STATEMENT BY MR. BONAR LAW.

HC Deb 14 May 1918 vol 106 cc209-300

Order for Second Beading read.

Motion made, and Question proposed,

"That the Bill be now read a second time."

Mr. LOUGH

I think my right hon. Friend the Chancellor of the Exchequer must consider himself in a more favourable position with regard to this extraordinary Bill than any Chancellor of the Exchequer has ever been in this House before. I am not sure that the House or the country appreciates the extraordinary nature of the Bill. My right hon. Friend has told us that the Revenue on the existing basis of taxation, without imposing a single fresh tax, will be £67,000,000 more than last year. On that he imposes taxes amounting to £67,800,000, so that the total Revenue will be £842,000,000 or £135,000,000 more than last year. Those are most marvellous figures, and yet there is no disposition in any quarter to obstruct my right hon. Friend. Therefore, I think he ought to consider himself in an extremely happy position. When I ventured to make one or two remarks on the night of the Budget, I then congratulated my right hon. Friend. I now repeat the congratulations, but I do it with this purpose. He is so strong that there is no hope of our getting any amelioration from him in any direction by force. We can only appeal to his good sense, if we make any appeal at all. I would, therefore, ask him to consider one or two things I have spoken about already, because they seem to me of some considerable importance.

I want to direct attention first of all to the bearing of the Finance Bill on Ireland. It is a most remarkable thing that with regard to this Bill, which puts burdens on Ireland such as were never placed on her by any Bill since the Act of Union, there is not a single Irish Member here to take part in the discussion. [An HON. MEMBER: "There's you!"] I am not an Irish Member. [An HON. MEMBER: "You are an Irishman!"] Yes, but not an Irish Member. Surely hon. Members will not contradict what I have said. In the midst of all the remarkable things going on in this country, or even the world, at the present time, one of the most remarkable of all is the absence of the Irish Members from this House, and it may be they will never return. If that be the case, especially when there is a Bill dealing so intimately with the fortunes of Ireland, it is, I think, a matter of some interest that you should at least consider these Bills before they pass into law from the Irish standpoint. I will not trouble the House with any details, but, perhaps, the House will bear with me if I tell them how finance has affected Ireland since war broke out. When war broke out the taxation of Ireland was larger than ever before, namely, £12,300,000, but the country was also fairly prosperous. By the Budget of 1916, £5,500,000 was added to that total. Those figures are in the White Paper issued by the Treasury, but that White Paper is only placed before us in time for discussion on the Budget Therefore, the figures I am giving refer only to the White Paper issued last year[...] In the year ending 31st March, 1916, the Irish taxes were raised to £l8,000,000, and in the following year, ending 31st March, 1917, they were raised to £23,750,000. At this point our definite information ceases, because the White Paper of last year with regard to Ireland is not furnished to us. We get a White Paper, a very useful Paper, with regard to Great Britain furnished on the Budget night, but the Irish figures are not given until it is too late to discuss them. However, owing to the courtesy of my hon. Friend the Secretary to the Treasurer, we can tell with comparative certainty that the taxation of Ireland in the year ending 31st March, 1918, amounted to £29,250,000.

Complaint has been made from the Labour Benches that indirect taxes are unduly heavy in the Budget. I believe that to be true. I have called attention to the Sugar Tax, and when we get to it, if I have the opportunity, I would be glad to divide against it at the appropriate stage, because it seems to me to be a very unfair addition to the indirect taxation. But there are a great number of indirect taxes in the Budget, and all of them press with extraordinary seriousness on Ireland, which is an extremely poor country. Without going into all the taxes, I will just mention the three or four principal ones as they affect Ireland. First, the Income Tax. The House will remember it is doubled on farmers. Well, Ireland is a farming nation. Three-fourths of the population there live by farming. The Income Tax will be raised to what is a very great figure for Ireland—£7,250,000—by this tax. It is very interesting to know this. I think it is the fairest tax levied every year. I have always said so, and it is a very good test of the wealth that exists in the country for purposes of taxation. It will strike this House as very extraordinary that, whereas the Income Tax is estimated by the right hon. Gentleman to produce £300,000,000, Ireland, with one-tenth of the population, which ought to produce £30,000,000, is only estimated to produce £7,250,000. That shows the difference between the two countries. When you get a fair tax upon wealth like this you get that result. Another tax has been imposed in the last few years—a tax that is easy to pay in a rich country, and a fair tax within certain limits, although I made certain criticisms on it when first introduced. But the difference that this tax displays in its incidence on Ireland and Great Britain ought to attract the attention of the House —I mean the Excess Profits Tax. My right hon. Friend estimates that that will produce in Great Britain this year £290,000,000. In Ireland it will only produce £7,000,000. These two facts show the advantage Ireland has got out of the War. She makes £8,000,000 out of the War, and this House takes the opportunity of putting £24,000,000 extra taxation upon her. I am not holding up the Chancellor of the Exchequer as a particularly wicked person for doing this; he has only done what his predecessors have done. But it is a very remarkable fact that is presented by these figures.

Mr. SNOWDEN

Farmers are not assessed—that is the explanation.

Mr. LOUGH

It would not hit the Irish farmers if they were.

HON. MEMBERS

Why not?

Mr. LOUGH

Because nearly all the farmers of Ireland are small men, and would be exempted. The Excess Profits Tax is imposed in the same way in both countries, and in one country it produces £290,000,000, and in the other country, which has one-tenth the population, and is two-fifths the size, and yet is treated as if it could bear the same burdens, it only produces £7,000,000. These are very remarkable figures, to which I invite the attention of the Chancellor of the Exchequer. Look broadly at the figures of the year. Direct taxation in Ireland is only 50 per cent.; indirect is 50 per cent. In Great Britain direct taxation is 80 per cent. and indirect 20 per cent. These are the facts that show the difficulty of the case, and I think are well worthy the consideration of the Chancellor of the Exchequer. To put them right, however, will require a very different Bill from that which we are now considering. Yet I think the facts ought to be mentioned in connection with a Finance Bill. I can do no more than to thank the House generally, and especially the British Member, who cannot be much interested in it, to the patience with which they have listened to my few remarks on these distinctive features.

The second question I desire to call attention to is the Cheque Tax. This tax illustrates, if I may say so—and use a very strong word—one of the vices of the right hon. Gentleman, in dealing with the House. The Chancellor is in a very strong position. He has only to touch his bell to bring in his men, and he can carry anything he wishes. I am afraid that sometimes, with a bad proposal like the Cheque Tax, he is under the temptation to put it through—as he may in this case—as a small and unimportant matter—though it may do what may be a great injury to the country. The matter has been debated at great length, and I do not want to repeat what has been said. But I want to ask the right hon. Gentleman a question. The Chancellor, in defending the tax, used these words: Before I arranged to have this introduced in the Budget I consulted representative bankers."—[OFFICIAL REPORT, 23rd April, 1918, col. 935, Vol. 105.] The Government is always getting into trouble about letters in the papers. The other day it was that of General Maurice. Since then we have had one on this subject from a very distinguished banker, Mr. Goodenough, chairman of Barclay's. He says, in reference to the Cheque Tax: Individual bankers may have been consulted, but the opinion which they are reported to have expressed does not, I believe, reflect the opinion of the bankers as a whole. That is a very serious statement from a banker like Mr. Goodenough, for I suppose the right hon. Gentleman will admit that there is no class of the community upon whom he is so dependent and who have done so much to strengthen his hands and help the country during the War than have the bankers. I do not want to put my case higher than to point out that the right hon. Gentleman did use the words "representative bankers." The committee of bankers have expressed their views from time to time on the various subjects brought before them, and here is the chairman of Barclay's saying that they have not expressed a very favourable view of the Cheque Tax, and the Chancellor said they had done so.

The CHANCELLOR of the EXCHEQUER (Mr. Bonar Law)

My right hon. Friend knows that no Chancellor would ask the Committee to pass a Resolution in regard to a tax he is contemplating without trying to discover the mind of those outside. What I said was absolutely true—that I consulted a certain number of gentlemen who were representative bankers, and the view given to the House was expressed to me by them.

Mr. LOUGH

I do not want to go unnecessarily into that aspect of the case. I want to get rid of the tax if I can. The right hon. Gentleman used the words "representative bankers," and the chairman of Barclay's says that the representative bankers were not consulted, and that they take a different view. That is pretty good authority. I leave it at that, and I would simply put it to the Chancellor of the Exchequer that if he did not know their view before, he knows it now. Let the House consider one or two points in relation to this tax. The right hon. Gentleman used these words: The objection is made—it would be a very valid one if there were anything in it—that if by alterting the stamp we limit the circulation of cheques we increase inflation and get more currency notes in circulation. He further said: I do not believe that there will be any great diminution."—[OFFICIAL REPORT, 23rd April, 1918, col. 935, Vol. 105.] He indicated that he would not like to cause the evil suggested. The chairman of Barclay's continues: There is no doubt— Perhaps this is a small different point, still it is in keeping with the whole argument— There is no doubt that the private individual will in the future draw a larger sum from his banking account when he draws a cheque— That is true— and will carry a larger sum in Treasury notes in his pocket than he was formerly accustomed to do— That will cause a larger number of Treasury notes to be issued— All this points to an increase in the issue of Treasury notes, which it is important to avoid under existing conditions. Then he goes on to speak of the Disinclination on the part of people of moderate means to open small banking accounts in eases where they would otherwise do so, with the result that the resources of the community as a whole will not become available to meet the general financial requirements of the country. At this present juncture it is essential that the whole financial strength of the country should be placed at the country's service. I do not wish to read the whole letter, because it is evident that many hon. Members have already seen it. But in it it is urged on every ground of good and sound finance that the Chancellor ought to leave this tax alone, as it will only give him a very small amount of revenue. I asked for the figures in regard to it. My hon. Friend the Financial Secretary courteously gave me the best figures he had. I am not sure that they are correct. I believe that a great revenue will be imperilled if the tax is proceeded with. A subject I want to mention, in a sentence, is the Sugar Tax—though I think it will be better to hold over most I have to say on this till Committee.

In conclusion I want, in two or three Sentences, to call attention to the Luxury Tax. I do not quite like it. It is all very well for the Chancellor to throw the blame on the House of Commons if anything bad comes afterwards. He proposes to put a tax of one-sixth on what a Committee upstairs declares to be a luxury. He has not calculated this Luxury Tax in his Estimates. No one knows anything about it. I believes the Luxury Tax is like a pig in a poke. It will be well for the House to let it out, so that we may know exactly what it is before it is accepted. The general principle on which Chancellors of the Exchequer have proceeded in this country and the principle on which my right hon. Friend is doing so well is this: Our past Chancellors—and the right hon. Gentleman also—have chosen one great object of taxation and got a lot of money out of it. Look at the examples I have given: of two taxes—the Income Tax and the Excess Profits Tax. Out of the latter £300,000,000, and out of both a revenue larger than any civilised State in Europe. That has been the principle upon which Chancellors of the Exchequer proceed to avoid niggling taxes which will vex and worry people. They take great subjects for revenue and get all the money they can out of them. This Luxury Tax is a violation of that sound principle. What is a luxury to one man may be a necessity to another, and in these grave days when the nation has many sorrows, trials, and anxieties, and when you have already imposed an Entertainments Tax, it may not be a wise thing to depart from the principle of selecting large subjects of taxation to go into these niggling taxes, which may be suggested by this busy Committee upstairs. I hope when the result of their investigations comes down it will be left in a very free way, and I trust the right hon. Gentleman will be willing to accept any reasonable Amendments. The living of a great many people will be disturbed by interfering with these luxuries. Many people engaged in these so-called luxury trades are not affected by the profits of the War and they do not get increased wages. I believe this is a very injudicious time to go blindly into a wild, worrying system of taxing these things. The one reason my right hon. Friend has given in favour of taxing luxuries is that the French have adopted that principle, but the French are not very sound financiers; their system is not as good as ours, and they have never had the experience which we have had of raising such large amounts. I appeal to my right hon. Friend to give full consideration to this matter up to the last moment. If my right hon. Friend will reconsider the Cheque Tax and the Irish case presented in connection with the Home Rule Bill, and keep an open mind with regard to suggestions and Amendments, then our discussions on this great Finance Bill may end as pleasantly as they commenced.

Sir C. HENRY

My right hon. Friend commenced his remarks by congratulating the Chancellor of the Exchequer on the reception accorded to his Budget. I think the Chancellor of the Exchequer has had many surprises in his life, but I think the fact that he will obtain taxation by his proposals to the amount of £800,000,000 is one of the greatest surprises that has ever occurred to him. I consider that the Chancellor of the Exchequer, by being courageous enough to raise revenue for the service of the Debt, and for normal and prospective expenditure, including pensions, has done a great deal to maintain the credit of this country, and I will go further and say that when the period of reconstruction commences we shall be in a far more favourable position owing to having had the courage to obtain sufficient revenue to meet our current requirements as regards our credit, not only than our enemies the Central Powers, but we shall be in a better position than our Allies and other belligerents, with the exception of the United States. The Chancellor of the Exchequer has successfully endeavoured to distribute the taxation over all classes. He has made demands on the financial, industrial, and commercial community, and he certainly has not been lacking in courage in imposing fresh taxation on the working classes; and I am certain nothing gives him greater satisfaction than to know what little opposition he is receiving both as regards the Sugar Tax and the extra tax on tobacco.

What I admire most of all is his audacity and courage in proposing such additional increased burdens on the drink trade. He said in the discussions on the Budget Resolutions that he was agreeably surprised at not meeting any great antagonism from that quarter. I think it will be generally conceded that no more pronounced indication of the determination of the people of this country to pursue the War to a satisfactory peace can be obtained than their willingness to support and bear these increased financial burdens. I do believe that the Chancellor can rely that so long as this War lasts any expenditure which the Government of the day, whether it is this Government or any other Government, may consider necessary, need not be avoided on account of the financial obligations that it demands. I said there were few criticisms levied against the Budget, and also that few alternative suggestions have been made. The only one with any concrete object was that made by my hon. Friend the Member for Holmfirth (Mr. Arnold), supported, I believe, by the hon. Member for Blackburn (Mr. Snowden). In the main there is not such a great deal of difference between the proposals of the Chancellor of the Exchequer and the Member for the Holmfirth Division, who proposes conscription of wealth on a very huge scale in a very drastic manner. The Chancellor of the Exchequer does propose conscription of wealth, but he does it, if I may say so, in homœopathic doses, whereas my hon. Friend the Member for Holmfirth would administer it in a manner which I think would paralyse and cripple permanently the industrial welfare of this country.

4.0 P.M.

I will make one or two remarks which I hope my right hon. Friend will not regard as criticisms, but merely as a desire to express a certain view in regard to some of his proposals. He has increased the Income Tax, but he has not increased this tax in a measure beyond what was anticipated, although it must be recognised that to-day the Income Tax stands at a level which no one four or five years ago ever contemplated. As I pointed out during the discussions on the Budget Resolutions, the late Prime Minister before the War gave the House to understand that it was his intention to set up a Commission to deal with the incidence and anomalies of the Income Tax. During the Budget Resolutions my hon. Friend the Member for Chippenham (Mr. G. Terrell) moved an Amendment with reference to one of the anomalies, and I notice that the Chancellor of the Exchequer in the Finance Bill has met the views of my hon. Friend by empower- ing the Commissioners to take into consideration depreciation of assets in machinery to a far greater degree than hitherto, but he still does not go far enough. He does not give the Commissioners power to deal with wasting assets in the nature of buildings or with the exhaustion of mines.

Mr. BONAR LAW

indicated dissent

Sir C. HENRY

He may do so with regard to buildings, but not with regard to mines. After all, that is only one of the anomalies. My right hon. Friend must recognise that the imposition of the double Income Tax levied here and in the Dominions, and by our Allies, is a great hardship. After all, the additional Income Tax levied in the Dominions and by our Allies has been brought about for the one purpose, namely, the pursuance of the War, and therefore a good many people are called upon to pay double Income Tax for the same purpose. There is another anomaly to which I have referred on previous occasions. A certain class of the community are immune from the payment of Income Tax, although they should be called upon to do so. I refer to that class whose income may be under £130 or in the neighbourhood of £130 a year, but who in addition get their board and lodging, which to-day is very substantial. If their board and lodging were added to their wages, they would come within the scope of the Income Tax, but at present they are free. My object is once again to urge upon my right hon. Friend how necessary and desirable it is that the Commission that was promised by the late Prime Minister before the War should be set up, if possible, without further delay. I believe that by so doing he will be able to redress some of the anomalies and at the same time to carry out one of the recommendations of the Report of the Committee of Lord Balfour of Burleigh.

It is not always that I find myself in agreement with my right hon. Friend (Mr. Lough) who has just sat down, but with his remarks upon the increase in the Cheque Tax I am entirely in accord. The Chancellor of the Exchequer stated that from this increase in the Cheque Tax he would obtain in a full year an additional revenue of £1,000,000. Am I right in concluding that up till now the revenue from the Cheque Tax has been £1,000,000, or, in estimating for an additional £1,000,000, has he allowed anything for a reduction in the use of cheques. I was not very much impressed by the reason put forward by my right hon. Friend as to the bankers not being in agreement upon this matter. Last year I sat upon a Committee in connection with Premium Bonds, and on that matter there was great divergence of opinion among the bankers, so I do not think that you would get a consensus of opinion among them on this question. If I were a banker or the manager of a big joint stock bank, I should certainly be in favour of doubling the Cheque Tax because I believe it will diminish the number of cheques that pass through the banks and thereby bring about a decrease in the amount of clerical work. But I am not in favour of reducing the number of cheques. I believe the cheque system is one of the most valuable assets that our country possesses at the present time. I do not like to venture my opinion against that of experts, but I must say that I do feel that an increase in the Cheque Tax must lead to an additional amount of currency being acquired. I believe that people who have been in the habit of paying small amounts by cheque will pay them in currency, and additional currency will thereby come into circulation. It will be generally admitted that to a certain extent inflation of values is caused by the amount of currency that is in circulation. My right hon. Friend admits that there is great difference of opinion about this tax. The amount to be received, one might almost say to-day, is inconsiderable, and I think it is an indication of the desire of the people to help the Chancellor of the Exchequer that, although it is only £1,000,000 sterling, there has been perhaps more criticism of this Cheque Tax than of any other feature in his Budget.

My right hon. Friend dealt with the Luxury Tax. I am in agreement with him to a certain extent. I am not enthusiastic about that tax, but, the Chancellor of the Exchequer having embodied it in his financial proposals, I do not expect him to withdraw it. It is true that in making his financial statement he did not mention any amount that this tax was likely to produce. It would have been impossible for him to have done so. After all, he does not know the articles on which it will be levied, and it would have been very difficult to have made any calculation as to the revenue which will be obtained. I am pleased, however, and I want to recognise, that the Chancellor of the Exchequer has met one criticism that I made on the Luxury Tax during the discussion on the Budget Resolutions. The Chancellor of the Exchequer had differentiated as between the sales made by wholesale dealers and the sales by auctions. As the Budget Resolution was proposed, any purchase made at auction either by a dealer or by an ordinary purchaser was liable to the tax. Now, under the new conditions, the Chancellor of the Exchequer has modified that, and if a dealer purchases at auction and he can show that it is for the purposes of his trade he will not be called upon to pay the tax.

Mr. BONAR LAW

indicated assent.

Sir C. HENRY

I think that will be received with great satisfaction, but I am going to ask my right hon. Friend to consider another concession. As I understand it, this Luxury Tax, once established, is likely to be a permanent instrument in our fiscal system. At the present time the purchases by foreigners in this country are very small, but after the War, when affairs get more normal, there will be visitors coming here from America, South America, and other parts, and it is to be hoped, in the interests of trade, that they will effect purchases of articles of luxury in this country. I do not want that trade to leave this country, and I am going to ask the Chancellor of the Exchequer if he will exempt from the Luxury Tax articles that are included in the Schedule which are exported forthwith and not used in this country. If that is done the industries of the country will not suffer. No tax of this character should be imposed which would be detrimental to the general interests of the community and the welfare of the people. The new tax in France, from all reports, is not receiving a very favourable reception, because a good many of the industries of France rely upon the trade that they do with visitors from other countries, and it is highly necessary that that trade should be maintained. There is one other point in connection with the Luxury Tax. I consider it illogical to impose a tax upon any articles in this country unless at the same time you imposed a countervailing Import Duty. It has been the system of this country when imposing an Import Duty to impose a corresponding Excise Duty. This is really an Excise Duty, and it ought to be met by a countervailing Import Duty. I have said that the country will respond readily and meet the financial requirements of the Chancellor of the Exchequer to carry on the War, but they have a right to expect that they will receive, as far as possible, value for their money. The Chancellor of the Exchequer would be the first to admit that during the War substantial money has been spent loosely and unnecessarily and has not given adequate results. I do ask him to keep a closer control over the expenditure of all the public Departments and not to allow projects and enterprises which entail a large financial outlay to be embarked upon unless he and his Department are satisfied that the expenditure is justified. If the Departments knew that they would have to undergo closer scrutiny than they do at the present time it would have a salutary effect and would be for the benefit of the taxpayers of the country. I will conclude by saying that I believe that the estimates of the Chancellor of the Exchequer as regards the Revenue from his proposals that he anticipates will be realised, and also that our enemies will recognise that no financial consideration will prevent our pursuing this War until our objects are attained.

Mr. CURRIE

I cannot pretend to feel any great interest in the fate of the 2d. tax on cheques. I do not think the country really attaches very much importance to it one way or the other. The real interest of the Budget is the place it appears to occupy in the sequence of War Budgets. That is of much greater importance just now than the actual proposals of the Budget, which we and the country, I believe, are willing to accept without much discussion. This Budget does more than any other War Budget to broaden the basis of taxation. It has borne in on the public mind the heavy weight of the burden that has to be placed on the shoulders of all classes in the community for the next twenty or thirty years, at least, and probably for a very much longer period of time. One sees that that is the effect upon' the minds of both capitalists and labour men alike. One sees it in the kind of appeal that is made to the House. It appears that there is a good deal of misunderstanding in the mind of labour when from one point of view it raises the proposal to conscribe wealth and at times does so in a somewhat harsh and ill-considered way. Nothing could be more fallacious than that any party in the country should think that any difference of view as to how a War Debt of this magnitude is to be paid can affect the burden which the actual incurring of the expenditure is likely to place on capital and labour alike. The trouble has taken place. The milk, so to speak, is spilt. Therefore, it does not matter very much to labour whether capital is conscribed or not. There may be 50 other reasons for doing it or not doing it, but it appears, to be a fallacy for labour to take the point of view, as it sometimes appears to be doing, that it can escape any portion of its share of the burden, which is bound to fall on all alike by proposing this financial prescription. The same thing is seen in regard to the capitalists. Some of the suggestions which are made to the Chancellor of the Exchequer that he should make some further alteration, in the assessment for Excess Profits Duty are really based upon a misapprehension. Capital is well advised, and quite justified, in pointing out that its own depletion will damage not only it and those who own it, but all those who depend upon it. It would be unreasonable to the last degree to object to capital forcing, that argument upon the attention of the House, but I do not see that anything, that the House or the Chancellor of the Exchequer would be warranted in doing now can, by the process of Budget legislation, do anything to relieve capital from its anxieties. Capital should also-remember that the mischief, so to speak, is done, and cannot be cured by any process of Budget legislation.

One of the most interesting problems raised by this Budget is whether the Excess Profits Duty is a tax which it will be found practicable to bring to an end as soon as fighting is brought to an end. The bulk of our discussion has proceeded on the understanding that the tax would come to an end. That was our original intention, but from the length the War has already run, I doubt whether the discontinuance of the tax will be found possible when peace comes. Of course, in a verbal sense, that particular tax might be taken off and other taxes of the same or similar amount might be put on. I wonder, however, how many people realise that if the Excess Profits Duty were taken off, just now, the ordinary Income Tax would need to be doubled at least, and that instead of a 6s. Income Tax, we should require one of at least 11s. or 12s. I wonder what reception to any proposal of that kind the country and the ordinary taxpayer would give. I often wonder how many people realise that before the War only about 1,250,000 of the people of the country, out of a total of 45,000,000, were paying any Income Tax at all, and that, even now, the number is well under 4,000,000. That means that a good deal less than 10 per cent of the population are Income Taxpayers. We hear a great deal about the equality of sacrifice. I would rather discuss the matter as being one of equality of service. This Budget should bear in upon the minds of the extremely wealthy section of the community that the burdens which are bound to fall upon them are certain to be upon an extremely heavy scale. I often wonder whether these people are making the re-arrangements of their expenditure which they should make, not in their own interests, which is their own business, but, in the interests of the country, which, after all, they are called upon to serve. If a man is possessed of a large fortune, say, £500,000 or £1,000,000, at the end of the War, and finds himself face to face with taxation—whether called a Capital Tax or an Income Tax matters very little indeed—which may reduce his fortune to the extent of one-half, or conceivably to the extent of one-third, I often wonder whether he realises that that places upon him no heavier a burden than has fallen upon many of the men whose whole financial scheme of life has been broken down and upset by five years' active service. If a millionaire finds his fortune reduced by one-half, is it not the case that arithmetic proves that money doubles itself in fourteen years? [An HON. MEMBER: "At compound interest!"] People generally invest their money at compound interest. It is the plainest of plain things that a lapse of ten or fifteen years will restore his fortune to where it was before, whereas it is doubtful whether a lapse of ten or fifteen years will restore the fortune of most men whose whole life, at the most important juncture from the point of view of a man's financial arrangements, has been rudely broken into by the War. So far as equality of sacrifice goes, the rich will not have any right to complain if heavier taxes are placed upon them than those at which the present Budget seems to aim.

Another reason why I think it is doubtful whether the Excess Profits Duty can be remitted immediately peace comes is this: It is plain that the moral sense of the country would not stand fortunes being thrown at the heads of people at the outbreak of war, and I see no reason to think that it will stand fortunes being thrown at the heads of people accidentally, at the outbreak of peace. The true theory to proceed upon is to take the period of the War and the following five years of peace and regard them as one period, and that the whole fiscal legislation and the whole of the heavy burdens necessary for laying plans for the liquidation of our finances after the War shall be looked at as a whole and not locked up in separate compartments. I wish that greater use could be made of the information which Government Departments must be accumulating in their own hands regarding the resources of the country. Clever as the reason may have been for imposing secrecy upon those who collect the Income Tax—one sees the cause of it at once—that really should not be allowed to apply to the Excess Profits Duty. I remember that about a year ago I made an attempt to extract from the Chancellor of the Exchequer some information as to where the Excess Profits Duty came from, and the answer, in round language, was to the effect that it was confidential information and could not be disclosed. That may be so, and so long as the obligation rests by Statute upon the Government to regard information of that kind as confidential, of course we in the House must be content to go without it. But a fetish is made of secrecy in this matter. If we are raising one-third of the War revenue by the Excess Profits Duty, it is absurd that no one can find out how much comes from coal mines, how much from the drink trade, how much from Army contracts, how much from engineering firms, how much from the textile trade, and so on. On the other hand, I can see many reasons why an analysis of information of that kind would be very useful to the whole country. It is rather absurd that the incomes of judges, Cabinet Ministers, and for the greater part the wages that are paid to the working men of the country should be a matter of common knowledge, and that, without divulging individual incomes, a complete withholding process should be relied upon by the Treasury, and that it should be impossible after the War to know which of the rich trades in the country yield the larger and which the smaller amounts of the Excess Profits Duty. An unnecessary fetish is made of secrecy in these matters. I do not think it is very likely that for much longer the wage-earning classes in the country will be content with the fact that the profits earned and the taxes paid by so many classes in the community as are treated in this matter with secrecy just now shall be withheld from their knowledge. For many reasons they would be quite well advised to insist upon a much greater degree of publicity.

I wish to say something about the Budget from another point of view, that is, to what extent it opens to us a view of how the enormous War Debt which is being piled up can be dealt with. In the first place, it is perfectly obvious from what the Chancellor of the Exchequer has done in this Budget with respect to the drink trade, that he regards it as a trade that can yield large sums of money. I do not intend to enter into the question of the Exports published the other day, and it is not material to my argument whether the drink trade should be bought out or on what terms. But if we are spending £250,000,000 a year on drink, it is perfectly obvious that if the country is driven to economy, there is in that expenditure a very large possible economy. I should say, for instance, that a sum of at least £50,000,000 a year for the next twenty years could be saved by the country from that source alone if it really wanted to do it. That represents a cutting down of about 20 per cent. of our expenditure on drink. It appears to me that far too much money is being spent in this direction. While I have no desire to force teetotalism on other people—I should resent it myself — it seems to me that in this enormous expenditure there is room for a good deal of economy if the country made up its mind that it wanted the economy. Fifty millions a year for twenty years, neglecting questions of interest, would provide £1,000,000,000. That £1,000,000,000 would pay a material proportion of the money that has been spent on the War down to date. Taking the case of Death Duties, as to which I said something the other day, I know, of course, that it is impossible to throw out any suggestion that they should be increased without being accused of a desire to restrict the rights of inheritance, and so on. It is quite true that, whether a man pays £5 or £200,000 in Death Duties, there is a restriction upon the rights of inheritance. It is a restriction which one cannot dissociate from any form of taxation, because if you pay only 2½d. it is a restriction upon the rights of inheritance in some degree. If another £30,000,000 a year was brought in by Death Duties for twenty years, then, including interest, and using very round figures, you would get something like £1,000,000,000. There is another £ 1,000,000,000 which might be available for the purpose of liquidating the War Debt.

With regard to the proposal of a capital levy, the Chancellor of the Exchequer, in reply to a question the other day, said the income brought under review for taxing purposes in 1916–17, amounted to £1,655,000. If that be so, nothing will persuade me that, if the country wished to do it, it would be impossible to raise, say, £ 2,000,000,000, equivalent to fifteen or sixteen months' income, from a levy of that sort. I do not enter for the moment into the question whether it is worth while doing that way, but if such be the taxable income of the country it is grotesque to take up the position that every version of these schemes is perfectly impracticable. It seems to me that if the country wished to raise the money in that way £ 2,000,000,000 could without very much difficulty be raised. If one adds these figures together one arrives at £ 4,000,000,000, about half the expenditure in question down to to-day. These, of course, are very heavy burdens to face, but at the same time it appears to me there is a good deal of evidence in the Budget, and in the discussions arising out of it that the country is well able to finance the War for a good long time yet, and the more clearly we and our enemies realise that the better. It is idle to deny that there would have been a feeling of great discontent in the country if the heavier taxation now placed upon us by the Budget had not been announced. If there is a feeling one way or the other in that connection it is probably that the taxes might have been a little heavier, but on the whole, as the Budget in a full year provides for about £ 900,000,000, I think the country is well contented, and the best evidence of it is probably to be found in the fact that the House of Commons on the Second Reading of the Budget is more or less empty.

Mr. G. FABER

Let me first touch upon the Cheque Tax. I only speak as an ordinary Member of Parliament. I do not claim to be a scientist or a professional in these matters, but I am certain the Chancellor of the Exchequer has not barred and bolted the door at all. He has an open mind. However many legions he may be able to take into the Lobby, he would not depend upon them alone but would listen to the voice of those who know, or who he thinks may know. Some bankers take his view while others take the other view. There is a difference of opinion. Attention has been called to the way in which the then Sir Michael Hicks-Beach in 1902 was forced by hostile opinion to withdraw his proposal to differentiate the stamp duty. That was an entirely different thing from this. Imagine the difficulty that bankers were faced with. The man at the desk had to look at every cheque and see if the stamp was right. The bankers would have had an intolerable burden placed upon them. An hon. relative of mine who has since been translated elsewhere—I do not mean that he has gone to a better world; from some points of view, I suppose it is a world almost beneath the notice of the House of Commons—was in the forefront of that fight, and had something to do with the conclusion to which Sir Michael Hicks-Beach ultimately came; that it was better to withdraw the matter altogether, and leave the tax at 1d. This is a flat tax of 2d., and the bankers are going to have no difficulty whatever. If cheques are fewer in number there will even be less clerical work to a certain extent. The whole of our cheque system is an auxiliary. Cheques are vital enough. I should like to know where the War would have been if we had not had the cheque to help us.

I daresay I am millions wrong in what I am going to say. We all get millions wrong nowadays, but I suppose I am somewhere within £50,000,000 when I say that our present note issue is somewhere about £220,000,000 to £250,000,000, and I suppose it is no secret that our gold is somewhere about £30,000,000. It is clear that we do not want to increase our note circulation if we can possibly avoid it. What are notes and what is gold? Notes are valueless. They are the credit of the country, that is all. We have got no money now. We are using the credit of the country, and if the credit of the country is valueless all the £250,000,000 of notes are valueless, too. Our credit is good, but do not inflate the note more than you can help. Will this inflate the note? Again, there is a large difference of opinion. The Chancellor of the Exchequer thinks his proposal will not. If he thought it would to any extent, I am quite sure he would not go on with it. A remark by my hon. Friend (Mr. J. Mason) —who is a man of financial knowledge— the other day impressed me. He said the little man who has got to pay his debts in small amounts is not in these times going to alter his habits merely because he has to put 2d. on the face of the cheque instead of 1d. He has got to pay his debts somehow, and he will not stop writing 2d. cheques and take the trouble to carry notes about with him and expend shoe leather. That is a small illustration, but it may possibly go pretty near to the root of the matter. If I thought that was so I should have no objection to the Chancellor's proposal, but human nature is very complex and very difficult to understand, and the little man may take the other view, and do not forget that it is the mickle that makes the muckle. It is not the big man who is going to increase the note circulation. It is all the little men. If all the little men say they are not going to draw their little cheques any more, there is no doubt that you are going to increase the note circulation, with all the dangers which that will involve. If that is so, I have no hesitation in saying the Chancellor ought not to go on with this proposal. Another point is that the cheque goes out and very soon comes home to roost again. You write a cheque and it is back again on its perch in a few days. But when a note goes out it does not come back to its perch, but stays out. Therefore, increase the note circulation and you increase it for bad and for all, except so far as the Bank of England cancels the note when it gets back.

These are matters which the right hon. Gentleman should take very carefully into his consideration. When we are spending money at the present rate, is it worth it? That is a bad argument, because, if everyone said: "Is it worth it?" the Chancellor would get nothing at all. But is it worth it for the sake of £l,000,000 possibly to drive hundreds of thousands of people who write small cheques into the use of notes, and so increase the note circulation, which it is most desirable not to increase? Is the right hon. Gentleman sure, first of all, that he is going to get double the income he gets out of the 1d. stamp; and, secondly, that he is not touching, perhaps deleteriously, a very delicate machine which, so far, has served us extraordinarily well. It is for him to decide, but I am certain there is no door barred and bolted here. If he comes to the conclusion that this ought to be done he knows full well that there will be no opposition from the bankers, who are no less patriotic than any other members of this great community, and who have made up their mind, to the last shilling, that this War has to be fought out. We cannot "go over the top." The day has gone by for that. But we can do our duty, and if we cannot find blood money in our own persons, we can find what the present Prime Minister called at the beginning of the War, the silver bullet. May I say a few words about that silver bullet? The present Prime Minister, then Chancellor of the Exchequer, was right when he said that he thought the silver bullet would win the War. We cannot win it without the silver bullet. But it no longer suffices. We know now, when the whole of the nations are at war, the silver bullet becomes from some points of view a minor consideration, and the present struggle can be fought out even although the silver bullet has gone. But we have to look to it to see that the silver bullet is there. I may be a pessimist in some senses. I remember my headmaster saying that "Faber was born in the minor key" half a century or more ago, but the minor key is just as important as the major key, because both are necessary to play the great tunes of life. I would never have dreamt that we could have faced 5,000 millions of debt and still be standing up smiling to meet the foe. Mention has been made of the conscription of wealth and the conscription of capital. What is a 6s. Income Tax and a 4s. 6d. Super-tax except conscription of wealth? It is not conscription of capital I admit, but as an old man, to whom this does not very much matter, let me warn the country that the time to draw the line is pretty close. When this War is over, and this I do not think the greatest Socialist in the House will deny —no one knows it better than the hon. Member for Blackburn (Mr. Snowden)— capital will be really necessary. How is the financial work of this great Empire— and we hope it will still be great after the War—to be carried on without capital? We shall want all the capital— every 6d. and every 1d. piece—we can obtain if this country is to be re-estab- lished and set upon its legs again to do its great work of trade, and to build up from the very foundation what is to be the new heaven and earth. How are you going to do that without capital? You must be able to draw a distinction between the taxation of capital and the taxation of wealth. You must not tax wealth so much that people who employ labour will no longer be able to do so, and you must not tax capital so much that it will no longer be available for carrying on this great Empire I am not quite sure that the answer which the Chancellor of the Exchequer made on this question of the conscription of wealth was a very wise one, because it was liable to be misunderstood. You have to approach these things very carefully.

Just a word about the Income Tax and the Super-tax and the finding of money for the further financing of the War. The Chancellor of the Exchequer must be careful not to put the Income Tax and the Super-tax too high. He must not bleed white the man who is still called the "rich" man, and who finds the bits of paper for carrying on the War. He must not bleed him quite white, because if he does so that man will be no longer able to produce the bits of paper necessary for the further financing of the War. Again, we have to know exactly where to draw the line. If you raise the Income Tax and the Super-tax too high you are not going to get the capital you need for carrying on the War. You may take a sledge hammer and tell people they must find the capital for the War, but remember you cannot have it both ways. There is one method of finding the money, and that is by War Bonds. There may be good reasons for the diminution in supplies from that source during the last few weeks. If I did not think there was an explanation for it I should not feel at all comfortable. However, there may be various explanations. It may be, although I cannot believe it, that the Chancellor of the Exchequer has frightened the people from buying War Bonds. The tanks have supplied a great many of the millions which the War Bonds have produced, and much of this money has come from the pockets of the poor man, who before the War had no money to invest, but who is now in a position to do so. Human nature is human nature all the world over, and if that man is led to believe that the investment is not a secure one, naturally he will refrain from investing. Therefore, I say: "Do not frighten the poor man and the little investor." And I address that appeal to the hon. Member for Blackburn, who, I hope, will not think that I am trying to make a cheap point at his expense.

The next thing I have to say is rather unpleasant. It is said that people have been advised not to put their money in War Bonds, because they are not safe. I do not say that the hon. Member for Blackburn gave that advice, but I assert if it was said, it was a wicked thing to say. Another explanation of the diminution of receipts from the sale of these War Bonds is that business men just now are paying the duty on excess profits, and if that is the explanation of the diminution, well and good; we shall, in due course, see them recovering their level. Of course, there is an artificial means of raising the War Bonds to their normal level, and the Chancellor of the Exchequer may have to face it, because if the War is not being financed by War Bonds, if we are not getting what we want in that direction, the Chancellor of the Exchequer must know that he is going to be up against a very nasty situation, as the money will have to be found somehow, and that will mean a new War Loan. As I have said, there is an artificial way, if the War Bonds are a failure at the moment, of screwing them up again. If the right hon. Gentleman still further reduces the interest on Treasury Bills, then the bankers will have to follow suit, and the ordinary investor, having nowhere else to go—he is confined largely to this country for his investment—you will force him to put his money into War Bonds, where, at any rate, he can get over 5 per cent. interest. But much depends on the next few months. It is not very often that I make my voice heard here. I think that, in these days, the less old men are heard, the better. I am much obliged to the House for the very kindly reception it has given to my somewhat prolonged observations.

5.0 P.M.

Mr. McKENNA

I am sure the feelings of the Chancellor of the Exchequer, as he has listened to this Debate, must have been feelings of complete satisfaction. He has introduced a Budget which, in a full year, will bring in close upon £900,000,000 of revenue, and, so far, he has had criticism directed only against one tax, which is estimated to bring in £1,000,000, and another tax which he has not included in his estimate at all. Thus, I think, something like £886,000,000 of the Chancellor of the Exchequer's revenue seems to be passing through the House without complaint.

Mr. SNOWDEN

No.

Mr. McKENNA

I say at the moment seems to be.

Mr. D. MASON

No.

Mr. McKENNA

I am quite aware of what my hon. Friend says. I said it seemed to be, having regard to the Debate that has taken place. There are, of course, as my right hon. Friend knows, objections that have been taken, and may be taken again to particular parts of his Budget, which are more remunerative than the Cheque Tax, but this afternoon he has escaped from all criticism of the kind. I, too, like those who have gone before me, would like to say one or two words as to the Cheque Tax. The Chancellor of the Exchequer stated, perfectly accurately, as it is needless to say, that some eminent bankers whom he has consulted upon the tax, did not object to it. If they were pressed, I believe they would probably say that in this crisis of our affairs they would be willing to support the Government in any tax which the Government had concluded was in the circumstances necessary for the finances of the year. At the same time, I hesitate to think that any banker could be found who would say in the abstract, and in times less trying than the present, that the Cheque Tax is a tax which he would approve. I notice that in answering a question my hon. Friend the Financial Secretary to the Treasury stated that the estimated revenue last year from the Id. Cheque Tax was £1,340,000, which represents a use in cheques of 321,600,000. That is to say, that in 321,000,000 instances, a cheque was found to be the most convenient method of settling a business transaction. The estimate of revenue from the additional 1d. in a full year is taken to be £1,000,000. It is consequently clear that the Government anticipate a reduced use of cheques. I have worked out the figures, and I find that the estimated reduction in the use of cheques is, in one year, 40,800,000. I am not considering, for the moment, what is going to take the place of the cheque, but I would ask my right hon. Friend to consider whether it is wise to force people in 40,000,000 of transactions to use a less rather than a more convenient method of paying their debts? What does it mean in waste of time and trouble? In 40,000,000 cases in the course of the year instead of writing a cheque people are going to do something else, something more troublesome and less convenient, and something which is consequently in time going to be more costly. Is it worth it, for the sake of an estimated million, to drive people by reason of the additional charge to use some other method than the cheque in 40,000,000 instances in the course of one year? The other point is that the transaction will be settled if not by cheque either by delaying payment, which is not a good thing, or by the use of the postal order or currency note. Is it wise to encourage people to use more frequently either the postal order or the currency note rather than the cheque? I only put forward these considerations to my right hon. Friend because I am sure he will keep an open mind upon the subject, and will remember that he is only dealing with a comparatively small amount—in his large total—of revenue, and that he must consider the business convenience side of the question as well as the mere revenue side.

The other tax which was referred to was the Luxury Tax. I believe that the general opinion amongst the whole of the public would be that if it can be conveniently levied without injury to trade the Luxury Tax is a good tax. I would be the last person to wish to criticise, unless there were very strong grounds for doing so, any form of raising revenue at the present time. It is so urgent that we should raise more in taxation and borrow less in order to meet our expenditure that I think we ought to assist the Chancellor of the Exchequer in every way we can in raising revenue. We have to cut down our borrowing as far as we can. We must pay our way as fully as we can, and consequently I approach the Luxury Tax with a mind very much prejudiced in favour of it. Nevertheless, I think we ought still to keep our minds open and to observe the operation of this tax in France. It has only been at work in that country for about a month, I think, but according to the reports I have received, some of which I have here, great complaints are being made about the effect of the tax. I am not sure I should always accept at their face value the opinions of the people taxed of the effects of the tax. Naturally industries that have to submit to a particular tax do not like it, but I think we still ought to keep our minds open as to whether the ultimate effect of the tax may not be to do a great injury to business and so to our total revenue, rather than itself to be productive of revenue.

I would like, following the interesting speech of the hon. Gentleman who spoke before me, to make one or two observations upon the situation as a whole and what it is that my right hon. Friend has to meet. During the first nine months of the year the revenue comes in comparatively slowly. We may take it that more than two-fifths of the whole of the revenue falls into the Exchequer during the last quarter of the financial year or the first quarter of the calendar year. There is little more than half the revenue coming in during the first three-quarters of the financial year. I propose, therefore, for the moment to look at the position in which my right hon. Friend will be placed up to the end of December of this year— that is to say, during the first nine months of the financial year or the last nine months of the present calendar year. I estimate that the expenditure during these nine months will be close upon £ 2,300,000,000. By some means or another my right hon. Friend has to raise money to meet an expenditure of upwards of £ 2,250,000,000 from the 1st of April to the 31st of December of the current year. The revenue which he will receive during this period amounts to about £500,000,000. Out of the total which he estimates for the year, of £ 842,000,000, he will only get £ 500,000,000 during the first nine months of the financial year. He will, therefore, have to find over and above that revenue over £ 1,750,000,000 before the end of the current calendar year. He has one resource outside this country. He has the item in our weekly balance-sheet which appears under the head of "Other debt." I believe the whole of that represents money borrowed outside this country. If I take the nine months from April to December, 1917, I find that during that-period he raised under the head of "Other debt" £520,000,000. I hope and assume that he will be able to raise not less during the corresponding nine months of this year. If he does so, he will have to find by other means during these last nine months about £1,250,000,000. That is what he has to find.

What is he already committed to? How far are his immediate resources for borrowing available? He has already at this time borrowed from Ways and Means £276,000,000; he has on Treasury Bills £958,000,000; he has on War Expenditure Certificates just under £23,000,000; so that on short-dated maturities, all of which mature within a year and a large part of which mature in less than three months, he has had to borrow to the extent of £1,257,000,000. It is quite obvious that during the next nine months he may increase the amount of this short-dated borrowing, but it cannot be very much increased, and consequently of the £1,250,000,000 which my right hon. Friend has to find during the next nine months the great bulk must come out of longer-dated borrowing than the short maturities. It would not, perhaps, be in order for me now to make a plea for a further effort in assisting my right hon. Friend in the sale of War Bonds. The Second Reading of the Finance Bill is not the occasion, but I put myself in order now by saying that I am directing my argument to the point that unless expenditure can be reduced these are the troubles which will confront my right hon. Friend. In addition to the £1,250,000,000 of short-dated borrowings already in existence he has to find in the nine months from the 1st April to the 31st December another £1,250,000,000, in order to meet his liabilities on the present scale of expenditure. It is a serious outlook, and it is the duty of every one of us, as my hon. Friend who spoke last has said, to spare no effort in the two directions, one as a Member of this House to insist upon the curtailment of expenditure, and the other as a member of the public, to assist in financing the Government through War Bonds, and in other ways, by every means in our power.

Mr. BONAR LAW

Let me begin by saying that my right hon. Friend who opened the discussion this afternoon was right in saying not perhaps that I was so much surprised, but that I was extremely gratified to find the response which the Budget received in all quarters of the House. I did not then, and I do not now, flatter myself in any degree that that is due to any special merit in the Budget. It was due, and I believe the small attend- ance this afternoon is due to the same cause, to a feeling which is universal in the House of Commons, and I think in the country, that we have got to see this struggle through, that money is necessary to enable us to do so, that our credit cannot be maintained unless there is a very severe taxation, and that, therefore, the House of Commons begins the consideration of this subject with a strong desire to support the Government of the day, whatever it may be, in whatever measures they think necessary to secure the objects we have in common. That is my explanation of the spirit in which this, and certainly the last, Budget, for which I was responsible, has been received, and I believe my right hon. Friend (Mr. McKenna) will say the same for the Budgets for which he was responsible. That is the explanation of the spirit in which they have all been received; and I am certain of this, that if it had been my misfortune in ordinary times of peace to propose a Budget covering so many classes, and covering them so severely, I would have had a worse time politically than I have had, which has not always been particularly pleasant even as it is. To-day the discussion has hardly been critical at all. Hon. Members feel, and I am sure rightly, that there is no use concentrating upon particular taxes at this stage. If anything is to be said with the idea of making a change, the proper time to do it is when we come to deal with them on the Committee stage.

One or two subjects, however, have been dealt with, and it is only on those that I wish to address the House now. My right hon. Friend who has just spoken dealt with the position in which the Government is placed in regard to raising money. I quite recognise that that is one of the difficult problems which the Chancellor of the Exchequer has to face, but, in my opinion, it is not an insoluble problem and the position at this moment does not cause me any serious anxiety. What I would wish the House to realise is, that from the nature of the case, from the dislocation which would otherwise be caused in financial dealings, you cannot have a big Loan to raise a very large sum of money except after a considerable interval of time. For instance, the 4½ per Cent. Loan was in June, 1915. We did not have the next big Loan until January, I think, of 1917. Then the War Bonds were started in October of last year. Everyone was greatly gratified by the success of the 5 per Cent Loan in January of last year. The amount of it, I think, was a surprise to everybody, and certainly it was a surprise to me who was responsible for floating it. That Loan was started on the 11th January, and no further long-term borrowing took place until October; that is to say, there was an interval of nine months, so that you may take that loan, which was entirely successful, as being what you may call the high-water mark of what can be got by long-term borrowing. We then got, in effect, £1,000,000,000 of new money. That was for a period of more than nine months. Then, in October, we had again to face the raising of money on long terms. I explained to the House before the considerations which had to be taken into account then. Of course, the obvious thing would have been to raise another Loan on the same lines as the one in January; but there were many objections to that, not the least important being that, because of the very success of that Loan, the amount of which had been increased to a considerable extent, as everyone connected with the banks know, by a system under which people not only gave their savings but pledged their credit, and by the fact that a great deal of these advances were not being repaid at once, there were very serious objections to raising another Loan of that kind.

In addition to that, I myself had for a long time the feeling that if it were possible to raise this long-term money week by week it would unquestionably be the best method of raising the money. Everybody took that view, and the only question was the possibility of doing it. I would like to tell the House what the success of that has been. This long term borrowing has been going on for father less than eight months. As against £1,000,000,000 raised by the spectacular loan in January we have already raised, not including War Saving Certificates, which is an item which has steadily increased—the most satisfactory feature of all—we had actually raised up to the 11th May £719,000,000. Therefore, it is not too much to hope that by the end of the corresponding period, that is to say, at the end of nine months, we shall have raised by this method not far short of the long-term money for the same period which we raised by the loan in January of last year. I think that is a very great success, and I do not in the least despair of being able to get the money in this way. This I know is not very germane to the Budget, but it does arise indirectly, and I hope the House will not think I am out of place in saying it, but I am not in the least despondent about getting our money in this way. Of course, everyone knows that the difficulty of this method of raising money is that you cannot keep the steam constantly on. It is one of the frailties of human nature that many of us do not see the necessity of doing to-day what we can do equally well to-morrow, and if there is no definite stimulus you cannot keep up the steam. But it can be done. Although there has been a falling off in the last few weeks, I ask the House to remember this, that we, and I specially include the Gentleman who had helped me in advertising these bonds, anticipated a falling off of this kind. For that purpose we had a special week which we hoped would give us a margin which would provide us with an amount to meet the lower amounts in the subsequent weeks.

Though the amount now is very disappointing, and I do not want to minimise it, I am very hopeful that this method of borrowing can be revived. In the first place, I am going to have a meeting with the bankers of the City of London. They have helped splendidly in this matter, and my right hon. Friend who introduced the discussion said so. I am bound to say, and every previous Chancellor of the Exchequer could say, that so far as taking trouble and everything of that kind is concerned, the bankers have done everything in their power to help the Government in the circumstances in which we are placed. I think they can do more, and I think they could give a little stimulus to their branches, and I am sure they will try. When the time comes we must again start, I do not say another Loan campaign, because I am not willing to allow this system to fail without giving it the fairest trial. It has succeeded very well, and I shall be very unwilling indeed to resort to any other method. At the right time, or what we think the right time, we shall try to put additional stimulus into the raising of money in this way. I was very gratified to hear what my right hon. Friend (Mr. McKenna) said—although it was unnecessary for him to say it so far as he was concerned—about the duty of every Member of the House of Commons to help in this matter. I am not at all sure that as part of that stimulus of which I am speaking I shall not make a special appeal to every Member of the House of Commons to help us in their constituencies, and, if I do, I am sure that appeal will be responded to.

Now let us come to the taxes. It is rather a curiosity of finance that in a Budget dealing with these immense sums the great bulk of the speeches and the bulk of the criticism has been in reference to a tax which is only going to bring in a million of money—the Cheque Tax. My right hon. Friend the Member for Islington (Mr. Lough) said that in this matter I could command the men—that is, that I could be sure of a majority in this House. I think that is true for the reason I have given, that the House of Commons would be very unwilling to refuse anything which the Minister responsible thought was necessary in a time like this. But that does lay an obligation on the Chancellor of the Exchequer—and I feel it not only in relation to this—I am sure everyone in my position would have felt it—that the very knowledge we have that if we insist upon a particular course we are almost sure to get it, lays upon us the obligation of being satisfied in our own minds that what we are doing is for the good of the country, and is as just and fair to individuals as it is possible to make it. I recognise that obligation. I ask the House to consider my point of view in regard to this tax. My right hon. Friend read a letter from Mr. Goodenough, a very well-known banker, whom I know very well, and of whom I have the highest opinion. He was against it. The right hon. Gentleman said I was wrong in saying that I had consulted representatives of the bankers. That is an entire mistake. If I could have done it I would have liked to have invited a committee of the bankers to consider the subject and pass a resolution, but obviously you cannot do that in connection with a Budget. You cannot begin talking in advance of what taxation you are going to impose. All that anyone can do is to consult men who are experts in the matter, and ask their private opinion. What is more -though I dare say none of them would object to having his name mentioned if I asked him—I think it would be a. very bad precedent, and bad for future Chancellors of the Exchequer, to let people whom they consult feel that possibly their names will be brought into public discussion, and they may be held responsible for something in regard to which they only gave their advice. This is what happened; I got the opinion personally of seven of the most, I think, representative bankers in London. What my right hon. Friend said is perfectly true. Once the Chancellor of the Exchequer had announced the tax I do believe that the bankers would say, "Though I would not have recommended it, I will not say a word which will prevent its being carried." But, on the other hand, that was not what happened here. I asked them for their advice before I committed myself to the tax, and it is a fact that while they did not say it was an ideal tax, every one of these gentlemen whom I consulted did say to me that in the circumstances he thought that it was a tax which would not cause much opposition, and which would be fair in its operations. My right hon. Friend has the advantage of being not only an ex-Chancellor of the Exchequer, but a banker, and he speaks with that double assurance; but he will not think me dealing unfairly with him if I mention the opinion of another banker which was not given in private. The chairman of the London City and Midland Bank is reported to have said—I have got the words here taken from the newspapers of the 23rd of April—that he thought the increased Stamp Duty on cheques a very good means of raising revenue and one certainly which would not affect business adversely. That is the position in which I am. I believe myself that the idea that this is going to stop the use of cheques is a mistake. I will not say anything about inflation; I think that there has been some mistake about that. If I may try to define it I would say that inflation is an increase of purchasing power by means of credit out of proportion to the increase of commodities which are bought. What does it consist of? My hon. Friend spoke as if the fact of the cheque going back at once made any difference. I do not think it does; I cannot see why it should. The inflation there is the credit which a man has in his bank. It is not the cheque. That is only the symbol of the inflation. Of course, I quite admit, and I am going to give part of the case against myself, that if a man wore to choose to go to the bank and take £30 in notes, when in the ordinary course he would pay by cheque, there are some who, because they had £30 in their pockets, would be more likely to spend it than if they had not. That is the only kind of inflation that I see. But if you look at it from this point of view, if anybody is going to issue cheques for small amounts that are not necessary and dislikes paying two-pence on every cheque that is the stoppage of inflation.

But this is the real reason why I think there is nothing in all this. My hon. Friend the Member for Windsor put before the House the other day the exact consideration which had weighed with me. If you have to pay small amounts, which you have been in the habit of paying by cheque, when the rate on your cheque becomes two-pence, how can you do it more easily and economically? You can, as he said, pay by postal order which you can get for a penny up to 15s. Above that you would have to pay more, and you would have the trouble of going to the post-office. You can, if the amount is suitable, send currency notes, but if so you must register it or you run the risk of losing it. You can, on the other hand, go round to the shops to make your payments or hire somebody else to do it; but I do not think that that would be found cheaper. My hon. Friend suggested another course which had not occurred to me, which was that you should not pay your debts at all. I do not think that that is a course which will be adopted. Clearly it is a psychological question which you cannot arrive at by any process of absolute reasoning. My own belief is that just as people now pay two-pence for the paper which they used to buy for a penny, without any diminution in the circulation, so also you will find that the two-pence will be paid on cheques in a short time, and people will never notice the difference. That is the position. I am not in the least obstinate about it. I have said before, and I say again, that a person in my position would be very foolish to feel that prestige or anything else was lessened by giving way on a matter of this kind when he knows that the House of Commons will support the Government if he chooses to insist on it. I am not at all obstinate about it. I am quite ready to weigh all considerations for or against, but on the other hand I do ask the House of Commons to consider this, that the responsibility is to a certain extent mine, and if, after listening to everything that has been said on both sides, I am myself convinced that I can get this extra million of revenue without any trouble, I do not think that the House of Commons would say that I am wrong in asking them to support it.

The only other subject on which I wish to Bay a few words is the Luxury Tax. My right hon. Friend, who spoke last, expressed what is the general feeling, approval of the principle. He showed that he realised the difficulties. So do I. But I think that the principle is one that we ought to try and carry out in spite of very great difficulties. I remember, and my right hon. Friend will probably recall it when I mention it, that when he was Chancellor of the Exchequer he honoured me by inviting me-to go to a meeting in the City to advocate a Loan and to preach economy. And I said to him, and he entirely agreed with me, that I would rather, instead of preaching economy, compel economy by taxation. He entirely agreed with me. He carried that idea out, to a certain, extent, in the Entertainments Tax. That was against all previous custom, and I think that there was a great deal of the kind of criticism which is vocal now about the Luxury Tax, about it. That was the right kind of tax—at all events, it was a tax upon expenditure on which it was right to raise revenue at a time like this. I think that this is a tax of the same kind. Last year, for the reasons which I have given, I went into the matter with a view of imposing this tax. The difficulties struck me at that stage, and we abandoned it. This year, apart from the fact that France has imposed such a tax, our need is considerably greater than it was last year, or the greater need is more obvious than it was then. Therefore the obligation really is on us to make a greater effort to get revenue in this way, if we can That is what we have done. In asking the House of Commons to accept this Finance Bill and pass the Resolution which they have done, I did not mean it to be understood at all that the whole question was in suspense; I meant it to mean, and I am sure that the House of Commons so understood it, that the House of Commons had determined on this kind of tax, and that all that was left open was as to-the method by which it was to be carried into effect.

That is the present position. It might have been of far greater advantage if one could have announced that tax like any other tax and had it imposed at the same time, because I am told that a number of foolish people, especially, I am sorry to say, people from a sex different from those who occupy this House—the folly is one that is not confined to one sex— are beginning, in anticipation of this tax, already to buy such things as ex- pensive furs which will come into use next winter. One would like to prevent this if one could, but can anyone imagine anything more stupid—I mean from the point of view of self-interest? They have got to pay for storage and run the risk of damage, and there is this certainty also that, if the tax is going to have the serious effect which some people anticipate, it will rather tend to diminish the number of buyers of these commodities and therefore lower the price, so that probably anyone who tries that method of economy will find that he has made a very bad bargain. But what we have to do is to try and make the best possible working arrangement we can. It is quite true that in France there is a great deal of criticism of the tax, which has been operating for a month. That is not surprising, and it does not in the least follow that, when people have got accustomed to the tax, the criticism will not stop. In any case, and this is one of the advantages which we enjoy, we shall have the opportunity, and so far as the means at my disposal will enable me to take advantage of it we shall make use of whatever experience is derived from the earlier operation of this tax in France. But from what has happened the House must not run away with the idea that because I do not include it in the estimate of revenue and expenditure, because I do not include it in the balance-sheet, I do not count upon it as a source of considerable revenue. The French Government expect to get £24,000,000. Well, I shall be disappointed—of course it depends on the Schedule, and therefore it is impossible to make an estimate—if we do not get a very large sum as well from this revenue.

That covers, I think, all the points raised in the discussion to-day. But the really big point is one which was dealt with incidentally by my right hon. Friend. It is really whether or not we are making the best effort we can to pay as we go along out of taxation as much of our expenditure as is possible. There will be differences of opinion about that. I know that there are many people who think that you can simply by a stroke of the pen add another 6d. or a 1s. to the Income Tax and get all you want without doing any harm. I do not believe it. I do not say that we have reached the exact and proper figure, but I do say that the most difficult thing which the Chan- cellor of the Exchequer or the Government of the day has to do is to try to take a proper mean between what you can raise by taxation and what you cannot. We have tried to do that, and the only thing that I can say as an indication of a factor which ought to be taken into account is this: We are dependent for a very large proportion of the big sums which we have taken on the classes which are described as the richer classes. We have all the habit of thinking well of our own nation, as the peoples of every nation have, but in this matter we have the right to speak highly of what has been done by our people. Taxation has been levied on all classes on a scale which has not yet been touched by any of the belligerent countries, almost without a murmur, if you take it all over, and one of the worst things which a Government could do would be to give this class the feeling that we are imposing upon it obligations greater than the need of the moment require. And on that ground also, I think, we ought to be reasonable in our efforts to raise revenue by that means.

Mr. RUNCIMAN

My right hon. Friend has been very fortunate this year in having to deal with a situation free from to a large extent from psychological complications, for I am sure he will agree with every speaker who has preceded him in the Debate, that the willingness of the taxpayers to pay generously and willingly, and without complaint, was never greater than at the present time. I have only one regret as regards my right hon. Friend's Budget, and it is that it was not imposed a year ago. I believe that a year ago, if he had attempted to impose the same scale of taxation, he would have met with no more opposition at that moment than he is meeting at the present time. The taxpayer is now met with two grave alternatives. He must either pay generously any taxes now, or, after peace, and when the War is over, he will have a burden of obligations involved, in taxation that at that time would seriously impede our industrial recovery; or there might be schemes of conscriptional capital which have already been adumbrated in this House and elsewhere, and which will be disturbing, to say the least of it. If the taxpayer realised that the only alternative to taking immense sums of money, in two or three large bites, over a comparatively short period, during the War, is the alternative of a very large claim being made on his capital after the War, I feel sure the first alternative would always be accepted. Heavier taxation will undoubtedly be borne now by men who are full of patriotic sentiment, but it would be resisted after the War, when I will not say that patriotic sentiment has been cooled, but when it has to a certain extent become exhausted. What is the alternative the Chancellor of the Exchequer has before him? So far as one can make calculations, it appears that over and beyond the revenue which he intends to raise in the next nine months he will have to provide for an expenditure of loans which must average £32,000,000 a week. That figure of £32,000,000 a week has not been grasped by the country as a whole. Thirty-two million pounds a week is far in excess of anything that has been contemplated in the course of the War Bonds campaign, and when one looks at the War Bonds campaign, and draws a comparison between what is collected in that way and this inevitable sum of £32,000,000, it is a matter so grave that we can only hoped that moneyed people and every class of the community will make further effort to provide the necessary funds.

There has been a grave slowing down in the amount of money which is advanced on War Bonds, and without going outside the rules of order, I think I should be justified in saying a word or two about the alternatives open to the Chancellor. Unless the pace can be accelerated, his difficulties are bound to increase. How are they to be accelerated? The efforts which have been made by the War Savings Committee all over the country have been admirable, and the schemes of local emulation have been extraordinarily productive, but it is quite apparent that men who have been able to put enormous sums of money into War Loans or War Bonds cannot go on repeating those payments month after month. There is still a very large amount of money which is available for investment in national securities. We are all well aware of the activity on the Stock Exchange during the last two or three months in what used to be called gilt-edged stock, showing that a large number of investors are prepared at the present time to buy railway debentures and local stock of various kinds. Over and above that, the great municipalities have been able to borrow immense sums of money on mortgage of their rates. It is very difficult to say how far money in- vested in that way is not likely indirectly to come back into Government loans. The probabilities are that those who have been selling railway debentures and the like on the Stock Exchange during the last few months have been doing so to lay their hands on some more liquid capital, which they require for the purposes of their business in one form or another. If the purchases had not been made, certainly gilt-edged stock would have gone down in value, and we should boldly face the fact that if they had gone down in value they would have been rendered more available for the purposes of the Chancellor of the Exchequer in War Bonds or otherwise.

The confidence of those who invest in War Bonds or War Loans must also be secured. There is one subject which the Chancellor of the Exchequer did not refer to in his speech, and that was the subject of expenditure. I feel quite sure it was present in his mind, for it is one of the dominant facts in the grave task which lies before him. But it is also present in the minds of those who have been investing and who will be investing in War Bonds. As one journeys about the country one comes across local men of money and means, who say the same thing over and over again, that they will gladly pay whatever scale of taxation may be imposed upon them by the Government, and that they would invest all their surplus resources in War Bonds, but they ask, Can we be sure that the money, so provided, will be spent to the best advantage? That is not a solitary question; it is being asked by thousands of men everywhere, and they are disquieted in their own districts. They see factories put up, and only half-finished, and left empty. They see immense expenditure on extensions which they know may never be used, and, in some cases, will never be used. They hear stories of lochs in Ayrshire, and elsewhere, where an immense amount of money has been sunk. They read of a very large number of double payments being made by the Ministry of Munitions, and they learn that there is an immense deal of extravagance, which undoubtedly impresses the public mind. I remember reading the speech of the hon. Member for Colchester on the subject of double payments by the Ministry of Munitions. He was pointing out how it was a very small matter that out of 600,000 payments by the Ministry of Munitions, in only 300 cases had payment been made twice. But 300 payments, even in a business of that gigantic character, is absolutely unjustifiable. I would like to know what would happen in a joint-stock bank if the chairman said, at the annual meeting, that in all the millions of transactions that had passed through their books in the course of the year there had only been 300 mistakes of double payments to those to whom they were indebted!

Mr. DEPUTY-SPEAKER (Mr. Whitley)

The right hon. Gentleman is going too far on these lines. He is not entitled to enter into these criticisms on a Bill originating in Committee of Ways and Means, and it is in Committee of Supply that such criticisms can be made upon expenditure.

Mr. RUNCIMAN

I bow to your ruling, Sir. But I would say one word on the Budget of my right hon. Friend. He is raising a large sum of money by way of Income Tax. A Gs. Income Tax, of course, is not operative on the whole range of incomes, and cannot be, on this scale, but without any hesitation I would say— having been able to collect opinion—that the country would be just as ready to provide 6s. 8d. as 6s. It is this generosity of feeling, this financial patriotism, that I think my right hon. Friend ought to exploit, and I hope that in future consideration, not only of this Budget but of future financial provisions, he will be prepared to take a much larger toll of the present contributors and upon all the rich classes of the community. At the present time they are far better able to face a heavy Income Tax, with the prospect of a reduction after the War is over, than if they had a less Income Tax of which no reduction could be made in time of peace

Mr. SNOWDEN

The earlier part of the discussion this afternoon was devoted, in the main, to criticism of some of the minor taxes, including the Stamp Duty on cheques. If I remember aright, the Chancellor of the Exchequer, in one of our former Budget Debates, said that where a Chancellor of the Exchequer was imposing a number of new taxes he generally made one proposal which at a later stage he was prepared to withdraw. I think, from the speech the right hon. Gentleman has just delivered in regard to the Cheque Tax, we may reasonably anticipate that when we reach the Committee stage on the Bill we will be gratified by the announcement of its withdrawal.

Mr. BONAR LAW

That was not my intention.

6.0 P.M.

Mr. SNOWDEN

We will wait and see. We are, I agree, discussing a question of taxation which comprises an additional taxation almost equal to the total taxed Revenue before the War, and a large proportion of which has been raised in a paltry and insignificant manner. As to the tax on articles of luxury, I believe, with the exception of my right hon. Friend who initiated the discussion this afternoon, there has been no criticisms of the principle of this taxation, and, therefore, so far as those who have taken part in the Debate are concerned, I stand alone in opposing the principle of the Luxury Tax. I do not believe that it is a good tax, not do I think it possible to administer that tax with fairness and equality. Why I object to the tax on luxuries is this: There are only two sources from which the Government can procure this national wealth, and these are from income or from capital. Therefore, to propose any kind of tax which is not a direct tax on income or capital is an indirect way of levying taxation, which means that its incidence is not necessarily fair and it does not fall equally on all those who contribute to that particular taxation. It means also an addition, either large or small, as the case may be, to the cost of administration. The administration of the Luxury Tax will require the setting up of a new Department and a new staff of officials. This tax, as has been pointed out this afternoon, is already in operation in France, and my Socialist comrades there, when the matter was before the French Chamber, were, I believe, practically unanimous in their opposition to the imposition of this tax on the ground of sound economy. I believe it was the ex-Chancellor of the Exchequer (Mr. McKenna) who stated in his speech this afternoon that so far the tax does not appear to be working very well. I ask, therefore, seeing that there is only one of these two sources from which a person can contribute to the national Exchequer, why the Chancellor of the Exchequer should have proposed this indirect way of attaining an object which could have been achieved by an addition to the Income-Tax.

These are the reasons for my objection to the Luxury Tax. I object to all these taxes. I would wish to see only one tax. I believe there would be sound economy in the adoption of that single source of revenue, and I have urged it in this House on former occasions, when taxes have been imposed on motor cars and particular articles of luxury. I have also urged this objection when the Entertainments Tax was proposed. These are amateurish, childish, pettifogging, ineffective ways of raising national revenue. I am quite willing to admit that they may appeal to the popular fancy, and that is the reason, I suppose, why the Chancellor of the Exchequer has proposed this Luxury Tax. But in justifying that tax this afternoon he said that one of the purposes of it was to limit or restrict expenditure on unnecessary articles. There is a much better way, and that is to increase the Income Tax. Do not allow people to keep the means of expenditure, and leave it to them to decide what particular form the expenditure should take. Prevent them having the means to do it; and the only effective way of doing that is by increasing the Income Tax. When we come to the Committee stage of the Bill—for I take it the Second Reading of the Finance Bill is not an occasion for detailed criticism of particular taxes, but rather an occasion for dealing with what I might call the general principles underlying the measure—when we come to the Committee stage of the Bill some of us will have something to say about the additions to already existing taxation, and the new taxes which the Chancellor of the Exchequer now proposes.

I was very glad indeed to hear the right hon. Gentleman who has just sat down saying that he regretted very much that the Chancellor of the Exchequer did not twelve months ago make the additions to taxation which he now proposes. Indeed, I would go much further than that, and I would say that I regret very much that in the first two years of the War the two right hon. Gentlemen then occupying the position of Chancellor of the Exchequer— one is now Prime Minister and the other the right hon. Gentleman who spoke earlier in the Debate this afternoon (Mr. McKenna)—I regret that they were not more courageous. There can be no doubt about it that at that time the capacity of the country to bear the present rate of taxation was quite as high as it is to-day, and therefore the fact that the present rate of taxation was not levied in those days means that the country or the Exchequer has lost revenue by means of Income Tax, I might say hundreds of millions of money, which could have been raised had these right hon. Gentlemen been more courageous at the time I speak of. If I remember aright, last year the Chancellor of the Exchequer laid down what I might call a plan of taxation, namely, that he should now during the War raise sufficient by taxation to make it unnecessary when peace returns to put on any additional taxation. Last year he claimed that he was fulfilling that condition. Some of us in the Debates of last year criticised that position, and we pointed out that the amount of taxation which he then proposed would not be sufficient to meet the expenditure. I think the position he left for himself at the end of the last financial year proved that we were right and he was wrong. He takes up precisely the same position to-day and he maintains that the amount of revenue he is now budgeting for, or that the permanent taxation he now proposes, will be sufficient to meet the post-war expenditure. I do not propose to go fully into that matter, but I think he overestimates the yield of the taxes which will be put on if this Bill passes, and he most certainly underestimates the post-war expenditure. By his overestimating the yield of the taxes and underestimating the amount of expenditure, I think, whoever is Chancellor of the Exchequer when peace comes, will find that there is a very wide disparity between income and expenditure, and he may be in the unfortunate position in which the Chancellor of the Exchequer found himself when he had to present this Budget to the House, confessing that he or his advisers had underestimated the expenditure of the last year by no less than £400,000,000. There is, of course, that temptation. There is always the temptation—and never was it so great as to-day— on the part of a Chancellor of the Exchequer to overestimate the yield and to underestimate expenditure.

I think the most valuable contribution that has been made in the speeches which have been delivered this afternoon were the two statements made, one by the late Chancellor of the Exchequer and one by the right hon. Gentleman the Member for Dewsbury, in which they emphasised the importance of endeavouring to raise a larger part of the current expenditure of the War by current taxation. If I remember rightly, the Chancellor of the Exchequer when introducing the Budget made the observation that it was not advisable to press Income Tax too far, because a heavy Income Tax would reduce the amount of money that was available for borrowing purposes. I think I am not misrepresenting what the Chancellor of the Exchequer said. That seems to me to be an extraordinary thing to say. John Stuart Mill quotes a dictum something to this effect, that it is a mistake to pay off the National Debt and that money should be left to fructify in the pockets of the taxpayer. The Chancellor of the Exchequer now goes much further than that. He is proposing to allow willing people to keep what they should be contributing to the Exchequer in the form of unnecessary incomes in their pockets until such time as he invites them to lend to the State at a high rate of interest. Surely a more unsound economic doctrine was never enunciated from the Treasury Bench than that to which the right hon. Gentleman has committed himself.

I join with the right hon. Gentleman (Mr. Runciman) in protesting against the lack of courage of the Chancellor of the Exchequer in not raising the Income Tax by a higher figure. I believe he has imposed this Luxury Tax mostly in order to avoid the protest which he thinks would have been made against a considerable increase in the Income Tax. May I give him, at any rate, this consolation? He has managed this year to avoid raising the Income Tax, except by an altogether inadequate sum of 1s., but he will not be able to avoid next year raising it by a very much larger sum. Now I want to say just a word or two further on this Income Tax. Now that Income Tax stands at a figure four or five times higher than it stood at before the War, all the anomalies and hardships of the present incidence of the tax— what I may call the details of the Income Tax—have become an intolerable burden. And although I know everybody is very hard-pressed with work during war-time, the hardship is so great that the Chancellor of the Exchequer should even now during war-time set up a Committee of Inquiry into the method of assessing the Income Tax, and I am sure he would gain from the discussion that Committee would have and from the representations they would make. I have a little scheme of my own. The hon. Member for Clapham, who referred to me several times in the course of his extremely interesting speech this afternoon, mentioned that I appeared before a Select Committee on the Revision of the Income Tax some eleven or twelve year ago. I made certain proposals to that Committee which, I believe, were regarded as being wild and extravagant and confiscatory, but even in my young and wild imagination of those days I never proposed an Income Tax such as is now levied on incomes of a comparatively small amount. I certainly was very hard on incomes of great amounts, but I do not want to impose anything unfair on any man, and I think the Income Tax as at present levied does press with undue hardship on people with incomes, shall I say, particularly below £l,000. But I have a little scheme of my own. I am not going to put it before the House this afternoon, but I believe that under it without raising the tax you could increase the yield by 50 per cent. Therefore, I press upon the Chancellor of the Exchequer the importance and the urgency of appointing such a Committee as I have mentioned without delay to go very fully into this question of the incidence of the tax.

Older Members of the House will remember that in those days, which now seem so far away, I was always, on Budget occasions, a champion of direct taxation, and an opponent of indirect taxation, and I used to urge—I think with truth—that the working-classes of the country had to bear a burden which was altogether out of proportion to their capacity to pay. Now, I have not in the slightest degree altered my abstract and theoretic views upon the question. I still believe that the poorer section of the working classes pay far more than they should be called upon to pay. I still believe that there ought to be left free from taxation an income sufficient to provide every man with all the essentials of a healthy physical life. That I still believe, and, having safeguarded myself to that extent, I want to say that I differ from some of the claims that have been put forward in various quarters of the House in favour of raising the present minimum amount of income liable to taxation. We have to remember that since the old days, when the sum was £160 a year, there have been important concessions which were not then in existence. In those days there were no concessions for children, and in this Budget there is a concession given for a wife. Therefore, he will be a very exceptional man, indeed, who will pay any Income Tax in the future if his income is below £200 a year. There is a further reason which I have for not sharing the view that the minimum amount assessed for Income Tax ought to be raised. I would like to see indirect taxation abolished altogether, but I do not believe in relieving the working-classes altogether from having to bear a share of the cost of the War, which they have approved. The working people, in the main, have approved of this War, and, therefore, I think they ought to be called upon to pay their fair share of the cost. I can imagine nothing more harmful to the best interests of the country than that we should have a large section of the community able to influence the policy of the country and yet be altogether relieved from financial responsibility for that policy. With the proviso which I mentioned just now of a certain minimum income to provide the necessities of a healthy life, I think the working people ought to contribute to the National Exchequer in proportion to their means.

There is one further matter with which I want to deal briefly. Reference has been made to it by two or three speakers this afternoon. The matter was raised a week or two ago by my hon. Friend the Member for Holmfirth (Mr. Arnold), and that is what has been called the conscription of capital, or a capital levy. In ordinary times I should have opposed such a proposal. I do not believe it is either practicable or desirable as a permanent part of our system of taxation. But these times are not normal, and the financial position of the country is certainly not normal. Therefore, we may be driven to adopt methods which are not altogether justified on the grounds of sound economy —methods which in their operation are bound to inflict a certain amount of hardship upon particular classes in the country, and even do some temporary injury to the industrial, commercial and financial stability of the country. We have to choose between two alternatives—whether we are willing to see an Income Tax, not of 6s. in the £, because it will be much more than 6s. in the £ when this War is over, but an Income Tax of 7s., 8s., 9s., or 10s. in the £ for thirty or forty years after the War; or to take a bold step, and by one act of renunciation reduce the amount of the National Debt by a very considerable sum. I believe there are few people who, if it were put to them, would not prefer to part with 10 or 20 per cent. of their capital than to know that they and their children were to pay the Income Tax I have mentioned for two or three generations.

An hon. Member asks, How are you going to collect it? Of course, it is always easy to put these supposed posers, but it is not difficult to answer my hon. Friend's question. You could collect it in precisely the same way as you collect the Death Duties. There is not a single objection I have seen put forward from any quarter against the capital levy which would not apply equally to a proposal to impose Death Duties, were that being done for the first time. Indeed, if you look up the Debates on Sir William Harcourt's Budget you will find that every one of the objections which are now put forward against a capital levy were put forward against those very moderate proposals to-exact a certain amount of the capital which a person left at death. The machinery would be precisely the same, and the difficulties which have been overcome in the case of the Death Duties would be overcome in the case of the capital levy. It was urged in the Debates to which I have referred that if a man knew that 10 per cent. of his fortune was to be taken away at death he would not save. The tax was imposed, and he went on saving. As a matter of fact, he saved harder in order that he might be able to leave his children as much as he anticipated being able to leave them before the tax was imposed. Precisely the same applies to a higher Income Tax, and precisely the same would apply to the conscription of part of a man's capital. He is still as anxious to be possessed of a certain amount of wealth, and will work all the harder to make up for the amount taken from him. Therefore I do not attach any weight at all to these objections which are put forward. They have all been made before; they have all been overcome. I do not advocate it, as I said just now, as part of our national system of taxation. I believe there would be some weight in some of these objections if it were proposed to be an annual imposition. But I am quite sure that if the country understood these proposals with regard to the taxation of capital, and they knew what the only alternative was, the overwhelming volume of opinion in the country would be in favour of a tax levy for a reduction of the National Debt.

I am not in favour of the repudiation of the National Debt. I can imagine nothing more disastrous to the credit of the country than that there should be even a whisper of the possibility of the repudiation of its honourable obligations. But repudiation means, I believe, a differential treatment of the forms of capital. It is not a repudiation where you treat all forms of capital alike, and all bodies of citizens alike. If it were, an Income Tax of 10s. would be a repudiation of National Debt, because people who subscribed to the War Loan, to which the Chancellor of the Exchequer referred, expected that they would get 5i per cent. with Income Tax at 5s. in the £, whereas they have to pay Income Tax at a higher rate now, and therefore if you are going to bandy words about repudiation you might as well apply repudiation to every proposal the Chancellor of the Exchequer makes to obtain more out of the pockets of the wealthy people of the country. I do not want to emphasise the point which I am now about to make, but I think it well worth putting before the House. If it were possible to discriminate between wealth which was the result of exceptional war circumstances and wealth which had been made in what we call legitimate methods of business, then I think a very strong case could be made out, shall I say, for the confiscation of wealth accumulated during the War as the result of the War circumstances. But it is an impractical thing to do. You could not do it, and, if you attempted to do it, I think you would inflict hardship in undeserved cases. We have a War Debt which has been accumulating during the War, I believe, of about £5,000,000,000. So far as I can calculate, that is to a very great extent—probably to the extent of from three-fifths to four-fifths—war profits. It represents money that has been made out of the War. I have here something that appeared in the "Economist" on the 16th June, 1917, and it will illustrate the point that I am trying to make: A firm owning tramp steamers appealed as a subscriber of over £700,000 to the War Loan. I asked how they came to possess so much loose money. The explanation given was that three steamers had been torpedoed. Further inquiries revealed the interesting fact that these steamers, worth some £9 a ton before the War, had been insured at the inflated war value of £40 a ton at the then Government rate of £2 2s. per cent., and had been sent to the bottom. Hence, what the market calls a very profitable sale, and £700,000 in War Loan stock. There is no doubt about it that a great deal of the money that has been subscribed to War Loans has been made in this way. I only regret that it is not possible to discriminate in the contributions or subscriptions to War Loan between contributions or subscriptions of this character and those which are the result of legitimate savings. We cannot, however, make a distinction in equity between the two, and I am afraid we shall have to deal with the matter in the obvious way. May I just say this, speaking on a matter which was touched upon by the hon. Member opposite in connection with the War Loan, I do not think, in the three reasons that the Chancellor has put forward this afternoon, that he has given the main reason why there has been such a falling-off during the last few weeks in the subscriptions to War Bonds. I think the main reason is that the savings of the country have been exhausted. Before the War, the amount of annual saving was between £300,000,000 and £400,000,000. The country has subscribed about £5,000,000,000 of War Loans in one way or another during the War. The savings, perhaps, have been about three times as high during the War as they were before the War; but it must be remembered that a great many people have mortgaged their future savings to subscribe to the various loans. I believe, therefore, that the main reason why there has been this falling-off in the subscriptions to War Bonds is because the people have not the money. If that be the cause, the Chancellor of the Exchequer may find himself before long in Queer Street. May I. as one likely to know something about the matter, repudiate—perhaps it is hardly worth mentioning—but repudiate the suggestion put forward by the Chancellor of the Exchequer last week, that the falling off in the sale of National War Bonds was due to pacifist activity. From one point of view, we might feel flattered if that were the case, for it would show that, at any rate, pacifist activity in the country was having an influence. I should like to say, however, that I have never heard a single speaker say one word deprecating investment in Government Loans. I have never seen in a Socialist newspaper the slightest hint of that character. Reference was made by the hon. Member sitting behind the Chancellor to leaflets that have been issued warning the people against subscribing to War Loans. I do not know if such leaflets have been issued.

Mr. BONAR LAW

The hon. Gentleman will excuse me for interrupting him. I certainly would never have made that suggestion without some ground for it. I had that morning been reading a Report sent to me from the Home Office which clearly showed that this kind of activity was going on. I did not say that those concerned have succeeded in reducing the sale of War Bonds; indeed, I said that, though they had tried, they had not been successful. At least, that is my recollection of what I said.

Mr. SNOWDEN

I think it was the hon. Member for Hanley who put a question as to what the amount of subscriptions to War Bonds had been during a certain period, and—this is my impression—the Chancellor announced that they had fallen oft, and he went on to give the reason of the falling off.

Mr. BONAR LAW

I think I said that the falling off was specially in regard to War Savings Certificates, and that the efforts of those whom I mentioned had not been successful.

Mr. SNOWDEN

At any rate, I do not know what the Home Office may have in its possession in relation to this point, but if I remember rightly, this question was raised in the course of Debate some months ago. I believe the Home Secretary then said that he had some information to the effect stated. He was asked to produce it. He failed to do so. If these leaflets referred to have been circulated, I know nothing about them. I should not be surprised to find that they have been printed by the same people who printed the leaflets which were distributed at Coventry some time ago among the munition workers on strike. They have been printed, not by the pacifists, but in order to discredit the pacifists. However, as I said, I do not attach much importance to this matter, but I think it is necessary that the bare suggestion should be repudiated. I regret that the Chancellor of the Exchequer has not had the courage on this occasion to increase by a very much larger sum the annual taxation of the country. By not doing so be is losing revenue which will never come back. "The mill will never grind with the water that has passed." I regret that he has not been taught by the experience of his two predecessors to take advantage of present circumstances. If he happens to be in office next year he may perhaps have cause to remember what my right hon. Friend the Member for Dewsbury said, that patriotism is liable to become exhausted. The longer the War continues, the less likelihood there is of the Chancellor being able to, impose taxation after the War, and, therefore, the larger amount in increased taxation during the War that can be got the better.

Mr. BIGLAND

The speech to which we have just listened is, I think, much more moderate in its criticism of the finance of the Budget than some of the previous speeches of the hon. Gentleman. In many of his previous remarks some of us have found ourselves in little sympathy. Indeed, to many of his remarks we have found ourselves very antagonistic. One point of his criticism which I wish to mention and to concur in is that part relating to the Luxury Tax. The Chancellor may subsequently find that, owing to lack of knowledge, he has done grievous harm to a part of our community—I mean to artistic workers, highly-trained people who produce these luxuries in which art in many directions is encouraged. The people to whom I refer are more highly paid and more highly skilled — they are the most skilful of the workers — and I imagine that when the list of articles declared to be luxuries is brought downstairs to this Chamber, that a number of the articles classed as luxuries will be found to be those that give employment to men and women who have received a very high training and education, and who earn very high wages because of their great skill. I am afraid that the employers of labour, having found that only machine-made goods are classed as non-luxuries, will revert again to them and, instead of seeking out artists to design and skilled workpeople to execute the work, will pursue a different course. It may be that the Bill will be such that hon. Members will not be able to give full concurrence to it.

A picture was put forward by the hon. Gentleman the Member for Blackburn which is certainly one that should cause every Englishman to think seriously—that of three generations having an Income Tax of 6s., 7s., 8s., and 10s. in the £. At a previous discussion on the Budget the hon. Member for Holmfirth (Mr. Arnold) brought in an extensive, well-thought-out scheme to be levied upon capital which would help to clear off the Debt and allow an Income Tax which would be very much lighter. It seems to me, in discussing this Budget, that one of the most extraordinary things that has come to light is the fact that we have been able to pay 23.2 per cent. of the total cost of the War up to date. I, for one, think that that is an exceptionally strong point. I am one of those who do not believe in going to the limit of taxation in order to pay the enormous amount incurred week after week and month by month. I believe that the amount of indebtedness that this nation may accumulate by the end of the War will be such that we, with the Empire that we possess, and the wealth of assets that we possess, hold securities which will amply cover it. Therefore we need not be too greatly anxious as to the immediate taxation of ourselves in order to meet the obligations of the War. I dissent strongly from the idea of the hon. Member for Holmfirth as to how this enormous debt must be met. One thing that I notice in the Budget is that while provision is made for immediate needs there is very little provision outlined for the future. I notice in the Budget the differential tax on one article, that of tobacco. In the Schedule we have 9s. Id. per lb. on the ordinary unmanufactured tobacco in leaf form, and we have it as high as 10s. 4 ½d. on that same tobacco if manufactured abroad. That is a difference of income collected at the Customs, and is one which is brought forward in this Budget and has been brought forward in many Budgets. I do not know who the first Chancellor was who introduced that differential rate, but it is a fact that in introducing it the Chancellor of the Exchequer became a great employer—or giver of employment, if I may put it so. When I wrote to the Board of Trade and asked how many people in this country were engaged in the preparation of this tobacco between the stage of the raw leaf and the stage when it was worked up for sale I was told that there were 29,000 people employed. Some years ago an attempt was made to take away the work of these 29,000 people and give it to the people in Virginia and Carolina, where the tobacco was grown, and the capitalists who attempted to do this found that it would cost them £5,000,000 a year to do it in increased taxation on the cigarettes when they were sent into this country after being made in America as against being made here. The principle of this Budget, which makes a differential duty between raw material and the manufactured article, guarantees an amount of labour in this country. Surely we might suggest to future Chancellors of the Exchequer that this same principle might be extended in many ways, and that a constant amount of employment might be secured in connection with various industries in this country.

I look upon it that the Chancellor of the Exchequer of the future will be the most potent person in the whole country in the regulation of wages and employment, and if there is any anxiety which I suffer from with regard to after the War it is the anxiety that employment may decrease and wages may fall. I know from information that I have that if that does happen it will be the Members of the House of Commons and the Chancellor of the Exchequer, and those who have to do with the organisation of the country, who will be blamed, and there will be bitter and angry feelings aroused, if, after the War, there is no thought taken by us of how to increase employment and keep the wages of the country at a high level. I feel that the Chancellor of the Exchequer is the man far more than any Minister of Reconstruction or any President of the Board of Trade who is going to be the most potent influence with regard to the rate of wages and the volume of employment, and therefore I take it that in discussing this Budget we have a certain amount of liberty in putting forward suggestions to the House and to the country as to how these desirable objects may be obtained through the imposition of duties. I have pointed out what has happened with regard to tobacco, and we know what happened with regard to cocoa. A former Chancellor of the Exchequer imposed a tax of £9 per ton between the stages of the cocoa nib and the manufactured cocoa. Our manufacturers said that such a thing did not exist, but afterwards they found it did, and they asked to have the tax altered and reduced.

The only other thing in this direction which a Chancellor of the Exchequer has done is to put a different tax upon spirits imported in the cask and imported in bottles. The House may ask what influence has that? Here in London there is an enormous amount of bottling done which would otherwise be done abroad, and that is one little instance of the application of this principle. The same thing happened in regard to tobacco, and if it was done in regard to sugar it would give an enormous amount of employment if the Chancellor of the Exchequer went one stage further and said, "We will rebate these duties by 33 ⅓ per cent. if produced within the Empire." I say that that would give an overwhelming amount of employment to the people of this country, and would create within the Empire what would do a great deal to settle many of our social difficulties of the future. We have now with regard to sugar an enormous tax that astonishes everyone in its percentage in proportion to the actual cost of the article. However, we admit that this tax is necessary in war time, but I want to go further and to suggest to the Chancellor of the Exchequer what would be the result if he reduced taxation on sugar grown within the Empire? It would immediately create a demand for land and call forth a volume of employment such as would surprise everyone. We know that in our own Empire we have the soil and the climate, but the workers are not there and the capital is not there.

I make the suggestion that it would be a wise precaution before we gave such preferences that the land on which those articles are going to be grown should be what I would call State-owned, and the State should acquire where they are giving these preferences a fund which might be called the unearned increment of that land. Take the case of British Guiana, where we have the soil, climate, and everything necessary to grow 2,000,000 tons of sugar a year, which is the consumption of this country. There are not enough people there to grow it, and there is no capital to develop the waterways that are necessary. From a business man's point of view it is perfectly legitimate that we as a State should take that land, which is practically waste desert land, and create a value in it by saying, "We will give Id. per lb. more than is given for sugar produced in Cuba." In that way we should draw people there to work, and we could lease that land to them on long-term leases with an option of sale, and by that means, having created a value in the land which did not exist before, we could legitimately as a State claim the right to take that value of the land when we have built up a trade on the spot, and perhaps by advancing money for machinery as well as harbours, railways, irrigation works, and everything required to produce that 2,000,000 tons of sugar.

I am glad to see that we have an immediate precedent for the policy of raising money in the way I have mentioned in India to-day, where the Government have acquired land which by irrigation can be made into gardens or farming land, and they are spending public money to irrigate that land. They say to the natives, "We will lease this land which had no value before, in which we have created a value, to you at a certain sum per annum." Instead of that investment, resulting in an ordinary four per cent. as we have done in railways, they are to-day receiving very large sums of money through this now idea of creating a value in land which did not exist until Government action was taken. If that idea once takes hold of our minds we might apply it with regard to forests, farm land, fisheries, and mineral resources, and with Treasury authority in this way develop the products of the Empire. In applying this principle I say that there is a legitimate claim for State partnership in the result. By that means future Chancellors of the Exchequer can meet the heavy liabilities of the War Debt in a way which this country has never previously realised.

This may be to a certain extent throwing out what may be called socialistic ideas, but I would remind hon. Members that at a time when the Government had no great debts to meet it was considered to be perfectly right to spend £5,000,000 on the Assouan Dam in order to develop the fertility of that region, and this money was spent in order to make land which was desert before into gardens and fields. In this case I say we, as a State, who have spent that £5,000,000 of money have a right to participate in the result. I am told that in Central Africa we have soil and climate suitable for the production of the finest smoking tobacco, quite equal to Virginia and Carolina.

Sir J. D

REES: It is quite true!

Mr. BIGLAND

Then why should we as a State not acquire land there and make it Crown land and invite the natives to come and work it, giving them a certainty of market, because that tobacco can be sold in England on better terms than the tobacco grown in Virginia and Carolina? And having created the value of that land we have a right to do with it as we did in Ireland, and give the men who live on it and till it a contract to pay so much per annum for forty years, and they might become the owners in time, and we as a State should become the possessors of enormous wealth.

I do not think people realise fully how land increases in value after generations of good management and good cultivation. I was called in some years ago to be the trustee of an estate in Lancashire, where, in 1680, a man named Thomas Shaw had bequeathed only 50 acres of land for charitable and educational purposes. That land had been held by one body of trustees after another for 130 years, and instead of bringing in £34 a year as it originally did, it is to-day bringing in £3,400 per annum. In the life of a nation Crown lands have increased in value in the most extraordinary way. You can see in the case of the Canadian Pacific Rail-road how land given in consideration of opening up the territory has become town sites to-day which are going up in the most extraordinary way in value. Why should not the Government where it builds a new railway, or developes a certain quantity of land, become the possessors of the town sites? Why should this nation three generations hence not become the recipients of enormous increments from adopting a far-sighted business policy by acquiring property and developing it?

7.0 P.M.

I throw these suggestions out because the world and the country is now full of all sorts of shibboleths as to how we are going to pay our debts. The idea of this conscription of wealth means that we have got to die two or three times during our lifetime in order to be assessed to pay off this sum. There may be some good arguments for it, but, in my judgment, it is not sound or workable. We must ask ourselves whether there are any other honourable and justifiable ways by which we as legislators can see our way to become joint owners in the industrial activities of the future. We levy an Income Tax and an Excess Profits Tax, and we do take a share of the producers' wealth, but we must become participators in the great world development that is in front of us.

Sir G. AGNEW

I need hardly say that, in common with all the rest of my fellow countrymen, I feel that the Luxury Tax is a right and proper tax to levy in this time of stress and war. A luxury is an exceedingly difficult thing to define, and I am very thankful that I have not been asked to sit upon the Luxury Committee. I fully anticipate that we shall have a list of articles yards and yards long. It is, of course, for the Committee to decide what is a luxury, but I fear it depends rather on the judgment of experts. A luxury to a working man is everything that his meagre means will not permit him to buy or acquire, and if we are to begin taxing at that point the list will be very, very long. I quite understand that the Chancellor of the Exchequer may find it easy to collect the tax on luxuries which are not sold at a high price, and I do not think that even the amount fixed would be detrimental to business in the case of articles up to £30 or £40. People will probably continue to buy them, and the Treasury will gain the benefit. I would, however, ask the right hon. Gentleman to consider whether the amount of the tax is equitable on articles sold at a high price, especially in the case of valuable works of art, such as pictures, silver, gold, or whatever it may be? If you continue the same rate on things of a high price, I fear the general tendency will be to stop the trade. The question is whether the Chancellor of the Exchequer would not get a larger income by having a 5 per cent. tax on all articles over a certain amount. I am told by those who are engaged in business of this character that a tax of over 16 per cent. will certainly act as a great deterrent and in a year or so will practically stop the trade. I do not think that is desirable, because the people engaged in this business have been in the habit of paying their Income Tax and in some cases Super-tax, and if we deprive them of their trade we shall lose whatever they have been paying. I hope the Chancellor of the Exchequer will look into the question closely. This business, during the past fifty years, has been in the hands of good people, and London, having become the centre of the world for this class of trade, I should be very sorry to see it lose its position as it might do if the tax were too high.

I would make a special appeal, not on behalf of the merchants in art, but on behalf of the living artists themselves. I am afraid that the modern artist in these belligerent countries has had a very bad time during the last few years, and I should deprecate any tax being put upon his works which would be so high as to prevent people continuing to purchase them. I do not think that a 5 per cent. tax would hurt anyone. Nobody buying a picture for £500 will grudge paying £25 to the State, and I do not think any artist will have the slightest objection to a tax of that kind; but if a man buying a picture for £500 has to pay £75 or £80 to the State it will make him think twice before he purchases a picture by a modern artist. It may have another result. If the artist finds that the tax is operating largely in the mind of the intending buyer he will say, "I must sell my picture; I have got to provide my family with bread and butter. You say that you do not want to pay a tax of £75 or £80. I will sell you the picture for that much less." I certainly hope that the Chancellor of the Exchequer will give favourable consideration to that class of people. I do not think that the smaller tax would have that result, but I am absolutely certain that a tax of over 16 per cent. would have a very detrimental effect on modern artists and sculptors. Perhaps it would not affect engravers. It would be a very sad business for artists. All those who have had to organise charitable operations for the benefit of wounded soldiers and sailors have always found in the artists a very ready response. I do not remember how many canvasses have been contributed by artists to be painted at a fixed price, and the money to go to the Red Cross Society. I am sure there have been a dozen or eighteen this year, and the same applies to last year. The artists have done this, although many of those who have undertaken to paint these canvasses have probably had a very bad year, and I know from my association with artists generally that very large sums of money have had to be paid out to help artists who, a few years ago, one would have said were making a good income. I do, therefore, think that it would be hard to penalise these men. It would not be hard if we could be always certain that the buyer would pay the tax. It is the same to the Treasury whether the buyer or the artist pays the tax, but it is not the same to the artist, and it is for him that I speak.

I know that the Chancellor of the Ex-chequer has been very good, and has settled the question of buying a picture at auction, I am glad to say satisfactorily. I observe that there was a great deal of misunderstanding in the House a week ago when the Budget resolutions were under discussion. Unfortunately, I was: on a Committee upstairs, or I could have put the whole thing right in four minutes. That misunderstanding, however, has been entirely cleared away by the Chancellor of the Exchequer very wisely consulting someone outside the House. I wish he would consult someone outside the House and see if I have exaggerated in what I have said about the artist. I hold no brief for the artists, and I have not consulted any of them, but I know what they will think. They will say, "We use our brains, our hands, and our brushes to give pleasure to the world, and we think it is rather hard that this tax to be imposed upon our works should be so harsh. We are willing to give something to the State." I do not know whether the Chancellor of the Exchequer could give any hint about it to-night, but, if not, I sincerely hope he will consider it, and do so on another occasion.

Mr. G. TERRELL

The Chancellor of the Exchequer stated that he would probably have to ask the assistance of Members at meetings for the issue of War Bonds. If he makes such an appeal to Members, will he post in the House, or in one of the Lobbies a list of the Members who are willing to help him and of the Members who either refuse or neglect to help him? We ought to know who are our friends in these matters and who are against us I make that suggestion, because I am sure, if he will adopt it, he will get a good deal of additional support. The speech which has been made by the hon. Member for Blackburn (Mr. Snowden), in which he advocated the conscription of capital, is a most mischievous style of speech. It can have but one object, that is the discouragement of investment in War Bonds, because i£ the conscription of capital means anything at all it must mean the repudiation of the National Debt, or at any rate some portion of it. We can hardly expect men to invest in War Bonds when, in this House, it has been openly advocated that some proportion of the National Debt. should be repudiated.

There are two points in the Finance Bill to which I wish to refer. I desire to ask the Chancellor of the Exchequer if he can explain why there is a difference between the words of the Financial Resolutions and the words of the Bill? Financial Resolution 19, which relates to "deductions on account of land abroad not to be allowed," refers to "profession, trade, employment, or vocation." In the Finance Bill the term "manufacture and adventure" is introduced. I should like to know whether those words are intended to extend the scope of the Finance Bill? If they are, my right hon. Friend will see at once that some little difficulty is being created, because it is perfectly obvious that the France Bill cannot go beyond the scope of the Financial Resolutions upon which it is based. The second point is with regard to the provisions introduced into the Finance Bill in respect of allowances for depreciation. Those provisions are some alight advance on the law as it stood previously, but considering the injustices which were pointed out in the Debate the other day, the concessions which my right hon. Friend has granted are a great disappointment to me. They do not meet the case at all. They do not go half far enough, and I am afraid, unless he can see his way to substantial additional concessions, these matters will have to be faced when we get to the Committee stage. The concessions, such as they are, are hedged in with qualifications. It has to be a class of persons engaged in a trade; the application must not be in the opinion of the Commissioners frivolous or vexatious; and then, subject to those qualifications, there is an appeal to a board of referees, who are merely the nominees of the Commissioners. That is not meeting the case which was put forward the other day when the Financial Resolutions were being passed through the House. No provision whatever is made for depreciation of buildings, and I am afraid that, unless some substantial concessions can be granted, these matters will have to be pressed further when we come to the Committee stage.

Mr. C. PRICE

I should like to refer to the speech made by the Chancellor of the Exchequer when he introduced the Budget, and to ask him if he will not make some correction in the statement he then made with regard to the effect of the Sugar Duty. He said: The burden on the consumer is l¼d. per fortnight. The Joint Financial Secretary to the Treasury said: The amount of the tax comes to 2s. 8½d. per annum per head on the rationed amount of sugar. I can quite understand how the Chancellor of the Exchequer made the mistake. He was simply dealing with sugar ordinarily sold over the counter to a customer, and he lost sight of the fact that there were other branches of trade in which sugar formed a very considerable part of the process of manufacture. The right hon. Gentleman the Member for the Rushcliffe Division (Mr. L. Jones) pointed out that the tax was over 3s. per head of the population. The hon. Member for York (Mr. Rowntree) said that even on sugar consumed by a family of five it represented a tax of 7d. a week. I myself put the figure very much higher, because I pointed out that the amount of the tax being £13,200,000, it was not to be expected that merchants would put money into that turnover without getting a profit upon the transaction. Accordingly, even the high figures given by the hon. Members for the Rushcliffe Division and for York do not represent anything like the charge that is going to be imposed upon the people. It was very unfair for the Chancellor of the Exchequer to give the figures he did when he said that was the burden imposed upon the people of this country, and I, therefore ask him to correct his statement.

I have listened to several speeches which have commented upon the different sources to which the Chancellor of the Exchequer has gone to increase his Revenue. Objection was taken by the ex-Chancellor of the Exchequer (Mr. McKenna) to the increase in the Cheque Tax, and we have had from the hon. Member for West Salford (Sir G. Agnew) a reference to the effect which the Luxury Tax will have upon artists; indeed, we have gone to various sources to find out where we can increase the Revenue. The extraordinary thing is that the Chancellor of the Exchequer has lost sight of a subject which is the one from which he could get many more millions than from all these pettifogging taxes, if I may use that term, such as the tax upon matches, the increased Postage Duties, and all these small taxes. I wonder if hon. Members have realised what has been the effect of the U-boat campaign in increasing the value of land in this country! The restriction of imports into this country has enormously increased the price of the products of the land, and have correspondingly increased the capital value of the land itself. It is an extraordinary thing to me that the Chancellor of the Exchequer should have lost sight of this source. Since the War began the Corn Production Act has been passed, which has also helped to increase the capital value of land, with the result that farms at the present time are selling at fifty years' purchase. Those who saw the report of the sale of the Duke of Sutherland's estate will have seen the prices that farmers were willing to give for land. A friend of mine told me of the sale of an estate which was left to his nephew, who was in France, engaged in the War. He sent home word that the estate was to be valued and then sold. A firm of valuers in this country valued it at £90,000, It was put up for auction and realised £160,000. It changed hands again very shortly afterwards at the figure of £200,000. There is an increase in the capital value of the land, yet the extraordinary thing is that the Chancellor has not thought it worth while to get hold of the increased capital value. He has imposed the Excess Profits Duty, he has increased the Income Tax, he has gone to any number of sources, yet the one subject which has enormously increased in value since the War began is the subject which the right hon. Gentleman entirely ignores.

It is all very well for hon. Members to get up in this House and say that the Chancellor of the Exchequer should not put the extra duties on postage, sugar, and luxuries, without suggesting to him some other source from which he can obtain his Revenue. It is a perfect scandal to think that during this War protection should have been given to all people who possess land, not only in regard to the money which has been spent, but in blood and treasure—I have also derived benefit from it, through being a landed proprietor—and that the owners of land should not have been called upon to make any contribution to this expenditure. It is unfair. It is not right for the House to constantly impose these increasing burdens on the people and at the same time treat this subject as one that is sacrosanct, and one that the House must not do anything to disturb In the White Paper issued by the Chancellor of the Exchequer I see a list of a large number of articles on "which taxes have been imposed. In that list is included the Land Tax, which the Chancellor of the Exchequer states has produced £665,000.Why on earth did he not treble that tax as he did other taxes? Why should that tax escape his attention? Looking down the disc, there is scarcely one he has not increased. There are the Land Values Duties, which produced last year £685,000. Why does not the right hon. Gentleman treble that tax? Why should these two taxes be the only two taxes which are not increased? I appeal to him not to treat this one subject as the subject which is to be free from an increase of taxation. In view of what lies before us, not only during the War, but after the War, I am perfectly certain that if the Chancellor of the Exchequer would devote his attention during the time he is in office not only to the Committees he has set up to consider the revival of trade, new industries, and all that sort of thing, but also to doing something to impose a direct tax on land, he will do more to help all these other industries and interests than by any other form of taxation he can impose.

Mr. CAUTLEY

I so thoroughly approve of all the taxes proposed in this Bill that I feel it almost churlish to criticise the method suggested for the collection of one of them, but the methods of assessment for the purposes of the farmers' Income Tax are, in my opinion, so devoid of principle and so unfair in imposition and will work such injustice in practice that I feel bound on behalf of my Constituents, who are mainly farmers, to protest. I sincerely trust that the Chancellor may between now and Committee stage find some fairer way of collecting Income Tax from farmers. I do not desire that they should escape paying tax on the profits they earn, but I differ entirely from the hon. Member (Mr. Price) that the profits on land are increasing. On the contrary, I am perfectly certain that the total derived by Income Tax from fanners in the coming year will be very much less than the Chancellor seems to anticipate.

Mr. PRICE

I wonder if the hon. Member is aware of the meeting held by the Worcestershire Farmers' Association protesting against the way in which landlords are selling their property, thus disturbing-the security of tenure which they formerly had?

Mr. CAUTLEY

My observations were directed towards profits attained from the occupation of land. I am not speaking on behalf of the landlords or in their interests. I am well aware that there is a feeling that farmers have been making large profits; but I should like to put one or two figures before the House so that it may know what the Chancellor's proposal really means. I assume that he is going to assess all farmers on double their rental because he thinks it is fair and that it represents something like the average profit being made by farmers. The total amount assessed under Schedule B for the last year for which there is any Report in Great Britain and Ireland is about £51,000,000 per annum. By one stroke of the pen the Chancellor is doubling that figure, and he is presenting to farmers the statement, "You are making out of the profits of your land no less than £102,000,000."My hon. Friend (Mr. Currie) said this afternoon that the total taxable income of the country is only £1,000,000,000, and we are actually asked to believe that the profits made by the farming industry are a tenth of the whole taxable income of this country. That statement is absurd on the face of it. I will test it in another way. Out of the £51,000,000, which is the total assessment under Schedule B, the assessment for England and Wales is £36,000,000. The total number of acres of enclosed land in this country—that is, of all arable and grass land; in fact, of all except mountain land—is 27,000,000 acres, so we are now, under this proposed system of assessment, having the statement going forth to farmers that they are making a profit of £72,000,000, which works out at £2 13s. 4d. an acre on every bit of land, good, bad, and indifferent. There is not an agriculturist who would not laugh at the suggestion that anything like that is being realised. For the sake of his own reputation, for the sake of his own financial escutcheon, which is so far unsullied, I would ask him to consider whether he is going to allow such a blot as this to be put upon it!

The right hon. Gentleman attempted to justify this in a manner which is entirely fallacious. He says the remedy is in the farmers' own hands. Has he thought for a moment of whom these farmers consist? There are in England and Wales, roughly, about 450,000 holders above 1 acre— they are the people we are concerned with—and no fewer than 300,000 of them occupy less than 50 acres of land, and therefore this system of raising Income Tax is going to hit a particularly small man — the man who occupies under 50 acres of land. It is true that all farmers have in the past preferred to be assessed under Schedule B. There were only, in 1916, 1,259 farmers in the whole of Great Britain and Ireland who elected to be assessed under Schedule D. Although I lay no stress on this, it is rather a striking fact that their assessments only amounted to a third of the rent they were paying. That may be the reason why they elected to be assessed under Schedule D. But the argument used by the Chancellor that the farmer could get out of this by showing his books is a fallacious and an unjust one, because farmers do not keep books. There is not time for them to make books, and not a half of these small people of whom I am speaking will have heard of this proposal till some months after it has come into operation, and then they will be faced with this exorbitant demand, which in thousands of cases will bring them into Income Tax paying for the first time, and they will have no redress from this gross injustice which the House is unwittingly going to impose upon them. I should have no objection if this system was deferred, say, to next Michaelmas Day, because then it would be known that this new system was to come into operation, they could start fair, and could all keep their books. But I do not think that is a possible system.

I ask the Chancellor to consider carefully before the Committee stage whether he will not put all farmers under Schedule D and do away with Schedule B altogether? In my opinion, what he wishes to aim at, and what is the view of the House, is that the farmer should pay his just tax and should be hit fairly and no more, and in working that out it seems to me that there would be no more trouble or difficulty, either to the Treasury officials or to the assessment officers, of assessment under Schedule D than there is in this proposal of putting them all under Schedule B. If you are assessed under Schedule B you can, at the end of the year, if you can produce your books, get the amount of the assessment altered to correspond with the exact profits which have been made. Therefore, so far as the richer farmers are concerned, and those who keep books, there is no injustice whether you assess them at double their rent or at the single rent to start with, but so far as the small men, of whom I am speaking, are concerned, who are ignorant, who spend their time working on the land, who are not much used to books or at writing, they will have the same difficulty in getting their assessments under Schedule B remedied and corrected as. they would have in meeting an assessment under Schedule D. So far as I am aware, in collecting Income Tax under Schedule P. the following system applies: A form is sent to every person who is carrying on any industry, and he has to return and fill up his assessment, and if the figure of the average annual profits for the three preceding years is accepted by the Income Tax Commissioners he receives a demand note on the particular amount that he has returned, but if the figures are not accepted, or if he makes no return, he is assessed at what the Income Tax Com- missioners think is the profit that he is earning, and he is assessed by Commissioners in his own neighbourhood who are likely to know something of the income that is being made. The Income Tax Commissioners may go on raising the assessment and putting the screw on until he either appeals, shows his books, or makes a return. I put before the Chancellor with all the force I can command that there is no difficulty about assessing the farmer under Schedule D. If he can make a return he will. If he cannot, or will not, he can be assessed, and he is not so likely to be unfairly assessed as by this artificial arrangement of doubling the rent under Schedule B. I should not have spoken now if this had been a matter that I could have put right myself in the Committee stage. I am suggesting a remedy. It seems to me only fair that farmers should be put on the same footing as everybody else in the country in regard to assessment under Schedule D. I did not think this was a matter which I could raise on the Committee stage, but whether I am right or wrong in that, I would ask the Chancellor of the Exchequer, before the Committee stage is reached, to consider whether I have not put forward a workable plan which will be productive of justice, and the putting into operation of which would be more simple than his scheme.

Sir J. D. REES

The Chancellor of the Exchequer, with characteristic modesty, disclaimed the credit accorded to him on all sides for a performance memorable in manner and matter, which appeared to be no effort when he made it, but of which few others are capable. He asked for the assistance of Members of Parliament in carrying out his admirable Budget. I can assure him, and I think he knows it, that we in Nottingham shall give him every help. I have no intention to-day of providing him with an alternative Budget, as some Members have done, notably the hon. Member for Blackburn (Mr. Snowden), because I am satisfied with the Budget which he has provided for us. Neither do I propose to wander in the whole field opened up by the Budget. Although it was particularly gratifying to me that my hon. Friend the Member for Birkenhead (Mr. Bigland) should praise both the Government of India and the tobacco of Nyassaland, both matters with which I have had somewhat close connection. I was glad to hear the hon. Member hold up the Government of India as an example to the Government of this country. I want to draw the attention of the Chancellor of the Exchequer to the new provision made in the present Budget—a provision which I think has not been found in any previous Finance Bill. In Clause 27 it is provided that no deduction shall be allowed on account of the annual value of premises abroad. The Clause reads: Where any lands, tenements … or other premises … used for the purpose of trade, manufacture … or vocation are situated outside the United Kingdom, no deduction or set-off shall, in estimating the amount of annual profits or gains arising or accruing from that trade … be allowed on account or in respect of the annual value of those premises. I think that is a harsh provision. Perhaps I am right in thinking its object is to stop a gap which appeared when the decision was given in the case of Bowstead and Company, in which it was held that a deduction of profit should be allowed before assessment to Income Tax on this account. Of course, I congratulate the Chancellor of the Exchequer on stopping gaps, but on the other hand, considering that there are notorious inequalities if not injustices under the Income Tax law as it stands, will he not allow me to take exception when he stops gaps which are in favour of the taxpayer and leaves those other items—such as the failure to allow for the amortization of capital of wasting properties like mines to continue? He has told us the whole law requires recasting, but I would ask him why, pending that recasting, stop the gap which is in favour of the taxpayer and leave the other inequalities which are to the prejudice of the taxpayer alone? I may be told that the one brings in money while the other does not. I admit that under the existing circumstances there is a good deal to be said for that answer, but I do want to ask my right hon. Friend to consider this matter before the Committee stage, when I venture to think he will find an Amendment has been put down by myself to omit Clause 27. I hope I have given some satisfactory reason for thinking that this novel provision is not quite fair. It has a serious effect on companies which have large premises in the East. Some of them have obtained provisional allowances in respect of the annual value of these offices, but until the final decision in the Bowstead case is come to it will be quite impossible for any satisfactory arrangement to be made or for the surveyor to decide how the annual value is to be arrived at. I hear that the appeal is not now to be taken to the House of Lords, and, indeed, there would be no object in doing so if this Clause becomes part of the Finance Act, but I do hope the right hon. Gentleman will consider whether it would not be an act of justice to allow the appeal to proceed and to drop this particular Clause out of his Bill.

Then there is a matter on Clause 30 upon which I desire to ask a question. I am not going to deal with the Clause itself. I want merely to refer to the payment of Income Tax by instalments. To some people I believe this is intended to be a boon, but I hold that it is one of the most fatal boons ever granted, because it renders the unhappy subject liable to be pestered by the tax-gatherer from the beginning to the end of the year. I am inclined to think that if a poll could be taken of Income Tax payers on the question whether the Income Tax should be paid in one or more instalments, the verdict would be in favour of a single instalment, because it would do away with the dreadful annoyance of repeated applications spread over a long time from the tax-gatherer. I hope my right hon. Friend will consider that question. I have purposely put in a lot of little points now because it is not my desire to suggest an alternative Budget. I want the right hon. Gentleman also to consider the gross injustice, as I hold it to be, of levying Super-tax on the gross and not on the actual receipts. When a man makes up a statement of what he has received in one year in order that he may be taxed upon it the next year, it is surely an aggravation of cruelty to make him pay, not only on what he has received, but upon that on which he has not received and will never receive. I want the Chancellor of the Exchequer to take also into consideration the question of mining dividends. It is a matter which has been urged upon him before now as a result of a conference between the Inland Revenue and the Board of Referees. The position is accepted that amortization should be allowed for in the calculations in regard to the liability for excess profits, but not in the case of Income Tax. I do not see my way to distinguishing in principle between the two cases, and I beg the right hon. Gentleman to take that into his serious consideration. A large proportion of the dividends paid by mining companies represent, not Income Tax, but the return of capital, and under some Governments this position is recognised and allowed for. It actually is the case under the existing law that companies which have never paid dividends have been made subject both to Income Tax and Excess Profits Duty, and this is a thing which nobody can defend. I hope the right hon. Gentleman will take it into account.

With regard to the 2d. tax on cheques, I think it my duty to say that when I am in the City, as I am every day, I find there is a very strong objection to this particular tax. Most of those with whom I come into contact hope that the right hon. Gentleman will drop it. As to the Luxury Tax, I had a letter on this subject from Paris two or three days since, and it may be of some interest to the right hon. Gentleman to learn that in the French Press, and I have some extracts here, it is indicated that though trade is bad, it is not due to the Luxury Tax. From one of the chief shops in Paris which supplies fine linen, a luxury as we all know, we get the statement that it gives little inconvenience; it is not an extremely serious obstacle to trade and I really believe that in this country the experience of Paris will be repeated. There remains the question of the pre-war standards for rubber and mining companies. This will be raised in Amendments which I have no doubt will be found on the Paper in the Committee stage and I shall take the earliest opportunity to move that the pre-war standard be raised. I want also to impress upon the right hon. Gentleman that he should be prepared to consider an Amendment not for the alteration of the tax upon amusements, because that would be out of order, but for the re-allotment of that tax so as to make it more acceptable to the cinema proprietors who are hard hit, not by the amount of the tax but by its arrangement, a point on which I believe the right hon. Gentleman is shortly to receive a deputation. The more quickly he does so the better. "Bis dat qui cito dat." When it is received I hope the deputation will get that very sympathetic consideration which should be extended to-people performing a most admirable service, educating and amusing the public and doing it cheaply. I greatly resent the remarks which are sometimes made, such as those by the Bishop of London, which suggest that these entertainments are not in every respect praiseworthy.

8.0 P.M.

There is one other point I must deal with, and that is the strong feeling amongst manufacturers that an allowance should be made in respect of wear and tear and depreciation of obsolescent assets, such as would be allowed in the case of any prudent owner. Another point is the double Income Tax. I do not need to repeat the arguments which have been advanced on this subject time and again. I will only refer to a new matter which has been imported into the discussion, and that is the suggestion of the Chancellor of the Exchequer in reply to the hon. Member for Abingdon that some mutual action might be possible in regard to double Income Tax where the profit arose in an allied foreign country, and that something might be done there by mutual action between the Governments of the countries concerned. My hon. and learned Friend asked whether the pooling of the resources of the Allies did not involve the mutual husbanding of those resources. The Chancellor of the Exchequer said that the question will come up on the Finance Bill, and I hope that when it does my right hon. Friend will be able to make some concession in regard to it. The right hon. Gentleman is familiar with these arguments, and if he cannot give way now as regards the whole question let him at least consider in Committee that suggestion which he has himself made in the direction of alleviation and see if Tie cannot arrange to do something or other to satisfy a long-standing injustice.

Sir E. POLLOCK

I desire quite shortly to refer to a matter which I think is of general importance upon this Finance Bill. There is one observation—I think the only observation—of the hon. Member for Blackburn (Mr. Snowden) with which I agree, and that is the one in which he pointed out that as you have increased your area of taxation it becomes more important to try and prevent harsh cases arising. On that ground he begged the Chancellor of the Exchequer to set up his long-promised Committee to consider the question of the Income Tax, its incidence, the modifications that might Be introduced into it, and also to deal with the question of the Super-tax. It is quite true that as you include larger numbers of persons within the area of the Super-tax and also of the Income Tax, that as you set up different compartments to which those persons belong, you necessarily increase the number of steps and consequently the number of hard cases which are just on one side or the other of the border. In the matter of Excess Profits Tax a certain number of cases have been brought to my attention in which very grievous hardship has been caused by virtue of the pre-war standard which depends on a measure being taken according as to whether it fell on one day or another day just before the War broke out. We are now bringing the Super-tax down to the standard of persons that have £2,000 a year and no more, and it is open to very grave question whether they will be able to pay the very considerable demands that will be made on them, because persons who are living in that standard of life have probably already allocated their income for the purpose of the education of their children and the ordinary burdens that fall upon the prudent householder. It may well be, therefore, that difficulty will be found by them in meeting the case. We cannot hope that the Chancellor of the Exchequer will be able to set up his Committee, or that that Committee will be able to report in due time to effect any modification, and what I am going to ask the Financial Secretary is how far the Treasury themselves have a discretion which enables them to deal with cases which are unforeseen, and which the cold lines of an Act of Parliament are unable to modify or to palliate?

One can give a great many illustrations of these cases, but let me take one. In the case of Death Duties, which may be described as deferred Income Tax, we find a very heavy demand is often made, and quite rightly made, in accordance with the Statutes, upon estates which fall within the purview of the Act of 1894. I have one particular case which I should like to bring to the attention of the Financial Secretary, and I should like to know whether or not, in a cage of this nature, he has any power of dispensation which would meet it. The same observations apply to hard cases of Super-tax, Excess Profits Tax, and the other taxes which belong to this Act. I will give the particular circumstances of this case. The late Lord Clive was a captain in the Welsh Guards. He died in hospital on the 13th October, 1916, of wounds received in the Battle of the Somme on the 6th September, 1916. He was a gallant young man, who received posthumous honours, which were conferred on him by the War Office, and he was confirmed in his captaincy, which is ante-dated some six months. Before he left for his service abroad he took proper advice, and made provision, under a disentailing assurance, in August, 1915, for possible eventualities. He had to consider the possibility of his own death, the possibility of his being taken prisoner of War, and being remote from dealing with all business for a considerable period of time. That particular case arose in regard to an hon. Member of this House who succeeded to his estate during a long capitvity in Germany, and the late Lord Clive made provision in 1915 for some of his relatives in the event of his succession while he was unable to seek advice from a solicitor or to deal with the matters which would then fall to him to attend to. He executed a disentailing assurance. After having gone out he received wounds, and died on the 13th October, 1916. What was it with which the deed dealt? It dealt with the reversion, which was an expectancy upon his father's life. He died in war; he never succeeded; he never came into possession; he never got possession of any of the estate or property with which the deed dealt under this disentailing assurance. He merely made a proper provision for those who would have to be dependent on him in the event of his succeeding, and burdens being thrown on him which it would be his duty to attend to, but to which he might not be able to attend if he were a prisoner in Germany.

What has happened? Quite in accordance with the law—I do not intend to suggest that there is anything incorrect according to the Statutes, but I want to point out how the Statute worked hardly —a demand is now being made against his estate for a sum of £37,000, and more, in respect of the property to which he never succeeded, but which fell within the disentailing assurance. Connected with the Finance Bill we have a certain number of Acts, which are continued in force, and to which application is made in Part III What are these Acts? This House passed in 1914 an Act under which relief was given in certain cases for a person who died from wounds received -on active service. That, of course, applies to the late Lord Olive's case, but, unfortunately, the relief is limited in favour of lineal ancestors or descendants. In this case the provision he had to make, as he was a young man and not married, was to deal with the succession that might go to collaterals, and, therefore, the Act of 1914 does not apply, because in his case, instead of the estate going to lineal ancestors or descendants, it will go to collaterals. We passed another Statute, intended to give relief, and that was in the case of quick succession. It was agreed that where estates passed in quick succession from one hand to another relief should be given, but that does not apply, because Lord Clive never succeeded. The result of this legislation is this, shortly put, that, in the case of a proper provision made to deal with estates which had to be dealt with in a case of a man going out, and who had to face the possibility of his not returning for a considerable time, his estate was caused to be liable to £37,000 if paid at once, or a great deal more if deferred. I think it runs up by something like 40 per cent., and that the sum may be £50,000, £60,000, or even £70,000. Yet none of the relief which is intended to be given by the Act relating to quick succession, none of the relief intended to be given for persons who are killed in war, applies. I have only to state the facts for it to be quite obvious that a case like that was never intended to be hit at by the Finance Acts, or the Death Duties Acts, or the other Acts to which I have referred.

I want to ask the Financial Secretary whether he has any power of modifying cases of that sort. Must we wait until a Committee has been set up and found a new power? Is it not possible that the Treasury themselves may have a power of dispensing in hard cases, a, power which it is important they should have, and all the more important where you have a greater number of persons brought within the ambit of the Statute, a greater uncertainty as to what their fate will be, and a greater difficulty in the present circumstances in which we live in making the proper business provision for dealing with the matters which it is the duty of every citizen to provide for? The figures that I have mentioned in this case are large, and considerable, and, of course, it would be very easy to say that a large estate must pay a large sum. I do not make any observation of that kind to the Financial Secretary, because I know he would not deal with it from that point of view. One must deal with it from the point of view of equity, and what one wants to see is whether, in the case of a quite small person who pays Income Tax, and is finding his Income Tax bringing him up to a higher standard, and in the case of an income that just pays Super-tax, and is brought up to pay a higher standard, and in the case of Death Duties such as I have given as an illustration to-night, there is not a power on the part of the Treasury to round off the inequalities and difficulties that arise, or whether one has to say that there is no power of any sort or kind, and that all these cases, increasingly important and numerous, must be governed entirely by the provisions of the Act of Parliament as they stand. If that be so, then I think we ought to take, for the purposes of the War, at any rate, a power to the Treasury to modify this harshness, inasmuch as it is impossible to set up the Committee which was promised, if my recollection serves me, at least four years ago, to undertake any general modification of the Income Tax, Excess Profits Tax, or Death Duties. Inasmuch as it is quite impossible that, with the business we have to get through to provide for an up-to-date system of imposing and collecting these various taxes, it seems to me that the right course would be to arm the Treasury with a weapon which would be suitable in these cases, and to give it what is a very precious weapon, certainly throughout the administration of the law, and that is discretion, in order that we may not have the unhappy spectacle of serious misfortune caused where only a duty ought to be fulfilled.

On that ground I ask him whether or not there is such power, and, if not, whether he will take steps to obtain such power in order that our consciences may be satisfied, and that we may not feel that serious hardships are caused to individuals without some concomitant advantage to the State?

Mr. DUNDAS WHITE

I am desirous of saying a few words on one aspect of this Finance Bill, namely, the tax on cheques. In view of what has been said by the Chancellor of the Exchequer, I am making an appeal just now because I feel sure that he is bound to a considerable extent to come to his decision between now and the time when we have to consider the proposals of Clause 36 in Committee. This tax appears to me to raise a very important question, because it goes to what may be regarded as the roots of the practical working of our trade and exchange. It is estimated that the increase of the tax on cheques from 1d. to 2d. will bring in about £1,000,000. My own estimate is that it will probably reduce the number of cheques to such an extent that it will not bring in quite so much additional revenue as is expected, but whatever view be right upon that point, the tax, of course, like any other tax, takes so much from the people generally in order to give it to the Exchequer. In applying the ordinary canons of taxation we consider what are the incidental disadvantages, because practically every tax has some of these. I will make a present to those who are proposing the tax on cheques the view that the tax will be cheap and easy to collect. That, I think, is common ground. On the other hand, the tax has incidental disadvantages of a very grave kind, because its tendency is to interfere with the action and still more with the development of the cheque system which, as Sir Michael Hicks-Beach admitted sixteen years ago when he made a somewhat similar proposal, has become for practical purposes the paper currency of the country. This is a paper currency. I do not need to labour the point whether it is an official paper currency; but while it is a private paper currency it fulfils the functions and mechanism of exchange, and it does so in an economical way, because it necessitates no State credit whatever. Cheques are paid, there are debit and credit accounts, the cheques are cleared at once, one obligation is set off against another obligation, and the whole system is perhaps the most perfect and the most cheap, so far as the community is concerned, that human ingenuity has ever devised for the clearing of debts as between man and man in this world.

This system has reached a very high standard in this country, and it has many advantages. It is of the greatest importance to the whole community that this system should have free course, and that it should be developed, because the more it develops the less need there is for governmental money and the less need there is for actual money coins. These considerations are particularly important now. We have to take as our base the economic tendency, and that is a matter of great importance, and one on which we all agree. Obviously, with a system of cheques like this, the tendency of any increased taxation on cheques is to prevent the use of cheques or to minimise the use of them. I speak of tendency because tendency is a fundamental consideration in this legislation. I quite agree that the effect of such a tax as is proposed is limited to cheques of a certain size, and I would make this further concession, because I do not want to overstate the case, that the cheques which will be affected by this tax are practically cheques under £10, and possibly cheques under £5. I do not think the difference between 1d. and 2d. would make any difference in cheques over £10, but it would make a difference in cheques under £10 and a very considerable difference in smaller cheques. The Chancellor of the Exchequer, in the very reasonable and kindly speech he made on this subject, quoted some remarks that had fallen from an hon. Member on this side, in which he suggested that, after all, even with the 2d. tax on cheques, it would be the most convenient form of payment. Various cases were put as to what would you do in regard to this, how would you do in regard to that, or how would you do in regard to the other, and it was shown with almost scholastic clearness that we should, therefore, come back to cheques. I personally rather distrust arguments of that kind, because I have been brought up to distrust the argument of the dilemma. It has been said that you are between the horns of a dilemma, but people can sometimes find a very convenient seat between them. If we distrust the dilemma, we may well distrust the trilemma which has been put forward.

It was said, "If you do not pay by cheques, what do you propose to do? Would you send someone round to pay cash, or would you buy a postal order, or what other means of payment would you adopt?" The whole argument proceeded on the idea that the payment would have to be transmitted. I take the case which would be most affected by the increased charge, namely, the payment of ordinary household bills of more than 18s., but less than £5. There is no reason why the payment should be transmitted at all. The question which would be before a number of people in paying bills of 25s. or 30s. would be this, whether when they went to order the things, they should pay cash or have the bill sent round and send a cheque later. That is the question which would be before a great many people, and in a great many cases I believe the extra duty on the cheques would deter them from using the cheques for the payment of these smaller amounts, and they would draw money from the bank and pay at the time for the goods. In the individual case it might amount to very little, but when you take the great numbers of cases that would be affected then you would have a very considerable amount throughout the country. Taking the country as a whole, I think the use of cheques would be lessened and the use of coin and currency notes would be increased. It would not only affect them. If you take the case of a shop it is a great convenience to any trading concern if the people who trade with them pay in cheques, because, apart from the physical convenience of the thing, it means that they can do with less till money than they would otherwise require. Consequently, not only many customers probably desire to have more cash, but the shops and trading concerns would also require a considerably increased amount both of cash and currency notes in their tills. When you consider that this affects these concerns all over the country, it is clear that the cumulative effect of this tax on individuals and trading concerns would be very large and check the total amount of payments by cheque and increase very largely the total of cash and currency notes required.

The evil by no means ends there, because there is another financial effect of payments by cheque which has hardly received the attention which it deserves. If you pay by cheque, the bank balance is not drawn upon until the payment is actually made, but if you pay by cash the ordinary procedure is to go to the bank and for convenience draw cash weeks before it is wanted and for large amounts. The result is that the total balance at the banks is made considerably less than it ought to be, and instead of the balance being at the bank it is taken away to be used as till money, in which form it is unproductive and useless for commerce. That is a very important consideration at a time like this, when, more than at any other time, every pound that is in the country ought to be made to pull its full weight. These are some of the considerations which members of the late Government had in view when they urged at the beginning of the War that people should use cheques as much as possible and try to do with as little cash as they could. And it is a matter of regret that the Government at that time did not go a step further, because I believe that it would be sound economy for the nation if they had abolished the Cheque Tax altogether, or, at least, on cheques of small amounts, and that the extension of the cheque system at that time would have been very great.

This is not a new proposition so far as I am concerned. In a little book which I wrote about fifteen years ago, in a chapter dealing with money I pointed out that the Stamp Duty on cheques and other instruments of credit was. a very substantial interference with the freedom of exchange, and I wrote this: To see how much these Stamp Duties on cheques narrow the use of cheques we have only to think how the cheque system would expand if the penny duty on cheques were repeated. And I then put forward the proposition that it would be a gain to the nation if these instruments of credit were relieved from taxation altogether. That may have been a counsel of perfection, but I do point out very seriously to the House that it would be of the greatest financial convenience to the country and facilitate exchange to proceed upon these lines. It would be idle, I know, to ask that the taxation on cheques should be repealed now, but what I do ask is that it should not be increased, or at least that it should not be increased in respect of cheques for comparatively small amounts, because it seems to me that the incidental and ultimate disadvantages and the cost to the country would be considerably greater than the advantages which this tax -would bring in.

In 1902, when Sir Michael Hicks-Beach was Chancellor of the Exchequer, this proposition was made. It is not merely a question of the amount of the tax, but of interference with what Sir William Harcourt called in 1902 the habits of the people. The 1d. duty on cheques has been established for a great number of years. People have got accustomed to it. Business is conducted on that basis. But if the duty is increased to 2d. it makes people reconsider the whole position, and the position, I believe, will be reconsidered by very many people on the point as to how they should pay their household bills. The Budget of 1902 was a precedent for this increase in the Stamp Duty, and Sir Michael Hicks-Beach was persuaded on the merits of the case to abandon that duty. I hope that as his Budget was a precedent for this duty, so his action may be a precedent for dropping this proposal, at least so far as the smaller cheques are concerned. Before speaking on this sub- ject I thought it well to examine the Bill in which Sir Michael Hicks-Beach made his proposal, and, comparing it with the present Finance Bill, it seems perfectly clear that Clause 36, which deals with the Cheque Duty, is taken from Sir Michael Hicks-Beach's Clause with certain variations. In his Bill it was proposed to deal with certain other bills of exchange, but it was a feature of his Bill that cheques for less than £2 should be exempted from the duty. Following that precedent, I hope, when the time comes, if the Clause is not dropped entirely, to propose a proviso exempting smaller cheques, and I would draft it on the same lines as those followed in the Bill of Sir Michael Hicks-Beach, except that the limit should not be £2, but £5 or £10—I think the latter figure.

I have tried to put before the House temperately and moderately these practical considerations as to the exchange of the country on which I have based my plea for dropping the Cheque Tax altogether. I hope that on consideration the Chancellor of the Exchequer and my hon. Friend (Mr. Baldwin) may see their way to drop this tax, and, if they do not, that they will at least limit the increase to cases in which the cheques are drawn for amounts over £10. I am encouraged to hope that further consideration will be given to this subject by the words which fell from the Chancellor of the Exchequer. Indeed, I think there was one remarkable tiling he said which showed that these matters must have been under the consideration of the Government, because when he was speaking on the Financial Resolution, on Report, he did allude to the possibility that this tax might increase the demand for silver, and that we might possibly see 59. notes. I frankly admit that he said that he did not expect it, but he did mention the possibility, and I think that the fact of the possibility having been mentioned by the Chancellor of the Exchequer indicates his having previously thought of it. We have had quite as much of currency notes as we like,. and there would be very grave disadvantages if they were to come for small amounts. There would also be grave disadvantages, in the present stringency of food, if we had an increase of silver currency to any larger extent. The Chancellor of the Exchequer himself has evidently thought of that possibility, and in view of the way in which he has put things to the House I hope that matter is still open to consideration, and that the important points which have been mentioned by others as well as myself may be well considered by the Government.

Mr. OUTHWAITE

I did not know, until I heard my hon. Friend speak on this issue, that the Cheque Tax involves issues of such very great importance. I wish to say a few words of criticism on the speech which was made by the hon. Member for Birkenhead, in regard to a project which he brought forward, and as to which I have no doubt we shall hear a good deal in the future. Already we find that this project is being brought before the public very prominently by an organisation which calls itself the British Empire Development Association, with which I think various members of the Administration are connected in regard to its direction. The proposal which the hon. Member brought forward is the proposal of the association, namely, that as a means of meeting our vast War Debt the Government should go in for the acquisition of vast areas of territory in various parts of the British Empire. He said that British Guiana is a suitable field for the growing of tobacco, and that the object should be to acquire large areas of land by purchase, and to hold it for the State, which is to retain the rental value and to acquire the unearned increment that will accrue in course of time to the land. The whole speech of the hon. Member was very interesting as showing at least his grasp of that fact of increment and its application far a field, but I desire to bring it closer home in regard to the values which attach to the land here through the industry and enterprise of the community. In the first place, I would point out that the hon. Member may be quite assured that we have land within the British Empire which is in process of increasing in value, but that the people in the particular parts of the British Empire where the increment occurs will assume possession of that increased value and that it will not come to the British Government. It is proposed by this association that the Government should acquire land in Canada. I would point out, however, that it is not likely that the Canadian Government will allow the British Government to buy great territories in Canada, and that afterwards when, as a result of the enterprise of the people of Canada, the land has increased in value, it shall take possession of that enhanced value. You may be quite sure that in Canada, as elsewhere, the increased value of and resulting from the labour and enterprise of the people them-selves will go to those who have created that value. Consequently it is a vain and barren hope on the part of the hon. Member if he thinks our War Debt will be wiped out by this kind of speculation in various parts of the Empire.

But I do think the hon. Member deserves a measure of commendation on the fact that he has arrived at a great truth as to the increased value of land, created by the enterprise of the people, but his application of that truth is not that which will be accepted in those parts of the Empire where it will be assumed that the increment belongs, not by right to any individual, but to the State, for the general purposes of the State—that is, the general purposes of the people who have created that wealth. It is for that reason that I desire to point out to the Chancellor of the Exchequer that he need not go to British Guiana, or to the uttermost ends of the earth, to secure the values which have been created by the community. He should not cast his eyes in vain on possible values to be created by peoples far a field, values to which we have no right or title, but rather should he cast his eye around him and think of the values which have been created by the people here, and of the prospective values to be created, as values rightly belonging to those people. The hon. Member gave an illustration of the rise of land values in this country. He told us that he was trustee of an estate which 130 years ago brought in £34 per annum, and now brings in £3,400. That case is not an isolated one; in fact, so great has been the increase of land values in this country that I am quite confident that the Chancellor of the Exchequer, if he secured those values by the same process as has been adopted in Australia, New Zealand, and elsewhere, of compelling the owners to disclose the values, he would find that the land values of the United Kingdom would represent so many thousands of millions of pounds that they would wipe out the War Debt that has been created. It is to this national asset we have at-home to which he should look to meet the national obligations imposed upon us by the War.

The other point I wish to raise arises out of the question which I put to the Chancellor of the Exchequer a day or two ago. I asked him the amount raised the week before last by the sale of War Bonds, and how far they had gone to meet the deficiency between revenue and expenditure. He replied that the amount was £12,000,000, and that we required £40,000,000 a week of loan money. I asked what was the cause of the falling off in the amount contributed to the War Loans. He said that it was, he was informed, due to the activities of the pacifists. He rather went back to-day on that statement, but I think he is attributing the cause of the deficiency in the wrong direction. My hon. Friend the Member for Blackburn dealt with that matter to a certain extent in his speech, and his statements rather surprised the House for its absolute repudiation of the idea that he or his friends had ever made any statement which would cause any concern to the mind of the possible lender and for the moderation of his statements. The hon. Member for Birkenhead, who followed him, actually alluded to it, and I would advise the Treasury to beware of my hon. Friend the Member for Blackburn when he is most moderate. I told him I was going to give that warning to the Treasury.

The hon. Member for Blackburn and those associated with him have no particular concern with limiting the borrowing activities of the State. They are Socialists, and, like myself, deplore most and always the vital human sacrifices of the War. I know there are many, of whom the hon. Member for Blackburn is one, who so deplore and detest the War that they hope to see a condition of affairs brought about which will ensure that this is the last of all wars. They think it will come about through economic causes. The hon. Member for Blackburn, in the back of his mind, would be glad to see this War Debt increased, because he knows it will bring the day of his revenge upon the social conditions which he and his friends believe lie at the root of war. They know you can go on borrowing until you drive this country after the War to raise an issue of taxation which will fundamentally alter their position, and they know that through the conditions produced through this vast debt and increase of taxation they may overthrow the old social system and hurl into the dust the interests which to-day are greatest in the War. They see in it the means of approach towards the economic and social state to which they give allegiance. I think it is quite probable that, so far as the hon. Member for Blackburn and his friends are concerned, they are taking no particular step to limit the borrowing of the Government, because they know there will be chickens come home to roost for those who are to-day concerned with the Governments of the countries and the maintenance of the present system.

I can go with them up to a certain point. I can see that you might, by the finance of this vast debt, bring in its train great economic improvements in this country and create forces which will bring great social and economic improvement; but there is a limit to that. If you are to have a revenue demand which will compel you to take the whole of the value of the national assets and make the land the property of the people by way of taxation, I see that although there might be some contingent advantage in that, there can be no advantage in increasing your indebtedness to a point when, having taken the whole value of the national assets and having taken the whole of the value of the land, there still remains thousands of millions of debt which will have to be advanced not from accumulated values created by the people, but taken out of the result of the individual efforts of the community. And that is the point we are reaching now. What I want to point out in connection with the Chancellor of the Exchequer's statement is that no statements can be more detrimental to the raising of money than the statements of the Chancellor of the Exchequer himself and his friends.

The Chancellor of the Exchequer said, in reply to a question put by me, that ho will not tax land because there is no taxable value in the land of the United Kingdom. Well, the chief asset of any country is its land, and if the chief security for this debt of £6,000,000,000—it will be £10,000,000,000 yet if we proceed as we are doing to-day — is of no value, what security have you for it I Again, we had a speech in which the hon. Member denounced the hon. Member for Blackburn because he advocated a tax on capital and said that would appreciate the value of the Loan and deter lending. What security have you for the Loans if you are not to tax the national asset of the land or tax capital when your £300,000,000 of Excess Profits Duties goes which you get from the fictitious increase on income and the other sources which you go to for the finance of your vast debt? It is because in your Budget you make no provision by way of taxation which will be permanent for the finance of the debt, and because the lender must see that after the War, in the time of terrible stress which is coming, the whole issue of the question of taxation will be raised for the meeting of the debt —because of those considerations there is likely to be doubt as to the security in which they are asked to invest. It is the cowardice of the Government in the matter of taxation which is, to my mind, the cause of the falling off in the subscriptions to the War Loan. If the State were to say we have to-day a security in the value of the national assets of this country of £6,000,000,000 by way of taxation, we would virtually secure the debt upon that security, and then there could not be any doubt in the minds of the possible lenders which must naturally be in their mind to-day when faced with these vanishing methods —they must vanish after the War—in which the Chancellor of the Exchequer indulges in these trumpery schemes of taxation, such as the Luxury Tax, the Match Tax, and the Cheque Tax, and all the rest of it—evidences of a State which if it is not bankrupt, has a Chancellor of the Exchequer who is bankrupt in ideas of revenue raising.

Mr. ELLIS DAVIES

I was rather surprised at the attitude of the hon. Member who has just sat down, and that of the hon. Member for Blackburn, with regard to the Luxury Tax. I thought those who represent the democracy of this country would be quite willing to take the ability of the purchaser in that respect as an index to his income and, consequently, as one method of assessing that income to duty. But, if I may say so, I think both the hon. Member who has just sat down and the hon. Member for Blackburn, and particularly the latter, are under a misapprehension as to how wealth has accumulated in this country. The hon. Member for Blackburn seemed to imagine that all that was required in this country, if not for the redistribution of wealth, at all events for obtaining money for the Revenue, was to tax income. It seems to me the hon. Member is leaving one thing out of account, and that is that the real wealth of the country—that enormous wealth in the hands of a very small number —is not the result of any saving from income, but is rather due to the increment in the value of property, and I think any glance at the figures published of the Estate Duties every year would show this. Roughly, there die in this country leaving money some 80,000 people every year. Of these, as a result of their thrift and sobriety, more than half leave less than £1,000. Leaving aside this class, which must include the working classes, even if you add to them shopkeepers, the lower middle class, and, I venture to say with some experience, the professional classes of the country, I find that only one in nine of those who die in this country leaving money leave £5,000; and surely, if wealth can be accumulated from income, more than one in nine of the industrious, sober, hard-working people that we know ought to be able to accumulate more than £5,000 and make a better provision than £250 a year either for their own old age or for those dependent upon them.

9.0 P.M.

But these figures, if studied, disclose another thing, and that is that they do not vary from year to year. The number of people leaving £l,000, £5.000, £10,000, remain practically the same for a decade, and the total amount of wealth left by them is, on the average, practically the same. That seems to me to point to this, that the ability of people to save and to accumulate wealth is governed by social and economic conditions over which the great majority of the people have absolutely no control. They are so bound and so limited, either by the amount of their wages or income on the one side, and by the cost of living and taxation on the other, that they have very little indeed left, and it is under these circumstances, I think, that the present proposals of the Government are unfair. There is, for instance, the increase of the Sugar Duty, the result of which will be, so far as I can make out, that every family of five in the country will be taxed on food alone to the extent of £4 a year—an exceedingly heavy contribution to a person in receipt say of anything from £50 to £150 a year. On the other hand, it is perfectly obvious that the real wealth of the country is in the hands of a very small number of people, notwithstanding all these taxes. The real truth is that wealth in this country escapes taxation. It escapes, for instance, the payment of the Death Duties. It is perfectly well known to every practical lawyer in the country how that is done. Property is conveyed during life, and so escapes the duty. It is a deliberate system which has been carried on for years. Private property is conveyed to children during the lifetime of the parents, and so escapes duty. But that system also prevents another call on the part of the Exchequer, and that is the higher rate of Income Tax upon the owners of property, and particularly the liability for Super-tax, so that the wealthy in this country are escaping on the one hand the Death Duties, and, on the other hand, both Income. Tax and Super-tax.

I have followed the discussion on the proposed capital levy. I confess the difficulties in the way of making the levy are almost insurmountable. As somebody has said Death Duties axe only collected at death, whereas a tax upon capital would apply to all taxpayers at the present time, and consequently enforce the realisation of their property. But, in considering these difficulties, we ought not to forget that the German war chest was made up out of the tax upon capital, amounting, if I am not mistaken, to 1,000,000,000 marks. Not only that, but a tax upon capital has been levied for years as part of the financial system of Frankfurt, and, if I am not misinformed, it has also been raised for a large number of years at New York. I would suggest to the Government, if, either for the present or for the future they have to put by the consideration of the tax upon capital, whether they might not, as a means of raising the necessary funds, consider whether or not some action might be taken by one means or another to tax the great increment that has taken place in the value of property during the War. I will give only three instances. Take brewery shares. Take the shares in the metal trade, and take the enormous increase in the value of agricultural land, the owners of which, by the way, show very little consideration for tenant farmers, as was shown the other night on the discussion on Lord Berkeley's estate.

All know the increase of value that has taken place in shipping shares. In one case within my knowledge the shares have increased by ten times their value in two years, but not a penny piece of that increment goes to the Exchequer. On the other hand, we are increasing the tax upon the food of the people, and I do urge the right hon. Gentleman to consider whether now, or at some later date, some means could not be adopted in the nature of an estate duty on property during life, because I can assure my right hon. Friend, from my knowledge of real property, that it is the studied and deliberate system of a large number of moneyed people in this country to transfer both real and personal property during their lifetime, and invest it for their children so as to avoid duty. It is not done occasionally, but it is done as part and parcel of a deliberate system to evade the Death Duties, and, being legal, of course we cannot stand in judgment upon it. But I would point out that not only do these people evade the payment of the Estate Duties, but they evade it at a time when it is perfectly obvious that they are in a position, without interfering with their own comfort, to transfer their property. That does not always apply in regard to Death Duties. Often death takes place suddenly. Sometimes it is the death of the owner of the property which has not been developed to anything like the extent he desired, or under conditions under which he anticipated. Notwithstanding that the widow, or the children—as the case may be—are immediately mulcted in heavy Death Duties. On the other hand, I do urge Gentlemen who come to the conclusion that their estate is sufficiently large to enable them to transfer part of that property to their children during their lifetime to consider, also, that they are also in a position to pay a substantial sum to the Exchequer. I suggest that they should not be allowed to transfer that property with the intention of evading a fair contribution to the Exchequer.

Colonel COLLINS

In his closing remarks the previous speaker has referred to the suggestion of a Capital Tax in the future. Two questions occur in this connection: First, is such a tax fair, and, secondly, is it feasible? Few hon. Members will question its fairness, although, no doubt, there will be considerable difference of opinion as to the feasibility of the tax itself. And as the subject cannot arise in an acute form until after the War, whether it is feasible or not depends upon the conditions then. It occurs to me that after the War the main problem which this country will be required to face will be the liquidation of the credit which has been created during the War; and if, after the War, we are going to have a Capital Tax, and thereby at the same time create further credit, such action may seriously weaken our finances at the time. Several hon. Members have referred to the proposed Luxury Tax. The Chancellor told us that, as this tax is clearly defined in the Finance Bill, we may understand that when the House passes the Second Reading, they agree to the principle of the Luxury Tax. Shortly after he spoke, the hon. Baronet dealt in detail with the tax and pointed out that in the case of certain pictures, if they were heavily taxed, the tax might press with extreme severity on living painters. I think that was a very fair illustration of the difficulty the House is placed in this evening in being asked to agree to the principle of this tax, without a Schedule, or the items which are going to be taxed under the Bill being before us. I hope, therefore, that the Government will not ask the House—or rather will not consider, when this Bill passes to-night, that the House is committed to the principle of the Luxury Tax, but that they will allow the House to have an open mind to decide this question on its merits, after having been informed by the Committee which the Government have set up, not only as to the machinery which is to be adopted, but the items which are to come within the purview of the tax.

Having on several occasions during the past twelve months crossed swords with the right hon. Gentleman the Chancellor of the Exchequer on various financial questions, and having last year attacked the Government for not having at that time increased taxation, may I to-night congratulate the right hon. Gentleman and my hon. Friend the Financial Secretary to the Treasury on having brought in a well-balanced Budget, and for having asked the House of Commons and the country to find an additional £140,000,000 by taxation this year? The Government seem to be a little surprised that the House of Commons has agreed so readily to this increased taxation. But the House of Commons in this, I think, correctly interprets the mind of the country, which is determined to find the sinews of war and to pay the necessary sacrifices, and readily to find the money for which the Government asks by taxation. Whether the country thoroughly realises that every twelve months of war means a permanent addition to taxation of £114,000,000 per year is an open question. The calculation is a simple one. The amount of new debt which his going to be created this year amounts to £2,000,000,000. The annual interest on that sum at 5 per cent. represents £100,000,000 a year. The cost of pensions will, at least, be £14,000,000 a year. Thus, we get a total sum of an additional £114,000,000, which will require to be raised yearly by taxation. The Chancellor intends to raise this sum of money in the financial year 1919–20. When he introduces his Budget next year —if, unfortunately, the War is still continuing—he will be forced to raise increased revenue by taxation to meet the debt which has been created during the year. The Chancellor, when he came to reply to the speech of my right hon. Friend, dealt at some length with the problem which he requires to face this year —that is, the problem of finding £2,000,000,000 from the pockets of the taxpayer.

Having listened to the whole Debate today, I think I am within the recollection of the House when I say that the point made by the late President of the Board of Trade, when he referred indirectly to the subject of expenditure, was the one point mentioned this afternoon which met with the general approval of the House. It showed the mind of the House of Commons. I think it showed the mind of the country, too. That is, that although the House is willing to find the necessary revenue, it asks for some more assurance than the Government's that closer supervision will be extended over the expenditure of the nation. The Financial Secretary may recall the fact that twelve months ago I spoke here, and asked him whether, in view of the manifold duties of the Chancellor of the Exchequer: the problem he has to face in raising money—the problem he has to face in raising £2,000,000,000 by borrowing—seeing his arduous duties as Leader of this House and his constant attendance as a member of the War Cabinet daily—whether he could give that attention to controlling the expenditure of the nation which the subject demanded? I say that in no spirit of hostility to the Chancellor of the Exchequer himself, because I am convinced that it is a physical impossibility for any one single individual to carry through successfully all the duties I have named. So long as the Chancellor of the Exchequer endeavours to undertake these many duties it is quite impossible for him to give that time and attention to the subject which the House of Commons expects. I hope before the Debate closes we may have some assurance from the Government, whether it be the Chancellor of the Exchequer or some other official upon the Government Bench, that this sum which we are asked to find by taxation under this Bill may be conserved to the utmost, and that the Chancellor of the Exchequer may take some further steps to bring the reality of the situation home to the different Departments. I desire to bring that point to the attention of the Financial Secretary to the Treasury.

Another point I wish to make is in connection with the policy of subsidising food out of the national Exchequer. In the financial statement which the Government has circulated, I find there the sum of £150,000,000 has been raised by Customs and Excise, and, as the House knows, some £40,000,000 a year are to be found by the Government in order to lower the price of bread. We have, therefore, this strange, and I think wasteful position. The Government to-day are raising by indirect methods on the food of the people large sums of money, and at the same time they are distributing through other channels some £40,000,000 per annum to lower the price of bread. This £40,000,000, which is the amount spent by the Government to subsidise the price of bread, is the exact sum of £40,000,000, but when the Government, on the other hand, raise by taxation sums in an indirect manner, if the public have to pay £40,000,000 extra for their articles, the Government do not receive that whole sum, but instead of that a sum of about £33,000,000.

For the sake of argument, take sugar or tea. The duty is paid by the importer to the Government. He passes it on to the retailer, and as the expenses are high he is bound to pass that duty on at a profit, say of 10 per cent., and then the retailer, having paid the wholesaler for the article, plus the duty, plus the profit of the wholesaler, passes the whole price on to the public. I have made a calculation, and I feel I am correct, that if the Government receive £34,000,000 by indirect taxation by the time that sum is passed on to the public it reaches the sum of £40,000,000. If my calculation is correct, and I shall be glad to be challenged by the Government if I am wrong, we have, on the one hand, the Government raising £34,000,000 by taxation indirectly and, on the other hand, the Government subsidising the price of bread by £40,000,000. It seems to me that that is a very wasteful method, and it distributes public money through unnecessary channels, leading to waste, and it sets up in certain trades unsound economic factors. I hope the Government, in view of the very largely increased indirect taxation this year, may review this subject. I know their attention has been drawn to it by other hon. Members, but I only desire to draw attention especially to the duties which the Chancellor of the Exchequer has to perform, and to congratulate him upon having introduced to this House a well-balanced Budget.

Mr. NEEDHAM

I would like to add a word in regard to the increased stamp on cheques. This matter has been fully dealt with to-day, but there is one point I would like to draw the attention of the Financial Secretary to the Treasury to in addition to the arguments which have been raised to-day. The point I have in mind is the question as to the effect of the increase in the cheque stamp on the enormous number of small credit balances which are in the hands of the bankers of this country. I happened to be a member of the Montagu Committee dealing with the question of what was the best kind of investment to offer to the small investors. The Chancellor of the Exchequer has referred in strong praise to the War Savings Certificates which were invented by that Committee. One of the facts emerging from that inquiry was that a very large amount of the accounts in the hands of bankers were small credit balances, and if the use of those balances is to be penalised, or to be made more difficult and costly, it may deter the accumulation of small credit balances in the hands of bankers, and to that extent will interfere with the lending capacity of the bankers for the purposes of trade or even of financing war operations.

I do not think the enormous number of these small balances is very well known in the country, but it is well known to bankers. I suppose that prior to the War there were about £900,000,000 deposits in the hands of the bankers of this country, and of that amount it is probably safe to say that the small balances and accounts might easily run to £200,000,000 or £300,000,000. That money is what they call "good money." I do not mean to say that large credit balances are not good money, but at any rate the small balances, from the point of view of the banker, are of considerable importance, and the Chancellor of the Exchequer should, before making up his mind, think of the effect of his proposed increase of the tax on the small credit balances in the hands of the bankers of this country. That this proposed tax is going to have unequal incidence is obvious. I ventured on the last occasion to refer to figures which were published in the public Press in 1902, when it was shown that a very considerable proportion of the number of cheques, almost 50 per cent., were below £10. It is curious, but that ratio is still very well maintained. I have had the opportunity of looking through the transactions of one day of a large commercial bank, and the operation of this tax would have had this result. Almost 50 per cent. of the cheques which went through that bank on that day owing to the increased tax would have paid one-third of a 1d. per cent. extra. The cheques were comparatively large in amount. Roughly, the other 50 per cent., being cheques of a very small amount, much less than £10 on the average, would have paid nearly 2s. 4d. per cent. You would, therefore, have had the extraordinary anomaly that the small cheques would have paid about eighty odd times as much as the large cheques.

I know perfectly well that the ordinary commercial transactions will continue to be dealt with and to be closed by cheque whether the tax is 1d. or 2d., but I am calling attention to the effect on the small credit balances. This House earlier on very wisely urged upon the Government the necessity of appealing to the small investor in this country. Do not let us overlook the importance of the aggregate small credit balances in regard to the financial stability of this country. They are of very great importance. I do beg the Chancellor of the Exchequer to inquire more into this part of the subject. The other arguments against the Cheque Tax have been very well dealt with this afternoon. I have found no one actively supporting it. The Chancellor was quite fair in his statement of the case. He relies upon the argument that people are so used now to increased costs that they will not trouble about the extra cost of the Cheque Tax. I am not sure that is quite correct. People may quite easily get into the habit of taking more out of their bank and carrying more about with them, or keeping it in their houses thus robbing the nation's store as supplied by their credit balances which are in existence at the present moment. I would urge the Chancellor of the Exchequer to keep well in mind the effect of the tax upon the small credit balances, and to make further inquiries before he finally decides. I am satisfied that people are anxious to pay their full quota of taxation for this War. This House has stated over and over again that it is willing to provide the taxation, and the people in the country are anxious to provide what is necessary. The main comment that I have heard made against the Budget has been in regard to its mildness. I have never heard a word of criticism about the extra Is. Income Tax or the extra is Super-tax. I have heard it said that the right hon. Gentleman might just as easily have got the extra 8d., but the Chancellor of the Exchequer has dealt with that point. The difficulty is to know where to draw the line with safety.

Question put, and agreed to.

Bill accordingly road a second time, and committed to a Committee of the Whole House for to-morrow (Wednesday).