§ In addition to the duties of Customs payable on every description of beer (other than is specified in the last preceding Section) imported into Great Britain or Ireland, there shall, as from the eighteenth day of November, nineteen hundred and fourteen, be charged, levied, and paid the following duty (that is to say):—
| £ | s. | d. | |
| For every thirty-six gallons where the worts thereof were before fermentation of a specific gravity of one thousand and fifty-five degrees | 0 | 17 | 3 |
§ And so as to both duty and drawback in proportion for any difference in gravity.
§ Motion made, and Question proposed. "That the Clause stand part of the Bill."
§ Mr. CHAMBERLAINDoes the Chancellor of the Exchequer propose to make any statement in regard to this Clause?
§ Mr. LLOYD GEORGEI think I stated the last time I addressed the House on the subject of the Finance Bill that I was in communication with the brewing industry of the country and with the retail trade as well. The hon. Member opposite made a very moderate and powerful appeal to the House for the reconsideration of the duty on beer, and of the figure which the Government suggested to the House. I am not saying, without having considered the matter, that it is a very heavy increase in the duty which is imposed. I must say that the way in which the trade has accepted, I will not say the actual figures, but accepted the fact that they must be prepared to face an increase in taxation is a thing which is in itself a gratifying symptom of the present moment. They have not protested in the slightest degree against the imposition on their trade of a very heavy duty. They have protested against details and have made strong representations on the subject. They have submitted to the Government very detailed figures showing that if the figure were placed at 17s. 3d. it would be impossible for them, even with the addition of ½d. on the half-pint, to carry on their business without very severe loss, which would amount in many cases to difficulty, if not bankruptcy. The conclusion we came to was this. Supposing a new brewery were started at the present moment and adapted itself to the diminution in the quantity of beer which will be consumed, we think that the 17s. 3d. imposed by the Government would enable them not merely to pay the duty, but also to have a reasonable margin of profit. But that is not quite the case here. You are dealing with a trade which has its own establishment—an establishment which is adapted to the present rate of consumption. With the compulsory curtailment of the hours of labour and the removal from Great Britain of a very considerable number of people who might fairly be regarded as probable customers, and also with the inevitable reduction in the consumption which will be effected, we came to the conclusion that it might be impossible for the trade for a year or two or even three years, to adapt 958 itself immediately to the demand upon it in these circumstances. Therefore, although we think 17s. 3d. a perfectly fair thing as a standard, there ought to be some relief granted for the first three years on the amount of the charge, so as to give the trade time to cut down its establishment charges, to effect economies, and generally to put itself in a position to adapt itself to such an enormous increase upon its charges. The proposal which we make is this: We stand by the 17s. 3d. duty per barrel, but we propose that up to 31st March, 1916, there should be a rebate of 2s. per barrel and that the actual charge should be 15s. 3d., that after 31st March, 1916, and up to 31st March, 1917, there should be a rebate of 1s., and that after that date the full duty of 17s. 3d. should apply. This should give the trade the necessary time to adapt itself to the new condition which is undoubtedly imposed upon it by this enormously increased duty. I am bound to say that the right hon. Gentleman opposite (Mr. Chamberlain) thinks that we ought to go further and make a little more liberal and generous allowance. If we did that, we should be unfair not merely to the general tax payer, but also to the general public who are paying this ½d.
I think the trade are entitled, as a whole, to ask that the Government should impose the duty upon them in such a way as not to inflict a serious injury upon their business. This is not a temperance proposal; it is a fiscal proposal for the purpose of raising money for the War, and we are bound to consider it from that point of view. I have considered it exclusively from that point of view: as an instrument for the raising of money for the purposes of the War. I have set before myself as an object that this money ought to be raised without inflicting any unfairness upon the trade itself and without doing any injury to it that we can possibly avoid. Of course, the reduction in consumption is bound also to diminish profits. That is in the nature of every tax upon commodities of any sort or kind. That we cannot avoid, but within those limits it is right that the Government should be called upon to consider this problem from the point of view of imposing a charge merely for fiscal purposes, and they ought to do it with the least possible injury to the particular trade upon which they are imposing the duty. I am sorry the right hon. Gentleman does not think that we have gone quite far enough, but I think we shall find on the whole that the 959 trade will not suffer very much from this imposition. There will undoubtedly be a reduction in consumption which will not be due to this charge.
§ Sir G. YOUNGERThere has already been a very large reduction.
§ Mr. LLOYD GEORGENot very large. There has undoubtedly been some reduction in the amount consumed which is attributable to the curtailment of the hours of business, but I am not sure that the public will not gradually accommodate itself to the change of hours. The removal of one or two million men across the seas within the next twelve months will also undoubtedly have an effect. The Government are not responsible to make up that loss, and I do not think that it ought to be taken into account; but when you come to a reduction that can be directly attributable to the tax of between 30 and 50 per cent., then, I think, the trade are entitled to ask us to impose it in such a form as not to do any injustice to their business, and not to do any severe damage to them. That is the point of view from which we have approached the matter. I might give one or two figures on this occasion. It is a very difficult duty to adjust, because the charge, as the Committee will realise, is not a charge upon the actual barrel. If you said, "Here is a barrel of beer, we will charge 25s. upon it," it would be a very easy matter. But the barrel of beer for duty purposes is purely an abstraction. It is something which is called "a standard barrel," the standard barrel being a question of gravity, and not of bulk. You have got in every barrel of beer 288 pints, but for business purposes you have only 272 pints—16 are waste in some shape or another. It is lost by the publican when he transfers the beer from the barrel to the pewter. Then you have the dregs as well. Yon have eight pints of dregs and eight pints of waste. Therefore the publican has for sale 272 pints. That has to be taken into account when you are fixing your duty. The standard barrel of beer is a 55 degree beer. That is not drunk by the public as a general rule, except in Ireland. They like to get it really good, solid, thick, and stimulating, and it is mostly drunk there in the form of stout. I do not think there is very much beer in the ordinary sense drank there. Stout is beer for the purposes of taxation, luckily. In Scotland I am told the average is about 47 degrees.
§ Sir G. YOUNGERI thought it was higher.
§ Mr. LLOYD GEORGEI am told it is 47.
§ Sir G. YOUNGERThen it has gone down.
§ Mr. LLOYD GEORGEThis is the information I got only this morning. The average in England is about 51 degrees, but that includes all classes of beer. It includes your bottle beer and also your lager beer. There is a very great difference in the taxation according to the gravity of the beer itself. A 55 degree beer would pay the full 25s. They like to have something really stimulating in the right hon. Gentleman's constituency, and they drink beer of very strong gravity in the Midlands. I do not think they do so in the hon. and learned Member's (Mr. Harold Smith's) constituency. They rather like it light Take the 55 degree beer. There you pay the full 25s. Take the average beer for the whole of England. They pay 23s. 6d. What does that mean? They pay on a barrel of average beer something like 1s. 6d. less than the charge we are imposing. All that, from the trade point of view, is a kind of margin created for the purpose of enabling the brewer and the publican to tide over their difficulties. But you take the cheap light beer which is sold sometimes in London and in the Home Counties, and I am not at all sure that it is not sold very largely in the West. That is a 41 degree beer. There, instead of paying 25s. on your barrel, you pay 18s. 7½d. roughly. That shows how difficult it is to adjust this tax. A brewer who is selling the 41 degree beer will get 6s. 5d. in the gravity to begin with, and we are allowing another 5s.
§ Sir G. YOUNGERHe sells the beer cheaper.
§ Mr. LLOYD GEORGEThat is a false point, and I am very surprised that the hon. Baronet should make it. The publican charges a halfpenny per half pint in respect of that particular transaction, and a halfpenny on a barrel is 22s. 8d.
§ Sir G. YOUNGERNo—
§ Mr. LLOYD GEORGEIf the hon. Baronet will allow me, I will finish my argument. He can answer me afterwards. A halfpenny a half pint is 22s. 8d. per barrel. We are charging 17s. 3d., so there is 5s. 5d. to enable the publican to adapt 961 himself to the diminution of business. I agree it is not enough upon all gravities, but on the lower gravities he gets not merely 5s. 5d. but also 7s., which is given in in the difference of gravity, and it ought to enable him at any rate to get along very well by charging the extra halfpenny. The House of Commons has drawn this distinction between the heavy and lighter beers, because it wants to encourage the trade in lighter beers, and I should be sorry to take away the financial inducement we are now offering to publicans to push the lighter beer rather than the heavier one. That is why, instead of altering the charge on gravity, we thought it better to make an allowance for the first two or three years to enable the publican to adapt himself to the altered conditions. I understand there will be a new Clause moved to-night, and in it we shall provide for a rebate of 2s. per barrel up to the 31st March, 1916, and a rebate of 1s. per barrel up to the 31st March, 1917. Having regard to the fact that both brewers and publicans have stocks in hand upon which they are charging the extra halfpenny at the present moment—
§ Mr. JOHN WARDIn the same way as the grocers are charging the extra duty on tea.
§ Mr. LLOYD GEORGEHaving regard to these facts, I think the concession made by the Government ought to enable the trade to bear this additional charge without serious injury.
§ Sir W. ESSEXCan the right hon. Gentleman say at what he estimates the cost of this concession?
§ Mr. LLOYD GEORGEAbout £450,000 for the present year, and between £3,000,000 and £4,000,000 for the three years.
§ Mr. CHAMBERLAINI had hoped I should have been able to dispense with the necessity of making any observations as to whether or not I exactly agreed with this provision, but I am afraid I must occupy the time of the Committee, although I will not keep it very long, in explaining my position. As I came into the House this afternoon, I met an hon. Friend who suggested that I was occupying a very awkward position at the present time, and I am inclined to agree with that. At this moment I do not know whether I have to resign from the Cabinet of which I am not a Member. I am afraid I have to do so. In other words, I find 962 myself so much divided in opinion from the Chancellor of the Exchequer that I cannot, by my silence, take any responsibility for the decision of which the Government has arrived. I desire at once to say that, in the confidential conversations which I have had with the Chancellor of the Exchequer and his colleagues since I was invited to discuss the details of the Budget with the right hon. Gentleman, I can make no complaint whatever of the spirit in which he has approached the questions with which we have had to deal. I am not merely ready, but I am desirous to admit that he has looked at the questions which came before him as revenue questions pure and simple, and has not allowed himself to diverge towards any ulterior objects which might have had a place in other Budgets, but which clearly ought to be excluded from an emergency Budget of this kind. It is not therefore of the spirit of the Chancellor of the Exchequer or of the purpose to which he has set himself that I complain.
But I differ from the judgment which he has formed. I think that the burden which he thinks he can appropriately place on the trade to correspond with the increase of a ½d on the half-pint of the consumer is heavier than the trade can fairly be asked to bear. At this stage I may just say, in passing, that I recognise, as the Committee must have recognised, that when I accepted the invitation of the Chancellor of the Exchequer to confer with him and his colleagues privately on these matters I forwent the ordinary freedom of criticism, because it is not possible at one moment to be in the most confidential discussion with a Minister and then to play your part in debate as if nothing had passed between you. Therefore I am not going to make an elaborate argument such as I might have presented to the Committee under other circumstances. If I did so, I should necessarily base myself in part on facts which came to my knowledge owing to my collaboration with the right hon. Gentleman, although in the majority of cases, certainly, they would no doubt have been available to me if I had never been called into consultation at all and had sought to obtain them for myself. At the same time I realise that limits are placed on my action by the fact that I did enter into the consultations, and I think the House will understand my desire to keep well within those limitations, rather than to 963 run any risk of transgression. I can quite understand a great many people making a simple arithmetical calculation as to the number of half-pints in a standard barrel on which duty will be charged, and the additional number of half-pints which there are in an average barrel as such, and supposing that the trade, either in the shape of the brewer or the publican, had the whole of the addition. That is not so. Even if there is a general rise of a ½d. on the half-pint, it does not follow that every half-pint that is sold will carry the extra ½d. with it. When you sell a half-pint only I think it will, but when you sell by the gallon or the jug probably something of the ½d. will be given back in increased measure. If the order is large enough, some of the extra halfpennies may be taken off.
§ 4.0 P.M.
§ Mr. CHAMBERLAINIf the hon. Member studies the trade he will find that a very small part of the trade in workmen's beer is done by the glass. It is usually sold by the half-pint. But for the purpose of the discussion of this tax I really think we should only confuse our minds by going into that question. At any rate I want to keep to very simple facts. How much of that ½d. the trade will be able to get, and on how many of the half-pints in the barrel the trade will be able to get the additional ½d. is a thing nobody, not even a brewer himself, can say at the present time with absolute certainty. He will not get the whole of it, and he will not get anything that you can prove or any result that you can arrive at by a purely mathematical calculation. The effect of raising the price will be, undoubtedly, to give a great shock to the consumption and cause a great fall in the consumption. At the moment, in my opinion, the fall will be very heavy. It will tend in the course of succeeding months and years to recover, but it will not get back to the point where it was before the additional duty was imposed. That is the reason for a sliding scale, such as the Chancellor of the Exchequer has proposed, and I am glad that he has at any rate gone that far. I want the Committee to consider for a moment what the effect of such a reduction of consumption is upon the brewers' profits. People sometimes 964 speak and argue as if it were the case that if you reduce the sale from four barrels to three you reduce the profits in the same proportion. That is not so. I am going to take a purely imaginary figure, which has no relation to the facts, merely in order to illustrate my argument. Having asked the Committee to bear in mind that the object set before us by the Chancellor of the Exchequer is, as far as this tax is concerned, to leave the profit to the trader as little altered as possible—he wants the publican and the brewer to get out of the increased price such a sum as will pay them their old profits, if they are reasonable and average traders, and will enable them to pay him the increased duty that he asks—I ask the Committee to look at the case I am imagining. Suppose you sold four barrels of beer at a profit of 5s. each, you made a profit of 20s. on the four barrels. Suppose that the result of your tax alone, without the other circumstances to which the Chancellor of the Exchequer alluded, is to reduce the consumption by one-quarter, then instead of selling four barrels you will sell three. Suppose you make the old profit on them, are you as well off? Of course you are not. Your total profit is then 5s. on each of the three barrels, or 15s. in place of the 20s. Accordingly, if you want to make the man as well off as he was before, you have to enable him now, when he sells only three barrels, to make the same total profit on the three barrels that he previously made on the four barrels. In other words, subject to one consideration, in order to make the three barrels produce the same profit of 20s. that was produced by the four barrels, he must make a profit on each barrel of 6s. 8d. instead of 5s.
It may be asked are there no reductions he can make in his expenditure. What deductions can he make? It is an extremely difficult figure to arrive at. The Chancellor of the Exchequer has said, and I fully bear out what he said, that representative brewers placed before us with great candour and fairness figures drawn from their own experience—the kind of figures which in ordinary circumstances are the secret of the partners in a business and revealed to nobody else. Even with the aid of those figures it is extraordinarily difficult to arrive at any result. No man of business experience will pretend that in any business it is possible to reduce your standing charges in the same proportion as that in which your turnover is reduced. It is true that if you equip a new brewery, 965 with a knowledge of all the new conditions, so that it shall be made to turn out just the amount of trade you can do, you can work on the most economical figure. But when you take a brewery equipped and started to turn out 100 units and if to-morrow your trade drops from 100 units to 75 units, you cannot cut down expenses in the same proportion or in anything like the same proportion. Those are very important factors. If you examined the different brewers and if they told you exactly what they believed, you would get different results and different estimates from each of them, partly according to the nature of their trade, and partly according to their own expectations of what the course of the trade generally would be. It is impossible for any of us to pretend to make such calculations accurately. Anyone who has not examined all these questions carefully is not in a position to form an estimate of what the trade can afford to do at all, and the mere fact that you say you are going to add ½d. to the half-pint to the consumer is absolutely no guide, without a detailed examination of all these factors of the tax, as to whether it would be fair to the brewer.
I do not suppose the Chancellor of the Exchequer will mind my saying that I think probably he has given away a little more than he would have done if he had never been in conference. He might have come without my assistance to exactly the same decision. At any rate, I am not prepared to say that he refused, and he certainly did not refuse, me a hearing, and I am not prepared to say that he refused me any concessions. That being so, I do not want to say what is the further concession for which I should ask, or what is the figure I myself would have selected on such information as was available. I do not think it would serve any public purpose. I am quite ready to state it to the Chancellor of the Exchequer, but I do not think it is necessary for me to state it here. But I do have to say that, in my opinion, the margin allowed for these circumstances which I have been attempting to sketch to the Committee is not sufficient, and that I cannot assume personal responsibility, even in the way I might otherwise have done, and do, in regard to some other matters in the Budget, subject to the limitations imposed upon me. Considering these circumstances, I cannot assume personal responsibility for the result, even as a compromise. That is all that it is 966 necessary for me to say in personal explanation. I hope it will not be necessary for me, under all the circumstances, to take any part in the discussion to which the Chancellor of the Exchequer's proposal gives rise.
There is, however, one general observation I should like to add. The Chancellor of the Exchequer spoke of this tax as a War Tax. So it is. But that is a phrase which is open to misunderstanding, and a misunderstanding which might be dangerous. All the new taxes which the Chancellor of the Exchequer is now putting on is war taxation, but if anybody thinks that all of it can come off when the War ends, or even three months or six months or twelve months after the close of the War, they are making a great mistake. However high the yield of the taxation is during the War, it will be but a small fraction of the liabilities which will be maturing during the War, even should the rest of them be met by a loan. After the War is over, there will be gradually, for a term of years, other liabilities maturing under the guarantees which the Government have had to give, and which will form the subject of discussion in the Bill dealing with guarantees to-morrow. For a generation—it may be for two generations—we shall still be paying part of the cost of this War, and therefore you must not put on a tax under the impression that, after all, it is only going to last for a year or two years, and therefore it does not very much matter. You have got to bear in mind that huge additional resources will be required for many years after peace has been made. I do not mean to say that we may not in time look forward to some reduction in our burden; but the man would be rash indeed who, at the present stage of the War, before we are in sight of peace, counted upon such reduction in armaments as a result of this War as would enable him to counterbalance to any considerable degree the enormous additional burden caused by the War itself. That is a factor which ought to be impressed upon our countrymen at once, because, while it is right that they should make this great sacrifice now, it is not right that we should delude them into believing that they are making it only momentarily. They have got to bear it for many years, and they have got to be as stubborn in bearing their burden as the men in the trenches are stubborn in bearing theirs. That is germane to the appeal I should have made to the Chancellor of 967 the Exchequer for greater indulgence at the moment. If these duties were only to remain in force for a short time, if within a few months of the close of the War the whole of the taxes would come off and the ½d. charged to the consumer would come off, the right hon. Gentleman might say, "I must get the last farthing I can." I do not say that has been the attitude of the Chancellor of the Exchequer on the point, but a Minister or Members of the House might say we must make hay while the sun shines. What the taxes will produce during the War is only a small part of what they will have to produce in the long years after the War, and it is far more important, to my mind, to bring them into operation without economical hardship and friction. It is far less dangerous to drop a little money at the beginning than to produce a sense of injustice, and it would be a wise policy for the House of Commons, in imposing such large burdens, either on Income Tax payers or on traders, to be very generous in the inception, and to make up their minds that the more smoothly they can set their taxes to work the larger will be the revenue that in the long run they will get out of them.
§ Mr. SHERWELLI should like to follow the spirit and attitude of the right hon. Gentleman (Mr. Chamberlain) in discussing what we must all regard as essentially a very important fiscal question. I am sure that in no part of the Committee will the right hon. Gentleman's spirit and attitude be more appreciated than by those who sit on these Benches. I listened with very special relief to the announcement which the Chancellor of the Exchequer made a few moments ago. Like all, I suppose, who have attempted to grasp any of those intricacies connected with this question to which the Chancellor of the Exchequer referred, I must frankly say I felt when the right hon. Gentleman put forth his original proposal that he was pressing the trade further than it could be fairly be called upon to bear the burden, and that consideration was the more important because I thoroughly appreciate the spirit in which the Chancellor of the Exchequer has approached this matter from a desire to treat it and judge it on purely fiscal grounds, and not from any propagandist or temperance point of view. I will not say that the Chancellor of the Exchequer 968 has fully met my misgivings in the concession which he has just announced. He has said, very properly, that if he went further in the way of concessions he might be doing an injustice to the taxpayer himself. When the Government puts forward a proposal which, by its very nature, has for one of its consequences a very great burden upon trade, and if the Chancellor of the Exchequer proposes a tax upon a particular trade which inevitably, in the very nature of things, tends to reduce the volume and measure of the trade done by that industry, he is bound to have some regard to the consequences which make themselves apparent in the reduction of the volume of trade.
Another point that has to be considered is that by the very nature of our fiscal system, and by the Exchequer demands which require that duty shall be paid by a particular industry on a particular date, you inevitably create in regard to this particular industry a necessity for a large volume of what I may call floating capital by which the Treasury itself may be advanced the amount of money which otherwise it might, in the ordinary processes of trade, have to wait a very considerable period for, and we must never lose sight of the fact in regard to this particular proposal that the State fixes a limit to the period within which the duty must be paid, whereas the trade itself on its part has to provide a much longer period of credit for its customers in that trade. But I am inclined to think, on reflection, while personally I should desire that the Chancellor of the Exchequer could have seen his way to extend the provisional period a little longer still, the trade will find a material benefit and advantage from the proposal which the Chancellor of the Exchequer has made. After all, the real injustice which the original proposal placed upon the trade was that the Chancellor of the Exchequer was calling for the advance of a considerable sum of money in the form of a duty which the brewer had no possible chance of getting back from his customers except within a much longer period. It seems to me that one inevitable consequence of this new proposal which the right hon. Gentleman has made will be that in the transitional period the trade may be able to accommodate itself to the altered conditions by revising the credit period which at present the brewers allow to their customers. I imagine that if the brewing industry can take into reconsideration the 969 period of trade credit they may very considerably soften for themselves the pressure of this new tax even when the transitional period has passed.
But, after all, the real disadvantage of this, as of all kindred proposals, is the inevitable inequality of incidence which is bound up in them. The Chancellor of the Exchequer has said that he is seeking by this tax—and that may possibly be within limits one of its indirect results—to give an advantage to the brewers of the lighter beers. I am not quite sure that that is the best way to bring about equality. I have long held that in reference to taxation, both of beer and spirits and all excisable liquors, a much more thorough and simple as well as scientific plan would be to tax these products according to their alcoholic strength. Throughout the Continent in recent years there has been an increasing tendency to tax beer according to its alcoholic strength—to divide the products of beer into certain categories according to alcoholic strength and tax them relatively to their alcoholic strength—but I believe, and I sincerely hope, that the time will come, when the pressure of this war taxation has passed, when the Treasury and the Inland Revenue may have time to reconsider the whole basis of our taxation of the liquor trade, both in reference to the Excise product and the manufactured product and the Licence Duty, and seek for a basis of taxation which will be more free from the inequalities which now attach to the existing system than is the case at present. But, on the whole, I confess to a sense of distinct relief at the concession which the right hon. Gentleman has announced this afternoon, and I hope and believe that the trade may, in the transitional period, by altering their period of trade credit, adapt themselves to the increased taxation.
§ Sir G. YOUNGERI should like to thank the hon. Member for the extremely able and temperate way in which he has dealt with the Chancellor of the Exchequer's statement. His speech shows his very intimate knowledge with the question. I endeavoured the other day to make a certain number of points which the hon. Member has now reasserted, and I shall adhere to the position I then took up, that the right hon. Gentleman has not anything like discovered the enormous effect his new taxation is going to have on the pockets of the publican, not arising altogether from the existing circumstances, 970 but arising in a very great measure, as I am sorry to see from telegrams which have just been sent to me, from the objection which the public has to any extra cost being put on its drink. We know what happened when the Whisky Tax was increased, and I am sorry to say the very same thing is happening apparently in England owing to the increase in the price of beer. These telegrams are addressed, not to me, but to the National Trade Defence Association, in Queen Anne's Chambers. They come from Portsmouth, and they say that already the customers there are avoiding beer, and the drop in sales is from 50 to 64 per cent. That, I earnestly hope, is not going to continue and I am not going to make any point about it. I hope that feeling will vanish before long and that there may be some moderate return, though there cannot possibly be an entire return to the original sales. For my own part, and on behalf of those who saw the Chancellor of the Exchequer, I have to thank him for the very kindly way in which he heard what we said, and the careful way in which he no doubt had gone into the figures. They were very striking figures. They bear out, I should think, in every case what I said to the House last Thursday. In some cases they went far beyond the figures I gave and the statements I made about the effect of this reduction. In some cases they were positively alarming, and I think the right hon. Gentleman will admit that if his calculation of the drop is borne out—35 per cent. of loss in sales—one or two very important concerns will cease to pay very much interest on their capital. The figure which the Chancellor of the Exchequer has fixed today for the first year is beyond the limit of these particular people to meet, and still continue to make a profit on their trade.
I am in the position of not being able to do anything more than accept the decision of the Government. I deplore it. I think it is an unfortunate decision. I think with the hon. Member (Mr. Sherwell) that the limit has been placed too high and that a lower limit ought to have been fixed. This is a case in which you should not adopt the usual practice. The usual practice in ordinary circumstances, I understand, is to take the highest possible figure, and say, "if I find my calculations are wrong, if I am hurting you or anything of that kind, I have a revising Budget in April next and shall reduce it if 971 you satisfy me that you are unable to bear the burden, which I had no intention of imposing on you." That in ordinary circumstances would be quite a proper course to take, but I do not think the circumstances are ordinary. I do not think anyone can calculate what the effect of the tax is going to be. We are harassed, and have to face difficulties of every sort and kind. The navigation of our rivers is stopped and extra railway charges in consequence have to be paid. In my own case the navigation of the Forth has been stopped, and instead of being able to send our product by steam we shall have to send it by rail at an extra charge of 2s. 6d. per barrel. That is a matter that should be taken into account. It is no fault of ours. We are absolutely shut out from the use of what has been our waterway all these years, and that is a very important factor in our business. At the moment, therefore, the right hon. Gentleman ought not to take the course I have indicated, but ought to begin at the lowest point of the scale, and if it is found in April or at the time of the next Budget that too large an allowance has been made, and too big a margin left, I shall be most happy that he shall increase it. That is the real way to deal with the situation.
He has rather taken too high a figure in his last figure of 15s. 3d. Whether the trade will ever be able to pay 16s. 3d. or 17s. 3d. remains to be seen. I dare say he will be open to argument about that. He does not want to penalise us, and I am sure he will treat us fairly and honestly, but he is putting a heavy burden, quite unintentionally, which I do not think the trade can possibly bear. I do not know whether he is in a position to make any alteration in his proposal. I do not know whether the Government has finally decided, if so, I shall leave it at that; but I should like to ask him one or two questions. First of all, he has made no provision whatever for granting a rebate of duty on faulty beer or returned beer? He is not dealing with spirits. He is not dealing with a stable article, but with an article which is extremely difficult to manufacture, and however careful you are and whatever care you may take in the selection of your materials, a little difficulty in fermentation may produce a beer which is unsaleable. That beer cannot be sent out, and if it is, it is very likely returned. When it is returned another barrel has to be 972 brewed to make it good. Of course the man loses his character and all that, but the revenue does not lose by it. The beer is not consumed, and it is replaced by another cask which can be consumed. There is no provision to make any allowance for beer returned, and that is a terrible burden on the trade. Two per cent. or 3 per cent. is about the average of returned beer in the best regulated brewery. Under these circumstances to lose 5s. or 6s. a barrel is one thing, but when it comes to losing 24s. it is perfectly impossible. I shall press the right hon. Gentleman to introduce a Clause into the Bill to deal with that question. I have brought it before him myself, and I know his advisors have mentioned it, and I beg him to consider it in a favourable way. There is another point I should like to ask him whether he has considered. I do not know whether he thinks Clause 7 would protect his revenue against an increase of brewing at home. Of course, if home brewing is to be restricted to an article only containing 16 degrees of alcohol my hon. Friend (Mr. Leif Jones) may safely drink it, because it would be rather weaker than the stone ginger beer, which I was once told he rather affected.
§ Mr. LEIF JONESI have avoided it since the hon. Baronet warned me against it.
§ Sir G. YOUNGERI am sorry for that, because the hon. Member must have seriously disappointed his palate. If that is intended to produce revenue it is all right, but if the Chancellor of the Exchequer is going to put a heavy duty like this on beer he will largely encourage the manufacture of home beer and very seriously reduce his revenue, and very likely increase smuggling. My right hon. Friend has already challenged the Chancellor of the Exchequer upon his statement that this is a War Tax. I am certain that if this price of beer is established permanently there will also be that permanently established tax—of course in proper relation to the income. Therefore it is all the more important that you should not make a start of this kind without endeavouring to construct the new proposal, not on revolutionary but upon reasonable lines. As to what has been said about the profits upon the large stocks of beer in hand before the imposition of the extra duty, it has been said that very large profits are going to be made by the brewers. I should like to tell the House what is happening 973 Scotland. Reference has been made to certain stocks held by brewers in Scotland, but I can say, speaking from my own experience, that every gallon of that stock was cleared by customers at the old price and not a shilling extra profit will be made by myself or by anyone else.
§ Mr. LLOYD GEORGEI did not specially say that it would come to the brewer, but to the trade, and in the case which the hon. Baronet has mentioned it goes to the trade.
§ Sir G. YOUNGERIt will, of course, be a plum to the retailer, and he thoroughly needs it. I only wish to make it clear that these people should be treated perfectly fairly, and no unfair attempt should be made to obtain any benefit out of the increased duty. I have nothing more to say, except to thank the Chancellor of the Exchequer for what he has said, although I am not altogether satisfied with his statement. I still believe that if he honestly intends, as I am sure he does, to carry out this revolution in the trade without penalising anyone, and if we can show him by actual experience that he is penalising the trade, he will put the matter right in the future.
§ Mr. J. H. THOMASI am sure we all appreciate the spirit in which this Debate is being conducted, and I am not desirous of discussing this question from a temperance standpoint. The hon. Member for Ayr Burghs (Sir G. Younger) has read a telegram to the House which indicates that a serious decrease has taken place in the sale of beer, and will continue. The hon. Baronet regrets this, and that is the only difference I have with him. Incidentally I might say that I should like to alleviate the anxiety of the hon. Baronet, but, judging from our experience in the past, I feel sure that if the Chancellor of the Exchequer had come here to-day and made his proposal 10s. 3d., the hon. Baronet opposite would have got up and said that it was too much.
§ Sir G. YOUNGERNo. I think the Chancellor of the Exchequer will confirm me when I say that I mentioned a higher figure than 10s. 3d.
§ Mr. THOMASSome hon. Members have been at great pains to point out that if any further burdens are placed upon the trade it will be done for, and I was judging the hon. Baronet's remarks from that point of view. I congratulate the hon. Baronet upon having succeeded in 974 taking £3,000,000 from the Chancellor of the Exchequer's Budget. The primary point I wish to deal with is to try and show that this is one of the clearest illustrations of the unfair methods of indirect taxation. In the two taxes which were primarily intended to deal with the poor man, namely, the Tea Duty and the Beer Duty, immediately 3d. is put on tea the poor people are charged 1d. extra for a quarter of a pound, and if they buy a few ounces of tea the proportion is more. Consequently, whilst the Chancellor of the Exchequer gets 3d. per pound on tea the poor people are paying 4d. extra in taxation. In the particular case we are dealing with, and taking the figures of the Chancellor of the Exchequer himself, it works out something like this: The right hon. Gentleman gets 15s. 3d. on beer as a contribution to the War Taxes. Already I have seen a circular from the brewers in Nottingham and Derby intimating to the publicans that the taxes to them amount to £1. This applies to the taxes already charged, and over and above that they themselves are only paying 15s. 3d. They have charged the publican £1, and the public are called upon to pay £1 2s. 8d., or, in other words, the poor people who have been talked about so much in this matter are paying £1 2s. 8d. as their contribution on the increased price of beer, while the Exchequer gets 15s. 3d. There again you have another illustration of the unfair manner in which the poor people are always called upon to bear the burden, and I submit that with the original margin between 17s. 3d. and £1 2s. 8d., which the Chancellor of the Exchequer clearly indicated was making every allowance for wastage, I regret the further concession of £3,000,000 in this connection.
§ Mr. SAMUEL ROBERTSI wish to ask the Chancellor of the Exchequer if he is prepared to make any concession in the Customs Duty on what is called black beer? Will he make the same concession which he has promised with regard to home-brewed beer? I am told that black beer is more a food for invalids than ordinary beer, and the trade in black beer is very much affected by this high duty. I have a letter from a large retailer in black beer, and he says that the effect of the additional duty will practically be to kill the trade. I am sure the Chancellor of Exchequer did not wish to interfere with the trade in connection with a food for invalids. I should be very glad to know 975 whether he is ready to make any abatement in regard to black beer to correspond with what he has promised in regard to home-brewed beer?
§ Mr. LEIF JONESI am in agreement with the views which have been put forward by the Chancellor of the Exchequer that this tax should be borne by the consumers and should not fall upon the brewing trade. I have listened carefully to the views expressed by the hon. Baronet opposite upon the duty as it has been proposed, and what I find is that there is an absence of any sort of figure which will give any evidence that what is allowed to the brewing trade by the Chancellor of the Exchequer is not sufficient to cover any demand which is now being made upon them.
§ Mr. CHAMBERLAINWe have had the opportunity of laying such figures before the Chancellor of the Exchequer, and we formed our opinion on such detailed information.
§ Mr. LEIF JONESI have made some calculations of my own and I propose to go into them. As far as I can judge, the margin allowed to the brewing trade by the £1 charged to the consumer will really cover the whole cost to the brewing trade. I take the figures for the financial year ending April this year, and I find that the brewing trade has paid a tax in round figures on 35,000,000 standard barrels; but really they sold to the public 37,500,000 barrels.
§ Mr. CHAMBERLAINWhere did you get those figures from?
§ Mr. LEIF JONESI think they are fairly correct.
§ Mr. CHAMBERLAINI have asked the hon. Member where he got his figures from? I suppose he got them from the Excise returns, and they do not deal with standard barrels sold.
§ Mr. LEIF JONESYes, I got them from the Excise returns. My calculation was made for the financial year. I have got the exact returns from the calendar year 1913, but these figures have been calculated for me, and they have not been published. It docs not really affect the argument, or, at any rate, only in a fractional degree.
§ Mr. CHAMBERLAINIs the hon. Member quite certain that he is speaking of standard barrels?
§ Mr. LEIF JONESMy point is that in paying the tax the brewer pays a proportion of thirty-five in taxes, and receives from the public thirty-seven and a half payments in selling a barrel. That proportion will be continued for every pint of beer which is sold, and taking that proportion of thirty-seven and a half to thirty-five, and reducing it, it comes down to the proportion of fifteen to fourteen.
§ Sir G. YOUNGERDoes the hon. Member suppose that on these light beers the publican is going to get an extra 1d. per pint?
§ Mr. LEIF JONESYes.
§ Sir G. YOUNGERNo, he will not, because he will sell a larger measure.
§ Mr. LEIF JONESI believe that he will charge the extra 1d. a pint on these light beers, and I am informed that he is already doing it. Where the trade have been paying fourteen times 17s. 3d., in the future they are going to receive from the public fifteen times 24s. In other words, you have to spread a profit of 24s. over every fourteen barrels sold. In other words, there is an extra gain to the trade in selling to the public of 24-14ths of a shilling on every barrel sold, or very nearly 1s. 9d. a barrel, to add to the margin of allowance in the Chancellor of the Exchequer's figures. This is very complicated, and I am not sure whether I have made clear to the Committee what is perfectly clear to myself. Before the concession was made by the Chancellor of the Exchequer the tax was to be 17s. 3d. a barrel, and the trade was going to get From the public a penny a pint, which would amount to 24s. That gives us—
§ Colonel WALKERWhat about the waste?
§ Mr. LEIF JONESThe Chancellor of the Exchequer takes a figure of 22s. 8d. I think that that made a very generous allowance to the trade for wastage and so on, and I think that the trade have ways of preventing that waste. My impression is that 24s. is a great deal nearer what they will get than 22s. 8d. At any rate I am going to show that the margin is sufficient to cover them. Assume for the moment they will get 24s.—that is, 6s. 9d. on the barrel. They will sell fifteen barrels for every fourteen on which they pay duty to the Chancellor of the Exchequer, which gives another 1s. 9d. on the standard barrel. That means that on every standard 977 barrel brewed on which they pay duty to the Government they have a margin of 8s. 6d. a barrel, which is amply sufficient to cover any loss that is foreseen on the figures of the Chancellor of the Exchequer. The calculation of the Chancellor of the Exchequer was that the reduction in the trade was going to amount to 35 per cent. That means a reduction of about 12,000,000 barrels in the year. Take a profit of 10s. a barrel, which is allowed commonly as compensation to the trade for loss of trade, and on this basis the loss due to loss of trade would not exceed £6,000,000. But assuming, again, the Chancellor of the Exchequer's figures, the trade are going to sell next year somewhere about 23,000,000 barrels, being a reduction of 35 per cent. below last year's figures, and the compensation at 8s. 6d. a barrel, which the brewers will receive, will amount to a little over £9,500,000. The loss of profit due to decreased sales is only £6,000,000 on the Chancellor's own showing, which means that there is £3,500,000 going into the pockets of the brewing trade with which to finance the scheme of the Chancellor of the Exchequer. I would like the hon. Baronet to produce figures which would upset those figures. The hon. Baronet exhibits a certain amount of mirth—
§ Sir G. YOUNGERThe hon. Gentleman's calculations are perfectly ludicrous. He has wholly forgotten that the brewer's profit is gone owing to the drop in trade of 35 per cent.
§ Mr. LEIF JONESI do not see what fault the hon. Baronet can find with the argument, except that he says the trade are not going to charge a penny on the pint, which I have yet to see.
§ Sir G. YOUNGERThere will be a larger measure.
§ Mr. LEIF JONESOn this 23,000,000 barrels they will receive extra from the public, over and above the tax, £9,500,000. The loss on the 12,000,000 barrels which they do not sell, taking it at 10s. a barrel which is a very ample allowance for the trade—is only £6,000,000, which means that the brewing trade will have £3,500,000 out of which to make new payments to the Exchequer to finance the business. The trade is perfectly safe in the matter. I do not wish it to be otherwise. But with the new concessions which the Chancellor of the Exchequer 978 announced to-day it seems to me that the members of the trade may be perfectly easy in their own minds that the adjustment which they have to make will be well greased by the amount of money which they have passing through their hands in order to put the system into operation, and that they have nothing to fear, which is the purpose of the House and my purpose at this moment, because I have no wish to put this on the brewing trade. I contend that the figures prove, that the burden will fall entirely, as it is intended to fall, on the consumer, and the hon. Baronet may rest easy with that assurance.
§ Colonel WALKER (indistinctly heard)From the figures which the hon. Gentleman has given, the House will recognise that he is not a business man. His speech reminds me of the story of the man who used to make shawls, and he sold them so cheaply that he lost 2s. 6d. on every shawl which he made. He was asked how then did he manage to make a profit on his business, and his reply was that it was owing to the number that he sold. The important point which the hon. Gentleman does not take properly into account is the cost of production. Then there is the question of the enormous disturbance of the trade to the country, which would be caused by the reduction of the output of large businesses to less than two-thirds of what it is at the present moment. How would the Chancellor of the Exchequer like the doubling of the burden on a department such as the postal service? He would say at once that it would reduce my output. He is so fond of reducing people's output; why does he not reduce his own first, and see what it looks like at the end of three months? He is going to take three months' experience of this tax, just to see how it goes, and whether he will lose money or not, and he will be able to find out no doubt, as Chancellor of the Exchequer, from the Income Tax returns, what the profits are of the firms who are affected. No doubt in a trade like this the weakest will go to the wall. The strongest only can carry on. But we should think of the trade as a whole, and should have some consideration for those who are not in as strong a position as others. At the same time we are going to pay this tax as patriots to finance this War, without a growl or a frown. We are going to stand up like men and do our share. But this tax will have one very great effect. Immediately the War 979 ceases, it will be the excuse for every workman in the country to demand more money for his drink. It will lead to turmoil among the labouring classes. The result will be that you will immediately increase the cost of production of every article in the Kingdom.
§ Question put, and agreed to.
§ Clauses 4 and 5 added to the Bill.