STAMP DUTY (BILLS OF EXCHANGE). (Hansard, 1 May 1918)

§ Mr. D. MASON
This proposal to increase the duty upon cheques has created more opposition and more discussion throughout the country than any other proposal of the right hon. Gentleman. Just to mention some of the more important bodies which have already protested against it, I might say that the London Chamber of Commerce passed a Resolution the day before yesterday, and the London Stock Exchange and many other bodies have passed Resolutions asking the right hon. Gentleman to consider the inadvisability of proceeding with this tax. In some of the previous Debates which we have had this afternoon and evening it was suggested that certain interests were represented, but I think the right hon. Gentleman will agree with me that this appeal, which I now make to him, and which I believe many others will probably endorse, is one not representing any particular interest, but is in the general interests of the whole trading community. It is quite true that some bankers may have expressed themselves as being in favour of this tax, as it may not mean any hardship to them, or because it possibly may reduce the number of transactions, and therefore the clerical work involved. This is not a banking problem; it is one which directly affects the whole trading and commercial community. I believe that anything that will tend to retard the use of cheques will be likely to interfere with business. The cheques of to-day are used for very small sums, often, I think, as low as 5s. That in itself, I think, is an advantage. It has been suggested—and, I think, very properly—that if this tax is persisted with it will tend to discourage the use of cheques, and the result will be an increase in the use of paper money. Even the Chancellor of the Exchequer will agree that while an emergency circulation may be necessary in time of war, anything that can be done to prevent us from unduly extending that most undesirable form of circulation ought certainty to receive his support; and anything which is likely to retard that desirable object—namely, the 1661 reduction rather than the extension of Government paper money—should surely appeal to him. It has been argued that there is no difference between the circulation of cheques and Treasury currency notes. One authority suggested that, but it was pointed out, I think by the City Editor of the "Times," that there is a very vital distinction. I should rather like to elaborate that. The difference between a Treasury currency note and a cheque is this, that the cheque rapidly returns to the issuer, whereas Treasury notes remain in circulation and accentuate the inflation, which leads to a still further rise in prices, which again stimulates imports, and further embarrasses finance. On the other hand, the more cheques that are used do not circulate in the sense that Treasury notes circulate, because they are rapidly returned to those who issue them, and the currency is contracted rapidly accordingly.
I cannot see why the right hon. Gentleman, who has been most reasonable, and is always ready to listen to any protest or appeal made to him by hon. Members in this House, should proceed with this tax. He has said that the amount which will be raised— £ 1,000,000—is not a large amount, but that, of course, a million is a million. I quite agree; it is not on the ground of the amount. If this amount which is to be added to the Revenue could be added in a legitimate way, then I, for one, would heartily support any proposal likely to lead to an addition to the Revenue; but at this time a million would be dearly bought if it tended to interfere with and to discourage our trade and commerce, and if it accentuated this inflation, as I believe it would, and which, I think, the Chancellor himself now admits, because, in answer to a question, recently, he said that the Treasury were now watching the extension of Treasury currency notes. When we remember that the figures of the currency notes now amount to something like £235,000,000, whereas the gold reserve held against them is only 28½millions; and when I remind the House that the total in paper money which has been issued by all the belligerents amounts to no less than 44,131 millions, surely any measure such as this, which would be likely still further to accentuate that, would be a most unwise one. As I have already said, the small sum obtained in revenue would not be commensurate with the injury which it might do and the discouragement it might 1662 inflict on trading operations and commerce by accentuating inflation. This should surely influence the right hon. Gentleman, before he brings in this Bill, to drop this most undesirable tax. After the facts which I have ventured to submit to him, I think the right hon. Gentleman will consider this matter. When great chambers of commerce, when bodies such as the Stock Exchange, and when many bankers who, if they take the trouble really to consider this question, offer their protest, then these things should surely carry weight with the right hon. Gentleman. He has already said he has consulted with some bankers. I do not suggest that bankers are superior to other people. Probably they are very similar in their characteristics and human nature to other members of the community. I do not wish to reflect on them in any way, but when we know that inflation is an advantage to bankers personally, you cannot wonder that, as a class, they have not worried very much about this problem. While I do not wish to reflect on them, if they thought it was likely to give them less clerical trouble with regard to the cheques and if it would in another manner lead to opportunities of obtaining further profit, then you can understand the banking community, as bankers, have not taken a very active position in opposing this increase.
But I venture to appeal to the right hon. Gentleman, in the interests of our trade, of our credit, and of the general situation. This tax will unquestionably tend to reduce the amount of circulating medium in the shape of cheques, and cheques are the only things we have now, apart from Treasury notes and Bank of England notes. Bank of England notes, as hon. Members will agree, we seldom see at all now. The real circulating currency to-day is the Treasury currency note. The Treasury currency note, considered as currency, is, of course, the finest you can have in the world. It is too good, really; it is so good that it never returns to the user. The only reason why it might return would be if the public were to distrust the ability of the Treasury to repay the notes, and then there would be a panic. But the very fact that it is so good makes its redundant, and leads to inflation and a rise in prices; whereas, if you could, by some means, restrict your currency, you would tend to reduce prices to some extent and to alleviate the distress and embarrassment that comes from that. 1663 Therefore, if you can encourage the use of cheques, which are a natural form of currency, and which, by the mere fact that they are drawn by private individuals and not secured by the revenues of the United Kingdom naturally tend to contract and are not elastic in the sense that they come back to the users, you will be doing something to alleviate the increasing evil of inflation, which is so prevalent to-day. I appeal to the right hon. Gentleman to consider the various resolutions that will probably be presented to him in the course of the next few days or weeks before he brings in his Finance Bill.

§ Mr. J. MASON
The hon. Gentleman who has just addressed the House has given the opinion that the use of cheques owing to the increased tax would be largely abandoned in favour of the increased use of Treasury notes. But I think everybody will agree that, so far as cheques for a substantial amount are concerned, 2d. instead of 1d. would have no effect at all. No one drawing a cheque of any size ever considers whether he pays anything or pays nothing. It is only in regard to the small cheques that the 2d. would be considered, but even in relation to them you have to think what the alternatives are to using them. You have the alternative of sending a postal order, but you have to pay for it. You have the alternative of sending a Treasury note in an envelope, but it must be registered, and again that costs 2d.; or you could walk round and pay the Bill yourself, but that would involve the losing of a considerable amount of time which one may assume, in some cases, would be worth at least 2d. Finally, you may abandon paying the bill at all, and take the consequences. I sincerely hope that the Chancellor of the Exchequer will maintain this additional 1d. upon cheques.

§ Mr. BONAR LAW
If the House desires to press this, of course there will be an opportunity in connection with the Finance Bill. In the meantime I hope there will not be much of a discussion tonight. I should like to make it plain to the House, and to those interested outside, that I have not seen any reason, so far, to alter the decision which I took when introducing this proposal. I think what my hon. Friend has said, in a way which commends itself to the House, is precisely the consideration which decided me in putting on this tax. I admit I did 1664 not think of his fourth alternative. [Laughter] I do not think that the making of the tax 2d, instead of 1d., will seriously diminish the number of cheques. I wish the House to understand that I did not put this tax on without doing my best to find out what the effect would be. Naturally. I could not go round to every hank to inquire, but what I did was to discuss it with one or two of the leading bankers in London, and I asked one of them to inquire of any of his friends what was the general opinion, and I was told by the bankers I consulted that, in their view, the 2d. would be paid just as the Id. now is. with very little notice after the first two or three weeks. I cannot, obviously, give the names of those whom I consulted, but one of them, a well-known banker, who used to be a Member of this House, said that it was a very reasonable tax in the present conditions. If the change should lead to a scarcity of silver, we might be prepared to issue 5s. currency notes earlier than would otherwise be necessary, but I do not want to do that, and if I believed for a moment that the effect would be to reduce the number of cheques, I would not go on with it. It is a kind of tax which it would be quite easy for organised bodies to make it impossible for me to continue. But I am convinced that the view expressed by my hon. Friend is the right one, and that it will have no serious effect in reducing cheques. Only to-day I received a letter from the chairman of one of the big banks. He wrote: In a week or two the 2d. cheque would be in use as if there never had been any other. It may be that it will not be a useful tax after the War, and that we shall have to go back to the old custom, but we can deal with that when the time comes. Unless an agitation is started—which it would be quite easy to do—and if the people, who are using cheques now, look upon this as a very small help towards the War—as something they are paying in addition—if they keep that view, it will have no effect whatever on the use of cheques, and I hope the House will try to stimulate that view. I am convinced, so far as I can judge, that the tax will not have the effect that is expected, and that being so, I ask the House to support mo in regard to it on the Finance Bill.

§ Sir F. BANBURY
I am rather inclined to think that the effect of the Cheque Tax will not be altogether such 1665 as the hon. Gentleman opposite (Mr. D. Mason) has suggested. I am not of opinion that it "will result in encouraging the use of currency, because, after all, the cheque is a convenient method of remitting money, and in all probability that convenient method will still be continued. There is, however, a very strong feeling in business circles against the imposition of this tax, and only yesterday I received a letter from the Committee of the Stock Exchange, informing me that they had passed a resolution, which has been sent to the Chancellor of the Exchequer requesting him not to proceed with this proposal, on the ground that it would inflict very considerable inconvenience in connection with business transactions, while the revenue to the Exchequer would be extremedy small. I think that that is true. The view I take of the case is that it is a tax on industry. A private individual like myself will not be much affected by it, but where you have a very large number of cheques to draw there is no doubt the tax will be an additional burden upon an already overburdened industry, which has to pay Income Tax and Excess Profits Duty, and is now to have this additional charge imposed upon it. There is another point. I do not say it is a very serious one—which ought to be considered, and that is that a large number of people have already got cheque books. How is it proposed that the additional tax shall be imposed? Is the owner of the cheque book to affix an additional Id. stamp on every cheque he draws?

§ Mr. KING
It would be easy enough.

§ Mr. BONAR LAW
I may say we quite recognise that difficulty, and we are considering now in what way it will be possible to facilitate the operation. We shall do everything in our power to make it as easy as possible.

Sir F. BAN BURY
I am glad to hear that from the Chancellor of the Exchequer. These matters are small, but they cause irritation. I hope the right hon. Gentleman will bear in mind the inconvenience that may arise. As far as I have been able to ascertain—and, of course, it is impossible to get the opinion of a big constituency like the City of London on a matter like this in so short a time—I think the Chancellor of the Exchequer will acknowledge that the business men of London have shown them- 1666 selves desirous of meeting him in every possible way; they are not in the habit of putting difficulties in his path, even although his proposals may considerably inconvenience them—there is a strong feeling in the City that this tax is inconvenient and troublesome,and will produce very little return to the revenue. I remember when the late Lord St. Aldwyn proposed to do the same thing, he met with very strong criticism, and was obliged to abandon the tax. In times like these a Chancellor of the Exchequer bringing in a Budget nearly always has some little point on which he may possibly yield, and perhaps this is the small and only point upon which my right hon. Friend is going to yield. I am not asking for any pledge, but I think it might be well if he would consider the arguments I have put forward in the interests of those who have hitherto so loyally supported him in his taxation.