That brings me to a subject which I, at any rate, regard as the most important feature of the present Budget. I come to the establishment of Imperial preference. Let me say at once at this stage, to prevent any misapprehension and any disappointment, that I am not propounding, and cannot propound to-day a general trade policy for this country. My right hon. Friend the Leader of the House dealt with that question a week or two ago. He explained the steps that would be taken, and, if the steps which are found to be necessary require legislative sanction, that sanction must be given in some other measure than the Finance Bill. For the present my task is only to give effect to the declaration of the Imperial War Cabinet and the Imperial War Conference two years ago, in which the representatives of the British Government concurred, that as soon as 195 possible preference on duties now or hereafter existing should be introduced for goods of Imperial origin.
The range of our present Customs Duties is not wide, though it covers more articles than people are apt to suppose. Only three Colonial or British oversea products fall into the categories subject to duty at the present time in any large quantity—namely, tea, cocoa, and rum; but there are many other dutiable articles which appear in our Customs returns from His Majesty's possessions overseas. I need name only such articles as coffee, sugar, tobacco, and wine. Though the beginnings may be small, the measure of what I am inviting the Committee to do is not the amount of British Imperial trade which secures preference at this moment, but the opportunities for the development of that trade, which I invite the Committee to open out. There is room for vast extension. There never was a time when it was more important to the Empire as a whole, or to us in particular, that development should take place. From the small beginnings of to-day I hope that many Members of this House will live to see a really wide structure of inter-Imperial trade develop
In deciding on the form which preference is to take I have had four main considerations before me. In the first place the preference should be substantial in amount. In the next place the rates should as far as possible be few and simple. Thirdly, where there is an existing Excise Duty corresponding to the Customs Duty which is affected, the Excise Duty must be proportionately altered. We cannot give preference at the expense of the home producer. Lastly, in carrying out this policy I have to remember the interests of our Allies and as far as practicable to avoid increasing duties on their products for the purpose of giving preference.
As I have said, the range of our existing duties is small. It falls mainly into three classes. First there are the new Customs Duties imposed by Section 12 of the Finance (No. 2) Act, 1915, which carry with them no corresponding Excise Duty, on cinematograph films, clocks and watches, motor cars and musical instruments. On these duties I propose to fix the preference at one third, which is what I may call the general Empire rate, in so far as a general Empire rate exists.
196 The next class comprises taxes on consumable commodities apart from alcohol. These are in essence Revenue duties pure and simple. On these in many cases the duties are themselves very high in relation to the value of the articles, and a preference of one-third would be both more than I could afford and more than I think is necessary or justifiable. Before coming to any definite decision I thought I ought to consult with the interests affected. I accordingly appointed a small Departmental Committee of representatives of the Colonial Office, the India Office, the Board of Trade and the Board of Customs and Excise and asked them to get into touch with representatives in this country of the producers, the importers and the manufacturers of the articles affected, and to ascertain their views as to the probable effect of preference on the trade and industry of the United Kingdom and the British Possessions and on the rate of duty. After considering the views of the interests affected as gathered by that Committee I have come to the conclusion that for preference on this class of article I should be justified in recommending to the Committee a rate of one-sixth of the duty. I do not of course mean to imply that this rate was, in fact, recommended by the trade interests who were consulted. No such absolute uniformity was to be expected. The differences between different trades are considerable. In some cases their recommendations approximated closely to my figures; in some they varied to a smaller or larger degree, but on consideration of the facts I have come to the conclusion that one-sixth would be an effective preference on these articles, and I hope that it will be satisfactory to those concerned. I take the opportunity of thanking the representatives of the trades for the assistance which they have given on this occasion as indeed they so willingly do whenever they are appealed to.
I ought to say at this stage that I propose that in the two classes of goods with which I have already dealt, namely, the duties on manufactured articles and the duties on consumable commodities other than alcohol, the preference should be given by way of reduction of the existing duties on Colonial produce and not by way of surcharge on foreign produce.
My right hon. Friend asked me to give him some further information as to the character of the articles concerned. The 197 most important is tea. The estimated revenue from tea in the coming year is, without the change in duty, £16,000,000. The duty is 1s. preference will therefore be 2d. Even in normal circumstances before the War, when the importation of tea was unrestricted, nearly 90 per cent. of the tea was already Empire grown. The results, therefore, of the Grant by way of preference will be practically equivalent to the reduction of the duty on tea, and I anticipate that that relief, as it always has done, will lead to a largely increased consumption. In the circumstances the loss for a full year involved in that preference may be put at £2,300,000, but probably will not be more in the current year, which is not a complete year, than £1,800,000.
The next article is cocoa. The estimated revenue from cocoa is £2,400,000. About two-thirds of our imports now come from Empire sources. Preference at the rate of one-sixth would be worth 7s. per cwt., meaning a loss of revenue of about £200,000.
The revenue from coffee is small—£650,000—and a small proportion, only about 20 per cent. of our imports normally come from Empire sources. The amount which could be grown in the Empire is capable, I think, of almost limitless expansion. The preference of one sixth of the duty which I am proposing is worth 7s. per cwt., and would mean on the present proportion an immediate loss of about £20,000 in revenue. Chicory will, of course, follow coffee, as it always does, and the Excise Duty will be proportionately reduced. The hon. and learned Member for York, I remember, used to make my life a burden upon the difficulties of the home chicory grower.
Now I come to sugar. The estimated Customs Revenue from sugar is £39,000,000. Only a very small proportion of the imports, 7 per cent., normally comes from Empire sources, and the preference would be worth about 4s. per cwt., which would mean a loss of revenue of about £500,000. The Excise Duty on beet sugar produced in this country will be similarly reduced. It already stands at 2s. 4d. per cwt. less than the Customs Duty.
Dried fruits are only a small matter. I need not trouble the Committee with the figures, but the preference will be given on them also. Coming now to tobacco, the estimated revenue on the present basis 198 is £47,000,000. Only 2 per cent. of the imports came from Empire sources, but a very considerable expansion is possible if tobacco growing were developed and improved. A preference of one-sixth, or about 1s. 4d. per lb. on unmanufactured tobacco, the rate which governs the other duties, is a substantial amount which will, I hope, stimulate increased production in India and the Colonies concerned. The Excise Duty on tobacco grown in the United Kingdom will again be correspondingly reduced. In the case of both tobacco and sugar it is proposed that the preference on the manufactured articles should be based on the amount of the British-grown product in the imports.
Then I come to motor spirit. The estimated Customs revenue is about £2,200,000. Only some 18 per cent. comes from Empire sources. A preference of one sixth, or 1d. per gallon, may mean a loss of revenue of about £60,000. I have decided for other reasons, as I have already explained, to recommend the abolition of the Excise Duty.
I am coming to that.
That concludes my second class. I come now to the third class of dutiable articles, beer, wine and spirits. There is no importation of Colonial beer. The arrangement of a preference would be complicated and difficult, and at any rate for the time we may safely neglect it. I propose to do the same for the same reason with table waters, matches, and playing cards. Cards are hardly worth mentioning except that I might be attacked afterwards for concealing what I was doing or was not doing. Then I come to wine. The estimated revenue on wine is £1,250,000. Only about 7 per cent. of the imports come from Empire sources at present, but the industry is one which is being developed, and is capable of being further developed both in Australia and South Africa. Both Dominions attach importance to it. At present the wine duty is levied at two rates, 1s. 3d. and 3s. a gallon, according to strength. A preference of one-sixth on those small duties, I am advised, would be quite ineffective. On the other hand, in consideration of the interests of our Allies, notably of France end Portugal, and of some neutrals, we are unwilling at such a moment as the present to raise 199 the duty on a very important article of their export. We propose therefore to give the preference by way of reduction and to allow 6d. on the lower rate of 1s. 3d. and 1s. on the higher rate of 3s. There is an additional tax on wines imported in bottle of 1s. a gallon on still wine and 2s. 6d. on sparkling. I propose to allow 6d. preference on the first and 9d. on the second. Lastly, I come to spirits. These again need special treatment. They constitute my most difficult problem. The State derives a very large revenue from the Excise Duty on spirits manufactured in this country, and it is essential that preference shall not be given in a form which would appreciably reduce the yield. For that reason it is necessary that spirits should be taken in a class apart, as an exception to the general rule which I have followed of giving preference by reducing the duty on imported products. To give a preference by reduction would involve a corresponding reduction in Excise Duty and a loss of revenue which I am unable to face. For the purpose of the duties, spirits are divided into five classes, four subject to Customs Duty, namely, rum, brandy, Geneva and other sorts, and the fifth home-made spirits, including whisky, subject to the Excise Duty. Over 80 per cent. of the rum comes from Empire sources. The imports from the Empire of other spirits are at present small, and I think likely to continue so, at any rate for a long time to come, though they are capable of development. As regards the amount of the preference, I have come to the conclusion that anything like a rate of one-sixth, with such high duties as are charged, would be too high. It would amount to 5s. a gallon on the rate of duty in force in the year which has come to an end, and a larger amount if this duty is increased. I propose, therefore, to fix the rate of preference at 2s. 6d. per gallon, not by a reduction in the duty on Colonial spirits but by an increase in the duty on foreign spirits. That will give me a slight additional yield of revenue. The effect of the preference proposals as a whole on revenue will be a reduction of about £2,500,000 in the current year, and something over £3,000,000 in the full year, without allowing for any increase in the imports of Colonial products. The great bulk will be in respect of the tea.