to whether this form of valuation and taxation can be wisely continued. We are spending huge sums upon a useless valuation. I claimed to have proved the valuations to be useless to-day and in the future. There is no revenue in it, but it has served its purpose. In the first instance, as my right hon. Friend here very wisely pointed out, it was not meant to catch money; it was meant to catch votes. Now it is catching votes, but it is not catching votes for the party opposite, but for this side of the House. I am prepared to go into the constituency of any hon. Member on the opposite side of the House and address an audience on this question, and I think the chances are I can carry a resolution against the Land Taxes in any constituency.

Mr. OUTHWAITE

Will you come down to my Constituency?

Mr. PRETYMAN

I am perfectly prepared. There is just as much opposition to this form of taxation from Liberal voters as there is from Unionist voters. Simply on its merits or its demerits, how is it possible? Has any such grotesque form of taxes even been proposed or passed in any legislative assembly in the world? The final remark I have got to make is this: I do not think any greater testimony could be produced to the extraordinary influence and persuasiveness of the personality of the right hon. Gentleman the Chancellor of the Exchequer than that he should have succeeded in inducing the country and the House of Commons to place on the Statute Book the absurd rigmarole which goes by the name of Part I. of the Budget of 1909–10, and the sooner it is removed the better it would be for the credit of this House and for the wealth and prosperity of the country as a whole.

Mr. SYDNEY ARNOLD

I desire to ask the kind indulgence of the House, an indulgence which I understand is always extended to those Members who address the House for the first time. I understand, Sir, from your ruling that we are at liberty to discuss any matter which arises on the Budget as a whole. The right hon. Gentleman who has just spoken referred, in the earlier part of his speech, in terms of condemnation, to the increasing expenditure of the country. He contended that our national expenditure is now too much, and that it imposed too heavy a burden on the resources of the country. That is a contention which is easily advanced but not so easily substantiated. It must be remembered that our national expenditure has been rising concurrently with the expenditure of other countries. It has been rising in accordance with the movement which is going on in nearly every civilised country in the world, and, as far as this country is concerned, we can well afford to spend more than we used to do, because this is a rich country, and it is becoming an increasingly rich country, and can afford large expenditure, if it is wise and beneficial expenditure. What has been the increase of expenditure under the present Government—that is to say, for the eight years, 1905–6 to 1913–14? The gross increase in expenditure for that period, including Post Office and telephone services, has been £41,947,000—that is, counting the surpluses in those years as expenditure, which I think should be done in a comparison of this kind. But it must be remembered that amount is being met by an increased revenue from taxes, which total in round figures to £32,500,000, and the balance is being raised in non-tax revenue, chiefly from the Post Office. Other countries have also been increasing their expenditure during those years. Let me compare the increase which has taken place in this country with the increases which have taken place in France and Germany. I cannot make that comparison of increase for eight years, including the current year, because the expenditure of France and Germany in the current year is not ascertainable. I will, therefore, make the comparisons of increases for seven years down to the last complete year in each case, though to do so is really in favour of France and Germany, owing to the very large military expenditure which will be engaged in by those two countries in the present year. I am, of course, in this comparison giving the increase on expenditure out of tax revenue, which I submit is the proper figure to deal with, because the increase of expenditure on national services like the Post Office in each of the three countries does not necessitate additional taxation, except so far as profit is made, and that I include. The increase of expenditure of tax revenue in the United Kingdom for the past seven years has been £25,310,000. The similar figure for France, as nearly as can be estimated, has been £27,893,000, and for Germany, £24,435,000. In the case of Germany, I am dealing with the increase which has taken place in the Imperial expenditure alone, not taking into account the increase of expenditure of individual States, although their expenditure is really national in character. In view of these figures, I submit that the increase of expenditure which has taken place in this country during the past seven years gives no cause for alarm. More particularly is that so if the relative wealth of the three countries is taken into account. The vital point with regard to national expenditure is the proportion that it bears to the total income of the country.

I will now compare the expenditure out of tax revenue in the United Kingdom, France, and Germany, with the total income of the three countries. In making this comparison I am again dealing with the expenditure of last year, and not of the current year, because, as I have said, the expenditure of Germany and France for the current year is not yet ascertainable. In regard to the United Kingdom, as the Committee knows, there is no official estimate of the total income of the country. The nearest approach to an official estimate is that given in the Report of the Census of Production for the year 1907. According to that Report, the total income of the country for that year was estimated to be £2,000,000,000. Last year the editor of the "Statist" put the total income at £2,250,000,000. In view of the increase of population, and the large increase in our trade, I am inclined to think that that is not too large an estimate. As I wish to err, if at all, on the side of moderation, I propose to take midway between the two, and to put the national income at £2,125,000,000. The expenditure last year out of tax revenue was £160,119,000, or 7.5 per cent. of the total income. Now take France. The total income of France is estimated to be from £900,000,000 to £1,100,000,000. These figures on account of their smallness may perhaps excite some surprise. The question, however, is not whether they excite surprise, but whether they are approximately accurate. That is the total income of France as estimated by the most competent authorities. The expenditure of France out of tax revenue last year was £166,000,000, or 15 per cent. on the total income. Lastly, take Germany. The total income is estimated to be from £1,400,000,000 to £1,750,000,000. In 1907 it was officially estimated to be £1,500,000,000. If I now take it at £1,750,000,000, it will be rather over than under the actual figures. The expenditure of Germany out of tax revenue last year amounted to about £165,000,000. That is the Imperial expenditure and the expenditure of the States, which is national in character. The two together approximate to our own national expenditure. Therefore, we may put Germany's expenditure out of tax revenue at from 9 per cent. to 10 per cent. on the total income.

I want to make it quite clear that in these figures I have been dealing with national expenditure. The hon. Member for Chelmsford spoke of the contributions under the Insurance Act, and said that they ought to be included in national expenditure. That would not make any real difference to my comparison, because in France and Germany also they have insurance and old age pension schemes. In Germany the contributions from the employers and workmen come to considerably more proportionately than in this country, while in France they are somewhat less. But I do not think that that sort of contribution should in any of the three countries be included as taxation. It is a premium, not a tax. I submit that the workmen and employers get very good value for their contributions. They get value in the increased security, efficiency, and well-being of the workers. In this country, where at the present time a large proportion of the cost of pauperism under the poor rate is for consumption, sickness, and infirmity, the poor rate will unquestionably experience relief when the Insurance Act is fully in operation. I have shown, I think, that, judged by this test, the United Kingdom is in a very favourable position as compared with either France or Germany. The comparison becomes even more favourable to this country when it is remembered that France and Germany have a system of conscription, which unquestionably imposes a heavy tax upon the people over and above what is charged through the national accounts. In this country virtually the whole of the cost of the Army is charged to the national accounts. That is far from being the case in France and Germany.

As regards our own country, the position is not really what it has been represented to be, because in estimating the growth of expenditure during the last eight years I do not think that sufficient account is taken of the normal growth or automatic expansion of revenue due to the steady increase in the population and wealth of the country year by year. From these causes during the past eight years, quite apart from any new taxation, and without the burden of taxation having been proportionately increased at all, there has been an automatic expansion in revenue at an average rate of about £2,000,000 a year, making a total expansion of some £16,000,000 to-day. Therefore, when it is said that the burden of expenditure out of tax revenue in the last eight years has increased by £32,500,000, it ought to be borne in mind that nearly one-half of that amount is being raised from the automatic expansion in the yield of taxes which existed when the Government came into power, and that only the balance of £16,500,000 is being raised from the net yield of new taxation, the gross yield of new taxation being now about £27,500,000 a year. I notice that the new taxes are always remembered, while remissions are nearly always forgotten. The total remissions of taxation made by the Government amount now to about £11,000,000 per year. If you take that from the £27,500,000, you get £16,500,000 as the net burden of new taxation imposed by this Government to meet the increase of expenditure. I submit that that is a very different thing from the £40,000,000 to £45,000,000 of which we hear so much outside. Hon. Members opposite continually complain of this increase of expenditure. I do not think that they can consistently do so, nor do I believe that they themselves think they can. That was evident from the speech to which we have just listened. Apart from the normal increases in the Civil Service, education, and so forth, most of the increased expenditure is going to three objects—old age pensions, the State contribution under the Insurance Act, and the Navy.

It is suggested from time to time that a large proportion of the increased expenditure is for the purpose of paying new officials, including those who are making the land valuation. The Chancellor of the Exchequer pointed out last year, that only about one-thirtieth of the new expenditure was for the purpose of paying new officials. I do not suppose the proportion is likely to be materially different now. A large number of the new officials are engaged in administering various schemes of social reform, of which the Opposition tell us they approve in principle. As regards land valuation, I say, in spite of the speech of the hon. Member for Chelmsford, that that valuation is already paying for itself, because it has already to such an extent stopped the under-estimation of value of land for the purpose of Death Duties. This has been challenged from time to time, but the Chancellor of the Exchequer and the Financial Secretary to the Treasury have both stated that the valuation is paying for itself, and I think that the official heads of the Treasury may be considered to be in the best position to judge of the actual facts. The hon. Member for Chelmsford has to-day brought forward precisely the same points that he brought forward about a year ago. Those points were then replied to by the Financial Secretary to the Treasury. I do not think I need go further into that matter; I will only refer the hon. Member to the OFFICIAL REPORT of 29th April of last year. Most of this increased expenditure is in respect of old age pensions, the State contribution under the Insurance Act, and the Navy. [An HON. MEMBER: "Education."] The proportion due to education is very small compared with the other items. With regard to old age pensions, hon. Members opposite tell us that they whole-heartedly support them. Apparently, they would almost as soon repudiate the interest on the National Debt as repudiate the obligation to pay old age pensions. Insurance also they approve in principle. The only thing certain about their suggested amendments is, that they would increase the cost to the National Exchequer.

Let me again emphasise the relief to local rates on account of the Insurance Act and old age pensions. I do not say that local rates have on balance been reduced. Other items of local expenditure have in most places been increasing, but old age pensions have unquestionably given relief, and now, combined with the Insurance Act, will increasingly give relief to local rates. It is also very important to remember that the money spent on old age pensions and under the Insurance Act not only benefits the recipients, but, in a greater degree than any other expenditure of the State, it benefits trade, and particularly the retail trade, of the country, because the money is flowing into productive channels. As regards the increased cost of the Navy, hon. Members opposite indicate that, if they were in power, the expenditure on the Navy would be considerably increased. It would almost certainly be raised partly by loans, and we should have the vicious and humiliating spectacle of seeing our Navy financed on the hire system. In view of all these facts, I do not think that hon. Gentlemen opposite can pose as the apostles of economy. It is, as Mr. Glad- stone pointed out years ago, easy to be perfectly reckless with regard to expenditure, if at the same time you are jealous in respect of any increase of taxation. I believe that we can, with complete financial propriety, even further increase our national expenditure if two principles are satisfied—first, if the money is coming from the right sources; and, secondly, if it is going to right objects. I think it is a matter for great concern that so large a proportion of our current expenditure is for the purpose of armaments. I deeply regret the Government think it necessary to spend £46,309,000 on the Navy. I believe that with bolder councils in this matter and a more accurate knowledge on the part of the Government during the past few years as to the naval activities of other Powers, we should to-day have found ourselves in a better position than that which unfortunately exists. I will not now go into details of the matter, because I think there are other and better opportunities for discussing this branch of our national expenditure, but I do sincerely trust that the Government will consistently and persistently devote itself to the task of arresting this heavy, unproductive toll of our national resources.

It is, however, I think some satisfaction to reflect that the working classes are not, on the balance, being called upon to contribute to the increase of naval expenditure which has taken place, nor are the workers, on the balance, apart from their contribution of 4d. under the Insurance Act—which is not a tax but a premium—to be called upon, nor have they been, to contribute to any of the increased expenditure of the present Government. I think it is the most satisfactory feature of the Government's financial policy that the whole augmented revenue required to meet the increasing expenditure is being got from the right sources. By that I mean it is being got from the better-to-do classes. The burden of taxation on the workers, taking into account the increase of population which has taken place, has been lightened since 1906. The remission of the Tea Duty in 1907, and the remission from the Sugar Duty in 1908, exceeded the new duties laid upon tobacco and spirits in the Budget of 1909 by some hundreds of thousands of pounds, the major portion of which, I would remind the Committee, is going to reduce the taxes paid by the workers. I should like to see the taxes on the workers again lightened by a further remission of duties on tea and sugar. I do not think it is realised how heavily these duties press upon the working classes, for they probably spend more, not only relatively but actually, upon tea and sugar and so forth than the richer classes. I regret that there is not to be any remission of these duties during the current year. I trust some remission will be made before the end of the present Parliament. I know the difficulties in the way under existing conditions, but I do not think they are insurmountable. I believe that the time is approaching, if it has not already come, when towards this purpose the Chancellor of the Exchequer might wisely and properly obtain one or two millions from the Sinking Fund, because the present position of the National Debt is an extremely satisfactory one.

I do not propose to follow the hon. and gallant Gentleman the Member for Chelmsford in his fantastic calculations about the Debt. He took, I think, the millions expended on social reform, capitalised that sum, and said we have added that much to the National Debt. I submit to the Committee that a contention of that sort has no real relation whatever to facts. Let me make a comparison of the National Debt which is a real one. Let me take the year 1899, because then the National Debt stood at its lowest actual figures of modern times—so that I think I am taking a fair year. The dead weight of National Debt stood in 1899 at £15 8s. per head of the population. The dead weight per head of the population in 1913, in March last, was only £14 7s. It has never stood at a lower figure per head of the population in modern times. If I deal, not only with the dead weight of debt, but the real gross liabilities of the State—not the fantastic liabilities conjured up in the minds of hon. Gentlemen opposite—in each of the two years I have referred to, it is still the fact that the dead weight per head of the population was less in March last than in March, 1899. Especially it is less if from the gross liabilities of each year there is deducted, as I think they ought to be, the value of assets belonging to the country which can be readily realised. I am not taking any assets that could not be readily realised though now these have considerable value. But if from the gross liabilities of the State the readily realizable assets are deducted, what I may call the net debt of the country, works out to £14 13s. 2d. per head of the population in 1899 and only to £14 5s. per head of the population in March last. The fact is that never before have we stood in such a favourable position in regard to this particular matter. That is the simple truth, neither more nor less. The Government in eight years has been able to reduce the indebtedness of the country per head of the population from almost the highest point of modern times—in 1905–6—to the lowest figure of modern times, and I think that may well be regarded with satisfaction.

The hon. Member for Chelmsford in his remarks referred to the low price of Console. This is a favorite theme with the Opposition. They persistently, I will not say patriotically, gloat over the fall which has taken place in the price of Consoles. [An HON. MEMBER: "Where?"] Both inside and outside this House. I do not think the position of the Opposition in this matter is sound. It is not sufficient to say that because Consoles have fallen that the present Government, to take the words of the hon. Member, is responsible for the fall which has taken place. To say that implies to my mind two things: First, that Consoles did not fall under the late Government; and, secondly, that the Government securities of other nations have not been falling during the past eight years. As a matter of fact in both cases the truth is precisely contrary. Consoles fell much more under the late Government than under the present one. They fell from about 113 to 89½, that is 23½ points. Under the present Government they have fallen from 89½ to 75—it is not 74, as some hon. Members if they will look at the tape outside will see. That is a fall of 14½ points. During that period other Government securities have fallen. French Rentes have fallen 12 points, German Three per Cents. about 14, Prussian Three-and-a-Half per Cents, have fallen about 14 points. Therefore it is perfectly clear that the fall which has taken place is general.

Sir F. BANBURY

What about Russia?

Mr. ARNOLD

I am dealing with the premier securities of France, Germany, and England, and I say it is evidence that the fall which has taken place in Consoles during the last eight years is part of the general movement in the case of the price of Government securities. The only real connection between Government policy and the price of Consoles lies in the provision made for debt redemption, and in the present position of the National Debt. I have already dealt with the present position of the National Debt. I think that a cause for satisfaction. As regards the provision made for debt redemption, it is a fact, as the Chancellor of the Exchequer pointed out last week, that unless something unforeseen occurred in the current year, the Government will have paid off—apart from the telephone debt, which is not a liability, because there are remunerative assets against it—about £102,000,000 of debt, which means a saving in interest on the debt of £2,600,000 annually. The amount paid off during the current year compares very favourably with the amount paid off in 1899—the most unfavourable year for my purpose. In that year the amount of dead-weight debt redemption was £7,576,000. In this year there will be repaid £7,556,000. But whereas in the former year £7,576,000 would only redeem Consoles to the amount of about six and three-quarter millions, the sum available this year will redeem Consoles to the amount of about ten millions. That applies with additional force now that the Government have so much reduced the Unfunded Debt, and therefore the major portion of the Sinking Fund may be available for the redemption of Consoles. Therefore I think it is not the Government's dealings in debt or debt redemption that has led to the fall in Consoles. Also there is no real truth in the contention, so frequently put forward, that the increased taxation of the Government, particularly the Super-tax and the Death Duties—the so-called taxing of capital—has led to the fall.

I have already shown that the expenditure of the country out of taxed revenue, in relation to the total income of the country, is only about 8 per cent., and that is a low percentage. I have shown it is lower than France and Germany. It is well under the 10 per cent. that Sir Robert Giffen allowed as being normal in this connection; and it must be remembered that quite apart from that it is estimated that the annual savings of the country now amount to about £300,000,000 a year after all taxes have been paid. In 1903 Sir Robert Giffen put the figure at £264,000,000. Last year the "Statist" put it at £350,000,000. To take it at £300,000,000 is a fair estimate I think, and compared with the sum of £300,000,000 after all the taxes have been paid, the amount raised on the Super-tax and Death Duties is comparatively insignificant. It is estimated that in the current year Super-tax will yield £3,300,000. That means that Super-tax will be paid on gross incomes of about £165,000,000. The heavy burden of Super-tax amounts only to about 2 per cent.! I do not think that is sufficient to stop the amassing of capital in any appreciable degree. Take the Death Duties. It is estimated that the Death Duties for the current year will yield £26,750,000. That is the total—not the increase which has been imposed by the present Government—that increase is somewhere about nine millions. Even if it be assumed that the whole of that £26,750,000 is raised by the sale of Consoles and other gilt-edged securities—which, of course, is not the case—on the other hand it surely ought to be assumed that at least that amount—I have no doubt it is very much more—is invested afresh each year in these securities out of the annual savings of the country. Therefore to contend that the Government is at present taxing capital in such a way as to depreciate the value of gilt-edged and other securities is quite opposed to the facts. I apologise for having spoken so long, but I was rather led away by the remarks of the hon. Gentleman who preceded me, and I desire to thank the Committee very much for their patient hearing.

6.0 P.M.

Mr. ROYDS

The hon. Member who has just sat down stated that in his opinion land valuation was paying for itself. I certainly say that that is not the case. I would just like to draw the attention of the Committee to some figures mentioned by my hon. Friend the Member for Chelmsford. Up to the present time the cost to the State of land valuation has been something over £1,500,000. The total receipts from the Land Taxes up to the present time have been something like £223,000. We have, therefore, a deficiency of something like £1,300,000. That is after four years' operation. The Chancellor of the Exchequer in the Budget of the present year has estimated his receipts from the Land Taxes at £445,000, and his expenditure at about £700,000. But included in this £445,000 is £240,000 for arrears of Undeveloped Land Duty, so that the normal yearly income from the Land Taxes, after five years' working, is £205,000 only, against an annual expenditure of £700,000 on valuation. By the end of next year the expenditure on valuation, taking the Chancellor of the Exchequer's figures, will have amounted to £2,250,000, and this sum does not include the expenditure by owners of land, and which, as has been stated in this House over and over again, and with practical truth, is at least equal to the expenditure by the State. Having considerable experience in this matter, I believe I am well within the mark, when I say that the expenditure by owners of land is at least equal to that of the State on valuation. If that is so, and the opinion has never yet been controverted in this House, and never questioned on the other side, the cost of the valuation by next year will have amounted to £4,500,000, and that is altogether independent of the special cost on "occasions" to which my hon. Friend (Mr. Pretyman) has referred. The cost next year in all will have reached £5,000,000 sterling, and the valuation will not have been by then more than half complete. I think we may safely say that the cost of valuation will ultimately amount to something like £10,000,000 sterling. That being the case, what are we going to get from a financial point of view, out of these Land Taxes? The Chancellor of the Exchequer assumed, after deducting the arrears of Undeveloped Land Duty, that this fifth year we shall receive £205,000 from Land Taxes, but out of that £205,000, £100,000, that is nearly one half, represents the Reversion Duty, for which a valuation is not needed at all. Therefore one half of your total receipts, upon which you are expending £700,000 a year, would be accounted for, if that valuation were abandoned altogether.

The main cost of this valuation scheme is incurred in consequence of a futile attempt to ascertain the site value. The object of ascertaining that is in order to get the datum line as at the 30th April, 1909, from which Increment Value Duty can be claimed. The whole of the valuation cost, therefore, is practically being incurred for Increment Value Duty, and what sum does the Chancellor of the Exchequer put as his receipts from Increment Value Duty? He puts it at £20,000. After five years' valuation for the purpose of imposing an Increment Value Duty, he puts his estimate of receipts at £20,000 only, and this is what he is to receive from this source of taxation which is to be collected at a cost of £700,000. These are the facts, because for Reversion Duty valuation is not necessary, nor in my opinion is it necessary for Undeveloped Land Duty. Undeveloped Land Duty is assessed upon the difference between the agricultural value of the land and the building value. There is no need to ascertain the site value at all in these cases, and that being the state of affairs, it is obvious that this scheme of valuation and taxation is not successful from a financial point of view. The Chancellor of the Exchequer gave as one of his justifications for this expenditure that huge sums of money were to be realised from this scheme of taxation and valuation, and after five years and an expenditure of £700,000 a year, and not one-half of the country valued, he budgets for only £20,000 from Increment Value Duty.

I do not know, from a financial point of view, what possible justification there can be for continuing this scheme. I know quite well the Chancellor of the Exchequer says that the increased receipts from Death Duties can be traced to the course of valuation. My hon. Friend (Mr. Pretyman) referred to that, but I should like to quote the Chancellor of the Exchequer's own words in a speech he made in October 1909, in this House. He then said that in the course of a single week, in consequence of the reorganisation of the Valuation Department, he had added as much as £100,000 to the sum collected for Death Duties, and a very substantial portion of the £1,300,000—the increase in Death Duties—was attributable to the fact that he had an efficient Valuation Department. He had that Department before this new Department was set up, yet the Chancellor of the Exchequer now says that the increase in Death Duty receipts is attributable to this new Department. These taxes came in when the old Department had been reorganised, and I think we may fairly assume that they would continue to come in if there had not been any new Department at all. The right hon. Gentleman's scheme of valuation has not been a success from the financial point of view. Has it been a success from the social point of view, because, of course, the Budget had a social side? The right hon. Gentleman said it was going to open up land for building, and to encourage building enterprise and so on. Has it opened up land for building? If so, in what way? Figures have been quoted in this House in recent Debates showing the effect this Finance Act had on the ebuilding of cottages and small houses. I will just put the position in a nutshell. The actual facts are these.

The average number of houses under and over £20 a year annually built in this country for the thirteen years preceding the passing of the Finance Act of 1909–10, was 121,000 or 122,000. After the passing of the Finance Act, that is in the year 1910–11, the number fell to 36,000, of which 10,650 only were cottages or small houses. The following year, 1911–12, the number of houses built went up to 92,000, but this was still 30,000 below the average of thirteen years. The right hon. Gentleman the President of the Local Government Board said, when speaking upon the Housing Bill last week, that confidence had now been restored because 80,000 cottages and small houses had been erected in 1911–12; but I would like to point out to the House that the actual number of houses built that year was 30,000 less than the average. One would have thought that with a shortage of 90,000 the previous year, there would have been a considerable increase that year. Rent materially increased, because people must have houses, and the houses were simply built for occupation, and not by speculative builders. They were built in part by local authorities, who are responsible to the ratepayers, and they have been more active in the course of the past two years. The fact is that although in these two years many more houses were built by local authorities than were built before, there is little improvement in regard to private and individual enterprise. That being the state of affairs with regard to the opening up of the land, I think we may confidently say that the expectations of the Chancellor of the Exchequer have not been realised on the social side. What justification is there then for this valuation proceeding? My hon. Friend (Mr. Pretyman) gave very many instances of the unreliability of the values placed on land by individual valuers. I should like to remind the House that this valuation does not contain any direction to obtain the only value of the property we ever hitherto knew anything about; that is the market value. It is what I may call an ad hoc valuation with special, reference to the taxes imposed by the Budget. The valuer is directed to find the total value, the gross value, the site value, and the assessable value, but none of these correspond with the market value. As the present taxes are a complete failure, from the Revenue point of view, and as the market value of the land is not being ascertained, and the valuation cannot be of any real use or value, what justification is there for our continuing it at an expenditure of £700,000 a year?

A good deal was said by my hon. Friend about the shock to land credit given by this scheme of taxation and valuation. I should like to ask the right hon. Gentleman what he thinks would be the position of affairs if an undertaking like the London and North Western Railway Company were singled out from all other railways to be dealt with by means of a special scheme of taxation and valuation of this character, and if that scheme of taxation and valuation was preluded by an attack made by no less a person than the Chancellor of the Exchequer, on the shareholders in the London and North Western Railway Company. That is what he did in regard to owners of land. "A" invests £2,000 in shares of the London and North Western Railway Company. They drop to £1,000, and then rise to £1,500. "A" decides to cut his loss and sell at £1,500. He has then lost £500. That, if this scheme applied, would be "an occasion," and on that "occasion" the Government valuer would say: "I have valued your interest in this undertaking, and although you get £1,500, I think the intrinsic value of your holding is only £1,000. You have sold the shares for £500 more than they are worth, and there must be a payment by you of 20 per cent. Increment Value Duty to the Chancellor of the Exchequer on £500, which is in the nature of a fortuitous windfall." Assume that the same conditions apply to every sale and transaction in shares of that company, but did not apply to sales and transactions in shares in any other company. What would be the position? Would not those shares become a drug in the market? Would not the company, if they desired to develop their undertaking or build workmen's cottages, or construct branch lines, be unable to obtain credit on the same terms as other undertakings? The development of that company would cease; their credit would be destroyed, and their ability to get capital in consequence of this special scheme of valuation and taxation would be impossible. Then the Chancellor of the Exchequer would say, "Your undertaking is not fully developed; you must now pay Undeveloped Land Duty." This is like what has happened with regard to owners of building land, and in particular in regard to the builders in this country; you have destroyed their credit, deprived them of the opportunity of getting capital to build houses and follow their usual course of business, and when they do not build you come down upon them and claim Undeveloped Land Duty, because they have not built. Land has been singled out from all other forms of investment in that special way, and it is no wonder that speculative building has practically ceased, and that the credit of land has received a very severe shock, so much so that people will not lend their money on the security of land, or for building purposes, except on very high terms, and not on the terms which were obtainable before the right hon. Gentleman's Budget became law. Three to four years have elapsed since this scheme came into operation, and I think it is only reasonable that the House of Commons should now take the whole position into consideration and decide whether they are justified in continuing a scheme which is not revenue-producing, but which is a heavy annual loss to the State, and in addition inflicts a serious blow at the credit of our greatest national asset—land and house property.

Mr. LLOYD GEORGE

Perhaps the hon. Member who has just sat down will not consider that I am lacking in courtesy if I proceed to deal, first, with the speech of the hon. and gallant Member for Chelmsford (Mr. Pretyman). The hon. and gallant Member divided his speech into very unequal parts, and the first part dealt with my financial statement as a whole. The hon. and gallant Member appears to me to have dragged in all sorts of irrelevant things in the ten minutes or quarter of an hour which he devoted to criticising the finance of my scheme, and he devoted the rest of a speech occupying about one hour and forty minutes to one very small part of the finance of the Budget of 1909. I wish to say one or two words in reply to what fell from the hon. and gallant Gentleman in regard to the finance of 1909. He told us that I am responsible for an increase of £42,000,000, but I do not know how he makes up that sum.

Mr. PRETYMAN

The statement the right hon. Gentleman made on a former occasion was that eventually the total cost of social reforms, including old age pensions and the Insurance Act, would amount to about £42,000,000.

Mr. LLOYD GEORGE

I thought the statement referred to what I had said on a previous occasion. In that statement I referred not merely to the finance of this country, but also the contributions of the employers and the employed.

Mr. PRETYMAN

I said so.

Mr. LLOYD GEORGE

The hon. and gallant Member went on to say that what he disliked was not so much the social reforms I had been advocating, and which I have taken part in carrying into legislation, but the spirit in which I approached it, because I had not made it clear that the recipients would have to contribute. In the speech referred to I made it perfectly clear that a substantial part of the sum I mentioned would be raised from the recipients themselves. The hon. and gallant Member has concentrated upon the Land Taxes during the last two or three years, but he does not know what has happened in reference to the most important Tax of all—the Insurance Tax. My difficulties arose from the criticism, not that I held the recipients free from any part of the burden, but because I had chosen a scheme which threw a substantial part of the cost of working upon the shoulders of the recipients. That was the argument put forward at by-elections and at public meetings throughout the country. Surely the hon. and gallant Member cannot have forgotten that, and I think it is well to remind him of that fact when he repeats a criticism of that kind, and he cannot say that he has not been forewarned with regard to the facts that I have given him in reply to his criticism. I do not know that the hon. and gallant Member said very much beyond that in regard to my general scheme of finance, and everyone will see from, the utterly flimsy character of his criticisms upon my statement that he did not say much in opposition to my Budget Statement of last week.

I now come to his lengthier and more effective criticism of the Land Taxes of 1909. The hon. and gallant Gentleman has studied that question very thoroughly. He mastered the details of the Bill as it passed through the House, and he has devoted the last three or four years to making himself still more master of the criticisms which has been directed against those taxes. I propose to take up those criticisms one by one and reply to them. The first criticism was upon the yield of those taxes in regard to what he called the "People's Budget." I think it is very unfair of the hon. and gallant Member to try to deprive the hon. Gentleman behind him of the only joke he is capable of perpetrating, because he called the Budget of 1909 the "People's Budget."

Mr. LLOYD

You called it the "People's Budget."

Mr. LLOYD GEORGE

The hon. Member thinks it is a very good jest, and he is so pleased that he has been able to discover a joke that he has repeated it in season and out of season. I am not complaining of it, and I have no doubt it is a very good joke, but I am complaining that the hon. and gallant Gentleman opposite should deprive him of his only joke. With regard to the yield of these taxes, I never stated in 1909 that they formed a substantial part of the revenue upon which I depended to meet the pressing needs of the Treasury, and I defy the hon. and gallant Gentleman to point out a single passage in the speech I delivered when I introduced that Budget, or in any speech I have made inside or outside this House, which would give warrant to the conclusion that I had ever treated the yield of the Land Taxes of 1909 as a means of meeting the immediate needs of the Treasury. I have always said that these taxes would develop naturally, and that eventually they would become fruitful, but I never said that I was dependent upon them to meet the expenditure of 1909, 1910, or 1911. As a matter of fact, before the Bill went through I accepted an Amendment parting with half of the yield of these taxes to the municipalities. That was in 1900. I am pointing out that in 1908, when, according to what has just been stated, these taxes were in a state of prediction and had not been verified or realised, even then I accepted an Amendment which parted with half of the Land Taxes, and I am giving that as a proof of the fact that I was not dependent upon them to finance me through the difficulties in which I was then placed. I hope hon. Members opposite will now understand that. What was the position in 1909? As a matter of fact, the one hon. Member who is responsible for pressing the Land Taxes into prominence is the hon. and gallant Member opposite (Mr. Pretyman). For months he criticised the Government and worried and kept up the House when taxes yielded £25,000,000 and £26,000,000 were awaiting criticism, and at that time he was the one man who drove the Land Taxes into prominence, and I hope his party are grateful to him for it. He forced the Land Taxes of 1909 into prominence, and that discussion forced the land question into prominence. Therefore he is responsible for all that has happened, and when the epitaph of the hon. and gallant Member comes to be written it will read:— Here is the man who forced the land question into prominence in this country, who destroyed Tariff Reform, and who overthrew the power of the Lords. R.I.P. I think, then, I wanted about £20,000,000 for that year, and the total I expected to receive from the Land Taxes was between £500,000 and £600,000. Therefore those taxes constituted a small part of the finance of the Budget of 1909, and what is the good of talking about that matter as if I had relied upon the Land Taxes as something which were going to be a fertile means of raising revenue for "Dreadnoughts" and old age pensions, because, as a matter of fact, they were only a part and a very small part of the revenue! [HON. MEMBERS: "Hear, hear."] I said so then, and the question is whether something was said that has not been justified since. The right hon. Gentleman has been taking his facts from the hon. Gentleman who sits by his side—a very dangerous thing when it comes to Land Taxes, because on this question he is really quite morbid. There is one Land Tax which I reckoned upon then as being immediately productive, and that is the tax on mineral royalties. The other three are dependent, some more and some less, upon valuation. Valuation is an essential preliminary to the Undeveloped Land Tax. I never expected that the valuation would go through for years, and, therefore, so far as the Undeveloped Land Tax is concerned, I could not have expected any revenue for years. Coming to the second, the Increment Tax, that depends upon an increase in the value of the land, as from 1909, in addition to 10 per cent. If I had expected an immediate revenue from a percentage of an increment which began in 1909, and which had to rise so high as to get over a 10 per cent. wall, then all I can say is that I am surprised no one in the House at that time pointed it out. I never depended upon the Increment Tax to meet immediate demands. I now come to the tax on mineral royalties. That has been productive. It has produced substantially what I said it would produce. I am told, however, it is not a Land Tax. Why? Because it comes out of the land. Therefore it is not a Land Tax. The test of a Land Tax is whether it is produced first of all out of the land, and whether it is a fixed charge upon the land. Taking what is known as the Land Taxes, that does not depend upon the valuation—it was originally 4s. in the £—but still it is a Land Tax. Supposing I proposed a tax of 1s. in the £ upon ground rents, would not that be a Land Tax? Of course it would. The hon. Gentleman's criticism means that no tax is a tax on land unless it is dependent upon a valuation. That is an absurd proposition, and one which has never been maintained up to the present.

Mr. PRETYMAN

I never said so.

Mr. LLOYD GEORGE

Very well, then why is not this a Land Tax, inasmuch as it comes out of the yield of the land and that which is equivalent to a rent upon land? [HON. MEMBERS: "What about Schedule A?"] Schedule A is known as a Property Tax. The difference between that and the Income Tax is this. The Income Tax depends upon graduations, upon deductions, and upon abatements, whilst an ordinary Land Tax is a fixed charge on the land. That is the difference between it and the Income Tax. If you deal with royalty rents as part of the income of the landlord and his income is only £160, you do not charge him; if it is above that you take off £160; and, if it is over £5,000, you charge him Super-tax. That is Income Tax; but supposing you charge him 1s. in the £ on his rent, that is a Land Tax, and I do not think anybody has ever controverted that proposition. The tax on Mineral Royalties is a fixed definite charge upon the rent derived from that part of the land; therefore, it is a Land Tax. It was always treated as a Land Tax during the Debates in the House of Commons; it was an essential part of Part I. of the Budget of 1909; it was part of the Land Duties; it was criticised as part of the Land Duties; it was supported as part of the Land Duties; and I am perfectly certain that I never made a speech during that period about the Land Taxes when I did not include Mining Royalties as an essential part of the whole proposition.

I now come to the next point raised by the hon. Gentleman. He has criticised me very severely for what has been done with regard to builders. The whole of his criticism was based very largely, as I shall be able to point out, upon a gross exaggeration of the facts. I shall, first of all, state the facts, and afterwards I shall state what we propose to do, not so much to remove any actual injustice as to remove any reasonable apprehension of injustice in the minds of these people. First of all, let us have the facts. The Lumsden case is the only one, as far as I am able to ascertain, and I have made inquiries, in which a builder has been charged Increment Duty in respect of a house which he himself has built. It is a case I agree, but it is the only one which has occurred in which a builder has been charged one penny Increment Duty upon any house which he himself has built. It has been multiplied, first of all, a thousandfold by the Land Union propaganda, and I have no doubt that again has been multiplied ten-fold by the apprehensions of those who are engaged in the trade. But let us have the real facts to begin with. It stands absolutely alone as the only case in which a builder has been charged one penny on any building which he himself has erected. [An HON. MEMBER: "There is the Richmond case."] No, the Richmond case has nothing to do with building. The hon. Gentleman quoted one or two letters written on my behalf. I accept full responsibility for them, but I will quote what I said myself during the passage of the Budget to a conference of builders who put the case before me. I must apologise to the Committee for quoting it, but it does bear very materially upon this matter:— This is one of the points I want to be quite clear to builders, and I do not think they have quite appreciated it up to the present moment. It is not the money they spend which they can deduct; it is the value which they create, which is a very different thing. You may spend £500 and create a value of £1,500 if yon put brains and intelligence into it: another man may spend the same money and not create a value of £300. Here is Mr. Smethurst, who has bought 27 acres and paid £300 an acre for them. He creates a value of £600 an acre, which is entirely due to the money he has spent. He has spent probably £100 an acre on the land. We do not add the £100 to the £300 and say we will tax it at £400. Builders were under the impression that profits were taxed as increment, but this was not what he called increment. Nothing which was due to brains, capital, or expenditure was to he taxed, and if any lawyer told me that the Act did not carry out the intention he had mentioned, he was perfectly willing to put in words to that effect in the Budget. He would accept any amendment, no matter from what quarter of the House it was moved, to make the point clear. I stand by every word of that declaration which was made to the builders in 1910, and I still say, if it can be proved that by any leakage or by any interpretation that property which is created by the brains or the exertions of builders is taxed—and I say there is not a case up to the present—but if there be a case—I am prepared to accept any Amendment that will make it perfectly clear that no builders' profit is to be taxed as increment. I can understand a case where increment is charged when it cannot be said that the land has actually increased in value in the meantime. I will take, not an imaginary, but a real case. There was a piece of land which was valued at £26 10s. an acre. It was bare agricultural land with no improvements of any sort or kind. There were nine acres of it, and the county council came along and said, "We should like to have an acre of it." It was for some public purpose—I think a school. All those acres were equally valuable; there was no difference. One acre was taken out of the nine, and, although the land was valued at £26 10s. per acre, and the owner had accepted and it had been registered at that valuation, yet he got from the county council £545 for one acre. Is it to be said that increment was not to be charged? That is one of the cases we wanted to tax in 1909. You cannot say the land had increased in value between those two dates, but at the same time it was perfectly legitimate to charge Increment Duty upon it. I still say, supposing that acre of land had been built upon, the builder would have been entitled not merely to the money he had put into it, but to his profit upon the transaction; and, if there is anything in the law which taxes to the extent of a single penny a profit which a builder makes upon the sale of his house and thus taxes his business, then I will accept any Amendment which will make that absolutely clear. It would have been much better to have introduced this general Amendment of the law later on, but the hon. Gentleman has preferred to force a discussion upon this particular occasion. I am not sorry because it enables me to say that I propose to introduce into the Revenue Bill an Amendment which will put it beyond a shadow of doubt, and make it impossible for any builder's profits to be taxed in any way in respect of a transaction of that kind. At the same time I want to safeguard myself by saying I certainly shall not assent to any Amendment so far as I am concerned that will exclude the possibility of our taxing increment of the kind I have mentioned with regard to land.

The hon. Gentleman who has just sat down said something about the very disastrous effect of the Land Taxes on the building trade. There has been a good deal of wild statement. Let me mention one or two facts. When the Budget of 1909 was introduced the building trade was in a very bad way indeed. It was in a worse way than it had been for certainly fifteen years, and one reason for that was undoubtedly that there had been a good deal of overbuilding throughout the country—in London and most of the South Coast towns. One has only to follow the figures with regard to the building of houses in the country, and to see the number added to the total during the twelve or thirteen years preceding the 1909 Budget, and to compare it with the houses built in the twelve or thirteen years before that, to find that from 1897 to 1907 there had been an enormous number of houses built—a number far beyond the average. There was overbuilding, no doubt about it, and one proof of that was to be found in the increase in the number of empty houses. There had been a considerable increase in that number. There was a speculative trade with regard to building: great tracts of land had been laid out, and houses had been built in London and in many great towns. But in 1907 there was practically an end of it, and the building trade began to suffer from overproduction and overbuilding. In March, 1909, unemployment in the building trade was 13.3 per cent.; and I think that represents almost the high-water mark of unemployment in that trade. Let the Committee follow what happened. So far from the Budget of 1909 affecting employment in the building trade, this is how things went. In March, 1909, the employment was 13.3; in 1910, 8.9; in 1911, 6.5; in 1912, 6.2; and in March, 1913, 4.3; so that employment is exactly one-third of what it was in the months preceding the introduction of the Budget of 1909. The hon. Gentleman opposite referred to the number of houses built. It is true that in 1910–11 the number was very much lower than it had been for some time, but in the very next year, 1911–12, the number rose from 11,000 to 80,000.

I do not doubt at all that for a very short time the agitation which went on had frightened the builders, and I am not at all surprised at it, for they were told on the authority of men in high position that their profits were to be taxed, that their business was to be made almost impossible in the future, that it was going to be an unprofitable investment, and that mortgages would be called in. Of course the building trade is, of all trades, the most sensitive in that respect, and if you go on assuring them, on the authority of hon. Members, that these things are to occur, you will undoubtedly, for the time being, check building enterprise. Most of the check has occurred in the southern counties. In the North they know what value to put upon this sort of thing; they know exactly what deductions to make, and there, consequently, the agitation has not had the very serious effect which it undoubtedly has had in the southern counties, where hon. Members opposite practically control, more or less, political opinion. They have said practically to their followers, "Don't you build, for all the money will go to the Exchequer. Your profits will vanish, and the Budget of 1909 make that sort of thing quite impossible." Of course the people cannot believe that their Members are not telling them something which is approximately true, and therefore I am not a bit surprised if building has been cheeked in Felixstowe or Essex, or indeed in the southern counties as a whole. But that is not the case in the North. There the building trade is almost as good as it has ever been, and it is very difficult in many northern counties to find men for the trade. There has been trouble in this matter in Scotland.

Sir G. YOUNGER

Very great.

Mr. LLOYD GEORGE

Yes, but that has been due to the land problem. I have not the figures just now, but hon. Members certainly will find that the number engaged in the building trade in the North is not only higher than it has ever been before, but that the figures of the trades union show that in those counties, where they appreciate agitation of this kind, mere political criticism has had no effect on the building trade in the slightest degree. Reference has been made to Box Hill. There, at any rate, the effect has been the opposite. First it is said, "You have stopped building," and next it is asserted, "You are driving land into the market." Both statements are equally untrue, and, let me add this, that not a single assessment has been levied or even given notice of in respect of Box Hill. More than that, inasmuch as Box Hill is open to the public, and as long as it is open to the public, under the Act of 1909, not a single penny of Undeveloped Land Duty can be levied. It can only be levied the moment the land is taken from the public, and not a minute before. I repeat that up to the present we have not given notice of a single assessment upon any part of Box Hill. So much for that. There have been two statements, both contradictory and both equally untrue. Let me sum up my point. As far as builders are concerned, I, on behalf of the Government, stand by every word which I said in 1910, that not a penny piece of their profits can be taxed or will be taxed under the Budget of 1909, and that if there is any conceivable loophole, by which in a single case—and only one case has been brought forward—if there is a possible loophole by which that may be done, we are willing to accept any words to stop it. More than that, we propose ourselves to introduce words to make it impossible even for a case like the Lumsden case again to crop up. So much for the building trade.

Next I come to another criticism of the hon. Gentleman, and that was with regard to valuation. He impugned this valuation; he impugned its worth, he impugned its soundness; he practically condemned it altogether. The hon. Gentleman, in his criticism, said we were after a valuation, rather than after taxes. Undoubtedly we did attach more importance to the valuation than we did to the yield of taxes. What does that mean? The valuation of this country is long overdue. That is not merely a statement which I make. It is a statement which has been made at this box for fifty or sixty years by successive Ministers and successive Administrations of different parties. There have been nine Bills to deal with valuations introduced into this House by Ministers of Conservative and Liberal Governments. The Budget of 1909 was the tenth, and it was the only one that got through. There is no country more seriously in need of valuation, for local purposes especially, than is this country. It is the only civilised country where there is not one.

Sir A. CRIPPS

Yes, we have.

Mr. LLOYD GEORGE

We really have not. I am loth to challenge the hon. Gentleman, because he is an authority on this question, but I will quote an extract from the Report of the Royal Commission on Local Taxation, the authority of which I do not think he will challenge. It reads thus:— The system for rating purposes in this country is a perfect scandal, parish competing with parish how to establish successfully an unfair assessment to the detriment of the neighbouring parish. Everybody who knows anything about the subject knows what has been the practice. He knows the competition there has been between parishes to reduce the assessment, so that it shall be called upon to pay less in proportion than the adjoining parish to the union rates. There is also competition between one union and another to reduce the valuation as low as possible so that the adjoining union may pay more to the county rate. Then, further, there is an unfair assessment as between individuals. I am not making a party point at all in reference to this. There was a very valuable paper read a few years ago at the annual meeting of the Surveyors' Institute.

Mr. AUSTEN CHAMBERLAIN

By whom?

Mr. LLOYD GEORGE

I think it was by a Fellow of the Society, and it is really a very important statement. It is as follows:— While human nature is constituted as it is, it cannot be expected that unpaid parish officials will incur the odium of their friends and neighbours by raising their assessments whenever occasion justifies it. Even if a man is occasionally found willing to do this, he has not the knowledge, and he is only in office for a year, and is perhaps called upon to value property of which he does not profess to have the slightest knowledge. Again, in many cases a large landowner, or, perhaps, factory owner, is perhaps the dominating personality in the parish. The overseers are probably his dependents, and how is it possible to expect them to exercise a free and independent judgment in assessing their chief's property? 7.0 P.M.

Practically the same thing was said before the Royal Commission. I will give a case. I am perfectly certain the hon. Gentleman must remember it when I bring it to his recollection. This is a case given by a witness representing the Norfolk Chamber of Agriculture before him and his fellow Commissioners by way of illustrating the point that there were three valuations that were not uniform. He said that in eighteen unions the county valuation exceeded the valuation for the poor rate by 15.5 per cent; and in eighteen unions the excess varied from 10 per cent. to 34 per cent. What does that mean? The further you get away from the parish and the local and personal influence, the more correct is the valuation and the higher is the valuation. What happens as a result of that? This is really a very important point. The right hon. Gentleman the Member for the Strand Division, who was then, I think, President of the Local Government Board, introduced a Bill in 1904 dealing with the question of valuation, and this is what he said:— Both political parties are committed to the reform of local taxation, but it will be impossible successfully and satisfactorily to carry out that object unless you first deal with the law which governs the valuation of property upon which local rates fall. He pointed out what the anomalies were. He pointed out exactly the anomalies I have already emphasised here; that the valuations are crude, that they are capricious, that they are unfair between one person and another, between one parish and another, and between one union and another, and that they are certainly unfair as between one class and another. There is only one assessment which, according to the evidence of all the witnesses who appeared before the hon. Gentleman and his associates, approaches fairness, equality and uniformity, that is the assessment made by the Surveyor of Taxes. [HON. MEMBERS: "Hear, hear."] Yes, but he is an officer of the Exchequer. He again is still further removed from these local and personal influences. What did the right hon. Gentleman the Member for the Strand Division do? He introduced a Bill wiping out all these little assessment authorities and setting up a county authority. [HON. MEMBERS: "Hear, hear."] Yes, but he did not rely upon that. He put the Surveyor of Taxes on that body. The next point is even more important—he enacted that where a Surveyor of Taxes was dissatisfied with the valuation and regarded it as an improper one, he was to substitute his own, and that was to be regarded as the valuation. What is the difference between that and our proposal? Our proposal is that instead of bringing the Imperial officer in at the end, we bring him in at the beginning, and instead of casting the whole burden of the valuation upon a county, we have cast it upon the Exchequer. Hon. Gentlemen opposite complain because we take upon the Exchequer a burden which they would rather cast upon the rates. That is a very different proposal and a very different attitude from that to which I am accustomed from hon. Gentlemen opposite. Do they really mean to say that if these valuations were made by a local authority, that it would not cost an enormous sum of money? Of course it would cost an enormous sum.

There is, of course, another essential and important difference to which I now come. What was the complaint made before the Commission of 1899 about the valuation? That it lacked uniformity, that it was inequitable between the parishes, and that it was not impartial as between persons in parishes. That was the criticism then. It is not only criticism that has been directed against rating. The great criticism against rating is not merely that it lacks uniformity, and is unfair between the parties, but that it is unfair in the class of property you tax and rate. This is the greatest grievance of all—that it taxes improvements. The more a landlord improves his property the higher he is rated; the more he neglects his property the less he is rated. If he improves his property by increasing the building upon it, or in any other way, 10s. in the £ in some cases—less the deductions under the Agricultural Rating Act—but 4s. or 5s. very often, and 2s. or 3s. in the £ is charged on every improvement he lays down. If he allows his cottages to fall into decay and become empty his rates are less, but if he is a good sound landlord who repairs ruinous cottages and builds new ones, up go his rates. The man who trusts to obsolete machinery in his business can keep his rates low, but the man who puts in new machinery and improves his buildings has to pay a higher contribution to the rates. Another thing is that it is not merely a question of landlord and tenant, or of bad landlord and good landlord. A trader in a district who may be making only £300 a year out of his business will pay probably two or three times as much in rates as a professional man who is making three or four times his income. All these are very essential things to consider when you come to deal with the question of local taxation. Merely getting a uniform assessment upon the basis of annual value does not settle it. You have to ascertain a few other facts. You have to ascertain the total capital value. You have to ascertain the value of the improvements as well. That is the advantage of a valuation of this kind, though I agree you have to make a few additions in order to elicit all the facts.

The value of an assessment of this kind is that it does not tie the hands of the House of Commons when they come to consider the problem. Before you can arrive at this assessment you have to ascertain every fact which would be necessary in order to ascertain real annual value as the basis of your assessment. It would take very little to translate the facts the surveyors have in their possession into annual value, so that when the valuation is complete the House of Commons will be able to choose their own method of assessment. They can either fall back upon annual value, or they can take capital value, as they do in Germany, in some parts of the United States, and I think as they do it in some of the Colonies and in France. They can take capital value minus improvements, or they can take both. They can put part of the local assessment upon the letting value, and they can put part of it upon the capital value; but the advantage of an assessment of this kind is that you get a per- fectly impartial assessment as between individuals, a perfectly impartial assessment as between parishes, a perfectly impartial assessment as between unions, a perfectly impartial assessment as between counties, and also as between classes; and the House of Commons will, when the time comes, be free to adjudicate as to the best method of dealing with the whole problem.

The hon. Member has been trying to impugn it. I quite agree, and I have never challenged it, that when you come to ascertain finally the value of agricultural land for rating purposes you have to make further deductions, and when he says that what we are doing now is making things worse, I reply that that is not so. You have now got to find the total value. You will find it then. You have got to find the value of buildings now. You will have to do it then. The only value you will have to find in addition to that, when you come to deduct, is the value of unexhausted improvements. This is not a matter which will take very much time, according to the testimony of those who advise me. There are two ways of doing that: one is the way of which we had an example under the Government of 1896—I am referring to the Agricultural Rating Act. There you had to separate buildings from the land. How did you do it? You were under the impression that there was some sort of valuation. The Local Government Board issued an order saying that buildings should be deducted by percentage. That is one way of making deductions for fences and other unexhausted improvements. That is the most expeditious way, and might be found to be wise, and it may be conceivably the best way. The other way is to go through the process of valuing. It is open to whoever takes up the valuation at any point to adopt one or the other of those two courses. We prefer the process of valuation, and we should like to take authority to do so, and we propose to do it in the Revenue Bill. I agree with the criticism of the hon. Gentleman that it would not be fair, if it is used for local rating purposes, to tax agricultural land without making deductions for improvements which correspond to the deductions now made in respect of urban land. For that purpose we propose to take the Bills in two parts.

Mr. T. M. HEALY

Is the right hon. Gentleman referring to Ireland?

Mr. LLOYD GEORGE

I am referring rather to Great Britain. As the hon. and learned Member knows, the process in Ireland is a very different one, because there you have three or four valuations. I do not want to be drawn into that controversy now. Up to the present I have been dealing rather with valuations in Great Britain. My right hon. Friend reminds me that the local rating proposal would not touch Ireland. I agree with the hon. Gentleman that it is most important, if you are going to have a valuation, that it should be perfectly trustworthy. The hon. Gentleman has given half a dozen cases. We have heard them all before. They are always trotted out and thrown on the Land Union cinematograph—the same cases, the same old Richmond case, the same churchyard somewhere; all the old cases trotted out over and over again. They have been answered no end of times. We have had 4,500 hereditaments valued. Supposing you are able to pick out, not six but sixty or 600 cases where you could not quite defend the valuation, is that a sufficient justification for impugning a huge survey of this kind? Let the hon. Gentleman go to any parish—his own or any other—and pick up the local assessment book. I could find him endless cases of gross anomalies, of injustice and of iniquity. The worst you can say here is that occasionally, amongst perhaps hundreds of officials, one man has failed.

What is valuation? The hon. Gentleman asked, "Would you prefer market value to valuation?" Of course you would, and if you sell a thing in the open market and it does not fetch what it was valued at, of course we will take the figure of what it actually fetched in the market. But you have to deal with thousands and millions of hereditaments which are not in the market, and the valuation must be the opinion of an expert as to what the value is. Is it surprising that, amongst the millions of cases where a man has to give his opinion on value, hundreds should fail? Does that impugn their general judgment? The hon. and learned Gentleman has had more experience in valuation cases probably than anyone in the House, and he knows perfectly well how difficult it is for the ablest valuer really to ascertain what the exact value is. Giving his best mind and honestly applying it, he might still make mistakes to the extent of thousands or perhaps tens of thousands of pounds. [HON. MEMBERS: "Hear, hear."] But that is impugning all valuation. That is as much as to say, "If you cannot get men who are absolutely omniscient, who know exactly what a thing would fetch in the market if there were an auction to-morrow, and know it to a penny, you must not have a valuation at all." These men are thoroughly able and they are experienced men, and they have conducted their work in a way that has not been impugned up to the present by anyone. There is only one case in which the conduct of a valuer has been seriously impugned. We investigated it and he is no longer employed, because we have always felt it imperative that the valuation should be trustworthy, and by trustworthy we mean a valuation that every class could trust. If there were a serious feeling on the part of any class of the community that they were not being fairly treated it would be worth our while to go out of our way to take steps to ensure a valuation which would command confidence.

Let me give the figures. Four and a half million hereditaments have been valued. Three and a half millions have already been settled. The number of hereditaments where provisional valuations have been subject to appeal is just one out of every 833. That is not very high. Let any man try and value 833 hereditaments, and if there is only one that is challenged before a Referee, I think he may take pride in it. The appeals in most cases were settled by meetings of the parties discussing the thing. A very large number of them were withdrawn altogether and the rest were settled, except, I think, thirty-eight cases affecting 155 hereditaments. The only cases which were taken before a Referee were cases affecting 155 hereditaments out of 4,500,000. Seventeen cases affecting ninety hereditaments were won by the Commissioners or the Referee. In twelve cases, affecting thirty hereditaments, the difference was split. There were only five cases lost by the Commissioners altogether, affecting seven hereditaments. Here is a valuation affecting 4,500,000 hereditaments, 3,500,000 are settled already, and in only five cases, affecting seven hereditaments, has their judgment been successfully impugned, and I think three out of these cases are subject to appeal. I challenge any hon. Gentleman, however bitter his feelings may be about the Land Taxes, and however suspicious he may be about the valuation—and I can understand suspicion about the valuation—after the most searching criticism and investigation, to find any valuation that has ever been made which has stood the test better than this valuation has. I remember the hon. Gentleman suggesting that there was a policy of undervaluing, except in the case of agricultural land which was over estimated. I said at the time that that was a very serious suggestion, and that as every suspicion of that kind should be removed I was willing to have an inquiry. It was purely a question of administration. It was a question whether these men were carrying out their duty under the Act, because if they were deliberately undervaluing they certainly were not carrying out the Act of Parliament. So I proposed a committee of experts. I think most of them were political opponents of mine. They were men known on the other side of the House.

Mr. AUSTEN CHAMBERLAIN

I do not dispute what the right hon. Gentleman says, but we never had the names. It is immaterial. The right hon. Gentleman carried on some negotiations with me and he mentioned one name, but no others It was not on a question of the names, but on the scope of the inquiry that the negotiations broke down.

Mr. LLOYD GEORGE

At any rate, they were names which would command confidence. I am quite ready to show the right hon. Gentleman the names. We did not ask them to serve, therefore perhaps it is not fair to state them publicly. We were willing to have an investigation into the whole administration of the Valuation Department. There was to be one lawyer on the committee who understood rating, and the others were great estate agents and valuers—I think the President of the Surveyors Institution and gentlemen of that sort. That committee was not accepted because the right hon. Gentleman wanted to enlarge the scope of the inquiry and go into the policy of the Act. I do not mind investigation into the policy of the Act, but the policy of the Act is something that ought to be settled by a totally different tribunal. We were perfectly willing to subject the whole administration by these valuers to a perfectly impartial investigation, and if they had deliberately undervalued in some cases and deliberately overvalued in other cases—not in individual cases but wholesale—they could be found guilty by this impartial tribunal and the whole of the valuation would have been impugned. The right hon. Gentleman (Mr. Austen Chamberlain) and the hon. Gentleman (Mr. Pretyman) felt that there was no good to be had out of an investigation of that kind. They must have felt that such a case could not be substantiated. If they thought it could it was their duty to accept the reference which I suggested. But this is the position. Here you have a valuation of 4,500,000 hereditaments already completed. After 15th March the whole of this country will have been valued. It will require very small adjustment to enable it to fit in as a national valuation with any proposals dealing with local taxation that I have ever heard submitted to the House on either side. That is in itself a great work. That cannot be treated as if it were merely the collection of revenue for the current year. It is a capital expenditure upon a work which has been overdue for a century, that one Government after another has been attempting but has hitherto failed. We have succeeded. We have put the cost of it upon the National Exchequer, and hon. Gentlemen opposite will be glad to join with us in reaping the benefit.

Mr. BONAR LAW

I do not think the right hon. Gentleman had an easy task after the speech of my hon. Friend, and I am bound to say I think he has fulfilled it as well as is possible under the circumstances. He has delivered the kind of speech of which I have heard many in connection with this subject. My hon. Friend made the suggestion that these taxes would never have got on the Statute Book, or could never have continued on the Statute Book, except on account of the wonderful versatility of the right hon. Gentleman. I think that compliment is deserved. But I think there is another reason. I do not believe, after our experience, that they could possibly have continued but for the fact that the party opposite, who know as well as I do how little there was in the defence of the right hon. Gentleman feel that party interests are bound up in it, and they cannot throw him over without throwing themselves over at the same time. I am not one of those to whom the right hon. Gentleman referred as being bitter about the Land Taxes. I certainly am not. I think I said at the time the Budget was going through that they were futile, and that they were based upon a bad principle. Otherwise I have no objection to them. I knew as well as some hon. Members on the other side of the House how little money was involved in them, and it was only on account of the principle they embodied that I strongly opposed them. Now the whole House knows exactly what value was in them. The first point I wish to take is as to what the right hon. Gentleman said about the Lumsden case. He told us that was only one case. Of course, he knows, but I suppose he thought the rest of the Committee did not know, that that was a test case, that there depended upon it an immense number of cases of the same kind, and that on the decision of that case all the others would hinge.

Mr. LLOYD GEORGE

I am sorry to interrupt the right hon. Gentleman, but it is such an important statement he has made that I ought to reply. No Increment Value Duty has been demanded from any builder in respect of any house he has built except in the Lumsden case.

Mr. BONAR LAW

My hon. Friend (Mr. Pretyman), who has a great deal of knowledge on this subject, says that the right hon. Gentleman is quite wrong, and I should like some proof of the statement he has made.

Mr. LLOYD GEORGE

I have asked the Inland Revenue officials, and that is the statement they have made to me. I practically read out from the statement they wrote to me, and surely the Inland Revenue officials, who are dealing with the matter, should know.

Mr. BONAR LAW

I was relying upon the knowledge of my hon. Friend, and I still think, considering the immense number of these valuations, that I would like some stronger proof than the assertion of the Inland Revenue authorities that the statement made by my hon. Friend is not correct. What is the position the right hon. Gentleman takes in regard to that? I wish the Committee to follow only those two points about which there can be no doubt. Not only in the letters which the right hon. Gentleman either wrote himself or dictated, but when the Bill was going through this House he stated in the clearest and most positive way that no Increment Value Duty would be charged unless there was a rise in the value of the land apart from everything else. Now what happens? Before a Court of Law his own officials claimed Increment Duty, although they said there had been no increase in the value of the land. He says now that he is going to put that right, but in answer to a question which was put the other day—I am not sure that it was not to-day—he said that he was not going to deal with a case of that kind, that the case is one which ought to be liable to this Increment Duty, and that it is a case where the land has risen in value, as shown by the selling price. But if the right hon. Gentleman does not stick to his principle and goes upon the other principle, stated by himself and repeated by those officials, that if property is sold for more than its worth—more than its value—they are going to have Increment Value Duty, then he is departing from the principle laid down by himself when the Budget was going through; for obviously what he is going to do in that case is not to tax increment value which is due to any cause of communal growth, but he is going to tax the good judgment of the men engaged in that kind of trade. The value of the property, or, rather, the value of the success of the man who builds, depends not merely upon the labour he puts into the house, but also upon the choosing of the site and the choosing of the kind of property he will put up. What the right hon. Gentleman says he is going to do is entirely contrary to what he said at the time the Budget was going through. He is going to tax the skill and judgment of the men engaged in that trade all over the country.

The next point I wish to deal with is the value of these taxes as a means of producing revenue. We heard what the Chancellor of the Exchequer said to-day. It was very different from my recollection of what he said when the Budget was going through. Let me deal with what seems to me the extraordinary contention that the cost of the valuation can be set against the yield of the Mineral Rights Duty. It is quite true that, as he introduced the Budget, there would be some sense in such a contention, for what he intended to do was to put a duty upon undeveloped minerals as upon undeveloped land. In that case the valuation would have been necessary. But what connection has all this immense cost for valuation with an additional 1s. in the £ of Income Tax, every penny of which could have been collected without any valuation, and which has no more connection with these Land Taxes than any other form of Income Tax which the right hon. Gentleman collects? We all know what the yield is. The right hon. Gentleman says he never expected much. I dare say he did not. I can agree with the right hon. Gentleman in that. What he expected was votes. He did expect something, and we can judge of the value of his optimistic references to-day by the value of his Estimates in the past. For the year 1910–11 the estimated yield, after all the concessions had been made, was £490,000. The actual yield was £2,800. For 1911–12 he estimated the yield at £300,000, and he got £58,000. He is getting nearer it now, but he is doing so by reducing the Estimates. In 1912–13 he estimated the yield at £255,000, and actually got £163,000. Here we have in his own answer a statement of the financial result of these wonderful taxes. I really do not think anything quite so remarkable in financial genius has been seen since a gentleman in "Gulliver's Travels" was employed in extracting sunbeams out of cucumbers. He has obtained from all these duties a little over £220,000, and it will cost, according to the admission of the right hon. Gentleman, £1,393,000. That is a very small part of the actual cost. Everyone knows that the expense to which individuals are put in order to get a fair valuation is far larger than the cost to the State. I ask the Committee to consider these taxes as a means of producing revenue. There are plenty of just taxes which all previous Chancellors of the Exchequer have avoided, for the simple reason that the cost of collection and the inconvenience to the taxpayers would be so great that it would be foolish to impose them. If ever there were such taxes, these Land Taxes are such taxes. The right hon. Gentleman told us that he never expected anything serious in the way of revenue from them. If that was so, the people of this country were rather misled. I have here a book—

Mr. LLOYD GEORGE

What I did say was that I did not expect anything in the way of immediate revenue.

Mr. BONAR LAW

You might have waited for the quotation first. I have here an interesting book, which is called "The People's Budget." It was the right hon. Gentleman's own invention. "The People's Budget, explained by the Right Hon. David Lloyd George, M.P." This is what he said in 1909 about the value of these taxes:— Even in the case of the 'Dreadnoughts' which you are laying down this year, the real expense will be next year, so that when the revenue comes in from the Land Taxes next year, it will be revenue that will be used just as much for the 'Dreadnoughts' as for old age pensions. The revenue the next year from these taxes was £2,800 for "Dreadnoughts" and old age pensions. I do not think there is more to be said for these taxes as a means of revenue. I think that is exhausted. My hon. Friend asked, "What good are they going to do to anybody?" Of course, we were told that one of the things they were going to do was that they were going to make the desert bloom like the rose all over the country. One of the things they were to do was to get cheap houses. What has been the effect in that respect? Under the previous Administration the number of houses built was over 100,000 a year. As the result of the 1909 Budget they fell to 10,000, and now the right hon. Gentleman tells us with great glee that they are 80,000. That is to say, with three or four years' arrears they come up to not quite the level at which they were before he introduced his Budget. That is the effect as regards cheap houses throughout the country. "What nonsense," the right hon. Gentleman says, "to talk about the building trade being in a bad state. It is only in the Southern Counties where it is in a bad state. In the sensible North, where they return Liberals, building is going on better than ever." I have been told there is a famine of houses in Lancashire. I received a letter, dated 24th April, from Birkenhead, together with the following resolution passed by the Birkenhead, Wallasey, and Wirral Building Trades' Association:— That the building employers of Birkenhead, Wallasey, and Wirral, in meeting assembled, strongly protest against the low valuations, the unfair Increment Duty, and the disastrous effect which the Finance Act now imposes upon the building trade. How can it be otherwise? I know that there are people who have got the land question on the brain, but I really think that the Single Tax is wisdom in comparison with what the right hon. Gentleman has said. Any Gentleman who has the smallest acquaintance with the building trade, or any other trade, knows that the one thing that hinders it is the feeling of insecurity which prevents people investing money and carrying on a trade. Even now, five years after the passing of the Act, we do not know whether a builder is to be taxed on his judgment and skill or not. How can you expect people to put money as an investment in the building trade? As a matter of fact, if anyone makes a calculation and takes an ordinary workman's house, he will find that if the rate of interest the builder has to pay on the money employed in building is raised 1 per cent. the rent will be raised by far more than that, even if he got the land for nothing. Of course they have destroyed the building trade for the time being. I do not mean that they have permanently destroyed it. People must live in houses and they must build, but the effect of what they are doing is to raise the cost of living and by doing so, they are raising the rent. The right hon. Gentleman talked of the value of a valuation, and I do not deny it, but a valuation to be of any value must have some principle of uniformity. This valuation has none. Nobody understands it. The right hon. Gentleman says that my hon. Friend always gives the same illustrations, but he did not listen very attentively when he told us that one of those, which struck me as the most forcible of the lot, was a new one that he had not heard before. He has two ways of dealing with these matters. If he has heard of them before he says, "Oh, we know all about them," but if not, then he says, "We must have time to look into them." The cases which my hon. Friend gave prove conclusively that the valuations are utterly unreliable for any purpose you like to name.

Take urban valuations. The new case to which my hon. Friend referred was really a striking one. In the town of Hinckley a valuer sent in a valuation for the whole of the town or a large proportion of it. The Member of Parliament for that district happens to be one of the party to which the right hon. Gentleman belongs. They made a protest against it, and the Member of Parliament came to him, or I suppose that at all events he went to the Valuation Department, and if he did come to the Chancellor of the Exchequer I am sure that he would use the argument which would appeal most to him, that it might affect his seat if something were not done. The result was that actually the whole lot of the valuations were reversed, and the excuse given was that the man who made them was ill at the time. Fortunately the Member of Parliament for the district was not ill, and the result was that in that particular case the valuations were altered. But look at the vice of the whole thing. The right hon. Gentleman gives us the kind of thing we have heard often before. He says, "Look at the immense number of the cases and how few appeals there are." He knows how little there is in that, and that the great bulk of the cases are settled, not by a decision of any kind, but by the lapse of sixty days. He knows that the great majority of people do not take any action about them until they find later on that they have been done by the Valuation Department. I have myself a very small amount of real estate, and I will not increase it while the present Government is in office. It produces about £50 a year, and the valuation form came to me. It put the value at what seemed to me an absurdly low figure, but I knew that the lawyers' expenses would make the cost much more than anything I could gain, and I threw it in the wastepaper basket. I am quite sure that hundreds of thousands of people are doing the same thing, and the fact that there are no appeals is no proof that nothing is wrong.

A better proof is that in the case of big estates, where the thing is of sufficient importance to make it worth dealing with, they communicate with the valuation office instead of appealing, and as a result of that communication, as pointed out by my hon. Friend, in the case in Edinburgh the valuation which was put by the valuer at £20,000 was raised to £46,000. Is it possible to conceive that valuation on that system can ever be a foundation on which we can build anything in this world? Then the right hon. Gentleman said that we need a valuation. So we do, but we need a valuation which has some principle behind it, which is based at least upon arithmetic, which does not give us, as this valuation does in agricultural districts, minus quantities, the worth of which we are left to gauge either by the higher mathematics or by astrology. That is not going to be of any value to this or any other community. The truth is that the more this is considered, the more it will be seen that the whole thing is worse than useless. The right hon. Gentleman said that rating was unfair as between individuals, that a professional man may pay far less than a small shopkeeper, and this wonderful valuation is going to tell us, I suppose, the amount of the professional man's income. Otherwise how will it affect any readjusting of rates between one class and another?

Mr. LLOYD GEORGE

I should have thought it very obvious, because the tradesman who has large premises which he uses for a business is paying upon them very much more on buildings than the professional man pays for what he occupies, whereas the taxes on the site will be nearly the same.

Mr. BONAR LAW

A very skilful physician with small premises is going to have the same site value as one of the big grocery stores! The truth is that the right hon. Gentleman recognises, as we all do, that the system of local rating is very unfair, and the right hon. Gentleman tries to get support for his insane scheme on the general ground simply on that ground. It is conceivable that a good valuation might be of use, but it must be a valuation which gives the real value of the property which does not in the case of agricultural land make deductions for building, and then add something for buildings on another estate, and which does not make deductions for hedges, but makes no deductions for permanent fences or stone walls. It must be a valuation to give as nearly as possible the real selling value of the property.

Mr. LLOYD GEORGE

Hear, hear.

Mr. BONAR LAW

That certainly is the valuation which is not given under this system. I do not say that the existing arrangements do not do good to somebody. They are giving employment, as we learn from the Chancellor of the Exchequer, to 4,153 deserving people at a cost of £490,000 a year. That is good for these people, but considering the expense to which individuals are put in protecting themselves against these 4,153 people, the money would be better expended, in my opinion, if it were given to the same number of people to drive a treadmill in one of the offices of the Government, instead of having them gallivanting over the country.

Mr. WARDLE

I should like to take the discussion back to the Budget itself, which has been brought in for the present year. We are told that we are to have an expenditure of £196,000,000. That expenditure the right hon. Gentleman has told us is not the highest on record in any single Budget. In 1902 the Budget was for a sum of £200,000,000, but we are told that that was a war Budget, and that this is a Peace Budget. I contend that the present Budget is also to some extent, and in some degrees, a war Budget, for there is at the present moment a kind of competitive war going on in regard to armaments which, though not a real war in one sense, is in another sense a war of armaments. The Budget in addition includes some amount of money, at any rate, for a war in another direction, a war against the results of poverty which it is hoped will produce excellent effects as years go by. It has been pointed out by an hon. Member (Mr. Arnold)—in a maiden speech, which I think everybody will agree was of singular power and which containing a reference to a large number of figures that were given without notes of any kind, constitutes one of the most remarkable exhibitions of memory that I have ever seen in this House—that in regard to the expenditure the revenue from taxes was in reality £160,000,000, and from other sources, chiefly the Post Office, £31,000,000. I agree that it is not fair to put those two amounts in the same category and to say that the taxes which are levied amount to £196,000,000, when in reality the amount collected is the sum of £160,000,000 only. With regard to the statement of the hon. and gallant Gentleman, who included in his figures of what he considered the liabilities of the country sums which are collected under the Insurance Act, no one can really maintain that it is fair to capitalise that sum and add it to the National Debt. Like my hon. Friend, I am rather inclined to think, as the Member for Holmfirth is rather inclined to think, that this claim of paying off the debt has got to too high a figure, and that something might be done now in another direction.

8.0 P.M.

When we consider that the revenue from the Post Office now yields a profit of at least £6,000,000 a year, which, if capitalised, would mean that the assets of the Post Office are worth £125,000,000 to the country, I think that we are entitled to deduct that from the capital liabilities of the country and also certain other items in the same direction, such as the Suez Canal shares. That would greatly reduce the amount of what we call the capital liabilities of the country, and, if they were deducted, we might consider that the National Debt, instead of being £716,000,000, is not more than £520,000,000. Coming to the question of the Army and Navy expenditure, the party for which I speak consider this expenditure not only non-productive, but in the present instance the source of much harm. The Chancellor of the Exchequer, in a speech last week, pointed out that the increase under these heads since 1861 had been £46,000,000—that is, that to-day we are spending on the Army and Navy more than twice as much as we were spending in 1861. The increase during the last five years has been no less than £15,000,000. The population in 1861 was, in round figures, 29,000,000. In 1911 it was 45,216,000. There was an increase of 16,000,000. It is true, no doubt, that the Empire has grown largely during the fifty years, but these Islands have not grown. When we reflect that the expenditure per head on the Army and Navy and population of these Islands has been nearly doubled, and that where it was £1 per head in 1863 it is nearly £2 per head now, it really does represent an increase that ought to give us very serious concern. The Chancellor of the Exchequer referred to the scare policy fifty years ago, and it ought to afford a lesson to us to-day. I do not say that the scare policy of fifty years ago was deliberately arranged in those days, but certainly it was engineered, and I do not think it is quite fair that we should be dragged entirely at the heels of other nations, and that, because they increase their expenditure, we must necessarily do the same. I do not wish to say anything offensive with regard to the affairs of another nation, but surely the Krupp revelations in the German Reichstag are of immense international significance. The allegations, of course, have to be considered and tried, and I am not going to say that everything which has been stated will prove to be true, but there is very little doubt that there is a substantial substratum of truth in the allegations that have been made.

In fact, I think I am right in saying that similar statements were made not long ago in regard to affairs in this country. We have an allegation to the effect that in Germany a ring has been formed to keep the scale of prices to the German nation at least 10 per cent. higher than the price that ought to be charged for war materiel supplied. It is not very long ago that a similar allegation was made with regard to the manufacture of war materiel in this country. If it be true that we are paying 10 per cent. more for materiel manufactured for the Army and Navy, then I think it is a very serious matter indeed, and ought to be looked into. I think the most serious part of the allegation is that there is this "trade in fear," as has been well expressed, that there is a deliberate manufacture of war scares. It is rather significant that in the agitation which took place in this country some few years ago, the statement was made, as we all remember, in regard to the increase of ships in the Navy—"We must have eight; we won't wait"—that the information conveyed to the Opposition with regard to German shipbuilding on that occasion came from a contracting firm in this country. Therefore, there is every appearance that not only in Germany, France, Italy, and Russia do we have these manufactured scares, but that they are manufactured in this country, and are manipulated here just as much as in other countries. We, however, got to the bottom of these scares, and we were not rushed as a Government and a people into undue and unjust expenditure. In one of the weekly periodicals "The Nation," which supports the Government, I read, this week-end, these words, and, for my part, I wholly agree with them:— The International Labour party by looking after things national would do a great service to peace if it could persuade every civilised State to make an end of private trade in war, and to manufacture its own armour plates and build its own ships, exclusively in its own yards and its own arsenals. That is a policy which the Government might well look into and consider, for though it might turn out that there would be times when they would have an excess of employés, yet it would pay them far better to keep the men on as Civil servants, even doing no work, than to constantly have to pay 10 per cent. too much to private manufacturers in order to keep them in their present position. There is a great difference between the seventy and odd millions provided in this Budget for the Army and Navy, and that part of the Budget which deals with the expenditure on social reform. I quite admit it, and I quite agree with the Chancellor of the Exchequer that the money which is being spent on old age pensions and on services of that character ought to be put in a different category, and ought to be considered in a different light from that in which we view the expenditure on the Army and Navy. I agree that, so far as the policy has gone of increasing and improving the aids to local taxation, the £11,000,000 which is spent in that direction is on the right lines, though I think the amount ought to be more. But the expenditure, so far as it concerns the Labour Exchanges, health insurance, old age pensions, and unemployment, I consider to be of the greatest possible value, not only to the recipient, but to the State as a whole. There is a great deal of exaggeration in regard to this matter. It is not an increase of expenditure. Before old age pensions were granted, the old people had to be kept somehow by somebody, and it meant that more money had to be spent out of the local rates, or the burden fell on relatives and friends.

Therefore, this expenditure is an expenditure which means a spreading of the burden by collective spending of what previously was in large measure an individual spending. Take, for instance, the case of education. The Chancellor of the Exchequer, in the comparison between 1863 and 1913, which he made, pointed out that in the former year the sum spent out of the National Exchequer upon education amounted only to £2,200,000, but that to-day the national expenditure on education was £19,200,000 from the Exchequer, and from local funds £16,600,000—a total of £35,800,000; and that so far as the State was concerned it was 8d. per head in 1863, and in 1913, reckoning the local and Imperial expenditure together it was 15s. per head. But that is not all increased expenditure. Take my own case. I remember very well that I went to school before board schools came into operation. There were eight of us at home, and my parents spent out of their very small income 4d. per week for each child attending school. The outlay at certain periods in my home life in those days must have been 2s. a week at least, and yet my father never had more than 23s. a week wages in his life. So that the money was being spent then for education, though not to the same extent I admit. Still, it is not right to say that the whole of the expenditure which comes from the national and local fund is an increased expenditure, because in former days the burden was upon the poor, and they felt it very keenly.

It is to their credit that they saved out of their small wages 1s. 6d. and 2s. a week, in order to give their children some chance of education. That brings me to the point that it is a mistake, simply because we are nationalising the expenditure and making it collective, to say that, therefore, it is an increased expenditure. I welcome, for my part, the expenditure, for I am sure, in the long run, it will prove to be a real economy to the country. The fact that we have brought together, so to speak, all the small sums, and have spread the burden over those who can afford to pay, makes it easier and cheaper to the working classes of the country to get their children educated to-day than it was in former days. It seems to me that we certainly cannot be said to be at the end of this kind of expenditure, and we have no right to be at the end of it, for undoubtedly the sums which we are now allowing for old age pensions, while it is something for the old people, leave a great gap so far as many aged people are con- cerned. We fix the limit at seventy years, but hundreds of thousands never reach that age, especially among the working-classes, who find that there is a gulf between the ages of sixty-five and seventy which the State at any rate has done nothing whatever to bridge over.

Of course there are matters in regard to the expenditure of money which will have to be attended to, and one of the most important is that undoubtedly we have as yet made no provision whatever for the widow and the orphan, and it seems to me that when the amendment of the Insurance Act takes place something ought to be done to insure that the widows and orphans shall have some sort of income guaranteed to them by the State, so that when the bread-winner is removed, poverty shall not overtake them. It is perfectly well known that in all the researches which have taken place, in regard to this problem, the undeserved poverty which comes upon the widows and the orphans is a greater cause of the suffering and misery which exists in our large cities all over the country than any one single case whatsoever. The State ought to step in and see that the widows and orphans have a chance of tiding over the very difficult period which comes upon them when the bread-winner has gone. In regard to the revenue side of the Budget, in the Estimates which the Chancellor of the Exchequer put forward, and in the statement which he made with regard to last year's revenue, he referred to items of working-class expenditure. Spirits are down, beer is down, the Tea Duty is down, sugar is down and tobacco is down. In all those cases where working-class expenditure is at stake the revenue has shown a decrease, and that, I think, can only mean one thing, namely, that there has been a relative decrease in the spending power of the working classes of the country. I know that the Chancellor of the Exchequer put forward the plea that part of this was due to the coal strike, and part to the holding back of dutiable goods. While it may be true that some of it is due to those causes, there can be no denying the fact that in a large measure it is due to the fact that the working classes of the country had not so much to spend as they otherwise should have. Even though the coal strike was a voluntary sacrifice of income, yet it was a sacrifice of income, and the returns show that the working classes of the country had not the same spending power as in the previous year.

Moreover, the rise in prices which has taken place during the last few years has told upon the working classes of the country with great effect, and has undoubtedly reduced their spending power. I agree, so far as the Spirit Duty is concerned, that the decrease is one which my hon. Friends and myself can hail with pleasure. It does show that there is an increase in morality and sobriety, and it is therefore a matter in the main for general congratulation. That, however, does not apply so far as the Tea and Sugar Duties are concerned. Tea and sugar are now practically necessaries of life for the working classes, and it is a very serious matter that there should be any decrease in the revenue from them. Contrast this on the other hand with the results from Income Tax, and this fact, I think, demonstrates in a most striking way the way that the wealth of the country is going. From the Income Tax the Chancellor received £600,000 more than he expected; that means a large sum in incomes while the reduction in the Tea and Sugar Duties shows that the working classes are suffering. There seems to be some kind of anomaly with regard to the Death Duties, for while the Income Tax is increasing by leaps and bounds, yet the actual value upon which the incomes seem to be earned, as shown by the Death Duties, does not reveal that increase that it ought if the whole sum bore that relation to the Income Tax which it ought to do. Death Duties were paid during the year on £276,000,000, practically the same as for the last two or three years, so that with the increase in the Income Tax it looks as if there were still evasions somewhere in the payment of the Death Duties. I suggest that is a point which might be looked into. The Death Duties point the moral I have been trying to draw still further, namely, that the wealth of the country is going in one direction and in one direction only.

With regard to Income Tax, Death Duties and Super-tax, I think it is now beyond all controversy that they cannot retard and have not retarded the commercial development of the country. The results so far as business is concerned show that the taxation levied by the Budget of 1909 upon the rich, so far from having retarded commercial development has assisted it, as I think one would naturally expect it should do. The results of the indirect taxes, on the other hand, show that there has been arrested development of expenditure on the taxed articles which are affected by the incomes of the working classes. I venture to submit to the Chancellor of the Exchequer that there is here a strong argument for the repeal of all indirect taxes so far as they apply to the food of the people, and a strong argument also in favour of continuing the process which he began in the Budget of 1909 of increasing the Super-tax and Income Tax generally. He seems disposed, so far as that part of his Budget is concerned, in this policy to call a halt. I noticed this morning one critic of the Government, a friendly critic, said that so far as the Chancellor's work at the Treasury is concerned it is about finished, and he relegates him to some other sphere. I do not know whether that falls in with the Chancellor's ideas or not, but certainly if he is not prepared to go any further in the direction in which he started in 1909, then perhaps it would be as well if he would make way for someone else who will. In this connection I was reading only the other day a book written by an hon. Member of this House on the Liberal side, in which he pointed out that there is a limit to the sum which a man can usefully spend, and I think he is perfectly right. His remarks were:— No individual is capable of possessing, spending or administering more than a certain definite amount of money, which can be roughly described as a full competence, without producing positively harmful effects on himself as well as those affected by his action. In other words, the rich man is an impossibility in any decently organised economic State, and the accumulation of capital in individual hands is detrimental to the public good The book is by the hon. Member for Stirling (Mr. Ponsonby), who succeeded the late Prime Minister. He is the author of that sentiment, and I think he goes a long way to prove it in the book.

Sir J. D. REES

Is the amount stated?

Mr. WARDLE

No, the amount is not stated. I can honestly recommend the hon. Member to read the book.

Sir J. D. REES

I am afraid if the hon. Member cannot tell me, I will not see it.

Mr. W. THORNE

Four hundred a year.

Mr. WARDLE

I will not do the hon. Gentleman who sits behind me an injustice. He argues that a full competence is what a man can reasonably spend, and that the man who knows it best is the man himself, and he will soon find out when he is spending to the full limit of his capacity. I am quite sure that if it is honestly tested it is worth a trial. As to the Chancellor's expectations with regard to the balance-sheet of the year, it seems to me that he is trusting a good deal to luck and optimism. Perhaps he has good grounds for his optimism, particularly if it is based on what has happened during the last few years. For instance, in each of the last four years the expenditure has been overestimated by from £2,000,000 to £3,000,000. It that is the case this year, the right hon. Gentleman will have £2,000,000 or £3,000,000 less to find than the Budget Estimates require. We on these benches are not satisfied with the present Budget Statement. We believe, that the Chancellor of the Exchequer ought to have used the present occasion to redress the unfair distribution of the burden of taxation. My hon. Friend the Member for Blackburn (Mr. Snowden) has pointed out again and again that indirect taxation—and there is still a large amount of it left—presses hardly upon the poor. It hits them harder than anybody else, and we feel that the time has now come when all taxation on foodstuffs should be abolished. The present Budget affords an opportunity which might have been taken, and we feel sure that if the Chancellor of the Exchequer had desired to do so he could have met the burden elsewhere.

There are still urgent reforms which will require more money. Old age pensions cannot stand where they are; education must not, and will not, be allowed to remain where it is; certainly money will have to be found for some housing scheme. The present condition of the housing of the working classes of this country is perfectly disgraceful. So far back as 1909 the Public Health and Social Conditions Command Paper, No. 4671, pointed out that there were 507,763 people living in single rooms, and 12,458,150 people living in tenements of two, three, or four rooms. This shows an immense amount of overcrowding, which is responsible for much sickness and disease. When we consider that there are people who have fifty or a hundred rooms in one house and sometimes six or seven houses to live in, and that there are horses and dogs better provided for in the matter of housing accommodation than are some of the people in this country, we feel that it is time something was done to level up the conditions in this regard. Much money will have to be spent before the housing of the working classes will be in a satisfactory condition, and the National Exchequer will have to be raided again for this purpose. Local taxation, of which we have heard a great deal this afternoon, requires that something should be done to relieve local rates. This was promised by the Chancellor of the Exchequer three years ago, and it is still unprovided for. If this matter is to be faced in all its broad national aspects, the present Budget has brought us to a very critical time.

The Chancellor of the Exchequer's schemes for raising money by the Budget of 1909 seem practically, for the present, at any rate, to have reached their limits. If, therefore, there is to be any alteration, it can only be in one or two directions. We shall make a demand for the abolition of the Tea and Sugar Duties and such other Food Taxes as still remain. We intend to press that demand. We shall put down in connection with the Finance Bill a reasoned Amendment, which we hope to have an opportunity of discussing, by which the whole question of indirect taxation will be raised. We say that if the Chancellor of the Exchequer will face that question he has still a large margin in connection with Super-tax and Income Tax upon which to draw, and it is only right that these burdens upon the poor should be removed. There is only one other way that I can see by which the Chancellor of the Exchequer can raise the money. He has the example of the Post Office before him, from which a profit of £6,000,000 a year is derived. In connection with the railways and mines there is money which could be diverted for national services. If the nearly £50,000,000 representing the profits which at present flow entirely into private shareholders' pockets were nationalised, the money could be used to far greater advantage than it is at present, and much of it would be a real contribution to the Exchequer. I think it is in that direction that we shall have to look more and more in this country if we want to get away from the snares of Tariff Reform.

Captain CLAY

I will not follow the hon. Member opposite except to take note of his statement that the party with which he is associated intend to move a reasoned Amendment calling for the abolition of the Tea and Sugar Duties. What I want to know is whether they will really vote on that Amendment or whether they will only talk on it.

Mr. WARDLE

Wait and see our Amendment.

Captain CLAY

I wish to turn once more to the Land Taxes. We have had a characteristic speech from the Chancellor of the Exchequer, but I doubt whether the land agents and speculative builders will be thoroughly reassured by it. The right hon. Gentleman stated that he could not understand why we object so strongly to these Land Taxes. We object to them because they are unjust and unremunerative. I represent a constituency in the South of England, and undoubtedly the Chancellor of the Exchequer is right so far as that part of the country is concerned when he says that building operations have gone down enormously since the introduction of the Budget of 1909. But I am perfectly certain that he is wrong in his reasons. The party to which I have the honour to belong has not the influence which he would have the Committee believe. Another curious point is that it is Members of the Liberal party in that Division who are most strongly opposing these Land Taxes. At a meeting of the local Liberal party the only important amendments put forward with regard to the policy of the Liberal party had for their object the abolition of these so-called Land Taxes. We have always noticed in our part of the world that when there has been a trade boom in the North of England or in England as a whole that after an interval there has been a considerable increase in building in the towns of the South of England. The reason is that people, having made a bit of money in the North, prefer to leave their smoky surroundings and to come to more salubrious and certainly more beautiful neighbourhoods in which to live and to spend their money. At the present time there is no doubt that building operations have almost come to a standstill in this part of the world; in fact, the only building that I can think of in my district that is going on is the re-erection of a cricket pavilion which was burnt down by the suffragettes. I sincerely hope that that work will be done as soon as possible. Several reasons can be adduced in connection with the arguments I am putting forward. First of all, we know there has been a great increase in the cost of living. We know also there is an increase in taxation owing to the Insurance Act.

Above all, there is the fear of undervaluation of buildings under the land Clauses of the Budget. This undervaluation frightens the builders and militates against trade. In nine cases out of ten the builder has not got a large amount of capital at his immediate disposal. He has to raise the money he requires upon mortgage, and he has found in many cases that the property he has raised the money upon has been reduced in value to the amount of the mortgage. The result of that is, and must be, that he is often taxed on what, after all, is a real loss. He is taxed as if he had made a profit. I think this is a point that cannot be too clearly laid down in all these cases. The valuation made ought to be taken if the owner of the property wishes it on the actual price, or the actual figure on which the property has changed hands. I cannot see any objection to that. The Chancellor of the Exchequer did not mention it in his speech. I hope the right hon. Gentleman the Financial Secretary will take note of what I say, because in cases of the kind it has been found over and over again that where land has either recently been built upon or has changed hands that the Government valuer refused to take the valuation put upon it. You can have no fair valuation except you accept the return of the owner as I have just stated. The right hon. Gentleman in his speech said that there had been many valuations made, I think he said about 3½ millions, and that there had hardly been any appeals. Surely that is hardly an argument. We know that in a majority of these cases it is only a question of a few pounds, and if you appeal you have to fight the whole power of the Treasury, and the expense is such that the man in possession and the speculative builders cannot possibly undertake that fight with any hope of success.

Let me give some of the cases I referred to. The first case is that of a house whose gross value was put at £425, with site value of £237, so that the house was thus £188. Now this house cost £400 to build and complete. The next is the case of two cottages of the gross value of £400 with site value of £80. That makes the value of the buildings £320. These two cottages have been sold recently, before the valuation, for £500. The builder concerned pointed out to the valuer that he had actually got £500 for the cottages. The reply of the valuer was, "Oh, you have been charging too much; you charged the lady who bought so many pounds more than the property is really worth." This builder had to go back to the lady for whom he was acting, and explain that the reason she could not get a proper valuation put upon her property was because the builder who had been doing the business for her had charged her too much. How can you expect building to increase in the country when you have cases of this kind, where the valuer actually informs the public at large that too high a price has been charged for the commodity, whether cottages or land. The value of land is what it will fetch in the market, and not that fixed by any Tom, Dick, or Harry which the Government chooses to send down to appraise it. The other case—and I can give the right hon. Gentleman names in all these cases if he wishes—was £800 put upon a house which had cost £900 to build. This is characteristic of what is happening all over the country. My personal experience of a small bit of land that I have was that the land has been valued at £500. That valuation was considerably less than the reserve which had been put on at auction within the last few months.

In spite of what the Chancellor of the Exchequer has said, that there has been no appeal, I do not know that his statement really conforms to the truth of the case. There is another point which, I think, has not been sufficiently pressed forward, and that is the obligation imposed upon every private landowner to spend large sums of money in seeing that the land is properly valued. We know that the valuers cannot be men of the very highest ability in the country, because the people who want to protect themselves have got to employ men of undoubted standing, and, of course, that costs money. There is another argument, the fact that these Land Taxes do not bring into the Treasury one tithe of the expense which they have put people to. Again, this valuation will have to be made every five years. Of course, it may not be so complicated in the future, but we shall have to go through this question of valuation every few years. It does not benefit the State; it certainly injures the landowner and the speculative builder; even the land agents, who, after all, are getting a bit of work in connection with the valuation of properties, are, up and down, all against the Land Taxes. I do not think anyone quite realised the effect of these land laws on the speculative builders. They have hit them very hard. Before the introduction of the 1909 Budget the speculative builder had probably built on land on mortgage. He now finds his property has depreciated in value, and he is reduced in many cases almost to penury. At any rate, for the moment his prospect in life is absolutely destroyed. This Act was intended to be popular, and to give a good electioneering cry; it was to destroy the wicked landlords, but it was to injure nobody else; it was to hit the rich ground landlords in London, but the question of the speculative builder or the small owners of property were never considered. I wonder why hon. Gentlemen on the other side of the House do not realise that by hitting these big men—and perhaps they are not injured really—that they may be taking away the livelihood of hundreds of people in the country. It seems to me rather ridiculous to talk, as hon. Members on the opposite side of the House talk, about the necessity for housing in face of these circumstances. The hon. Gentleman who spoke last said that throughout the length and breadth of the country many thousands of people were living in one-roomed tenements, yet hon. Gentlemen do not seem to have measured the cause of the depreciation in building which has taken place throughout the country.

There is another branch of the Land Taxes not really touched upon this afternoon, and one perhaps not so harmful as that which I have just dealt with, and that is the great increase in Reversion Duty. I should like to show the Committee that even in this branch which is not so dangerous as the other, that great injury can be done to the poor and to the State as well. I happen to be one of the trustees of a very large charity. We distribute some £10,000 or more every year to hospitals, convalescent homes, institutions, like the Research Society, and others. A large part of the remunerative property is let on lease in London, and the leases are coming in. This is not the time in London when you can get a large premium for renewing a lease. The amount it is going to cost this year for increased Reversion Duty is no less a sum than £5,000. The question is, how are you to pay that, and what is best for the charity? And the best that can be done is to take half that cost out of this year and half out of next year, and the charity and all those institutions will have to suffer owing to the increase in the Reversion Duty. There are more leases falling in in a few years, and I think this is a most serious state of affairs when you consider the great needs of the hospitals and other institutions of the country. I look upon these Land Taxes as partly speculative investments which are being carried out at the expense of the whole community. You are charging the country some hundreds per cent., and you are not bringing in the smallest benefit or any prospect of lasting assistance to the revenue of the country. You are putting it down to the advantage which will accrue from having your valuation, but we have proved that your valuation is not a fair one; it is not a valuation which will command respect or will be successful in the desire you yourself wish it to fulfil. I wish I could have seen exactly, what the Amendment is that the Chancellor of the Exchequer intends to make in the Land Taxes of the Budget. It was a little bit difficult to gather how far the right hon. Gentleman intends it to apply, but I sincerely hope he will by some means or other recompense those unfortunate men engaged in the speculative building trade, and that there will be some Clause which will enable men, if they wish it, to have their property valued at what it will fetch in the open market.

Sir J. D. REES

I do not intend to follow the hon. Gentleman who spoke last upon the other side of the House in the general remarks he made upon the Budget, but he made one remark with which I agree. He said tea was a necessity of life, and that was the only thing he said with which I agree. That being the case I should like to know on what ground the Chancellor of the Exchequer has based his estimate of receiving £280,000 more in Tea Duties in the financial year. There was only one occasion since 1904 that a figure anything like this was reached; that was in 1911, when tea was reduced by one penny. It appears to me that the Chancellor's estimate is simply based on the fact that he wants to make it appear that £6,000,000 or £7,000,000 wanted can be got without putting on any extra taxes. I say, as one who is somewhat familiar with the tea trade, this means an increase in consumption of 14,000,000 1bs. of tea for the year. Perhaps the Financial Secretary will kindly say on what basis this estimate was formed. I believe it to be as fallacious as every other estimate made by the Chancellor of the Exchequer, as fallacious as his estimates on old age pensions and the Insurance Act. The estimates of the Chancellor of the Exchequer are pure politics. I have two cases immediately connected with the subject before the Committee from my own Constituency, and I beg the right hon. Gentleman opposite to note them in order that he may say something about them. The Porchester Garden Estate was formed in 1887 in Nottingham for workmen's allotments, and they were paid for by instalments, the money being found by public-spirited gentlemen. During twenty-five years £20,000 was spent in development. Of those allotments 152 were built upon and the remaining 680 are gardens, and the great majority of them are intended to remain as gardens. They are owned chiefly by workmen who live in the city and who grow fruit and vegetables on these allotments. I put a question upon this matter and I referred to the persecution of these people, but the Table struck the word "persecution" out. It really was the proper word to use, and I repeat I regard this as persecution. They had received notice of Undeveloped Land Tax simply because this ground was intended to be used as a garden and not covered by houses. It is true that some of them may get off this payment under the provisions of Section 18 of the Finance Act of 1909–10, but it is unfair that these people whose land is being put to the best possible purpose should be served wholesale with assessments, and it should be left to them upon appeal to obtain such redress as is due to them. I put a question on this point to the Chancellor of the Exchequer, and I was told that exemptions were being considered, but I hope the right hon. Gentleman will immediately take some steps to desist from the persecution of these poor men. My hon. and gallant Friend pointed out what is quite true that these taxes, like all taxes, hit the poor the most. It is not a case of taxing the rich, because the poor man suffers the most, and the rise in the cost of living is more due to the taxes of the Chancellor of the Exchequer than to any other cause.

9.0 P.M.

I wish to bring forward the case of a company in Nottingham, which was formed to introduce and work embroidery by machinery from the Continent. They acquired a plot of land and installed their machinery, and they have been served with Undeveloped Land Duty assessment for four years, although the company has only been in existence for three years. Although I can believe a great deal on the part of those who go about enforcing this cruel enactment, still I cannot understand such action, and I ask the right hon. Gentleman to make inquiries into this case, and I shall be glad to place him in possession of the facts regarding this particular company. Under no circumstances can Undeveloped Land Tax be due from them for more than one year, and it is a great hardship that they should be paying it at all. I asked a question in regard to the Richmond case, and the Chancellor of the Exchequer answered that he could not deal with it pending a decision in the Lumsden case. When the right hon. Gentleman asserted that the Lumsden case was the only one of the sort, I instanced the Richmond case, and he said it was not a similar case. I admit there are differences, but the fact that this answer has been given cuts away the whole ground from the Chancellor's case. I ask the Secretary to the Treasury to bring that fact before the Chancellor of the Exchequer, point out to him what his own answer in the House was, and ask him how he reconciles it with what ho said to-day, at the same time doing justice to the injured persons in that case. The hon. Member for Stockport (Mr. Wardle) made a statement to which I should like to take exception, because it was one of a most injurious character. He spoke of the provision made in this Budget for armaments as being unproductive expenditure. I do not think any expenditure could be more productive than that which makes all production possible, and without which there could be no production. I put it to hon. Members opposite, whether they really accept the view put forward by the hon. Member for Stockport, that expenditure on armaments is really unproductive. If an hon. Member representing a dockyard constituency, discovers that the expenditure in the Royal dockyards has been diminished by 1s., we find him protesting here on behalf of this constituency. Expenditure upon armaments give us peace and prosperity, and brings the money back to the taxpayers' pockets by making ships and implements of war in this country, and anything more absurd than this contention I cannot conceive. I do not know of anything more absolutely wicked than the argument of the hon. Member about international action, which only means that patriotism is to be wholly abandoned, and that a corrupt understanding is to be arrived at with organisations in other countries to paralyse the arms of our own country in the hour of need, and make us powerless in front of an enemy. [An HON. MEMBER: "He never said that."] The hon. Member did say that in the course of his speech, and I should be sorry to sit down without repudiating that statement with all the scorn and disgust of which I am capable.

Mr. CROOKS

He never said it.

Mr. CHARLES BATHURST

The Chancellor of the Exchequer charged the hon. and gallant Member for Chelmsford with having brought land problems into prominence. I am very glad indeed if my hon. Friend has succeeded in that, because the more prominence that can be given to land problems the better I shall be pleased. I am quite certain that these land problems will only be solved by a fair consideration of them at the hands of an impartial judicial tribunal. The attempt that is now being made to gather information in a somewhat secretive and underhand manner is not calculated to produce that confidence in the methods of the Government, as is likely to result in a solution of these problems. I say with all pride, as one who belongs to the class which it is sought to attack by this kind of legislation, that there is no class in the whole of this country which during the last century has carried out its obligations in a more public-spirited and unselfish manner than the class I may describe as the squires of England. The time will come when it will be demonstrated to the public at large that the country squires have more faithfully carried out, with all insufficient means, the obligations which they have set themselves to carry out than any of the so-called commercial classes of this country. The right hon. Gentleman made one remarkable statement with regard to the state of the building trade in the South of England. I represent a portion of the South of England, and I am wholly unconscious of what he suggested, that there was serious overbuilding in that part of the country as well as in the North of England up to the time of the so-called People's Budget. I am still less aware that those who profess the same political faith as myself have done anything to discourage prospective builders from carrying out their building operations. So far from that being the case, all of us who are interested, as I am, in rural housing have been doing our utmost during the last three or four years to encourage more building in and about our villages, because we felt that there was a real, genuine need for it, and I think that it is a little unfair of the Chancellor of the Exchequer to point to the South of England, where this campaign has been carried on mainly by gentlemen of the same political faith as myself, and say we have done anything to discourage building in that part of the country. I should like to ask this: If there was serious over-building at the time when this famous Budget was brought before the House, how can the Chancellor of the Exchequer justify his oft-repeated statement at that time that land was held up from building to such an extent that it became necessary to levy an Undeveloped Land Duty in order to effect its further building development? The two statements are so absurdly inconsistent that I am surprised at even the right hon. Gentleman daring to put such a case before the House.

I should like to ask upon what principle the Undeveloped Land Duty is being levied and assessed in rural and semi-rural localities. I do not want to be personal, but I have had rather a curious experience myself with regard to this Undeveloped Land Duty. The only site in respect of which so far Undeveloped Land Duty has been charged upon me, and in respect of which I was told I should be put into Court unless I immediately paid, and I did pay in consequence under protest—[HON. MEMBERS: "Shame!"]—well, I am a law-abiding citizen—was a plot next to a place of Non-conformist worship. It is a plot which was purposely left, as is always the case on my estate and in my part of the country, in order to provide, if necessary, for further extension either of the chapel itself or of a school which is conducted in connection with that chapel. It seems to me a little hard that I am now compelled to put that particular plot into the market and get what I can for it to the detriment of the community which owns that chapel. It was clearly never intended to build an ordinary house or shop upon that plot, and it is grossly unfair not only to myself but to the interests of that religious community that this should be driven into the building market when, in fact, there is no demand there for a building of such a kind. I object to it still more, because it so happens that in this very town—it is little more than a village—I have myself during the last four years gone to considerable expense to lay out two roads for the sake of developing land for building purposes in a far more suitable situation for workmen's cottages because it happens to be much nearer the two large industries, mining and tin-plate works, upon which the local population depend. These gentlemen who come down from London or from a distance—Worcester or somewhere else—cannot have the knowledge we have as to the land which is best suited for development and what development is in the best interests of the local population.

What is going to happen with regard to Increment Value Duty as charged upon land under which there are minerals? Most people who own land which contains minerals are either developing those minerals at the present time or are waiting till such time as there is likely to be some commercial value in those minerals so as to justify their development. If an owner of undeveloped minerals has to make a return for the purposes of this valuation, he either has to put a fancy value upon the whole of the minerals under his land, whether there is any immediate or even a remote prospect of working those minerals, in which case his successor will be charged a considerable sum upon the increased value of his property for the purposes of Death Duty, although in fact no revenue is being produced by the minerals, or else he will make no return with regard to the minerals, the exact value of which he is wholly unable to determine, and when they come to be developed, one-fifth of the whole value will pass to the State. My hon. Friend the Member for Chelmsford (Mr. Pretyman) has drawn attention to the great injustice in the present method of valuing rural land without making proper deductions in respect of what are generally regarded as improvements in a rural district. The Chancellor of the Exchequer emphasised the fact that he did not desire to tax improvements, and especially improvements on agricultural land, and he also indicated in a particularly plain manner this afternoon that he had in view the possibility, if not the probability, of levying taxes in future upon the basis of capital value rather than upon that of annual value. If that is so, it is most unfair that you should make a valuation of agricultural land without deducting from that valuation such matters as drainage, stone walls, sea walls, gates, or even tenant right.

The case is particularly strong with regard to tenant right, because tenant right is clearly in the nature of things not the landlord's property, and, bearing in mind the provisions of the Agricultural Holdings Act, 1908, it is clearly unfair that a landlord should have tenant right assessed as part of his capital value, when, in fact, he has under that Act paid full compensation to an outgoing tenant in respect of all unexhausted value of fertilisers, feeding stuffs, and the like which go to constitute tenant right. With regard to drainage, there is a large amount of land, particularly in the fen districts of Lincolnshire, Cambridgeshire and Huntingdonshire, which owes its whole value to the drainage which in years gone by has been carried out in respect of that land. Surely it cannot be fair to say that no deduction shall be made in respect of such drainage, whether that drainage has taken place five years ago or fifty years ago. The greater part of the most valuable land in my own district would be submerged beneath the estuary of the Severn every time there was a serious high tide if it were not for the fact that the owners have to maintain sea walls and banks to keep the water off the pastures near the river. Is no value going to be deducted in respect of those improvements which in their very nature alone make it possible for the land to be occupied as agricultural land? I want to refer to the still unfortunate position of the local ratepayer under the existing system of taxation. I would suggest to the right hon. Gentleman and to this Committee that the real reason why the Chancellor of the Exchequer is able, on the face of it, to balance the national revenue with the national expenditure, is because he is perpetually, persistently, and continuously throwing on the shoulders of the local ratepayers charges which should be thrown on the Imperial Exchequer, and he is only able to save the bulk of the wealth of the country—and after all personalty represents the bulk of the wealth to-day—from additional taxation by continuously, by Act of Parliament and by Departmental Orders, throwing increased charges on the unfortunate occupiers of land and buildings all over the country.

I want particularly to refer to the question of Local Taxation Licences. It is a matter which has been more than once before this House, and about which the local authorities feel very sore. The amount which is now returned to the local authorities in respect of local taxation licences for motor cars and carriages is based on the year 1908–9, and in that year the amount produced by these licences was smaller than at any time during the previous ten years, and considerably smaller than it has been at any time since. It is a most unfortunate year to select as the basis of refundment to the local authorities, because during the earlier part of that year—during the first nine months of the financial year—the Exchequer, which was then responsible for collecting these taxes, was so busy in bringing the Old Age Pensions Act into consideration that there was considerable slackness in getting in these duties, and during the remaining three months the local authorities whose duty it was to collect them had not got their machinery into operation for doing so. The result was that there was a very serious decrease in the amount of the Licence Duties, and upon that basis the local authorities have to rest satisfied, although the whole of the balance which they may collect on behalf of the Exchequer goes to the Exchequer, and does not pass to them for their own local administration. The injustice does not stop there, because no adequate allowance is made for the work of collection which they carry out on behalf of the Exchequer. In my own county of Gloucestershire the cost of collection is just 33 per cent. more than the amount that the State allows for it, and £6,000 is now annually collected for which no allowance is made. There has recently arisen a still more glaring case of unfairness to local authorities, and I am going to ask the right hon. Gentleman to see if he cannot do something to amend it in one of the two Bills which are to be introduced. It is in connection with the Pleuro-pneumonia Account. Possibly the right hon. Gentleman may never have heard of it.

Mr. MASTERMAN

Oh, yes.

Mr. C. BATHURST

Then I hope that the right hon. Gentleman knows what I am about to tell him, because it is a very serious injustice. The Pleuro-pneumonia Account is an account out of which is paid the administrative expenses of the Board of Agriculture in connection with outbreaks of serious contagious diseases among animals, and if there is any deficiency in the account the local authorities have to make it up out of funds which would naturally pass to them in the form of the Local Taxation Account. In other words, when there is a serious outbreak of any contagious disease, such as foot-and-mouth disease, there is always a deficiency in the Pleuro-pneumonia Account, and the result is that the balance which is necessary to pay the expenses of the Board of Agriculture has to be deducted, from the amount which would otherwise pass to the local authorities for their administrative work which is lessened to that extent. During last year local authorities have had deducted from the Local Taxation Account £66,000 in respect of the expenses of the Board of Agriculture. Of that amount the county of Gloucester had to find £1,000, and the county of Wilts another £1,000, and they got so much less for their work of administration than they would otherwise have received, although not a single case of foot-and-mouth disease occurred in either of those counties. In addition all counties have got their own local expenses in connection with cattle diseases as in past years. That is so flagrantly unfair, seeing that it is for the maintenance of a Government Department that the local authorities are being bled, that I sincerely hope the right hon. Gentleman will take some steps to remedy the grievance, either in the Finance or in the Revenue Bill which is to come before the House.

I should like to ask the right hon. Gentleman what has happened to the Report of the Departmental Committee on Imperial and Local Taxation. Two years ago we were told that this was a most urgent and important matter, requiring immediate treatment, and that the Committee would be appointed and be asked to report at an early date, so that the question might be promptly dealt with. Since that time every single grievance which the local authorities have brought before the Chancellor of the Exchequer has been met with the reply that "nothing can be done, however good may be your case until the issue of the Report of the Departmental Committee." Surely that cannot justly be used as a pretext, and I hope it is not intended to be so used, for putting off the demands of the local authorities to some indefinite date as in future. If it is, I think it would be a most immoral proceeding. The time has come when we are justified in asking that the Report shall be presented, or that at any rate there should be an interim report upon which something may be done to alleviate the glaring and unfair burden placed upon the shoulders of local ratepayers for purely national services. I do not know whether it is any good making a further appeal on this subject. We are now a little bit frightened by the suggestion being made almost daily that further matter should be submitted to this Committee for consideration. Surely the time has come when they ought to wind up their proceedings, and not be invited to consider further evidence, which various people in the country, somewhat late in the day, may desire to lay before them in connection with this subject. In the meantime the local authorities are getting more and more embarrassed and there is less and less genuine interest in carrying out the serious duties Parliament has thrown upon them, especially in connection with education. In many counties local administration is almost at a standstill, and if this state of affairs is not remedied at an early date, I venture to think the threatening suggestion of Lord St. Aldwyn, made before the Gloucestershire County Council last year, will be accepted and acted upon by many local authorities in this country, namely, that they will decline to carry out any further duties imposed upon them by any Act of Parliament which puts upon them fresh financial burdens, without providing any money out of the Exchequer to enable them to carry out what is a national service.

Mr. CHIOZZA MONEY

The speech we have just listened to has not unnaturally dealt at some length with the Land Taxes, and I hope the hon. Gentleman who has just sat down will forgive me for saying I am sorry that so much time in this Debate has been spent on discussing one part only of the Budget of 1909. I happen to be one of those who has very easily dissembled his love for the Land Taxes. While they were absent from this country I was not very fond of them, and I cannot say that their presence has made my heart grow any fonder. I am not sure even after a lapse of five or ten years more it will be found by the present Chancellor of the Exchequer, or his successor, that any great revenue is to be derived from Land Taxes in this country. There is a very obvious reason for that. The wealth of this country is not based upon the land at all, and it never will be[...] While this country depended upon the land for its wealth it was, of course, a poor country, and it was only when it got its living by other methods that it became a rich country. That is a fact to which every Chancellor of the Exchequer must pay attention in framing his Budget; therefore I may almost say I was pleased to hear my right hon. Friend state this evening—I think this may be gathered from what he said—that he hardly expected at any time a very considerable revenue from these Land Taxes. There is this to be said in this connection: Their chief recommendation to the people of this country was that they would produce revenue. I would say to those who expect revenue from that direction, or to those who expect a great revenue, they are saving up for themselves a very great disappointment. I do not intend to say very much more about the Land Taxes, but I will say that there is only one great principle to which this House must pay attention in levying taxation, that is the old principle, which I am afraid is one more honoured in the breach than in the observance, that we should levy taxation with due regard to ability to pay it. The very moment you select any commodity—I care not what it is, whether it is tea, which is the nominal cause of this Debate, or land, which is the real cause of it, or sugar or any other commodity—if you tax that commodity you really do not tax the commodity at all; you tax the persons who use, or own, or are in some way connected with the commodity. You cannot tax commodities; you can only tax persons. Therefore, when you select any commodity for taxation, what you are sure to do is to offend against that principle of ability to pay, because you cannot be sure how that commodity is owned and how your tax connected with it will hit the individuals who compose the country.

The truth about land is the sad truth in regard to any other commodity, that the greater part of it is owned by a few people. It is true of land; it is true of iron or of any commodity you like to name. This is also true about land, that a small part is owned by a great many people; therefore if you choose land as your medium of taxation you will hit a very large number of people you do not intend to hit, and you will offend against that principle of ability to pay. That is being done in every constituency in this country. It is being done in my own. The other day I got a letter from a poor man. He was such a humble man he was afraid to write to me, and he wrote to somebody else. There are these people in the country. When my right hon. Friend talks of people not appealing against valuations, he must remember that there are people who are afraid to appeal against the valuations; they are too ignorant and too humble to exercise the machinery of appealing against valuations. This particular person who put his case to a third party, was a poor man, who owned a little bit of land. He has to pay Undeveloped Land Duty upon it, but he cannot afford to pay it. It is not his fault that the land is undeveloped. He would gladly develop it. If any Member of this House would buy it from him—I do not know whether any hon. Member who is listening to me now will take it up—he would greatly relieve this poor man. He cannot get rid of his land, and he is taxed because he cannot get rid of it. He is a poor man and cannot afford to pay the tax, therefore you are offending against the principle that you should levy taxes according to the ability to pay. One further observation upon the matter is that for years in this country Members of Parliament, writers, and every person who can in any way appeal to the public intelligence has told poor people that they ought to be thrifty. What is the poor man's first method of being thrifty? What is the very first thing he chooses? Does he buy stocks and shares? Does he invest, as some Members of this House are able to invest, with knowledge? No! The very first thing he does is to try to own his own home. We have encouraged him to do it, and we were right in encouraging him and he was right in doing it.

Mr. MORRELL

Is he taxed under the Budget?

Mr. CHIOZZA MONEY

That is what I am coming to. The person who wants to buy a home, like this man, bought a little bit of land with the idea of putting a home upon it, which he has not yet done. That man has undeveloped land, and he is taxed upon it. My hon. Friend asks whether he is taxed under the Budget. He is taxed, and he cannot afford to pay the tax. Take the poor leaseholders, who have bought their little bit of land from a building society through putting by year after year. Then comes along a man valuing the land. Say the man gave £300 for it. There is a mortgage of £250 upon it. The Government valuer values it at £210. That is the case of hundreds of thousands in this country, and not the case of a few. I wish it were the case of a few. To each of these men it is a very considerable sense of hardship. How can we relieve that sense of hardship? By a very commonsense plan which I am going to propose now in principle and shall propose in detail later on. I am going to propose that every poor man below a certain limit of income as in the case of the Income Tax shall be exempt altogether from these Land Value Duties, whatever their name, whether they be Increment Value Duties or Reversion Duties, or any other name. I am going to say quite boldly to the Chancellor of the Exchequer, and, indeed, to every other Member of the House, that just as you exempt from Income Tax a poor man because you know he cannot afford to pay it, so also you must exempt from the Land Value Duties the same poor man, because you know he cannot afford to pay them. My hon. Friend who interrupted me may feel quite sure that he is not taxing the poor man, but I am not, and I want to make quite sure. Another point in that connection is that my right hon. Friend in the course of the interesting speech he made a little while ago, referred again to the question of local taxation. On the last occasion when that subject was raised in the House I took the liberty of pointing out to the House and to him that other countries have found it quite possible to levy a local income tax. I urged that that was the only means of applying local taxation with due regard to ability to pay and equality of sacrifice. What did my right hon. Friend say when he replied to me in the last Debate? For some mysterious reason, which I did not see then, and am now unable to understand he threw at me a quotation from Mr. Gladstone. I have not the faintest idea of its relevance. Whatever was said in the past by that man, whose name I utter with as much reverence as any other Member of the House, whatever may have been said in his time and in his day and generation, I am quite sure that in our own time and day and generation it is possible to levy a local income tax. It is done in Germany with very great success.

I have just obtained from Frankfort particulars as to how they levy their local revenues. The local income tax is the mainstay of local finance. They raise by local income tax as much as they raise by every other source of revenue, including the profits—and they are big profits—from waterworks, gasworks, and electricity undertakings. They levy from local income tax as much as they get by all other forms of taxation, and by non-tax revenue. I have inquired as to the method in point of detail, and I am satisfied at any rate as to this, that while it is not possible to levy any form of taxation with absolute justice—let us not be under any illusion on that head—you cannot be absolutely just in levying taxation, but when that is granted this is true, that you can levy a local income tax with a larger degree of fairness than you can levy any other form of local rating or taxation, and I commend that proposition to every Member who is listening to me, and I ask him to inquire into the details, and see whether he cannot satisfy himself, as I have satisfied myself, that granting imperfection, which must attach to all human affairs, still the system of local taxation is fairer in its incidence than any other form of local taxation. I once more remind the Committee that our rating system was originally, in the reign of Elizabeth, instituted as a local income tax and as nothing else, and it ceased to be a local income tax simply because of the difficulty of levying it upon personalty. That difficulty does not exist in our time, and, as the difficulty has disappeared, we ought to revert to the original principle of the Act of Elizabeth, and make our local rate what it ought to be, a local income tax. Therefore I deprecate very strongly the observations of my right hon. Friend, which seemed to lead us to this, that he, or the Government, intends to propose in the near future something which is called the untaxing of improvements. What does that mean? Let us not invent new phrases for old ideas. What do you mean by exempting improvements from taxes? You mean untaxing capital. My right hon. Friend mentioned a case in point. He wanted to know when a capitalist put in new machinery why he should pay more rates. There is a good reason why. Find out whether the new machinery makes more profit or not. If it makes more profit, then tax the profit. If it does not make more profit, then do not tax the profit. Surely, that is exceedingly simple. I think my right hon. Friend forgot, when he used that illustration, that it is not the capitalist who works the machinery, it is working men who work the machinery, and whether or not the capitalist makes a profit out of the working men is the real test of whether or not we should levy an additional tax for rates upon him. Local income tax settles that question and settles it once and for all. Therefore we need be under no difficulty as to what we should do in that particular matter.

I should like to pass from the subject of Land Taxes to what I regard as a much more important subject, because really, in the time to come, it will be found that while the hopes of the Land Taxes are largely exaggerated, the fears of those who oppose them are also largely exaggerated. It is really a very small subject, but, as is very often the case in politics, small subjects are exaggerated into the fictitious appearance of being large ones. I should like to pass to what is really important—the expenditure of this country. A Debate like this ought to be an opportunity for discussing the national expenditure and the means of meeting national expenditure in the broadest sense. We ought to be asking ourselves whether we are spending too much, or whether we are spending too little. We ought to be asking ourselves what the nation can afford to spend in order to raise the standard of living and comfort of the nation, what it ought to be spending in order to train the nation better, to guard the nation properly and to develop it in the highest possible degree. Instead of discussing those important subjects, we find ourselves talking at great length upon such trifles as Land Taxes, which seems to me exceedingly unfortunate. If I may come to the really important part of the matter, I should like to enter a protest, as has already been done by the hon. Member (Mr. Arnold), who gave us such an interesting speech, in which he pointed out with great force that this country was not the only country which was increasing its expenditure. May I put the facts in another way, which may help us to see how this thing lies.

If you take the five years which ended in 1911—and if I do not take 1912 it is only because I have not the facts relating to all the countries for that year—I find that the United Kingdom's expenditure, including the Post Office expenditure, which I agree ought not to be included, increased by a little over 12 per cent. What about other countries? Of the chief countries of Europe, Italy was the only one which increased her expenditure as little as we did, and all the others increased by much more. In Russia, the increase was 22 per cent.; in France, 18 per cent.; Germany, the Imperial expenditure without the States, 22 per cent.; Austria, 50 per cent.; and the United States, 20 per cent. So that we find, instead of our country having embarked on a peculiar course of extravagance, it is the country amongst the great countries of the world which is peculiar for having increased its expenditure less than the others and not more. Is that a good thing or a bad thing? The Chancellor of the Exchequer gave us another quotation, in which Mr. Gladstone talked about the boundless augmentation of expenditure and the tendency to break down all barriers and all limits, and that at a time when the national expenditure of the United Kingdom was only £70,000,000 a year. I could not be sure when he gave us that quotation whether he meant to commend it to the House or not. If he meant to commend it to the House, he was condemning all that he himself had done; therefore, I cannot think he wanted to commend it. Surely rather he quoted it to us to remind us that in those days, fifty years ago, the ideas of statesmen with regard to public expenditure are not our ideas, unfortunately for us. What is the fact about the expenditure of fifty years ago? Surely it is this: That just because Mr. Gladstone and those who thought with him did not spend enough on education; did not spend enough on housing; and did not spend enough on social reform, we to-day are left with a terrible legacy of degradation and deterioration in every department of national affairs. We have got the children of that day with us as old men claiming old age pensions. We have got the children of a much later date with us to-day as grown men, unskilled in their employment, and unable to gain a living. We have got the slums to-day which were actually being built when Mr. Gladstone made that speech. That is the consequence of a too small expenditure two generations ago.

If I may appeal to the Committee very urgently indeed, as one who has thought a great deal about these things, I would say this, let us be careful lest someone is able to arise in this House thirty, forty, or fifty years hence, and say that the statesmen of our time, just because they were fearful of embarking upon necessary expenditure, had piled up for them a legacy such as we are enjoying to-day. I am quite sure if you consider the amount raised from national income we need not be afraid that we are spending too much or increasing our expenditure too greatly. I have taken the trouble to find out what has occurred during the lifetime of the present Administration in this respect. I find if we take the net incomes of Income Tax payers—and to arrive at this net income I deduct 10 per cent. from the gross income assessed—that between 1905 and the new financial year on which we have just entered these incomes have increased by over £200,000,000, while the amount of taxation realised from them has increased by only £15,000,000. If we take the income left for paying taxation I find that it has increased in the short period of nine years by £199,000,000, so that we have not even taken for national purposes a tithe, not of the national income, but even of the increase of the income of the Income Tax payers. I think that is sufficient evidence that it cannot be said that our expenditure is running ahead of our means. When I am told that we are spending too much, when it is hinted that our expenditure is increasing too rapidly, when we are told that we must pull up in the reckless and ruinous course we are pursuing, surely it is very germane to quote the facts to which I have referred. How much would it cost the nation to get rid of the slums, and to give proper training to the children of the country, which at present they do not receive? Why, a mere tithe of the increase—not a tenth of the income of the country, if properly expended, would go a long way towards wiping out the reproaches to which I have referred.

Some hon. Members opposite have introduced a Housing Bill which has called for a very modest Grant by the Treasury. I wish to take this opportunity of saying that I am in hearty sympathy with the proposal, but how insignificant is the amount which is proposed in that Bill in relation, on the one hand, to such sums as those I have mentioned, and, on the other hand, to the great need for better housing in this country. I think that those who oppose that Grant might take to heart the facts I have quoted. Let me give another illustration. In 1905 the percentage of the Income Tax to Income Tax payers was only 3.4 per cent. In 1914, in spite of the increased taxation it will be no more than 3.9 per cent. of the income of Income Tax payers, showing that if we make up our minds that certain expenses are necessary, we need not be afraid to spend money because of the dimensions of our national income. I am not pleading for taxation for taxation sake. I mean that if, on examining certain social questions, it is found that certain expenditure is necessary, we need not shrink from the expenditure because of the increase in the national dividend. When it comes to the question how the national revenue shall be raised, then again I put in a plea, as I have done before, for greater attention to the principle of ability to pay. May I direct attention to the way in which Income Tax is now graduated? It is very difficult to understand our Income Tax, because of its many complications, but if you work it out in the light of concrete cases, you find that an earned income of £200 a year pays less than 2d. in the £, that an income of £300 pays about 4¼d., and that an income of £500 pays nearly 6½d. Hon. Members will see how steep the graduation is. That is graduation if you like, but it is very steep and very unfair graduation. Let me direct attention to another point. At £700 a year the abatement system comes to an end. If a man has a little more than £700 a year, he is very unfairly taxed. Incomes between £700 and £5,000 a year, when unearned, are not graduated in any way, so that a man with small means drawing his income from investments who has £750 a year pays 1s. 2d. in the £, or exactly the same as the man who has £5,000, because the Super-tax does not apply until a man has over £5,000 a year.

Whether you take earned or unearned income, you have not got a fair scale of taxation, and I appeal to the Committee once more to face the question of the possibility of framing a fairly graduated Income Tax. Why should not we have it? The answer usually given is that if you graduate the Income Tax, you would have to dispense with taxation at the source. On examination that is not found to be of sufficient excuse. We levy Super-tax directly on the individual, and that very fact shows that you can directly tax and have a graduated Income Tax. You need not give up collection at the source for this reason. Super-tax payers have all had their dividends taxed at the source. Why not apply that system all round? It is only unearned incomes that are taxed at the source. If you frame a scale for earned and unearned incomes, with regard to unearned incomes you could levy a between-way rate—a flat rate. Suppose it ranges from 1 per cent. to 15 per cent., you would levy the flat rate, and then collect the balance as you now collect Super-tax, by the personal declaration of the individual. It is merely an extension of the system which already exists. What would be the result of doing this? We should get declarations from both poor and rich people. At present you get personal declarations from the poor through their employers. You make the very rich declare their incomes. Then why should not those who receive the middle incomes declare their incomes? I am of opinion that if you did this and applied all round the system which you now apply to the majority, you would get a larger assessment to Income Tax and a larger yield upon the same rate of taxation. At any rate, the system is well worth trying. It would sweep away the anomalies to which I have referred, and also others which I have not mentioned. It would make taxation not only fair but plain to the taxpayer. The Income Tax payer would receive a form showing that the man of small income was taxed less than the man of large income. Taxation would be reconciled to him by the sense of justice which would accompany it, and we can not only do that but we can add to his convenience by altering the system of collecting taxation. In Prussia they do not collect the tax yearly as we do. This is a matter of great convenience to people of small means. They collect the tax quarterly. Why should we not do the same thing? They make allowance for people who have misfortunes. Say a man has a poor relative to keep, or has met with exceptional losses in business, they make allowance for these things. Why should not we make allowance? If we did we should make it appear to the taxpayer that the Government of a great country have regard to the principle of ability to pay to which I have referred, and were not unregardful of the small man.

There is another thing which you need to consider. I ask now, as I ventured to ask before, why should we have sole regard to taxation for raising revenue in this country? What are the facts about our national balance sheet? When my right hon. Friend or some other Chancellor of the Exchequer rises at that box to make a Budget for a great nation he has to find an enormous sum of money and he has practically nothing to start with. All he has got to start with is the profit on the Post Office and the telephones. He has got a small profit of about £500,000 from the Crown lands and a certain amount of money from the Suez Canal shares which were bought long ago by that Socialist, Lord Beaconsfield. I use the term advisedly, as any hon. Member who reads some of Lord Beaconsfield's novels will realise that it is correct. There is nothing to start with in preparing a Budget for this country. There are no national revenues, such as are possessed by nearly every country in the world except ours. We have got to tax for almost every penny. Why should this be? We know why it has been in the past, because this country was the country which had regard to the now discarded principle of laissez-faire. Because of our worship of that principle we have got no national revenues in this country. It is not so in Germany, as the States of Germany have large revenues from railways, land, minerals, forests, and so on, so that when the Prussian Budget is made half of it comes without taxation. In the case of Bavaria not half of it, but a very large proportion of it is met without taxation. In Saxony exactly the same thing is true. It is true that the Budgets of the States of Germany are not the same thing as the Budget of the German Imperial Treasury, but do not let us forget that they affect it. If the States of Germany had not these revenue-producing undertakings then the German Empire could not possibly cut in the world the figure which it does to-day.

10.0 P.M.

The German Army or Navy of to-day could not exist, but for the fact that German statesmen in the past had the wisdom and the foresight to acquire national railways, and in other ways to lay up for the future large national revenues. Germany as a whole makes something like £40,000,000 a year profit on the national railways of Germany. So, after the interest is paid upon the capital sunk in those railways they have a considerable sum which is net profit, which relieves the taxpayer pro tanto. We have started somewhat late in the day. It is perfectly true that we cannot readily or quickly gain such revenues as these, but I do suggest to the Committee that the longer we delay the start, the longer will it be before any Chancellor of the Exchequer in this House will be able to get many millions from the National revenue. If we nationalise the railways in this country we could not hope at once for a big profit revenue. We have got a back wardation to make up, and a great debt to wipe out, but, undoubtedly, the companies themselves, by taking a leaf out of the book of those who have advocated railway nationalisation in this House, have shown us what great economies can be effected in railway management, and what, large additions can be made to railway profits, and there is no doubt whatever that if we set our hands to this task, this year or next year, before ten years have passed there would be a very considerable addition to national revenue because of railway nationalisation. There are other matters to which I might refer, but the time at my disposal does not permit me to deal with them, but I do plead for a consideration by this Committee of something more than taxes to raise national revenue. You need not rely upon taxation alone so far as revenue is concerned, and I do urge with all the force of conviction at my command that we might have more regard than we have now to the breadth of the shoulders of those who have to bear taxation. If my right hon. Friend would only have the courage which could easily be derived from the figures which I have submitted to the House this evening, with which he is perfectly well acquainted, he can do much more than he has already done to make the burden of taxation more equitable.

We are still left with the legacy of part of the Sugar Tax. We have still got the Tea Tax and other taxes which bear on the poor out of all proportion to their ability to pay. It is quite possible for my right hon. Friend by a further graduation of the Income Tax, which even then would not touch the fringe of luxury, to provide means of sweeping away those imposts, the incidence of which cannot be arranged with perfect justice to the taxpayer. On the whole, I think that even when the worst is said with regard to the Land Taxes, it must be acknowledged that the Budget of 1909–10 has been a triumph and a success, for it has produced an increasing revenue year by year without the imposition of a single new tax. Why is it that the Budget of 1909 has been sufficient, not only to meet the increased expenditure of that year, but of every succeeding year? The reason is plain. It is that it had more regard to the principle of ability to pay than any previous Budget, and because it had that regard, as the revenue of the country increased, as the income of the country increased, there has naturally arisen an increasing revenue sufficient to meet all our needs. That is the great triumph, the great justification of the Budget of 1909–10. And whatever small imperfections hon. and right hon. Gentlemen opposite may be able to point to in the Land Taxes, imperfections which we have already in part had a promise of having remedied to-night, this must be acknowledged, that the Budget has been successful in giving us the revenue we require, and hon. Gentlemen opposite, if they challenge it, have got to show us, if they disestablish any of the taxes which have been set up by my hon. Friend, what they would put in their place.

Sir ALFRED CRIPPS

I intended to limit my speech to answering what was said by the Chancellor of the Exchequer, but I should like to say one or two words in reference to the speech we have just heard. I think we can all agree with the hon. Member who has just sat down (Mr. Chiozza Money), that any system of Imperial taxation must have regard to the ability of the persons who have to pay to bear the particular taxation imposed upon them. I cannot agree with what the hon. Member has said in regard to the nationalisation of our railways. I do not regard the results in Germany of that policy as in any way satisfactory, and I think if you wanted to make a contrast between this country, where taxation is fairly imposed—as I think it is here—for national purposes, and such a country as Germany, it would entirely undercut the most part of the argument addressed to this Committee by the hon. Gentleman who has just sat down. I want also to say a word about two other points to which he has referred. Of course, land taxation is not in proportion to the ability to pay. A very rich man may have a very small amount of land, and a comparatively poor man may have a very large amount of land, and everyone will admit that the initial objection to that system of land taxation is that they put on one side what ought to be the foundation of all national taxation—that is, taxation in proportion to wealth, or, as the hon. Member put it, taxation in proportion to ability to pay.

But I differ from him when he comes to the question of local taxation. I think the difference is this, that whereas national taxation ought to be in proportion to ability to pay, local taxation ought to have regard to the benefit received, and that is the distinction which was laid down in the Report of the Royal Commission as regards local and Imperial taxation. I am one of those who think that it is quite just that where local expenditure gives a particular benefit to a particular person, or particular property, it ought to be taken into consideration in adjusting the amount of local taxation that the person ought to bear. But that is not ability to bear. The hon. Member cannot have it both ways. And where I join issue with him is that you ought to have a clear distinction between national and local taxation. One ought undoubtedly to be the ability to bear, and the other ought to be in proportion to the benefit received from the local taxation to which the individual is asked to contribute. The hon. Member opposite said that he is not an advocate of the laissez-faire system. Nor am I, in the sense I understand he used that term. I agree with him that perhaps thirty, forty, or fifty years, or a certain number of years ago, we had slum populations, and slum buildings were allowed to be constructed without any proper regulations being introduced in sufficient time, and that we had not efficient education by Government means to raise the social condition of the people of this country. We have a very heavy legacy of social duty handed down to us, with which we ought, and with which we are bound to deal, irrespective of the question of mere expenditure. Of course, when we come to the question of expenditure, and the method of taxation, that is a very important consideration. But I think social duty stands first, and, where you have this legacy of what I may call social disaster caused by those who went before us not having taken sufficient precautions to prevent the slum populations which existed and the unfortunate condition of some of our artisan classes, we have, no doubt, to make up that deficiency, and I believe that on both sides of the House we in our time, if taxation were fairly adjusted, are ready and willing to do it.

I want to pass from those general considerations to deal with what was said by the Chancellor of the Exchequer. The right hon. Gentleman said very rightly that one of the main purposes of his land taxes in the Budget of 1909–10 was graduation. But when he says that, I must wholly differ from him; I do not want to be discourteous in what I say, but I think his idea of valuation is nothing else than a fallacy in regard to what valuation really is, and what the facts really are. First of all, the Chancellor of the Exchequer said that he dislikes valuation by experts. That is a mere question of opinion. What is the valuation under the Budget Act of 1909–10? It is expert valuation on a hypothetical basis at every possible turn. Expert valuation I grant leads to enormous difference of opinion even when dealing with market value. What is the result when you ask experts to come in to make a valuation on a basis which is never adopted in business transactions at all? Let us take gross value, total value, assessable value, site value, and all those other various values which are found in the Budget of 1909–10; what is their effect on the true value of the land of this country? Why, in every single instance—and I ask the Financial Secretary to answer this if he replies—you not only have the expert valuer, but you have the valuation on a hypothetical basis, unknown as regards business lines and business matters in this country. If I may remind him, a very eminent Liberal (Lord Farrer)—I admit he is of the laissez-faire school—some years ago said that these valuations of experts were not valuations to which any business man would attach any weight at all, and he went to the extent of saying that they were so untrustworthy that no legislation ought to be passed which bases the values of this country on mere hypothetical facts of that kind. I entirely agree with that.

The Chancellor of the Exchequer says that I have had great experience of these valuation cases, and I think I have; but I say this most positively that everyone that has had this experience condemns the principle of the Budget of 1909–10 as regards valuations, because they are valuations outside business experience, on a hypothetical basis, on which experts differ infinitely between themselves, so that the reasonable man has no test to apply as to which is right. Let me refer to the parody of the history of this question given by the Chancellor of the Exchequer, who said that there had been ten valuation Acts or proposals in recent years. He really had the hardihood, in support of his argument, to refer to the Report of the Royal Commission on Imperial and Local Taxation. The valuations before the Budget of 1909–10 are remotely connected with the principle of valuation which we find in that Budget. The Report of the Royal Commission on Local and Imperial Taxation said that the best method of taxation known to us is what you find, with some alteration, in the Metropolitan Act, and the reason why the Commission adopted that was simply because—and I will ask the right hon. Gentleman to bear this in mind—it was a common valuation both for local and Imperial purposes, and was one valuation for all purposes, whether local, or county, or Imperial. That was the arrangement in those various Acts, and that was the arrangement suggested in the Report of the Royal Commission. What is the valuation we find in the Budget Act, 1909–10? It has nothing even remotely to do with the valuation dealt with by the Royal Commission, as anyone who reads their Report will see. I have heard that Report quoted in this House for almost every financial fallacy in connection with local and Imperial taxation, but I say this, that the Chancellor of the Exchequer outdid himself this evening when he had the hardihood to refer to a Report which was absolutely inconsistent with the methods found in the Act of 1909–10.

Let me say one or two words on this question of valuation, to come to close quarters with the right hon. Gentleman (Mr. Masterman) if he is going to reply; and, in passing, let me refer to what was called the Lumsden case. I want the right hon. Gentleman to make this clear. Does he mean, as was so constantly stated by the Chancellor of the Exchequer in this House and outside of it, that the comparison is to be between bare land and bare land or not? We must have an answer, yes or no, to that question, and I will tell you why. I thought the Chancellor of the Exchequer had answered that question at one time in the course of his speech, but he came back to this position to say, "Although you may ordinarily have the bare land compared against the bare land, yet you may have a fortuitous windfall, and if you have a fortuitous windfall that justifies you in upsetting all that I have said as regards my general principle of valuation." What becomes of general principles if you allow influences of that kind. Why, I was going to say the Government valuers are not worth what I will admit they are worth, unless they are pleased to find a very large number of fortuitous windfalls. The builder in the Lumsden case chose the land with great knowledge, and where you have got increment in land on the building value, there is no reason why he should not have the advantage of that. It was just as much the production of his skill as the production of cotton and woollen goods are the skill of the manufacturer and the artisan. There is no difference between the cases. Let me ask the right hon. Gentleman this. Suppose the case of a poor artist who is suddenly brought into prominence and that one of his pictures which was purchased cheap is sold at Christie's for a sum of a thousand pounds—is that a fortuitous windfall which the Chancellor of the Exchequer wishes to tax when he is dealing with land values? I am reminded that there was a case of this kind only last week of a sum of £20,000. Suppose the poor artist for a long time had no market, but came into vogue, and that his pictures went, say, to £1,000 each, then I say it would be a monstrous iniquity to tax him on the value which has been the product of his own genius and his own energy. And it is just the same with the Lumsden case, which is not a fortuitous windfall at all. That additional sum in the Lumsden case arose because the builder, through his skill and foresight, chose a site which gave an inherent value to the site itself and the building erected on it. Let me mention the questions which were asked by the hon. and gallant Member for Chelmsford (Mr. Pretyman), and to which no answer has been given.

I do not know how many persons were present when the Chancellor of the Exchequer spoke. I speak with all respect of what he said, but he never joined issue and came to close quarters with any one of the difficulties suggested by my hon. and gallant Friend. I will give an illustration. As regards urban properties, my hon. Friend asked, "Are you going to value them on the basis of their adaptability to particular purposes?" No answer was given to that. If it were done as it is for rating purposes, of course, you would value any property in reference to its special adaptability to particular purposes. So, if you are taking what I may call the original value in order to compare it with an increment value which may be obtained some years on, you would not have some absurdly low value, possibly a minus quantity, but you would have the true value properly ascertained, as it has been ascertained for centuries when dealing with questions of local taxation. What is the right hon. Gentleman's answer to the question of tenant right? Like everyone else who has a certain amount of agricultural property. I have had loads of documents showered upon my head on this question of valuation; yet the most essential feature of it, the one which goes to the very root of valuation for rural property, namely, tenant right, has never been explained to this day. I have heard the Chancellor of the Exchequer say that this valuation would not be of much value without all people assented to it. Are we going to assent to a valuation when one of the first principles has not yet been determined? What is the use of the answer which has been read out? The question was a very definite one: "Do you or do you not take into consideration the tenant right in dealing with the owner's value?" No answer at all has been given. I do not know whether the right hon. Gentleman has made up his mind. At any rate, the Valuation Department have not. What is the good of their writing back and not giving an answer to the question, but making the statement that "We intend to value it in accordance with the terms of the Act of 1909–10?" The question was, What is the meaning of that Act? To refer back to the Act again is wholly shirking the real issue, and as long as these issues are shirked this valuation is not worth the paper upon which it is written.

Let me deal with the Increment Value Duty, the Development Duty, and the Reversion Duty. I am only going to deal with this matter in answer to what was said by the Chancellor of the Exchequer. Take the Undeveloped Land Duty. I believe that everyone is convinced that that has had a serious detrimental effect on the building trade, and, above all, has interfered with the building of houses for the poorest classes in the country. [An HON. MEMBER: "NO."] I will give my reasons for that statement. If you take the number of houses built per thousand of the population, it is half now what it was before the Budget of 1909. I saw the other day that in one urban district in my own locality where there were a hundred before, there are now only ten. As for the numbers of unemployed, the Chancellor of the Exchequer, if he went down to my district, could easily find an explanation. There is nothing I regret more than the stream of emigration which is going on from our country districts at the present time. I was told at the station in my district from which the emigrants go that this year a sufficient number has gone to depopulate three or four ordinary villages in the locality. Is that a desirable result? Is it not an explanation showing why the numbers of unemployed have gone down in the way suggested by the Chancellor of the Exchequer? Many of us have assisted these people in the matter of emigration, and we know that the very men who are wanted abroad are the skilled workmen, such as the builder or the carpenter—the very men who are and have been employed in the building trades here are the men who are wanted abroad, attracted there because there is an endless field for their employment, and they can obtain very considerably higher wages than in this country.

Let me say a few words on the Undeveloped Land Duty to show its gross injustice. Let me assume—the case is common enough—that a builder has bought a piece of land that has not gone off—that he has made a mistake. What is his position? That undeveloped land for building purposes may be worth £1,000 an acre. That means the builder may pay £2 an acre in taxation. While he is waiting for the development of the estate he is not getting a farthing return. It takes in England fifty, sixty, or one hundred years to develop an estate—about eighty years is the average. In Scotland the time is one hundred years. If the builder, or his representative, holds the land for the intervening period of the eighty years he will be taxed in the aggregate a sum out of all proportion to the value of the land. How can you under those circumstances expect that the building trade of the country will not be seriously affected or has not been seriously affected? The builder cannot get the money he could in the old days for the land because you have interfered with his security, and, on the other hand, you have rendered him liable, under the head of Undeveloped Land Duty, for such taxes as will necessarily bring about the ruin of the builder, who was carrying on his business in the ordinary rational manner. Just a word or two in respect to Reversion Duty. What did the Chancellor of the Exchequer say? He said he would like to introduce some change which would ensure not patting a higher tax or a higher rate upon the improving landlord, because, said the right hon. Gentleman, in proportion as you spend your money under the existing conditions of improvement your rates are raised. He was greeted with a corresponding cheer when he made that statement. Let us apply that to the Reversion Duty, and let us take the case of a man who has been improving his property to the utmost. What does he do? He takes a very small ground rent, and puts very special obligations upon the builder as regards the class of building which he has to erect, and in respect to the open spaces and gardens which have to be made; that is to say, he gets a very small immediate return because he thinks more of the improvement of his property than his actual return. Supposing the Reversion Duty to be put on. Suppose it to be imposed on the very man who takes less money in order that the district may be improved, this same man under the Reversion Duty will have to pay the heaviest tax because the original value was small in proportion to the improvement which he is building up on his own property, being willing in the meantime to take a small rental.

You have the very case here under the Reversion Duty to which the Chancellor referred. you have the improving landlord taxed the heaviest amount—the man willing to sacrifice for the moment because of his desire to improve and ensure proper housing conditions and the putting up of better classes of houses. That is a most monstrous injustice, to fine the man for doing what is admitted to be the best for the locality and for the community. One word or two more upon two other topics. The right hon. Gentleman pointed out there were £42,000,000 or something of that kind of national expenditure now placed upon the local rates. Surely that is a monstrous abuse, and ought not to be allowed to go on, and although the Chancellor from time to time makes sympathetic reference to the local taxpayer, he is constantly putting on new charges and making it more difficult for subsequent Governments to adjust the proper proportion between local and national taxation. I think every penny of that ought to be borne by the National Exchequer, and for this reason: It is all national expenditure, that ought to be laced upon the bearer according to his ability to bear taxation. You ought not to allow to escape that taxation all persons obtaining in this country the benefit of their incomes or work from the conditions under which the community exists at the present moment. The Chancellor of the Exchequer knows very well that a penny on the Income Tax produces three times as much as a penny on the rates; in other words, as regards this national expenditure it ought to be adjusted in proportion to the ability to bear it, and that is, to my mind, the bad effect of it, that you allow off two-thirds of the property and income which ought to assist if you are to have a fair distribution between local and national expenditure.

The hon. Member for Chelmsford pointed out that, the payment under the Insurance Act made by employer or wage earner is really a tax and he was quite justified. I am not now going to discuss the general principles of the Insurance Act, but what I always protested against when the Act was going through the House, and what I always will protest against, is having a charge of that kind either upon the industry or the wage earners of this country. I do not know whether hon. Members read the letter of Sir Charles Maraca on this point. I say if you want an Insurance Act it ought to be borne by the taxpayers in proportion to their ability to bear it, and I object to putting a special tax upon our industry, and, what is worse, putting what is practically a tax for such purposes upon the wage earners. The vice of the Insurance Act is that you put a tax upon the wrong principle and upon the wrong shoulders, and until this is remedied I do not believe you will ever get the Insurance Act to work smoothly in the country. There is so much to be said about those Land Taxes that one might go on for a very long time, but I was anxious to answer the statement made by the Chancellor of the Exchequer. I think what he said about the valuation was simply a parody of what they are doing as regard these Land Taxes. You have never looked upon them as taxes, and you never will get anything like a return for the trouble and expense involved.

Mr. OUTHWAITE

The Chancellor of the Exchequer said the hon. Member for Chelmsford has through his activity brought the Land Taxes into prominence, and we owe an obligation to the hon. Member for that, and again to-night I think we owe him an obligation, because his speech drew a very important declaration from the Chancellor of the Exchequer. The Chancellor's statement, it seems to me, contained three important factors. In the first place, the right hon. Gentleman gave the assurance, which was very pleasing to most of us, that the valuation is progressing satisfactorily. All the difficulties that have arisen as regards valuation have arisen, in the first place, because the Chancellor of the Exchequer listened to hon. Members opposite, and withdrew his proposals for owners' value on the Australasian precedent, which compels the landowner to make his own valuation. Then you would have secured a valuation in ten weeks instead of in five years. That system was withdrawn, and the State valuation was brought into operation. As soon as Form IV. went out to provide for that valuation, the Landowners' Association, of which the hon. Gentleman the Member for Chelmsford is president, sent out a letter to all the landowners, giving them certain information, saying if they followed those suggestions "you will be able to make the Land Tax Clauses of the Budget a dead letter." They have endeavoured through the Land Union in this country, to defeat land value taxation. That has been the object, and so far as the anomalies have arisen, I think the blame lies very much at the door of the right hon. Gentleman himself. Nevertheless we are securing the valuation, and if we get it by March, 1915, as we have been told we shall do it will be sufficient for our purpose, because later on we can appeal to the country as to what use they wish that valuation to be put. [An HON. MEMBER: "There it is for votes and not revenue."] If this valuation is unpopular, as hon. Members opposite assert it is, then it will be most satisfactory to the party opposite. The Chancellor of the Exchequer told us that he is going to amend the valuation by means of the Revenue Bill. I do not know that supporters of land value taxation have always been willing to support the Chancellor of the Exchequer in his view that we were not getting a correct valuation of agricultural land and that it would include certain improvements. We have always agreed that you could not under the valuation being obtained, make that valuation the fresh assessment for rates falling solely upon land values We have heard this afternoon that in the Revenue Bill this Amendment is to be made, and I wish the right hon. Gentleman joy of it later on, because it will enable us to have land value made the basis of assessment for rates throughout the country, and for a national land values tax in relief of rates. We have heard that this valuation is not being made for amusement, and we were told very definitely that it is for future use for a reassessment of the basis of local taxation. I think that the importance of this is seen when you take it in relation to the Budget Statement itself. The hon. Member for Chelmsford agreed that the Budget Statement did not reveal the whole truth of the situation. In the first place, he said there is the casting of these national services on to the local authorities, and he mentioned £42,000,000 of taxation which is thrown upon local authorities. The hon. and learned Member who has just spoken (Sir A. Cripps) said that that sum should be transferred to the National Exchequer. The principle we go upon is that these services should be regarded as national services. As regards this matter, undoubtedly the Chancellor of the Exchequer will through the pressure of the local authorities have to find greatly increased revenue. With reference to the Tea and Sugar Duties they are only maintained through the restraint put upon hon. Members to vote for them, because we are not able to-day to point to any other source from which we could get the revenue if these taxes were abolished, but when this valuation is secured then I think we shall be able to meet this demand made by local authorities that these national services should be financed more largely from the National Exchequer, and also to meet the demand that the Tea and Sugar Duties shall be abolished. The Budget of 1909 did not solve the problem of Liberal finance, but it laid the foundations of the solution of that problem, and the foundations of the solution of that problem is to be found in the valuation which we are going to secure. Then in future, instead of talking about raising our revenue according to ability to pay and not in any way doing it, we shall be able to introduce another principle, that of raising our revenue according to benefits received. We shall be able to acquire for the community values which are created by the community. So I think we, at any rate, who are desirous of seeing this new system of taxation introduced and these anomalies abolished, can look forward with great confidence to the future from the statement made by the Chancellor of the Exchequer.

Mr. NEWMAN

The hon. Member for East Northampton shire (Mr. Chiozza Money) said these Land Taxes were, after all, a trifling matter, because England was mainly an industrial country. Ireland is quite different. Ireland is a country where 78 per cent. of the population is engaged in agriculture and you have 500,000 peasant proprietors. Half of them at the present time actually hold their own land subject to an annuity they pay to this country, and the other half are tenants at judicial rents, and cannot be turned out, and will in a few years, I hope, be absolute owners of their own land. Therefore land valuation, and Land Taxes in consequence of land valuation, must be a matter of very great importance in Ireland. It is old history now, but there was an idea when the Budget was introduced that the Land Taxes would not apply to agricultural Ireland. It was thought that they might apply to some small degree to the purely urban districts, that the preliminary valuation was only to affect those who held land in the urban districts, and that Form IV. and other tiresome necessaries would only be imposed on those who owned urban properties. At the back of the Irishman's mind there was a feeling of confidence that, supposing that was not the case, every Irish Member, irrespective of party, whether he was a Nationalist or a Unionist, whether he came from Cork, Dublin, or Belfast, would unite to see that these 500,000 peasant proprietors were not affected in any way by this taxation or valuation. Subsequent events showed that those who thought that were leaning on rather a broken reed. As a matter of fact, apparently 75 per cent. of the Irish representatives are or were Land Taxes, and the hon. and learned Member for Waterford put the matter very plainly when he spoke to the National Liberal Federation at Nottingham some few months ago. He said:— He was there to say that apart from Home Rule on every great, item in their programme the Government could count on the sincere and enthusiastic support of the Irish Nationalist party. It was stated that they hated the Budget because of the taxes on land values and so forth that it contained, and yet they supported it. But so contrary was the fact that there were no more enthusiastic supporters of the Land Taxes in the Budget than the Irish Nationalist Members: they were among the pioneers of the question. That was a pretty plain statement on behalf of 75 per cent. of the Irish representatives. But it was not equally true in respect of North-East Ulster and Cork. I do not think the people there love the Land Taxes. However, with the help of the Irish Members, the Finance Bill of 1909 became the Finance Act, and having become the law of the land some simple-minded individuals up and down Ireland who had a certain amount of leisure and money bought a copy of the Act and read it. They came to Clauses 26 and 27. As hon. Members in all parts of the Committee know, Clause 26 provides that the Commissioners shall, as soon as may be, cause a valuation to be made of all land in the United Kingdom, showing separately the total value and the site value as on 30th April, 1909. These simple people marked the words "all land" and "the United Kingdom." They began to think if the Act was going to apply to Ireland. They learned that Form IV. was being served in thousands and hundreds of thousands in England. This I know is ancient history. But there arose two years ago a very keen controversy as to what was going to happen in Ireland with regard to Form IV. It was hotly debated: one party said one thing and another party another. But in a speech which attracted a good deal of attention at the time—it was October, 1910—the hon. Member for East Mayo, who was one of the heads of the party supporting the Budget, said:— During the last few weeks they had had a most amusing illustration of the lies and false charges made against the Nationalist party. For three weeks that portion of the press in Ireland whose chief business was to criticise and blackguard the Irish party had been ringing with the impending horrors of Form IV. It was to be circulated in tens of thousands through all the rural districts of Ireland, and the farmers were at last to be made aware of the monstrous treachery of the Irish party in deceiving them into the belief that they had succeeded in exempting all agricultural land from the new taxation. About ten days ago it dawned upon those gentlemen that there was no intention of circulating Form IV. in the agricultural districts, and instantly the clamour had ceased. I quite admit that as events proved the hon. Member for East Mayo was right and that those who spoke in a contrary way were wrong. As a matter of fact Form IV. has not been served in the agricultural districts, but a small Form IV.—in abbreviated form—was used sparingly almost entirely in the urban districts. Hon. Members will remember it was served on one or two urban district councils, which forthwith consigned it to the waste-paper basket and passed on to the next business of the day. When woo asked whether it was not necessary to serve Form IV. in rural districts before obtaining provisional valuations, we were told in this House that Sir John Barton's Valuation Department in Dublin had all the information they wanted, that they had Griffiths valuation, that where judicial rents had been fixed they had all the information they wanted, and that valuations showing the total of the site value would be issued, and were going to be issued without expense to the taxpayer, without issuing Form IV., and without the worry to the man who received Form IV. Again, the simple-minded man cropped up and pointed out that even supposing that for every holding in Ireland where a judicial rent had been fixed the Valuation Department in Dublin had all the information they wanted, that that only represented half the land of Ireland, and he wanted to know what was going to happen to the rest, and whether the Poor Law valuation, that is Griffiths valuation, was sufficient to enable the authorities in Dublin to arrive at site value, gross value, assessable site value, and full site value? Other people besides myself went into the question of what the Government meant to do. I put a question to the Financial Secretary to the Treasury in the following terms:— Whether the only agricultural land in Ireland in respect of which the fixed charges are already known is the land sold under the Land Purchase Acts, comprising rather less than one-half of the whole; and whether, in view of this fact, it will be possible for the Commissioner of Valuation to ascertain the assessable site value and total value of agricultural land without an issue of Form IV. to owners of such hereditaments? The Secretary to the Treasury gave me a quite straight answer. He said:— The answer to the first part of the question is in the affirmative. As regards the second part, in cases where fixed charges have not been deducted in arriving at assessable site value and total value the valuations can be corrected on the owner pointing out the need for such correction within sixty days of the issue of the provisional valuation."—[OFFICIAL REPORT, 22nd July, 1912, cols. 783–4, Vol. XLI.] That makes the matter perfectly simple. What the authorities are going to do for the purposes of the Irish Domesday Book is to issue provisional valuations with the total value the same as the gross value, and the full site value the same as the assessable site value. If the owner on whom the notice is served has the intelligence or the energy, it is open to him to object if he wants to claim any deductions. If he does not do that, this Poor Law valuation, or Griffith's valuation is entered in the Irish Domesday Book as his total value and his assessable site value for all time. I understand, and the Secretary to the Treasury will say if I am wrong in this, that instructions have been issued by Sir John Barton's department to the Irish valuation authorities to make the valuation in this way in all cases, whether urban or rural, that is to say, they are simply to take the tenement valuation, which is the Poor Law valuation, multiply it by a certain number of years, and serve it as the total and assessable site value. What does that mean? Surely it means this. It may be good or bad. At a stroke of the pen the Commissioners of Valuation have swept away the divested site, the full site, the gross site, all the other sites, and all the other valuations and they have, perhaps very rightly, simply gone back to the valuation which was made for rating purposes some sixty years ago and which for certain urban districts has been lately revived and brought up to date. That, of course, is delightfully simple and inexpensive, but it is not the Act of 1909. The Act of 1909, Section 26, makes it perfectly plain that on the Commissioners and not on the individuals is the onus of giving the true total value and the true gross value, and if they can find out the true assessable value and the correct site value, they have to do it. They have to give the owner, first of all, the chance to give his own idea of what his charges are and then they have to serve him with these values. They are not allowed to serve him with a form on which the total value is put down the same as the gross value, and the site value the same as the full site value. So much for one-half of the land. That is all they have to go on. It is absolutely illegal and against the Act for them to serve this provisional valuation in the way they are doing.

What about the other part? What about that part of the land which had judicial rents fixed, or which has been sold under the Land Purchase Acts? I am quite prepared to admit that where there has been a fair rent fixed since 1896 by means of what is called the pink Schedule, which was issued in accordance with the Act of 1896, and which is a very carefully drawn-up document by the Land Commissioners—it is not given either to the landlord or the tenant to look at—perhaps the Commissioner of Valuation in Dublin is able to fix something in the Act to approximate assessable site value and approximate total value. But let us remember this. After all, a great many fair rents were fixed before 1896, and then remember that this pink Schedule is not issued in cases where fair rents are agreed upon between the landlord and the tenant, and in a great many cases this fair rent is agreed upon between the landlord and the tenant without the necessity of calling the Land Commissioners. I did that myself almost entirely. I did not have the Land Commissioner on my land at all. I agreed on the rent between myself and the tenants, and we never had a pink Schedule. Even supposing this pink Schedule is in existence, and even supposing the land has been sold by the landlord to the only person to whom he can sell it, is this valuation to be arrived at by the Commissioners in Dublin likely to be a valuation for total value or for assessable site value which a prudent man, be he a tenant or be the owner of the land, would accept or which the Government themselves would accept for the purpose of Death or Estate Duties? I think not. We have heard to-day a certain amount about tenant right. Tenant right in Ireland and tenant right in England mean two very different things. Tenant right in England is something more. It is something which has been omitted apparently from the total value. But tenant right in Ireland is a very valuable thing. Let me give a concrete instance of what tenant right is worth—

It being Eleven of the clock, the CHAIRMAN left the Chair to make his Report. Committee report Progress; to sit again To-morrow (Tuesday).

The remaining Orders were read, and postponed.