§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a second time."
§ Mr. LOUGHI trust the Government will not take it amiss if one or two provisions of this Bill, which is a very important Finance Bill, should receive discussion in this House. There is a disposition in some quarters to suggest that almost any discussion is obstruction of the Government. I would like to assure the Chancellor of the Exchequer and the Government that I believe, as far as the great majority of the House is concerned, and certainly as far as I am concerned, there is every disposition to give every facility possible to the Government, and, above all, to help what I understand to be the main object of the Finance Bill, and that is the raising of the necessary money for the successful conduct of the War. This Bill, however, raises one or two very new principles, and I hope the Government will not take it amiss if those of us who have given some study to these particular principles should take the opportunity of bringing them before the House. We are deeply convinced that we are not in any way prejudicing the conduct of the War in doing this. On the contrary, we think it quite possible that the interests of the country may receive a very injurious check if this House does not do its part in examining new proposals, such as those now before us. I wish my right hon. Friend the Chancellor of the Exchequer were in his place. It is rather hard that we should have to discuss the Finance Bill in the absence of the Chancellor of the Exchequer, but perhaps my right hon. Friend (Mr. Montagu) will bring what I have to say to his notice. I hope the further stages will not be rushed as fast as those with which we have dealt. I personally got a promise from the Prime Minister that if we had not had fair time to consider the Bill, the Second Reading would not be taken so early. Instead of that the Bill was only distributed yesterday, and now we are asked to take the Second Reading of this, the greatest financial measure which Parliament ever has had before it.
With the general object of the Bill—that is, the raising of large sums of money for the conduct of the War—I am in hearty 1303 accord. I have only one criticism in regard to that matter, and that is that you did not bring in the heavy taxation earlier, and did not raise large amounts at a much earlier stage. Certainly, so far as those taxes which I consider will be helpful and productive are concerned, they shall receive nothing but help from me. But it seems to some of us that the Bill affords two or three examples of cases in which large sums might have been raised, but this was not done and a great opportunity was missed. I am not going to dwell on this. I merely mention it. One article—rubber—has been mentioned; Rubber has been exempted from taxation in dealing with the Motor Tax, I think that it is an article which might very well have been taxed. The import of rubber is increasing very rapidly. The estimated import this year will be 90,000,000 tons. The price of rubber has fallen. It is less now than it was before the War. The article is cheap and abundant in this country, and a tax of 1s. a ton would produce £4,500,000 a year. Yet rubber has not been touched, but is allowed to come in free while other parts of motor cars are to be taxed. Cocoa has been mentioned as well as coffee. In the case of these two, which are the luxuries of the rich, the additional tax imposed is only ½d. on cocoa and ¾d. on coffee, whereas if these articles were put on a lever with tea a revenue of £3,000,000 or £4,000,000 would be raised. Why should tea, the drink of the poor, have an additional 7d. a lb. imposed, while coffee, the luxury of the rich, is only put up ¾d. and cocoa only ½d.?
I will not elaborate the point, which appears to receive a certain amount of support in some parts of the House. I think that this matter should receive more attention than it has received from my right hon. Friend. He might have something to say as to cutting down some of these taxes. I do not want the point to be made that I am taking away millions of pounds of revenue. I am willing to give the Chancellor £10,000,000 more, only I wish to put this clearly, that he is affecting very great interests in this country which may be damaged if he takes a wrong course with regard to taxation. I will only deal with two points in connection with this Bill. The House will see from the preliminary remarks which I have made that I am almost precluded from dealing generally with the Bill. I am not going to say a word in reference to the important section dealing with Income Tax. Perhaps 1304 more might have been raised by that splendid system of taxation that is splendid so long as it is imposed justly. The point to which I wish to call attention, is what is the most remarkable part of the Bill for my right hon. Friend to have touched. My right hon. Friend, as everyone knows, was at one part of his interesting career secretary of the Free Trade Union, and those who are members of that union;—this House contains many of them—feel that the very principles of Free; Trade have been interfered with by the fact that, in a somewhat paltry way, a tariff has been introduced into the Budget. My hon. Friend behind (Sir G. Younger) says that it is a very good thing. That shows what interesting discussions we may have on this point. But my suggestion is that the House, may well be surprised that the right hon. Gentleman in. charge of the Bill should have introduced a tariff in the middle of it, and it is all the more extraordinary that this has been, done when we consider the nature of the tariff.
I remember when we used to make studies of tariffs in this country that one which attracted a great deal of attention was the McKinley tariff, which we often maintained did a great deal of harm to America, though it was mainly aimed at, this country. I think that in future the McKenna tariff will become as famous as the McKinley tariff, and will prove to be as futile, if not as dangerous, to the interests of the country on whose behalf it has been introduced. I will be very brief in dealing with this matter because of the stage to which it has got. We have now got a tariff in this House. None of us should have objected to these taxes if the Customs Duty imposed had been accompanied by an Excise Duty. We only ask for the corresponding Excise Duty, but we do not find that, and therefore the taxes form a departure from the principles that have been laid down by Chancellors of the Exchequer belonging to both parties in this House for many years past. This part of the Bill, I am glad to say, has been brought down to very small dimensions. There were only six taxes originally. Two have disappeared entirely, and the largest and most productive has been reduced to half. When you have gone so far as that in the good path, we may very well appeal to the Chancellor of the Exchequer to go the whole way and strike Clause 12 out of the Bill, as it is a Clause which will bring in no revenue worth, mentioning and will raise many troublesome 1305 and mischievous questions in reference to great and important interests in this country.
As regards these few remaining taxes, one of them is a tax on musical instruments. We were told that the object of these taxes was to prevent these luxuries coming into the country. In this particular case the whole import has been practically destroyed owing to the War. For instance, the import of pianos, which a year or two ago amounted to £1,000,000 a year, is now only £50,000. The Government made a mistake in picking out a market in which, owing to natural causes, the imports already have been almost completely destroyed, and they might very well leave it to these same natural causes to finish up these imports, and be quite sure that none of our money was going to be spent on pianos. The other tax to which I desire to allude for a moment is the tax on films. We have not had a single word from the Government as to why this particular import of films has been picked out. The film import is one of the most curious in the whole of the complicated list of our imports. The Chancellor of the Exchequer, when he passed these duties, did not, as I think he should have done—as each one of them represents a large interest—go to each of these interests, and give a reason for his proposal. He said, "Look in the Budget and there you will see the reason." I have looked to see what our import of films may be. I find that there is apparently a considerable import of nearly £1,000,000, but I could not find any previous figures and I could not understand that £1,000,000. I had not time to examine the matter at an earlier stage of the Bill, but I have tried to get a little information about it since then, and I find now that the whole figures are perfectly fictitious. There is no import. Nobody pays £1,000,000 for films imported into this country. It is only a fictitious value put on these articles by the people who send them here.
If you ask why this fictitious value is put on, the reason is that it is purely speculative. You, Sir, may be perfectly familiar with the custom that exists in dog shows. The rule is often made in a dog show that all dogs sent in must be sold, and so I believe theoretically, though it may not be expressed, that the idea in the United States is that all films sent here must be sold. If the owner does not want to sell his dog which he has sent to the show, he puts a thousand pounds as the price of it. 1306 That does not mean that the little dog is worth a thousand pounds; it only means that it should not be sold. That is the explanation of the films import. An hon. Friend behind me asks what is the point. The point is that it is a speculation. One film may turn out to be extremely valuable, but when the importers send their films they do not know which it may be. For instance, what can be more extraordinary than the film of Charlie Chaplin, which has turned out to be worth an empire's ransom? From what I saw of it, I was not very much interested in it.
In order to keep a finger on the films that are sent to this country, fictitious values are put upon them. I understand that in this country the payment for films is almost entirely by royalty, so that the import will not be touched by this proposal, quite apart from the fictitious value which I have mentioned. My right hon. Friend has told us that this tax is to stop the import of luxuries, but I think I have satisfied the House that there will not be much from an import tax of this class. I suggest to the House that the real object of this tax has its origin in an agitation which has been carried on persistently in certain organs of the Press of this country. The tax itself was defended in the "Evening News," a powerful syndicate paper, from the 11th to the 17th August. There was a tremendous agitation about putting a duty on films, and the only ground put forward was that it would be a protective duty, and that it was desirable to protect the British industry. There was no suggestion of luxury. In the first article, which appeared on the 11th August, there was a suggestion that all these films were made in Germany, "the Hun on pictures." On the 12th August this was further developed. The Government was urged not to pile up imports, and the article said:—
It is time the Government took command by imposing such a duty as will prevent them underselling British.On the 16th August, in the same paper, we find it stated:—As the Government must in future raise revenue by some sort of protection, a duty of 1d. per foot on positive films and 2s. 6d. per foot on negative would enable the British manufacturer to compete.Next day there appeared a long article stating that:—Money spent on foreign that could be spent on English goods is sinful waste.One of the directors of the company which owns these newspapers also owns a film manufactory, and this paper in which the agitation was carried on, the "Evening 1307 News," is one of the papers owned by a company, I think, called the "Amalgamated Press."
§ Sir TUDOR WALTERSThey are the same people under a different name.
§ Mr. LOUGHI am told that one of the directors of that company, Mr. Tod Anderson, has 3,900 shares in a film company called the "Regal Films, Limited." It has been suggested that my facts are not quite right, but I am informed that one of the directors of the company that owns these newspapers is also a director of a film manufacturing company. I do not suggest that there is anything wrong in a man who is a director of a newspaper company being also a director of a film manufacturing company, but if this agitation is started in a newspaper to protect a British industry against foreign competition, and if a director of the company that owns that newspaper is interested in film manufacture, the House, I think, should look askance at such an agitation before departing from the principles of Free Trade, and before it starts a protective tax, especially of this kind, which has no positive value. I only wish to say, with regard to Clause 12 of the Bill, that I believe it will do a great deal of harm to the trade interests of the country. All the principles of which my right hon. Friend is understood to be a great champion are violated in this Clause, and I make a final appeal to him not to trouble the Committee with it, but to drop it out of the Bill.
The other question to which I wish to call attention is that of excess profits. This is a most interesting departure, and I wish the House to consider it for a moment or two. All we heard of this matter, before the proposals of the Bill were made, was that a tax would be laid on war profits, and that those who made great and undue profits out of the War must pay up a large proportion of their profits. I want to call attention to the fact that the original basis has been entirely changed. There is no longer anything about war profits; it is a tax on excess profits. That is a very strange thing, and there seems to be no reason for it at all. Let me say at once—I want to be quite candid with the House—that I never quite sympathised with the theory of profits that seems to exist in 1308 some minds. Profits in business seem to me the same thing as victories in war, and if we are to go into the question of excess, profits, they ought to be defined. No definition has been given, no attempt has been made to look into this question, nor to give an explanation with regard to it. I suggest to the House that in these days in which we are living excess profits are not being made in this country. There are, no doubt, some businesses in which excess profits have been made, but you must not legislate for exceptional cases, but should take a broad view of the trade of the country. That trade has been carried on under extreme difficulties, and the companies which show any improvement in their balance sheets are few and much fewer than the large number that show a falling off. I would like to utter this warning, that where companies do show some improvement there is a plain and obvious reason, especially for the period taken, why that profit is not likely to continue. I said to my banker the other day, and one has to keep on good terms with one's banker nowadays, "How is business?" and he replied, "If you will tell us what is the value of our securities then we will tell you how business is." Any person in business who knows these trading organisations knows what losses they may have to face during the critical days in front of us. I say in face of that grave circumstance, which nobody can deny, it is a serious thing to plunge into this question of measuring too closely with a 12-inch rule the exact profits that may have been made during a few months since the commencement of the War.
Therefore, I make the suggestion that if you look broadly at the trade of the country there cannot be room for this tax. The trading community is made up of many interests. For instance, the shareholder who is interested in a prosperous company is also probably interested in many companies that are not doing so well. When my right hon. Friend hits a company he gets back to the individual, and I think he will find that there are very few individuals whose excess profits in these days balance the tremendous losses they are sustaining in other quarters. For these reasons I think that the principle which underlies this tax should receive a great deal of attention from the House before it is adopted. I put this point also, that so far as excess profits are made out of the War, they have been taxed already. We have got a great tax in this. 1309 country sanctioned by generations of usage and by volumes—mountains, I might say—of thought and work, and that is the Income Tax which is at once the wonder and admiration of every other country in the world. That is a tax on profits. My right hon. Friend has explained that he is now levying an Income Tax amounting to as much as 34 per cent, in the case of incomes of £100,000. If that is not enough, double it. The hon. Member for Black-friars (Mr. Barnes) said he wanted excess profits taxed 80 per cent. Why not raise the Income Tax and make it 80 per cent.? It is a tax we know and understand, and will be equal in its operations. But do not take a weapon which may strike blows which we know nothing about and which may damage interests of the greatest importance to this country. I have got another suggestion to make and which has been adopted already by the Government in one direction. The Government have already control of a great many businesses totalling now we are told up to 1,000. Beyond a certain line they take all the profits and nobody has objected. I suggest that that principle of taking over the business would be a far safer rule to adopt than the method which you propose. That system of taking control has worked exceedingly well. I have not heard of a single person objecting.
The Government has also done something else which, although personally I disapprove of it, yet is an alternative. They have taken over the whole supply of sugar. I do not know whether they have prohibited excess profits. They bought a great deal of wheat and commandeered ships. All those things are safe experiments and have done no harm. I have an objection to the sugar management by the gentleman in control of it, but I may be wrong about it. I am not self-opinionated, I only go the length of throwing out a point or two. I say that by means of Income Tax and control of business you would be adopting a far safer method than the one proposed. It will be said, perhaps, that I am always objecting and criticising, and why cannot I accept the thing which the Government puts forward. The Government has no better friend in the House than I am. I am only too anxious to support it and to swallow any dose or take anything which it gives. The only thing which prevents me doing so is that at times I think the matter which is put forward by the Government may bring them into difficulties, and then out of friendship I some- 1310 times object. That is why I object to this principle here. The idea has been founded and the basis has been that there are some scoundrels—and I have heard them described as felons in this House, and bloodsuckers—who are making great profits out, of the War. My right hon. Friend the Chancellor of the Exchequer surely does, not deny that that has been said.
§ The CHANCELLOR of the EXCHEQUER (Mr. McKenna)What I deny is that the Bill was founded on any such idea, or that those responsible for the Bill have ever made any statements in the least like that.
§ 4.0 P.M.
§ Mr. LOUGHI admit that the whole basis of the tax has been changed. The basis was such a basis as I have suggested in that remark. The right hon. Gentleman did not deny it was said in this House, and I can name the hon. Members who said it. Those charges are constantly being, made by a section of the Press which lives, on the idea that British trade is honeycombed with scoundrels and scoundrelism and that those people are very active at present. It is quite easy to test the matter and I think that before any action of this House is based on such an idea some facts ought to be put forward. What is the truth about the matter? All the particulars of 98 per cent, of the commerce of this country are at the disposal of any man who likes to look at the returns of public companies as disclosed in their balance-sheets. It would have been quite easy to have ordered a return to be made giving the yield on the capital invested in those companies. It may be said that there may be some of these people in the 2 per cent, not included in the returns, but you can get at them by the Income Tax. I suggest that in dealing with such mighty interests this House ought to be very careful indeed lest it should take some step in the dark. I heard a speech on this matter from the hon. Member for Blackfriars at an earlier stage in these proceedings, and which interested me very much. He said that the Labour party had considered this tax and had come to the conclusion that it was not high enough, but that a tax of 80 per cent. should be imposed instead of the mere tax of 60 per cent. which the Chancellor of the Exchequer has suggested. I thought, "What a noble speech this is. Here is an offer from the Labour party as a whole of 80 per cent. of all excess profits made since the War started. That means that if a 1311 workman has made £1 a week extra he will give back 16s.; if he has made 10s. he will give back 8s.; if he has made 5s. he will give back 5s." I thought what a noble proposal that was; but when I came to the end of the speech I found that my hon. Friend did not intend to apply it to working men at all. He exempted the Labour party. He reminded me of the words of Scripture about binding burdens for other people's shoulders and not lifting a little finger to help bear them.
I then looked above the Gangway to the Government. I have some experience of business, and I do not know of any group of men in business who have directly made more profit out of the War than the Cabinet. One-half of their number have tremendously increased their receipts. They have gone up from £400 to £2,000 or £5,000. They have made a vast war profit. If this principle is to be followed—I am against the principle all through—the Government are a group of men who have increased their receipts more than any other group that can be named. I thought, "The Chancellor of the Exchequer is a fine fellow; he is proposing something that will tax the Government." But when I look at the Bill I find that the Government propose to exempt themselves altogether. There again they are binding heavy burdens for other people to carry. I asked a fortnight ago whether the medical profession and the legal profession in both its branches would come under the Bill. Of course they will not. My right hon. Friend is a lawyer himself. Nearly all the Liberal members of the Government are lawyers, and they are all exempted. Complaints have been made about the price of food. When we traced those complaints to their origin we found that the price of wheat and of cattle had doubled in this country. Wheat was nearly 70s. One would have thought that all those people who were producers of wheat in large quantities might have to pay. But we have had a great landed interest added to the Government within the last few months. Is it owing to the presence of that landed interest in the Government that agriculture is altogether exempt?
§ Sir G. YOUNGERWhat about the Income Tax?
§ Mr. LOUGHWe all have to pay Income Tax. But my hon. Friend has given me a point—that agriculture is touched by the Income Tax. Why not apply the same 1312 principle to business people? What is sauce for the goose is sauce for the gander. Treat all alike. I say that when this House faces the large problems that are raised by this tax, it will be found impossible to deal with them on the unequal basis which the Government propose to apply. I will not ask hon. Gentlemen below the Gangway what they think of the illustrations I have given, but I will ask them what they think of the exemptions. What does the Labour party think of the exemption of agriculture? While speaking of agriculture, I may mention another point. The thing bristles with difficulties. Husbandry in England is exempt. Why not husbandry in the Colonies? Why should we treat in this unequal fashion India or Ceylon, or any other of the Colonies? It may be suggested that it is because there are people in the Government who are largely interested. I do not want to take that view; but we ought to be most careful lest others, who do not know the lofty motives of the Government in matters of this kind, might think it unfair that such a heavy tax should be proposed for business men and a certain section of the community, while these others are left out. The agricultural producer is left out, but the broker who sells his wheat and cattle is brought under the tax. Why should not the producer, who gets most of the profit, be taxed, instead of the unhappy agent, who gets only a small brokerage?
I suggest that the tax in its present form is limited and unequal. I do not want to speak too strongly at this stage, because it may be modified; but if the Government are going on with the tax, it must be equal in its operations, and made like the Income Tax, so that it will press fairly on every individual. You must take the same proportion from everybody who has got it to pay, and not pick out one man here and another man there. For the purposes of the tax an arbitrary period is to be taken—the three years before the 31st March, 1914. The average profits of a concern for those three years are taken, and if in the next twelve months, or any period during the War, the profits increase beyond that amount, one-half of the excess profits is to be taken by the State. With several other Members I responded to my right hon. Friend's appeal that we should discuss this matter with him, and I think the Bill is in a better form than the Resolution. But it is only a little better, and it will require a great deal of examination 1313 before it is accepted. I thank my right hon. Friend for the distance he has gone to meet us, and I am sure he will have patience with us to the end. This arbitrary period may work the greatest injustice to trading companies. Business is not carried on by those bloated individuals to whom I referred earlier in my speech. Trading companies generally are collections of poor people.
§ Sir A. MARKHAMOh!
§ Mr. LOUGHI do not know why some of my millionaire friends opposite jeer at that statement. A thousand people with a hundred pounds each put their money together, and so you get a hundred thousand pounds capital. These people have to live on what they get out of the company. There is no difference in principle between a trade union and a limited company. The shareholders in a limited company may not be able to earn nearly so much as the class represented by hon. Members below the Gangway. Therefore, if you do any gross injustice to these people, you are injuring those who are least able to put up with it. You are confiscating property on which the lives of people depend. It has been suggested that these bloated people in the trading concerns of the country are not doing their duty in the War. I repudiate the suggestion altogether. As far as I know everyone of the great trading concerns has its Boll of Honour. A large percentage of their men, sometimes all the available men of military age, have already gone to the front, and many of them have paid the penalty, just as some Members of this House have done. All the limited companies that I know and the banks have agreed to keep their situations open for these men, and they are making up their wages to the amount which they received in business. Speaking of it as a whole, the business community has not been unprincipled and greedy; it has been a happy hunting ground for the recruiting sergeant, and it has done everything it could to fight the War and bring it to a successful conclusion.
§ Sir A. MARKHAMMay I remind my right hon. Friend that the Treasury have agreed not to charge Income Tax on the wages paid to the dependants of men who have gone to the front? Consequently no shareholder is a penny worse off than before the War.
§ Mr. LOUGHAll these points will be dealt with later. My hon. Friend need not feel sore at what I have stated. Profits—that is, the dividends which you are taxing—are the wages of one class, and wages are the dividends of another class. You do just as much harm if you do any injustice to the great class of whom I am speaking, as you would if you did an injury to the poorest of the people. This arbitrary period may do a great injustice to trading companies. Take the case of a limited company which has been established twenty, or thirty, or forty years, but which for some reason during the past seven years has fallen on bad times. Supposing it had been accustomed to make £100,000 profit, but that in the three years, 1911–12–13, it divided no profits. There are many such companies. The datum line will be nothing. If hon. Members will look at the Schedule, they will see that half the concession that was made to meet such cases is taken away. Such a company, if it has now got back nearly to its former level, will be extremely hardly hit under the Bill. Surely it ought to be allowed to give something to the people who have got nothing for years past, before the State comes in and takes one half the increase.
Every year in a great community like ours new companies are started. The great business of English commerce could not be carried on if a large number of new companies did not come in every year. New companies will be able to show no profits in the earlier period at all. Although an attempt is made to meet them, it is made in a very niggardly and grudging way. No attempt is made to give them anything for the period that is past in which they got nothing, but in come the Government and take a large share of their present profit. What will be the effect? Wherever there are rich people in a company, the rich people will have the benefit—the preference shareholders. The rich always hold the best securities and the poor have the ordinary shares. Unless they alter the existing company law the Government will take away the dividends from the ordinary shareholders. Many of these shareholders are at the front, and they will see this House depriving them of their means of subsistence, while they are offering their lives on behalf of the country. Take the case of a company that was doing well and shows no improvement in the selected period. That company pays 1315 nothing, while the other company which may have had just as good a record for thirty years will have to pay over an immense proportion of its profits. Surely that is an illustration which we ought to avoid of the text, "To him that hath, shall be given; and from him that hath not, shall be taken away even that which he hath." I feel I must apologise to the House for having mentioned these cases. But I do say that the House wants to think on this matter, and it wants to get its notions cleared up. The matter should be examined—and it is quite easy to examine the returns up to date of these businesses. The Government ought to have commenced—it may not be too late yet for the Government to commence—to examine these returns, and to show the profits that they want to take. I would ask them to remember the alternative I have offered: increase your Income Tax or anything that falls equally on everybody. Increase it as much as you like, but do not bring out a tax which would have effects of which you have no knowledge, and which may possibly do grievous injury to that great business community which I venture to say here has done its duty in this War, and has stood by the Government in every national emergency.
§ Mr. SNOWDENWith a great deal of what the right hon. Gentleman who has just sat down has said in his speech I am in the most complete agreement. I have a very large measure of sympathy with many of the details of criticism which he has offered in regard to the proposal as to the taxation of excess profits, but not in his general opposition to that proposal. I think it will be generally agreed that the scheme which has been submitted by the Government in this Finance Bill is one which is capable of very drastic amendment indeed. I hope that many of the points which the right hon. Gentleman has put before the House will receive due consideration on the Committee stage of the Bill. There were three points that the right hon. Gentleman put before the House. First of all, he mentioned the proposed increase of taxation on tea; secondly, he made a very vigorous onslaught on the Protectionist proposals of the Government; lastly, he dealt with the matter of excess profits. I quite agree with him—and I know that I am expressing the views of all the members of the party with which I am connected—in his opposi- 1316 tion to the proposed increase of the duty upon tea. If there was no other course than to increase the duty upon coffee in order to avoid an increase of the duty upon tea I might be prepared to agree with the right hon. Member in that proposal. But I do not think it is necessary, even in the present critical condition of the finances of this country, to add to the already very heavy burden which has fallen upon the poorest portion of the population.
I want, however, to deal with this Finance Bill upon more general lines. When the Chancellor of the Exchequer sat down after his Budget speech two or three weeks ago he was congratulated from every quarter of the House upon the lucidity of his statement, and upon the admirable manner in which he had, for the time being, met the financial necessities of the War. I think that those congratulations and that consensus of approval were due rather to a feeling of relief that the burdens to be imposed were not so heavy as had been anticipated. I have noticed, both in speeches in this House and in newspaper criticisms in the country, a change of view since the date of the introduction of the Budget. The criticism has been mainly directed to two points. The first was that the Chancellor of the Exchequer proposed to raise far too little during the current financial year by taxation, and that he was relying to far too great an extent upon borrowing. The second line of attack has been—and the right hon. Gentleman who has just sat down has given illustrations in his speech on this point—that some of the proposals seem to have been introduced without any necessity—which, if it had existed, would have caused them to be accepted—and have caused a great deal of irritation and opposition in the country. Since the Budget speech, however, certain proposals and changes have been made in the financial scheme. Certain Protectionist taxes have been dropped, and I share the hope expressed by the right hon. Gentleman opposite that what still remains in the Bill of these will very speedily follow those which have disappeared.
I do not profess to be able to understand the intricacies of the proposed taxation upon War profits. We shall, in my opinion, need a great deal of explanation from the Chancellor of the Exchequer in regard to the details of this proposal. It does, however, seem to me quite clear that the proposals which are now embodied in the Finance Bill have whittled down very con- 1317 siderably the estimate which the Chancellor of the Exchequer gave in his Budget speech, and which seemed to me to be a very low estimate. Leaving all exceptions or modifications out of consideration for the moment, and taking the estimate of £30,000,000 as being one-half of the excess profits made during the period of the War, I think it will strike everybody—there will be little dissent I imagine—that it is ridiculous to say that the profits during the last twelve months have not exceeded by more than £60,000,000 the average profits of two or three years ago! I will return to this subject later. The first general criticism I want to offer is this: The Chancellor of the Exchequer is raising far too little by taxation this year, and, as I said a moment ago, is relying to far too great an extent upon borrowing. I was quite disappointed that the Chancellor of the Exchequer did not impose more taxation in his Budget: there had been pressure brought to bear upon him from very influential quarters to do so. Even the "Times" newspaper had for some weeks before the introduction of the Budget been urging that there should be heavier taxation. I believe that similar views had been impressed upon the Chancellor of the Exchequer by financial interests in the City. What is it that the right hon. Gentleman actually proposes?
During the current financial year, the right hon. Gentleman proposes, there shall be raised no more than £30,000,000 by extra taxation. It is perfectly true that the taxes which are now proposed will not fully mature until next financial year. Next year it is expected that £100,000,000 will be raised by them, but the total increased contribution to the Revenue by means of taxation during the current financial year is only £30,000,000—which is not more than sufficient to pay for the War for a single week. Even next year, after the taxes have fully matured, and the estimated yield of £100,000,000 has been secured, the sum will be barely sufficient to pay the interest upon the accumulated War Loan. I want definitely to know—and I hope the representative of the Treasury will make a note of this—if this is going to be the policy of the Government? Is it the intention of the Government during the period of the War to raise by taxation only sufficient to pay the interest upon the debt; because if that is going to be the policy of the Government I look with dismay at the financial situation of the country after the War. It will make economic reconstruction, when 1318 peace returns, an almost impossible thing to accomplish. We have been led to believe—at any rate I have been led to believe—by the Budget speech of the Chancellor of the Exchequer last April that the policy of the Government was going to be something different to that. I remember on that occasion he dwelt upon the savings of the country, and seemed to suggest that those savings, amounting to three or four hundred millions a year, were going to be appropriated for the purpose of paying for the War. Again, he referred to the methods by which former wars had been financed. He told us how Pitt had financed the Napoleonic Wars by raising half the cost by loan and the other half by taxation. Taxation during that time reached a sum which was equal to two-sevenths of the then national income. I would further point out this in connection with the financial policy of that time: it is perfectly true that if you take the whole of that war period that half of the cost was raised by taxation and the other half by loan; but in the earlier years of the war it was financed almost wholly by loans and it was only when the folly of such a financial policy became apparent that Pitt changed his policy, and the later years of these wars were financed almost entirely by taxation.
During the Crimean war the policy of Pitt was also followed. Half of the cost was raised by loan and half by taxation. It may be said in reply to this that the expenses involved in the carrying on of these wars were a mere bagatelle compared with the present expenditure. That is true; but the reply is that the financial capacity as well as the taxable capacity of the country are enormously greater today than they were at that time. I make bold to repeat the statement which I have I think made before in this House, that if we were to-day to take one-fourth or two-sevenths of the national income of this country by some just system of graduation we could afford to bear it much better-than were the people of this country able to bear their proportion of taxation a hundred years ago. What is going to be the effect of this War Loan policy? I can imagine only one class of people by whom a policy of this kind will be welcomed. I have often stood here as the champion of what are regarded as the interests of a, class. I am not doing that this afternoon. This is not a matter which interests one class of the community above another. The matter is one of national interest. I 1319 can imagine only one class of the community benefiting by such a policy as this, and they will do so at the expense of the nation at large: that is the class which has money to lend. It will be disastrous to the business men. It will be disastrous for the municipal enterprises of the country. May I give an illustration?
The credit of this country has, during the last fifteen months, fallen from a little over 3 per cent. to—what shall I say, taking the basis of the last Loan, the American Loan—to something like 7 per cent. [HON. MEMBERS: "No, no!"] Of course, I am perfectly familiar with the excuse that the Chancellor of the Exchequer gave yesterday, but I do not for a, moment accept it. Take the rate of our last War Loan, 4½ per cent. Before the War British credit stood at a little over 3 per cent., say 3¼. A person who had £10,000 to invest in Government Stock could have obtained a return of £325 a year. A person who invests £10,000 in Government Stock now, gets £450 a year. Now before the War he paid an Income Tax of 1s. 3d. in the £. Now he pays 3s. 6d., and a little sum in arithmetic will show that, after paying the increased Income Tax, he still is £67 a year better off than he was before. That is the only class of the community which is likely to gain by this policy of borrowing. Who is going to suffer? The trade of the country is going to suffer. If the Government cannot borrow at less than 4½ per cent, or 5 per cent.—probably the next War Loan will not be raised under 5 per cent.—municipal credit is going to pay 1 per cent. higher or lower, just as you care to put it. Municipalities cannot borrow under 5½ per cent, and what will a sound industrial concern have to pay for new capital? Before the War a first-class, well-known industrial concern could not raise its preference share capital under about 6 per cent. If it were permitted to raise it to-day, it would not be able to obtain the capital under 7 or possibly 8 per cent. What is going to be the effect of this upon business—upon the reconstruction of our commercial system after the War? What is the effect now upon prices, and what is going to be the effect upon wages later?
Reverting for a moment to the effect upon our municipal enterprise, I know of a municipality in England which has already had notices sent in for the withdrawal of capital which, if that has to be replaced at 4½ per cent., will mean a 5d. 1320 rate upon the public. And the full effect of that has hardly yet begun to be seen. I heard yesterday, at Question Time, an outburst against the raising of house rents. I have no sympathy at all with the landlord who proposes to raise house rents without just cause, and I believe that in a great many of these instances no just cause can be discovered. But what about building in the future? It has been possible in the past to get a mortgage on cottage property at, say, 4 per cent. It could not be obtained now under 5 or 5½ per cent. I know of a great financial corporation in this country which recently placed £500,000 on mortgage at 5¼ per cent. What is going to be the effect of this upon the rents of the working people? I venture to think there is not a builder of working-class property in England to-day who would speculate a single penny in the building of cottage property unless he were assured of a rent of at least 1s. 6d. to 2s. a week more than before the War. I should like to call attention to a matter that has been brought to my notice. I have always understood that it was a legal obligation upon the mortgagee to pay the Income Tax upon the mortgage interest. [HON. MEMBERS: "It is!"] I had brought to my notice the other day a case which was quite new to me, and which, I think, is a case of very considerable importance. It was the case of a working man, with a mortgage of £200 upon his house, the rate of interest being 4 per cent. He had, of course, been called upon to pay Income Tax. He himself was not liable to Income Tax. He had made no claim for the repayment of this Income Tax for three years. At my suggestion he made an application to the mortgagee's solicitors, and his attention was then directed to the mortgage deed, which I saw, in which it was stated that the rate of interest must be 4 per cent., but that all Income Tax must be paid by the mortgagor.
§ Mr. SNOWDENThere is no doubt about it, because I saw the mortgage deed myself. The solicitor said that it had been the practice of his firm for a considerable number of years. I want now to turn to the taxation proposals which are embodied in this Finance Bill, and I have already expressed my opposition, and the opposition of my colleagues, to the proposed increase in the duties upon food. From a great many points of view, and for a good many reasons, I think these taxes cannot be defended, and especially 1321 are they indefensible at a time like this, when the cost of living has risen so considerably, and is continuing to rise. The cost of living has risen since the War by between 35 and 40 per cent. I believe, so far as the absolute necessaries of life are concerned, the figure is higher. What does that represent? I suppose the wages bill of the working people is higher this year than probably ever before. Suppose we put it at £1,000,000,000. They spend the whole of that amount. It does not means that their spending power has been increased by 40 per cent. It means that they have had to reduce the quantity of commodities, and the services they would otherwise have been able to obtain by that 35 per cent, or 40 per cent., and 40 per cent, on £1,000,000,000 is £400,000,000. When we talk of putting additional taxation on the working people I hope we shall never forget that terrible impost they are called upon to pay. I quite admit—it would be idle to deny, and I do not wish to deny—that large numbers of working people are earning higher wages now than ever before in their experience, but that is by no means universal, and we have plenty of evidence that many trades which have been extremely busy during the early months of the War are now beginning to fall off. I know one place in Lancashire where two weeks ago forty mills were stopped during that week for the want of work. I was in Yorkshire last week in the khaki district, and was told that the khaki trade there was very slack indeed. We have to bear these things in mind when we talk about imposing additional taxation on working people,, and we have to remember, too, that if this policy of the Government of raising the cost of the War by loan, and raising only sufficient taxation to pay the interest on the loan, is going to be continued, then all these taxes must necessarily be continued after the War, and, therefore, these imposts upon the working people will continue to be laid upon them when their capacity to bear them is smaller than it is now.
I turn to the Income Tax proposals. May I say with how much enthusiasm I welcomed the concluding words of the speech of the right hon. Gentleman opposite in which he advocated, with very great power, a very considerable increase in Income Tax? I, of course, have always been an advocate of Income Tax. I believe it is the justest and fairest way of raising our taxation. I would, if I had my way, abolish every other form of taxa- 1322 tion, and raise the whole of the necessary national revenue by means of Income Tax, with two reservations—Estate Duties and taxes upon alcoholic liquors. [An HON. MEMBER: "Tobacco."] Well, perhaps tobacco. I might have something to say about tobacco. I think the Income Tax proposals in the Budget have been very badly conceived. They are full of anomalies, and they are going to impose a great amount of irritation without securing a compensating amount of revenue. They are most unjust and most unfair to the lower range of incomes. The Chancellor of the Exchequer gave us to understand in his Budget speech that he was proposing a uniform addition of 40 per cent. He is doing no such thing. There is only one class of Income Tax payers who will pay 40 per cent., that is between £5,000 and £8,000 a year. The man with an income of £100,000 is not paying an increase of 40 per cent., but only 35 per cent., and there are those with very large incomes who are not paying an addition of more than 27 per cent. But when we come to the lower range of incomes—those below £200 a year—we find the gravest anomalies. I could quote to the House cases where the increased percentage is not 40, but 100, 200, 600, and shall I give one case where the increase is 2,600 per cent.? Take the case of a man with an income of £182 a year. He has got one child. Previously he got the abatement of £160, and therefore paid Income Tax upon £2, which, at 1s. 6d., made 3s. Now he gets—and I am glad to welcome this in the Bill—an abatement for one child of £25. That brings the amount down, to £157, and he has to pay Income Tax upon £37 at 2s. 1d. in the £. The result is that he pays twenty-six times more than he paid before, so far as my arithmetic is able to solve the problem. How can that be fair? How is the Treasury going to impose such an additional impost in the case of people with small incomes, while they are letting off people so lightly in comparison in the higher range of incomes?
May I make a suggestion? I do not know if there is anything in it, but if it be practical I think it would remove many of the existing anomalies. It is that, taking the case of incomes below £200 a year, instead of having this system of an Income Tax of so much in the pound, with all these abatements and allowances, you should have a Poll Tax—a fixed Income Tax—of, say, 10s. per man with an income between £120—the figure fixed by the 1323 Chancellor of the Exchequer—and £150—I am not binding myself to the figures; it is only a rough suggestion—and then, say, £1 between £150 and £180, and 30s. between £180 and £200 a year. I am quite sure that would work out more justly than the scheme proposed under this Finance Bill.
I want to turn now to another means of raising the revenue. I have already intimated I do not think that under this Bill the rich are paying their fair proportion of the cost of this War. I am very glad to be able to join in what is the universal testimony and tribute of the country to the sacrifice of life which both the middle and aristocratic classes have made, but in the matter of wealth they are not paying their fair share to the cost of the War. What are they paying? The capital wealth of this country used to be estimated at about £15,000,000,000, and I believe those figures were based upon an estimate made by Sir Robert Giffen some years ago. Recent investigations, however, have led to a considerable reduction of that figure, and the opinion of many people who are considered qualified to speak on this question is that it does not amount to more than £10,000,000,000. Suppose we take that figure. Taking the capital wealth of the country at £10,000,000,000, the rich who own that wealth are not contributing to the cost of this War more than half of one per cent. out of their total capital wealth, and they have most to lose by this War. Less than a thousand persons own more than one-half of the land of this country, and less than ten thousand own more than two-thirds of the land of this country. In former times it used to be the established fiscal system that land had to bear the burden of the poor. The question is how can we compel the property classes of the country to contribute a larger proportion to the cost of this War? In purely normal times I would not have made this suggestion. Under normal conditions I do not think a tax on capital is a desirable thing, but we are living in abnormal times, and whatever objections there may be to a tax on capital, they are infinitesimal compared with the ruinous policy which the Government is now pursuing of raising the cost of the War by loan. Therefore I would suggest for the serious consideration of the Government the taxation of capital. This, of course, ought to be graded. As a rough scale I would suggest that capital value below £1,000 should be exempt altogether, 1324 and then begin at 1 per cent. and grade the tax as the Super-tax is graded. If the tax on £10,000 be 5 per cent., it is not paid upon the full £10,000, but, say, 1 per cent. on the second thousand, 2 per cent. on the third and the fourth, and so on. I calculate that a tax of that kind rising to 10 per cent. upon amounts of £1,000,000 would bring in £500,000,000. There would not be much difficulty in doing that. I know the objections that will be raised to this suggestion. I know the objection in regard to capital which is invested in business; but that difficulty could be met by permitting the taxpayer to have two or three years in which to pay the tax. I submit these considerations to the Government.
I wish now to say a word or two upon a matter which was so ably dealt with by the right hon. Gentleman who preceded me, namely, the proposal to depart from our policy of Free Trade. It is no use the Government saying this is not so, because they know as well as everybody else that these Protective taxes have not been imposed for the purpose of securing revenue. A tax like that which I have suggested on capital would be infinitely better than a tax on motor cars, and an increase in the higher ranges of the Income Tax would secure the same effect. I see very little evidence of any lessening of luxurious expenditure in this country. Two days ago I read in the newspapers that a small portrait had just been sold for £35,000. Why was it possible to get £35,000 for a painting? Because there are people who have too much wealth. In a shop window in Bond Street a week ago ladies' handkerchiefs were exposed for sale at £20 per half-dozen, and we see similar evidences of luxurious expenditure all over London. The Government could do something to stop all that, but they are not going to stop it so long as they permit a man with an income of £100,000 to retain £63,000 of that income, because no man can spend £63,000 a year in a way which is beneficial to the interests of the country at a time like this. Dealing with this point in his Budget speech, the Chancellor of the Exchequer said that the rich had obligations. Of course they have, but the poor have obligations, and the country would suffer far less by the rich people being compelled to break their obligations than by the poor people being compelled to break theirs.
The Government do not intend these Protectionist taxes either to keep down luxury or for the purpose of raising 1325 revenue, but it is simply the thin edge of the wedge of Tariff Reform. It is the first step on the slippery slope that is going to lead us down to the Hell of Protection. Protection was started in this way in the United States of America during the American Civil War in order to raise revenue, and this kind of thing went on until America became the most Protectionist country in the world. I need not go in to all the Free Trade arguments at this time, but we know that by a system of this sort you are now setting up a protected industry in this country, and we know what that means. We all know that motor cars are to be taxed because of a certain motor car which is imported into this country from America with which at the present time English motor-car manufacturers are not able to compete, and consequently British manufacturers require protection against that import until the time comes when they will be able once more to compete with it. This is the price we are paying for a Coalition Government. I am quite in sympathy with many of the detailed criticisms which the right hon. Gentleman the Member for West Islington (Mr. T. Lough) offered, but I wish to contest his argument that the people who have been making very large profits out of the War ought to be permitted to retain those sums in their pockets.
§ Mr. SNOWDENThen my right hon. Friend does not contest the general principle, and it is simply a question of the best way to obtain what we all want to secure. The right hon. Gentleman can rely upon my support in Committee in any attempt he may make to remove some of the quite apparent injustices in the scheme of finance which is embodied in this Bill. In regard to the proposed change in the method of assessing farmers under Schedule B, that is a method which I have often denounced under our former system. I am not at all satisfied with what has been done. Does the Treasury think that farmers are going to contribute like other classes of the community under the scheme now proposed? They are not. I know of one particular case, and it must be typical of hundreds of others, where a farmer has never paid a single penny of Income Tax, although his average profits for many years have been over £1,500 a year. In the past men who are really not farmers at all have 1326 been able to take advantage of Schedule B. They hire a field for pasturing cattle and then they claim to be assessed under Schedule B. The Finance Bill proposes no change in that respect. Why should farmers not be assessed like other people? I know it is said that they are too ignorant to keep books, and that seems the only excuse I have heard. Farmers who pay £400 or £500 a year in rent must keep accounts, and they certainly are not less capable of rendering a return than a small tradesman or shopkeeper. Therefore, while I welcome the little concession which the Government have made in this matter, I regret very much that they have not abolished Schedule B altogether, and put farmers upon precisely the same footing as every other person who is liable to Income Tax.
5.0 P.M.
I would like to say how heartily I approve of the reference made by the right hon. Gentleman the Member for West Islington to the exemption of Cabinet Ministers, which is distinctly proposed in this Bill in regard to War profits. However, I want to give them this word of warning. They were already suspected in the country. They began to be suspected when they rushed through this House a special Act of Parliament in order to save themselves the expense of re-election. This is going to make them more suspected. I would refer them to an article in a paper which I do not very often read, to which I was attracted by a sensational placard, called "The World," and on inquiry I am told that "The World" is the organ of fashionable society and the aristocracy. In this week's issue of "The World" there is an article headed "Revolution or Defeat," and one of, the statements in that article is that within the next few weeks certain members of the Treasury Bench are going to be hanged from street lamp-posts. I should be very sorry indeed if such a fate as that did befall any one of them, but I ask them to be careful and do nothing that can encourage such a spirit as that abroad. There is another class which is going to escape and which certainly ought to be brought in. There are a number of men who cannot be accurately described by anything less harsh than charlatans who are making enormous sums of money out of this War. They are men with a certain reputation as writers who are now posing as great authorities on foreign policy and military strategy. According to popular report, one of these men is paid £100 a week for one article. There are a good many of them, 1327 and they are to escape altogether under the proposals of this Finance Bill. If there is anything which can be properly described as war profits, surely it is the remuneration of these men. I want to submit these comments and these criticisms and suggestions to the Treasury. We have been very often told that this may be a war of resources, and, if that be true, it is most important that we should do nothing which is likely to lessen our economic power to continue the War. My last word to the Government is that they should very seriously consider this matter of raising so small a part of the cost of the War by taxation and of relying to such a great extent upon Loans.
§ Mr. DILLONUnder other circumstances than those which now obtain a very strong case could be made out against the incidence of some of the taxes contained in the present Finance Bill upon Ireland. It might be argued, and argued with great force, that the indirect taxes in this Bill are an unjust and an unequal burden upon Ireland. I allude, of course, to the taxes upon tea, tobacco, and sugar. These questions have frequently been debated upon previous occasions in the House; but I do not take part in this Debate for the purpose of raising any special or separate claim on behalf of Ireland. Ireland has contributed a full and, I would say, a generous share of her blood to this War, and she is quite prepared to contribute a fair share in proportion to her means to the cost of the War. I am content, from the point of view of Ireland, to leave over to the Committee stage certain matters of detail which will have to be raised, and which I am quite certain the Chancellor of the Exchequer is prepared to consider in a fair and reasonable spirit. The one or two points upon which I propose very briefly to address the House have a general application, and are not specialised Irish matters at all.
First of all, I want to say a word on the question of the tax upon excess profits, which was so ably dealt with by the right hon. Gentleman who sits upon the Front Opposition Bench (Mr. Lough). That tax in principle received universal support when it was first proposed, but I, like the right hon. Gentleman, knew at the time, and I am convinced much more after listening to his speech, that it would raise all kinds of difficulties. I am quite content to leave the discussion of that tax and the 1328 difficulties which it will raise to the Committee stage, but I would just mention for the consideration of the Chancellor of the Exchequer two illustrations to show the enormous complexity of the difficulties with which he will be faced. I take, first of all, the case of the City of Dublin. It so happens that practically the whole of the business of the City of Dublin—all kinds of business—was paralysed and almost destroyed as regards profits during the year 1913 by one of the most terrible strikes that have taken place in the recent history of these countries. It took a considerable time for the manufacturers and traders in the City of Dublin to recover from the crushing effects of that strike, and I venture to say, as regards all the great businesses of Dublin, it is only in the year to which this Excess Profits Tax would apply—that is, since this time last year—that they have reached anything like a normal figure. Just observe what the effect of this tax would be upon the City of Dublin. Men, including the whole business community without exception, who have been staggering under the effects of the terrible strike of 1913, and who have just recovered themselves, would be penalised to the extent of 50 per cent. of their profits because they were ruined in 1913. [HON. MEMBERS: "No!"] I was going to say it is only perhaps this last year—as regards the great majority of the Dublin trade at all events—that they have reached the normal figure.
These are really more Committee points; but I would give one other point, because it has attracted a great deal of attention. Take the case of a great milling company, one of the largest, I think, in this country, who announced an extraordinary profit last year. I am assured by men in the milling trade that a vast part of the profit made by men who closed their accounts two or three months within the War breaking out has been lost during the last six months. That particular company—Spillers and Bakers, of Cardiff—were denounced as blood-suckers and enemies of the public because they had made these great profits. As a matter of fact, anybody who understands business knows that they were really in no sense more wicked than any other traders in this country. All such great concerns as Spillers and Bakers have to have in their stores for contracts a very large quantity of raw material, and when the sudden rise in price came they, like all other traders situated in the same circumstances, made very large profits, but when 1329 the recent fall in wheat came, the sharp fall of the last six months, they no doubt—at least, so I am assured by persons in the milling trade—like a great many others, suffered very heavy losses. I only mention that as a sample of another class of case—I am sure that there is an infinite variety of them—in which it will be found exceedingly difficult to adjust this profit tax so as to do even justice, and that is all that my right hon. Friend and other Members who criticise it desire to see.
I now pass to the real point which chiefly induced me to take any part in the Debate at all. It was touched upon by the hon. Member for Blackburn (Mr. Snowden) amongst the other points he raised. He drew attention to that which I consider to be the great blot in this Finance Bill, and that is the inevitable and, I think, wholly indefensible injustice of the new Income Tax provisions. We have heard continually throughout the whole of the discussion on the finance of the War, and also on the question of Conscription and Voluntary Enlistment, the formula that there should be equality of sacrifice, and I think it is a formula to which we ought to endeavour as closely as possible to adhere. Can anybody who has examined and worked out the figures of the new Income Tax proposals of this Bill contend for a single moment that there is equality of sacrifice? I do not think any Government ever introduced a Bill so indefensible as are these new Income Tax provisions. I am speaking now, of course, of the proposal to lower the limit for exemption, and still more of the proposal to lower the limit for abatement, contained in Clause 20 of the Bill. How does that work out? It is almost incredible how the figures work out. Those who are now assessed for Income Tax at from £10,000 to £8,000 per annum are to be called upon to pay only about 27 per cent. increase. Those who are assessed at a figure of £3,000 and under will be called upon to pay 40 per cent. increase, and that is the normal. When we come down to the class represented by people who have incomes from £160 up to £300, we find that their Income Tax is in some cases first doubled and then 40 per cent. added to the double tax, and in other cases raised 400, 500 and 600 per cent.
I heard an hon. Member make an observation during the speech of the hon. Member for Blackburn. He asked the question, "What is the figure rise, not the percentage, but the actual figure?" I must 1330 say I think that was a wholly irrelevant interruption and had no force in it whatever. One pound a year to a man who is struggling to support a family on £200 a year is much more than £100 to a man with £8,000 a year, far and away more. Therefore, in estimating the justice or injustice of the addition to the Income Tax, you must have regard, not at all to the actual figure of the increase, but to the proportion. I think that is absolutely plain. If you depart from that principle, it might be argued that the proper, just, and reasonable way to increase the tax would be to add £10 all round, or £5 as the case might be, making it an equal addition both to the man who has £200 a year and to the man who has £8,000 a year. I hope that the Chancellor of the Exchequer will endeavour to explain to us when he comes to speak on what principle he attempts to justify a 27 per cent. increase on the man who has £8,000, a 40 per cent. increase on the man who has £3,000 a year, and the doubling of the tax on the man who has £300 a year. It is an amazing proposal.
In all the previous reforms that have been carried out in the Income Tax one principle has guided Parliament and the Government, and has guided it more and more in recent years, because one of the greatest achievements of the late Liberal Government was their reform of the Income Tax. They introduced the graduation, they introduced the Super-tax, they introduced that most admirable principle the differentiation between the Income Tax on earned incomes and on investment incomes, and they also introduced the remission on behalf of children, all of them excellent reforms. What has been the principle that has guided Governments for the last fifty years? The principle has been that you should grade the Income Tax in proportion to the extent of the income. Here we have introduced under the cover of the War, and under the pretence apparently of calling upon all classes to make equal sacrifice, an Income Tax Bill which reverses the entire policy of fifty years and proposes to grade the Income Tax inversely to the income, because that is the basic principle of the Bill. The smaller your income the larger your increase. How can anybody stand up in the House of Commons and defend that? I feel very strongly on this question for several reasons, but there is one reason which I feel impelled to impress on the House. It is that I am speaking on this matter on behalf of a class who, 1331 in my opinion, have suffered more from this War, and have a harder struggle to make ends meet than any other class, and who are, on the whole, not very well organised and not so well provided with champions in this House as are other interests. Who are they that have been hit by this extraordinary, and, as I contend, most unjust innovation in the Income Tax? They are clerks, teachers, poor clergy, and small traders and shopkeepers, and these are the class of men who suffer under this provision.
Take a good standard case, the case of a man in receipt of an income of £200 a year. That is, I should say, a good average example of the classes to which I have alluded, classes which, although they are not very powerfully represented in this House, are yet very important and very numerous. They have a very hard struggle for existence, and I really think I am justified in stating that they are the classes who have suffered most from the War, because, as a rule, they have not obtained those increases of income which many other classes, particularly the working classes and manual workers, skilled and unskilled, have secured since the War broke out. Take the case of the man earning £200 a year. I am, of course, taking cases where there are no children. At the old rate of Income Tax that man paid £3 a year: at the new rate he will pay £8 6s. 8d.—that is to say, his Income Tax is doubled, and 40 per cent, is added on to it. How can the Government defend or excuse that? If it were of any use, I could give a number of other cases, but I think I may rest my case on that as a fair specimen of the class on behalf of whom I am speaking. I have here an extract from a letter which appeared in the Press the other day, and which was signed by "A Teacher." The writer said:—
If the Chancellor of the Exchequer will tax the man with a large income as he is taxing us, he might roll in money and pay his way. But no! The rich must he spared, whoever suffers. What sacrifice does the £5,000 a year man make when he pays £975. None at all. It is no sacrifice to give up superfluities. The sacrifice begins when the ordinary comforts of life have to be surrendered, the children's holidays stopped, part of their education perhaps, and when coal and even clothing and food have to be curtailed.That is an honest description of what takes place. They have no way of making ends meet, except by reducing the food and the coal bills and the bills for other absolute necessaries of life. All this man says is perfectly true. Nobody likes to pay a high Income Tax, and I am sure that the 1332 £5,000 a year man pays with a very wry face. But he does not shorten his coal bill or reduce his food. He does not give up taking the children away in the summer time, although he might better do that than the poor man. I have here another letter, written by a lady. She says:—I do not think it is being realised that while the percentage of increase in the Income Tax on this Budget to a man earning £8,000 a year is 27 per cent., to a man earning £300 a year it is 80 per cent.; and whereas the man earning £300 paid in 11113 £5 5s. and in 1914 £10 10s., he will now pay £18 18s.; while a man earning £8,000 who paid last year £1,479 will now pay £1,879.My conviction is that there is growing up amongst these classes of people the bitterest possible sense of injustice as to the effect of these alterations in the Income Tax. I have made it perfectly clear, without entering into more figures, that if you contemplate this matter solely from the point of view of the effect the Income Tax changes may have on these two different classes, and also from the point of view of justice, then the case against the changes is overwhelming. But when you take into account the indirect taxes and make allowances for them, the case becomes tenfold stronger, because not only is it true that the Income Tax changes alone are a terrible injustice to this section of the community, but these are the men and women who are hit, and cruelly hit, by indirect taxation. We have seen daily the rise in the necessaries of life owing to the increase of indirect taxation. We have all seen in the papers carefully worked out budgets by people who have to face the terrible problem of keeping a family on a weekly outlay of £2. It has been shown that in order to provide the same class and quantity of food for the family £3, or close upon it, is now required instead of £2. That is a result which I have seen worked out by various women. It costs, I think, £2 18s. 6d. to get the same quantity of food and coal as could be got for £2 before the War.This Budget adds considerably to that bill by indirect taxation, and having still further enormously increased the difficulties of that unfortunate lady who has to spread out her weekly allowance to provide the actual necessaries of life, you bring down upon these unfortunate people this additional burden of Income Tax. It is all very well for a man with £5,000 a year to make little difficulty about paying a few more guineas a year in Income Tax, but anybody knows the position of a person struggling to live on £200 a year, and it very often happens that a man trying to 1333 do that has a much harder struggle than the artisan, who has not to keep up the same position and appearance as the shop assistant, or the poor clergyman, or the small trader. To tell me to present such a man with a bill of three or four guineas at the end of the year is a very small matter, is to tell me something with which I cannot agree. It may be a small matter to some Members of the House, but it is a great, a terrific hardship to the man on whose behalf I am speaking. It means all the difference to him. It may actually involve such a hardship as deprivation of food.
What I want to bring home to the House is that this is a real case of hardship. It is creating a great deal of the bitterest feeling, which will tend to increase in the country, a feeling which is inflamed very much by some of those orators who are advocating compulsory service, and which may become very dangerous. For my part I would do nothing to encourage such a feeling or to promote it. But it is growing in strength, and there is being put forward the formula more constantly, that if you want compulsorily to take the blood of the people, you must take their money first. You hear that on all sides, and you will hear a good deal more of it in the future. It will be asked in ever increasing volume, how can you invite the people to expend their blood and submit to compulsory service if you leave the rich man his money? That feeling is growing; it will spread, and if we are going to have another outburst of the conscription campaign in this House to-morrow, you will find this will be the cry that will come back from the working classes of this country, "Let us first see the rich deprived of their money, and then we will consider the question of giving our lives." This policy contained in these Income Tax proposals, which spare the rich and unjustly tax the poor, will undoubtedly inflame that feeling and embitter many thousands of men and women in this country, and therefore I do strongly appeal to the Chancellor of the Exchequer to take this matter into his consideration between now and Committee stage, and see whether he cannot, instead of adopting the suggestion of the hon. Member for Blackburn with which I cannot agree—a suggestion for the introduction of a poll tax, a tax which wherever it has been produced in the history of the world has always ended in friction and disaster, and which has never been either productive or satisfac- 1334 tory—whether the right hon. Gentleman will not meet this case by the simple remedy of reverting to the old principle and adding whatever Income Tax is needed, but dropping out these Income Tax proposals, this new principle which, I repeat, will lead to most dangerous and bitter feeling throughout the country.
§ Sir G. YOUNGERI do not rise to follow the hon. Member who last spoke on the lines of his very interesting speech, but I would express my regret that, at the end of it, he introduced a subject which perhaps was not quite germane to this Debate, and which too might better have been left out. I rise to make no general statement on the proposals of the Chancellor of the Exchequer, but I want to raise one or two points in connection with Income Tax. The first is contained in Clause 27, which deals with bankers' profits. The proposal is that, in future, the interest paid on deposits shall be added to the profits of the banker, and the banker shall be entitled to deduct Income Tax on those payments. I think there is the very gravest objection to this proposal, and I am extremely sorry it should have been made. The excuse of the Chancellor of the Exchequer for making it is that, owing to the manner in which bankers are supporting the Government and the country in finding money for the War Loan, and in making enormous subscriptions, a question has arisen with regard to the difficulties in which they will be placed in respect of interest on investments which are charged with Income Tax at the source, and which, would largely exceed the amount of annual profit made by the bank on which Income Tax is alone payable. Some adjustment is deemed to be required. It is provided for by Section 2 of this Clause, and is perfectly satisfactory, but it is entirely confined to the current financial year. My claim is that that special form of adjustment ought to be continued and made a permanent form of adjustment. It is not by any means fair that, because of the situation which has been created by the generosity and support of the bankers, they should be placed in a position which they have never before occupied, that of being tax-gatherers for the Government.