§ Motion made, and Question proposed, "That the Customs Duty charged on tea until the first day of July, nineteen hundred and fifteen, shall be charged as from that date until the first day of July, nineteen hundred and sixteen, that is to say:—
|Tea, the pound||…||…||eight pence,|
§ Mr. LOUGH
On a point of Order. I would ask whether we are to have any statement from my right hon. Friend the Chancellor of the Exchequer. Changes have been made in the financial proposal since the last time we met, and I think a statement should be made, as the House has not been put in possession of the facts up to the present time.
§ The CHAIRMAN
That is not a point of Order. It is quite within the competence of the Chancellor of the Exchequer as to whether he makes a statement or not.
§ 4.0 P.M.
§ Mr. CHAMBERLAIN
I will not stand between the Chancellor of the Exchequer and the Committee for more than a very few moments if he is prepared to make a statement. With the consent of the Chair, it has been arranged that the Committee should be at liberty, on this Resolution, to resume the general Debate on the whole of the Budget proposals. I do not propose to avail myself of that latitude. I rise only to ask for some information on a specific point. At first sight it may seem that the point arises in connection rather with the third Order on the Paper [Immature Spirits (Restriction) Bill] than with this Resolution. But that, I think, is not the case, because, although it arises out of the third Order, the remedy of the difficulty in which we find ourselves is germane to, and must be introduced in, Committee of Ways and Means. I think, therefore, if I am permitted to state my case, and put my question to the Chancellor of the Exchequer, you, Sir, will find that my remarks are not irrelevant to this discussion. The Chancellor of the Exchequer originally proposed certain enormous increases in the Spirit Duties. He has subsequently abandoned those proposals, for reasons which I think were good and sufficient, and has substituted for them the restriction of the sale of immature spirits. It has been the avowed intention of the right hon. Gentleman, in dealing with the liquor trade for the purposes of the present condition of war, to do no injury to any individual, and to provide fair compensation for anyone who was deprived of the trade which, but for the War, he would have been allowed to 1678 do. I am afraid that in the provisions made by the Chancellor there has been a serious casus omissus which must have escaped his attention in the first instance, as it certainly escaped mine. The proposed provision for the compulsory bonding of all spirits for three years does not work equally on all parts of the trade. There is a particular trade associated with Belfast and the North of Ireland which is hit by this provision in a manner which is quite exceptional. The Chancellor of the Exchequer asks whether I would like to take the discussion on this Resolution. I am in the Chancellor's hands. If he can make a reassuring statement on the subject I think he will greatly facilitate the progress of business. It is for that reason, with an entirely friendly intention, I raise the question at the earliest opportunity. I only want to make it clear to the Committee, if I can, what the case is. I would be very glad to postpone the matter altogether, if the right hon. Gentleman would postpone the Immature Spirits (Restriction) Bill until the question is settled. There is some inconvenience in raising it at the present time.
§ Mr. LLOYD GEORGE
I do not object at all. It is easier to talk the matter over in Committee rather than in a Second Reading discussion. With the consent of the Chair, it is generally permitted to discuss the whole of the Budget proposals on a particular Resolution.
§ Mr. SNOWDEN
This is a matter which interests not only Members on the Front Benches, but other Members of the House. I should like, therefore, to have a clear understanding of the import of what is going on. It was understood that this day was to be devoted to a general discussion of the Budget. I understand that now—I may be mistaken—it is proposed to restrict the discussion to the question of spirits, or at any rate that that point should occupy a considerable part of the discussion. If some arrangement could be made by which the general discussion would be separated from this particular issue I should be glad.
§ Mr. CHAMBERLAIN
I want to do what is most convenient for the Committee, provided that if I forego my opportunity of raising the matter now, those on whose behalf I feel bound to speak are not prejudiced. If the Chancellor of the Exchequer will postpone the Second Reading of the Immature Spirits Bill, I am quite 1679 ready to remain silent now, and allow the general discussion to go on. I think that that would be the best plan; but if that cannot be done I must be permitted, acting within my rights, to raise the question now.
§ Mr. LLOYD GEORGE
The difficulty about postponing the Immature Spirits Bill is that we cannot take it to-morrow, because that is an allotted day; and if we postpone it to next week the Spirit Duties will have to be renewed or they lapse. The result of that would be that there would be neither Spirit Duties nor Bill to prevent spirits from being taken out of bond. Therefore the question must be settled one way or another by Monday. I should have thought that the right hon. Gentleman was well within his rights in raising the question now, because the Spirit Duties are part of the proposals of the Government. They are on the Paper; therefore, they are part of the general Budget scheme until they are negatived. I should have thought that the right hon. Gentleman was not only within his rights, but within precedent and practice in discussing something which still remains on the Paper as part of the Budget scheme and any alternative which he proposes.
§ Mr. LLOYD GEORGE
There will be a Committee stage. If the Leaders of the Opposition consent to take the decision of the House one way or another on Monday, and let the Bill through or get it withdrawn—the decision must be taken one way or the other—I do not mind postponing it; but the matter has to be decided by Monday.
§ Mr. GLYN-JONES
On a point of Order. I do not quite understand what the proposal is. The right hon. Gentleman has suggested that because there is some interest.
§ Mr. GLYN-JONES
Are we in this Debate entitled to discuss the effects of the Immature Spirits Bill? I have a number of matters that I wish to put before the 1680 Chancellor of the Exchequer, and I want to know whether I shall do it now or whether the Bill will be postponed?
§ The CHAIRMAN
I have nothing to do with the other arrangement. As a matter of order, the Chancellor of the Exchequer is quite correct. This is necessarily a part of the finance of the year. Therefore, if Members desire to do so, they can discuss it amongst other matters.
§ The CHAIRMAN
Unless the right hon. Member wishes to put a point of Order, the right hon. Gentleman the Member for West Birmingham is in possession.
§ Sir T. WHITTAKER
Other Members have been listened to on the question of convenience. The point I wish to put is that we have already once been switched off from the discussion on the general bearing of the Budget. It seems to me very unfortunate if—
§ The CHAIRMAN
The right hon. Gentleman can intervene only if the right hon. Member for West Birmingham gives way.
§ Mr. CHAMBERLAIN
I wish to consult the convenience of the Committee, but I think I must ask the Committee to bear with me while I state my case. I take the earliest opportunity in the hope that, if it is the intention of the Chancellor to withdraw his proposals, he may be able to give such a reply as will facilitate the further progress of business. The financial Resolutions before the Committee include very large increases in the whisky duties. The Chancellor of the Exchequer has expressed his readiness when the proper time comes to negative those duties if he receives in substitution the Immature Spirits Bill. The negativing of the taxing Resolution has so far been declared by the Chancellor to be subject to the acceptance of his other proposal. The right hon. Gentleman, in 1681 making that proposal, as in making all his proposals, has quite clearly and definitely stated that it was not his desire to injure unnecessarily particular traders, or to injure one section of a trade to the advantage of another section of the same trade. I am sure he has tried his best to fulfil those conditions, but there is, I think, a casus omissus in this respect to which his attention must by this time have been called. It arises in the strongest possible form in the case of the distillers of whisky in Belfast and the North of Ireland. Their trade is a peculiar one, carried on under peculiar conditions. Their custom is to put their patent still whisky on the market almost immediately. They have no reserve stocks in hand; they have no stores in which they could bond the stocks; and they have no casks in which they could place them. Their position is not that of improvident people in this respect; because the whole question of the wholesomeness of their whisky, and its suggested deleterious effect on the public, was thrashed out, in the years 1909–10, before a very strong Royal Commission, presided over by Lord James of Hereford. If at that time it had been found, as a result of that careful inquiry, that this whisky was deleterious, and that it did have a bad effect upon the consumer, the trade, given a little time, would have adapted itself to any recommendations that were made, and would not have been in the position in which it is to-day. But it was given a clean certificate of character by one of the strongest Commissions that ever sat, and it was not suggested that any changes should be made. If the provisions which the Chancellor of the Exchequer has suggested as an alternative to his taxing proposals are insisted upon as they stand, it means ruin to those trades. If they are not allowed to supply whisky which is less than three years old, they can supply no whisky. They have got no whisky of that age, or they have only trifling quantities of that age in stock. They would be absolutely unable to do the great bulk of their trade, and it would pass into the hands of rivals. Not only have they no stocks, but they have not sufficient storage to bond this whisky for this number of years, even if they had the casks in which to put it. Unless you deliberately mean to crush out the trade—which nobody does mean—you must make such modification of your proposals as will meet their case.
I put in the first instance the case of the North of Ireland trade because it is the 1682 strongest and most exceptional. But the considerations are not confined to that alone. I am informed that the Scottish trades have never agreed to the three years' proposal of the Chancellor of the Exchequer. They could not agree, because they also have not the facilities nor the stocks necessary for it. As far as I know—I do not speak with authority in their case—it is two years rather than three. There are certain spirits which it is not proposed to subject to this bond regulation at all. In order to preserve the equality the Chancellor of the Exchequer proposes certain impositions. I suggest to him that the way to meet the legitimate case of the Belfast and Scottish trade would be to apply the principle of the Surtax to whisky, as he is applying it to other spirits which he allows to be sold new. There again I say, as I did on an earlier occasion, that I think it is for the Chancellor of the Exchequer to get into direct consultation with the trade—I have no doubt he has done so—and to work out with them a satisfactory arrangement, as he has worked it out in other cases. I do, however, press upon the right hon. Gentleman that it is utterly indefensible on any principles which he has laid down, or anything contained in the Report of that Commission—and it has not been thought worth while to call for any such action in the intervening years—to hand over the whole of the businesses of particular distillers to their rivals in the trade. You cannot justify it. It is not what the Chancellor of the Exchequer intends to do. I hope that at this early stage he will be able to give us some assurance that it will not be done, and that he will make a satisfactory and reasonable arrangement with these people, as will, as I say, facilitate the further progress of his measure.
§ Mr. LLOYD GEORGE
I do not know whether I had not better deal with this matter now. No one knows better than the right hon. Gentleman how very difficult it is to adjust this difficulty. I think I am entitled to say this in reply to him: My first proposal was a proposal for a graduated scale, varying according to the age of the whisky. I had representatives of the whole trade in front of me—I do not say of every locality—but this is really largely a question between the pot still and patent still—the whole fight of Pot versus Patent.
§ Mr. LLOYD GEORGE
There is the special case of Belfast. I had before me 1683 the largest manufacturers of patent stills. I had the largest body of still manufacturers before me—the best known of them certainly. I had also the gentlemen who come between the two, the blenders. Probably, though, there were more patent still representatives present than pot still men. I thought, having got those two interests there and having blended them with the third set of gentlemen—a real blend!—I was perfectly safe in the particular beverage that I wanted to imbibe. It was their suggestion, not mine, that instead of having a graduated scale there should be compulsory bonding. It is perfectly true that at that meeting the two years' suggestion was put forward. Afterwards I had negotiations with these gentlemen, and the proposal was put forward for the three years, as it would be a better test of the rawness of the spirit than two years, and for that reason I substituted three years, but gave them twelve months in which to increase their bonding accommodation and their storage. The right hon. Gentleman says there is the special case of Belfast. What is the special case of Belfast? It is, as I have said, that they practically put this raw whisky upon the market straight away. In the case of the patent still and the pot still I believe they keep it four years in order to enable it to mature. [An HON. MEMBER: "Three to five."] The patent still manufacturers admit that it improves with age.
§ Mr. LLOYD GEORGE
Not in flavour, but it is not so destructive of the tissues. If you have a strong, fiery quality of spirits it must have a very injurious effect upon the tissues of the stomach. That is what I am told.
§ Mr. LLOYD GEORGE
What the Commission said was this—I have been trying to find the actual words—there was no difference at all in their view on this point. The hon. Member will find it on page 43. This is all they say:—It was not established before us that any material change in the toxicity of the whisky is effected by age.
§ Mr. LLOYD GEORGE
I suppose it means the poisonous quality of whisky, but that is not the point which is put now.
§ Mr. LLOYD GEORGE
Well, then, my hon. Friend knows less than ever, because there was no real evidence put in this case. As a matter of fact this was one of those Commissions where it was no body's business in particular to put the other side of the case and the case was never really put, except by those who defended the provision of raw whisky. All the Commission said was the words that I have just quoted. There were no witnesses. It was not the business of any temperance association in particular.
§ Mr. CHAMBERLAIN
The right hon. Gentleman surely does not mean to suggest that this Commission took no steps to ascertain whether this new whisky produced drunkenness because of its newness. They searched for a drunken man, drunk because of drinking what is called raw whisky, not because he had taken too much whisky, and they could not find him.
§ Mr. LLOYD GEORGE
There was a Commission where there was a good deal of evidence taken, a Commission which sat upon the whole licensing question, and that was the Royal Commission on the Liquor Licensing Laws. [An HON. MEMBER: "Whose Commission was that?"]
§ Mr. LLOYD GEORGE
Yes. Lord Peel's. This is what the Commission say:—We cannot resist the conclusion that newly distilled whisky is less wholesome and more intoxicating than whisky which has been recently matured.That is perfectly unanimous, and those who composed that Commission comprise representatives of the trade as well as representatives of the party opposite. The hon. Baronet for the Ayr Burghs (Sir G. Younger) was a member of that Commission. Undoubtedly it was a Commission that excited far more interest than any other Commission, and therefore 1685 witnesses were much more likely to give evidence before it. That is what they say—cannot resist the conclusion that newly distilled whisky is less wholesome and more intoxicating than whisky that has been recently matured.They continue:—We agree with those who advocate that some provision should be adopted to mitigate the evil caused by the consumption of new whisky by requiring it to be bonded for a certain period. We are aware that the Select Committee on British and Foreign Wines appointed by the House of Commons thought it was not desirable to pass any compulsory law in regard to the age of whisky, but the main ground of this conclusion seems to be that certain restrictions on commerce would impose an unfair burden upon particular classes of spirits.That was the point raised then!The evidence we received satisfied us that no hardship at all commensurate with the general advantage to be gained would be felt by the distillers if it were made compulsory to keep whisky for a certain number of years in bond.
§ Mr. LLOYD GEORGE
It was the same question nine years ago as it is now. I want to point out, as my attention has been called to this Commission, and as a new inquiry has been instituted on the subject, that here is a Committee of—I will not say of a more important character, but it was a Committee which sat for years to consider the whole question of the drinking of intoxicating liquors, and that was the unanimous conclusion to which they came. I have made inquiries of men in the trade, of men who had no sort of interest in selling, men whose judgment I trust, and they say there is absolutely no doubt at all that the selling of raw whisky creates a good deal of the mischief which we have heard about. My hon. Friend behind me perhaps would say that alcohol in any form is bad.
§ Mr. LLOYD GEORGE
Yes, I know. At any rate, there is no doubt at all that that was, more or less, the general opinion of men who regard the whole question quite impartially. Let me point out to the hon. Member, and anybody who may just now be referring to this Commission's Report, that the toxicity is not quite conclusive. I do not think that that comes into the 1686 question. It is rather whether the whisky contains more poisonous elements, more poisonous chemically, which vanish with age. I do not think that was the suggestion considered by the Royal Commission. The first point was whether it was more wholesome, and the second was whether it was more intoxicating, and on both points they found against the raw, immature whisky. I defy hon. and right hon. Members to find anyone who has watched the effect on the Clyde of the drinking of these fiery whiskies who has not come to the conclusion that they are extremely mischievous in their effect. They drink it raw, and they drink it raw without food. They are trying, it is perfectly true, to meet that by providing food, but we cannot compel them. What I am told is that it burns the tissues. Now, mature whisky may be just as alcoholic, but it has not that effect. The maturing of the whisky deprives it of that fiery quality. I am not going to deny that there is some hardship in this particular case. It is very difficult in a state of war, so to make your arrangements as not to inflict some hardship upon somebody. One of my hon. Friends called attention the other day to the hardship inflicted upon fishermen on the coast of Scotland who are actually prohibited from fishing in certain areas where they were dependent entirely for their living.
§ Mr. LLOYD GEORGE
In that case compensation is paid. I am referring to something where compensation is not paid—the actual prohibition of fishing in certain areas in the public interest. There is no compensation paid to them. There are hundreds of them and their families. Now let us have the dimensions of this problem. There are two whisky firms who would be hit here—just two. I am sorry, and right hon. Gentlemen know perfectly well that I have racked my brain to find some means of accomplishing this purpose without doing any damage, and if anybody could find out for me a way in which it could be done, I should be glad.
§ Mr. LLOYD GEORGE
I am not at all sure that could be done without reopening the whole question. What I find here is, the moment I am driven from one position and I take up another to meet objections, I generally find I am creating absolutely 1687 new objections in the breast of someone else. Here you have reduced the grievance to these dimensions, that only two firms are temporarily injured by this action.
§ Mr. LLOYD GEORGE
I cannot find any firm, as far as two years are concerned, that would be injured except these two firms. If it is true that it is desirable in the interest of the workers, and, what is still more important, the work that they are now doing for the State, to stop the output of this raw, fiery whisky during the period of the War, I ask whether the interests of two firms ought to stand in the way altogether of that being done?
§ Mr. LLOYD GEORGE
That is the point between two and three. The evidence given before the Commission by a good many of these whisky firms was entirely in favour of compulsory bonding.
§ Mr. CHAMBERLAIN
The right hon. Gentleman knows that the whole case for the origin of Lord James' Commission was a trade dispute. A verdict was found in favour of one party, and you are now proposing to reverse it in favour of the other.
§ Mr. LLOYD GEORGE
I am not proposing to reverse it at all. The right hon. Gentleman knows perfectly well that the whole sentiment of the House of Commons was in favour of stopping this raw whisky. I put it to the right hon. Gentleman that there is much evidence that raw, immature whisky is of a more intoxicating character, and the second Royal Commission never found that was not the case. They simply dealt with the question of its poisonous character—its toxicity. I do hope we are not going to allow the interests of just two firms—
§ Mr. BONAR LAW
May I remind the right hon. Gentleman that he has seen the same representatives whom I saw, and their statement is that they spoke for three-fourths of the whole distilling trade of Ireland?
§ Mr. LLOYD GEORGE
If that means three-fourths of the output in Ireland, I am not in a position to dispute it, and I accept the statement at once; but it does not represent three-fourths of the whisky trade of this country. We cannot legislate separately for Ireland. This is really an Imperial question, and a very important Imperial question. I should have liked to have gone very much further with regard to spirits, because of the overwhelming evidence there is of the mischief done by whisky. What happened about that? I do not mind saying so at once: I should have thought it would have been very much to the national interest to stop the drinking of spirits and to pay compensation. Then comes the second proposal, that you should diminish the sale of spirits by the imposition of a stiff duty. I accepted the decision of the House of Commons on that subject. Now, the third alternative is put, to stop the sale of raw whisky. We are to be driven out of that again.
Are we really considering as paramount the interests of the country? The Noble Lord (Lord R. Cecil) made a very forcible appeal in the House a few minutes ago, and it was cheered from every part of the House. He said, let us subordinate everything to the one consideration of making ready for the successful completion of this War. Is there any doubt in the mind of anyone that the sale of these cheap, raw, immature whiskies on the Clyde does interfere with the output of equipment of war? I do not suppose there is a doubt in the mind of anyone. The right hon. Gentleman may say the percentage may be low, whereas, I think, the percentage is high; but, whatever the percentage is, I do not think it ought to be allowed to interfere with such a paramount consideration as this. Really, if the interests of two or three, or even four persons, are to interfere with what is vital at the present moment, all I can say is the nation is not in a fit condition to carry through a great war. Other nations have made sacrifices. Russia gave up everything in the way of alcoholic liquor; France gave up absinthe. What happened in France when absinthe was given up? We had exactly the same process as we are having here. The manufacturers of absinthe appeared in the House of Representatives and fought it. The representatives of the absinthe districts protested in the Chamber of Deputies. What happened? The whole of the Chamber of Deputies, without exception, voted them down. An inquiry was made 1689 for us over there in connection with munitions of war, and, wherever they went, they found that the suppression of absinthe had had a most admirable effect in increasing the efficiency of the workmen. That was the official report given to the Munitions Committee the other day. It is a pitiful spectacle for the House of Commons; it is really pitiable that, every time we attempt to deal with the situation, there is always some difficulty with some interest or other. Compensation I have always been prepared to face to deal with the situation, but here, in this case, we are simply asking them to take exactly the same position as anybody else.
§ Mr. LLOYD GEORGE
It is true that in their special case there are special circumstances, but is it to be said that something which is obviously to the interest of the community, the stopping of this raw and cheap whisky, should not be proceeded with for this reason? All I can say is the responsibility on those who say so is a very serious one. I shall be very happy to leave it to the House of Commons. This is not a thing in which to call upon party loyalty; it is a matter which must be left to the House of Commons, and I should be very glad to leave the whole question to the House of Commons to decide one way or the other, without accepting any responsibility, except that of recommending it. If the House of Commons say they cannot do it, the responsibility is theirs, but I should not be doing my duty if I did not point out what is the position.
There is only one thing I say in conclusion. With regard to the bonding difficulty, we could meet those gentlemen from Belfast; we could find improvised warehouses for them, and we would undertake to do so. There must be buildings in Belfast which would do for temporary warehouses for the next two years. With regard to the making of casks, it is almost incredible that a sufficient number could not be turned out in this country for the purpose of bonding the spirits of two manufacturers in Belfast. I cannot believe it; it is a thing which to me is absolutely incredible. When we are prepared to meet them in regard to warehouse bonding, and I am sure the country will enable them to meet this other matter, I do appeal to their patriotic sense to make some sacrifice of convenience, and, if 1690 necessary, a greater sacrifice, in order to help the country to get through this present crisis.
§ Sir E. CARSON
After the statement of the Chancellor of the Exchequer I should much prefer, if possible, not to intervene in a Debate of this kind. I have never up to now, since the War broke out, said a word in opposition to any proposal the Government have made; but on the present occasion the Chancellor of the Exchequer, at the eleventh hour, and without giving any chance whatsoever of proper discussion, has brought in a proposal which seems to me to be so absolutely unfair that I think we have a right to have the matter fully discussed in the House of Commons. Indeed, I think we owe it to citizens who are carrying on a legitimate trade, and who, on the faith of a report, after an inquiry into the whole of this subject—not into every subject, as the Peel Commission did, but solely into this subject—and on the action of the House of Commons and of the Legislature ever since, have gone on extending their businesses and increasing the investment of capital in those businesses. I am very anxious at the earliest moment to state the position of these firms. They manufacture two-thirds of the whole of the whisky produced in Ireland. If this had happened in the South or the West of Ireland, we should not have had to discuss the matter at all, but it happens to be in the North of Ireland. What is the position of these firms? I have seen their representatives, and they have not the slightest objection to the bonding of whisky. I do not want the position to be misunderstood. They have no objection whatever to the bonding of whisky. They have no objection to the Chancellor of the Exchequer, under the Bill which has just passed its Third Reading, prohibiting in the War areas, or the restricted areas, the sale of whisky of any kind. They have no objection, or at any rate, they would prefer a proposal that we should prohibit the sale of whisky altogether during the progress of the War, because then they would be put upon equal terms with every other whisky distiller in the trade. What they say is that in their present position, and acting on the faith of the present state of the law, they have carried on their business in a perfectly legitimate way. They have no stocks in hand, and if you lay down that they are not to sell anything until the stock is three or two years old, then they will have to shut up 1691 their businesses for three years. Of course, what you are really doing meanwhile is, you are handing over their business to the other distillers who happen to have stocks on hand. That is the whole thing. Put them in the same position in any way you can with the other distillers, and then they will withdraw every bit of opposition. Restrict the sale of whisky altogether if you like—[HON. MEMBEBS: "Hear, hear!"]—in the restricted areas, and they have no grievance because then you are treating them the same as every other distiller. It is all very well to say people ought to rise to the importance of the occasion. So they ought. But I ask ought you, as an emergency measure, to come down here at the last moment to carry out this proposal not because you really think it is for the safety of the Empire at this great juncture, but because you are driven out of the position which you thought was the right position to take upon this particular matter, which is going to ruin these companies, and then you say, "What does it matter? It is only two companies." I think that is a most unfair thing to do.
It is very easy to make a case and ask, "Are you going to set up raw whisky in a crisis of this kind as against the interests of the nation?" That is not a fair way to look at it, and you ought to take care that you treat the whole trade equally, and not make one or two, or three, of these firms, who represent two-thirds of the whole consumption of whisky in Ireland, pay alone for the injury which you are inflicting upon them. I think that the Chancellor of the Exchequer entirely misrepresents the position of these gentlemen and the whisky they sell. After all, this is a long-standing controversy between pot-still distillers and patent-still distillers, and we may as well face it, and the result of what the Chancellor of the Exchequer is doing is that the pot-still distillers, who produce by far the most deleterious whisky when it is consumed new, have gone away having got a victory over the whole controversy that has been going on for the last twenty years in relation to this matter. [An HON. MEMBER: "No!"] Of course they have, because these distillers have stocks on hand, and they drive these men out and get the trade for themselves, and the Chancellor of the Exchequer thinks he is meeting the trade by doing that. The whole question was gone into by the 1692 Commission upon whisky and other potable spirits. It was not like Lord Peel's Commission, which was inquiring generally into the liquor traffic, but it had its whole mind applied to this matter, and they issued a unanimous report signed by Sir Laurence Guillemard, the Chairman of the Board of Inland Revenue in this country. They said a great deal more than the Chancellor of the Exchequer has stated. They said:—It was also stated that new patent-still whisky is not injurious to health, and that less change in its flavour is developed in the course of ageing than in the case of pot-still whisky. Patent-still whiskies mature more rapidly, and many of them pass into consumption when only a few months old. Some, however, are kept from two to ten years in wood.Then the Report says:In our opinion the evidence is not sufficiently positive to justify us in holding that it is necessary for the protection of the public health to detain any spirits for a minimum period in bond. We may add that, apart from the fact that the price of spirits would have to be raised in order to cover the loss of interest consequent upon their detention in bond, the practical difficulties involved in any system of compulsory bonding would, in any case, make us hesitate to recommend such a restriction.In the first place, new spirits are suitable for making into British gin and compounds, liqueurs, tinctures and medicinal spirits,and so on, and then the Report says:If compulsory bonding is considered as a means of securing the maturity and flavour, as distinct from the wholesomeness of spirits, it must be borne in mind that spirits of different character do not mature with equal rapidity.Therefore you have the finding that, as far as wholesomeness is concerned, it has nothing to do with it. When the Chancellor of the Exchequer says that he wants some means to deal with these people at the present time engaged in those areas, or any other people who are connected with the Government service at the present time, I am not here to try and prevent in any way the right hon. Gentleman doing whatever may be necessary for that purpose; but I say that to come down here as a war emergency and to try and pass as a non-controversial measure here a matter which is going to ruin two-thirds, of the trade of Ireland in this respect, without a moment's notice to enable them to adapt themselves, and without the possibility of adapting themselves, to the new conditions, and to say that is a case which ought to receive consideration without compensation, is going in the teeth of everything which the Chancellor of the Exchequer has done in relation to all the legislation he has passed. Why, Sir, when the right hon. Gentleman shuts up a public-house in the new areas he is going to compensate them, and he is going to compensate the brewers; but when he is 1693 going to shut up these distilleries he is not going to give them a penny. What is the difference between the two? He shuts up the public-house and compensates the brewer because he takes away their trade in the interests of the country. [An HON. MEMBER: "He denies that."] He said he did not deny it, and otherwise his Bill would not have passed. What is the difference? It is quite true that we are somewhat isolated, and that we have got eighty representatives below the Gangway to stop the Bill. I say that the directors of these companies are as willing as any men in the kingdom to join the Chancellor of the Exchequer in helping him, but they see no reason why they should be alone, of all others engaged in the trade, the persons who are to be sacrificed. I appeal to the Chancellor of the Exchequer at this stage to give us, at all events, some hope, in the interests of the progress of business here, that this matter will be reconsidered; and I can assure him that he will find these firms absolutely reasonable, and if he finds any method of bridging over the difficulty, or enabling them to adapt themselves to the new circumstances, I will undertake at once that they will accept it.
§ Mr. LLOYD GEORGE
I am sincerely anxious to meet the case made out by the right hon. Gentleman. There was one suggestion which he made at the end of his speech. He suggested that they were being deprived of their business practically during the whole of the next three years without any compensation at all. Do I understand that it would meet the right hon. Gentleman's views if the question of the extent to which they were injured by the application of this Bill were referred to this Commission? We feel, at any rate, in that case we should have done our best to meet his case.
§ Mr. BONAR LAW
I do think that it is in the highest degree pitiable that we should wrangle about a matter of this sort. I do not think, however, that it is our own fault, and this is a kind of question which ought to be settled beforehand if a grievance exists. We have done our best to arrive at a settlement, and we suggest that the Bill should be postponed. I do wish the House of Commons would understand the case as I see it. It is all very well to appeal to the patriotism of all of us in a crisis like this, but the right hon. Gentleman has no right, unless it is necessary, to make proposals which fall upon one firm or one class of firms only, and which
1694 5.0 P.M.
actually inure to the benefit of their rivals, and which, in other words, will absolutely destroy these distillers and will proportionately benefit rival distillers in other parts of the country. That, surely, cannot be justified unless it is absolutely necessary. I ask the Committee further to consider this: It is not as if this thing has been carefully considered and it is not as if the Government had arrived at a decision after mature deliberation and no other proposal was possible. It is nothing of the kind. The Government have been driven from pillar to post in this matter, and they suddenly arrive at this solution which seems, for the moment, to meet with the approval of the representatives of the-trade, and consequently they jump at it. Then we find that, without the right hon. Gentleman's knowledge, it is inflicting an intolerable hardship upon one class of people, and is the right hon. Gentleman not bound to meet them? It is not our case to argue that immature whisky may be bad. I happen to have read just now the Report of the Commission and it is worth something, but there is a universal feeling—an instinct, if you like—that immature whisky is bad, and I have been told it ever since I was a boy by chief constables and people of that sort. We do not wish on the ground of any theory to run against a feeling which appears to be so widespread, but, I ask, Is there no other way? Will the right hon. Gentleman say this is of such desperate importance that it cannot be met by some other method which will treat these people fairly? I do not see how he can say so. Suppose we adopt the suggestion made by my right hon. and learned Friend, is there anyone who will say it is not fair? Is there anyone who will say that it causes an evil so great that you cannot face it? That proposal was simply that for one year you should put a Sur-tax upon whisky sold in this way to give them time to adapt themselves to the new conditions. That is all they want. Put on a Sur-tax which will not interfere with the sale of it and they do not object. They are willing to stand that. Put this Sur-tax on for one year, and then at the end of that year bring into effect precisely the proposals which the Chancellor of the Exchequer suggests. Is not that reasonable? Does the right hon. Gentleman realise that this is not a case which compensation could possibly touch? It is no use offering these people bonding facilities; they have not got the stock. They have been accustomed to sell their output 1695 as they make it. Bonding facilities would not help them. Therefore what he proposes means that while they are waiting until they have the stocks of mature spirits of two years they have lost every one of their customers, who have gone to other people, and they have absolutely no means of recovering the trade which they have lost.
I can assure the House that I hate discussing this matter, but, if there is one thing which an Opposition is bound to do, it surely is to try and prevent what they believe to be an act of gross injustice, apart from the district from which it comes, and that is what I believe this to be. It is not intentional; not at all. The right hon. Gentleman has no such intention, but he has been driven in such a way that he does want to get something, and he has arrived at this as the one thing he can do, and he says, "For Heaven's sake, on the ground of patriotism, let me at least have this!" That is not fair. The position from the national point of view is not so dangerous that you cannot meet it either by a Sur-tax, which is the only thing I can think of, or in some other way which will not deprive these people of their trade. I say further, and I am sorry to say it, that I do not think the Chancellor of the Exchequer ought to have made us make speeches of this kind. We have shown in every possible way that we are ready to meet him. We did not move the Adjournment of the House when he proposed something which we did not like, and I am bound to say that when, after careful examination of the facts, we who are responsible for the Opposition had come to the conclusion that it was an unjust thing, and had told him so, he ought not to have proceeded.
§ Mr. LLOYD GEORGE
I shall do my best not to conduct the discussion in an atmosphere of heat, because it certainly will not help anybody to arrive at a conclusion, and it is much too serious a matter for us to bandy taunts at each other, which could very easily be done, but which would serve no useful purpose. I am trying honestly to find a solution for a great evil. I have tried my very best, and I have tried to do it in such a way as to carry along with me as many interests as I possibly could, and if I have failed it is not through any lack of honest effort; it may be from the absence of capacity to negotiate, but I am certain it is not through any lack of desire to meet any 1696 reasonable complaint. If I went to the extent of saying that if these people, if they were really hurt, and I am not disputing it, were met in the same way as the brewers in the munitions areas, who for the moment have the whole of their business stopped, not two firms, it may be twenty, or even a 100.
§ Mr. LLOYD GEORGE
We might give the people a taste for some other kind of beer. These brewers have not complained. They say, "Very well, we will stand it so long as you pay us compensation." I thought that when I went to that extent I was really meeting the whole case. The right hon. Gentleman said, "Why not put on a Sur-tax in order to enable them to sell? Does he not see what that means. If it is a Sur-tax heavy enough, they do not sell. That is why I put the duty so high in my proposals—but if it is a Sur-tax which is low, well then they sell, and a Sur-tax which enables them to sell this stuff is exactly what we want to avoid. If the thing is to be stopped at all, it must be a Sur-tax that will stop it. Then, how much better are they? They are worse off. On the other hand, if it does not stop their selling it, what do we gain by it? Now I come to the other point put by the right hon. and learned Gentleman. He says, "Cannot you stop it in the munitions areas?" That is just what you cannot do the moment it is out of bond. That is the only point at which you can stop it. How are you to stop it the moment it gets out of bond?
§ Mr. LLOYD GEORGE
That very proposal was put in this House yesterday, and I am perfectly certain that if I made it it would not be carried. I should have had much more fierce resistance if I had proposed to accept the Amendment of my hon. Friend sitting behind me to exclude all whisky in munition areas. The right hon. and learned Gentleman puts forward a suggestion with which I agree, but if I had proposed it I should have met with the same amount of opposition, though, perhaps, in another quarter of the House. I thought that I made a fair offer when I suggested that they should be put in the same position as the brewers whose business will be stopped.
§ Sir E. CARSON
I have not had an opportunity of talking over these matters with these very large business concerns. Does the right hon. Gentleman mean that the compensation would include the consequential fact of their losing their business? If you stop their business for two years, of course the business is gone. Therefore if you give them compensation it is practically the same as if you buy out their business.
§ Mr. LLOYD GEORGE
That is exactly the point which I have no doubt will be put by the brewers in these areas, and it is for the Commission to decide it. They are to take all relevant facts into consideration, and the only instruction which we have given them is that they shall pay what is fair to the man for the loss he suffers. We have given no other instructions whatever to the Commission. It is a perfectly fair Commission. The hon. and learned Gentleman the Member for Exeter (Mr. Duke) is in the chair, and I am perfectly certain that he will take all these things into account. If I began to lay down all the principles of compensation, we should have a Debate upon compensation. I am sure that they will take all these things into account. The brewers in the munitions areas have quite fairly put themselves in a position where their business may be destroyed, and we have said to them, "If that is the case, then the Commission must take that into account." They are bound to do so. If the same thing happens here—
§ Mr. LLOYD GEORGE
No; in England there are only one-tenth of the houses open to them because of the tied-house system. Take the sort of brewer whose business will be closed. They are small brewers, and they do not sell outside. They sell only in the areas. There are scores of them, and their trade will be destroyed. All they ask is, "If it does happen, will you compensate us?" and we say that we will leave it in the hands of the Commission. We only ask that these men should do the same.
§ Sir E. CARSON
I should be very glad to shorten this discussion at the earliest possible moment. May I say that this is a new proposal? I have only just heard of it, but I should hope in some way or other we might by that proposal find a way out of the difficulty. Certainly, so far 1698 as I am concerned, I shall do everything to promote that state of feeling which will assist in arriving at a solution. I suggest, therefore, that we should terminate the discussion now. So far as I am concerned I do not mind, after what the Chancellor of the Exchequer has said, if he gets his Second Reading, because we have still the Committee stage to take, but I should have hoped that there might be some way of getting out of a difficulty which is admitted.
§ Mr. LLOYD GEORGE
May I also appeal to all sections of the Committee that for the time being we should resume the Debate upon the Motion before the House, which is the renewal of the Tea Duty—
§ Mr. LLOYD GEORGE
That we should proceed to discuss the general finance of the year upon the Tea Duty, and that we should accept the suggestion of the right hon. and learned Gentleman and give a Second Reading at any rate to the Bill.
§ Mr. GLYN-JONES
No one will be more anxious to respond to the appeal of the Chancellor of the Exchequer than myself, but I do want to point out that apparently we discussed these matters as if alcohol and whisky were synonymous terms, and as if when dealing with alcohol you are dealing with whisky. It would not have occurred to me to have raised the question at this particular point but for the fact that right hon. Gentlemen on the Front Opposition Bench, in the interests of two great distillers, have thought it wise to raise it. They are old Parliamentarians, and I can not help thinking as a youngster that there is some reason for their doing so. I do not apologise for a moment to the House for taking their minds from the great distilling interests and the interests of those who supply alcohol for the purposes of drink, and I am not here to ask the Chancellor of the Exchequer for compensation for any interests whatever. But I am here to point out to him something which has evidently escaped his attention, and that is that his modified proposals do affect very seriously the position of medicine. They will also affect the insurance scheme. About three or four weeks ago, when pharmacists learned that the right hon. Gentleman contemplated making some change in the rates of alcohol, they asked him if he would be good enough 1699 to see them. I am not complaining in the least that the right hon. Gentleman himself did not see them—of course, he could not be expected to do so. He referred them, however, to the Customs and Excise Commissioners, by whom they were received. [Interruption.] I am not talking about whisky. I am talking about medicine, which is a matter of interest to some Members of the House. The Chancellor of the Exchequer must be interested. The Insurance Commissioners have some concern in it, although other hon. Members do not appear to be interested. I wish to thank the right hon. Gentleman for having taken into consultation those who are in a position to advise the Government regarding the increased cost of medicine owing to the War. But they heard of these new proposals for the first time this morning, and I want to ask the Chancellor of the Exchequer not that he should give compensation to anybody, but that he should again ask his advisers to take into consultation those who can really help in this matter. They are not out for compensation. Apparently the only people who are to be listened to are the big distillers who get hold of the Front Opposition Bench, and through them barter with the Chancellor of the Exchequer across the floor of the House. The right hon. Gentleman has been so driven by this enormous interest that he has not had time to consider the effect of his proposals in other directions. I am not complaining of him at all.
§ Mr. LLOYD GEORGE
In our new proposals we do not propose to put any fresh duty on medicines. It is rather our object to relieve them of duty.
§ Mr. GLYN-JONES
We were told last night that certain exemptions were to be made to certain people, subject to such duties as Parliament might decide, and yesterday the Attorney-General distinctly stated that immature spirit would be obtainable on payment of a duty of 1s. 6d. per proof gallon. I am perfectly satisfied that the right hon. Gentleman and his advisers do not really understand at this moment the effect of that proposal on medicinal spirit, and all I am asking is that his advisers should consult the 1700 authorities in the country on the effect of these modified proposals. I venture to state that certain proposals in the Bill will not do, and, before they are again submitted to the House, I hope the right hon. Gentleman's advisers will consult those who are best able to give information as to the effect of them. I want the whole of these questions, in fact, to be thrashed out by the Chancellor of the Exchequer's advisers in consultation with those for whom I am speaking.
§ Sir F. BANBURY
I propose now to discuss the general question, and not to revert to the question of spirits, which can be debated in the Committee stage of the Bill. The Chancellor of the Exchequer made an extremely important and interesting speech when he introduced his Budget. I do not mention what I am going to say with any desire to criticise the action of the right hon. Gentleman in the past, but merely in order to prove to this House that I have some little claim to be heard on this question. For the last four or five years, on every Budget night, I have stated that if we were to be involved in a great war we should find ourselves in an extremely awkward financial position, as we were using taxes which ought to be raised for war purposes only for a variety of purposes in times of peace. The Chancellor of the Exchequer has told us that our National Debt at the present moment is something like £1,160 000,000, and that, if the War continues until the 1st of next April, another £1,170,000,000 will have to be added to it. If you deduct from that the income derived from taxation, say, £270,000,000, it means that another £900,000,000 will have to be found by Parliament, and if you add the £900,000,000 to the already existing debt of £1,100,000,000, you arrive at the enormous total of £2,000,000,000 for our National Debt. The largest sum at which our National Debt has hitherto stood, in the history of this country, is £900,000,000, and therefore we have an enormous increase to face, concurrently with the enormously increasing expenditure of the country.
When I first came into the House the Liberal party, headed by Mr. Gladstone, who was then Prime Minister, were horrified at a Budget which would amount to £100,000,000. But now our ordinary peace Budget amounts to £209,000,000, and on the top of that, when the War is over, we shall have to find revenue to meet the interest on the £2,000,000,000 of National 1701 Debt. I have made a calculation. I do not presume to say it is absolutely accurate, but I do not think it is very far out. I take the interest on £2,000,000,000 at £80,000,000 a year that is at 4 per cent. and I very much doubt whether we shall be able to raise the enormous sum which we shall require at a less interest than 4 per cent. Then there must be a Sinking Fund to reduce an enormous debt like that, and taking the Sinking Fund at 1 per cent.—or £20,000,000—you get an Annual Debt Charge of £100,000,000. At the present moment our Annual Debt Charge is £24,500,000. When Sir Stafford North-cote, in the year 1876, established the Annual Debt Charge he put it at £28,000,000, so that the increase from the £24,500,000, at which it stands now, or the £28,000 000 at which it was first put, to £100,000,000 a year, represents an addition in round figures of £70,000,000; if you add that to the £207,000,000, your ordinary peace Budget, you will find that the Budget will work out at nearly £300,000,000 after the War. That is a very serious burden. I do not say it is a burden which cannot be faced, but certainly it is one that requires to be considered. I want to make an appeal of the sort which the right hon. Gentleman himself made a little while ago—an appeal to every class in the country to exercise economy in the future. The first people to set such an example should surely be the Government itself, and, after the Government, corporations and local authorities all over the country. But I do not find that the Government are giving any indication that they desire to inculcate economy. Take, for instance, the Civil Service Estimates. There we have an increase in round figures of £2,000,000 over the Estimates of last year. I have taken the figures from the Estimates, and the actual increase is £9,950,000.
Can the hon. Baronet give separate figures for the different countries—for England, Wales, Scotland, and Ireland?
§ Sir F. BANBURY
I am afraid I cannot. I do not want to take up the time of the House at any undue length. I only took out rough figures, because my object was to illustrate generally the lack of economy which apparently characterises Government Departments at the present moment. The total of the Civil Service Estimate for the year is a little over £59,000,000. Nine years ago, in 1906–7, the 1702 Estimate only amounted to £29,000,000, and I must say that the increase this year at a time when the nation is engaged in a big war, is very noteworthy. Surely those who framed the Estimate might have been content with the figures of last year, without adding another £1,950,000 to them. I notice that the Education Vote shows an increase of £397,000, and, as far as I can see, one of the worst offenders in this respect is the Board of Education. I am speaking from what I read in the public Press. Instead of doing as they should have done, instead of going round to the various local authorities who control the education of the country, and telling them that for the future they must be very economical, and that, though there may be certain classrooms in not such a good state as they might be if everything were absolutely perfect, and although in certain classes the number of pupils may be larger than the most critical educationists would desire, yet these things can not be remedied in the present year, but that they must economise their money, and not spend any more—the Board of Education have adopted a very different policy. They have asked the London County Council to spend more money—I do not care for what purpose—and I do suggest that money ought not to be spent on anything that is not absolutely necessary at the present moment.
Take the case of the local authorities. So far as I can gather very few, if any, of them have done anything whatever to stop the expenditure that is going on. They are talking about building houses. That may be very necessary, but we have gone on very well without them up to the present time, and surely we can do without them for still another year. If we began to build them now, they would not be finished for another eight or nine months, and people might well wait a short time longer before entering on this expenditure. It is not only a question of money; it is a question whether or not you are taking the men who ought to be employed in making munitions of war and in other directions, and are employing them on what may be all right in time of peace, but which is certainly not right in time of war. Only the other day I drew the attention of the House to the fact that in the park certain trees were being taken up by ten or twelve men and transported to another part of the park. The hon. Member who represents the Office of 1703 Works replied that he thought that buildings were going to be put up there. He must have relied upon information which was incorrect, because I walked by the same spot only two or three days ago and there was no sign of any building. The site is on a slope, and I do not think that any building whatever could be put up there. That is only a small thing, but it is a straw which shows which way the wind is blowing. It shows that in all the Government Departments, so far as I can ascertain, and in all local authorities, there is the same desire to go on spending money that existed before the War.
All these different Departments are not the departments of the Chancellor of the Exchequer, although, of course, he can control them. If we come to his Department, what do we find? I do not take this case because there has been a controversy about it, but merely because it seems to be something which shows that the true spirit of economy is not being followed. Take the Land Taxes. They yield this year £350,000, while last year they were estimated to yield £700,000. I cannot find the actual cost, but I do not think I am exaggerating when I say that they cost £800,000. Included in the £350,000 is the Mineral Rights Duty, which is only another form of Income Tax. If you take the £350,000, including the Mineral Rights Duty, there is, if my figures are correct, and I think they are, a net loss of £450,000. It has been stated in the House—I think it was to-day—that there are over 2,000 men employed in this Department. Leaving out the question whether the Land Taxes are good or bad, there is no doubt that they are not profitable at the present moment, and are employing a large number of men who might be usefully employed on something else. At least these taxes might be suspended until the close of the War. They are not profitable, we are losing money on them and using men to collect them who might be used for other purposes. If it had not been for the truce, I might have made what, perhaps, would be called a critical speech. I have endeavoured to avoid all matters of party controversy, but I feel very strongly that if we are to come out of this War successfully—the Chancellor of the Exchequer himself has talked about silver bullets ending it—and if we are to raise the money that is necessary to enable us to do so, every man in this House must drop any particular hobby that he had 1704 before. I do not much care what the hobby is. I do not think I have any myself, but if the Chancellor of the Exchequer can show me one I shall be perfectly willing to drop it.
§ Sir F. BANBURY
That would not cost money. [HON. MEMBERS: "Yes, it would!"] At any rate I must drop it, because no private Member can bring in a Bill now. Therefore that is not a very good illustration. Every Member, whatever his hobby is—whether it is education, the housing of the working classes, or doing this, that, or the other—must make up his mind that he has to drop it if we are to find the money necessary to carry the War to a successful conclusion.
§ Mr. SNOWDEN
The hon. Baronet who has just sat down is as unconscious of his hobbies as he is of the many personal virtues he possesses. Those who heard the hon. Baronet's speech will agree with me when I say that he has upon this occasion, as he does upon most occasions when he addresses the House, been riding quite a number of his favourite hobbies. One of the hobbies he rode this afternoon was his opposition to the Land Taxes. Although other parts of his speech were a plea for financial economy, in that particular respect he advocated a sacrifice of a not inconsiderable amount of revenue.
§ Sir F. BANBURY
No. I pointed out that they cost £800,000, while the yield was only £350,000; therefore I was advocating an increase in the revenue by suggesting that the taxes should be dropped.
§ Mr. SNOWDEN
The hon. Baronet is perfectly well aware that if the revenue were sacrificed the expenses incident to the valuation, and so on, would not be stopped at all.
§ Mr. SNOWDEN
Nobody, at any rate no outsider, could have listened to this Debate and seen the present condition of the Committee and imagined that we are now faced with the gravest financial problem which this or any other country can be faced. The Debate, apart from the speech to which we have just listened, was concerned with the financial interests of one or two very rich distilleries, and since the Chancellor of the Exchequer gave the assurance that the interests of 1705 those distilleries would be protected, the interest which the Opposition had in the Budget appears to have evaporated. The Budget Speech which the Chancellor of the Exchequer made last week was remarkable and unique in three respects. First, it dealt with the most colossal figures ever presented to this or any other Parliament; secondly, it set forth—taking the estimate for the continuation of this War at twelve months—a deficit of something like £800,000 000; and, in the third place, it was remarkable in that the financial statement made no proposals for meeting this enormous deficit. I take it that the Chancellor of the Exchequer's speech last week was rather in the nature of a feeler. A considerable part of the speech was devoted to setting forth possible ways by which an increase of revenue could be secured if the whole of the deficit could not be made good. In considering this question I, like the hon. Baronet, do not want to be hypercritical or controversial this afternoon. In the present situation it is the duty of each and all to contribute whatever we are able to the solution of this very important matter.
The first thing we have to consider, and the thing we must bear constantly in mind when we are considering the question of raising additional revenue, is the fact that the wealth of the country and the income of the country from which the national revenue must be derived depends mainly upon maintaining the productive capacity of the nation, and that the productive capacity of the nation depends, in the main, upon leaving unimpaired the standard of life of the great body of the workers. The Chancellor of the Exchequer last week spoke in a very optimistic tone of the present industrial prosperity. He assumed that the savings of the nation this year will be considerably higher than they have been in recent years. It is a matter for universal gratification that serious unemployment has not, so far, been one of the results of this War. But we should be living in a fool's paradise if we were not to realise that the present apparent prosperity is not real, but, in a sense, fictitious. It is not due to the fact that there is a real increase in the material wealth of the nation. It is not, of course, a difficult thing to get a temporary prosperity if one is prepared to live upon one's capital. That is really what we are doing at the present time. We shall have to pay for this later, I am afraid, in commercial and industrial depression 1706 and a large volume of unemployment. There are two reasons, among others, which have contributed for the time being to this apparent national prosperity. One is the fact that something like two million of, perhaps, the most efficient of the working classes have been withdrawn from the ordinary channels of employment.
§ Mr. SNOWDEN
Yes, more if you include those engaged in the manufacture of munitions of war. That must have a very appreciable influence indeed upon the general state of employment in the country. Bearing in mind what I said a moment or two ago about the importance of doing nothing at all to impair the productive power of the nation and of keeping up the standard of living of the working classes, we are driven to this conclusion: That no part of the additional revenue ought to be raised by an additional impost or taxation upon the wage-earning classes of the country. The wage-earning classes of this country are paying for the War in a great many ways. They are paying for the War not only by the increased duty placed upon tea last year and the increased duty upon beer, they are paying for it not only by the sacrifice of their lives, but they are paying for it financially to a far greater extent than by the increase of taxation which was levied last November. The Chancellor of the Exchequer shakes his head, but I will give him one or two facts in support of the general statement I have made. I noticed in the "Economist" this week that the figures which are published regularly dealing with the prices of commodities—taking practically every article which enters into the economy of a working class family—show an average increase since August last of 30 per cent. That does not include rent. Probably there has been no increase in rent. Even if I were to take 20 per cent. as being the proportion of expenditure upon rent of the average working class family, the figures show an increase of 30 per cent. The total spending power of the wage-earning classes is about £800,000,000 a year. If we deduct 20 per cent., that leaves over £600,000,000 which is spent upon other commodities—food, clothing, coal, and the like; 30 per cent. increase upon that means not less than £180,000,000 a year. That brings us to being compelled to accept one of two conclusions. Of course, if there had been an increase of 1707 £180,000,000 in the total wages bill of the working people, then we should be financially in the same position that we were in before the War; but we know that no such increase of wages has taken place, and therefore there has been a reduction in the spending power of the working people since last August of not less than £180,000,000. That is part of the working classes' contribution to the cost of this War.
§ Sir F. BANBURY
There is a considerable increase in wages, not only in the amount, but in the larger amount of employment given. The hon. Member has also left out the question of clothing.
§ Mr. SNOWDEN
The hon. Baronet is absolutely wrong in both points. There has not been an increase in the wages bill. There have been two million men withdrawn from wage-earning employment, and I agree that there has been in some industries an increase of wages, but last month the total increase of wages amounted only to £70,000. That is less than £1,000,000 a year. The total amount of indirect taxation which will be raised during the current year on the basis of existing taxation is about £82,000,000, and if we take four-fifths of that as being paid by the working people, that means that they are contributing, indirectly, through taxation, to the Imperial Exchequer during this year the sum of £65,000,000. The amount which is paid by Income Tax and Estate Duties is more than double that—about £150,000,000—but no one will maintain that to exact £150,000,000 from a very rich class like those who, in the main, contribute to the payment of Income Tax and Death Duties, is a fair proportion to the sum of £65,000,000 which is paid by the wage-earning classes. I submit that, whatever other means we adopt, we cannot afford to increase the taxation upon the wage-earning classes of the country. We have to consider by what means this enormous sum can be raised, and we have a choice of three courses—taxation, loans, or a combination of additional taxes and loans. The Chancellor of the Exchequer pointed out, I think last week, that the practice adopted at the time of the French wars and the Crimean war was to raise the sum needed in about equal proportions by revenue and loan, and he pointed out that at the time of the Napoleonic wars taxation rose to a figure which took two-sevenths of the national income.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Acland)
That would fall on the working classes.
§ Mr. SNOWDEN
Two-sevenths of the national income at that time was a far graver impost than it would be now. Two-sevenths from an income of £140 a year would be £40. That would be a very heavy tax indeed upon such a comparatively small income, but to take, say three-quarters of an income of £50,000 a year would leave an income of £12,500 a year, and surely £12,500 a year is as much as any individual could expect to have to spend according to his own sweet will in such a time of national crisis as this. I see no insuperable obstacle to raising perhaps the whole of the deficit which the Chancellor of the Exchequer will have to meet by means of taxation. If he were as courageous as the Chancellor of the Exchequer in the time of the Napoleonic wars and took two-sevenths of the present national income, which he himself stated last week to be £2,400,000,000 that would give him just about the sum that he would want, say £800,000,000 a year. That is one of the suggestions I would make for the consideration of the Chancellor of the Exchequer.
I now come to the question of raising this money by means of a loan. It seems to me that there are only three favourable conditions under which a large national loan could be raised without inflicting very considerable injury upon the trade of the country, and particularly upon the working classes. If we were able to borrow in the foreign market, a loan would have no very serious consequence upon the industry of our country, or if it were possible to raise a loan out of savings which were not needed for ordinary commercial purposes, or if there was capital lying idle, and if a loan could be raised from that, no very serious consequences would ensue. Of course there would still remain the very serious objection to a large loan, that the interest upon the loan would be a permanent burden upon the prosperity of the country, and it would give to the bondholders a perpetual right to extort a certain proportion of all future wealth which was produced in the country. But not one of these favourable conditions exists at present. We cannot borrow in the foreign market; all the foreign markets are closed, there is no surplus capital in the country waiting for investment, and although the Chancellor of the Exchequer 1709 last week seemed to think that he might be able to appropriate, if not all, at any rate a considerable part of the current savings, he could not do that without its having a disastrous effect upon the industry of the country generally. There is an index by which we can test whether we could borrow without serious financial and commercial consequences. I believe it was Dr. Chalmers, some seventy years ago, who first raised this point, that a loan under such conditions as I have stated was a tax upon the working classes—a tax falling wholly upon the working classes—and that the total amount was raised out of the year's income. That condition has, I believe, been accepted as orthodox by every recognised economist since that time. Mill accepted it practically without any doubt or equivocation. What Mill says upon this point is so very important that I will read two or three sentences. This answers the interjection made by the Secretary to the Treasury a moment ago, when he said that the burden would fall upon the working people.
§ Mr. ACLAND
I said the national income quoted by the hon. Member was included in the income of the working classes, so that when he was advocating that our expenditure should be raised by a tax on two-sevenths of that, he would have to include the working classes so as to get the money.
§ Mr. SNOWDEN
I did not limit myself to two-sevenths, because I had been pointing out how much better able we were to bear a large impost than we were at the time of the Napoleonic wars. This is what Mill says upon this point of a loan falling wholly upon the working classes:—If the capital taken in loans is abstracted from funds, either employed in production or destined to be employed in production, their diversion is equivalent to taking the amount from the wages of the labouring classes. Borrowing in this case is not a substitute for raising the supplies within the year. A Government which borrows does actually take the amount within the year, and that, too, by a tax exclusively on the labouring classes, than which it could have done nothing worse if it had supplied its want by avowed taxation, and in that case the transaction and its attendant evil would have ended with the emergency; while, by the circuitous mode adopted, file value exacted from the labourers is gained, not by the State, but by the employers of labour, the State remaining charged with the debt besides and with the interest in perpetuity. The system of public loans in such circumstances may be pronounced the very worst which, in the present state of civilisation, is included in the catalogue of financial expedients.I say we can test whether the conditions which are stated to exist at the present time actually are existent. If the Government borrowed under other conditions 1710 than those I have stated, it would have no appreciable effect on the rate of interest, but when the rate of interest rises as the result of borrowing, it is proof positive that the amount that the Government borrows is being withdrawn from capital employed in industry, or that it is diverting capital which otherwise would be employed in industry, and therefore all that Mill says, supported as it is by every other recognised economist, applies to the circumstances of the present time. One word more about this burden in perpetuity of interest. Roughly speaking, the National Debt, ever since about 1820, has stood at between £700,000,000 and £800,000,000. Since 1820 the country has paid £3,000,000,000 interest on the National Debt. Every generation of taxpayers pays in interest the total amount of the debt, and this will go on from generation unto generation, or until the patient taxpayer develops sufficient intelligence to kick against it.
I turn now to the other possible course, and that is taxation. I have pointed out how undesirable it is that any part of the new taxation should be levied upon the working people. I mention one or two indirect taxes which have been suggested simply to dismiss them. Some people seem to be very strongly in favour of a tax upon mineral waters. I think it is bad national economy to have too many taxes. The fewer taxes you have the better. I think Income Tax and Death Duties are the two most ideal forms of taxation. I am quite sure that if the Chancellor of the Exchequer were to attempt to put a tax upon mineral waters the result would be very disappointing—to him at any rate. You must understand the difference between a tax upon mineral waters and a tax upon intoxicating liquor. People do not drink mineral waters because they like them, though they drink whisky and beer because they like those beverages; therefore if the price of mineral waters were raised on account of taxes imposed upon them, it is perfectly certain that people would cease to drink them. Even if there were only a little drop in the consumption of these beverages, the amount of revenue raised would not be worth the trouble of collection. I now come to another question, taxes upon wages. I gathered from what the Chancellor of the Exchequer said some time ago that he and his advisers had been considering this. I go so far as to say that 1711 if we were considering de novo the establishment of a system of taxation, then something might be said in favour of this proposal. Something is to be said in favour of it, provided of course always that you exempt a certain income from taxation altogether. There is, however, nothing to be said for it now, because that is not the alternative to the indirect taxation which is already in existence. It could only be proposed as an addition to the Tea Duty and the other indirect taxes. That, therefore, rules it out on the ground which I have already dealt with at some length. I am quite sure that any tax upon the wages of the working people would give to the revenue no very considerable sum. For instance, take an income of £200 a year. At the present rate of taxation that income would pay on £40, and £40 at 1s. 6d. amounts to £3 a year. Therefore a man with an income of £200 a year would pay £3 a year Income Tax. I do not suppose that those who advocate this tax upon wages would suggest that a man with £1 a week wage, or a man with 30s. a week, or even 40s. a week, should be taxed at the same rate as a man with £200 a year. Suppose we take it at half of that. What would the tax upon wages of that amount bring in? It would raise only £3,000,000 a year. And certainly when the Chancellor of the Exchequer is talking in hundreds of millions, and is approaching the time when he may be thinking in thousands of millions, it is not worth while to incur all the opposition which such a proposition would encounter for the sake of raising £3,000,000 a year.
Then how can the tax be raised? I think it could be raised, or, at any rate, a considerable portion of it could be raised, by an increase in the Income Tax on high incomes. If the tax were raised to 15s. in the £ on very large incomes, not one of these persons would be reduced to a condition of starvation. I think that this national necessity will compel the Chancellor of the Exchequer to adopt the course which in times of peace I have often tried to impress upon him, namely, that we must reverse our ideas of imposing taxation. In the past we have looked at what we were taking from a man, to a great extent regardless of what was left. Now we shall have to say that no man shall be left with more than a certain amount, and that we are going to take all the rest. I gather from what the Chancellor 1712 of the Exchequer said last week that even that proposal would be received with enthusiasm by the class to whom it was applied. He told us how these people rushed, in the first days of the War, to pay, and that very often they accompanied their remittances with letters saying how glad they were to do that. Surely their enthusiasm and loyalty is not going to be damped because they are going to pay so much more. We have often heard, in debates upon these matters, from the other side of the House, that taxation, whether in the form of an Income Tax or a tax in the form of Death Duties, was injurious and harmful to trade. I have often tried to deal with that contention, and it was only a day or two ago that I was aware that the point which I have often brought before this House could be supported by the authority of a very eminent economist. I have repeatedly stated that the more you tax people, provided, of course, that you spend the revenue economically and wisely, the more you advance the prosperity of the country. I happened to be reading M'Culloch the other day, and I found that he stated that very point:That taxation is a means by which you can increase the productivity of labour; that the more yon tax a person the more energetic you make him, because he works all the harder in order to keep his income at the point at which it was before.There are other important matters involved in this. I think the experience of this War is going to alter a good many of the orthodox opinions we have had in the past. One thing it will certainly do. It will show that the existence of a rich class, having an enormous spending power, is from every point of view a danger to the community. The tendency for wealth to concentrate in the hands of a few people has produced this industrial and social disaster—it has drawn people away from productive work. If you refer to the Census returns, you will find this fact, and it is a fact which can be noticed in all the Census returns since 1871, that in proportion to population the number of people employed in productive work has been growing less and less. I know the late Mr. Chamberlain in the early days of his Tariff Reform crusade pointed that out. It is undoubtedly the fact that in proportion to population the number of productive workers each decade is shown to be less and less, and that the occupations which are increasing in number are those which are catering to the luxury and comfort of the well-to-do classes. That is not good for the community. Therefore, 1713 if by taxation, by reducing the spending power of those classes you can prevent them from employing people in these ways you are rendering a great national service. The taxation that I have been suggesting would have that result amongst many others, and it is all the more important at this moment because the Chancellor of the Exchequer pointed out last week another financial difficulty which is arising owing to the falling off of exports, which in a large measure is due to the fact that two million of workmen are being withdrawn from the ordinary trade to make war munitions. If, therefore, we can reduce the number of those who are employed in the parasitic industries, train them and put them to productive work, industry and the country generally will gain.
There is one other suggestion I want to make. We have heard a great deal about abnormal war profits, and many of us expected that the Chancellor of the Exchequer would at least have had something to say about this matter, even though he were not in a position to make a statement in regard to what he proposed to do. This is a matter upon which the country feels very keenly indeed. In the early part of my observations I pointed out that there had been an increase of £180,000,000 in the price of commodities consumed by the working people. That simply represents so much extra profit which is going somewhere, and which has to be paid by the people. The indignation of the country was brought to boiling point a week or two back by the announcement of profits which had been declared by a certain firm of millers in South Wales. I have a letter which I may perhaps read to the House from a man, who is certainly not of my way of thinking politically, in reference to this matter. He encloses a newspaper cutting announcing the profits of this particular firm of millers. I will read what he says, because I am sure it expresses the feelings of millions of people in this country:My own feelings and those of several of my friends in this district, are the excuse I make in asking if you will, at the earliest opportunity, call the attention of Parliament to the enclosed, needless to add, it has caused a feeding of intense revulsion amongst us. What is the use of being patriotic even unto death, if we are to be exploited in this manner by men who appear to have no conception of what is due from them to their country at such a time Bread may well be dear, when such are allowed to make such profits One would have expected less profits to such firms in face of high freights and scarcity of grain. I am only a middle class wage earner; my income is much less through less business done, and my only child, a son, is serving in His Majesty's forces. My blood boils at such contemptible trading.1714 The country is expecting the Government to do something in this matter. I now come to shipping profits. I do not know why outside Stock Exchange firms should occasionally send their circulars to me, but I sometimes receive them, and I invariably read them, and at times I get useful information from them. I had a circular sent to me recently advising me to put all my wealth in the shares of shipping companies, and the most alluring prospect of high returns was put before me. Extracts were given in this circular from a number of important daily papers, such as the "Daily Mail," and important weekly papers like the "Observer." I would like to mention one or two facts given in these statements. One statement says:With the rates at their present level a six thousand tonner is making a profit for her owner of £7,000 to £8,000 for every Transatlantic voyage. Such a steamer can make about five such voyages a year, so that at the present rates the owner will be making from £35,000 to £40,000 per annum.Then in regard to South American trade:A steamer of this type—that is a 5,000 ton cargo boat—could make about four voyages per annum, so that running in this trade the owner would net something like £28,000 to £29,000 a yearI now come to the Mediterranean trade:The round voyage occupies about a month. Thus, the owner of a 6,00 tonner running in this trade could make something like £31,000 per annum profit.I want to give the House an even more remarkable statement. I happened to be in Newcastle recently, and I was talking to a man who is engaged in the shipping trade, and he told me that a friend of his who had two steamers had let them out on what they call "a time charter." I understand that to be that he had let them to some firm and he simply received rent for them. For those two steamers this man was receiving £5,000 a month. That statement is supported by an extract from a speech made by Mr. Laurence Phillips at a meeting of the Court Line, Limited, recently held. It appears that they have been doing this time charter business also. He was speaking of the purchase of a steamer for the Court Line, and he said:Only a few weeks ago we bought a vessel, the "Ilvington Court." We got her fairly cheap or we should not have bought her. She has been chartered for twelve months with a loading French shipping company, and I believe she will be employed a good deal in the service of the Allies. She cost £56,000 and the freight payable to us on twelve months means £54,000. However, that is not all profit, but a decent slice of it is, and I do not think she will be a white elephant to us.I should think not, So much in regard to shipping profits. Take the leather trade. I will give this one instance. Attention 1715 was, I believe, called to it some time ago. A firm of leather merchants in Liverpool recently issued a prospectus. They are increasing their capital. Before the War the average yearly profits were £24,000. Since the War, between August and December, according to this prospectus, their profits were at the rate of £180,000 a year.
§ Mr. HOUSTON
Will the hon. Member say what are the annual profits of the Royal Mail Steam Packet Company?
§ Mr. SNOWDEN
If a company is incompetently managed or is obviously over capitalised that is not to be taken as a typical instance. It would be interesting to the House if the hon. Member would be sufficiently confidential to tell us something about the profits of some of the companies with which he himself is associated.
§ Mr. SNOWDEN
The hon. Baronet the Member for the City of London said that the price of cloth had not risen. The fact is that few things have risen so much as the price of woollen clothing. I have some figures which cannot be contradicted with regard to the profits now made out of the making of khaki. Before the War the Government paid from 3s. 4d. to 3s. 6d. a yard for the khaki cloth of which tunics are made. Now they are paying about 2s. more than that. The price of the wool from which this cloth is made has risen, I am told, from 1s. 4d. a lb. to 2s., and I understand that in Yorkshire there was a great deal of fortunate buying before the prices reached the present figures, and that the profits which are now being made are simply enormous. Spinners themselves admit that they never had such a time, and there are plenty of cases where a man is making from 1s. to 1s. 6d. a yard clear profit on every yard of khaki cloth turned out from his factory. In regard to the increase in the price of food, I want to make a practical proposal. We all know that the price of wheat is from 24s. to 28s. a 1716 quarter higher than it has been in recent years. There are, I believe, from seven to eight million quarters of English-grown wheat consumed in this country. I do not say that all this crop has been sold at the highest figure—by no means. But suppose we take a much lower average of increase of value on eight million quarters and we say that the average increase has been 15s., that would give an increased profit over that of previous years to the growers of wheat of £6,000,000. Attention has been concentrated too much from this point of view upon wheat. But there has been an increase also in the price of barley, and there has been a large increase in the price of oats, and the number of quarters of oats grown in this country is nearly double the number of quarters of wheat. Therefore upon a very moderate estimate, if we are to take the increase in the price of English-grown corn, wheat, barley and oats, we should find that the growers of these commodities are taking no less than from £15,000,000 to £20,000,000 more in profit this year than they have done on the average of previous years.
I have a practical proposal to make. The form in which farmers have paid their Income Tax in the past is nothing less than scandalous. They have not paid their Income Tax on the increase on their revenue, but upon the assumption that the farmer makes only one-third as much as the landlord takes in rent. That, of course, applies only to farmers whose rent is less than £480 or something like that. Of course it applies to the great majority of farmers. The landlord is expected to take three times as much as the man who actually does the work. But to take one-third of the rental as a means of getting at the profit of the farmer is simply ridiculous. We have to alter that, and we ought to alter that now. Something has got to be done at once by which the farmer, like other business men, will pay not upon a fictitious, unreal and absurd estimate, but upon the real profits that he makes. That can be done by the abolition of the three years' average; and I suggest this as an all-round reform, and as a means by which we can get at some of the abnormal war profits—that is, to put the tax upon profits which are actually being made and put the farmer out of Schedule B and put him, like every other business man, under Schedule D. Those are practical proposals which I submit to the House. I have dealt with the three means of raising the money required—taxation, loans, and 1717 a combination of the two, and the conclusion at which I arrive is this: that as much as possible, and if possible every penny, of the money which is needed this year for the prosecution of the War ought to be raised out of the year's revenue. Of course, we all regret that it should be necessary to raise these enormous sums. As I said a moment ago, we shall learn many lessons from this War, and I shall be expressing the general sentiment of this House when I say that one lesson at least which the nations of Europe should learn from this War is the folly and futility of attempting to settle international differences by such an expensive and inhuman system as is now being employed.
§ Sir JOHN SPEAR
I do not rise for the purpose of following the hon. Member for Blackburn into the very important financial problem which he has raised. But I do feel compelled to second the appeal made to the Chancellor of the Exchequer by the hon. Baronet the Member for the City of London to keep a firm hand on the expenditure of the Departments. The Civil Service Estimates have gone up a great deal. Some of the expenditure was doubtless necessary. But I remember the Chancellor's appeal in his Budget speech to us all to be economical, that we may raise the money, which we shall pay cheerfully, to liquidate the expense connected with the War. The right hon. Gentleman has caused a circular to be sent round to the local bodies to study economy. The inspectors of the several Departments have not shown that they have realised the necessity of carrying out the admonitions of the Government on this point. Last year the Chancellor of the Exchequer, in discussing the burden of local taxation, admitted that the burden on the ratepayer had become intolerable, and must be relieved at once. We know that that has not been possible, because of the occurrence of this War. But we who are members of local bodies do contend that, during the War, in order to meet the expenditure necessitated by the War, local authorities ought to avoid all unnecessary capital expenditure. Yet—and I can give instances—the inspectors of the Local Government Board and the Board of Education have not acted upon that principle.
Five or six weeks ago we in Devon received an intimation from the Local Government Board that with the return of soldiers from the front, which we hope by and by will take place, there would be a 1718 danger of the recurrence of small-pox, and that hospitals must be provided in case of such an outbreak. The Devon County Council at once took action. We appointed a committee at the head of which was a medical man who was always in the forefront of any movement to promote the health of the people of the county. That committee consulted the county architect. He drew up a scheme for two hospitals. In the opinion of the chairman of the committee, who was a man of such progressive ideas, the buildings provided for, which would have cost £1,000 each, would be ample for the requirements. The county council applied for the Local Government Board's consent. The inspector came down and insisted on alterations which would necessitate the expenditure of £2,000 on each of the two hospitals. The county council felt that this was so contrary to the appeal, which we had received, to avoid unnecessary expenditure that, after full discussion, it was felt, in justice to the ratepayers, to be impossible to accede to the demands of the inspectors of the Local Government Board. That is a case in point which shows that it is most important for the Chancellor of the Exchequer to control the inspectors of the various Departments during the present crisis in the direction of practising all possible economy that will not interfere with the health of the people.
Again, in the matter of education, we all know how enormously the cost of education has increased in recent years, largely on account of the demands of the education authority for the erection of very expensive buildings when less expensive structures would answer the purpose. I have brought before the President of the Board of Education a question which was sent to me from my own county only two days ago. The Education Board was pressing for the expenditure of something like £10,000 on a grammar school. The President, it is right to say, agreed at once that the demand for this expenditure should be postponed until after the War. I thank him for doing so. We, who are prepared to take a long pull and a strong pull, all together, to raise the money to pay for the War, feel that the Government ought to act on the same principle in the directions to which I have referred. Otherwise it will be a great deterrent to the ratepayers who see large capital expenditure being made, which might very well be postponed without any injury whatever to the public service. 1719 Not only on that ground do I ask for a temporary discontinuance of these matters of expenditure, but the cost of building is so great at the present time that that is an additional reason why this expenditure should be postponed. Further, when the War is over there will probably be considerable unemployment, and it would be well to have these works postponed until that occurs. I support therefore, the appeal of the hon. Member for the City of London to the Chancellor of the Exchequer, that he should give directions to his inspectors in the several Departments to be moderate in their demands for public expenditure by local bodies. In reference to what was said by the hon. Member for Blackburn (Mr. Snowden) about farmers' profits, I would point out that the agricultural community are prepared to bear their share of the burden of taxation. Everybody must admit that in the last two or three years there has been a very considerable improvement in the position of agriculturists, but the hon. Member at once demands that there should be a rearrangement of the system of levying Income Tax on farmers. That may be right or it may be wrong, but it is rather singular that the hon. Member for Blackburn has never raised this question during the years of depression.
§ Mr. SNOWDEN
I do not think there has been one year of the ten years I have been in this House that I have not raised this question.
§ Sir J. SPEAR
I am rather surprised to hear that, and I am bound to say that the hon. Member did not show that sagacity which he generally displays in his speeches; because everybody connected with agriculture knows very well that in the difficult year of 1879 and for twenty-five years afterwards the average British farmer never got a penny interest on his capital, and lost a quarter of his capital. How the hon. Member for Blackburn, in the face of those figures, could raise the question of making the farmer pay more Income Tax, is a surprise to me, I always thought that hon. Members below the Gangway opposite were in favour of a fair wage for a fair day's work, and I submit that this principle should be applied by them to the agricultural community. The hon. Member spoke a good deal about the increased prices of food. Although I am a farmer, I regret exceedingly that the poor should 1720 have to pay these increased prices for the necessaries of life. But, after all, it is one of the vicissitudes of War. Fortunately, owing to our strong Navy, the condition of things in this respect has not been so bad as there was reason to fear. I would observe, however, that part of the increased cost of the necessaries of life has been caused by the neglect of agriculture by this House for many years gone by; and no part of the House has displayed that neglect, I was going to say criminal neglect, of the work of raising the greatest possible amount of food for the people, and no part of the House has shown a greater lack of foresight on that subject than hon. Members below the Gangway opposite. [HON. MEMBERS: "Question!"] Yes, it is the question. I have been in the House now for some years, and I am bound to say that I have never heard from any Labour Member, except the hon. Member for Norwich, one word which showed me that he realised the importance and difficulty of raising food upon the land of this country. Whenever any proposal has been forthcoming to relieve agriculture, and thereby to increase the output of food, it has been opposed by hon. Members below the Gangway. [HON. MEMBERS: "No."]
In regard to the price of food, I would point out that most of the farmers sold their produce last autumn before the high prices took place. I admit at once, however, that there has been an increase of the farmers' earnings, but I should have thought, apart from the regret we must all feel that the poorer classes of consumers have to pay more for the necessaries of life, that the judgment of hon. Members below the Gangway at least would have been tempered with mercy, having regard to the difficulties of the agricultural industry in the twenty-five years following 1879. Be that as it may, I can only say that we want those who till the land to obtain from it as much as it is capable of yielding in the interests of the commonwealth. We as farmers have no less regard for the interest of the community than hon. Members opposite, and if we do not talk so much as they do I think we do a great deal more. Practice is better than precept. We hold that the man who makes two blades of grass grow where only one grew before is a public benefactor, and, consequently, we claim that we are working for the nation just as well and just as effectually as any other 1721 section of the community. I will not, however, follow the question any further, except to express my surprise that not only did hon. Members not sympathise with agriculture in the time of depression, but now that better conditions have arisen they seek to kill the goose that lays the golden egg, thinking in that prospect they will better the position of the working classes. We want to see more people living in the rural districts, and that can only be accomplished by making it better worth their while to stay there.
I know that hon. Members will say that the landlords must suffer. I am bound to say that the landlord must feel that there should be a living for the farmer and good wages for the labourers, but it must be remembered that the landlord had to bear his share of the depression, for in one season alone the decline in rental amounted to £14,000,000. I would further point out that the agricultural value of land only represents the interest on the capital laid out in bringing that land from its prairie state into a state suitable for food production. Therefore the produce of the land is as much the fruit of labour as wages are the fruit of artisans' labour. What we want is to till the land and make it produce as much as possible in the interest of the commonwealth. Farmers do their best in devoting their energies, capital, and skill to the cultivation of the land, just as other members of the community devote their energies to production in other departments of industry; and, in so doing, the agricultural community as well serve their country as do others in other departments of industrial life. I think that those who criticise farmers could better serve our country than by carping at the agricultural classes.
I do not wish to say very much about the way the money for the War should be raised. On one or two occasions I have asked the Chancellor of the Exchequer to put a very considerable tax on motor lorries, which are breaking up our roads, and making the rates imposed by county councils almost intolerable. The right hon. Gentleman promised, although he could not reveal his financial proposals, that he will in the near future remember that the enormously increased expenditure of county councils has been largely brought about by the introduction of motor traffic, especially that of motor lorries. Although I do not want to penalise any section of the community more than another, the owners of these vehicles have caused so greatly the increased 1722 cost of the maintenance of the main roads, that I think they ought to contribute a larger share to the repair of the damage that they have caused than they do at present. As a member of various public bodies I do feel that the point I have raised as to the Chancellor of the Exchequer controlling his inspectors in regard to making demands for expenditure by local bodies is one of very great importance. We who are members of those bodies are execrated by the ratepayer because of the ever-increasing burden we are putting upon them, and we say that it is largely the fault of the Government, who are constantly putting more work upon us. We, as business men, are anxious that public work should be done properly; we are jealous to protect the health of the people, and to provide a sound and practical education for all. We who are members of these local bodies are large ratepayers ourselves, and we know very well what is wanted, but we do object to representatives of the various Departments constantly coming down and over-ruling plans, matured and carefully thought out plans, in the faithful fulfilment of the duties which devolve upon us. I trust that the right hon. Gentleman will put a check upon the inspectors of the various Departments, and that he will encourage us to carry out his admonition to save our money for the War. If the Government itself will set an example in that direction, I am sure that we shall set about it, with a better heart, to carry out his request.
§ Mr. J. M. HENDERSON
I always listen with the greatest interest to the speeches of my hon. Friend the Member for Blackburn, and I think I have heard every speech he has delivered on this subject since I have been in this House. I always know what is coming. First of all, he gives us a great number of statistics—a sort of economic lecture which he might very well address to a London school. He gives us statistics which are fenced round so that the working classes should in no circumstances have more claimed from them. But I have seen too much of figures and of statistics, of proportions and percentages, and I know how unreliable they are when they come to be practically applied. In a general way they can be applied so as to work out anything or to lead anywhere. I do not put any great faith in general statistics. My hon. Friend's plan is to tax highly everybody except the working classes. That is not 1723 an ideal which we are able to adopt yet; what we may come to I do not know, but the idea that certain classes should pay the whole of the tax, or all the special War taxes, and that the workmen who have been earning very good wages of late, a great many of them at any rate, should not contribute, is one that could not be adopted.
I would like to make some reference to what took place in the earlier stages of the discussion between the two Front Benches. I agree entirely with the Chancellor in his desire to limit the sale of young raw whisky, and I am astonished that there should be any great opposition to it on the other side. In the time of the 1909–10 Budget, when this big Tax was put on, I think the House will remember that it was suggested that the spirit duty should be scaled according to the age of the spirit, and that the raw spirit should be taxed more than the older spirit. There is a good deal of nonsense talked about the intoxicating power of whisky. Raw spirit will intoxicate, and mature spirit will intoxicate just as much. The effect of raw whisky is more violent, and every year that it is kept in bond it loses so much of the fusel oil, and thus becomes less fiery and more palatable and less injurious, but at the same time quite as intoxicating. I think the Chancellor must begin to wish that he had kept his proposals in bond for another two years himself. I would warn him against attempting to start any negotiation for compromise with these distillers who sell whisky in its raw state, on the basis of compensation. They are not the only people who would have to be compensated. There are the blenders. The way the blenders deal with whisky is this—they take out of bond a six or seven or eight year old whisky, and they also take out of bond whisky which is a year or a year and a half old, and they blend the two of them together. If you compel the blenders to use older whiskies, then there will be so much less profit, attached to their business. I know that in the case of one of the biggest blenders in London, who has practically control over all the raw whisky sold in London, the process followed is as I have described. It is not whisky spirits alone which are to blame for all this trouble. There is a tremendous quantity of spirits distilled from potatoes, and rice, and other things which passes as whisky, as gin, and as brandy. I have actually seen in a hotel in England whisky, 1724 brandy, and gin in three classes and composed of the same spirit in each case. It is those spirits which are most over proof and which do most mischief. I think the Chancellor will make a very great mistake if he starts compensation on those lines, and he had much better drop the idea altogether, although I am entirely in favour of it, than start compensation because he would not know where that would land him.
The hon. Member for Blackburn also spoke on the large profits made during the War. The Chancellor has indicated that he has some proposals in his mind and, of course, we must deal with them when the question comes up. I warn him that this is also a very thorny, difficult subject, and I will tell him why. I do not speak of houses which have made some extraordinary profits, bat there will be a great many houses which have made some profits this year in excess of their average, but you must not leave out of account this fact, that once the War is over there will be a tremendous slump in those particular businesses. There is then the particular case of a great many houses which have given up their usual business or restricted them for the purpose of making munitions. They have put in the plant and they have been pushing those munitions which will pay them very well this year. But in order to do so they have had to neglect their ordinary business, which will go away from them and which will take them years to pull up. So that anyone putting taxes upon those extra profits over the average will find themselves faced with this very great difficulty, that you will have great numbers of people making a little profit which will be more than absorbed in the years to come, in which there will be a tremendous slump. Six months after peace is declared always finds a great slump in a manufacturing country. I therefore hope that the Chancellor will be warned by his adventure into the spirit taxes, which have been withdrawn, not to go boldly on with the scheme of taxation of war profits, because that will be very controversial, and I am afraid he would find such difficulty with it that he would have to drop that as well.
§ Mr. POLLOCK
I desire to intervene to raise a matter of general importance. The hon. Member for Blackburn appears to be an advocate for the abolition of the three years' system which is adopted in the collection of Income Tax, and would be in favour of levying the tax year by 1725 year upon the profits of the year. That is a very old controversy, and a great deal has been written and said upon the subject and a good deal of evidence taken, particularly before the Royal Commission of 1905 and the Committee of 1906. Certainly the best opinion on that rather large subject is that the three years' average works justly as between the State and the individual Income Tax payer. Through the whole of the Income Tax we know that there are a large number of exemptions which have been from time to time engrafted on and made part of the system. Nearly all those exemptions are granted upon the initiative of the subject. The Income Tax is deducted in the first instance and the person affected claims the exemption, and, where he is entitled, is repaid the amount which has been so deducted. In normal times that system on the whole works well, and I think the Income Tax Commissioners may look with a certain amount of satisfaction on the way in which it is carried out. The present War has brought us new conditions and new circumstances in this matter. At the front there are a number of persons in the Army and in the Navy who would undoubtedly be entitled to exemption and to have the amount deducted returned to them. What opportunity will there be for those persons serving their country to fill up the necessary forms in order to enable them to secure the exemption? Under present circumstances I think there would be no opportunity, and I propose to suggest a remedy. Let me give a parallel case. There has always been in the laws of this country a special privilege granted to men who are serving their country in the matter of wills. Hon. Members know that in order to comply with the Wills Act it is necessary that a will should be made in a particular form and signed before two witnesses, with other conditions. The State has always realised that men who are undergoing the hardships of a campaign are quite unable to fulfil those conditions, and an exemption has always been made to enable them to have their last wishes fulfilled and carried out without the requirements which are necessary with civilians.
With regard to the difficulty as to exemption from Income Tax, I hope the Chancellor will accept a proposal which, whenever the Bill is brought forward, I, or one of my hon. Friends, will submit, and which will have the effect of dealing with this matter from a somewhat different 1726 point of view this year. Instead of requiring the exemption or amendment to be claimed, the proposal will be, in particular cases where payments are made to men actually serving in the Navy or Army or allied forces, that in the case of all payments which are made through the Admiralty or the War Office those payments should be made in full in the case of all payments which, we will say, run up to about £400 a year. I believe the amount lost to the revenue would be very small indeed, because in the case of a man receiving £400 per year he is entitled to an exemption of £150. If it is a smaller sum, he is entitled to an abatement of £160. Therefore, if he is receiving £300 per year, he would be entitled to the full abatement. But the tax he has to pay is a very heavy one, and the amount recoverable from the State in respect of these small incomes is of far greater importance, both relatively and actually, than it is in respect of the larger incomes. The abatement to which such people are entitled is one by which they rightly set much store, and it is very important to them.
I have in mind a number of young professional men, possibly earning small incomes, who have engaged at remuneration which is in no wise adequate to their original scheme of life, and in whose cases it would be very important that they should secure the advantages to which they are entitled. But how shall they get them? It is almost impossible to imagine that men serving for a week in the trenches, and then having ten days or a fortnight in reserve, should spend their leisure in or have facilities for asking for exemptions or abatements. It seems almost a mockery to ask them, under the circumstances, to fill up exemption claims or to handle questions of Income Tax. We ought therefore to take care that their position is safeguarded, and that their salaries are paid to them free of Income Tax this year. I hope the Financial Secretary will look into the matter in order to ascertain the possible loss to the revenue. I have some ground for believing that it would be very small indeed. One cannot formulate any estimate from the Returns hitherto published, nor does one know how many persons are serving abroad, but from such information as I have been able to obtain it appears to me that the loss to the revenue would be comparatively small. I believe we should be meeting the wishes of this House and 1727 of the nation at large if we ensured the exemptions and abatements to those who are entitled to them, even if it did entail a small amount of extra burden on those dwelling in peace and comfort at home, and have the advantage of these men's services under difficult conditions abroad. I hope the Chancellor of the Exchequer will look into this matter, in order that we may prevent what seems likely, unless some special measure is adopted this year, to prove an injustice to men who are entitled above all men to the careful and sympathetic consideration of this Committee.
§ Sir T. WHITTAKER
The present condition of the House indicates, I think, the extreme undesirability of the course which has been adopted. The right hon. Gentleman the Member for West Birmingham "switched off" the discussion on the Budget to the purely liquor details, which we have had an opportunity of discussing on other occasions, and which we shall again be able to discuss when the Bill comes on. When the Chancellor of the Exchequer made his Budget speech, the same course was adopted. The Chair could not have interfered, even if it had wished to do so, as the proceeding was technically quite in order. But it is extremely inconvenient that on both occasions when discussing the largest expenditure of which this nation has ever heard, we should have no adequate or proper opportunity in a proper House of discussing the general question. Look at the condition of the Treasury Bench, and also of the Front Opposition Bench. The conditions are unfavourable. The questions raised by the right hon. Member for West Birmingham involve the absence of the Chancellor of the Exchequer in order that he may consider the difficulty in which he has been placed.
It is always interesting to listen to the hon. Member for Blackburn (Mr. Snowden), and it is exceptionally interesting to hear him, the ablest Member of the Labour party on these subjects, attempting to tackle the financial questions that arise from the teaching in which he and his Friends very much indulge; because when you get the proposals of the ablest Member of that party as to how they would raise the revenue, you see the farcical nature of the whole thing. Were ever such proposals submitted to a deliberative assembly? The hon. Member suggested that practically the whole of the cost of 1728 the War should be raised by taxation, and he referred to the fact that in the early days of the last century, during the French wars, the taxation represented two-sevenths of the income of the nation. Does he realise to what an extent that came out of the pockets of the masses of the people? The duties were extremely heavy, and in such cases the masses of the people paid more than two-sevenths of their income. He now proposes to reverse that entirely, and they are to be practically let off. [An HON. MEMBER: "No!"] To a very large extent they are to be let off. But if a man has £50,000 a year he is to be taxed to the extent of three-fourths. That is an impossible suggestion. This taxation is not suggested as permanent. It is to pay the cost of the War. What is a man with a large income to do? His income is practically committed. He has his houses and his servants; is he to get rid of them all? What is to become of them? The taxation is temporary. He cannot give up his houses or other places; what is he to do with them? This is interesting in connection with another statement of the hon. Member—that the raising of the money by loan out of savings would have disastrous consequences. How in the world does he expect that a man with his model income of £50,000 a year is to pay £37,500 out of it? He cannot pay it out of his income, because it is so committed. He can but pay it out of his savings or capital, but according to the hon. Member, to raise the money out of savings would be disastrous. The whole thing is inconsistent and impossible.
The hon. Member quoted John Stuart Mill. Surely he remembers that at the very time the statement quoted was written, John Stuart Mill was advocating the wages fund theory—the very theory which has since been dissipated, and which the hon. Member for Blackburn would not accept. It was because he believed in the wages fund theory that John Stuart Mill enunciated the doctrine which the hon. Member now quotes to justify his proposed heavy taxation. The whole thing is inconsistent in every way. The hon. Member promulgated a doctrine which certainly was not new, but which he is now applying in another direction. That doctrine was to the effect that the more you tax a man the more energetic you make him. That is a very old doctrine. If the hon. Member will turn back to the writers on political economy and taxation of 250 years ago, he will find that that was 1729 the very argument which they used in advocating taxation of the working classes. They said that the working classes were lazy; that they only worked long enough to get food and beer; that if you only taxed them heavily enough, they would have to work longer in order to get food and beer, and that that would promote the wealth and well-being of the country. The hon. Member does not propose to apply this particular method of persuasion to the class which he is supposed specially to represent; he is going to apply it to someone else. I venture to say that it is fallacious in both instances.
With regard to the taxation of war profits, in theory we should all probably be in favour of it. Anybody who is making special profits out of the War may, I think, legitimately be called upon to make special contributions towards the cost of the war. I admit that there are practical difficulties in the way, but I hope that the Chancellor of the Exchequer, with the assistance of his advisers, will be able to devise a method by which they may be overcome. But in connection with taxation you cannot legislate to hit one particular man or one particular firm. The scheme must be general and pretty easy to work. A simple suggestion is that you should take the average profits of an individual or firm for, say, the three years prior to the War, and if the profits during the period of the War exceed that average, you should impose special taxation on the excess. That is very nice theoretically, but there are many cases where it would not work. Take a case where a man has been building up a business—erecting premises, putting down plant, and all that kind of thing. He would have made very little profit while that was on the way, but as soon as he had got the whole concern into good working order he would make bigger profits. They would very much exceed the average of the preceding years, but they would not be war profits at all, and it would not be fair to tax that man as though he were making special war profits. There may be men in a particular business who have acquired another and amalgamated the two. The result is that the profits made on the combined concern are very much larger than the average of the previous three years. It does not, however, follow that they are war profits at all. The difficulty is to get at what exactly are war profits. I hope the Chancellor of the Exchequer will be able to do it. There are very great practical difficulties in the way.
1730 Reference was made to the case at Cardiff of Messrs. Spillers and Baker, who are millers, and whose balance-sheet shows a large profit. The hon. Member talked about exploiting—a very favourite word in some quarters—and he referred to a gentleman who had written him a letter, which he read. The writer said that bread may well be dearer. Really that shows a misapprehension of the whole position, even of that firm. Bread was not one farthing dearer because of the profits this firm made. They sold their flour at the market price, the same as anybody else. They made their money out of successful buying of wheat. They bought it early and it went up in price, and they made their profit in that way. Supposing that they had not bought that wheat early and well in advance, they would not have made the profit; they would have bought the wheat as they required it, within a month or two, to make into flour, and it would not have affected the price of flour one jot, but they would not have made the profit. Who would? It would have been made by the speculators out yonder in Chicago. As it was, they bought the wheat earlier and then made a profit owing to the rise in price. If they had not bought and made that profit, flour would not have been reduced in price a farthing, but the profit they made would have been made by men who held the wheat in Chicago. That is the position. The hon. Member used that as an example, and it really shows a misunderstanding of the whole position.
There is one thing I should like to have done if it were possible, but I do not know that it is; that is, if we could have had a considerable levy upon the capital of the country to pay for this War. It is not easy to manage. If you could have raised, say, a levy of 2½ per cent. on the capital of this country you would possibly have got £250,000,000 upon which you would have had no interest to pay. Germany, just before the War, raised a considerable sum by a levy upon capital. It is an attractive proposal, but like many of these attractive things it is very difficult, because so few people in this country have any considerable amount of their capital in available cash. That is the difficulty. It is cash that we want. It is no use giving the Government a field, or a house. They cannot pay for munitions of war and for the cost of the War in houses, fields, factories, and railways, or even in railway shares. The real difficulty at the 1731 present time is that you cannot sell these things; you cannot turn them into cash. There is practically only one market open in the world, and that is the United States. That is not a very big market financially. It has, indeed, as much sent to it as it can well absorb; therefore, you cannot turn these things into cash. If you attempted to do so you would be depreciating securities to an enormous extent.
That reminds me of another point. When people are considering the sacrifices which are being made in this country in the matter of the cost of the War and what people are contributing towards it, I should like to say, in the first place, that those who are better off as regards this world's goods are at least contributing their share in the men who are out at the front. Their sons are out there or they themselves are out there, and they are there equal in proportion in numbers to those of any other class in the community. As regards taxation, they are being hit pretty heavily indeed. They are bearing it well, and responding, as the Chancellor of the Excheuer has told us, more readily than ever before. The point I want to make is that on the top of this they are suffering very seriously in the depression in the value of the property that they hold. The loss in the depreciation in the value of what people possess is going to be almost as great as the direct cost of the War. It is a very heavy burden, and ought not to be lost sight of.
In his Budget speech the Chancellor of the Exchequer said something about obtaining the loans of money required for the War out of the savings of the country. The right hon. Gentleman spoke with great force, and I thought very opportunely, about the necessity of making those savings as large as they can be made, because the nation will want them. You can only make savings large in two ways. The one is by producing more wealth so that there may be more to save, and the other is by being more economical and thrifty when you have got it. You must be more efficient and more industrious to produce more, and you must spend less. That is the secret. Then the problem which the Chancellor of the Exchequer may have to face is how to get hold of these savings when they are made; where to find them and how to get hold of them. I do not know what he contemplates; possibly he has not made up his 1732 own mind. But these savings will, to a large extent, drift into the hands of certain institutions, organisations, and societies throughout the country. If the Chancellor of the Exchequer is to get them he must get them, or make arrangements for getting them, as they come along. People will not put this money into a stocking and wait until the Chancellor of the Exchequer asks for it.
We are, it is suggested, saving in the ordinary way £400,000,000 per year. That money is not available at the end of the year. As people save it they invest it somewhere. The smaller people put it into building societies, and into various societies, or institutions, or bodies. These societies invest the money in something else, and so it gets locked up. Insurance companies receive a good deal of money from year to year in premiums and in interest, but as they receive it they invest it and it gets locked up. If the Chancellor of the Exchequer wants it he must get at it before it is invested. The same applies to the banks, to the large investment companies, and all organisations of that kind. They invest their money as they go along. The suggestion I want to make to the Chancellor of the Exchequer is that if he has any intention, if his thoughts run in the direction of compulsorily, or by those means of persuasion which he possesses to such a liberal extent, of inducing bodies of the kind referred to to provide the money for these loans, that he should give them a hint, tell them what he wishes them to do. If he does not, when he wants the money he will find that it is being locked up.
I believe a great number of people are taking Treasury Notes at the present time. That is one way of letting the Government have money, and of having that money available for putting into permanent loans if the country wants it. There is also a great deal more money passing through the hands of the various bodies representing the people's savings that will be going into securities, and be lost for the purpose of loans, because you cannot sell the securities again. If the right hon. Gentleman wants the money from those who may have it—though the rate of interest may not be what they like—I would suggest to him that he should make it known, that he should make it a little plainer, stronger, and more definite. There is one other point. I do not think the country realises the extent to which we shall need this money. 1733 The expenditure is something enormous. As I have said, we cannot pay it by houses, or fields, or railways, or waterworks, or that kind of thing; it has got to be in cash. Something has been done—I have the honour of serving on a Committee for the purpose—to assist in checking the passing of money out of the country, and not only that, but of checking the expenditure of money on permanent works that now are not absolutely necessary. We want to have money available, and therefore there has been a check put upon that kind of thing.
I do want to urge the Government to apply the check where they only can apply it, in the matter of Colonial borrowing. We have had a number of Colonial loans issued on the market recently. It is no use checking small concerns in this country of £10,000, £25,000, or £50,000, and then letting £5,000,000 go the next morning out to the Colonies. Let them find their money out there, or somewhere else. We have not the money to spare to send out to our Colonies for them to spend on works and undertakings that at the present time we cannot spend on undertakings here. I hope that the Colonial Office and the Government will put a check on the sending out of money in that way. There has been something done—I would like more to be done—to check the expenditure of our local authorities. There is a tendency, as the result of the legislation of the last few years, to press local authorities to undertake works. I do not wish for a moment—for in a majority of cases those works are very desirable—to stop that work if you have plenty of money and nothing else to do with it. It is the same with public bodies as with individuals. There are many things that you like to do, that it would be very nice to do, or very beneficial to do, but you have to keep asking yourself, "Can I afford it; is it a wise expenditure just now?" I do feel that our local authorities have not yet been impressed sufficiently with the fact that all expenditure whatever that they can stop should be stopped at present, because they are direct competitors with the Government. When it comes to the matter of issuing loans, the money that they will get comes from the very persons who would invest it in Government loans. We should stop everything of that kind so far as practicable in every way during this War.
1734 There is another reason why we should do this. The first reason that I have given is that we shall want the money for the War, and we shall want it badly. Another reason is this: That when the War is over, sooner or later—it may not immediately follow, but it may—and when all these men come back from the front that can come back and the work that the War has caused is stopped and everybody is very much the poorer because of the taxation that has been levied, the lime will come that we shall have a great deal of depression, a great deal of unemployment, and very hard times. At present there is practically no unemployment. There is no necessity to undertake these local public works in order to give employment. In fact, the truth is that it will be better from the war point of view that you should not go on with these works, because you want the men who are thus employed elsewhere whore there is work to be done, and where you cannot get anybody to do it. Therefore we do not want to start further work, and further undertakings, and so take these men from work which is more pressing. When the War is over, and employment is slack, that will be the time to undertake these works. That will be the time for local authorities to spend money—wisely and well, of course—so that by that means our people may be helped to tide over the time of depression which we shall certainly have. Therefore, I do want to urge upon the Government very strongly to put pressure upon the Colonial Department, upon the Local Government Board, and upon my right hon. Friend at the Education Department—I know he will not like it—to curtail public expenditure that can be deferred for a year or two.
§ Mr. BUTCHER
I do not propose to follow the right hon. Gentleman into the various points of what I may be allowed to call his most interesting and practical speech, and the excellent advice he gave for the purpose of husbanding and carefully guarding our resources to meet our expenditure both during the War and afterwards. But there was one point to which I should like to refer. He spoke of the desirability of taxing, and perhaps heavily taxing, some of the profits which arise solely owing to the War. I think in principle there can be no objection to that taxation. I agree with the right hon. Gentleman that it may not be very easy to determine what profits are made as a 1735 direct consequence of the War and what are not so made; but I hope the Chancellor of the Exchequer will do his very utmost to apply the principle and discover some practical way of getting money out of it, because no one can object—at least he ought not to object, in my judgment—to giving to the State for the purposes of the War a portion of those profits which arise solely in consequence of the War.
The subject, however, on which I mainly rose to speak was the question of policies of life insurance, which are dealt with by one of these Budget Resolutions. I need hardly say that life insurance is one of those forms of saving exceedingly largely adopted by numerous classes in this country, both the rich and the relatively poor, and one of these Budget Resolutions in its present form is likely to have a prejudicial effect on certain forms of life insurance. I refer to paragraph (5) in the Resolution affecting insurance companies. I know what the right hon. Gentleman wants to do, and I entirely sympathise with his object. He is thinking, no doubt, of those endowment insurances made for short periods which are merely and obviously to evade the Income Tax. I dare say most Members of the House know how it is done. A man goes to a life insurance company and says, "I will pay a very large premium for five years, and, in return, you pay at the end of the five years, or, at my death if it occurs in the interval, a very large sum of money." Of course, that evades the Income Tax. At the end of five years he gets this large sum of money, collected entirely out of his income, on which he has not paid any tax. It is right that that artifice should be got over, and, in the right hon. Gentleman's attempt to do so, I entirely sympathise with him. But may I point out that in the form in which he proposes to hit those endowment policies for short periods he directly injures and prejudicially affects perfectly legitimate forms of policies? I am not going into details now, because I think a more proper time will be when the Bill is brought forward. But just let me indicate, for the consideration of the Chancellor of the Exchequer, the kind of thing involved.
The Resolution, in effect, says that whereas, as the law at present stands, you can deduct from your income, so as to get at your taxable income, the full premium of any policy you take out, in future you shall only deduct a premium equivalent 1736 to, or not exceeding, 5 per cent. of the capital sum insured. In other words, if, to insure your life, you have to pay £5 10s., £6, or £7, you will not be able to deduct your full premium to get at your taxable income, but you will be allowed to deduct 5 per cent. and no more. May I point out to the Chancellor of the Exchequer that the limit of 5 per cent. really prejudices perfectly bonâ-fide forms of insurance, which I am sure he does not want to do. For instance, he will prejudice and injuriously affect policies of insurance taken out by men for their whole life at ages of fifty-two and upwards, and I am sure he has no desire to discourage insurance policies of that sort. Let me give him one other form of insurance, which I think is a perfectly good and legitimate one, that will be injuriously affected. Take the case of a man of fifty who is earning a good professional income. He may contemplate retiring from his profession at sixty-five, and may want to take out an endowment insurance which would be payable at the end of fifteen years, or at his death, whichever happens first; in other words, an endowment insurance of fifteen years' period. That, I think, the Chancellor of the Exchequer will agree, is a perfectly legitimate and proper form of insurance. I think he will find that that form of insurance will be heavily hit by the present proposal.
§ Mr. BUTCHER
I think the rate would be about 7 per cent. If a man aged fifty wanted to insure for £5,000 payable at sixty-five or death, he would have to pay a premium of £7 11s. 9d. per cent., and if you work that out you will find that, owing to his not being able to deduct the whole of the premium from his income in order to get at his taxable income, he would have to pay an increased Income Tax of over £16. If the right hon. Gentleman will consider the matter between now and the next time this Resolution is before the House, I think he will probably see that the 5 per cent. ought to be 7 per cent., which would meet such a case as I have suggested, and also meet to a great extent a perfectly legitimate case of insurance where a man insures rather late in life, and has to pay a premium of 6 or 7 per cent. of the capital sum.
§ Mr. LLOYD GEORGE
The hon. and learned Gentleman (Mr. Butcher) has put 1737 a question to me with regard to insurance, and I promise to consider the case, which, on the face of it, seems a perfectly reasonable proposition for consideration. There would be no difficulty in putting 6 or 7 per cent. in the Bill if we came to the conclusion that six or seven is a right figure, as we can decrease the charge upon the subject but not increase it, and, therefore, if the hon. and learned Gentleman can see his way to accept the Resolution in its present form, I will look into the case he puts, which, I must say, interests me because it seems a legitimate insurance, and not a device to escape Income Tax. With regard to the general discussion, I regret very much I was not in the House to listen to the whole of the speech of my right hon. Friend (Sir T. Whittaker), and I regret it all the more because what I did hear induced me to believe that it was an exceedingly wise statement of the general position of the Government in reference to finance. The advice which he gave was sagacious and weighty, and his knowledge, of this matter added a good deal of weight to his observations. I am not sure that the country sufficiently realises the point he put, that you cannot pay for a war with railway companies, houses, and land. You must have liquid assets for that purpose, and the difficulty of the Government is not that this country is not rich enough to wage a war for twenty years with the wealth it has accumulated, but the difficulty is to liquidise your assets to pay debts as you go along. You cannot say to a man to whom you owe a debt, "Well, here is a house," and transfer it to him. You have to pay it in cash, or the equivalent. The difficulty with which the Chancellor of the Exchequer is confronted is to raise £1,100,000,000 in the course of the year—£800,000,000 over and above the revenue for which he ordinarily makes provision. I wished to warn the country in the statement I have already made. It was not merely a warning; it was a hint. My right hon. Friend was perfectly right. I think it right to let those who have got the handling of national savings know in time the direction in which the Government—those who are responsible for the time being for the finances of the country—are travelling, so that if the call comes upon them, whether voluntarily or compulsorily, they will be in a position to respond to the call made upon them, to finance the war. But I again wish to emphasise that, even if you have the whole of the ordinary savings of the 1738 country, you would not be able to meet the finances of the War.
With regard to the expenditure of local authorities, in an appeal which I made to a deputation from the local authorities I warned them at that time where the strain would come, and that they could not indulge in expenditure. I made exactly the same appeal to the representatives of the Colonial Governments, and the country must have been misled by some of the advertisements that have appeared in the papers. Most of them are practically renewals of bills and obligations that have already been incurred. There is no fresh cash in them at all. It is purely a manipulation of the readjustment of existing liabilities. The only new liabilities they propose to incur, so far at any rate as this country is concerned, are liabilities in respect of contracts already entered into which they could not possibly stop. At any rate, that is the limitation which they have accepted upon their borrowing powers. If a railway has already been started you cannot leave these people in the wilderness. If you save all that money and the expenditure of the local authorities this year, and if you compare it with the money of the same period of last year, you will then see the extent to which they have responded. What would it amount to if you saved the whole of that money in every Department of the Government which has been criticised? The hon. Member opposite would like to save the whole of the Land Taxes, but if you save the whole of that, and the whole of the Colonial Governments borrowings, it would only be a mere infinitesimal percentage of the sum we shall require in the end. It is true it would be a contribution, but it would be a very small one. The only savings which will help us substantially are the savings of the people themselves, the savings of individuals, of families, and of the man who is getting an income in any shape or form—those are the savings which will be helpful in prosecuting a great war. Whether they invest those savings in Government securities or loans or in other securities on the market, it almost comes to the same thing, because those who sell securities may invest in a Government loan. The savings of the people at the present moment are vital to the success of this country, and every man who cuts down unnecessary expenditure in his own sphere is contributing something material and important towards the success of this country 1739 at the present moment. If the savings of the country could be doubled, and if instead of saving £400,000,000 we were saving £800,000,000 or £900,000,000, that means something of the very greatest importance to the interests of the country at this very critical juncture. I wish to emphasise the statement I made on this point this afternoon. I do not wish to indulge in reiteration, but it is important that it should get thoroughly into the public mind that every man, however small his income, who saves and cuts down unnecessary expenditure is helping the country at this moment.
It is easier to save at a time like this than in ordinary times. One of the difficulties of saving is the question of pride. A man is afraid, if he cuts down his expenditure, that some people will think there is some reason for it connected with his private affairs, and in the case of a business man a word of that kind going round may damage his credit. I know that a good deal of expenditure is kept up for that reason. Another reason undoubtedly is that you do not like to cut down expenditure upon labour or your expenditure in the village, because you are afraid of being accused of meanness. This is not a question of meanness, but a question of patriotism, and this is the time when people can save without their motive being misinterpreted, and if men of influence would set an example in that direction they would be rendering a very great service to the country at a moment when every penny is required to finance, not only our own expenditure but the expenditure of our Allies. The Postmaster-General tells me that some of the observations I made in the course of my Budget speech have been regarded by some investors in the Post Office Savings Bank as an indication of the resolve of the Government to appropriate all those savings and to put them into a War Loan, and use them without a penny of interest. I was not thinking of that matter at all—in fact, I was thinking of something more important at the present moment, and that is of the savings of all classes of the community high and low, because I desire that the aggregate amount available for investment should swell to dimensions which will be helpful to the country.
The hon. Member for Blackburn (Mr. Snowden) is not present, but he has delivered his usual contribution and his rather usual alternative Budget, and as you listen to him it all seems so easy. I want 1740 £1,100,000,000 this year—a stroke of the pen. All you have to do is to put 15s. in the £ on the Income Tax. The working classes will be no worse off, and the people with incomes of £150 and £250—and they are only a small group—if you take three-fourths of their income, they would not suffer; on the contrary, they would be all the better for it. That is not the sort of criticism that has been directed at me from the majority of the people of this country. May I just put this point to the hon. Member for Blackburn? Quite apart from the wisdom of taking away three-fourths of a man's income, you would not get the money I require. The whole of the income of those who have got £3,000 a year—I do not know whether he regards a man with £3,000 a year as a rich man—comes to £220,000,000. I will take three-fourths of that, and then the £3,000 a year men would have £750 a year. Supposing I took three-quarters of the whole of the income of those earning £3,000 a year, that would bring me in £165,000,000, and that is only about one-fifth of what I need. May I point out that I have already got from this source probably £30,000,000 or £40,000,000 at the least. Consequently, all I would really get by this method would be about £120,000,000, but I am short of £850,000,000, so that by the proposal of the hon. Member for Blackburn I get about one-seventh of what I am in need of. These magical ways sound all right, but they are not business. The hon. Gentleman said: "You must not go to the working classes, and you must not go to the people earning £200 or £300 a year, but you must go to the people at the top," and he spoke of a man with £50,000 a year. May I point out that if I took the whole of their income I should not be so much better off for financing a great war. If I take the whole of the income of the men getting £3,000 a year, I should only get about one-fourth of what I am short. I am glad the hon. Member for Blackburn has made this statement in the House of Commons, where it can be answered, because when such statements are made outside they are really mischievous. My hon. Friend says: "Here you are, one-third of the income of the country wipes out the whole of your deficit." My hon. Friend the Financial Secretary to the Treasury pointed out that the income of the country is £2,400,000,000, but what is that? That is the whole of the income, but the amount which passes for review under the Income Tax is only £1,150,000,000, and the total upon which 1741 income is actually paid is only £970,000,000. There is a balance of £1,400,000,000, and that balance represents the income of the people who receive less than £160 a year. That means the working classes, clerks, or men who are engaged in businesses of that kind. The hon. Member for Blackburn says he would not charge a penny piece more in taxation upon that £1,400,000,000.
Supposing I took the people earning between £160 and £700 a year. If I took one-third of these incomes, they would only produce £300,000,000, and I am still £500,000,000 short. Where is the hon. Member going to get that amount? It is no use making sums of this kind, and the hon. Member should figure it out. No hon. Member should come here with statements of this kind without figuring out the whole thing. You cannot come here in a light and airy fashion and say: "I will get the money by taxing people with £50,000 a year." You cannot do it. How are you going to raise £800,000,000 in this country in the course of a single year? The hon. Member says you must not borrow, because that is wrong, and it hits the working classes. He says you must tax, but you must only tax people who have got thousands a year. If you took the whole of the money belonging to those people you would still be short. I hope the next time the hon. Member delivers a Budget speech to this House he will just make up the account, because it is a matter of arithmetic. If he would not mind, I should like him just to make up an account from the beginning to the end, and show me where I am going to get the cash unless everybody in this country contributes something. I say that everybody ought to contribute something. You cannot go into a great war and say to the vast majority of the people of this country: "You need not give up anything." You cannot do it, and it is not right to lead them to expect it. The working classes are making sacrifices by sending their sons to the War and going themselves. There is no class of the community which has not done that, high and low, middle-class, just as much as the working class, so upon that there is an absolute level of sacrifice. But when you come to the question of raising money, then I think everybody ought to contribute. I agree that they should do it according to their means, but let each contribute, and if that is done, and if all classes alike make a contribution, we shall be able to square the account.
1742 8.0 P.M.
One thing is perfectly clear. The standard of living in this country for all classes will perforce be reduced in one way or another. Anyone who has studied the standard of living during the last thirty or forty years must have seen how it has been rushing up at a prodigious rate. With the increasing wealth and prosperity of the country year by year, up has gone the standard of living. We shall find that this country will have to return to its old and simpler level of expenditure. It will be a good thing in itself. Had not we better face it at once? Men can make sacrifices of luxuries and comforts in a great war when they make sacrifice of life, so that this is the time when people will be prepared to bring themselves down to that level. There is the heat and there is the passion that will enable you to mould and remould a country and a society to some better form and fashion. You can do it in a great war, and I think that this is the time for us to do it. It will be kindness to us in the future. My hon. Friend said what was perfectly true. There is a great appearance of prosperity now. It is purely artificial. We are living upon borrowed money exactly like the man who mortgages his estate and instead of living upon his rent-roll lives upon the money he has borrowed on the mortgage he has effected upon his property. That thing cannot last. The rate of living is even going up at the present moment amongst the more prosperous classes. I am not referring to the working classes. We hear of men making great fortunes in certain businesses dependent upon the fortunes of the War and instantly beginning to spread themselves out. That is purely being done upon money which the country is borrowing. We are living on mortgaged money. We shall have to pay for it. When the War is over there may be a slight period of artificial prosperity in order to repair its ravages, but then will come a great collapse, and, if the nation is wise, let it be wise in time. If the nation is wise it will just look ahead, take advantage of this opportunity and lay by for that day when it comes, so that we at any rate will be able to face it without the distress, the misery, and the wretchedness which has ever followed upon a great war.
§ Mr. GODFREY COLLINS
The Chancellor of the Exchequer has pointed out the great economic effects of this War, but the country, I am afraid, will not 1743 appreciate sufficiently the economic effects of this War unless taxation is raised and each man feels it in his own pocket. I rise to urge upon the Government, or rather to express my regret that the Government has not increased taxation in the Budget already introduced. There is a spirit of self-sacrifice abroad to-day, and now is the time, it seems to me, that the Government should seize to place further burdens upon the people of this country. As the Chancellor of the Exchequer rightly said just now, business to-day is in a completely artificial state. Private enterprise is checked, the Treasury have stopped the issues of new capital, and capital and labour have been solely concentrated upon the successful prosecution of this War. Through the Government pouring out millions of money for contracts there has been an artificial state of employment created. While, on the other hand, the Government have been creating extreme employment and high wages and large profits, yet, on the other hand, they have not been taking sufficient steps to earmark and take a share of those profits and increase the taxation on the luxuries consumed by the working classes.
The Chancellor of the Exchequer rightly stated that the financial resources of this country would be strained to the utmost, not only during the later period of this War, but when in time the wreckage is being repaired. Then would be the time to reduce taxation. Now is the time to increase taxes very largely. Every penny spent to-day on luxuries is economic waste. The elimination of waste is a national duty, whether it be short time in shipyards and the making of munitions of war or the expenditure of money in the purchase of luxuries, and I regret extremely that the Government have not placed much heavier taxation on every luxury consumed by the people of this country. The Treasury have stopped the issue of new capital so as to conserve the capital of this country. It seems to me that high taxation of luxuries is a natural corollary. The horrors of war are known to the people of this country, but I am quite convinced that the financial effects of this War have not been brought home to them as a whole.
Turning for a moment to the national revenue and expenditure, the Chancellor of the Exchequer last week stated that the revenue this year would show an increase of £43,000,000, while, on the other hand, there would be an increase in the fixed 1744 debt charges of some £30,000,000 per year. We are, in other words, by our present method of taxation, only raising some £13,000,000 to pay for the cost of this War. Practically the whole amount of the increased taxation is going to meet the debts which have already been incurred. I have figured it out, and the present taxation only yields one-tenth of 1 per cent. of the cost of this War. That seems to me to be quite an inadequate figure to be raised by taxation to pay for this War. The payment of the interest of debt will keep our rate of taxation at its present level, and it is quite apparent from what we have heard from the Chancellor of the Exchequer that year after year in the future the permanent debt charge of this country will be increased by some £60,000,000 per year. At present the increase of taxation is only £43,000,000. It is quite apparent, therefore, that the present rate of taxation must be increased, and the sooner it is increased the better it will be for all classes in this country.
We have witnessed earlier in the afternoon the dangers of delay. The public have forced upon the Government the vital necessity of doing something in connection with the aliens question. The Government in this matter have delayed. Some few weeks ago the country might have been prepared to face the whole question of prohibition. We have seen during the last ten days that the Government failed to seize the psychological moment to press that point upon the country. I give these two instances in order to point out the dangers of delay, and I sincerely trust the Government will increase, and increase soon after the Whitsuntide Recess, the taxes payable by the people of this country. There has been, so far as one can see, no undue hardship caused by the increased taxes of last Autumn. I agree in many respects with the hon. Member for Blackburn (Mr. Snowden), but I differ from him acutely on this point. I think we should face a lowering of the Income Tax limit; we should increase the Income Tax and Super-tax; we should increase the taxes on tobacco, tea, and spirits; we should increase as well the rates of Estate Duty, and I hope that in the modified Budget which is bound to come before many months are out the Government will operate on these articles and on these first, and so by that means bring vividly before the people of this country the terrible financial consequences of this War.
§ Mr. GOLDSTONE
I trust that I may be allowed to congratulate the hon. Member who has just sat down, on his excellent speech. The main point of it was the point which was made by my hon. Friend the Member for Blackburn (Mr. Snowden), that a far larger proportion of the present cost of the War should be borne by taxation and not by borrowing. It is because I agree with that I rise to answer in part some of the things which have been urged against the speech of my hon. Friend. I would like the House to consider what is going to happen after this War. We shall have a heavy burden of debt which will throw permanently a large amount of taxation on this country. Where then will come our schemes for social betterment. As a matter of fact, unless the Chancellor of the Exchequer accepts the advice given by my hon. Friend, and given by the hon. Member for Greenock (Mr. G. Collins), it would appear to me that all persons in the region of forty-five years of age may very well bid goodbye to some of the things they have hoped for most, and I say, and say deliberately, that by neglecting the psychological moment of taxing heavily those who have the wherewithal, the Chancellor will indefinitely postpone the coming of those social reforms which will make this country in days to come a better place in which to live. He spoke of the light and airy method of my hon. Friend the Member for Blackburn. It is the first time I have heard my hon. Friend spoken of in that way. His speeches always strike me as being too solid and close and hard with facts ever to be described as light and airy. I observe that those who criticise him sometimes talk about the farcical character of his suggestions, but at least they do now pay him the compliment of debating them at length. My hon. Friend has at least got to the stage where his utterances may be dismissed, but where his suggestions have seriously to be considered.
The Chancellor of the Exchequer warns us of a coming depression in the standard of living. What does that mean? Not that the hon. and right hon. Gentlemen who cheered him most will suffer from any lowering of the standard of living, for such a lowering would leave them, as it would also leave all hon. Members of this House, quite comfortable. But the lowering of the standard will hit people hard who to-day are making reasonably good wages. It means pushing them 1746 back to sweated conditions, with insufficiency of food, and driving them into houses into which some hon. Members would not put their horses or dogs. These are the people who will suffer from the lowering of the standard of living, if the Chancellor of the Exchequer proceeds with his scheme of drawing the main cost of the War from loans, instead of relieving the future by taxing the rich of the present. Everyone to-day has been screwed up to the position of facing willingly any sacrifice the Chancellor of the Exchequer may call upon them to make, and I feel he is letting off too lightly those who are in receipt of large incomes. He might take three-fourths of incomes in excess of £3,000 a year, and persons who suffered that deprivation would still be in an excellent position, so far as this world's goods are concerned, and as regards their standard of living.
The right hon. Gentleman the Member for the Spen Valley (Sir T. Whittaker), in airily criticising the speech of my hon. Friend the Member for Blackburn, called attention to the fact that the local authorities must not go ahead with their schemes, because, incidentally, if they did, they would keep in their employment men who might be better employed at the War. But then he destroyed his own argument by suggesting that people in receipt of large incomes cannot dismiss their servants and cannot reduce their establishments. Why? Surely, if they reduce their establishments, and, so far as parasitic employment is concerned, reduce at least extravagant expenditure on luxuries, the right hon. Gentleman will observe that in that way they will just do, as far as they are concerned, what he is suggesting the local authorities should do—they will be limiting their expenditure to works which may be necessary. In warning the Chancellor of the Exchequer that local authorities should be thus restricted, the right hon. Gentleman the Member for the Spen Valley singled out particularly the President of the Board of Education. Why he should have done so, I cannot understand. As a matter of fact, the President of the Board of Education has already commenced to restrict the expenditure of local authorities in educational administration. The Grants which were given in recent years to local authorities to establish training colleges are gone. The suggestions which were made and pressed upon the President of the Board of Education 1747 to find more money for local authorities for that kind of thing has gone by the board. There ought to be a caveat entered against this suggestion, so far as the Board of Education is concerned. The right hon. Gentlemen should recollect that the War will come to an end—I hope soon, and successfully so far as we are concerned. It ought not to be forgotten that we have to rebuild, and in rebuilding we have to count most on the children at present in the schools. If they are to be prejudiced, as they are being prejudiced to-day, and prejudiced unnecessarily as I think, and if they should be further prejudiced as they will be if the right hon. Gentleman the Member for the Spen Valley has his way, we shall restrict the development of the children who are to rebuild the State in the years to come.
I wish to refer for a few moments to the speech of the hon. Member for the Tavistock Division of Devonshire (Sir John Spear) who, somewhat strongly, criticised Members on these Benches for their attitude of indifference towards a question of agriculture and towards the well being of agricultural labourers. I observed that the hon. Gentleman singled out my hon. Friend the Member for Norwich (Mr. Roberts), and excepted him from his general condemnation. As a matter of fact, the Members who sit on these Benches have appointed a Commission, which has been in existence for some time, and which is charged with the consideration of rural affairs. Of this Rural Commission my hon. Friend the Member for Norwich is chairman. The Commission went to the trouble and expense of visiting Ireland and Denmark. I had the privilege of accompanying the Commission to Denmark, its object being to inquire into agricultural conditions there, and as a result of their inquiries they have produced a report which probably the hon. Gentleman has not seen. This shows at least in some small way that our interest in agricultural questions is active. What is more, it should be remembered that the bulk of the Members on these benches were not brought up in the rural districts. The conditions of their employment, the conditions of their nurture were associated with towns, and it was because the hon. Member for Norwich knew more than most of us of what happened in the country that we placed him in that position. But when he speaks on these questions, he speaks on behalf of the party which keenly supports him in 1748 the appeals he has made for more consideration for the agricultural problem. I rather fear that the hon. Gentleman's hostility is due to something which we urge on these benches; it is because we have directed the main point of our propaganda to increasing the wages of agricultural labourers. That may be the head and front of our offending. It touches those farming interests for which the hon. Gentleman speaks so often and so well. Our party has never neglected the agricultural question, and if we do direct our attention to the position of the agricultural labourer, it is because we feel that, in his low wages and in the wretched housing conditions he has to endure, you have the real set-back to any proper development of life in agricultural districts.
Perhaps I may be pardoned if I say a word or two with reference to the speech of the hon. Member for Aberdeenshire, who suggested that the hon. Member for Blackburn had given us his annual speech—a speech which would have done well for the London School of Economics. I take that as a great compliment. If the speech of my hon. Friend was worthy of the London School of Economics, it was an excellent speech, and I think it contributed more to the Debate than what fell from the hon. Member for Aberdeenshire. The latter contributed nothing practical. He indulged merely in negative criticism; he was rather doubtful of any advantage accruing from attacks on immature whisky, and he was very doubtful of any advantage accruing from putting a tax on the exceedingly large profits now being made in certain industries as the result of the War. But my hon. Friend made a practical contribution to the Debate. I have heard hon. Members opposite speak of the Chancellor of the Exchequer as having sat at the feet of the Member for Blackburn and learned how to draft his Budgets on suggestions he has made. Anyone who has attended the Budget Debates of late years, will allow that a most notable contribution to the Debates has always been delivered by the hon. Member for Blackburn, and his main proposition, which he reiterates and repeats, using the illustrations which new events furnish, is one which cannot be too often reiterated in this House. The point of view to be taken, as far as taxation is concerned, is that we should look more at what is left in the pockets of those who are taxed and less at what we take from them. That is a point which I would reinforce, and I would like to see it borne in mind by hon. Members generally.
1749 May I also make a practical suggestion to the Chancellor of the Exchequer. Many suggestions have been made to him to-day, but the one I will make has not, so far as I know, been made in the course of this Debate. It is this: That in the banks of the country there is a considerable sum of money representing unclaimed balances. In equity, those balances are not the property of the banks. I suggest to the Chancellor of the Exchequer that he might by an Emergency Bill, take over the whole of those unclaimed balances, which would contribute at least some small amount towards the present great sums which are going out to meet the cost of the War. I expect there will be some amount of hostility to that proposal from those who represent the financial interests in this House. I imagine it will come from the same people who unite in saying that we should tax exceptional war profits, although with the exception of the hon. Member for York (Mr. Butcher), practically everyone who advocated that taxation desired to warn the Chancellor off because of the difficulty. We have competent men at the Treasury who might very well bend their energies to the solution of the problem of how to tax exceptional war profits, which everyone believes should be taxed, but which a good many Members of this House apparently desire should not be taxed for one reason or another. I rose chiefly to controvert some of the criticisms which have been urged against the speech of the hon. Member for Blackburn. I only regret he was not here personally to have an opportunity of answering them himself, but, knowing him as well as I do, I am sure he will take the first opportunity of replying to the criticisms urged against him in this Committee.
§ Mr. DAVID MASON
I also desire to offer a few remarks upon the speech made by the Chancellor of the Exchequer and more particularly upon his criticism of the speech of the hon. Member for Blackburn. I heard the speech of that hon. Member and must confess it struck me as being most thoughtful. The Chancellor of the Exchequer was not fair in his criticism of the views expressed by the hon. Member. The hon. Member laid particular stress upon the necessity for taxation in the present Budget. The Chancellor of the Exchequer, in a very eloquent peroration, emphasised that point and spoke at great length upon the necessity for economy. He made, as he usually does, a very interesting speech, as he did when he introduced 1750 his Budget. He spoke then at great length when he diagnosed the financial position. One naturally expected, after that very interesting survey of the finance of the present position, that the right hon. Gentleman would have made some practical proposals for new taxation which we could have discussed upon the Budget. The hon. Member for Blackburn undoubtedly made a very interesting contribution to the Debate by emphasising the point of an increase in taxation which is entirely absent from the Budget now before us. It will repay us if we consider the figures showing the enormous proportion of borrowed money or loan operations as compared with taxation. The figures are out of all proportion, and are not in accordance with the principles of sound finance. When the Chancellor of the Exchequer introduced his Budget, he spoke of the sacrifices of the people during the Napoleonic wars and of the willingness with which they taxed themselves to a large and an increasing extent as the war progressed. The extraordinary thing about his speech then and his speech to-day is, that so much of it is in the air. Why does he not practice what he preaches, and why did he not offer us some, taxation proposals to discuss instead of lecturing us as delivering speeches suitable for the London School of Economics when proposals are made of a practical character?
I find that on the right hon. Gentleman's own figures of the cost, of a War for six months, the cost would amount to £786,000,000 or £790,000,000, while the Revenue from existing taxes, according to his own figures, would be £267,000,000, or a gross deficit of £523,000,000. If we take into account the Sinking Fund, which is the only item we can deduct, because he has withdrawn his wine, spirit and beer duties, the deficit on the six months' estimate would be £519,000,000 odd. Taking again his own figures on the estimate of twelve months' War, the estimated total expenditure would be £1,136,000,000. The Revenue from existing taxes would be £267,000,000, leaving a gross deficit of £869,000,000, and after deducting the Sinking Fund of £3,789,000 we are left with a deficit of £865,000,000. The amount of Revenue from taxation to meet that would be only £267,000,000, so that less than 25 per cent. of the cost would be paid out of taxes and the remaining 75 per cent. has to be raised from loans or borrowings. Contrast that with what happened in 1751 the Napoleonic Wars. The people began with taxes equal to one-seventh of the national income, rising to one-fifth, then one-fourth, and, finally, to two-sevenths. The Crimean War was comparatively a small one compared with the gigantic undertaking with which we are now engaged. I do not suggest, therefore, that the same proportion should be maintained, but the principles are the same. We find that the Crimean War cost about £70,000,000, of which about £38,000,000 was drawn from taxes and £32,000,000 from debt. I wish to emphasise the point that in the present War the proportion raised by loans is far too excessive and the proportion from taxation far too small. That was the main issue which the hon. Member for Blackburn desired to impress upon the Chancellor of the Exchequer. It was a point in accordance with the highest and soundest principles of finance, and it deserved much more consideration from the Chancellor of the Exchequer than he gave it.
I pass from that to some proposals which I imagine one might venture to offer in regard to the increase of taxation. Many of the speeches made have referred to the necessity of taxing the abnormal profits derived from the War during the present year. I, for one, certainly believe that it ought to be, and is, possible to tap that abnormal source of profit. It should not be a very difficult matter for the Treasury to draw up some form, which might be introduced by the Government, say, in the Committee stage of the Budget, of war Super-tax or Income Tax which might be based, not upon the three years' average as at present with regard to ordinary Income Tax and Super-tax, but upon the actual income of this particular year. It would then catch these abnormal profits. It would be passed naturally, as all taxes are, just for the year, and it would apply only to more particularly war finance, and be on an ascending scale, and that, it seems to me, would be the means of bringing into the Treasury a very large accretion of revenue, and would, I believe, be a tax fairly placed upon those best able to bear it.
I should like to draw attention to certain statements which were made by my right hon. Friend when he introduced his Budget. I was entirely at a loss to understand his reasoning with regard to certain statements he made, more particularly on what he called the financing of the difference between our imports and our exports. 1752 He spoke of the balance of £130,000,000. When you are dealing in peace time with this country, which is a creditor country, as compared with other countries which are more or less debtor countries, it is a good thing when your imports very much exceed your exports, and we had a margin of something like £130,000,000 excess of imports over exports in ordinary times. I cannot see what he means by any necessity to finance that. That surely finances itself. The fact that a creditor country, which is a large lender of money, has a very large margin of excess of imports over exports means, of course, that there is a great deal of accumulated capital which is invested abroad, and that money comes back to the country in the shape of interest and, of course, goes to swell the imports.
It might be said that we had to finance this excess, but how is the interest paid on those loans which we have made to other parts of the world—to Argentina, to the Colonies, and to America? Of course we know it comes here in the shape of goods, because the holders of this capital spend their money, being the interest, in this country, which goes, of course, to swell the demand for various commodities and luxuries, which in turn is reflected in the increases of imports. But there is no necessity to finance it. It finances itself. Let us take, first, the actual interest paid. The interest is paid for in the shape of coupons in this country, which are readily disposed of in the City of London. Then it is not necessary to finance this balance that he refers to because American or Canadian coupons are like a bill on New York and they are readily bought up because people have to make payments to New York. We have at present this particularly adverse foreign exchange to which my right hon. Friend's remarks more particularly referred. The people abroad, say, in the United States of America, who have to remit this interest to this country for the investments which we have in those countries, are very desirable people to have at present, because they are really people that there is rather a scarcity of. They are buyers of these bills upon London which we should like to see increased. It is owing to our large purchases of munitions of war and so on, of which the right, hon. Gentleman spoke, and to the necessity there for us to finance the cost of these very large purchases, and our huge indebtedness to America to a very large 1753 extent, that we have this adverse foreign exchange at present. But to include this excess of £130,000,000 of imports over exports is, to my mind, really to confuse the issue, and when he, in his rather superior and airy fashion, gives us a lesson in economics, I suggest that he himself might give a little more study to political economy and what governs foreign exchanges. The whole argument is based on a fallacy, and, indeed, he does not understand the laws which affect and govern foreign exchanges between ourselves and other countries.
I will pass on to what he further said on this very important question, because he gave a considerable amount of attention to it, and how he got over this difficulty which we have at present with regard to our Government purchases. On a former occasion I suggested that there was one contributing cause which accentuated this difficulty of financing these purchases, and I have never been able really to get him to meet the point. Through various engagements he has always been absent. The Financial Secretary very gallantly stepped into the breach on one occasion and endeavoured to meet the point, but so far I have never been able to get a satisfactory answer to it. It is that this difficulty of financing these huge purchases of ours from America, more particularly because we have there this adverse rate of exchange. Gold has been going across the Atlantic, and will probably continue to go in spite of agreements with France, because of the existing situation. The point I want to emphasise is one for which we are more or less responsible, and which accentuates this situation, that is the continual issue of paper money by the Treasury. When he first brought that measure before the House last August, when it was regarded as an emergency measure, the right hon. Gentleman pointed out that it was necessary to conserve our gold because credit had dried up almost entirely. We largely subscribed to it. I, for one, ventured to ask him whether there was any provision for the final retiring of those notes, because from my study of the subject, and it is well known by those who give any thought to it, that if any Government enters upon a period of continued issue of paper money, it dilutes the currency. The Chancellor of the Exchequer himself—and that is a most extraordinary thing about our Chancellor—comes in, makes most admirable speeches, and 1754 points out, as he did on a recent occasion, the effect of "paper girders" in Germany, where this process has been carried out to an abnormal extent. There the finance is more or less in a parlous condition, because of the fact that they have simply turned on the printing press. They will some day have to redeem that paper, and Heaven knows how they will be able to redeem it. But we in a minor degree are pursuing a somewhat similar policy. The latest currency note return comes out at the rate of about half a million a week, and now amounts to forty-two odd millions. If you continue this process of pumping currency into the country at the rate of half a million a week, there will come a time when something will happen. I ventured on a former occasion humbly to suggest that this was one of the contributing causes to the continued increase in the cost of living. And anyone who goes into a study of the question will agree that the increase from something like thirty odd millions of paper money a year ago to what must amount to something like seventy or eighty millions now must have an effect upon commodities and fall very hard upon the poor, whose wages do not increase to anything like the same extent. But the right hon. Gentleman, whilst speaking at considerable length on the disadvantages of "paper girders," does not practice what he preaches with regard to his own finance.
The point to which I want to come back is that this continued issue of paper increases and accentuates the difficulties to which the Chancellor of the Exchequer has referred, in financing the purchases from America, because you undoubtedly depreciate the value of credit owing to various causes. That is, of course, accentuated and added to by the printing press of the Treasury. And while I quite appreciate the difficulties of a sudden withdrawal of some forty-two millions, I venture to suggest that it would be sound finance to gradually do so. The matter was very neatly stated in "The Economist" recently by a correspondent with regard to the Bank of England returns. Some time, very soon, the Chancellor of the Exchequer and the Government will come into the market for another loan. I would venture to suggest to them that if they wish to improve their credit and present a strong position in the City of London, it is well worthy of their consideration to consolidate the return of the Bank of England 1755 and the Treasury Return, and instead of showing these Treasury accounts to reserve against issues of Treasury Notes, that they should hand over to the Bank of England the control of those Treasury Notes, which it is more the business of the Bank to control than of the Government, and consolidate the ratio of gold against all liabilities to something like 28.7 per cent., as against 18.6 per cent. which it shows at present. The effect of this continuous efflux of gold is to reduce the only working reserve of the Bank of England and to create nervousness. This matter is well worthy of the attention of the Government if they want to conserve British credit and create as favourable a condition as possible for an issue of a loan. I should like to say I myself am not averse to the issue of paper money by a bank. The right hon. Member for West Birmingham and the Chancellor of the Exchequer seemed to believe that I was personally averse to the issue of small notes. That was a misunderstanding. I am not in any sense averse to the issue of such notes if they are issued by banks. The danger of this continuous issue by the Treasury is a twofold one. It has the effect of increasing the price of commodities, and it tends to interfere with the operation of the Bank of England. I hope I have made that point clear, and that it may receive the consideration of His Majesty's Government.
There is one other point I should like to touch on, that is the new method of issuing Treasury Bills by the Treasury. While that undoubtedly is a great advantage, we have the tap turned on which requires very careful watching and great caution in operation. I suppose the issue now of Treasury Bills must amount to 107 odd millions. I understand that the issue of these bills is popular to the purchaser of the bills. The advantages of getting rid of floating debt and funding debt into a consolidated loan is very great because of the fact that Treasury Bills are a short dated security which mature after six, nine or twelve months, and when you come to refund them the time may not be as favourable as the present, whereas if you have funded your floating debt into a large loan operation the advantages of your loan being financed and got rid of would, I hope, appeal to the Government when they come to consider it. I suggest these two points, the, continual issue of the 1756 Treasury Notes and the necessity for caution with regard to the over issue of the Treasury Bills. In conclusion, I agree entirely with the sentiment expressed by the Chancellor of the Exchequer as to the necessity of economy and of trusting in the main to the savings of the people in this country for the carrying out of this great War. I do feel that while it is easy to increase our loan operations and while I recognise that it would be absurd to endeavour entirely or even approximately to finance this enormous operation by taxation, yet I would like to emphasise the supreme importance from many points of view of increasing the proportion of the revenue derived from taxation as against loans.
§ Question put, and agreed to.
§ Resolved, That the Customs duty charged on tea until the first day of July, nineteen hundred and fifteen, shall be charged as from that date until the first day of July, nineteen hundred and sixteen, that is to say:—
|Tea, the pound||…||Eight pence,|