FINANCE BILL.

HC Deb 02 June 1913 vol 53 cc619-91

Order for Second Reading read.

Mr. CASSEL

May I ask your ruling on a question, of which I have given notice, as to the title of this Bill, which is in a very unusual form? The question which arises is whether the title, as drawn, will preclude hon. Members from moving Amendments on the general provisions of the Income Tax Clause in Committee on this Bill. The words which have given rise to some misapprehension on that point are these:—

"To apply with respect to Income Tax (including Super-tax) and the annual value of property the like provisions as were applied in the last preceding year." These words are not, I think, in the title of any Finance Bill hitherto passed, not even in the days when the Income Tax was imposed alone in a single Act. The Income Tax Act of 1860, which continued the provisions of previous Acts with regard to Income Tax, had as its title— "An Act for granting to His Majesty Duties on Profits arising from Property, Professions, Trades, and Offices."

I wish to ask if it would be out of order, in a Bill with a title such as this one has, to move such an Amendment, for instance, as that a husband shall not be liable for his wife's Income Tax? If you rule that the title would not preclude that, or similar Amendments being made in Committee, I shall be satisfied so far as the point I am raising is concerned. But if the title does preclude such Amendments, then it raises a serious question with regard to the rights and privileges of Members of this house. What would the position then be? It would be that by merely changing the form of the title of a Bill the Government could come forward in this House and propose to impose taxes on the subject, and at the same time deprive not only the Opposition, but the whole House of Commons of the right of getting amended any hardship which the course of administration of the tax in previous years has revealed. It would be in a position to come forward and say, "We are going to impose Income Tax, but the House of Commons shall have no right to say that any hardship that may have been found to exist in a previous year shall be altered in any way whatever." That would be a constitutional change of the gravest importance, and one with reference to which we ask your protection. I moved the Amendment to which I have referred, by way of example, on the Financial Resolution, and you then ruled—and I bowed to your ruling—that the proper time to move it was on the Committee stage—which I take to be the Committee stage of Bill on which the Resolution was founded. After that ruling the Government proceeded to draw the title to the Bill in such a way as to make it impossible for me on the Committee stage to move that Amendment. In these circumstances I look to you, Sir, far protection, and to secure for me the opportunity to move the Amendment which, according to your ruling, I moved at a stage which was not the proper one. If I had had the chance of moving it, then, and it had been carried, the Government could not have drawn the title in the form in which they have now drawn it. I may be told that this must be done upon the Revenue Bill, but with reference to that I submit to you that if that is to be the guide for this year and future years, the subject ought not to be driven to some Other Bill than the Bill which imposes the tax. What guarantee have we that the Revenue Bill will be passed? It is possible that the present Government may not be in office. Even if it is passed, it would be passed at a date later than the date upon which the Finance Bill would be passed, so that there would be a period of time during which the subject would be subjected to the tax and still subject to the very hardship which it was the object of my Amendment to remove. That period of hardship at all events would intervene. Moreover, the Revenue Bill could not mend it, for this Bill is for the particular year in question, and would have already imposed the tax, and the Revenue Bill would only take effect with regard to future years. In any case I submit that there is no certainty about the Revenue Bill, and that the subject ought to have the right of having grievances rectified by the same Act which imposes the tax. In these circumstances, I ask you to call upon the Government, if the effect of the title is what I suggest it to be, to withdraw this Bill, and to introduce a Bill in proper constitutional form.

Mr. SPEAKER

I think the hon. and learned Member attaches too much importance to the title of the Bill. The title is only a summary of the contents. The valid and enacting words are those contained in the different Clauses of the Bill. The hon. Member is entitled under the Standing Orders to move any Amendments which are relevant to the contents of the Bill. I will read the Standing Order; it is No. 34:—

"It shall be an Instruction to all Committees of the Whole House to which Bills may be committed, that they have power to make such Amendments therein as they shall think fit, provided they be relevant to the subject-matter of the Bill."

If, therefore, the hon. Member's Amendments are relevant to the subject-matter of the Bill as contained in Clauses 1, 2, and 3, then he will be entitled to move them. If they are not relevant, he will not be permitted to move them. The Standing Order goes on to say:—

"But that if any such Amendments shall not be within the title of the Bill they do amend the title accordingly, and do report the same specially to the House."

So that if the hon. and learned Member can persuade the Chairman of Ways and Means that his Amendments are relevant to the subject-matter of the Bill, and if he can persuade the Committee to accept them, then he can amend the title. I am afraid that I cannot give him any further assistance in that. I do not think I ought to take upon myself a duty which is by custom and authority placed upon the Chairman of Ways and Means, namely, to decide what Amendments are relevant and what Amendments are not relevant to the subject-matter of the Bill.

Mr. AUSTEN CHAMBERLAIN

In order that I may be quite clear as to the scope of your ruling, Sir, am I right in understanding you to decide that if an Amendment be relevant to the Clauses of the Bill, it is not out of order merely because it goes beyond the scope of the title?

Mr. SPEAKER

That is so. I think that follows from the Standing Order. If the Amendment is relevant and the House accept it, then it is open to the Committee and an Instruction to the Committee, that they shall make the title of the Bill such as be a summary of the Bill as it finally goes through Committee.

Motion made, and Question proposed, "That the Bill be now read a second time."—[Mr. Lloyd George.]

Mr. HEWINS

I have no intention of raising large questions of general principle as regards the general policy of the Government, for very good reasons. In the first place, I understand from the discussion in the House, to which I have listened, that the minds of the Government are absolutely closed as regards the fiscal policy of the country, that they are completely satisfied with the unfair combination of indirect and direct taxation we have at the present time, and that they think the fiscal system we now have, including the preposterous rates of duties in force to-day, represents the final goal of economic development. Perhaps in the future the Chancellor of the Exchequer may suggest some fresh developments in land taxation or other forms of taxation, but I take it that there is no intention to vary the principle of the fiscal system we have in operation at the present moment under his guidance. In the second place, I do not raise these large questions because the Government have themselves—I suppose in the heat and strength of the convictions they hold—placed almost insuperable difficulties in the way of any change for the benefit of the great mass of the people to be undertaken by themselves. Under the Amendment they accepted upon the Provisional Collection of Taxes Bill with regard to indirect duties, I imagine it would be extremely difficult for them to rearrange the taxation, for the simple reason that they could not accept the large views of policy we entertain upon this side of the House. Since they came in they have, on several occasions, hampered the fiscal autonomy of this country. The practice the Government introduced of not consulting the House at all with regard to the Anglo-Japanese Treaty was such that it would be extremely difficult for them to add to the duties on certain imported articles. That being so, we must take this Finance Bill as it is, with all its imperfections, and I am going to confine my observations to trying to get from the Chancellor of the Exchequer some exposition of the reasons by which he justifies the taxation on the great masses of the people. In passing, I should like to make one very humble suggestion. In view of the constitutional legislation that has been forced upon the country by the Government, is it not time that we abandoned some of the archaic phrases in the Finance Bill? For instance, the Preamble says:—

"We…have freely and voluntarily resolved to give the grant unto Your Majesty the several duties hereinafter mentioned."

4.0 P.M.

It is not a question of our giving or granting our own property, but the property of other people, who are not represented at all in either House. I take another case. "This is to be enacted by and with the advice and consent of the Lords Spiritual and Temporal." The Government does not propose to ask the consent of the Lords Spiritual and Temporal. It is not necessary. It is a mere archaic survival. Why does not the Chancellor of the Exchequer take that phrase out altogether? He is very fond of facing facts. Let him face this fact.

I come now to the actual provisions of the Bill. Clause I imposes the Tea Duty. Why is the Chancellor of the Exchequer so enamoured of the Tea Duty? I remember reading a great speech by an American statesman delivered some years ago in which he contrasted in eloquent language the method adopted by most countries in the arrangement of the duties they put on with the method adopted by this country. He imagined a Finance Committee sitting, and considering what duties they would put on, and the article he took for special illustration was this article of tea. It is perfectly certain that if you put a duty on tea the people who will pay it are the working classes. I do not wish to raise these large questions of general policy. I only give that as an illustration. First of all, the rate of duty is preposterously high. Every time a housewife purchases a pound of tea she hands over 5d. on the counter to the Chancellor of the Exchequer. The Chancellor of the Exchequer expresses great sympathy with the poor. That is a very large sum. They cannot afford it. Moreover, that 5d. is bound to react upon every other trade in the country, because it restricts the demand of the working classes for a large number of other articles. The payment of large Tea Duties like that is not Free Trade. Duties of that kind were originally suggested by Free Trade writers because it was thought: proper that the consuming classes should pay a certain amount, upon their luxuries. Tea is no longer a luxury.

I take another aspect of this question, which really does not raise any great controversial question. The duties on articles which the working classes are bound to pay afford a basis for all large statesmanlike schemes in regard to Empire matters. I should like to know what possible economic objection the Chancellor of the Exchequer can have towards reducing taxation by exempting these goods front taxation. It is purely a domestic question so far as the Empire is concerned. In all our treaty relations these questions of the relations of our Dominions with other countries are regarded as internal questions. When you can confer a benefit on the great consuming classes of the country by exemption from taxation this particular article, why on earth do you not do it? What is the economic objection? I have had occasion at different times to go into the views of economists, but I cannot recall any passage or any principles which stand in the way of the adoption of this perfectly practical proposal. I suggest that the Chancellor of the Exchequer is not acting up to what I may call Liberal records. The Liberal record is certainly in favour of reducing the burden of taxation on the necessities of life. Why does he not do it in regard to tea? If he cannot reduce the Tea Duty, why does he not look back on the old experiment we had in English legislation when we graduated it? I am not able to express an opinion right off as to how far any method of graduation of that kind might be possible, but still we have had graduation, and I should like the right hon. Gentleman to consider how far it will be Possible, under modern conditions, to give relief to the poorest classes by graduating the duties. I do not wish to be dogmatic about it or to adopt a controversial tone. I merely wish to put before the Chancellor of the Exchequer how far, even from their point of view, without seriously modifying the general fiscal system, they can approach these great problems which affect the working classes, which affect Imperial problems, and which we certainly wish to see solved in some way or another. So far as I know, the Free Trade argument would be wholly in favour of doing something to the Tea Duty to remove existing difficulties, but I am persuaded of this, that if you search right through the writings of great economists, who really supply the basis of the argument of the Free Trade movement, they would condemn our existing food taxes almost unanimously. The fact is that these great Free Trade economists were not academic. They were perfectly willing to look at things in a practical way. There is one principle which is closely bound up with the theory, that you should not burden the necessaries of life of the working classes of this kind where it is perfectly certain that you will bring great hardship upon the people concerned.

Then I come to direct taxes. I do not know what the result of the Chancellor's Land Inquiry may be, but we also on this side of the House have had occasion to look very carefully into the existing land system and our experience undoubtedly is that the present system of direct taxes as we have it now—I am not talking about statistics, but from the evidence we can collect by talking to people—is helping to destroy one class of the community who we very particularly wish to retain. Let the Chancellor of the Exchequer work his sweet will in regard to the great financial millionaires. Let him concentrate all the eloquence at his command on the virtues or vices, whichever way he regards them, of the great financial millionaires. I want to know what is his quarrel with the great middle class. Why is he adopting a system of direct taxes which is steadily carrying forward the process of elimination of the very class we want to keep in the country? I should have thought if there was one thing one could complain of above all others in the country districts it is the way in which during the Free Trade era, certainly during the last sixty years, more or less, the smaller class of landed proprietors has gradually diminished. I have had to live a good deal in country districts, and there has been a marvellous change in my time, and this steady de- velopment of direct taxation of the kind the Chancellor of the Exchequer has made himself responsible for is putting no obstacle whatever in the way of millionaires, but is steadily eliminating a class of the community which has done useful work, which we require in the community, and which supports every good work. Could he not see his way to some modification of the system of direct taxes which would give distinct encouragement to the agricultural classes of the community in particular? Right through this period which we are reviewing, in dealing with this question, this country has become steadily more and more dependent upon outside sources of supply. About sixty years ago we supported something like 90. per cent. of the population. About the year this Government came into power the proportion was something like 10 percent., and in spite of the fact that particular classes in rural districts have undoubtedly made a certain amount of money, that process has steadily gone forward since the Government came into power, and we support a smaller proportion by home produce now than when the. Government came in.

Quite apart from any general abstract views we may have upon agriculture, I suggest to the Chancellor of the Exchequer that that is an appalling situation in the heart of the Empire. Even if we put a penalty upon inefficiency I would consider that, but if he could encourage, by some method, in his direct taxation system the brains and the enterprise of the middle classes in the rural districts to take up agriculture as a practical pursuit, working for all it was worth, he would confer a great benefit on the country. At present what he is doing is to eliminate the small man. During the tenure of office of the present Government I could give, if necessary, the names of a large number of such small men who have been eliminated by the impossibility of facing the financial burden. I cannot help thinking that that is contrary to the proper economy of the country. I should not be in favour of relieving extremely wealthy men from what they can afford to pay. They should pay in proportion to their ability, but I think there is something wrong in the series of figures which the Chancellor of the Exchequer is responsible for in regard to the finance of the country in the last seven years. The increase of revenue which we have had, and which he congratulates himself upon, has come almost entirely from direct taxes. With regard to the very classes we wish to retain, especially in the rural districts, those taxes have reached the point of confiscation. I do not suppose he would desire to eliminate that particular class. I do not agree with the present fiscal system and should like to substitute another for it. But while we have that system, at any rate let the Chancellor of the Exchequer follow it out. Let him, if I may say so, expand his genius, and not confine himself to the question of revenue. Let him think of these matters in the way of statesmanship, and try to use the existing system in such a way as to promote those socio-political purposes which I have indicated, and to strengthen the country, not by putting fresh burdens upon the people, but by exemption. The burdens are too high already, and we want them taken off instead of put on. I am sure, if the Chancellor of the Exchequer would only listen to my appeal and act in that spirit, then the constructive measures which his genius would invent would no doubt fall into line with the other measures which we have invariably criticised in the sense I have indicated.

Mr. DAVID MASON

The hon. Gentleman (Mr. Hewins) has made a very interesting speech. He told us that such taxes as the Tea Tax absorb a big payment by the working classes from which large sums of money arc drawn, and then in the latter part of his speech he told us that he was a supporter of another fiscal system. We on this side are at a loss to understand how, in view of the argument he has advanced with respect to money coming out of the pockets of the working classes, he can reconcile his advocacy of the other system with that, because we believe that those who advocate a change in our fiscal policy contend that the foreigner pays the taxes.

Mr. HEWINS

The Tea Duty.

Mr. D. MASON

We have always believed that hon. Members opposite advance the argument that fiscal duties are paid by the foreigner.[An HON. MEMBER: "Which duties?"] All fiscal dutes. [An HON. MEMBER: "No."] We have always contended that the consumer pays the duty. The hon. Member is quite right when he states that the duties take very large sums of money from the consumer. If he can show any duty which he would put on and which the foreigner would pay, we would be very glad to know of it. If he adheres to the contention which he stated in the early part of his speech that these duties take large sums of money from the working class, we cannot see how the putting on of fiscal duties would derive revenue from the foreigner. Of course, the consumer pays the duty, and the important admission which the hon. Gentleman has made is one which we have made a note of. I would like to refer to the general discussion and to the previous Debate. On that occasion I ventured to ask the Chancellor of the Exchequer if he could show on what grounds, or state what authorities he could give, for his estimate that the prospective deficit of £7,500,000 would be made up by increased revenue in the current year, and the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) agreed with that request on my part. I have seen nothing since to alter the opinion which I then ventured to express. It is true, of course, that since that discussion took place we have peace in the Balkan Peninsula. That point was referred to by the Chancellor of the Exchequer, and he anticipated that when peace took place we might expect a great development in that part of the world. Although we rejoice that peace has been brought about, and although on both sides of the House we congratulate the Government, and especially the Foreign Secretary, for the distinguished part they have played in bringing about peace, still I, for my part, cannot quite see that the establishment of peace there justifies the right hon. Gentleman in his sanguine estimate that we are going to derive immediate benefit from that part of the world.

The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George)

indicated dissent.

Mr. D. MASON

I think if the right hon. Gentleman refers to the speech he will find that I am correct.

Mr. LLOYD GEORGE

On the contrary, my hon. Friend has misunderstood me. What I said was that undoubtedly the restoration of peace would go a very great length for the continuance of good trade, but I went further than that and said that we would not derive benefit front those quarters. I meant generally throughout the world.

Mr. D. MASON

I am glad of that interruption, because it still further confirms my contention that with the restoration of peace we might look with the right hon. Gentleman to a considerable drain upon the capital resources of the world to make good the tremendous loss and devastation which have taken place in those regions. I said then that if peace should occur we should have to look for added calls upon the capital resources of the world to make good the loss. The right hon. Gentleman has admitted that there has been considerable loss. It will mean a great drain upon the capital resources of the world. Many of those engaged in finance will confirm what I state when I say that we are suffering from great stringency in the money market. I then pointed out that that surely was a matter which should be considered by the Chancellor of the Exchequer in framing his Estimates, and that the probability was that loans would not be so easily subscribed this year as in former years. Many hon. Members will bear me out when I say that some of the recent loan issues have been failures in the sense that they have not been successfully floated on the money market. I think that all goes to show that the estimate that this £7,500,000 deficit will be made up in the current year is too sanguine. I should like the right hon. Gentleman to be good enough to give us some of the authorities to which he referred, because. I have been quite at a loss to find any authority to justify us in expecting such a prosperous time during the period we are now entering upon. Though I should be sorry to be correct in my estimate—I mean that I have no wish to be a prophet of evil—I must admit that T do not see what justification there is, with the evidence before us, for the estimate that you are going to get £7,500,000 by writing up Excise, Customs, and so forth, and arriving at the balance in that way.

We are at present, of course, engaged in a great and colossal trade. There is trade prosperity all over the world, and if that is to continue, and possibly expand, it will have to be financed. We are also aware that there has been an added call upon the resources of the world, not only by the restoration of peace and the making good of the devastation caused in the Balkan regions, but by the vast and increasing demand for loans. Capital in large amounts is now to be called for by Continental nations for the purposes of armaments. France proposes a loan of £40,000,000. Germany will follow suit, and Russia probably will come forward with increased demands. I do submit that these are considerations which we should bear in mind, because this is not merely a matter that affects our own national expenditure alone. We are affected, capital being a fluid matter, by the excessive demands on the part of Continental nations, and also by the excessive demands en the part of other countries. I should like to quote here what a distinguished financier says in regard to this very matter. M. Neymerck says:— On every side Governments are acting as if war would break out to-morrow among the Great Powers and plunge Europe in blood and fire.… The tremendous sacrifices which nations are imposing on themselves to increase their military forces in time of peace will long weigh, it is to be feared, on the money market; and a slackening up of economic activity may come on us without money rates going down much.' I think that also confirms what I have stated. In view of those facts, we are not justified in estimating that the vast expansion of trade which has been going on during previous years is likely to continue. It is well-known that vast trade depends, like the wheels of industry, on the oil which lubricates it. This extensive trade demands the free flow of capital, and where will you find anyone who will state that there is a free flow of capital at present? On the contrary, there is great stringency of capital. That is not confined to this country. You find the same thing in France, Germany, and the United States. The other clay a leading railroad in America went into the hands of the receiver. So far as I know it was a good railway, but it had a large amount of short term notes falling due, and the bankers were unable to renew them. That is only perhaps a straw, but it shows how the wind is blowing. It is an indication that the high rates now ruling for money are having their effect. Not long ago a first-class Power had to pay 6½ per cent. for temporary accommodation. That is rather an indication which points that we should take warning from what happened.

Sir F. BANBURY

What Power?

Mr. D. MASON

It was Austria which, when borrowing for mobilisation, had to pay an amount equal to 6½ per cent. That shows how stringent capital is at the present time, and it surely should weigh with us. Having regard to that fact, we are not justified in assuming that the vast national revenue derived from expanding trade is likely to be carried on during this year. I hope, however, that this may be worthy of the consideration of the Chancellor of the Exchequer and the Govern- ment. I would like, if I may, at this stage to offer some remarks with regard to the position of the Secretary of State for Foreign Affairs. He enjoys a peculiar power at the present time. He has been successful in recreating the Concert of Europe. It is to the Concert of Europe, of course, that we must look for the cessation of what has been called this sterilising expenditure. It is only, I believe, through mutual reductions of armaments that we may hope for some cessation of this expenditure. I think the Chancellor of the Exchequer would go so far with me in this respect that, while not agreeing with my action in moving reductions, he would be happy to see reductions if there was no further necessity for the expenditure—if there was some mutual action taken by the great Powers of Europe to bring about some cessation in this really horrible expenditure. I do not suggest for a moment that we should abolish the British Navy or not have adequate defences, but we have to cut our coat according to our cloth, and we have to remember that this is an international matter. The right hon. Gentleman has a unique opportunity. He has, I believe, the confidence of the Concert of Europe, and he can express in council with the Concert of Europe the wish of this House and other Houses in France, Germany, and throughout the world. We have, I believe, already responded to the proposals of the United States to take certain steps before there could be any possibility of dispute, and this, I believe, would be also responded to by other countries. But we want more. We want some practical step taken by the responsible Government in conjunction with the other Powers. I, for one, believe that the right hon. Gentleman the Foreign Secretary has the ability and the power to take some action along these lines. Apart from that, I would impress on the House and the Chancellor of the Exchequer that it behoves us to have regard to our financial reserve as well as to our national defence. We should not jeopardise our Budget or the possibility of balancing our accounts by assuming a sanguine estimate of the position which I do not think the facts entitle us to take. Therefore I hope that the Chancellor of the Exchequer will give some consideration to these proposals, and perhaps something may be done along the lines which I have ventured to suggest by the Secretary for Foreign Affairs to bring about the happy consummation which we desire.

Mr. HENRY TERRELL

It is indeed somewhat remarkable, after all the Debates on the fiscal question in this House, that the hon. Member should have made the suggestion which he did as to the attitude on this side of the House in reference to the Tea Duty. If the hon. Member had taken the trouble to read the arguments of his opponents, he would see that no suggestion such as he indicated has ever been made. That is not remarkable when one remembers the confusion of ideas that prevails on the other side regarding the Tea Duty. In 1906, when the present Government came into office, the Tea Duty was 6d. per pound. In the first year they reduced it to 5d. In 1910 we, on this side, proposed a further reduction by d. We were met by the argument of the then Financial Secretary to the Treasury in these terms, to which I call the attention of the Chancellor of the Exchequer. He said:— Unfortunately for the hon. Gentleman this Debate has taken place not for the first time in this House, and it has been agreed by every Chancellor of t he Exchequer that I can recall, and by every Government that I can remember, that it is not the slightest good from the point of view of the consumer to take a single penny off tea. If you take only a penny, off the whole of the profit goes not to the consumer, but either to tie purchaser or to the middleman who is dealing with the commodity. That was in 1910. Soon after that the House will remember we had a General Election. Then for the, purposes of the General Election the Secretary to the Admiralty wrote a book, which, no doubt, the Chancellor of the Exchequer has read, "Tariff Reform for the Working Man," which was intended to give the working classes some idea of fiscal questions, especially Tariff Reform. Bearing in mind the argument of the Financial Secretary that a penny in the pound does not benefit the consumer at all, when addressing the working man for the purpose of an election, the Secretary to the Admiralty says at page 65 of this book:— What has been the policy of the Radical food taxers? They came into a financially embarrassed heritage in 1906. This notwithstanding in 1906–7 they reduced the duty on tea from 6d. to 5d. a 1b. That means a relief to the consumer year by year of £1,120,000. When you can find the two right hon. Gentlemen opposite coming to such diametrically opposite conclusions, one saying in this House that the consumer does not get the benefit of a reduction of in the pound, and the other saying in the country, when wanting votes, that in the pound gives the consumer a benefit of £1,120,000 a year, it is not surprising that the hon. Member for Coventry does not appreciate the incidence of taxation, as suggested on this side of the House.

I do not propose to say anything further in regard to tea, but I will ask the House to bear with me while I call attention to the position in regard to Income Tax. Income Tax depends on a number of Acts. The law on the subject, it is no exaggeration to say, is absolutely chaotic. There are between thirty and forty different Statutes to be consulted if you want to understand the law of Income Tax, and when you have consulted all these Statutes, I do not think that any man would get up and say that he understands really what the law is. When we remember that the principal Statutes are practically taken from a very old Statute which was framed at the time when the income was derived from comparatively few sources, and when the state of trade was very different to what it is to-day, it is not surprising that it has become difficult to apply such an ancient Act as that, over 100 years old, to the conditions prevailing to-day. To-day the incidence of the Income Tax bears very harshly upon those who ought to be treated gently by the Revenue, and allows to escape altogether many who derive considerable profits which ought to be taxed. I will take one instance of that. A man who derives his income from the exercise of his individual skill and talent has to pay Income Tax upon every bit of profit which he derives from the exercise of that skill and talent, whereas, a man whose income is not wholly derived from his own personal skill is able to establish a business and accumulate a considerable amount of the fruit of his labour, which is wholly free from Income Tax. Take as a concrete illustration the case of two men embarking in unlike businesses, one an artist whose income would be wholly derived from the exercise of his personal skill and the other a man in any business you please, say a solicitor.

The two men carry on their avocations equally successfully. Assume that they carry on those avocations for thirty years and make a considerable profit, say £3,000 or £4,000 a year. At the end of the thirty years the artist has paid Income Tax upon the whole fruit of his labour. Every bit of the fruit of his labour is represented by income and is taxed. The solicitor has in the establishment of his business capitalised a good deal of the fruit of his labour in the shape of goodwill of his business. The result is that when the artist has to give up practice of his art he has nothing left except the accumulations of his income which have paid Income Tax. The solicitor, on the other hand, can sell the goodwill of his business for three or four years' purchase, and in the case which I have put, in which there was an income of £3,000 or £4,000 a year, he can sell the goodwill for £10,000 or £12,000, and on that £12,000 which represents the accumulation or capitalisation of the fruit of his labour he has paid not a penny of tax. It cannot be right that the one man should pay income tax on every particle of the fruit of his labours and that the other man can capitalise a considerable part of it and not pay a farthing on it to the State. I can take a stronger case than that. We know very well that in the City of London there is a large number of people who do not carry on the business of underwriting, but who constantly underwrite certain blocks of shares which are issued. Sometimes these men make considerable profits. These profits do not come under Schedule D as to the profits of their business, as the underwriting is a casual venture on these issues from time to time, and consequently no Income Tax is paid on these profits, which do not come into account at all. [An HON. MEMBER: "Why not?"] It is because these men do not carry on the business of underwriting. If you look at the decisions, which are clear, you will see that unless you carry on the business of underwriter, any casual profit made by the casual dealing as an underwriter is not a profit which is taxable under Schedule D.

Take a case which is stronger still, the case of men who do not carry on the business of company promoters or financiers, who often carry on totally different businesses, but who get from time to time it may be a mining claim or a concession or some kind of patent, or something of that kind, for which they have paid £1,000 or £2,000. They place it in the hands of a company promoter. He promotes a company. They get back their £2,000 in cash and a large lot of shares, which they sell for a considerable amount. On all these profits they do not pay Income Tax, as they do not carry on the business of financiers, but they put the whole of it into their pockets. Is it fair that a man like the artist should have his whole income taxed, while others such as those whom I have described should be able to make considerable profit and escape all payment of Income Tax? Of course, the artist might underwrite, I agree, but if so, like every other person, he ought to pay Income Tax upon the profit which he obtained. Take another instance, which is a celebrated instance now—the Chancellor of the Exchequer will remember it. One gentleman made a considerable profit of £500 in three days by the permanent investment of nothing. There was no Income Tax upon that £500. He put the money in his pocket and did not pay any Increment Duty or any duty of any kind upon it. It was all profit which he put in his pocket and on which he paid nothing to the country. Surely it cannot be right that men should be able to make very large profits and escape all taxation in respect of them! If you want to increase the proceeds of such a tax the first thing to do would be to get in these profits and make them amenable to taxation, and not to let all these large sums go free of Income Tax, while taxing these other men on everything which they earn as a result of their labours.

I should like to know, if you take all the great fortunes which have been made in the floating of South African mines by the persons who have obtained concessions, or claims in South Africa, and who have made huge fortunes, whether they have been brought within the Income Tax. Those fortunes are accumulated profits. How much of those profits has been made liable to Income Tax? A very small fraction indeed. Yet a man has been able to make an enormous fortune by accumulating profits in this way, and, because he does not happen to carry on the business of or call himself a company promoter or financier, he has not paid a farthing of Income Tax on that fortune. I submit to the Chancellor of the Exchequer that this is one respect in which the law of Income Tax requires very great amendment. Men who make these fortunes ought to come under the law of Income Tax, while men who make their incomes by their skill ought to be treated more lightly in the matter of Income Tax than the men who simply make these great profits in connection with enterprises which, after all, are not of very great value to the State as a general rule. Let me pass to another branch of the law relating to Income Tax, and that is the methods of administration. I think the methods followed in the administration of the Income Tax require to be very materially amended in order to coincide with our ideas of justice. A man has to make his return to Income Tax in the ordinary form. There are Commissioners whose duty it is to examine the return and to assess the man. If the surveyor of taxes imagines that the man who has made the return has given one which is not accurate, it may be through ignorance or negligence, or any other reason, or even intentionally, what does he do? He simply goes to the assessors and gets them to make what is called an additional first assessment. They put in whatever they please. As a matter of common practice in those cases, when the surveyor suspects that a man has omitted some source of income from his returns, they put in a very big figure as an additional first assessment.

The result is that the man has to pay the tax on that large additional figure or he must appeal. If he appeals to the general Commissioners, what is his position? The general Commissioners are usually men in the same locality as the appellant—they are always men of the same locality except in the City of London; they are very often men who are engaged in a trade similar to that of the man who has been assessed. If the man wants to appeal against this additional assessment, he must either go to the general Commissioners or the Special Commissioners. If he goes to the general Commissioners, they are entitled, not directly—because the State does not give them any such power—but indirectly to compel a man to produce all his books relating to his business. There are cases and I can refer to instances—where men do not wish to expose their business affairs in all their details to the Commissioners or the surveyor. The man makes his return. They have put on a very large additional assessment. He submits to it, and pays it, although it is vastly excessive. Next year they increase it again, and then the man can submit no longer to the assessment, and he is compelled to appeal. He appeals to the Commissioners, who are entitled to investigate, and do investigate, his books and all his private dealings. His whole business is laid bare. Many men will pay a great deal rather than submit to an inquisitorial examination of their whole business, especially by men of their own locality, and in many cases by men carrying on the same trade. What seems to me a further iniquity in this matter is, that the surveyor is the person who opposes the appellant, and he is the person who complains of the insufficiency of the return made by the man. In 99 cases out of 100 the Commissioners who are the judges know little, or very little indeed, about Income Tax law; there are few people who know much about it.

The Commissioners are guided to a great extent by the surveyor. When they have heard the case, and heard the surveyor, the appellant, and all the witnesses, they retire to consider their decision, and the surveyor goes with them. When they are considering in private, under the Statute as it exists at present, the surveyor is entitled to go into the room with the assessors, and the arguments he uses there the appellant is unable to hear and therefore unable to answer. Nobody knows what they are. That, I submit, is most unfair, and is contrary to our sense of justice. First of all, the men who are judges may be opponents or competitors of the appellant, and they may be men carrying on their business in the same locality; yet he has to bare the whole of his business to the tribunal so constituted. They can indirectly compel him to produce all his books and all the details of his business, while the surveyor, his opponent in the litigation, can go into the private room with them when they retire to decide the appeal. There is another appeal. The man may, if he chooses, appeal to the Special Commissioners. The expense of an appeal to the Special Commissioners is very great. These Special Commissioners are after all simply the nominees of the Inland Revenue Department. They are men, I say at once, who desire to do justice; I do not say that they do not desire to do justice; but hon. Members can well understand that, being officers of the Inland Revenue Department and brought up and trained in that department, their sympathies, their feelings and their minds are all in favour of the department, and against the appellant. These are the persons who are to act as judges. They are not men trained as lawyers; they are not men who have had any experience in the conduct of this sort of questions; they simply go there as officials of the Inland Revenue to hear a case which involves questions of the utmost complexity and abstruse points of law. These gentlemen, having regard to the magnitude of the businesses they have got to deal with, are absolutely underpaid. Generally they receive very small salaries. When you consider the magnitude of the matters with which they have to deal, it will be seen that they are not fitted for the duties imposed upon them. They are not trained to the judicial office; they have not had experience of the administration of justice, yet they have to determine, and finally determine, the most important and complicated questions of law and of fact.

Mr. LLOYD GEORGE

May I ask the hon. and learned Gentleman what his suggestion would be?

Mr. TERRELL

My suggestion, in the first instance would be that this whole question of the Income Tax, the law relating to the Income Tax, and the administration of the Income Tax, should be overhauled by a Select Committtee, or, at any rate, by some competent body. Nowadays the Income Tax has become practically a permanent tax. Although, of course, it is an annual tax for constitutional purposes, yet it has, as we all know, become practically a permanent tax; and when you consider the enormous difficulties and complexities of legislation on the subject, and consider that the legislation was framed at a time when the present system of business was unknown, I submit that it is time the whole system was overhauled. The law should be simplified so that any man can understand it. A proper tribunal should be set up composed of men accustomed to deal with such questions as well as with questions of law. The person aggrieved should have a right of appeal to the ordinary Courts of Law, so that when he comes to pay an enormous sum, such as some men have to pay in the way of Income Tax, he may be able to have decided by the highest judicial tribunal in the land the amount which he has to pay and the income in respect of which he has to pay. I venture, respectfully, to suggest that that is what ought to be done when the opportunity arises. If a Select Committee were appointed to investigate this whole matter, I am perfectly certain that the result would be that you would be able to have a codification of the law, so that it could be put before the public-in a clear and simple manner. You would be able to establish a real and adequate tribunal for the purpose of considering and deciding all these great questions of Income Tax, and you would by that means, I am perfectly certain, very vastly increase the amount which is payable every year to Income Tax.

5.0 P.M.

Mr. EDWARD WOOD

My hon. and learned Friend has given us a very interesting speech in relation to the law of Income Tax which should hardly fail to impress the right hon. Gentleman the Chancellor of the Exchequer and the House. I do not intend to follow him along that path, and the fact that there are thirty Acts relating to Income Tax does not encourage one to do so. I rise for the purpose of calling the right hon. Gentleman's attention to a point which is a more narrow one, and it is one on which, when it was last discussed, the right hon. Gentleman said he hoped to make some definite statement. The Chancellor of the Exchequer will remember that in 1909 the question of the Income Tax in relation to agricultural land was discussed, and the right lion. Gentleman then stated that he was fully convinced of the injustice involved, and proceeded to make various suggestions for the amelioration of the injustice which were to be afterwards crystallised into law. The owners of agricultural land have, in the matter of Income Tax, a distinct grievance. They are assessed, it is true, with allowances and deductions upon income which passes through their hands only in the most formal manner, and is replaced to the benefit of the estate from which it is drawn. That is a fact which will not be challenged, and it was recognised as long ago as 1894 by the then Chancellor of the Exchequer (Sir William Harcourt) to the extent of giving some small rebate on condition that it was used for repairs and maintenance. When the grievance was put to the right hon. Gentleman he went so far, I think, as to say that he would be quite prepared, if possible, to examine the facts, to remove their case from Schedule A to Schedule D. I think that was the reply to a deputation from the Central Land Association. Continuing, he said that that was extremely difficult for various reasons. It would mean, he said, a considerable loss of revenue, and in the next place— It would involve examining the accounts of every estate in the Kingdom—it would practically involve an annual audit of every estate. At the time I was not in the House, and I presume that that seemed a rather conclusive argument, but to those who have any experience of the manner in which the rebate is now given under Form 99 it is known that that almost involves an annual audit of all the estates which claim rebate. I hardly can see that any duty that would be involved in the transference would be much more complicated than that required Under the system by which the right hon. Gentleman has now been good enough to give rebate. He went on to say this, that it was not possible to make the transference to Schedule D:— But we propose that on a declaration of the landowner, accompanied by general figures, which can be examined by the Inland Revenue if they think it necessary in any given case, that he is spending more, a further deduction shall be made up to 25 per cent. He added that the Government had set aside £500,000 for this purpose, and— If £500,000 is not altogether disposed of by this concession the Government will probably be in a position, at any rate next year, to increase the maximum. If there is any surplus we propose to increase the maximum of those who are spending more than 25 per cent. In September, 1909, that statement was repeated and emphasised when the new Clause was discussed in the House in the following terms:— It must for the first year be experimental—next year we may have something to spare and we may increase the allowance, may be up to 30 per cent., if the £500,000 runs to that extent, to the improving landlord. Surely out of that one or two points emerge with comparative clearness, and one is that £500,000 was to be set aside for this purpose. I know that the right hon. Gentleman quarrels with the words "set aside." I think we need have no quarrel with the words. Whatever words he used, it is clear he was prepared to pay claims up to the extent of £500,000.

Mr. LLOYD GEORGE

Hear, hear.

Mr. WOOD

This also emerges clearly, that if the whole of that £500,000 was not claimed in any one year the right hon. Gentleman pledged himself and his Government that they would in the following year extend the maximum allowance, always supposing that the £500,000 was not exceeded. It is a matter of great disappointment, I think, to all those who are interested in this question that the sums paid under the allowance the right hon. Gentleman gave, of an extra twelfth in the case of houses and an extra eighth in the case of land, have been up to the present rather small and comparatively trivial. The figures have been given before, and the fact remains that in each of the years for which we have figures there has been an enormous balance left unclaimed out of the £500,000 which the right hon. Gentleman says he was prepared to give. There are four or five reasons for that known to those who are in the least familiar with estate management, and the difficulties involved in the form of claims by which the rebate has to be obtained. In the first place, it is a matter of extreme difficulty for small owners who do not keep a large office or extremely accurately kept books to be able to comply with the provisions demanded in Form 99 with the exact information and vouchers and ability to show exactly where the expense has been incurred, in what corner of the estate. The man who has not up to the present time been in the habit of keeping what I might almost term scientific estate books will have great difficulty in filling that form. I think there is another reason, and that is that up to the present time a great number of landowners are unfamiliar with the mere fact that this rebate is obtainable. I think that is perfectly true.

The right hon. Gentleman is, I think, to blame, because during the last four years he has kept the landowners so busily employed in filling up Form IV. that they had not time to look around and see what the benefits were. There are, I venture to say, also a great many of the landowning classes of this country who have become rather suspicious of the right hon. Gentleman, that, like the men of Troy, they fear him even when he brings gifts. If the right hon. Gentleman, when he begins the land campaign in the course of the next month or two, would be good enough to preface all his remarks on public plat forms by saying that there is this rebate payable, I am sure he would be doing a good service to the cause he has at heart, and in the interests of land generally. The reason I ask the attention of the right hon. Gentleman to this subject at this moment is this. We have been told before that it was not possible to fulfil the pledge of extending the maximum allowance, although the £500,000 was not nearly claimed because, we were told, more claims might come in, and that the right hon. Gentleman did not yet know where he was, and that in short it was too soon to judge. The right hon. Gentleman, in August, 1912, stated however:— It is impossible for us to make any further statement at the present time. We shall be in a position to know by the time of the next financial statement what the claims will be. The right hon. Gentleman can now, I presume, make a statement of some kind to show us where he stands with regard to this matter, because those claims have to be made within three years, and, I think I am right in saying, the three years during which the claims must be in are up by the present time. Therefore the right hon. Gentleman can, if he will, tell us how he stands at the end of the first triennial period. While I am on the question of three years I would like to make reference to a matter in connection with it. At the present time it is necessary in each return you make to fill up a rather complicated form, Schedule II. I should like to know whether in the case of an owner who makes his returns once in three years if it would be sufficient to fill up the names of each holding, etc., once instead of three times. I think that would be a practical saving, if the conditions arc the same. Assuming they were the same, I think it should be adequate to fill up the form once instead of having to write the same information three times. I would also like to ask is this system, after three or four years' working, a satisfactory one? I cannot myself think that any system is satisfactory under which you start by saying, "the extent of the proportion of your income on which we will give you rebate is unfixed, but what is fixed is the sum that we are prepared to devote to this purpose." Thus you never know what proportion you are going to get until the end of the three years. I cannot think that that is satisfactory either to the Treasury or the individuals concerned. I do not suppose the right hen. Gentleman will say, although I should be very pleased if he did, at the end of the three years to those who have claimed this rebate, "I have got something like a million pounds to spare for this matter, therefore if you can bring your expenditure up say, to 40 per cent. of your income from agricultural land, then you can have rebate of Income Tax as far as the million pounds goes all the way back for the three years." If the right hon. Gentleman is prepared to say he means that, then a large portion of my criticism will be misdirected, but I shall be surprised if he does. If he does not I cannot help feeling that the method itself is unsatisfactory. You would not dream, for example, of working your Poor Law relief upon a hypothetical notion of the number of people supposed in the year to claim relief. The whole thing would break down and would be absolutely unworkable. I do not think the system is any more satisfactory in this case to which I am referring than in that.

As the right hon. Gentleman invites suggestions, may I suggest that he should return to what is still with him a Utopian idea and transfer this class of property as it ought to be into Schedule D which, incidentally, would have the result, to which I know he aspires, of being able to discriminate with even greater accuracy between the good landlord who improves and the bad landlord who merely spends. Either do that or else arrive in your mind by calculations, which the right hon. Gentleman is in a better position to make than any of us, as to what is the utmost sum you are prepared to devote to it and then grant your exemption on the fullest and most generous terms you can on that basis. Either of those methods would get rid of what is a doubtful element at the present time. You are not now clear of the basis and you only know you cannot grant beyond a certain sum. You do not know how far that sum of money will take you. We hear a good deal at the moment about the various difficulties in which the countryside is involved, and we hear various remedies suggested for them. I would say this, in so far as housing, for example, in country districts is aggravated by old houses and cottages being allowed to fall either into disuse or not being repaired or replaced it is increased because agricultural landlords, who have no other means except their agricultural rents to spend upon what after all is an unremunerative undertaking, are at the same time charged Income Tax on money they never receive. I do not want to discourage the right hon. Gentleman from more drastic remedies, but I should be glad if he would at the same time consider this very simple remedy of relieving from Income Tax the money spent in one sense on solving or preventing the aggravation of the housing difficulty. If the right hon. Gentleman considers these points, he will see that I am not putting them forward simply in the interests of landlords, as some hon. Members opposite might think. The matter has a wider application than that; I really nut the suggestions forward as one who sees how the system works. Therefore, speaking on behalf of myself and many other hon. Members who are interested in the matter, I hope the right hon. Gentleman will be able to make a satisfactory statement in reply to the points I have raised.

Mr. WALTER REA

I wish to support the plea of the hon. and learned Member for Gloucester (Mr. H. Terrell) in favour of some inquiry into the actual incidence of the working of the Income Tax at the present time. I cannot quite agree with every word that fell from the hon. and learned Member, particularly when he dealt with the fiscal question, but no doubt there are some grievances which are felt by all parties in the State in regard to the administration of the Income Tax. So long as the Income Tax was supposed to be temporary and was small in amount, people put up with a great many of these difficulties and did not make much trouble about them; but now that it is perfectly well-known that the Income Tax is to remain as a permanent tax, and, as I hope, is to become rather altered in character, and heavier instead of lighter on a certain number of incomes, it is necessary that we should put our house in order. Some very great hardships occur. In particular I have had my attention called to the hardships which occur in connection with appeals to the income Tax Commissioners. It is a very great grievance when a local man has to appeal to his neighbours and disclose his income to those who may be his rivals in trade. I know of one case where a man had to appeal to the wholesale dealer who supplied him with goods and the local bank manager; and, as he was appealing with a view to showing how little business he was able to do, his credit was withdrawn by the wholesale trader, the bank manager in consequence refused him an overdraft, and the man's business was ruined. That cannot be the intention of the law. Like the hon. and learned Member opposite, I have no particular solution of the difficulty to put forward, but I have not the same fear that he has of the Special Commissioners, who, after all, although they may be underpaid as he suggests, are none the less skilled men and might be increased in number. I submit, however, that it is time that we should make some general survey of the question, and put the whole matter upon a footing on which it can be understood without reference to numerous Acts of Parliament which none of us can follow or understand.

A further grievance which might be inquired into is that of the trader who employs wasting assets. He may be the owner of a mill or of machinery or of a ship which depreciates in the course of time because it either wears out or becomes obsolete, and he has the greatest difficulty in persuading the Income Tax authorities that any reasonable depreciation ought to be allowed. There seems to be no general rule laid down to govern this matter. Perhaps, from the nature of the case, it is impossible that there should be. If that be so, it is all the more necessary that there should be sympathetic treatment by the authorities responsible for the collection of Income Tax, and that they should not set up a standard which leads the whole commercial community to believe that the Income Tax authorities are the enemy. When that occurs, there is always the risk that even the average honest business man may feel that he is acting meritoriously in doing the Income Tax authorities. I think that considerable ill-feeling and difficulty would be overcome without any great loss of revenue if the suggested inquiry tried to devise some means of solving the problems which face the officials who have to do with allowances in connection with wasting assets. A further point which might very well be referred to the suggested inquiry is whether it is not possible in sonic way to mitigate the admitted hardship suffered by those who pay Income Tax upon small unearned incomes—that is to say, such people as the widow who has a small sum left her with which she has to educate her children. As this may be considered a special subject of mine with which I have wearied the House before, I will not dwell upon it. I simply admit it as one of the many subjects which might very well be included in the terms of reference to the suggested Commission. I was glad that the Chancellor of the Exchequer turned a sympathetic ear to the suggestion, because this is not in the least a matter of party politics, but one in which any offer that he may make would be received with thankfulness in all quarters of the House. The hon. and learned Member for Gloucester suggested that there might be a possibility of increasing the Income Tax by taxing what are technically described as capital profits due to underwriting shares and so forth. That no doubt, is a very proper subject for inquiry, but I would warn the hon. and learned Member that there are two sides to that question. If you once begin taxing such increments of capital, you must at the same time be prepared to allow very large sums off the Income Tax for decrements of capital and for losses on investments, in connection with which no allowance is made at present. That, however, is more properly a matter for investigation by the suggested Committee than for discussion on the floor of the House. I heartily approve of the hon. and learned Member's suggestion that there should be an inquiry, and I hope that the Chancellor of the Exchequer will see his way to accede to his request.

Sir F. BANBURY

I am sorry the hon. and learned Member for Gloucester is not in his place, because while I agree with everything he said about the incidence of the Tea Duty and the apparent want of comprehension in the minds of hon. Members opposite as to the actual results of Tariff Reform, I cannot say that I agree with him in the majority of his remarks in reference to the Income Tax. My hon. and learned Friend seemed to consider it a very great hardship that a man is not able to sell the goodwill in connection with advantages with which he may be endowed by nature. But that is the fact with every personal business. If you happen to be endowed in a particular direction, and people come to you for advice, you cannot say, "I have sold my advice to someone else, and you had better go to them." That happens in a great number of businesses. On the other hand, a business like Maple's or Shoolbred's can be started and turned into a company, and a large sum realised for the goodwill. That is the fortune of war. The same thing applies to a barrister or arbitrator he cannot sell his business when he retires. But if I had been so fortunate as to be gifted with the peculiar faculties which would have made me either a great lawyer or a great artist, I should have been content to thank God that I had been given those faculties, and I should not have tried to extend the iniquities and the inquisitions of the Income Tax Acts to people who had not been so fortunately gifted, but who, by dint of hard work and much more unpleasant dealings, had managed to create a great business which they were able to sell and pass the proceeds on to their, children. The suggestion of the hon. and learned Member would increase the inquisitorial nature of the tax. Every time any person desired to retire from his business there would be a discussion as to how much of the goodwill arose from the fact that he had not spent all his income during the years he had been working, but had devoted it to the factory or business, and the question would have to be settled whether it was income or capital. I think myself that the Income Tax is a bad tax. Of course it is a tax of which we cannot get rid, but, at any rate, we should do our best to make it as easy as possible to collect, and in no way endeavour to put into the hands of the Commissioners the power to make further inquisitions. With regard to underwriting, I do not believe that the ordinary person in business does much of it. If he did, I think the net result would be loss, and therefore he would not be liable to Income Tax. That, at any rate, is my experience; the hon. and learned Member may have been more fortunate. I think the profits on underwriting are very much exaggerated, and that in many cases, especially in the last two or three years, the result has not been very satisfactory.

My hon. Friend (Mr. E. Wood) has made some interesting observations upon the offer made by the Chancellor of the Exchequer four or five years ago to owners of landed property in regard to the rebate of Income Tax. My hon. Friend said that a considerable number of people had not availed themselves of the offer because they were naturally suspicious of the Chancellor of the Exchequer. He also said that many of the smaller landowners had not large estate offices, and therefore found it very difficult to give the figures required to obtain the rebate. I believe that that is the real reason. Suppose you are the owner of a small property of, say, two or three thousand acres, and you have not a regular estate office; perhaps you employ an agent who is also an agent for other people in the neighbourhood, and you keep a considerable part of the books yourself; it is very difficult to distinguish the exact amount which might be taken for repairs and that which might be taken as capital expenditure. In all probability you have have only a small estate staff. Some of the carpenters and masons will have been doing work in the house and work in the stables. It is very difficult to separate the work done for yourself and the work done purely and simply for the estate. I know an instance where there was undoubtedly a considerable sum of money spent every year upon repairs, over and above the 25 per cent. allowed by the Income Tax Commissioners. The agent of the property, who was also employed by other landowners, very kindly offered to take out the figures. The landowner said, "Well, it was not part of your duties when I first made the arrangement by which you became my agent, and as I do not feel inclined to increase your salary, I do not think it is fair to ask you to take this additional work; I do not feel that I have the time to devote to it—especially I believe in the particular case to which I refer—although there may be a further percentage deducted and a swing of about £10 or £15 a year expected." I believe there are a great many similar cases to that, and I think that is one of the reasons why the offer of the Chancellor of the Exchequer has not been accepted to any very great extent, not because there are no grounds for demanding a rebate, but because the forms to be filled up are such that it would take so much time that the thing would not be worth doing.

What ought to be done I think is as my hon. Friend said, to assess income upon the actual amount received; then the sense of injustice which undoubtedly prevails at the present moment, would disappear, proper accounts could be kept, a proper amount would be received by the State, and a proper amount would be paid by the individual concerned. The hon. Member for Coventry seemed to cast considerable doubt upon whether the Chancellor of the Exchequer would realise his expectations as to income this year. The hon. Member spoke about the stringency of money at the present time. He seemed to be under the impression that money was so stringent that trade would suffer in consequence. No doubt there has been during the last two or three years a much greater demand for money, and higher rates have been obtained—much more than we have been accustomed to in the previous ten or fifteen years. Still, actually at the present moment there has been rather a, set-back in that direction, for money is at a lower rate than for some little time past. Personally I do not think this will last. I think we shall—I agree with the hon. Member to this extent—during the next few months, possibly during the next year or two, see a considerable demand for money. I do not myself anticipate that it is going to be so stringent that it will have the effect of stopping industrial enterprise, or acting as a very serious check upon industrial enterprise in the country. I do not myself believe—and I am only expressing my own opinion, because, after all, it is mere guesswork—that you are going to have much higher rates for money in the next eighteen months than in the past eighteen months. Whether or not, however, the hones of the Chancellor of the Exchequer are going to be realised is another matter. After all, it is only speculation. The Chancellor of the Exchequer has opportunities for arriving at some decision as to whether or not the trade of the country during the next few months is or is not going to continue as prosperous as it has been which are denied to the ordinary Member. I should be very sorry to attempt to prophesy or to give any opinion as to what the future course of trade is likely to be. On the other hand, I have met during the last few months several persons who are qualified to give an opinion, and their unanimous opinion is that we are at the present time at high-water mark, and that, though the tide has not perhaps begun to recede, that probably it will recede after a while.

That is rather my own opinion, and I am rather doubtful whether the Chancellor of the Exchequer will find that his very sanguine Estimates will be borne out. But I should not like to express any very strong opinion upon that, because I think the Chancellor of the Exchequer has much better means of ascertaining these facts than I have. I should like to say this: I presume the Chancellor realises that he has taken a very serious responsibility upon himself in bringing forward the Budget in the way he has brought it forward this year, and though, if he is successful, no doubt a considerable number of people will say, "What a clever man; how glad we are that he has not put any further taxation upon us!" on the other hand, if his schemes fail, the position may be very serious. It certainly will be very awkward for the Chancellor of the Exchequer himself and for his particular party. I do not say that I attach very much importance to the latter. But, looking at the matter for the moment from the national point of view—from which, I think, finance ought to be looked at—I must say I feel anxious as to what the future is going to give us.

My hon. Friend the Member for Hereford made sonic very interesting remarks earlier in the afternoon upon the effect of direct taxation. There is, I understand, an Amendment to be moved later in regard to the effects of direct and indirect taxation. I do not wish to anticipate any remarks I have to make upon that Amendment if I am fortunate enough again to catch the eye of Mr. Speaker. But it does open up a very serious question, and one which is, I think, germane to the question under discussion—that is, how far we are justified in relying so much upon direct taxes as we do at the present time. By direct taxes I mean specially the Income Tax and the Death Duties. My hon. Friend the Member for Hereford pointed out that a very large number of people, whom we called the middle-class landed class, were being driven out of their land by the taxation which has been put upon them. I do not think it is altogether so much the taxation of the present as the fear of future taxation which has something to do with this. What I really think—I do not know whether my hon. Friend will agree with me here—is that a great deal to do with it is that the class of man who is content to live upon a small property in the country and take a great interest in the methods of working, either because he is fond of country life or because that particular property has been in his family for a great many generations, is getting afraid to invest his capital in the enterprise, which gives him a very very small return for his money, because he thinks he may be taxed out of existence at any moment. My hon. Friend says it is a very serious position, and though I have not any hope that any words I shall say will influence either the Chancellor of the Exchequer, the Financial Secretary, or any hon. Member on the other side of the House, I do hope that they will pay some attention to the words of my hon. Friend, and that those who were not fortunate enough to be in the House at the time will read his observations in to-morrow's OFFICIAL REPORT.

Before I sit down I should like to say one or two words bearing upon the great misfortune, or rather the great evil, which is being caused by the continuation of a large Income Tax and large Death Duties. Practically the Income Tax and the Death Duties are one and the same thing. One speaks about an Income Tax of Is. 2d. and a Super-tax of 6d., making 1s. 8d., but one leaves out of consideration altogether the effect of the Death Duties, which are only a deferred form of Income Tax. A great number of hon. Members opposite say, "I should be very glad if I had £5,000 a year to pay the Super-tax; I should not think anything of it." A similar sort of argument might be used if the Chancellor of the Exchequer or the Financial Secretary were to say to me, "I will make you a present of £1,000,000 if you will return me £100,000. My reply to that would be that I would be very glad to do it, because the net result would be that I should have £900,000. In like manner it might be argued that a man with £5,000 would be very glad to pay the 6d. Super-tax. It is an absurd argument. The way you should look at the matter is: whether it is good for the country that there should be so large an Income Tax placed upon incomes, and, secondly, whether it is just. I remember my right hon. Friend and colleague (Mr. Balfour) some years ago saying that what we were suffering from in this country was not that there were too many rich men, but that there were too few. Hon. Members opposite are doing everything they can to discourage men from becoming rich, in effect saying, "Whether or not we will take your money in various forms of taxation," especially in the form of Income Tax, Super-tax, and Death Duties.

That is all very well, but it must be remembered that that policy can have but two effects. It has had this effect that the small landowners in the country have been driven out of their estates. You may get some one in their place who is not of English birth, and the result of that is that that gentleman being of great astuteness sees to it that he does not pay the taxes at all, or only in a minor degree; an the net effect of what takes place is that the last person that you should let off is let off, and the person that you want to let off suffers. I trust the Financial Secretary has followed the few remarks I have made, and that he will endeavour to see whether or not there can be some rearrangement both in the Death Duties and in the Income Tax. I know that is a very unpopular thing to say. Hon. Members who represent the Labour party will not, I think, agree, but I think it would be well for them to consider whether it would not be in their own interest to adopt such a course as I suggest., because the more employers there are and the more prosperous the better it is for labour. Would it not be well that by the alleviation of these enormous duties capital should be induced to embark upon enterprise and so more people be employed in England I should like for a moment to revert again to some remarks I made a little while ago, I think upon one of the Resolutions, and that is the very serious position that we should be placed in if we should be at war, when we have such a high Income Tax and such high Death Duties. I said then—and I hope the House will excuse me if I repeat myself—that the Income Tax used to be considered our reserve in time of war. I have heard nobody in this House contradict that, and it is the fact that we have always relied first upon the Income Tax as our war chest when we have been at war, and, secondly, upon our power of borrowing money at a low rate of interest. We certainly cannot borrow money at a low rate of interest at the present moment.

I do not want to-day to go into the old controversies as to the price of Consols and the relative fall between English securities and the securities of foreign countries. Something was said upon that point on one of the Resolutions, and I was really astonished to hear an hon. Member opposite who endeavoured to make out that this country compared favourably upon that point with other countries. I do not think that is so. I think the reverse is the case, but whether that is so or not there is no question we cannot borrow money at so low a rate of interest as in the past. I do not really know what would happen if the Chancellor of the Exchequer had to borrow £100,000,000 upon Consols at the present moment. I think he could not do it. I think it is likely he would have to pay such a high rate as has not been paid certainly for the last fifty years in this country. Probably you would have to go back to the days of the Crimean war. Before the Crimean war the Three per Cent. Stock stood at a little over a hundred. It certainly does not now. That is a very serious consideration, and should not be lost sight of. Income Tax stands at over 3s. in the £ when you include Super-tax and Death Duties—my hon. Friend says it is much higher, but I wish to be on the safe side—and I would point out that in time of stress it is the rich people who would have to be depended upon for Income Tax, and, therefore, the fact that it is now so very high would make that very difficult. I may be asked what is my solution. My answer is I am not the Chancellor of the Exchequer, nor do I belong to the party upon the other side of the House, and, therefore, it is for the right hon. Gentleman and his friends to find a solution of what I think is a very serious question. I am sorry the Chancellor of the Exchequer is not in the House, because I think this question is one which deserves serious consideration. I trust the Financial Secretary will be good enough to repeat the purport of my few remarks to the right hon. Gentleman, and I hope the seed will not fall upon sterile ground.

Sir JOHN SPEAR

As a Commissioner of Income Tax of a good many years' standing, I desire to say a word or two in support of the appeal of my hon. and learned Friend the Member for Gloucester. It has become very apparent that the present system is defective and extremely irritating in its character. It is difficult to suggest a remedy, I am aware, but I think sufficient discontent exists to induce the Chancellor of the Exchequer to give effect to the proposal of my hon. and learned Friend, and to appoint a Select Committee to consider the question. We know that it often happens that a surveyor of taxes does greatly increase the assessment returns of individual traders. It may be in some instances there is ground for his suspicion that the returns are not adequate, but I venture to say that the increases over and above the returns are often very unfair and cause great irritation, and militates very much against the efficient and successful collection of Income Tax. I cannot help thinking that some system ought to be devised where, if the surveyor of taxes deems it necessary to increase the valuation returns of an individual trader, before he makes that increase he should bring the matter before the local Commissioners and confer with them as to the probability of the insufficiency of the assessment returns. I think by that plan much irritation will be avoided, and the difficulty and annoyance which exists to traders in bringing their books before the Commissioners and exposing their financial position would be to some extent, at any rate, mitigated or got over. It is extremely annoying for a trader to have to reveal his financial position in detail before men who may be, in some cases, his competitors in business, and who, at any rate, may get a knowledge of the circumstances surrounding that man's business, and I think it would be very helpful to secure the full collection of Income Tax which is honestly due and also to avoid the demand of unjust levies on people in a position according to the law to pay. We know that many of the traders do not keep their accounts sufficiently clear to reveal their actual financial position. I know that is the fault of the traders, but it is a difficult matter, and if the Commissioners were brought into consultation with the surveyor before the increased levy was made I think equity would prevail to a larger extent than at present, and very much annoyance to the individual trader would be avoided. I agree also with my hon. and learned Friend in thinking that there ought to be no different treatment as between the surveyor of taxes and the appellant, but that when the case is put before the Commissioners both should remain to hear the discussion or both should retire. I cannot help thinking it is giving the surveyor of taxes an unfair advantage over the appellant, after the case is fully discussed, that he should have a further opportunity of presenting his side of the case. I believe surveyors of taxes desire to do what is just. I admit the difficulty of the position, and I think the state of the laws rather aggravates that position and the grievance and injustice to the payer of Income Tax. I support the appeal for the appointment of a Select Committee, so that Income Tax can be collected in a way that will not cause so much irritation and so much annoyance to the private traders and yet result in the Exchequer receiving what is justly due to it from this source of revenue. There was another point mentioned as regards the rebate given for the expenses of management of landed property. I am quite prepared to admit that the Chancellor of the Exchequer made a liberal suggestion when he proposed to give back 25 per cent. of rebate of the Income Tax where expenditure to that amount has been made, but it is extremely difficult on small estates especially to keep an account which will make clear that certain expenditure has been made on that part of the property, and hence the opportunity has not been taken advantage of so much as it should have been, because no doubt certain things have happened which have brought about a sense of lack of security on land which has curtailed expenditure and repairs on which might be justly claimed the rebate of 25 per cent. But apart from that point, I put it to the Financial Secretary that there is one great grievance with reference to the assessment of Income Tax, and that is the rebate on cottages is not at all adequate to the actual cost of the repairs, with the result that this is acting, and has acted, as one of the regrettable deterrent influences in the provision of cottages for the working classes. We know that as an economic expenditure of money it is not profitable, and it is aggravated by the present attitude of the Government upon the question. Directly that a man builds cottages, instead of investing his money abroad, he has at once to pay the rate for local rating and for Income Tax, whereas if he invested his money in foreign securities he would not contribute one farthing to local circumstances, although he is resident and enjoys the advantages, though he takes his money from foreign securities. We feel that it is a deterrent to the provision of more cottages or the keeping of present cottages in a better state of repair than at the present time. I hope the Chancellor of the Exchequer will keep that in view. I can assure him, speaking in some degree as an agriculturist and a resident in a rural district, we are not indifferent to the claims of the working classes for better housing. We are anxious to promote it. All we ask is the co-operation of the Government and the removal of unjust grievances which should be an object both sides are anxious to obtain.

I regret that there is no provision made in the Budget for increasing the Grant to local authorities in carrying out the administrative work placed in our hands. We have been asking the Chancellor of the Exchequer for years to give increased Grants from the Imperial Exchequer towards the cost of education and main roads, and we are very greatly disappointed that in this Budget there is no such provision made. As administrators of the law we maintain we are contributing to the welfare of the people as well as the State is, but we cannot administer a law efficiently unless we have funds to carry out the work as we are directed to do. The present system presses so heavily upon local authorities that they feel it is almost impossible to make further demands on the rates to get money to carry out further developments in the work of local administration. I know the Chancellor of the Exchequer has told us again and again that there is a Local Taxation Committee sitting, and that he hopes before long there will be a report from that Committee, and then something will be done. The right hon. Gentleman recognises the justice of our claim, but we have been waiting and appealing now for years for some increased Grant from the Imperial Exchequer towards the cost of those local services which are indeed national in their character, and it is most unfair that local ratepayers would have to contribute constantly increasing burdens to this class of work, and we submit the right hon. Gentleman is acting unjustly to the ratepayers and to the administrators of the law in the localities by neglecting to see that the State contributes a fair share towards the increased cost of those local works which are so essential to the well being of the people.

6.0 P.M.

I ask the right hon. Gentleman to consider the advisability of appointing a Select Committee to see if the system of collecting and assessing the Income Tax cannot be made less offensive to the contributors of that tax and less likely to cause that irritation and resentment which at present exists. My view is that before a surveyor of taxes refuses to accept the return made by an individual trader, and before he increases that return he should bring the matter before the local Commissioners, who have considerable knowledge of the circumstances of the case, so that he may thereby avoid any unjust or any increased demand over and above that which the trader may have returned. We must consider that every trader is an honest man until he has been proved dishonest. It is an insult to a tradesman to have his word doubted in this way, and this ought not to be lightly done by the Surveyor of Taxes. If the Surveyor of Taxes feels that some increase ought to be made at least he might consult the local Commissioners before taking that step. I think the whole question of the collection and assessment of the Income Tax demands consideration. I know it is a most unpleasant business and it is extremely difficult to do justice between man and man in these matters. I know that the money has to be collected, we all desire that it should be done on just and fair lines, but that is not what is being done at the present time. I think a case has been made out for the appointment of a Select Committee. With reference to the deductions and rebatements of Income Tax on cottages, I know that what is being done in regard to this question is militating against the provision of cottages. I hope the Chancellor of the Exchequer will see the justice of making a Grant-in-Aid of the cost of education and the main roads. At present it is most difficult for administrators to do their work with a due regard to the interests of sanitary and educational progress and the maintenance of good roads because of the increasing burden on the ratepayers, which is driving people out of the country and making it impossible for small traders to carry on their business with any prospect of earning a livelihood.

Sir GEORGE YOUNGER

I wish to raise a point about the Super-tax. The Super-tax form is rather peculiarly worded and it states that the receipt is given for the money "on account" of the Super-tax for the year. If the words "on account" mean payment for the year, I have no fault to find, but if they mean what they are held to mean in ordinary business life then I find very serious fault with this form. Either the return should be accepted definitely or it should be substantiated by inquiry. If it is found to be an honest return then they ought to be given a clear receipt. This method means that the revenue officials are deliberately keeping open the matter by that form of words, so that if they think fit they can reopen the question of the assessment in future years. I think that it is a gratuitous insult to a man who has sent in his return. The right hon. Gentleman has issued a, White Paper explaining his statement about the Spirit Duty, and explaining that the tax has been a highly successful one in respect to the reduced quantity of spirits sold and the increase in the revenue. That was given by the right hon. Gentleman as a statement of fact, but it was a purely conjectural statement. The Chancellor of the Exchequer assumes certain things, and then brings out those figures which are net facts in any sense of the word, and I think he ought to qualify those words. So far from their having been an increase of £5,000,000 in the Spirit Duty, there has been a loss of £600,000 to the revenue on the figures contained in the Blue Book, and the statement now issued was based upon conjecture and not upon the facts.

Mr. LLOYD GEORGE

The Debate, as far as I have heard it, has been a very interesting and a very practical one, and some very admirable speeches have been delivered which will be, I am sure, a real contribution to our consideration of the finances of this country and our methods of raising the revenue. The hon. Member opposite has asked me two questions, but I am afraid I am not in a position to answer at this moment the queries he has put to me. With regard to the question put to me by the hon. Baronet the Member for Ayr Burghs (Sir G. Younger) about the Super-tax, I can assure him that there is no idea of the kind he has suggested. Even in the form of words quoted, the powers are only exercised in the case of any withholding of any portion of the income, and there is no hidden meaning or purpose in the words which have been quoted on the part of those responsible for the collection of the Super-tax. The hon. Member for Tavistock (Sir J. Spear) put two questions to me, one in reference to Imperial Grants for local pur- poses, a tremendous issue which he invites me to discuss. I quite agree that there is no more important question for the consideration of the House, but we had a very full debate earlier in the year, and at the present moment I could not throw any more light upon it than I did then. We shall not be in a position to deal with the question this year, and it is only one out of several urgent problems which are waiting to be dealt with. I hope it will be possible for some Chancellor of the Exchequer to do something more at no distant date than deliver the kind of speeches he is forced to deliver when he has to speak upon the very important problem of local and Imperial finances.

A discussion was initiated by the hon. Member for Gloucester (Mr. H. Terrell) in a very able speech, in which he dealt with this method of collecting and assessing the Income Tax at the present moment. The hon. and learned Member suggested a Select Committee to enter into the whole of that question. He further stated that there are a good many anomalies at the present time, and he was followed by the hon. Member for Scarborough (Mr. W. Russell Rea), who also took that view and pressed upon the consideration of the House the suggestion that there should be a Select Committee to inquire into the whole question. As the hon. and learned Member knows very well, several Committees have been appointed from time to time to consider kindred questions in reference to the collection of Income Tax. As a result of some of these Committees improvements have been effected in the law, but, on the whole, I cannot say that they have resulted in throwing any very considerable light upon the best method of assessing and collecting the Income Tax. I feel sure that if the hon. Member who raised this point pursues his inquiries further into the realm of practical experience he would find that these inquiries would be of very little service from a revenue point of view. In his illustrations of the artist, the solicitor, and the business man he is, of course, quoting extreme cases, but the moment he assumes that the artist is making £2,000 or £3,000 a year purely out of his art he is also assuming that the others are also making a profit out of it. That is not the experience of those who know anything about it, whereas the hon. Member has preferred to call them all into account and charge a profit on all the items he mentioned. I should like to know whether he is prepared, on the other hand, to allow a deduction for losses incurred.

Those are the circumstances which weigh with the Income Tax Commissioners, and I am not sure, from the point of view of the revenue, that much would inure out of the alteration of that principle which has been suggested. Take underwriting. An underwriter may make huge profits, and I agree they ought to be charged in the income of the year as far as he is concerned. I am certain that there is a good deal of income which escapes under these various headings, but I am doubtful whether it is possible to alter this. There is a good deal of revenue escapes legitimate taxation within the four corners of the present Income Tax Acts under these various headings. When I come to the first suggestion which the hon. Member made with regard to District Commissioners I thought there was a great deal in what he said. I have always thought that it was very hard that men trading in a given district should be compelled to submit their accounts to their trade rivals. That is one of the most unsatisfactory parts of the working of the machinery of the Income Tax, and no doubt many men prefer to pay almost an unfair Income Tax to submitting their private accounts to examination, not merely by their trade rivals, but even to their neighbours in a sparsely populated district. No doubt in many of these cases the taxpayer who is assessed too highly rather than appeal and have to go through the process of submitting his ledgers to an examination by people in the same trade would infinitely prefer, unless it is a grossly extravagant amount, to pay a little more than he should be legitimately be called upon to pay. I am sure that when there is an alteration in the machinery of the Income Tax the question of District Commissioners ought to be very carefully reconsidered.

I am not at all sure that the present system is a beneficial one to the revenue. I am very doubtful about it. I think that a good deal of revenue escapes. I will not say that it is the fault of the District Commissioners altogether, but I am certain with, I will not say a more impartial tribunal, but with a tribunal which would not have any local bias or personal bias, a purely official tribunal, that whereas now there are some men who are overtaxed, there are a good many men who are under-taxed who would probably be brought into the net. I should very much like to see that question considered by a Committee. I will not say a Committee of the House of Commons, because a Committee of the House of Commons the moment the House rises cannot sit, and there is an end to its proceedings, and you have to reappoint it. It is also desirable that you should get some outside men to sit on these Committees to assist in the investigations. I should myself prefer a Committee appointed by the Department, and upon which you would have business men who are not sitting in this House, as well as Members of this House. I will consider the suggestion made by the hon. Member; it is a very valuable one. I think it is very desirable that we should have evidence as to the way the Income Tax Acts are working, as to the way the Income Tax machinery is working, and as to whether there is not some tribunal which might be more efficient and which, I will not say, might be more impartial, but which would be free from suspicion of partiality, and which would act more fairly as between individuals as well as to the revenue itself. The hon. Gentleman the Member for Herefordshire (Mr. Hewins) opened this discussion in a suggestive speech. Seeing he is one who has considered these problems very carefully and given a good deal of thought to them, I was rather struck by his general attitude towards all the taxes of this country. He first of all objected to the taxation which fell upon the working classes. He said, "Here you are putting fivepence per 1b. on tea, and it comes largely out of the pockets of the working classes." Then he came to the middle classes, and objected to taxing them.

Mr. HEWINS

I referred to the intermediate class of landowners.

Mr. LLOYD GEORGE

Yes, and he objected to taxing them because, he said, you are eliminating them. He wants to take the burdens off. Where is he going to put the burdens on? There is really only one way of taking burdens off the taxpayers and that is by reducing expenditure. You may reshuffle your taxes and take them off one shoulder and put them on another; you may lighten the burdens on one class, but, if you do, unless you reduce the expenditure, you are bound to increase the burdens on another class. You cannot avoid that. It is very easy to say to one class, "Here, your burdens are too heavy. They ought to be lightened. You are paying too much on tea and sugar." "You, landowners, are paying too much on your land." "You, the middle classes, are paying too much Income Tax." But, unless you reduce the expenditure, you have got to get the money out of some class in this country. The hon. Gentleman did not put it quite in this form, but what he really said was, "Why do you not tax millionaires?" He did not object to that at all. I am the last man in the world to object to the taxation of the very rich in this country, but, if he will only look at the sources of revenue, he will find that if he confined his taxation to the very rich he would not be able to raise his revenue.

Mr. HEWINS

I did not suggest that.

Mr. LLOYD GEORGE

Therefore, if you want to raise your revenue in this country, you have got to have it distributed over all classes, and what you want to do is to see that it is distributed fairly over them all, and that no class is unfairly taxed in proportion to the rest. The hon. Member wants to take the burdens off the working classes; he wants to reduce the burdens on the middle classes; and he would also reduce the burdens on the landowners.

Mr. HEWINS

I was objecting to the particular kind of tax which the right hon. Gentleman puts on, and I want to know his reasons for those taxes.

Mr. LLOYD GEORGE

The hon. Gentleman did not tell me to which particular tax he objected. Is it the Income Tax?

Mr. HEWINS

I want to know, for instance, about the Tea Duty.

Mr. LLOYD GEORGE

The Tea Duty is not a very heavy burden on the intermediate class of landowners, and I do not think it really disturbs the balances of the great financial magnates to whom the hon. Member referred. Therefore, I do not think it is the Tea Duty. I should like to know to which tax he objects. Is it the Income Tax? Is it the Death Duties? He did not indicate, in his very thoughtful and suggestive speech, to which particular tax he objects; he merely entered his general protest against taxes at large. There is only one way of reducing the burden of taxation and that is by reducing the expenditure, and no suggestion has come either from him or any of his hon. Friends which would involve any reduction in the expenditure of this country. On the contrary, the suggestions which I have heard even this afternoon are all suggestions for increasing the expenditure. The hon. Gentleman the Member for the Tavistock Division (Sir J. Spear) ended his speech, as he began it, by suggesting an increased Treasury Grant in aid of local taxation, and there have been other suggestions which have been made, not merely in this House but outside, all in the direction of increasing expenditure. We are at the present moment pressed for more "Dreadnoughts," and, I think, to adopt conscription. Whatever merits there may be in conscription, I am perfectly certain that it is not going to be cheaper. We have also been asked to give Treasury Grants for roads and for rural cottages. They are all suggestions for increasing the expenditure, and, if you are going to have increased expenditure, you are bound to have increased taxation on somebody. I heartily agree with what the hon. Member said about rural life. He did not give any particulars, but I think lie did indicate the general direction in which taxation could assist. He suggested that a man who was really doing his duty—he was referring to landowners—should not be penalised by taxation, but that so far as you could you should adjust taxation in such a way as rather to encourage the man who was doing his duty. I have always advocated that. This is where extremes meet. I can see hon. Friends of mine who have been preaching that doctrine all over the country. They want to so arrange local taxation that you do not penalise the man who improves his property. That is their doctrine, and now they have such high sanction and authority they will be doubly encouraged, I am sure, in that campaign.

I agree with another hon. Member in the speech he delivered. He entered into particulars and referred to the case of cottages. He said that the landowner who had not much money to spare could not expend a considerable proportion of his income upon repairing cottages and they fell out of repair, with the result that there was a shortage of cottages in rural areas. He put it to the House that you ought not to make it still more difficult for him to do so by taxing him for something which is not income, but which is expenditure which he incurs in the interests of the community. I entirely agree with him there. I accept the principle which was laid down by the hon. Gentleman the Member for Herefordshire and by the hon. Gentleman the Member for Ripon (Mr. E. Wood), and I had thought that by the proposals that were incorporated in the Budget of 1909–10 we should have encouraged expenditure of this kind to the extent of £500,000. I am not to blame and the Government is not to blame because that £500,000 has not been expended. The hon. Gentleman the Member for Herefordshire was one of a deputation that first brought the matter to my notice. He, and the hon. Member for Wiltshire (Mr. C. Bathurst), and Lord Onslow introduced a deputation on behalf of landowners, and they made what I thought was a very strong case indeed. They submitted accounts for certain estates, and their case was that whereas a maximum of 12½ per cent. is allowed in respect of repairs and money that is spent for the improvement of the property, some landowners spend 30, 40, and 50 per cent. and even more upon repairing their properties, upon drainage, and upon other things which it is supremely in the interests of the community should be done and should be encouraged in the rural districts. I was rather alarmed when they told me that the vast majority of landowners of England expend at least 25 per cent., and a good many much more, but I could not at that stage, when I had to raise the sum of £16,000,000 to meet a deficiency, see my way to provide more than £500,000 for the purpose of meeting a claim which I thought was a just one. I moved an Amendment to the 1909 Budget, which enabled landowners to claim up to 25 per cent. on the income from rent in respect of any expenditure on cottages or general repairs. The money simply passes through the landlord's hands and is not income at all. I fixed on 25 per cent. because it was just as much as I could see my way to allow at that time. I was very much surprised at the small number of claims sent in. The landlords simply had to prove that they had spent the money. That was only a fair condition, and under Schedule D every tradesman has to make similar proof. In the first year only £5,000 had to be paid out in respect of remissions for repairs, etc. In 1911–12 the remissions amounted to £49,000, and in 1912–13 to £68,000.

I do not think there was any cause for complaint as to the conditions. We really imposed no conditions which are not imposed on every trader and every professional man in the country, and if the hon. Gentleman opposite can point out anything unfair in the conditions with regard to proof I can only say I shall be very glad to consider it. Why were not more claims put forward? I think the hon. Gentleman pretty fairly stated the case when he said one reason was that a good many landlords knew nothing about it. Unfortunately they have been concentrating their efforts on things which matter very much less to them personally. The agricultural landlord has concentrated himself a good deal upon the Undeveloped Land Tax and the Increment Tax, which really did not concern him. A good deal of alarm has been expressed, and there has been much exaggeration in regard to the matter. There are certain organisations, which I need not name, that are devoting their time to spreading panic and alarm amongst the rural landowners in regard to things which do not concern them in the slightest degree, except generally as citizens of this country, and if they devoted one-tenth of the time to telling the agricultural landowner what he can get under the Bill the landowners might have been better off than they now are to the extent of £400,000. Indeed, I would advise the landowners to send in a bill to the hon. Member for Chelmsford in respect of the losses they have sustained within the last few years in this regard. The hon. Gentleman has admitted that the claims had not been made because the landowners did not know that they should be made. That is probably accurate. They have a most morbid suspicion of the Government in general, and of me in particular, and when they were told that there were £500,000 they could have if they would only prove their expenditure on cottages and reprairs, instead of sending in their bills they said, "It cannot be true. He is Limehousing again. This is only another promise, and there is nothing in it." The fault rests, perhaps, not so much with the landowners as with their agents, who ought to have known better—especially those who are of my profession. They, at any rate, ought to have known that they had only to send in a claim and to prove it in the ordinary course, and then they would get 12½ per cent. reduction, in addition to the 12½ per cent. made before.

Mr. PRETYMAN

It was one-sixth before, not one-eighth. I do not want to enter into the controversial side of the question, but I should like to point out it was one-sixth on cottages and one-eighth on land. May I add that the reason why, I believe, the claims were not made in greater numbers is this: Although the returns asked for were not really complicated—I admit that, and I admit everything the right hon. Gentleman has said in regard to the offer made and the consequence which it would have had—yet they looked complicated, and the evidence which has reached me is that a large number of landowners did not understand the form issued and did not think that they could comply with it. I would suggest that the return should be put in a form more simple and more easily understood.

Mr. LLOYD GEORGE

The hon. Gentleman might issue another pamphlet. I have no doubt at all as to what happened This document came to these gentlemen enabling them to make a claim. They said, "Here is another Form IV.," and they just threw it into the wastepaper basket, not realising that they were thereby throwing a cheque into the fire. That is really what happened. Comments are superfluous. Here we have a form admittedly simple, and the hon. Gentleman says that men whose business it is to deal with the land could not understand it, although it would bring them in £500,000 a year. It is a remarkable comment on the way in which land is managed in this country. I was talking to a great landowner the other day who has sent in his claim, and he tells me that there are other provisions, with regard to Death Duties and so on, and if landowners would only apply their minds, or force their agents to apply their minds, to the question, they would get a good many more remissions than they do at present. That may or may not be the case. All I can say is that under Schedule A, a sum of £500,000 was set aside. It was there to meet claims if they materialised. I understood the Member for Ripon (Mr. Edward Wood) to suggest that we should substitute Schedule D. But I would very much prefer to see my own plan tried first of all. It has not been given a trial at present, and I do not see why I should take a step which would revolutionise the whole method of taxation in respect of land when the landowners themselves up to the present have not taken the trouble to prove their claims even to the 25 per cent. I think the Government are entitled to say, "You can have the 25 per cent. deducted if you can prove the expenditure; if you can show that you are spending your rents on improving the cottages and draining and developing the land." It is the duty of the House of Commons to encourage that, and no Chancellor of the Exchequer of any party would have difficulty, I imagine, in getting more money for the purpose if he could show an expenditure which justifies a still greater remission.

Mr. BRIDGEMAN

Is there any reason why a further rebate should not be given to those landlords who have understood and made the return, and who have proved that they have spent more than the 25 per cent.

Mr. LLOYD GEORGE

I think there is a good deal to be said for that point of view. Inasmuch as the £500,000 has not been spent, I do not see there would be any reason against raising the percentage. I will certainly give further consideration to that point. If the hon. Gentleman will put down an Amendment to that effect, I will see what can be done in the course of the Debates on this Bill.

Mr. E. WOOD

Would it not be possible to act on the suggestion I made and let one return cover a period of three years? It would mean a serious saving of labour.

Mr. LLOYD GEORGE

I am not quite convinced that that is a practical suggestion. In any business these claims have to be put in in each year. The amount spent in one year is not the amount spent in another year. In one year more might be spent on cottages and less on drains. In one year, too, a good deal might be spent on farm buildings and less in the following year. I should have thought it was impossible to make any fair claim for one year to represent three years. But I will consider the suggestion made by the hon. Gentleman, and if he has any further ideas to advance on the point perhaps he will communicate them to me. I was sorry I did not hear the speech of the hon. Baronet the Member for the City of London. It took the form of a general growl, so far as I can decipher the notes made of it by my right hon. Friend the Financial Secretary to the Treasury. Does the hon. Baronet say that that does not fairly represent what he said?

Sir F. BANBURY

It would not be in order for me to repeat my speech.

Mr. LLOYD GEORGE

The only part of the hon. Baronet's speech—beyond his remarks dealing with Income Tax, with which I have already dealt—upon which I should like to say a word was that in which he referred to the trade of this country. He was more or less in agree- ment with my hon. Friend (Mr. David Mason), that I took a rather optimistic view of the outlook, and that on the whole I was too sanguine in my estimate of what was going to happen in the course of the current year. It is a very difficult thing for us to prognosticate what will happen in regard to trade. I certainly would not like to dogmatise. What I gave in my Budget Statement was purely a summary of hundreds of reports I had received from all parts of the country. It was not that I had consulted any single individual, because I had hundreds of reports from every part of the country, and they all came to the same thing. They said that so far as this year was concerned the outlook was one of abounding prosperity. It is a thing that can only be tested by experience, although that prophecy has been fortified by the facts. My hon. Friend challenged my Estimates. Will he tell me what part of my Estimates is incorrect?

Mr. D. MASON

I think the whole Estimate is wrong. The right hon. Gentleman estimated for £7,500,000—that he would get £1,000,000 on Excise, £1,500,000 on Customs, and so on. I did not single out any particular item. I think his general survey and his estimating the revenue to produce £7,500,000 more is too sanguine. Did the right hon. Gentleman include in his calculations the increases in France and Germany which have taken place?

Mr. LLOYD GEORGE

The general financial position was thoroughly well known in this country at that moment. The question I put to my hon. Friend and which I put to hon. Gentlemen opposite on the Budget Resolutions was, What part of the Estimate is challenged? My hon. Friend says I shall fail on every one of them, that I shall not get my Customs—Tea, Tobacco, Beer, Spirits, Income Tax, Death Duties and Stamps—and that I shall be short in all these. That is his view, but it is not the view taken by my critics on the other side.

Mr. D. MASON

The, right hon. Gentleman is hardly fair to me. I did not say that on every single item he would be short, but I certainly do hold that his estimate generally is a mistaken one. It would be absurd for us to say on which particular item out of the whole Budget he would be short.

Mr. LLOYD GEORGE

I cannot carry on an argument with my hon. Friend. I am quite willing to give way if he wants to correct any mistake I may make with regard to his speech. When the Chancellor of the Exchequer makes his estimate he cannot do it in a general sort of way. He has got to descend to particulars, and ask his officials how much each item will produce, how much beer will produce, how much tobacco will produce, and how much spirits will produce. He cannot go to them and say, "Generally, things are looking all right, and we will just jam on £7,000,000." I can assure my hon. Friend that that is not the way it is done, and that when he comes to prepare his Budget he will find that he will have to descend and get a soul which is not above these little particulars. I should like to know which of these estimates is supposed to be exaggerated. The hon. Baronet dealt with the Income Tax. Does he think that estimate is exaggerated?

Sir G. YOUNGER

There is a lot of it left uncollected.

Mr. LLOYD GEORGE

The hon. Baronet knows a good deal about the Income Tax. He is a very shrewd observer. There is an appreciable increase in the Income Tax. I am disposed to ask the hon. Baronet if he thinks I shall not get my Death Duties?

Sir G. YOUNGER

I never said that. Some of them are also uncollected.

Mr. LLOYD GEORGE

With the canniness of his race the hon. Baronet will not say. I think he might distribute some of his caution to my hon. Friend who lives a good deal south of the Tweed. There has been an increase on beer, spirits, tea, and tobacco. I should like to know which of these estimates is challenged. If anyone is disposed to challenge them, before he gets up I would advise him privately to look at the Returns received up to the present. He will find that even at the present moment Customs and Excise are about £600,000 above last year, which is a very considerable increase in that period of time. As for trade, I do not know what information the hon. Baronet (Sir F. Banbury) has. I can only give him the information which comes to me. No Chancellor of the Exchequer endeavours to give his personal opinion upon a matter of such importance. He is bound to consult such authorities as are at his disposal.

Sir F. BANBURY

The right Gentleman was not here when I spoke. I said that he had sources of information which were not at my disposal, therefore I ventured to make the few remarks I made with great reluctance.

Mr. LLOYD GEORGE

It would be a very reckless thing indeed for a Chancellor of the Exchequer to express an opinion upon a question of that kind, upon which he could not possibly know more than anybody else, unless his information were official and obtained from sources which are at his disposal. This year I took more trouble than usual, for the simple reason that there was a general opinion that perhaps we had reached the crest of the wave, and I wanted to know what was the opinion of business authorities as to the prospects of the coming year. No one knows what is going to happen with regard to next year, but so far as this year is concerned, almost without exception the men consulted were of opinion that trade was going to be good. Each was speaking for his own particular branch of industry, and said that trade was going to be good for the rest of the year. Therefore, I was justified in depicting a glowing year. In my speech I said that there would be a considerable sum of money sunk in repairing the ravages of war.

Mr. D. MASON

No; I have the right hon. Gentleman's speech here.

Mr. LLOYD GEORGE

If I did not say so, he has taught me that this afternoon. I agree with him. I hope he will not quarrel with me about that, and that he will not change his mind the moment I tell him I agree with him. Undoubtedly the moment that peace is established capital is sunk in repairing the ravages of war. I certainly had that in my mind when I surveyed the general position. You cannot have a great war and the destruction of the resources of a country without having to spend considerable sums of money in repairing them. It is a great mistake to assume that it is only the country which is engaged in war, which is engaged in the work of reparation. We discovered that in the Russo-Japanese War. It was not merely the war in South Africa of which we had to bear the brunt, but there was the destruction of capital, and money had to be sunk in reparation work. Undoubtedly the Russo-Japanese War had a very bad effect for a short time upon all the productive industries of the world. This war has not been quite so serious a business as the Russo-Japanese War in actual extent, but it has been a serious business, and money has been spent in Eastern Europe in arming for possible contingencies. All this has to be made up. My advice is that such is the prosperity of the country, and such are the resources of all the countries, accumulated more especially during the last few years of peace, that all that will be simply overwhelmed in the deluge of prosperity, and that, at any rate for this year, we can depend upon trade being exceptionally good. The last unemployment returns are very remarkable. They show the lowest figures of unemployment this country has ever seen. I am very glad to say that even in the building trade it is lower than this country has seen for years. It has come down from something like 10 per cent. in April, 1909, to, I think, 3 per cent. last month. That shows a very considerable improvement in the conditions of labour. We have still a small percentage of unemployment, but at the same time the prosperity of the country is such as has never been witnessed before. My advice is that that will continue. It is something over which to rejoice. I should like to make the heart of my hon. Friend rejoice, and to be able to persuade him that the country is not really so badly off, and that the prospects are not so gloomy as his speech would indicate.

7.0 P.M.

Mr. AUSTEN CHAMBERLAIN

The Chancellor of the Exchequer has made a very interesting if a somewhat discursive reply to a Debate which has been equally interesting and equally discursive. The Chancellor of the Exchequer has dealt, with great good humour and very considerable good will, with the business criticisms coming from many of my hon. Friends in regard to our system of taxation or our methods of collecting it. The right hon. Gentleman only lost his geniality when he came to deal with the critic upon his own side of the House. I observe that while the Chancellor of the Exchequer will stand a great deal from us, he is very impatient of any hon. Gentleman on that side of the House who ventures to express an opinion that all is not perfect even while we have such an admirable Minister of Finance. I confess, if it is any comfort to the hon. Member for Coventry (Mr. D. Mason), that I stand in the same box with himself. I, too, would venture to express the opinion that the Chancellor of the Exchequer was over-sanguine in his Estimates, and I feel myself no more called upon than the hon. Member for Coventry to place my finger on a particular Estimate and say, "Here you are taking so many thousands or hundreds of thousands too much," in order to justify the general criticism I have made. I am content to base my criticism on the language held by the Chancellor of the Exchequer. It may be, and I know it is sometimes the case, that the Chancellor's actions are wiser than his language. It is not always the case. There are some people who talk very wisely and act very foolishly. But if we are to judge of the way in which the Chancellor frames his Estimates by the language which he uses, I say he budgeted in a condition of hopefulness such as becomes reckless in a man with the responsibility which he carries. It may be that in fact he was very much more cautious than he tells us he was. He tells us that having heard the information and the advice of his officials, he saw that there were various contingencies, any one of which might turn out well or might turn out ill. Did he say, as he fairly might have done, "I shall strike an average; I shall suppose that some of these things will turn out well for me and some ill"? Not at all. If we are to trust his language, he betted that every chance would turn out in his favour, that everywhere where there was an opportunity of things being either better or worse, they would be better, and accordingly, to use the language which he himself used only a few moments ago, the Budget is framed upon the assumption that we are all going to be overwhelmed by an unparalleled deluge of prosperity.

Mr. LLOYD GEORGE

I never said that. I was referring to those countries in the East, and the loss which would be sustained as the result of the war and the cost of repairing it. I said that would be a loss which would be overwhelming. I explained that the loss was not great in comparison with other wars waged either by us or by Japan.

Mr. AUSTEN CHAMBERLAIN

I certainly do not want to attribute more importance to particular phrases of the Chancellor of the Exchequer than they are meant to carry, but if he looks at the observations he made in answer to the hon. Member (Mr. D. Mason), or if he will look again at his Budget speech, he will see that to anyone coming to the consideration of his Budget figures only with such information as he himself has supplied to us, we are driven to the conclusion by his own statement that everywhere where there is a possibility of things being better or worse he has budgeted on the assumption that they will be at their best. I say that is rash under the circumstances of this year. I desire to be as cautious as the hon. Baronet (Sir F. Banbury). Though I do not pretend to put my resources against those which are available to the Chancellor of the Exchequer, I am bound to say, upon such inquiries as I have made, that I cannot find this universal feeling in trading circles that the trade of this year is going to be better than the trade of last, that we have not got to the top of the boom, that we have not reached the zenith of this wave of prosperity. I cannot get these reports from the manufacturers and traders with whom I have consulted, and if the Chancellor of the Exchequer has been basing his Budget on that, I still remain of opinion that he is unduly sanguine.

With that observation on the general Budget Statement, on which I have to remember that I have already made two speeches, and on which, therefore, I am not anxious to say anything more, I go to one or two matters comparatively of detail, but still of very great importance which have been raised in the course of this Debate. Let me deal first of all with those questions which concern land, and among them let me go first to the question of the allowance made to landlords for repairs. I share the surprise of the Chancellor of the Exchequer that so little advantage has been taken of it, though I never believed that the claims would amount to anything like the figures which he originally estimated. In the first place, I think we have gone long enough to justify the appeal made by the hon. Member (Mr. E. Wood) and the hon. Member (Mr. Bridgeman), who interpolated an observation to which the right hon. Gentleman promised a not unfriendly consideration. I think, having regard to the slowness of the general mass of landowners to use the new right conferred upon them, the time has come when the Chancellor of the Exchequer ought to give the full relief to those who go to the, trouble of proving their right. Even last year that question was raised, and the right hon. Gentleman then said that the claims had just begun to come in with such rapidity that he thought his money would be used up. I am not suggesting that the Chancellor of the Exchequer was not speaking on good information, or in perfect good faith.

Mr. LLOYD GEORGE

made an observation which was inaudible.

Mr. AUSTEN CHAMBERLAIN

The total claims for the year rose only from £40,000 to some £60,000.

Mr. LLOYD GEORGE

From £49,000 to £68,000.

Mr. AUSTEN CHAMBERLAIN

They did rise, but still they are well within the figure of £500,000 which the Chancellor of the Exchequer allowed three years ago, and he might safely give those who prove their case that full relief to which they proved themselves entitled without arbitrarily limiting it by a percentage. He should bear in mind that this is not a question of relieving someone of tax which is due from him. It is relieving someone of tax with which he has been charged on the assumption that his income was bigger than it is, and, as the Chancellor of the Exchequer has admitted, we have not really the slightest moral claim to take it from that particular class of taxpayers, because in taking it from them we place them at a disadvantage with men of equal means and equal wealth, deriving their revenue from other sources.

Then I come to the return. The right hon. Gentleman could not resist a fling at my hon. Friend (Mr. Pretyman). My hon. Friend will not mind that. After all, a Chancellor of the Exchequer cannot be expected to love the Land Union, which is giving him a great deal of trouble and which has wrung from him by persistent agitation concessions which but for the Land Union we should not have had, and the promise of further concessions from which we should be still wholly removed but for their exertions. But the Chancellor of the Exchequer knows that my hon. Friend takes a great deal of trouble when he makes speeches on this matter, and I think he knows that when my hon. Friend makes suggestions they are not foolish. They may be from the point of view of the Chancellor of the Exchequer right or wrong, but my hon. Friend on this subject does not talk nonsense. [Laughter.] I do not wish unduly to bring blushes to his face, but since the House laughs I must say that is more than I could say for all of them. With regard to this return which the revenue authorities require, I wonder whether the Chancellor of the Exchequer could get up now, or with such rapid reference to his advisers under the Gallery as is possible to a Minister, and tell the House what return the landlord has to make and what he has not. I doubt it, and I doubt, if he had a copy of the return placed in his hand, whether he could say offhand or without consultation with his authorities what they require the landlord to fill in. I listened to the hon. Member (Mr. E. Wood), and I think he is under the impression that the Inland Revenue require something which my hon. Friend (Mr. Pretyman) said they do not require. The Inland Revenue require, as I understand, that you should fill in in your return every separate tenement to which your claim has reference, but they do not require that you should split up your claim for the relief claimed amongst these different tenants or property. My hon. Friend obviously thought that was their requirement. I went into a land agent's office in connection with other legislation of the right hon. Gentleman, and I happened to find the land agent filling up the returns on a claim for exemption for a property of which I know something, not very far off, and he was complaining of the vast amount of work he was required to do and of the very arbitrary division of the total amount of his claim between the different portions of the property out of which the claim arose which he was obliged to make in order to satisfy the Inland Revenue. If the Inland Revenue do not require it, if all that they require the landlord to state is the total amount of the expenditure which he has incurred, and then to define the property on which it has been incurred, your return would be very much simplified and rendered very much easier for the landlord to fill in. You require the landlord at present to separate the amount which he has spent on cottage and house property, and the amount he has spent on the land. That was necessary in the old times, when the percentage of allowance varied according as the money was spent on the land or on house property, but I cannot see any advantage in requiring them to do that from the moment that you undertake to allow all that is spent up to the limit of what is proved. Surely you could very much simplify this return. If all you want is the total claim for relief, and the property for which it is required can be ascertained by reference to the rate book, if you could do that, you could certainly allow what the hon. Member asked for, that is that the clerical work should be done once in three years, or should remain to be carried forward by a simple reference as long as the property remains unchanged. This is not a matter which it is very easy to put clearly across the floor of the House, but my object is to suggest to the Chancellor of the Exchequer that if he would confer with my hon. Friends or put the Inland Revenue into communication with them, I really think he might simplify the return, and enable the landlords to make their claim more easily, and he might bring home to them the relief which he very rightly desires to have the credit of having offered.

Then hon. Members raised the question of the general administration of the Income Tax, of the allowances which are made, and of the question of an inquiry into those allowances, and the Chancellor of the Exchequer invited me to express an opinion on the subject. When I was Chancellor of the Exchequer I appointed one of the numerous Committees to which he referred. It was presided over by the late Lord Ritchie, the present President of the Board of Trade was a member, together with Sir Henry Primrose, then chairman of the Board of Inland Revenue, and Mr. Cosmo Bonsor, formerly a Member of the House, one of the Commissioners of Income Tax for the City of London. There were a couple of other gentlemen on the Committee. The Committee were asked to report if any changes were desirable as to the prevention of fraud and evasion, the allowances made in respect of depreciation of assets charged to capital, the profits under Schedule G, the average profits of three years, and the rules and regulations governing the recovery by taxpayers of over payments they may have made. On the whole the Committee disappointed me by recommending so little change. They declared at the outset that, speaking generally, they desired to place on record recognition that the system of collecting taxes on the whole represented the minimum of friction and the maximum of result. Though they recommended some little changes, I was unable to carry them through, but in the main they were adopted by the present Prime Minister when Chancellor of the Exchequer, and they were partly embodied in an Act. They did not recommend any very large changes.

I would not discourage the Chancellor of the Exchequer from having a fresh inquiry if he thought it desirable. I am not sure that that Committee said the last word, but I think anybody who wishes to criticise the allowances for depreciation and the treatment of wasting assets, such as were alluded to by the hon. Gentleman opposite, should refer to the report of the Committee. They would see that the question is a very difficult one. As the Chancellor of the Exchequer said, you may take extreme cases, and your argument will appear conclusive, but as you come nearer together with the cases and fine off the separate and distinctive features, it is extraordinarily difficult to know where to draw the line without leaving old anomalies still in existence or creating new ones. I believe in regard to collection that the most effective method of efficiently collecting taxes when they are due, is to enforce, as widely as you can, the requirement that the taxpayer should make a return. I quite agree that there are a great many people who will never make a dishonest return, but will not think it necessary to correct an insufficient assessment. I think I am one of those people myself. If I were put in that position, I really do not know that I should feel it necessary to write to the authority which assessed me and say, "Gentlemen, you have under-estimated my liability." But on the other hand, I hope I should not knowingly set my hand, under any temptation, to a return which I knew was false. There is a great deal of income which escapes taxation, though it is much less than it used to be. It escapes because those who are responsible for the assessments do not know the income that is being made. That is the case where there is a growing business, and where a man has not altered his style of life in proportion as his income has grown. In these cases the assessors are unable to judge whether the old rates of assessment are right or not. The Chancellor of the Exchequer spoke of the District Commissioners. I have listened to the complaints made in regard to these Commissioners. I perfectly understand the objections which many people have—and very sound objections they are—to carry their affairs before local gentlemen who may most honourably observe the obligations of secrecy which rest upon them, but to whom as neighbours, not necessarily as competitors, though they may be competitors, or it may be creditors, they do not care to disclose the exact position of their affairs. Of course, they have the alternative of coming to the Income Tax Commissioners. That is not convenient for all.

I think you will have to consider very carefully before you change the system of having District Commissioners. I have got an idea for which I can give no very solid ground on the spur of the moment that the House has discussed and debated very seriously, the question of District Commissioners more than once, and that a serious attempt has been made by individuals in the House to change the system. But when that has occurred, and when it has appeared likely that a change might take place, then a strong revolt has arisen against more paid officials interfering in our affairs, and against placing the taxpayers at their mercy, and although the District Commissioners may be unpopular so long as the present system exists, they begin to become popular when you propose to put others in their place. I do not say that it may not be the right thing to do, but I advise the Chancellor of the Exchequer not to commit himself rashly to a change of that kind. It is necessary to have the support of public opinion in order to make the change successful.

In dealing with some of the criticisms of our present Income Tax law rather than administration, the Chancellor of the Exchequer propounded to Gentlemen sitting on both sides of the House a question which is worth considering. He said, "If you are going to insist upon taxing such-and-such a form of income as profits, are you prepared to allow for losses when, instead of a profit, these transactions, speculations, or whatever they may be, result in loss?" I was interested to hear the Chancellor of the Exchequer put forward that argument, apparently thinking that the Treasury, where it recognises profits and takes a share of them, must be prepared to recognise losses, and, if not to pay a share, at any rate to give a man credit for his losses. Why is that only so in regard to income? Why should it not apply with regard to the Land Taxes? That is an argument with which, when the Land Taxes were discussed, we were very familiar, but there the Chancellor of the Exchequer insisted that wherever a man made a profit the revenue was to have a share, but if he made a loss he was to write it off as best he could. I invite the Chancellor of the Exchequer to apply this principle of correlative profits and losses to the Land Taxes in the Revenue Bill which he is going to introduce. If a man buys certain land, and then sells a certain portion of it at a profit, the Chancellor of the Exchequer is going to take his share of the profit, but when the man sells a portion of the land at a loss, the right hon. Gentle- man does not allow him to deduct that loss, and to pay only on the balance of profit. On the Chancellor of the Exchequer's own argument addressed to the House to-day he ought to allow for the loss, and many of us have long thought so. The Revenue Bill has not yet been introduced, and I invite him to set that straight in the Bill he is going to introduce, and to make his legislation consistent with his argument.

I do not wish to go, any more than the hon. Member for Hereford (Mr. Hewins), into the whole question of our fiscal system. My hon. Friend made a very interesting and thoughtful speech. I do not think it is easy to answer, and I am not surprised that the Chancellor of the Exchequer was not inclined to try. I agree with the Chancellor of the Exchequer, and I have never pretended anything else here or elsewhere, that every class of our community ought to contribute to the common expenditure. I go further and say that the expenditure is rising so rapidly, and that so large a proportion of the new expenditure is directly, and even exclusively, for the benefit of the poorer classes that this is not the right time to reduce the contributions which they make. The Chancellor of the Exchequer will see that in taking that line I am not trying for any cheap clap-trap advantage in the criticism in which I follow my hon. Friend in regard to the Tea Duty. If you want to change your fiscal system, I do not know that you could find a better means of raising revenue from working men than such taxes as you now propose, but is it no objection that the Tea Tax bears such a large ad valorem proportion to the article on which it falls? I think it is. Is it not an objection that your revenue is collected from so few taxes? After all, these taxes are kept at a high point to meet the normal expenditure. Is not that an objection when you consider the almost limitless liability that might fall on the country at any moment in the case of a European convulsion, and the fiscal as well as other exertions which you would have to make for national defence?

I regard it as a grave matter that the taxes we have are so few, because, owing to the amount of our expenditure, we are bound to keep these taxes at so high a point that the elasticity of our system is, therefore, grievously impaired, and there would be difficulty to meet sudden emergencies from sensible increases. Of course, it is a commonplace to say that all taxation is undesirable. So much is it a commonplace that I think it is said almost too broadly, and with too little qualification. Substantially taxation is a thing which we have because it is necessary, and not because we think it is desirable in itself. But is that any reason for excluding, when you are settling the taxes you will impose, all other considerations except that of money from your purview? Nobody thinks so. When the Chancellor of the Exchequer put a third or a fourth on the Whisky Duty—I think it was 3s. 4d. a gallon—he did it because he wanted money, but when he did not get money, as was the case at first, he was equally proud of his Spirit Tax. It is the taxes which do not produce money that the Chancellor of the Exchequer seems always to be proud of. He really cared more for the new Spirit Duty when it produced little or no money than he has ever cared about it since money came in. He cared about it for non-fiscal reasons. He thought it promoted the sobriety of the people, and undoubtedly one of the reasons why we have treated the liquor taxes differently from others is because we wish that they should promote sobriety. If it is legitimate to use a tax to promote sobriety, if it is legitimate to use another tax to promote what the Chancellor thinks is the proper use of a man's land, does that exhaust the objects for which we are entitled to use taxes, and why should you cling so exclusively as you now do in your Customs Duties to taxes which cannot produce any advantage except a purely fiscal one? Admittedly, whatever our thoughts on the fiscal question, the consumer has got to pay the whole of this enormous duty. The consumer has got to pay the whole of the Sugar Duty practically at present, unless beet sugar growing develops here and you continue to allow it to exist without a corresponding excise. The consumer has to pay at present the whole of the Tobacco Duties. I have heard the Financial Secretary say that in the case of the Tea Duty it all goes into the Treasury and that you get your full 5d., but is that all that the consumer pays?

Does all that the consumer pays go into the Treasury? Of course, it does not. That is part of your case in regard to every other duty, but you cannot see that it holds good with reference to the Tea Duty. It is not true to say that what distinguishes your Customs Duty from ours is that all which the consumer pays goes into the Treasury. It does not. What is the difference between the duty on an article which we cannot produce, and where therefore the consumer has to pay the whole of it, where the whole amount of the duty is necessarily added to the price, and such duties as we have proposed on articles which we can produce? The difference is that in the latter case you cannot add the whole of the difference to the price. I would not delay the House for a moment with a discussion of these questions if it were not for the astonishment aroused at this time of day by the reception given to the observations of my hon. Friend the Member for Hereford by hon. Members on the other side of the House. He spoke of the tax being paid by the consumer, and we heard Gentlemen on those benches murmuring, "what a strange doctrine for a Tariff Reformer." Why, it is the doctrine we have preached ever since we were Tariff Reformers. Who ever said otherwise? If you tax an article which you cannot produce yourself, of course you raise the price of the article by the amount of the tax and by the profits that the dealer has to put on the amount by which he is out of pocket between the time he pays the duty and the time he realises the sale of the commodity. Do you suggest that because that is true of an article which you cannot produce yourself, therefore it is true of an article which you can produce yourself? The question is decided by the proportion which the untaxed supply bears W the taxed supply, and by the power of expansion and elasticity which there is in the untaxed supply, and you cannot square the facts which are patent to you, if you would only look at them, with any other theory. Do you suppose that if you put a duty of 5s. a ton on coal we should all have to pay 5s. a ton more for English coal at the pit-mouth? No one supposes that, because we can supply ourselves fully. You will not contend that we should have to pay every duty.

The factor that decides is the relative proportion of the untaxed part to the taxed part and, above all, the power which you have to alter that relative proportion, if you have any power of expansion in your own country, so as to fill up any gap which is left by the supply from the foreign country decreasing. And with that expansion an ever decreasing part of the duty falls to be paid by your own people, and an ever increasing part has to be paid by the foreign exporter who still wishes to retain his market. Is not that the knowledge of our own Foreign Office? When a foreign nation proposes to raise its duties, do Chambers of Commerce wait upon the Foreign Office and beg the Secretary of State not to trouble about the rise in the French, or American, or Japanese tariff? Do they say, "It really does not matter to us, so do not worry. You have got other and more serious things to think about. All we have got to do is to raise our prices. They put on five dollars duty. We clap five dollars on to the price which we take out of the consumer and something else as well?" That is not what happens. What they say is, "We cannot retain the trade. The last time they raised the duty we were not able to raise the price in proportion. We are only just able to keep the trade now. If there is any further rise in duty we shall not be able to get it back in our price and we shall lose the trade." And we find instances again and again where, behind the high Protection, articles are sold more cheaply than you can buy them in a Free Trade country, where the protected country which, according to the theory, is supposed to destroy its enterprise and its power of cheap production by the cost of Protection, beats our own Free Trade producers in their own market. Take certain kinds of agricultural machinery on which there is a duty in the United States of America. That does not make them more costly in America than here. On the contrary, those American manufacturers, working under Protection, send those goods cheaper here than our manufacturers can produce them. It is not because our manufacturers are unenterprising or that our workmen are idle, but because of one factor which Gentlemen opposite will never take into account, which is the governing factor in regulating the cost of production at the present time.

The cost of production, in the great industrial works in which production is now mainly carried on, depends above all on the scale on which you produce and your success in keeping your factory or mill full of work. And if you can produce on a great scale and look forward to a steady and regular trade you do not need higher prices to encourage you to produce. You can make bigger profits by selling at lower prices. That is why there is dumping. That is why the protected interest, instead of having only their own market and failing to take a share in the exhort trade. have increased their export trade faster than ourselves. It is because under their fiscal system they have given to them, often under great mistakes, often under tariffs which I think are absurdly and ridiculously high, a security for their enterprise and a largeness of market which our people do not enjoy; that they have made progress out of proportion to ours, even at a moment when the Chancellor of the Exchequer is flattering himself, and rightly so, with the most prosperous trade. It is because we refuse to give similar assistance and security to our own people that they are handicapped in the competition of the world, and I, for one, share the views of the hon. Member for Hereford that there is no principle on which you can justify overloading a particular article of taxation like tea with these tremendous duties, or using your duties on alcohol to promote social objects quite apart from fiscal questions, and that position justifies, and more than justifies, the reform of our fiscal system, of which he is acknowledged to be one of the most skilful and most able champions.

Mr. SNOWDEN

I beg to move, as an Amendment, to leave out from the word "That" to the end of the Question, and to add the words "this House declines to assent to the Second Reading of a Bill which continues the system of taxing the food of the people, whereby the unfair proportion of taxation imposed upon the poorer classes is aggravated, instead of abolishing such injurious and indefensible forms of taxation and raising the necessary revenue by increasing the direct taxes on unearned incomes and large estates."

I do not rise for the purpose of adding to the appeal which has been made to the Chancellor of the Exchequer to make it easier for landowners to get the advantage of more generous concessions, and if there is £500,000 to give away I think that he will find overburdened taxpayers who are much more needy and much more deserving than members of the landowning class. Neither do I rise to express any opinion upon another matter that has occupied a great part of the discussion this afternoon, namely, as to whether the Chancellor of the Exchequer has been over-sanguine in the Estimates which he has formed as to the yield of revenue for the coming year. I think we may safely wait for something like nine months to see whether experience will justify his optimism or not. But if I did venture to express an opinion I should say that I am not inclined to think that that good fortune which has invariably attended the efforts of the right hon. Gentleman is likely to desert him now. Nor am I going to be led into a discussion of the question of Tariff Reform by the arguments used in the latter part of the speech of the right hon. Gentleman who has just sat down, though I note with interest the admission of the right hon. Gentleman and of the hon. Member who spoke earlier in the Debate that a tax upon a particular product takes a great deal more out of the pocket of the consumer than it brings into the revenue of the State. I rise for the purpose of urging the claims of a class of taxpayers who have so far received very little consideration in this Debate—that is the great mass of the working people, who, in my opinion, are paying a burden of taxation which is unfair, unjust, and very oppressive. The right hon. Gentleman estimates that he will receive during the current financial year from Customs and Excise a sum of £74,000,000. I think it is generally accepted as being a very fair estimate to assign four-fifths of the revenue from indirect taxation as the contribution made by the working classes of the country. It is usual in the term "working classes" to include that section of the people below the Income-Tax paying limit.

Four-fifths of £74,000,000 is, roughly, £60,000,000. If I were to include the relatively small proportion paid by this class of some duties and the profits of the Post Office, I shall be well within the mark when I say that the working people contribute to the Chancellor of the Exchequer's estimated revenue no less than £60,000,000. That works out at something like £6 13s. per family—say, £6 10s. This £3 10s. represents half-a-crown a week on the average paid in national taxation by the working people of this country. Take the food taxes alone, which gave a yield last financial year of a little over £10,000,000. That means that the working people are paying on the average 4s. 6d. per head in taxation upon food—that is 5d per family per week. But it has been admitted by the right hon. Gentleman and by the hon. Member who initiated this discussion this afternoon that it does not represent by any means the total burden which food taxation puts upon the wages and incomes of the working classes. It may be largely a matter of opinion—it certainly will be a matter of very intricate calculation, to say how much the Tea Duty at 5d. in the £ really takes out of the pockets of the consumer. But when one remembers the very large number of hands through which tea passes in the course of trade from the importer to the small retail grocer, I do not think I should be exaggerating when I say that the 5d. becomes 7d. before the packet of tea is finally handed across the counter by the retail trader to the consumer. Fivepence a week reduced in terms of the Income Tax means a considerable cost to a family with an income of £1 a week. It has been stated in this House that we have 2,000,000 families in this country whose total income in each case does not exceed £1 a week. Therefore the food taxes in at least 2,000,0000 of families in this country are reduced in the terms of Income Tax, 5d in the £, taking all indirect taxation.

Taking the case of a family with £1 a week to provide all the necessaries of life, 5d. a week, reduced in terms of the Income Tax, means half-a-crown in the £. You may say that 5d. a week is not very much to contribute towards the cost of and in return for all the advantages which families receive from the Government of the State; but 5d. a week means a great deal for a family with an income of £1 a week. It means that such a tax cannot be paid without depriving that family of something which is necessary to its physical health, not even to mention the material comfort of the family. Fivepence a week means the difference in the case of hundreds of thousands of families in this country between milk being provided for the infant children and the absence of milk. Of course, to take 5d. a week from an income of £1 a week is an infinitely heavier burden than to take a tax of £20 a week from the income of a man who has £500 a week. I very gratefully admit that there have been remissions of taxation since the Government assumed office some seven or eight years ago; but, in considering the matter, this point is very often ignored, and is always ignored in Liberal leaflets and in election speeches of Liberal candidates—I refer to the reduction of the Tea Duty and the remission of the Sugar Tax. That is not the point, however. It is not whether the tax upon tea is less in the 1b. than it was seven years ago; the point is, what is the total amount that is being paid through taxation by the working classes?

As a matter of fact, an analysis of the revenue figures shows that the amount which is being paid in taxation by the working people of the country is very much higher to-day than it was when the Government assumed office. As a matter of fact, on the Estimates of the right hon. Gentleman, the working people have paid in taxation during the current financial year £11,000,000 more than they paid in the year before this Government took office. The statement has been made, and it was made in the speech of the hon. Member for Holmfirth (Mr. Sydney Arnold) a few weeks ago, a speech which excited the admiration of everybody who heard it, that the working classes have not paid for social reforms carried out by the Government during recent years. I beg to dispute that statement, and I will give two or three reasons in support of my refusal to accept it. In the first place, there has been this increase of £11,000,000 in the total amount of taxation contributed towards the £74,000,000, and on the proportion of four-fifths, an increase of £9,000,000 has been paid by the working classes since 1906–7. Then, again, I could support my objection to and refusal to accept the statement by the declarations of the Prime Minister and of the Chancellor of the Exchequer. The Prime Minister, in 1907, made a statement to the effect that he was not prepared to reduce the Sugar Tax altogether, because the working classes ought to pay something to the scheme of old age pensions. About that time I submitted to the House a leaflet which had been issued at a Liberal meeting and which said that a part of the Sugar Tax has been reserved because it was the opinion of the Liberal party that the working people ought to make some contribution towards the cost of old age pensions. If it had not been for this expenditure, this tax would probably have been remitted; therefore, in that sense the working classes are paying also. It is not fair, therefore, to say that the cost of financing these schemes of social reform, for which I repeat we are grateful to the extent to which they have conferred benefits on a deserving class of the community, is not being contributed to by the working classes.

Mr. SYDNEY ARNOLD

If the hon. Member will allow me, the statement I made was in this sense, that the remission of the duties on tea and on sugar exceeded all the new imposts under the Bridget of 1909 on tobacco and spirits. That cannot be denied. I presume the hon. Gentleman is including the license duties but that is wrong.

8.0 P.M.

Mr. SNOWDEN

Of course, I am. I think the Chancellor of the Exchequer has altered his opinions very much indeed in recent years in regard to the working classes and general taxation. I confess that at one time I had hopes that he would do something to relieve the portion of taxation which now falls upon the working classes, but I must further confess that I have no hones now. I believe that the Chancellor of the Exchequer holds that the present proportion of taxation between the rich and the working people is a fair one. Last year he seemed inclined to favour a direct tax upon working people by way of a substitute for some of the indirect taxation they have paid. But during the intervening months he appears to have changed his mind once more, and in a speech he made a week or two ago, he put forward certain objections to an Income Tax upon small incomes. Working class taxation as I have said, is altogether about £60,000,000 a year. Here we come to another aspect of the question which brought my hon. Friend to his feet. It may be asked what are the public services which might be described as services for the benefit of the working classes? There is education, for which about £19,000,000 are required this year; old age pensions take about £13,000,000, and there is the Insurance Act about £7,000,000. These together amount to £39,000,000. The working classes are contributing £60,000,000, and they are receiving benefit to the extent of £39,000,000. About £20,000,000 remain. My hon. Friend says there is the Army and Navy, but the Army and Navy do not exist to protect the working people—they do not exist for the benefit of the working people. Have we not been told a thousand times by the party opposite, that the German workers and the French workers are quite as well off as the working men in this country. Suppose we had an invasion by German aeroplanes, and they succeeded in imposing upon us in this country a German Government. Is there any man here who thinks that, as soon as the ravages of the invasion had been repaired the working classes of this country would be any worse off economically or socially under the German Government than under their own British Government to-day? I do not believe that there is a man here who thinks that. It would not be to their economic advantake to possess the country with the people in a bad economic condition. Are the Boer farmers in South Africa worse off to-day under British rule, since the invasion and conquest of their country, than they were when they governed themselves? No; the Army and Navy do not exist for the protection of the working people; and that was formerly recognised to be the case, because the maintenance of the Army and the cost of the defence of the country was formerly placed entirely on the landlord class. When the landlord class got more power, they used that power to shake off burdens from themselves on to the shoulders of the people. Beyond all question the national taxation paid by the working people is unfair and excessive, and the method by which it is raised is vicious and unjust. The arguments as to the system of indirect taxation are fairly well known. Those indirect taxes violate every canon of sound taxation. They do not tax a person in proportion to his ability to pay, and they are uncertain and unequal in their incidence. The system of indirect taxation does not tax a man according to the benefits he receives, but taxes him according to his personal tastes. Indirect taxation can always be avoided. Take our own taxes on sugar and tea and a few other minor taxes. It is not a very difficult thing for a man who does not pay Income Tax to avoid paying a single penny of contribution to the taxation of the country. A system of that sort cannot be defended on any canon of taxation. In the speech of the Chancellor of the Exchequer to which I have referred, in which he raised objection to an Income Tax on small incomes, he said he did not think it was right that a person who had political power should be exempt from taxation. I admit there is something in the argument, but that has not always been observed in the levying of taxation. At a time when the great body of the working classes of this country had no votes at all it was then that the heaviest part of taxation was laid upon them. Between, say, the Napoleonic wars and 1867, which was the time of the enfranchisement of the Working classes, three-fourths of the taxation of the country was raised by means of indirect taxation, and, therefore, mainly on the working people. I do not accept the right hon. Gentleman's statement that we ought to have no class of the community enjoying political power, and yet making no financial contributions to the State. I will give you one or two reasons why I do not agree with him. In the first place, I may say that the poor, even if they do not pay direct taxation, are paying a good part of the cost of the maintenance of the nation because the poor work and labour and create the wealth of the nation. Therefore they are paying the taxation out of the wealth which is being taken from them and which is paid by the idle rich. The idle rich are living upon the plunder of the industrious poor, and therefore the taxation of the idle rich is really a payment which has been made by the poor who have been exploited.

I will give the right hon. Gentleman another reason why it might be just to exempt the very poor from taxation altogether, and that is that the State has no right to tax any individual until it has ensured that the individual is able by honest labour, to maintain himself and those who are dependent upon him in a degree of physical efficiency, health and comfort. The individual is at greater liberty in a savage country to provide for himself than he is in a country like our own. There are no laws there standing between him and his right to exercise his labour in producing to supply his own needs and the needs of those who are dependent on him. In our own country people starve while the State taxes them in order to protect others in the enjoyment of property which has been taken from the labour of the poor people. Those I think are reasons which might in certain circumstances justify, in the interests of the general well being, the State in exempting altogether the very poorest part of our people from taxation. I believe it was the hon. Gentleman who started this Debate who pointed out that taxation upon the poor is a restriction upon income to the extent that it is bad for the general trade of the country. To an extent you increase the purchasing or the spending power of the poor if you relieve them of taxation, and thus, to that extent by doing so you would benefit the country and promote its welfare generally. May I call the attention of the right hon. Gentleman to words used by Mr. Gladstone on this very point. Speaking on the taxation of the very poor, Mr. Gladstone said:— Such a tax is in no small degree a deduction from the scanty store which is necessary to secure them, not the comforts but the prime necessaries of life. What they pay through Imperial taxation does not represent their total maintenance to the State. There is local taxation also, and local taxation is every year becoming as national taxation is, a heavier burden on the people of the country. There is a connection between the two things. Local taxation has been rising during recent years, and part of that increase is due to the fact that this House has been placing on the localities the financial responsibility for carrying out national and Imperial obligations. In spite of all the theories about the incidence of rates, I think nobody will dispute that the burden of local rates does fall very heavily upon the working people. If you want illustration of that, I cite to you what is happening in the city of Bradford. The rates there have just been increased by 6d. in the £, and the rents of cottage property in Bradford have been raised from threepence to sixpence per week, and that is, in the case of the maximum increase, an increase of 26s. on the cottages, and is being contributed by people a large proportion of whom have wages which are totally inadequate to provide them with the fullness of the necessaries of life. Once or twice I have been interrupted in the course of my observations, and I was asked the question whether I included the liquor taxation in estimating the amount of working-class taxation. Certainly. I am quite prepared to say that there are certain features of taxation upon liquor, and, though perhaps not quite to the same extent, but to some extent, as to the tax on tobacco, which disinguish them from taxes on food, like sugar, tea, and the like, but those are not economic differences; they are really moral and social differences. Whether you take taxation on drink or on tea, in each case it is equally a subtraction from a man's spending power in other directions.

There is this further point, Why do we tax liquor and tobacco? Perhaps until the present Chancellor of the Exchequer imposed a very heavy additional duty on spirits, no Chancellor of the Exchequer had ever before imposed a tax upon liquor for any other purpose than an economic object, that is the raising of revenue. Why was liquor selected? It was because men drink, and men do spend money on alcohol. According to the opinions now held by the Chancellor of the Exchequer in regard to the necessity of the working classes contributing to national taxation, suppose every working man in the country became teetotal, what would happen then? We should have the Chancellor of the Exchequer standing at the Table next year and proposing some other form of indirect taxation which would make the people, who hitherto had been contributing by the liquor contribution, contribute through a tax upon some other commodity which was in common use amongst the working classes. I do not agree at all with the view put forward by the ex-Chancellor of the Exchequer in regard to the advisability of a large number of taxes. I do not believe in a large number of taxes. I do not believe it is a sound method of taxation, and it certainly is not an economical method of raising national revenue. It may surprise some Members of the House if I were to make the confession that I do not believe in the tax on motor cars, although it is paid by rich people, nor do I believe in the tax on men servants, armorial bearings and the like, for this reason: that I want to tax, not the way in which a man spends part of his income, I do not want to tax tastes, whether of the poor or rich, but what I want to tax is his income, his means to pay, and not the way in which he spends a particular part of his income. I would abolish an enormous number of small taxes which we have at present. I would abolish, for instance, taxes upon occupation, such as auctioneers, game dealers' licences, the licence for patent medicines, registration and carriage licences and the like. Perhaps I would abolish, first of all, the tax upon motor spirit, because, if I may use the words of the Prime Minister with regard to it, "It is a tax on a raw material which is a necessity for a very important industry."

My main purpose in rising was to advocate the abolition of the taxes upon food, because, after all, we are practical men, and I know it would be impossible for any Chancellor of the Exchequer to remove all the £60,000,000 of taxation which is the working classes' present contribution. I rise for the purpose of demanding the repeal of the taxes upon food, and all that I have said about the viciousness of indirect taxation applies with accentuated strength and effect to the taxes on food. Nobody is in favour of the taxation of food. Not even the Unionist party at present is in favour of taxes on food, until the Leader of the Unionist party makes another speech, or until the next election. I am not going to say anything in denunciation of the taxes upon sugar and tea and the like, because those taxes have been denounced by every Member sitting on the Treasury Bench, and by none so eloquently as by the present Chancellor of the Exchequer, and always in language far more forcible and picturesque than I could command. Therefore I am going to denounce the Sugar and Tea Taxes out of the mouths of right hon. Gentlemen themselves. What did the Prime Minister say about this? He said, and this was not said when he was in a position of greater freedom and less responsibility when in Opposition, but said since he became a responsible Minister of the Crown:— The Sugar and Tea Duties, I agree, are grievous taxes which weigh heavily on the class of our population least able to bear the burden. On another occasion the right hon. Gentleman said:— I entirely agree that the Sugar Tax is a bad tax, a tax which ought to be got rid of, and got rid of at the earliest possible moment. That is six years ago, and again:— The tax is vicious in principle, burdensome in its incidence, unequal in its operation as between different classes and interests, and as such it ought not to form a permanent part of the fiscal machinery of the country. From the Chancellor of the Exchequer you will find language more forcible and picturesque. He said:— I do not think that under these conditions they ought to continue a tax of that character as a permanent burden upon the people of the country. It adds a burden to the poorer classes of the people, because sugar is an essential part of their daily food, and if they cut it down very largely they diminish the comfort of the poorer classes of the community. In order to put the matter shortly, I may say that, not only the Prime Minister and the Chancellor of the Exchequer, but I believe every Liberal who is now a Member of the Government, voted against the imposition of the Sugar Tax by the Unionist Government.

It being a Quarter-past Eight of the clock, and there being Private Business set down by direction of the Chairman of Ways and Means, under Standing Order No. 8, further proceeding was postponed without Question put.