HC Deb 21 April 1920 vol 128 cc431-95

Question again proposed, That it is expedient to amend the Law relating to the National Debt, Customs and Inland Revenue (including Excise), and to make further provision in connection with Finance."—[Mr. Chamberlain.]


My right hon. Friend the Chancellor of the Exchequer has been in receipt of a very large number of congratulations, but I am sure that—


On a point of Order. I was speaking last night at the Adjournment of the Debate, and I ask your ruling, Mr. Whitley, whether in the cir cumstances I have not the call of the House on the recommencement of the Debate to-day.


The hon. and gallant Member is mistaken. It is not so in Committee of Ways and Means or in Committee of Supply. There is no carry-over in these cases from the proceedings of one day to another. The hon. and gallant Member closured himself at eleven o'clock last night.


You must hear the Oracles first.

4.0 P.M.


At any rate, I can assure my hon. and gallant Friend that I shall be very brief, so as to allow him as much time as possible later on. The congratulations which my right hon. Friend received from all quarters of the House were fully deserved, but I am certain that what he will appreciate more is the intimation in this morning's papers that Consols showed some tendency to rise. I have no doubt that, if a considerable portion of his speech had been devoted, not only to the raising of revenue and the starting of a Sinking Fund, but to a denunciation of unnecessary expenditure, Consols would have gone up still further. I shall direct my remarks in the main, except for some comments on one or two of the taxes, to that very important subject. I should like to make one general observation. Our Budgets at all times are of international importance, but they have never been so important as to-day, because now, and I fear for many years to come, this country will be called in to redress the balance between the old world and the new. Look where we like east of us, there is nothing but finance in a state of chaos. All the belligerent Allies, of course, have a deficit, and apparently their only hope of meeting it or filling it up is by the product of the printing press. It is, indeed, a matter of congratulation to us, although I take a very strong view as to the application of the realisation of assets to current revenue rather than to the reduction of debt, that whether by hook or by crook, I fear mostly by crook so far as my views are concerned—I do not use that in any offensive sense—our deficit has been made up from revenue and from realisation of war assets. There is one point upon which I would like to place some emphasis. It was made by my right hon. Friend and Leader (Mr. Asquith), whose speech yesterday covered the ground in so ample a manner that it leaves little necessity for me to deal with more than three or four points. I refer to the most objectionable method of presenting the net Estimates and to the use which has been very frequent in the Estimates which have been presented to us during the last few months of Appropriations-in-Aid. It is only by knowledge and experience that Members can get anything like a clear idea what the net Estimates really mean. We had, for example, the Ministry of Munitions Vote before us last week. The total sum put from the Chair was £15,000,000, but the real Estimate was one for £58,000,000. They brought in Appropriations-in-Aid amounting to £30,000,000, and they had £12,000,000 on account. It therefore left it necessary for you only to put that question to the House. I am glad to note that in the Estimates, presented to Members, but not before the House, there are only two or three Civil Service Estimates which we find presented in that objectionable form. Appropriations-in-Aid are disappearing according to a note which appears on one of them, and I am glad that the Committee will be glad of it.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

I am quite certain that my right hon. Friend does not wish to convey the impression that the practice which he condemns was initiated by me, or even by the present Government.


Certainly not.


It has been the usual practice of the House and of all Governments.


They are all alike.


The new practice which the right hon. Gentleman commends is an innovation for which, no doubt, he can take large credit.


It is one which I strongly supported when the question was brought before me in my official position, and I am very glad indeed to welcome it. There are a few comments that I should like to make on one or two of the taxes. I think the business community are entitled to some measure of grievance that the announcement of the increase of the Excess Profits Duty came without any warning at all. I quite agree that there is a risk in raising the necessary money this year except by keeping that tax, and perhaps it may be necessary to keep also the increase, but I want to repeat what I said last year, though it does not find a measure of support among those with whom I am often associated, that I regard that kind of tax as really bad, and we may as well face the fact at once. Nobody who is acquainted with the practical working of that tax can come to any other conclusion than that it leads to extravagance in management, and to an amount of evasion and dishonesty. I am talking of what I know. It is bad for the whole of the community as well as for the taxpayer and the Treasury concerned. I agree that it was really a necessary tax. A more effective emergency tax, I think, it was impossible to devise, but the sooner the Treasury and the Chancellor of the Exchequer can face the opportunity of doing away with it and getting back to much more normal and sound methods of raising money, the better it will be for us all. On the whole, I welcome the proposals with regard to the Income Tax and the allowances with regard to the lower incomes and married men. I suppose that my right hon. Friend has had many suggestions made to him with regard to the taxation of bachelors. I regard them as useless and dangerous; they ought to be abolished, anyhow apart from the bachelors in this House, and I should be glad if their abolition could be brought about by means of a tax.

I would like to say a word or two about the Land Duties. I know that I am touching on ground that has been rendered almost classic by the observations of my right hon. Friend and Leader yesterday. There is one quite interesting point in connection with the land. An immense amount of war wealth has gone into the land, and as far as we can see land is going to be the special pet of the Government and is going to be absolved as far as they can possibly do it from the incidence of taxation which, in my judgment and in the judgment of those with whom I associate, might well fall upon it. The Government in taking the line which they have initiated of abolishing the Land Duties are deliberately raising an amount of opposition in the country of which they know little. The principles upon which those duties were initiated still stand, and I regret indeed to hear that it is proposed to abolish them. At any rate, I can promise my right hon. Friend that the funeral rites will be accompanied, I hope, with no measure of real Parliamentary disorder, but at any rate with a certain liveliness, because we shall make as clear as we can our position with regard to those duties and the proposals of the Government in connection with them. It has been stated, I do not know with what authority, that the Corporations Profits Tax is intended to be applied to the Cooperative Societies. Perhaps my right hon. Friend will deal with that question when he comes to reply. I can only say that if he does apply it to those societies he will raise a veritable hornet's nest, but of course we shall hear what he has to say. Of course, the tax is one which will commend itself on the ground of sound finance. It is always a very easy task to start whittling down a tax no matter how sound one may think it to be. I would only put this to my right hon. Friend. He might take into his sympathetic consideration the incidence of such a tax on cottage building societies in the very urgent condition of the country in regard to housing. It might react very unfavourably on such societies. I simply put that point for his consideration.

I now come to the main point which I wish to raise. What is the general outlook with regard to the Budget of my right hon. Friend? We shall, I hope, get through this year, but I have considerable doubt whether we shall get through the year without largely increased Supplementary Estimates. I see that he has budgeted for only £20,000,000. Let us hope the conditions of this year will be very much more stable than last year, but I must remind him of the fact that, starting in July last year, we had a Supplementary Estimate for the Civil Service of £20,441,000, another of £1,500,000—that was the Out-of-Work Donation—and a further Supplementary Estimate on 4th December of £37,978,000. This is all exclusive of Supplementary Estimates for the Army and Navy. I forget for the moment whether there was a Supplementary Estimate for the Air Force or not. Dealing only with the Civil Service, the Supplementary Estimates last year—I do not mean the last financial year—amounted to £59,919,000. Since this Session began—again, I am confining myself entirely to the Civil Service Departments —we have had Supplementary Estimates amounting to no less than £28,432,000, making a total of well over £87,000,000 for the financial year. That has been our experience in the last twelve months of the miscalculations of the Departments concerned. What guarantee have we that we are going to have a much better state of things? So far, none. What evidence was there in the Estimate presented last week for the Ministry of Munitions of any desire to economise or of any determination to cut down wasteful and unnecessary expendiure? It is quite clear that we shall need a regular revenue for two or three years to come of about £1,400,000,000, on the present basis of taxation, to meet the needs of the country, allowing for about £300,000,000 for the debt service, and leaving out the special contributions which will fall in from realisation of assets. How is the right hon. Gentleman going to fill up the inevitable deficit?

We are often charged with asking these questions and suggesting no remedies. I suggest an obvious one, and that is retrenchment and economy all round—sweeping economy. A penknife is of no use; it is an axe you want. It was Burke who said, "Retrenchment is one of the very best forms of taxation." Never was it so glaringly obvious as it is to-day. How is it to be done? Quite apart from what I think could be done, what we hope to show in the Estimates to come before us ought to be done with regard to the £500,000,000 of Civil Service Estimates, it is quite obvious that so long as the Government is spending money like water in Mesopotamia, looking for oil-fields, and painting the climate and the country in glowing terms, as the Prime Minister did, which seemed to me very much at variance with the actual facts of the situation—as long as you have that kind of thing going on, what is the use of only putting down £20,000,000 for Supplementary Estimates? As far as one can see, the Army alone on its present scale of expenditure, which is consistent with what is apparently the present policy, will require £20,000,000 alone. It is futile to talk about making ends meet and having a substantial sinking fund so long as this kind of policy is allowed to continue. I daresay we shall also have the Navy and the Air Service in for a Supplementary Estimate. The right hon. Gentleman spoke with regret of the fact that he has to raise revenue to make the Post Office balance its accounts. He proposes to do it by making the postage, formerly 1d., into 2d. What I feel so strongly about is that the necessity for a tax like that, which hits the very poor, could be done away with by a simple alteration of policy in one or two directions. An alteration of your military policy alone would make it unnecessary.


Does the right hon. Gentleman suggest that the State ought to carry on the Post Office services as subsidised services at the expense of the general taxpayer?


I thought the right hon. Gentleman was going to say that. The matter was obviously in my mind at the moment. Such a service as that, I feel certain, ought to pay its own way, but I am just taking the hardships of the situation which are brought about, as I suggest, by the policy of the Government. I and those who think with me are thoroughly dissatisfied with the right hon. Gentleman's attitude on the subject of the Estimates Committee. A chance ought to be given to the House to enter into partnership with the Execu- tive for promoting and effecting economy. Economy can only be effected by bringing down our State Departments to ordinary, simple, humdrum methods of administration. There is no difference between expenditure by the State and by the individual. The same results follow from good expenditure as from bad expenditure. There is no magic about the Government apart from spending money or saving money, except that it is on the grand scale, and is a great public example for either good or for bad.


And the House encourages it.


The right hon. Gentleman said that more than once last Session, and I am not saying he is not very largely justified. There are subjects of expenditure which even in this House we cannot afford to curtail if we wish to hold our place amongst the nations of the world as an effective unit in the family of nations. But my right hon. Friend has not been here on occasions when we have been fighting for economy and have been resisting expenditure, and I will join with him every time I possibly can in standing up against any popular outcry in this House. I agree that it is one of the worst features of any popular assembly, but whether that has been a feature of it in the past or not it ought not to be a feature of it in the future, and until we get through the highly dangerous position in which we still are, do not let us live in a fool's paradise. We have £8,000,000,000 of debt; our Budget this year is £1,400,000,000, seven times more than it was before the War, and are we richer or poorer than we were before the War? Vastly poorer. I am astonished sometimes at one's own confidence in the future because I believe we shall get through at some time, but we shall only get through by getting back to the ordinary humdrum common-sense management of finance. I close with a quotation of Lord Morley in the "Life of Cobden" on that point when he says: From the fall of the Roman Empire to the mortal decay of Spain and the ruin of the ancient monarchy of France history shows that Cobden"— and that is a splendid name in inter national and national finance— was amply justified in laying down the principle that the affairs of the nation come under the same laws of common sense and homely wisdom which govern the prosperity of a private concern.


I certainly have every reason to be grateful to Members of the Committee for the generous appreciation which they have shown of the efforts I have made in this Budget, and the Government have every reason to be satisfied with the reception it has met with, not merely in Committee, but in the country generally. It has not only met with a wider acceptance than I should have anticipated, but the proposals which I submitted on behalf of the Government for meeting the present financial situation hold the field. There is no sort of practicable or equitable alternative to them. There was indeed one alternative to an important part of my proposals which was suggested by the right hon. Gentleman (Mr. Clynes), but with that alternative the right hon. Gentleman (Mr. Asquith) was careful not to associate himself. There have of course been demands for further information and there have been criticisms. The right hon. Gentleman (Mr. Asquith) asked for a return of the capital liabilities and assets of the State. I shall be very happy to furnish it, and in order that the House may have it in the best form, when I have got it in proof, I will submit it to him and see that all the information which he thinks we ought to give is being given The fuller the information I can give the House and the nation as to the condition of its finances and its position generally the better I shall be pleased.

Then I was asked for some information as to the proposed Corporation Tax. I think my hon. and learned Friend (Sir J. Butcher) did not quite appreciate the scope and the limitations of the proposed new tax. There is first the major limitation that in no case is it to exceed 1s. in the £ of the profits and income of the corporation, but there is the further limitation, directed specifically to the protection of such cases as he mentioned, where amount available for distribution in the form of dividends to ordinary shareholders or to shareholders with no fixed rate of interest is limited, namely, that the tax is to be at the rate of 1s. in the £ on the profits, after deduction of Excess Profits Duty, subject to this further limitation, that in no case is it to exceed one-tenth of the sum available as dividend or reserve for the benefit of the ordinary shareholders after deduction of fixed charges in the nature of a fixed debenture interest or a fixed preference interest on debenture and preference shares already issued.

The right hon. Gentleman (Sir D. Maclean) asked for further information. He inquired whether the tax applied to co-operative societies, and he spoke in menacing terms of the trouble which I should be bringing on myself if I had the audacity to make that suggestion. It does apply to co-operative societies, and I think I am running no such risks as he supposes. The taxation of co-operative societies is a subject dealt with by the Royal Commission on Income Tax. It is a subject on which they were divided. The majority, not a very large majority, but still a majority, recommended their subjection to Income Tax. The minority, or the larger portion of the minority, in which were included the two Labour Members of the Commission and the representative of the co-operative societies themselves, dissented from the recommendation that the co-operative societies should be chargeable to Income Tax. I will quote from a reservation signed by "C. W. Bowerman, William Brace, E. E. Nott-Bower, late Chairman of the Board of Inland Revenue, N. F. Warren Fisher, present permanent Secretary to the Treasury and also late Chairman of the Inland Revenue, Henry John May, representing the co-operative societies, William Graham, and A. C. Pigou." While dissociating themselves from the recommendations of the majority that these societies should be assessable to Income Tax, they said: If there was in the United Kingdom, as there is in the United States of America, a corporation tax, levied specially on corporations as such, it would, no doubt, be proper that a co-operative society should, as a separate legal entity, be liable to that tax. As my right hon. Friend will see, I have high and domestic authority for the proposal I make, and I hope it will not give rise to the controversy which he anticipates. As regards the class of building societies to which he alluded, so far as I can see they fall outside the tax. But of course there is an infinite variety of these societies, and I do not like on the spur of the moment to make a general statement which may be taken to cover certain cases which I have not in my mind at the time. I think, however, my right hon. Friend may feel pretty secure in his confidence that a building society of the type which he has in his mind is exempt. Similarly, the right hon. Member for Paisley asked for some information as to the bearing of the corporations tax on bonus shares distributed. I am not quite sure that my right hon. Friend exactly appreciated the present position of the law; probably he did, but, of course, these profits which are accumulated by companies and eventually distributed in the form of bonus shares have all paid Income Tax. There is no avoidance of Income Tax by placing profits to reserve. What they have not paid is Super-tax. The Royal Commission made a recommendation on this subject. The corporations tax, which may be regarded as a composition in lieu of Super-tax, will affect the sums first placed to reserve and subsequently distributed in the form of bonus shares. It will, therefore, to the extent of its operation hit the evil which my right hon. Friend described, and correct that evil in practice.

I deal first with the minor requests for further information, and I am happy indeed that they have been so few, which, perhaps, is a tribute to the success of my effort to make myself clear. Many of the minor criticisms will be more suitable to the discussions of the Finance Bill in Committee, where we can deal with them with greater knowledge and with more particularity. Such a criticism, and yet one which is of sufficient consequence for me to refer to to-day, is that of the proposed increase in the wine duty. My right hon. Friend the Member for Paisley and others who have spoken of the possible feeling of our Allies on this subject will not think that I or the Government have ignored that consideration. If I thought that this tax would seriously impede the restoration of French prosperity and really add appreciably to the difficulties of our Allies, France and Portugal, I would ask the House to forego it, and that in spite of the fact that to forego it would be to involve direct injustice to our own traders, because you cannot make a continuous and immense addition to the taxes on the output of State alcohol, British spirits and British beer, without a certain disturbance in the habits of the nation, and without causing people who were previously drinking spirits or beer to have recourse in larger measure to wine. I am not apprehensive that it will have any such unfortunate consequences to our Allies. Let me, at this point, say that I suppose my right hon. Friend and the Committee have observed the action which is being taken in France. I see from the newspapers that my French colleague, if I may so describe him, the French Minister of Finance, and the French Government, propose to take very drastic steps to restrict the importation of luxuries. It is stated that they are going to prohibit absolutely the importation of a large number of luxuries and to tax others at a very heavy rate of Customs duty. That must affect British trade; but I make no complaint of it. I utter no word of criticism. Neither on their side nor on our side is the action which we take unfriendly, still less is it in any sense retaliatory. It arises out of the national position of each country, and the necessity for restricting expenditure upon luxuries and for raising an immense revenue to meet the obligations which our different countries have incurred.

I would like the Committee to see what the course of the wine trade has been. I think it will interest them. The total clearances in 1913, the year before the War, were 11,367,000 gallons. In the year 1918, for several months of which severe restrictions were imposed, the clearances were almost the same amount, 11,317,000 gallons. Last year they were 19,174,000 gallons. That is to say, from a pre-War clearance of a little over 11,300,000 gallons it has sprung to over 19,000,000 gallons. If you examine the figures and take out the different classes of wine you find that sparkling wines, which accounted for 1,165,000 gallons in 1913, and which dropped in 1918 to 783,000 gallons, rose last year to 1,498,000 gallons. Heavy wines, which in 1913 accounted for just under 2,800,000 gallons, rose in 1918, in spite of the restrictions, to over 4,000,000 gallons, and last year to over 8,500,000 gallons. Clearances on that scale were exceptional, and I do not pretend that they will continue, but I do say that they show an increased consumption in this country of an article of luxury, because whatever it may be elsewhere, in countries where wine is the natural product of the country, wine in this country is a luxury. It shows an expansion of consumption in an article of luxury which points it out as a suitable matter for increased taxation at the present time.


Will the right hon. Gentleman give the effect in revenue receipts of the wine duty?


The wine duty has been unaltered. I have not the figures with me, but if my right hon. Friend will put down a question I will give him the actual receipts. There has been no alteration in the wine duties during that period.


Has there been any alteration in prices?


I believe so.


Is not the increase in the drinking of wine due to the serious decrease in the quality of spirits and beer.


I have already explained that the immense increase in the spirits and beer duties must disturb the habits and customs of the people, and had caused a certain diversion of drinking from spirits and beer to wine. I said that before the hon. Baronet came into the House. These are comparatively minor matters, some of which we shall return to in the later discussions.

My right hon. Friend the Member for Paisley called attention to a phrase towards the conclusion of my Budget statement in relation to the yield of the Excess Profits Duty. The actual words which I used were: These changes which I have mentioned will produce in a full year £198,230,000, or, excluding £9,500,000 drawn from the Post Office, £189,000,000, derived as to £125,000,000 from direct taxation and £64,000,000 from indirect taxation. My right hon. Friend will see that my object in bringing the yield and the tax so imposed together in that way was to show what proportion of the new taxation imposed is derived from direct and what from indirect taxation. I guarded myself from any misapprehension that that would be the yield in the present year by immediately afterwards saying: In the current year they will give me an additional revenue of £76,650,000"—[OFFICIAL REPORT, 19th April, 1920, col. 99, Vol. 128.]


Is it not a fact that the Excess Profits Duty brought in £5,000,000 more with the 40 per cent. duty than it did with the 80 per cent. duty?


Perhaps the hon. Member will allow me first to answer the question put to me by my right hon. Friend the Member for Paisley yesterday. The yield of the increased Excess Profits Duty is not £100,000,000 in the year, but £100,000,000 is one year's excess yield of the tax at that increased rate. It is quite true, as I explained, that the actual payment of the duty is made not in one year, but in three. But the proportion of the increase of 20 per cent. arises in one year, and one year only. I think I can now explain the figure with regard to the yield of Excess Profits Duty. The exact figure was as much the yield of the 40 per cent. at which it stood last year as of the previous year. The whole of the yield of last year has not yet been received. That comes, except to a small extent, either in this year or in the succeeding year. What was received in cash last year is the produce of the tax in the previous year. That is the case, and that is what probably interests the hon. Member. It undoubtedly goes to show that the produces of the Excess Profits Duty have begun to show an increase; at any rate, they did not diminish. They showed an increase.

I think I have dealt with many of the minor points, and I now come to the major criticisms which were addressed to me in regard to my Budget proposals. The first that was dwelt upon by the right hon. Gentleman the Member for Paisley, and again repeated by the right hon. Gentleman who immediately preceded me to-day, is as to my treatment of the realised assets resulting from the War. The right hon. Gentleman the Member for Paisley, echoing the complaint which is rife outside, argued that the whole of these assets, the whole of the £280,000,000, ought to have been excluded from the revenue. That is the sum which I derived from the sale of the whole of these assets last year. The right hon. Gentleman the Member for Paisley would thus lightly propose the reversal of the whole of our system of public accounts. Would he suggest how I could have accounted for these receipts if I had omitted them from the revenue account? The system I have pursued is in the main that which is the settled practice of Parliament, and is held to be the Palladium of our financial? security and Parliamentary control. My right hon. Friend suggests that this £280,000,000 should have been treated as capital and used in the reduction of debt. That is a view widely held outside, where people are not accustomed to the Parliamentary system of accounts and judge this matter in the light of the accounts of trading companies. If the Committee would allow me, I should like to show, with the assistance of a colleague whom I have brought in to help me, what would have happened if we had followed the course which he has suggested to us. In other words, what would have been the result if the £280,000,000 had been treated as capital and dealt with, not in the revenue account, but in the capital account. I will assume against myself, for the purpose of this calculation, that the whole of the expenditure of past year, including the whole of the abnormal expenditure, of which nearly £450,000,000 has already ceased, and does not reappear this year, and which, therefore, I think, might properly be treated or classed as capital expenditure—I will assume that the whole of that was properly chargeable as expenditure of the year. For the purpose of better illustration I will use the form of accounting adopted by trading companies. I take a profit and loss account and a balance sheet. What would have been the result of such a profit and loss account? We should have had on one side £1,059,000,000 total revenue, excluding the £280,000,000 in question. On the other side, we should have had an expenditure of £1,665,000,000 showing a deficit of £606,000,000 on the year's accounts. How would a company have dealt with such a deficit as this on its profit and loss account? It would have carried the loss for the year to its balance sheet. I will follow the same procedure now.

The balance sheet will have as its first item the loss on the year of £606,000,000, that is to say, the capital would have been reduced by £606,000,000. But during the year capital assets amounting to £280,000,000 have been realised. That must be set off against the £606,000,000, so that there would remain a deficit of £326,000,000 which would have had to be borrowed. That is the amount of the deficit on the Revenue and Expenditure Account which has, in fact, been met by borrowing. I hope this explanation that I have given will make the matter clearer both to the critics inside and outside the House, and that they will see that on the past year's accounts, if this sum realised from these assets was not carried to the reduction of debt, it was used for the reduction of borrowing. A commercial company would have treated it, so far as the deficit was concerned, by carrying it from the profit and loss account to the balance sheet and dealing with it there. The system of accounts imposed on the Government does not include a balance sheet and therefore both the capital loss and the £208,000,000 are dealt with in the Revenue and Expenditure Account, but the result is exactly the same. We have a deficit of £280,000,000 which has to be borrowed.

I think I need not pursue this matter and will now turn to the question of the extraordinary receipts of this nature included in the Revenue of £302,000,000. The right hon. Gentleman the Member for Paisley thinks we might properly have appropriated some part of this in aid of the expenditure of the year. I do not think the right hon. Gentleman would dispute this, that I may include in my reckoning, with due regard to financial purity, such part of this as directly corresponds with expenditure falling within the year. I do not think that any hon. Member would dispute that. I might include in my revenue so much of my receipts as I have dealt with to a similar extent on the other side of the account. Let me take an illustration. Among these miscellaneous items of expenditure is a sum of £15,000,000 for coal. That sum appears in the expenditure; it has to be advanced in the early part of the year and has to be recouped before the year ends. Clearly my right hon. Friend agrees that it might properly be included in this year's accounts. Then there is Loans to Allies, £16,000,000, which will be repaid within the year. It is rather a complicated transaction relating to the settlement of our accounts and of currency matters in connection with the wheat purchases, and so on; we being the bankers for other nations. That £16,000,000 will be repaid within the year and that also is included. Then there is the Ministry of Munitions Account, £27,000,000, and the Shipping Accounts for £16,000,000. These are expenditure incurred in the getting in of the receipts, and I am entitled to put them into the Revenue Account just as I put the receipts in the Post Office Account against the expenditure, but the difference between them is that in the one case it brings me in an enormously greater sum than the expenditure, whereas in the Post Office the expenditure is greater than the receipts. I think these items will not be challenged by the right hon. Gentleman or other Members. They appear in both sides of the account and they amount to £74,000,000. The total amount of the realised assets is £302,000,000, and the total amount provided for the reduction of debt is £234,000,000. If I deduct this amount of £74,000,000 from the £302,000,000 of the assets realised this year, the provision for debt already exceeds the balance. In fact, we are providing for the reduction of debt more than the whole of the amount of the nett assets realised within the year.

I take, for the purpose of this argument, only cases where the revenue may be taken as a proper set off to an equal amount on the expenditure side. Why in this year should we bear all the extraordinary and abnormal charges, which are the direct result of the War, and take no credit for the abnormal receipts which are equally the result of the War? I might follow the example of certain other nations, such as France, of having an "Ordinary" and an "Extraordinary" Budget. I do not follow that course because it is contrary to our whole tradition and would not be acceptable to the Committee. What would that extraordinary Budget contain? It would contain the £302,000,000 receipts less the £74,000,000 to which I have referred. See what extraordinary charges would be carried to the other side. On the Army alone for sea transport and other services, and restoration and other expenses in the course of demobilisation there is a sum in this year of £29,500,000. For the Air Force, the Navy and similar services there is £27,000,000. For loans to Allies and relief to distressed districts in Europe there is £36,000,000, for the bread subsidy £45,000,000, and for the Ministries of Munitions and Shipping £43,000,000.

5.0 P.M.

Let me say that of the total of £27,000,000 for the Ministry of Munitions, £17,000,000 is for the liquidation of war contracts. That is as direct a war charge as any we have yet met. There are grants for railways, £25,500,000. So little are those an expense proper to the present year that they are the result of a bargain made by my right hon. Friend the Member for Paisley with the railway companies at the very commencement of the War. It was a very proper and necessary arrangement, but he cannot saddle me with it in this particular year as an expenditure properly debitable to this year. It is for the payment of his debt of 1914. No, Sir; he must have a little consideration. I am paying his debt. He must allow me to use the assets which are available for the purpose. Lastly, there is the Coal Mines Vote of £15,000,000, to which I have already alluded. The only other thing I need mention is the training and reinstatement and land settlement of ex-soldiers, for which £27,000,000 is included in the current year's expenditure. Take items like that and you have a purely transitory, a wholly abnormal and exceptional expenditure, due directly to the War, of a sum not of £70,000,000, but of more than the whole £300,000,000 of extraordinary resources, which are brought into the account, or at least equal to the whole £300,000,000. I really think there has been a great deal of misconception and an insufficient appreciation of what we really are doing.

I must say that it has amused me to listen to this Debate. I, who have listened with becoming humility and patience, while I have been rebuked for showing no signs of making any effort to reduce debt—I sat yesterday, with some amusement, while I heard hon. Gentlemen asking whether I had not been a little precipitate and exaggerating in the amount I had taken for the reduction of that same debt. It is a pleasant change, at any rate, after being smitten on the one cheek to get hit on the other cheek, which is less bruised. I do not want to have obscured by these discussions or by the attention which is very properly given to a single portion of the debt, namely, the Floating Debt— I do not want to have obscured from this House or the country or from the world the immense things we are doing as a nation. So much attention was paid to the subject that I think it did lead to some obscurity of that kind. Let me ' say that the right hon. Member for Paisley will appreciate that the distinction between the Floating and the Funded Debt is no longer as keen as it was in pre-war days. The old Funded Debt was represented by Consols, and Consols were not a debt repayable at any moment; they were an annuity payable in perpetuity. They were not repayable at all. All that you were liable to find was the interest you had agreed to provide year by year. During the War you could not borrow on those terms, and you could not borrow on those terms to-day. The people who hold our securities would wish that we had borrowed on those terms. We cannot borrow to-day in perpetuity on terms which as taxpayers we are ready to accept, and accordingly we borrowed with fixed maturity. Many of these stocks are maturing at a comparatively early date. Take the past year, Ways and Means advances and Treasury Bills. We had to meet the bonds maturing within the year. I have to do the same this year. So, as these different securities approach their maturity, they become gradually indistinguishable from the Floating Debt. What was at one time classed as Funded Debt because it had ten years to run, or as semi-Funded Debt because it had five years to run, becomes a liability of the next 12 months or the next six months. The distinction is not as clear as it was.


The real point is the meeting of capital repayment.


That is so, but the moment the right hon. Gentleman states that, he and the Committee will see that to measure our effort by the reduction of what is called the Floating Debt is not enough. It is very much greater. We are met by these maturities as well—the calculation I put before the House will show that—and we have to absorb and cancel all the longer-dated maturities which taxpayers have the right to tender to us in payment of Death Duties or of Excess Profits Duty.


I quite agree that that is so, and the £160,000,000 which the right hon. Gentleman will have to provide this year, is, I imagine, to a considerable extent, due to repayments of that kind. I do not in the least minimise that. At the same time the Floating Debt remains most serious.


I agree that the continuance of the Floating Debt, especially the early maturities, is most felt by me. What we are able to do in that respect is no measure of what we are doing for the reduction of debt, and my right hon. Friend knows it. I am not suggesting that he represented that it was, but I am afraid lest in the attention given to the Floating Debt the world at large did not realise what we are doing. The Floating Debt may be what concerns us most in this country, but there is also the foreign debt, the debt of our external obligations. The world is thinking more of our external obligations, and of how we are facing our responsibilities, what strength we are showing to meet our burden, and what resilience we have under the strain and pressure of the War. Let me remind the Committee what we are doing. We propose to reduce our debt this year by £234,000,000. I think I am safe in saying that we shall be able to devote £300,000,000 to the same purpose next year. That is £534,000,000 for the reduction of debt in two years. It is a prodigious sum. We make this effort on the top of all the immense sacrifices of the War. In my belief there is no nation in Europe which could do such a thing, and we do it without recourse to any extravagant method, and without recourse to any levy, whether on war wealth or on capital. I think that that shows a position of such remarkable strength that we may find confidence in it ourselves, and that through it we shall inspire confidence in the world at large.

That brings me to the second large body of criticism, which was with reference to the Excess Profits Duty. I do not desire for one moment to minimise the objections to that Duty. I stated them as fairly as I could last year. They are real, and I do not deny it. I should be very sorry to think that this Duty was going to be a permanent part of our financial machine. But I beg the House to consider what alternative I have. What alternative has anyone at the present time? What are the circumstances in which I ask them to continue it and to continue it at an increased rate? Some hon. Member said that the continuation and the increase of the Duty must lead to a rise in prices. Is the converse true? I reduced it from 80 per cent. to 40 per cent. last year. Where is the fall in prices? I am not exercising a moral judgment on the profits which are made, not for one moment. I say that the state of the world, the relative conditions of supply and demand, are such that men cannot help making abnormal and extravagant profits if they are producing to the full extent of their capacity, which it is in the higher interests of the world they should do. There is such a condition of scarcity as practically gives a monopoly in great areas of production, or all the conditions of monopoly as regards prices in great areas where in normal times there is acute competition. In other words, the demand so far exceeds supply that there is no competition. The buyer will pay any price that the producer will charge. He is prepared to pay. That is what forces prices up. He wants to pay; he is glad to get the goods on any terms. Under these circumstances I think we are justified—


No. Read your own speeches of last year.


I think I was justified in saying that I made a mistake in my forecast of last year. Had I known what the conditions of the year would be, I never would have reduced the duty to as low as 40 per cent. at that time, and I consider that we are justified in asking that, subject to the one condition which I indicated in my Budget speech, the duty should be raised, not, indeed, again to 80 per cent., which I think is too high a rate, but to 60 per cent. I think it better at once to say, in view of the fact that a foolish rumour was started yesterday, that by that proposal I stand or fall. There is no going back. But I stand or fall also by the alternative which I mentioned in my Budget statement. If the inquiry into the taxation of increases of war wealth results in practicable proposals acceptable to this House, I am prepared to forego the increased 20 per cent. I think that the future of the Excess Profits Duty, as apart from the rate at which it may be levied, cannot depend wholly on the results of that inquiry, but must depend partly on the continuation or cessation of the peculiar conditions of supply and demand which I explained a moment ago Yet, on the result of that inquiry and the verdict of the House of Commons must also depend to a great extent the time at which the Excess Profits Duty comes finally to an end. Some of my hon. Friends do not like the idea of a levy on increases of wealth during the War—


Is it the intention of the right hon. Gentleman to forego the advantage of the one impost before the other can take effect?


Oh, no. I will make my meaning quite clear. The 20 per cent. of Excess Profits Duty imposed this year brings the revenue into the Exchequer next year except as regards a very small portion. The revenue really comes in next year and the year after. If, in the course of this Session, the House adopts a levy on increases of War-time wealth, then in the same Bill in which I lay that proposal before the House I will include a Clause to reduce the Excess Profits Duty again from 60 to 40 per cent. for the current year. The Bill which imposes the levy is the Bill which will repeal the 20 per cent. I was on the point of saying, when my right hon. Friend interrupted me, that my hon. Friend the Member for Oxford (Mr. Marriott) addressed some observations to the Committee which left me in a little doubt of his exact attitude. I was not quite clear whether in his view a levy on War wealth was worse than a general levy on capital, or whether he only felt that it made a general levy on capital easier. I, at any rate, hold that there is a very clear distinction between the two, and I would like to try to put it to the Committee once again. I do not say that either kind of levy is free from objection; it is not. If it is immoderate in amount, either form of levy would do a great injury to industry, would destroy credit and security, and would depreciate sales and might very seriously affect our financial stability. The one advantage of a general capital levy, of which I make my hon. Friend a present, is its easier assessment and collection, but are they comparable in justice? I do not believe either resort is one to which we ought to turn except for a great national emergency such as a great war. A general capital levy strikes with the same proportion everywhere, the man who has lost, the man who remains in the same position as he was, the man who has gained, and perhaps gained enormously.

Again, let me say, and I am anxious to say, that anybody who talks of the capital levy or war levy as a method of moral justice or who speaks of the increases of wealth made during the War—I am not talking of a particular individual case the circumstances of which may be known—but speaks of them generally as if they cast a moral stigma on the possessor, is really obscuring the whole issue and fatally injuring his case. There is no question of morality. Many men were in a position where, if they did their duty to their country, they could not help making big profits. Many men were in a position where, if they did their duty to their country, they were involved in big losses. Some men survived, others did not. But what is the national position? We are not richer after the War than we were before; we are poorer. But there has been a great redistribution of wealth. The financial sacrifices demanded by the War have fallen unequally. It is not a moral judgment that I should suggest we should pass on the individual profits of particular persons in attempting to asses a levy on increases of War wealth; it is some approach to an equalisation of War sacrifice. You do not get it by a general capital levy. A general capital levy goes directly counter to it, but if you make, I will say not only a fair, but a generous allowance for saving and such as may cover to a large extent such an abnormal circumstance as, say, the value of money, and if you then say that allowing for all these things here where the great bulk of the community are worse off, certain people by good use of opportunities which they were fortunate enough to possess, became very much better off, is it not fair, if you can collect your tax, that some greater sacrifice should be asked from those fortunate people than from their less fortunate or actually unfortunate neighbours?


In reference to what has fallen from my right hon. Friend, I want to make it perfectly clear that I object both to a general levy on capital and also to a levy on war wealth. I conclude from what has been said by some of my hon. Friends around me that that impression was not given by my right hon. Friend. What I did say in my speech of yesterday, and what I intended to say, was that a general levy on capital was more easy to collect and more easy to assess, and that a valuation would be more easy to make than it could be in reference to war wealth alone. I did not enter into the respective merits of the case except on that point.


I said there was an alternative proposal. The proposal of the right hon. Member for Platting Division (Mr. Clynes) was a capital levy. For the reasons that I have expounded to the House I think a capital levy exaggerates the hardships which war has brought, and has in it, to an intensified degree, every objection you can bring against a levy on increases of war wealth, and by reason of the fact that it is not associated with war conditions, and is therefore capable of repetition at any moment, there is far greater danger to future credit and security than is contained in any proposal for which I have ever shown myself ready to take responsibility.

My right hon. Friend, in language which I regretted, contrasted not very fully or fairly what the State was doing for the ex-soldier with what it was spending on interest on the debt. My right hon. Friend forgot on the one hand that the pensions he spoke of were only a part of the charge we have incurred on behalf of old soldiers or other ex-service men. He omitted altogether from his calculations the immense amount of the expenditure of the State which goes directly to the benefit of the classes on whose behalf he professes to speak. If he will permit me to say so, I think it was unfortunate that he should do so. It seemed to cast a doubt upon his willingness—I will not say on his willingness, but on the willingness of those he represents to face and maintain the national obligations. He spoke of the charge for the public debt. He must remember that a great part of that debt is not held by people in this country at all, and that of the debt held by people in this country a great part is very widely held by people of very small means, much more widely held now than ever before. If he is going to menace the security of that then he will sit on that side of the House for the rest of his life, whoever sits on this side. My right hon. Friend admits that in the ultimate sacrifice no class of the community was behind the other where life was at stake and that men of every class gave their lives equally readily. Certainly, as he and others have borne witness, the highest and most fortunate were not behind in the race to serve their country, but has he considered what their financial sacrifices were. I cannot say what they may have contributed to local taxation or by indirect charges, but I will take just three taxes, Income Tax, Super-tax, and Death Duties. My right hon. Friend said that he had a friend with an income of about £26,000 a year. How much of that income does his friend enjoy after he has paid Income Tax and Super-tax and made provision for his Death Duties? He gets 7s. out of every 20s. Where would Members' salaries be if the same rule were applied?


I think my right hon. Friend misunderstood my statement yesterday. What I said was that I knew a man whose total investments in War Loan permitted him to receive, after he had paid all Income Tax and Super-tax, a weekly sum of £400.


I misunderstood my right hon. Friend, but perhaps he will at any rate allow me just to show—I think it is desirable that it should be shown—what is the burden of some of these taxes upon big incomes, because it is these big incomes that excite jealousy and hostility, and it is desirable that it should be known what burdens they bear in order that people may know how far it is fair. Take a man with an income, then, of £26,000 a year. He pays 13s. out of every 20s. in these three taxes to the State, and he gets 7s. for himself. On an income of £50,000 he pays 14s. out of every 20s. to the State; on £100,000 he pays 15s. 3d., and on £150,000 he pays practically 16s. out of every 20s. to the State.


Then he is very much better off than most folk.


What I am pointing out to the hon. Member is that he is making a terrific contribution. If the hon. Gentleman, whatever his income, found that he retained less than half of it, and perhaps less than a third, for his own use after deduction of taxes, I should be surprised if he would view it as philosophically as he does the sacrifices of others.

There is one other point with which I must deal, and which I did not mention in my Budget statement. I am asked, "What about expenditure?" I have called the attention of the Committee to the marked reduction of expenditure this year as compared with last year, and last year as compared with the year before, and I shall be gravely disappointed if there is not another marked reduction in expenditure next year. I am not going to adventure into the realm of prophecy. I am not going, at the beginning of the year, to make estimates for the next year, but I recognise it as the duty of the Government and of the Treasury to watch carefully all estimates, to cut down any wastefulness, to stop any extravagance, and to bring to an end at the earliest possible moment any service which, though it may have been necessary during the War, can be dispensed with now. In the appeals that I have made to the House I have never desired to shirk any part of the responsibility attaching to the Government or to myself. I place the duties and the rights of the Treasury as high as anybody, and with my colleagues' assistance I mean to keep them in their proper position; but I do not regard it as any part of the duty of the Chancellor of the Exchequer to come down to the House and seek popularity for himself by dissociating himself from Estimates in which he has concurred, which he has approved, and for which he is equally responsible with his colleagues. I have never thought it very dignified to do that. Estimates which are before the House are the Estimates which, in the opinion of the Government, are necessary, and I share that opinion, and if we did not hold that opinion they would not have been presented. If circumstances permit us in the course of the year to make a reduction in them I shall be very glad, and, in any case, I expect a reduction next year. My right hon. Friend the Member for Paisley said expenditure depends upon policy. That is why I invited him and others to place their finger on any change of policy which they were prepared to recommend that would save us a substantial sum.

Lieut.-Commander KENWORTHY

Peace with Russia.


I am not aware at the present time that we should save anything in that way. Does my right hon. Friend always think of that connection between policy and finance when he is speaking about policy? He drew attention very fairly, and, indeed, generously, to the uncertainties of the future, and he said, "What may happen in the Middle East?" Well, what may happen in the Middle East? I agree there are uncertainties, but when he was condemning the policy of the Government with regard to the Turkish peace, had he thought for a moment of the financial effect of the policy which he advocated? That is not the way to save money. I do not know of any recommendation that has come from my right hon. Friend that would help the Government to save any money.

Lieut.-Commander KENWORTHY

What about peace with Mesopotamia?


The right hon. Gentleman does not propose that we should vacate Mesopotamia.


We have not yet discussed the Turkish Treaty. I suppose my right hon. Friend was referring to the discussion on the Austrian Treaty?


No, to the right hon. Gentleman's observations on Constantinople.


I refer him to the speech I made about Mesopotamia and the Middle East.


We are in Committee of Ways and Means. We are discussing the raising of revenue and not questions of policy.


Then I will content myself with saying that expenditure does depend upon policy and that right hon. Gentlemen, when they are criticising the policy of the Government or offering alternatives of their own, must at least bear in mind the effect of those policies upon the expenditure of the Government. I cannot be certain that all our provisions of this year will be exactly realised. All I can say is that we have made our calculations on the best basis available, and on that basis we have made such provisions as no other country has made or can make to face our great responsibilities, and that I believe, by adopting those provisions and settling this as the finance of our year, we shall indeed start ourselves on a new path of credit and stability.

Lieut.-Colonel Sir J. NORTON-GRIFFITHS

I am sure the Committee will have heard with great pleasure the frank statement of the Chancellor of the Exchequer in the beginning of his speech in regard to co-operative societies coming under the Corporations Profit Tax. I consider it is only right and fair that they should bear their proportion of taxation May I, in passing, refer to the remarks of my right hon. Friend in regard to champagne? I think it would be wicked to take that tax off, and if we did so we should create throughout the country the old cry we have heard before, that while we tax the poor man's beer the rich man's champagne goes free. At the last two elections I advocated that luxuries should bear a fair proportion of taxation. I am sure the French people, as well as ourselves, will realise that we are not taxing French champagne because it conies from France, but that we must make a point of taxing all luxuries. I wish to congratulate the Chancellor of the Exchequer on the colossal task that in two years he hopes that we shall reduce the National Debt by £500,000,000. It is a wonderful thing, especially at this time, when we have not yet recovered from the effects of the War or indeed got into our normal stride. I have had numerous letters from all sorts of traders and merchants and manufacturers throughout the country on the question of the Excess Profits Duty, and it was with regret that I heard there was no foundation for the rumour we saw in the Press this morning that we were going to revert to the 40 per cent. In the course of my daily work I meet men deeply engaged in the industrial life of this country, and I have frequently been asked in the last two days to express the views which they hold in regard to this matter. They all view with great alarm the increase in the Excess Profits Duty from 40 percent. to 60 percent. Of course, money has got to be found somewhere, but it seems to me a great pity that some other means could not be found of collecting the necessary revenue than by raising this tax. We all know that it has proved to be an absolutely unsound method of taxation, and I think instances will occur to everyone where this attitude has been adopted over and over again: "As the Government are contributing 40 per cent. or 60 per cent. of the cost, why should we worry?" That spirit, which has been engendered by the Excess Profits Duty, has to a large extent been responsible for the enormous rise in wages and the increased price of commodities in general. It is a distasteful method of collecting revenue to one who has the true interests of industry at heart. The four points I am desired to emphasise are the inequality of the tax as between an old business and a new one, the restriction imposed upon trade expansion, the incentive to extravagance, and, lastly, the liability of it being passed on to the consumer.

With regard to the first point there is certainly an allowance ranging from 6 per cent. to 9 per cent. or more in special cases of the capital employed in a business, but especially in businesses where a large amount of capital is necessary this is quite inadequate as compared with the ordinary trading profits made by a similar concern before the War. As equity should be one of the fundamental principles of taxation, on this ground alone the Excess Profits Duty at the earliest possible moment should be abolished. We must congratulate ourselves that we have weathered the storm in a much more satisfactory way than any of the other belligerents, but with the very high wages which are now being paid, it is absolutely imperative that increased efficiency and great expansion in our trade is necessary to place this country permanently in the position it occupied in pre-War days. With this end in view, it should be, and I am sure is, the policy of the Government that by every means in its power it will encourage the development of our industries and our foreign trade. How does the business man with capital to invest view the Excess Profits Duty? We have to realise what these people who have capital say to themselves. We want to encourage them to spend it and invest it in this country. He says, "Sixty per cent. of my profit in the first instance goes to the Government, and I am left with forty per cent., out of which I have to pay Income Tax and Super-tax amounting to fifty per cent., so that eventually I shall be left with twenty per cent. of the profit resulting from my enterprise." The result of that is that if it were to continue he would forthwith turn his eyes abroad to seek for investment elsewhere which would yield him a better return with far less trouble, or he would resort to speculation.

A large percentage of the profits of a business undertaking over and above a certain standard being appropriated by the Government tends to make those responsible for the management of the business less careful in the matter of expenditure, so that the spirit of extravagance which we see on every side to-day is fostered. If you take, for example, the 40 per cent., the incentive to economy is reduced by 40 per cent. If the duty is 60 per cent. the incentive is reduced by a like amount. The Government and hon. Members of the House preach economy, but if we wish to encourage it we must do it by such legislation as will not encourage extravagance—for example, this pernicious Excess Profits Duty. The fourth point is that we are faced with the problem of increasing prices, whether on the necessities of life or on luxuries. At the same time we are confronted with the demand that the rising tide of prices shall be stayed. In a great many cases, as has been found by experience, the proprietor of a business falling within the grasp of the Excess Profits Duty takes the view that if the Government are going to appropriate 50 per cent. of the profits, he must see to it that his profits are doubled, so that there will still be left the profit that was made before. I have heard it said over and over again in the last two or three years that people are doing that, believing they are doing right in the interests of the whole of the shareholders of the concerns they represented. Nevertheless, it is certain that whenever this view of the case is taken, it results in the consumer paying the duty, and that in a very direct manner. So that, undoubtedly, one effect of the increase in the rate from 40 per cent. to 60 per cent. would be that the price of commodities would go higher. I was interested to-day in a discussion with a member of the deputation of the British Federation of Industries which was seen by the Chancellor of the Exchequer in regard to this tax. The deputation left with the impression, rightly or wrongly, that it was not the intention of the Chancellor to maintain the two taxes, but that if he kept the Corporations Profits Tax he would give up the Excess Profits Duty.


The Corporations Profits Tax was never mentioned.


This particular Member hopes that if the Corporation Tax was maintained my right hon. Friend would revert to the 40 per cent. instead of 60 per cent.


What they suggested was that for the Excess Profits Duty there should be substituted a tax which would fall on a great number of people who do not now contribute to the tax.


That was the Corporation Tax.


No it was not; it was a tax on the profits of all businesses, professions, trades and agriculture.

6.0 P.M.


I am much obliged for the right hon. Gentleman's answer. It will probably help to clear the air in that direction. I always think, whether one is a back bencher or whatever position one takes up in this House, it is always one's duty if he objects to a policy proposed, to offer some alternative or make some suggestion of a helpful nature. I desire to congratulate my right hon. Friend on the Corporation Tax. In my opinion it helps to level things up. There are a lot of private concerns which were subject to the whole bag of tricks. They had to pay Excess Profits Duty, then Super-tax and then Income Tax. The Corporation Tax is admitted all over the country to be one of the standing features of the Budget which gives us some hope of a quick and early reduction of the Excess Profits Duty. I hope the right hon. Gentleman will give this point his sympathetic consideration. We know that the right hon. Gentleman is opposed to the principle of the Excess Profits Duty. It is not the best method by any means, but necessity drives him to that form of getting in revenue. I should like to make one suggestion here, which I put forward after conversations with serious business men, various classes of the community, and those engaged in industrial work, and that is, if I understand aright, that they would much prefer to have a 2s. instead of a 1s. Corporation Profits Tax as now suggested if by that means you could do away with even a portion of the Excess Profits Duty. Such a proceeding would be welcomed, especially if it were found that that extra 1s.—2s. instead of 1s.—would produce something equivalent to that expected by the proposed increase of the Excess Profits Duty. I have been asked to make that point, and I have pleasure in putting it to my right hon. Friend, who I am sure will give it his consideration—I hope with some effect!

Perhaps later he will be able to say that if the Corporations Profits Tax is satisfactory and he can ascertain something like the net result, that he may think it advisable to increase the one as I have suggested if by that means he can revert to the 40 per cent. Anything, and almost any method, is wished for than this excess 20 per cent. as proposed. I am bound to admit that the sooner this Excess Profits Tax is abolished the better, and the Corporations Profits Tax takes its place, even graduated up to perhaps 5s.—whatever amount you like!—for this method is a better one of obtaining the money that we have to get, and get from somewhere; and it is no good our squealing, for everybody has to pay his share. Now, as to the increased tax on champagne. My medical adviser has ordered me a bottle of champagne per week, and my heart sank into my boots when I heard of the increased cost of it. That, however, by the way. If we can get the Excess Profits Tax removed we shall inspire trade, and help to prosperity quicker than by any other means we can devise. Half the trouble between employers and employed is due to the tax, for the workmen press forward claims for increases of wages, thinking that there is plenty from which to get those increases when Excess Profits Taxes are paid.

Let me make a suggestion which may produce a million or two. I am sure the right hon. Gentleman will not object even to that small amount if he sees an opportunity of getting it. In the course of constant travel I go on board different passenger-ships to all parts of the world. I find that on these ships I am charged just as much for liquid refreshments as I am on shore, though the ship gets the spirits out of bond without paying any duty. I suggest that a substantial sum could be collected, and quickly, in view of this fact—for you do not get these things cheap on board ship. Whether I have been on the "Lusitania," the "Mauretania," or ships sailing to and from South America, a "whisky-and-soda"—or whatever the refreshment might be—is the same price, yet they do not pay taxes. I think that is a shame. That sort of treatment has always rubbed me the wrong way and I have always said that I meant to get a bit of my own back, and, in endeavouring to do so, I am putting forward my suggestion to the Chancellor of the Exchequer, who will perhaps consider whether there is anything in it. Before I leave what I may term the "cork" part of the business, I should just like to suggest a corkage flat rate on every kind of bottle in which there is a cork—1d., 2d., ½d., or ¼d. on ginger pop or ginger ale.


And on champagne?


Yes. Then what about an advertisement tax? Why should the right hon. Gentleman not collect, as in most other countries, revenue from advertisements? Lastly, I should like to mention the motor tax. All I am going to say about that is, because so much has been said, is there no chance of halving it and making the horse-power unit 10s. instead of £1? To balance the loss of revenue, let us collect a similar tax on the spirit. It was suggested by the right hon. Gentleman the Member for Peebles that the Chancellor of the Exchequer would have to come down to this House in the near future and budget for new money. If the Chancellor has to come here again and ask for more money, in addition to that for which he is asking now, I think every Member will agree that we will feel that the bottom has dropped out of the business. I appeal to him—perhaps it is presumption to do so—that the Government will endeavour to cut down their expenditure to the measure of their income, no matter who suffers by the way; that the Government will stick to the amount that they have voted, and if one Department exceeds what has been allotted to them, they will take such action as is necessary, so that, on the whole, the Estimates before the House will not be exceeded.


I returned to the House last night after a long absence. Therefore I had not the pleasure of hearing the Chancellor of the Exchequer present his Budget to the House. I have, however, heard most of the Debate to-day and yesterday. I have made myself acquainted with the other portions of the Debate; therefore, I should like to submit a few observations to the House. First of all, I think the Chancellor of the Exchequer may be congratulated on his good fortune in being in office at a time when the Revenue has shown such extraordinary buoyancy, thus enabling him to come out with a balance on the right side. I will express the hope, as expressed yesterday by the ex-Prime Minister, that he will not allow that balance to be frittered away by the demands that may be made upon him by the various Departments. I say that after having had the opportunity and privilege of an inside view. Speaking from knowledge derived from that inside view, I should say that there is still a good deal of cutting down to be done in the Government Departments. Some of the departments of a Department exist, I am afraid, only because they have existed, and, for my part, while I am here I shall be very glad to support the Chancellor of the Exchequer or the Treasury in taking any drastic action that may be thought proper. I agree with what has been said by the Chancellor, and others I think, in this Debate, that policy very largely determines finance. To that I would add that sometimes events determine policy; therefore the Chancellor does well to have a nest-egg in hand so as to be prepared for any unforeseen event. It is true he has got £20,000,000 in hand for any supplementary demands that may be made upon him. I have, however, just returned from the East, and I have been impressed with events as I have seen them there developing. It seems to me that the East just now is somewhat in the nature of a pot boiling over. From all I could hear in one place recently, and from all I know of the circumstances connected with the Turkish settlement and various things in the Middle East, I should say it is not at all improbable that we may have trouble there, and that we may have to incur expense; therefore it is desirable that the Chancellor should keep a little in hand if that trouble should come.

The Chancellor may also be congratulated on having made a start in the reduction of debt. I would not go so far as some hon. Members did yesterday to say that he has made a bold start. I do not see anything very bold about the Budget except one aspect with which I will deal later. At all events, he has made a start, and I think that may be described as the beginning of wisdom. It is clear, or might be clear to all and sundry outside this country, it is being made clear by this Budget, that we have turned, or are turning, the corner from doubt to confidence. It must be clear that the fact of our having started to pay off debt, that we are paying off the Anglo-French Loan, and the further fact stated by the Chancellor that in all human probability if there were 20 such Budgets we might wipe off the whole of our colossal indebtedness—all these things are a clear indication to the outside world that the resources of this country are by no means done, but that, on the contrary, we are going now to put our house in order in such a way as to contribute to the conditions under which trade will revive. I wish to express my opinion that the Budget does not do as much as it might have done to equalise the burden of the War amongst various sections of our people. I was glad to hear the Chancellor of the Exchequer make a sympathetic reference to the possibility of some kind of special war charge if it could be made. I hope the Committee will go into the matter and have another investigation, and come to the conclusion that such a charge can be made and point out the way. Everyone in this House will remember how we asked young men to go and fight for us five or six years. Later on they were conscripted and had to go, and we all know that to nearly the number of 1,000,000 those men sacrificed their lives and gave their all, and while doing that, many of those at home waxed fat and grew rich as a result of the War.

It is perfectly true that a great number got exceedingly rich during the War. There is no need to trot out the figures. There are cases of men who were comparatively poor before the War who have now blossomed out into millionaires. Riches simply fell into their laps. I think we ought to see if we cannot reach them in some way, and get some contribution from them commensurate with their good fortune and the needs of the case. I heard the Chancellor of the Exchequer put a very strong case, showing that these men were already contributing a very large part of their incomes to the country's needs, and he gave the case of a man with £26,000 who had to contribute 13s. out of every pound, and another case of a man with £50,000 who was contributing 15s. out of every pound. That looks like a strong case against any further exaction being made upon those rich men. But may I remind the Chancellor that this £26,000 or the £50,000 is quite abnormal, and that money has been taken by the receivers in such a way as to provide for the tax. I was talking to a manufacturer the other day, and he told me some of his experiences in regard to what he had to pay for certain things that entered into his production. One article, which was 1½d. per lb. before the War, was now 1s., and he gave other instances of cases where he had to pay six, eight and even ten times as much as he did before the War. He told me of one article which he had to buy now at 7d. per lb., which used to be one-fourth or one-fifth of that price before the War, and he pointed out that the people who produced those articles come to London once a month, and being few in number, they fix the price at whatever they liked, and that practice is getting largely to be the case with all commodities. Manufacturers meet in London and they decide what the price shall be, and it is generally altogether abnormal and sufficient to cover the tax however high it may be.

Therefore, when the Chancellor of the Exchequer tells us that a man with £50,000 has to pay 15s. in the £, he might have told us that that money had been made out of the customers who sold those goods and the consumer was being bled in this way. These things are sinking into the minds of the people of this country. I do not think hon. Members realise how deeply the people are thinking of these iniquities, great at any time, but greater in consequence of the War. I am sure if the hon. Member for Oxford (Mr. Marriott) were to mix more with labouring people he would discover the truth of what I am saying. I do not know how this can be remedied, whether it can be done by the Death Duties or some other method of reaching those people who have got rich during the War, but I am sure that if it is not done the demand for a capital levy will become almost irrisistible. For my part I cannot see why the ordinary method of apply taxes should not operate just as well as the capital levy. I do not see any particular merit about a capital levy at all, but if it cannot be done by an increase of the Death Duties or in some other way as to reach those who have got rich during the War, then I am sure that the demand that has been made for a capital levy will become so strong as to become almost irrisistible.

My second point is in regard to the land values taxes, and I want to express my sincere regret that they have been dropped. It may be that there has not been much got out of them, but I do not think there is a more appropriate subject for taxation than the accretion of wealth to the land-owning classes on account of the increase in the value of land due to the presence of the population around it and the needs of the people. An hon. Member objected to some observation by the right hon. Gentleman, the Member for Platting (Mr. Clynes), who referred to landlords generally as being extortionate, although the right hon. Gentleman explains that he would not include in that category agricultural landlords, and possibly he was right, because they are a class quite apart, and have sunk capital into their business. I would, however, ask any sensible man what capital is sunk in the land adjacent to big towns? None at all.

It may be true that the cultivation of agricultural land is a business, but, so far as the land adjacent to a town is concerned, the owners are drawing incomes from it on account of the needs of the population, and I am sorry that these special taxes, upon which such great hopes were placed in 1909, have been dropped. I think they have been a failure, but, at the same time, that failure has arisen, in my opinion, because we have not tried hard enough, and I believe some future Chanchellor of the Exchequer will have to try a little harder to tax the men who get rich at the expense of other peoples' efforts. With regard to the Corporations Tax, I do not like it, and I am afraid of its effect. I think by this tax you are altering the whole basis of the Income Tax. I heard some speeches yesterday and a discussion as to whether it was really more of an additional Income Tax or Death Duty.


Excess Profits Duty.


To my mind the matter is quite simple. It is simply an Income Tax under another name, but it is applied in such a way as to alter the character of the Income Tax. The Income Tax is an individual tax imposed because an individual is assessable upon income over and above his actual requirements. What is going to arise as a result of this Corporations Tax? A great number are not taxable at all. It does not matter whether the income is to be £250 or under, he has to be taxed because the money coming to him is taxed at the source and is taken away before it reaches him. This point was made clear by the hon. Member for York (Sir J. Butcher), who pointed out that at present the individual Income Tax payer got relief. The man who is taxed under the Corporations Tax has to bear the loss, and we have already been told that there would be no return. This Corporations Tax alters the whole character of the Income Tax. Whereas a man is taxed above £130 or £250, if he is getting half that amount from enterprises that come under the Corporations Tax, he will have to pay on the lower amount.

With regard to what has been said about co-operative societies. I think you are going to tax co-operators unjustly. [HON. MEMBERS: "No!"] Well, that is my view. I have not seen their representative nor have I said a word to the Labour representatives on the Committee on this question, but I should like to know something more about its bearing in regard to the corporations tax in America. I do not know anything about the operation of this tax in America, but what is the use of citing the imposition of taxes in America unless they are com parable. There are no co-operators in America, and when I was in that country I looked out for a co-operative society and I never found one, with the exception of one in Canada, and I had to go 2,000 miles to find that one. When the statement is made that a tax should be put upon co-operators because a similar tax is put on them under the corporations tax in America—


I do not know whether the right hon. Gentleman professes to be quoting my words or the argument of the Commission. He is, however, under a misapprehension, because that was not the argument at all. The statement of those who signed this reservation in the Committee's Report was, that if there were in this country such a tax as the corporations tax known in America, then it would be proper that it should apply to the co-operative societies here.


Of course I must accept the right hon. Gentleman's statement that the co-operators' representatives and the trade union representatives on the Committee accepted that view of the position. I can only say, if they did so, I am perfectly sure they did not understand it, and to my mind a great controversy will arise on this particular matter. What is the justification for taxing co-operators? I should like to hear some of those hon. Members who cheered the Chancellor of the Exchequer to-day when he said he was going to tax co-operators make out a case for such taxation. As a matter of fact, co-operators are taxed now. If a man's income is above £120 or £130, as the case may be, he is taxed just the same as anybody else. For at least thirty or forty years it has been accepted as an axiom with regard to this matter that the dividends of co-operators were not taxable because they were not income. Are you going to go back on that? If you are, remember this, co-operators can get over the difficulty at any time they like by simply charging less for the goods they sell and making no profits at all. Therefore, for my part, I should say you are launching on a campaign which is unjust, and being unjust, will certainly create much opposition, not only among co-operators, but among a great many people who are not co-operators. Their income is already taxed, and co-operators can reduce their selling prices and pay no dividend at all. In that case, the private trader, as it seems to me, would be in a far worse condition than before. I would ask hon. Members to look with a good deal more sympathy on what co-operators are doing in this country. They are doing something which is of immense social value; they are educating the people. There are now nearly 4,000,000 members in their ranks in this country, all of whom are being educated in economic ways of conducting business, and that I believe to be one of the finest things for the country. The co-operators are building up a practically new movement from the bottom, and they have been encouraged to do it by the State. I believe they are thereby going to get an increased interest in the State, and they will, as a consequence, be interested in the State's stability. I appeal to hon. Members to think once, to think twice, and to think even thrice before making an attack on a movement so great and so full of potentialities, not only for the working classes, but for the stability of the country.


Hear, hear.


The right hon. Gentleman says, "Hear, hear." I can only say from my point of view that this tax, if it be imposed, would be unjust, because it brings in a number of people who may possibly be below the Income Tax assessment limit, and it is also unjust, because it would tax co-operators who are already taxed on their incomes. I therefore hope the right hon. Gentleman will reconsider the matter. I congratulate him on having made a really good start in reducing the National Debt. I only wish he had gone a step further and imposed a special tax on War fortunes.


I wish to express my regret that the Chancellor of the Exchequer, in dealing with the many weighty and important matters which he has brought before the Committee in his Budget, has not been able to find time to deal with a small but important matter with which he expressed considerable sympathy when I brought it to his attention at the latter part of last year. I refer to the suggestion which was made then of placing an export duty on works of art sent from this country, in view of the large number of pictures and other works of art which have recently gone hence to America and elsewhere. When I raised this question in the House in November of last year the right hon. Gentleman greeted the suggestion with considerable sympathy, and informed me, in reply to questions, that if the proposal met with general approval and was likely to pass as a more or less uncontentious measure, he would be prepared to give the matter his favourable consideration. On receiving that reply I took the opportunity to bring the question before a number of Members of this House, and I secured the signatures of some 150 Members in a few days—Members of all parties —to a memorial which I handed to the right hon. Gentleman, suggesting that an export duty should be placed on works of art, the proceeds of which should be devoted to the purchase of pictures and other works of art for the nation, as, in view of the present national stringency, it is very unlikely that money from public funds will be available for the purchase of pictures or other works of art for the nation unless obtained from an export duty such as I have indicated. I also handed to the Chancellor of the Exchequer a memorial signed by the President of the Royal Academy and thirty members of the Council, which, I think, represented practically all the principal Academicians of the day, and, as I say, in view of the favourable reception which the proposal met at the right hon. Gentleman's hands, I hope that, even if not in the present Budget, at any rate at an early date he will be able to indicate to the House that he will impose an export duty such as I have suggested.

I only desire to make one or two brief remarks on the speeches delivered to-day. With regard to the Corporations Profits Tax, I take a rather different view to that of the last speaker. It seems to me that by the imposition of the Corporations Profits Tax which the Chancellor of the Exchequer has stated to-day is a Super-tax for corporations, we are imposing the tax on that very small section of the community who are already burdened and over-burdened both by the payment of Income Tax and also by the payment of Super-tax. It will be largely the same people who are paying Income Tax and Super-tax who will also have to pay this new Corporations Profits Tax, and if it is persisted in it seems to me it would be very much fairer if a larger tax than the one suggested by the Chancellor of the Exchequer were imposed, not on the whole profits of the limited company, but on the undistributed profits; that is to say, that there should be an inducement to the company to distribute as large an amount as possible of the profits amongst the shareholders, as, in that case, the Income Tax and Super-tax would be payable on them.

I very much regret that the Commission on the Income Tax and also the Chancellor of the Exchequer have not seen their way to deal with what I consider is the injustice of putting an Income Tax on the joint incomes of husbands and wives. I do think that this is a crying injustice. The instance given by the dissenting members of the Commission is one which must appeal to everyone. It is the instance of three people living in each of two houses adjoining—three ladies living in one house, each with an income of £135 a year. They pay no Income Tax, but in the next house, where lives a man, with his wife and child, with exactly the same income, they have to pay £21 12s. in Income Tax. That is a very great injustice, and if it is too much to hope that the Chancellor of the Exchequer, because of the amount of income which he derives from this injustice—and the more income he derives, the greater the injustice—will deal with this crying injustice, yet he might deal with the injustice which is greatly accentuated now that Super-tax is to be payable on incomes of £2,000 and upwards, with the result that a man and woman who might otherwise be free from the payment of Super-tax are, by the mere fact of becom- ing married, liable to it. If he cannot relieve married people of the payment of the Income Tax, yet perhaps he will consider the cases of people who, by the mere accident of marriage—well, perhaps I should not say accident, but by the mere fact that they are married—are made liable to the payment of a Super-tax which otherwise they would not be called upon to pay.

I desire to associate myself with what fell from the right hon. Member for the City of London (Sir F. Banbury) on Monday last. I feel sure all of us are willing to be taxed as much as we can bear, and even more than we can bear, if we are assured that the money which is being taken from us is going in reduction of debt and especially in reduction of the Floating Debt. But we are not willing to endure these sacrifices if this money is going into a pool from which doles will be drawn as the result of pressure from powerful organisations throughout the country. In this connection I think the House of Commons requires to have more control over the doles and the bonuses which are given at the instance of one or other Member of the Government after consultation with these powerful organisations. These doles often involve the payment of twenty, thirty, and even forty million pounds, and I submit they should not be granted before the House of Commons has an opportunity of considering them. It is all very well for the House of Commons from time to time to discuss whether there shall be an employment exchange at Manchester or a new post office building in some other town. That is only a matter of thousands of pounds, but before the House of Commons has an opportunity of considering whether it can pay or not, we are often landed into the expenditure of millions and tens of millions which we are told we shall have to pay, or the country may be plunged into the throes of revolution, or some other disaster. I consider that the House of Commons in these matters ought to have an opportunity of expressing an opinion before they have that expenditure put upon them.


I should like to associate myself with the praise bestowed upon the Chancellor of Exchequer on his courageous Budget, and I congratulate him on the attempt he is making at the extinction of the debt, at the time when the inflation is probably at the highest point. I take, however, seriou3 exception to the Excess Profits Duty. Most people who criticise any proposals of this kind are concerned with putting the burden on other people's shoulders, but, as a business man, I want to make it clear that I am speaking for a class of people who are perfectly willing to bear their full share of the burden which is justly theirs. I consider, however, that the Excess Profits Duty is an iniquitous and extravagant tax. Everybody will agree that the money must be got from those who have it and from those who are going to make it, and the business community of this country are anxious to pay it. In levying any tax however, the general effect it will produce upon trade and upon the revival and stimulation of trade is a very important factor. Business people look upon the continuance of this tax as unsound and unfair. It was introduced, as we know, as a War measure, and I believe it was largely introduced by the Ministry of Munitions as a method of making sure, that they were not going to be bled too largely in connection with the contracts they made. It was extended to all other business, since, in course of time, as we know, almost every business had to do something for the War. Therefore it was admittedly a rough and ready way of meeting our great liabilities. But its basis is inequitable, and it discriminates unduly against new concerns, which is one of the chief points I want to make. It is an extravagant form of tax, and has caused much spending in business, which is a very bad thing for the country.

I am glad to see the Financial Secretary (Mr. Baldwin) in his place, because I believe I shall have his sympathy in this matter. Pre-war standards are a very misleading figure to adopt with regard to business, when those pre-war standards are fixed on trade done, I believe I am right in saying, as far back as six years before the War. It is most unjust, in 1920–21, to say that a man's profit shall be fixed with reference to some trade which he did prior to 1914. We fought in this War for freedom, and I claim for the traders of this country that they should have freedom to say how they shall contribute their full share of the burden. They do not complain of the burden, but they complain of the unjust way in which it is being levied. I say most emphatically that the Excess Profits Duty is going to give an advantage to the thriftless man, and is not going to encourage the man who has enterprise and energy. Firms which had a low pre-War standard have to pay taxation in 1920–21 on the basis of what they did then. In addition to that we have a Bank rate to-day of 7 per cent. Thousands of young men who have been to the War are most anxious and willing to develop businesses. That will not only be for their own good, but those young businesses will probably in the future become the leading firms in the country. By the continuance of this tax, all these firms are handicapped, and it is impossible for them to start under conditions such as are now proposed. No man can go to a bank to-day to borrow money at less than 8 per cent., and even then the bank will want security of some sort. If people are able to give that security, they can borrow money at 8 per cent., and the maximum they will get on the pre-War standard is 11 per cent. Is it possible to expect that they will show any enterprise when their profits are going to be limited to the narrow margin of 3 per cent.?

I strongly urge that we should sweep this tax away altogether, and not tinker with it; and why should we have hanging over our heads the question of either a levy on War wealth or a capital levy? The Government are showing a weakness here of which I did not think they were capable. We are either going to be a country that is going in for nationalisation and socialistic legislation, or we are going back to pre-War conditions. Talking as you are doing—[An HON. MEMBER: "Hear, hear!"]—I quite accept your point of view, and I am willing to fight you on it. As we say in Yorkshire, there are "no heeltaps" about me. You know what I mean. I say most emphatically that this is an unjust tax, and that it is quite possible for the Chancellor of the Exchequer to put a tax upon profits. Let the people who make the profits contribute their fair share, but for goodness' sake do not let something that happened in 1913 prejudice the firms which make the money in 1920–21. I want to appeal for the young men who have come back from the War, and I say that by this proposal these men are ruled out absolutely, as far as I can see, from having any interest in opening up new business.

I do not know that I can make any stronger statement than to refer what the right hon. Gentleman the Chancellor of the Exchequer said to-day to the right hon. Gentleman the Member for Paisley (Mr. Asquith) with regard to the charges which have to be paid on railways. The Chancellor of the Exchequer said, "Why should I, in 1920, pay something that you incurred in 1914?" As we Yorkshiremen say, "Let every herring hang by his own yed." I believe the Chancellor of th Exchequer proposes that each year shall stand on its own account, and that it is intended that the three years' average shall be suspended. If that be so, and I think it is only right, let every firm pay its proportion. Do not raise one penny less than you propose by the proposals in the Budget produced on Monday, but let everybody pay according to what they are making in that year. Speaking as a manufacturer, I have no desire to escape paying my share, but I do object most strongly that a man should be prejudiced because he happens to have a business which had a bad pre-war standard. I am sure that the Chancellor of the Exchequer can get every penny he requires by putting a tax direct on profits. I think all the Members of this Committee will agree that it is very desirable that that tax should be graduated, and that those who get the most should pay the most. The same principle might be adopted with very great advantage in regard to the Super-tax. Several hon. Members have referred to the confidence which we all have in the future of our country. I share that confidence, but the pledges which have been given ought to be carried out. It was stated definitely and distinctly that this Excess Profits Duty was put on as a War measure and, if not by word, by implication, the Chancellor of the Exchequer last year led us to believe that the 40 per cent. was only temporary, and that it was necessary to carry on for one year. If you find you want the money, by all means raise it by proper methods, but let us revert to pre-War conditions—let us have freedom, and know where we stand. If my hon. Friends opposite want nationalisation, let them fight for it. I am against it, and do not believe in it. I ask that we should enable the people who are paying their far share to keep the confidence that they have, and to develop our export trade. We cannot develop our export trade or any trade unless we have that confidence, which is our life-blood, and I ask the Chancellor of the Exchequer to give us that opportunity, although criminals may not select the manner in which they are to be despatched from this world. We are not criminals, but we have to pay our share; we have to pull our weight. Let us do it in the way which we think—and we ought to know—is going to do the least harm to our business and our Empire.

7.0 P.M.


I propose to confine my remarks to that portion of the right hon. Gentleman's speech which was directed to the question of co-operative societies. In the course of his speech the Chancellor of the Exchequer referred to the fact that some of us on these Benches had appended our signatures to a Report which seemed to indicate that we were in favour of the Corporations Profits Tax being applied to the co-operative societies of this country. Before I come to that, I want to try and make clear the general attitude of the Royal Commission on Income Tax as far as the co-operative societies were concerned. Possibly the best way to achieve that end is to make is clear as I can the position in which co-operators would stand if the present proposals, - or the present practice with reference to them, were to continue, and if certain of the proposals of the Royal Commission were adopted. I regret very much that not only in this House, but also in the country outside, there is a widespread impression either to the effect that co-operators pay no Income Tax at all, or that they are unwilling to pay that proportion of Income Tax which they should properly pay. The very reverse is the case. The great majority of members, I should say, of the co-operative movement in this country are sincerely desirous of paying their fair and just share of taxation, but they do claim the right to certain safeguards and protection, which they believe should be accorded to them by the nature of the business which they carry on. What will be their position on the lines of the argument which I have just developed? In the first case, they will pay Income Tax on their co-operative investments. There is not the least doubt on that point at all. In the second place, under these proposals they will be liable for Income Tax on the profits of the so-called non-mutual trading; and, in the third place, they will continue to pay Income Tax, as they are paying it now, on the interest on their share capital. These three points my right hon. Friend opposite will not dispute. That practice will be continued, but we come to the keynote of this controversy when we have regard to what is commonly called the dividends on purchases, proposals for this taxation, which were made by a large number of the manufacturing concerns of this country, which have only been partly adopted by the Royal Commission on the Income Tax. Unfortunately, there is misapprehension in the country on that point. There is no proposal to tax dividends on purchases as such. The ordinary dividend was clearly recognised by all the members of the Royal Commission to be something which arose from the system of book-keeping and the method of trading of the co-operative societies. That dividend was returned to the members of the co-operative movement on their purchases, very largely because a range of prices was adopted by the co-operative societies which made that dividend or that result possible. It was clearly seen that the co-operative movement had only to charge a reduced level of prices in order to wipe out that dividend altogether and then there would have been nothing at all to tax.

Quite apart from that argument, which would have been strong enough in itself, leading officials of the Board of Inland Revenue pointed to the fact that, if there were any attempt on the part of the Government to tax so-called dividends on purchases, then clearly when we had raised the Income Tax limit to £250 for married people and to something between £350 to £400 in the case of a home with one or two children, the great majority of the members of the co-operative movement in this country would not be liable to Income Tax at all and would not have to pay on those dividends, and we should have a great scheme of claims for repayment, which would involve public departments in this country in great expense, official and otherwise, for no end whatever. The majority of the members of the Commission took another view from that of the minority with reference to that part of the net profits which were not paid to the members as dividends on purchases, but were placed to reserve or dealt with in some other way. What was the whole case in the minority statement? We utterly failed to understand how there could be any distinction between that part which was returned to the members, and held to be the result of mutual trading and non-taxable, and that proportion not returned, but which flowed from the very same course of action on the part of the movement. I cannot understand the attitude of the majority of the members of the Royal Commission on that point. But even if we cannot understand the logic of it, what have we to say of this matter with reference to its practice? Here is a sum, which may be large or small, in the possession of the co-operative societies which, under this new scheme, is going to be liable for the first time to Income Tax in this country. Is it to take the form of some kind of general tax, or are we going to try to sort out the liability of the members of the individual co-operative societies and their respective proportions of that fund which is liable to taxation? If that is to be the idea, the Government are only going to repeat all the difficulties which would confront them if they tried to recover Income Tax or charge Income Tax on those so-called dividends on purchases which have been recognised as a result of mutual trading, and not a profit in the ordinary sense of the term. That is, broadly, the contention which faced us in the Royal Commission, and while co-operators have no desire to escape their liabilities in any way, and whilst I should be the last to suggest that co-operative societies or individual co-operators should be exempt, there is no continuity of argument at all in the two propositions advanced by the rival schools in the Royal Commission. They are dealing with one subject flowing from one method of trading, and dealing with it in two ways. One must be wrong, and I submit on this occasion, as on many occasions, the Minority were correct.

The other point I desire to make is this. The Chancellor of the Exchequer has made it clear this afternoon that he intends to apply the Corporations Tax to co-operative societies. Without dealing at all with the merits of the Corporations Tax, I think on the whole it is a tax to be welcomed, and probably in the long run to be encouraged. It is going to deal with a certain class of returnable profits which may not be amenable to ordinary Income Tax, from some points of view, or only partially, and certainly not amendable in many cases to the Excess Profits Duty. We should get it in some shape or form, and I think it is not unfair to come along with a Corporations Tax of this kind, and try to secure to the whole of the people of this country revenues which it should rightly obtain, and the raising of which will confer no injustice whatever upon the people from whom it is collected. As a matter of fact, it may be necessary for Governments in future with a large social outlook to extend this tax. The Chancellor of the Exchequer has given us from the very bosom of the Coalition now a precedent which may be usefully used and employed by other Governments which follow. The right hon. Gentleman read out—and I should be the very last to accuse him of unfairness—from the Report of the Royal Commission a statement which was signed by myself, amongst others, of minority Members of that Commission. They said that if we had a Corporations Tax in this country like the tax in the United States then it might be applied to Co-operative Societies, but they immediately went on to say that the Income Tax was not a Corporations Tax, and if the right hon. Gentleman will forgive my saying so, I remember well the attitude of mind in the Commission, and that that was put in by way of illustration, although I am willing to admit that we had no idea that so soon following the result of our deliberations such a terrible result would emerge. That passage of the Royal Commission's Report, I submit, should be read as the lawyers very often put it—I think not unfairly—broadly and generously. I did not regard it as a definite statement of policy at all, but as an introductory statement merely to indicate quite clearly the basis of our case as regards the so-called mutual trading of these societies. We insisted that the Income Tax was not a Corporation Tax, as indeed it is not, and we used this by way of convenient illustration, unfortunately, no doubt, and we should revise it if we were coming to the discussion to-day. We certainly never imagined there would be a Corporations Tax in the history of this country.


Surely the hon. Member does not mean to say he asserted that a thing would be just because he felt confident it would never be done, and, now that he finds it is going to be done, he wants to withdraw his assertion that it is just?


Not at all. I do not suggest that for a moment. I am only suggesting most strongly that some of, us, at least, understood that it was there for purposes of illustration. It may be unfortunate that that phraseology was used, but, at all events, that was our point of view. I think we should press to-day for some information as to whether the Corporations Tax is to apply to the broad profits—we use that word loosely for the time being—of the Co-operative Societies, or whether you are only going to impose the Corporations Tax after the money returned in dividends on purchases has been taken into account or excluded. The right hon. Gentleman will agree that that will make a very substantial difference to the operation of the Corporations Tax. If we assume that it is applied generally to the whole range of so-called profits of a Co-operative Society, the whole of the Members of the Royal Commission quite frankly recognised that these so-called dividends on purchases are the result of trading, are not profits as such, and should not be subject to taxation. I regret that I am obliged to make this intervention to-day. I have only intervened to make perfectly clear what I believe to be the point of view of the minority members of the Royal Commission on Income Tax, and I think I have summarised their attitude. There is no disposition on the part of co-operators to evade their just obligations, but they complain very strongly that in this country, having regard to existing social and industrial conditions, the Government are going to ignore the fact that the co-operative societies are doing a great deal of what may be called Friendly Society work. In many localities they are engaged in a great deal of healthy social enterprise and work which otherwise would only be done by the local authorities, who would make a call upon the Chancellor of the Exchequer for that purpose. There are many illustrations which I could give if I had time, but I do submit that this is a position which we are bound to take into account. We should also remember that the co-operators are paying all these taxes, and they are entitled to the consideration recognised by the whole of the members of the Royal Commission on Income Tax, in the light of the social and public service which the co-operative movement is rendering to the country.


I ask that the indulgence of the House, which I feel sure is always given to new Members, will be given to me. I am a very humble and recent addition to the House, and I suppose that I shall be described by the right hon. Member for Paisley as a product of some sort of political legerdemain. At any rate, I am here as a somewhat substantial representative. I should like, if I may, to congratulate the Chancellor of the Exchequer on the very businesslike and clear way in which he introduced the Budget. This afternoon he threw out a challenge with regard to the Excess Profits Duty which I should like to take up. When hon. Members suggested that prices would go up if the Excess Profits Duty is raised by this Budget to 60 per cent. he asked whether the opposite would prevail in case the duties were lowered. I venture to say it would, and I will give him my reasons. There is somewhat intelligent anticipation of these things, and the Chancellor of the Exchequer has agreed that a year ago he said that the incidence of the Excess Profits Duty was entirely wrong. Commercial men generally thought from these remarks that the Excess Profits Duty would be lowered. If the right hon. Gentleman will look up the price of values —and I can best refer back to those in my own trade of cotton spinning—he will find that the value of raw material in our industry at the time he brought in the last Budget were about half what they were at the time of the Armistice in November, 1918. He will also find that they were about one-half what they are at the present time, so that it is a fact that after the reduction of the Excess Profits Duty from 80 per cent. to 40 per cent. there was a very considerable lowering in values and in prices. There are other things to be taken into consideration besides the question of duties in relation to values. There is the question of supply and demand, and that has affected the position in regard to the cotton trade. Further, last year, after he reduced the duties from 80 per cent. to 40 per cent., trade in the cotton industry was vastly different from what it is to-day. To-day it is very good, and I should be the last to deny it, but from the time of the Armistice up to the time of last year's Budget the cotton trade passed through a very bad time. My own firm was working from 1914 on Government work at fixed prices as to 90 and 95 per cent. of their home production, and they never took an order in the ordinary way of business from the time of the Armistice being signed until April of the following year. But they never stopped a spindle during that time. All that production went to stock, which shows that the trade was in a very bad position, and prices were very much lower when the Excess Profits Duty was reduced.

I feel very strongly about the Excess Profits Duty, not because I disapprove of the tax itself—I do not know any business man who does, certainly I have never come across a business man who does disagree with the tax as a tax—but only as to its incidence. I can illustrate its inconsistency by the case of two firms close together, one not being allowed, until they are chargeable for Excess Profits Duty, one penny piece beyond the statutory limit, while the other is allowed to make 80 per cent. on their capital before they become chargeable to Excess Profits Duty. That is what business men fight against, and I think the House will agree that they are justified in that. Business men like to have security in their business. There are two things that we ought to have in this country at the present time; one is security for labour and the other security for those who employ labour. One is almost, but not quite, as important as the other. When you suggest taxation with a view to aiming straight at one particular section of the community, you must be careful that in doing that you do not hit other sections that you have no intention of hitting. Now you are putting on this extra taxation in the way of Excess Profits Duty, especially after it was understood, from what the Chancellor of the Exchequer said last year, that it would possibly be taken off. We certainly never imagined that it would be increased. This means hitting at the very lowest classes in this country. It will put up prices without a doubt. I will give an illustration from my own case of what was done by business men last year when the Excess Profits Duty was reduced from 80 per cent. to 40 per cent. The Government asked people to try to improve the situation in the country as regards the housing of the people. We thought that, as this duty had been lowered, we would invest some of our money in building property, and we built property and people are living in the houses to-day. We built the houses at a cost of £800 each, which works out at 18s. per week in rent. This increased taxation, or this threat of increased taxation in Excess Profits Duty comes at a time when firms have to borrow money. I am not one of those who is in a position to lend money to my banker and to ask him what rate he will pay. I am one of those individuals, seeing that the country owes £8,000,000,000, which represents £200 per head of the population, who has to go to the banker and ask him to lend me money. Although many firms have done very well during the last period of good trade in the cotton industry, the cost of their stock has gone up very much in value owing to the cost of raw material being so much greater. It is eight times greater than in 1914. They require, therefore, so much more money to run their business, and the bulk of their money is locked up in their stock. I have gone over eight concerns, and every one of these concerns has to borrow money, not only to pay their dividends but to pay their Excess Profits Duty. If they wish to help in connection with housing as we did, they will have to build the houses on borrowed money. £800 for a house, at 6 per cent., means 18s. a week. £800 borrowed at the present bank rates means another 3s. a week on the rent of the house, and that is where you hit the working classes by taxation of this sort, because money has to be borrowed. I do not say that the Excess Profits Duty ought not to be used, but I do say that it is very unfair in its incidence. I suggest that all firms should be taxed on a fixed basis from before the War if there is to be any Excess Profits Duty at all. I would ask the Chancellor of the Exchequer to allow business men to have a certain amount of security in their business, and if he could see his way to keep the Excess Profits Duty at the present level, it would be much better not only for employers but for employees and for the country generally.

The right hon. Member for Paisley suggested that only one year could be taken as the standard for Income Tax, and that we should do away with the three years' average. It is inconsistent to suggest that we should do away with the three years' average in one case and in another that we should actually tax people according to what happened in 1913–1914. The Chancellor of the Exchequer may not have had the opportunity of hearing the views of our constituents about the Budget as a whole, but I can tell him that I went to Manchester yesterday, and those of my constituents whom I have seen who know anything at all about business are entirely opposed to the Excess Profits Duty being increased. They are opposed to it, not for selfish reasons but because they believe it will be against the best interests of industry as a whole. Another view is, and I have great sympathy with it, that the teetotaler is let off a little more than one would have expected. I saw one of my constituents yesterday, and I will tell the Chancellor of the Exchequer what he said. He said: Will, aw'll tell thee this, lad. Aw've bin eawt feightin' durin' th' War, and aw doant see why aw should have to pay for it in my beer neaw. I do not know whether the Chancellor of the Exchequer will understand that. We are asked to do a great deal out of our excess profits. We are asked in Manchester to extend our University and to extend our College of Technology. We are not told whether we shall be allowed even to consider suggestions for a building fund for our Cotton Industry Research Association out of trade expenses, or whether these will be subject to Excess Profits Duty or not.

I should like to sympathise with the hon. Member who mentioned a point about the Income Tax of husband and wife not being separate. That point has been brought before my notice several times in my constituency and I should like the Chancellor of the Exchequer to know that there is a very wide feeling of dissatisfaction about that particular point and that a great deal of injustice is being done. In regard to the Corporations Tax, which has been mentioned as a sort of substitute for the Excess Profits Duty, there arises a question which concerns the industry in the district in which I live. The Chancellor of the Exchequer mentioned that this would be reckoned after all interest has been paid on debentures and preference shares. I should like to know whether loan money, which is used to a very great extent in the Oldham district, would be put on the same footing as debenture and preference shares, and if not I ask very respectfully, Why not? Because we get loan money from all over the world. Only this week we have got it from Japan, the United States and China. It is a matter which does help to balance the Exchange. The duty on share capital has been put up from 5s. to the £1 per £100. As a business man I regard that as an outrageous increase. To double it would have been a substantial increase, but to increase it fourfold means penalising new industries. I sympathise very much with position of doctors with regard to the cars used by them as professional men. I do not think that the remuneration of anyone who works has advanced less in comparison with the advance in the cost of living than that of the professional medical man, and I would like the Chancellor of Exchequer if he can to meet the position on this matter. The question has been asked as to why co-operative societies should pay Income Tax on the profits. But I will give the case of our own company, a corporation which has a thousand shareholders. There are only seven of those who do not earn their daily bread, who belong to those who toil not neither do they spin. What is the difference between that corporation and the co-operative societies? If the latter are free from taxation why should not our poor shareholders be free? We should look at the thing broadly in the best interests of the whole and not try to legislate for any particular section of the people.


I wish to call the attention of the Chancellor of the Exchequer to motor cars. It is very unfortunate that at the moment when adequate and efficient transport is absolutely essential for solving the various problems with which we are faced, the Chancellor should increase so enormously the taxation on this form of transport. The Minister of Transport tells us, and every Member of the Government tells us, as an excuse for the inefficiency and inability of his De- partment to deal with any problem that arises, that there is congestion on the railways, and in transport generally. Yet in this Budget we find an enormous increase in taxation on all sorts of transport, an increase which is not fair and is not based on anything reasonable, and is not based on knowledge of the actual conditions. If they want to tax transport, to tax the users of the roads, why do not they tax the users of the roads, and not those who purchase vehicles? The taxing of horse power is a tax on every man who buys a vehicle, is a tax without any regard to the amount of use given to those vehicles. If the Chancellor of the Exchequer wishes to tax those people who are destroying the roads of this country, he can do so by taxing the petrol or the tyres. You cannot use a mechanically propelled vehicle without running it on wheels, and it is the part of the mechanically propelled vehicle which comes in contact with the road which wears out the roads. You cannot wear out the road without wearing out that part of the vehicle. Therefore, if you tax that part of the vehicle which comes in contact with the road you put a direct tax on the actual users of the roads in direct proportion to the extent to which they use them.

If that is not satisfactory you might put it on petrol rather than relieve petrol. We all know what will happen. The profiteers in petrol—I am referring to all that gang who have cornered the petrol market in this country—will, penny by penny, or so great is their audacity that they will probably do it all at once, immediately put the 6d. on to the price of petrol. They will say, "If the public stood for 3s. 8d. per gallon with the tax on, they will stand for 3s. 8d. with the tax off," and industry will be seriously injured. A man who wants to start a small motor business must commence by paying £20 or £30 tax on a small motor-car. It is so funny. I happen to possess a motor-car which develops 109 horsepower, and which I cheerfully admit does more to destroy the roads of this country in a week than a Ford automobile would do in a year; yet according to the incidence of the Chancellor's tax it will pay £27 a year tax, while the Ford most probably will pay £30. I give that as an example of the crass ignorance of the Committee that has been set up. The result of their findings gives a new lease of life to the petrol profiteer and penalises the transport of the country. No man can say what the horse-power of a motor is if it is calculated only on the bore and stroke of an engine, which has no relation to the horse-power at all, as anyone interested in engineering will know. The horse-power depends also on the number of revolutions per minute, the design of the engine, and other things which are not borne in mind. The Chancellor of the Exchequer comes down and says he is obliged to tax motors on the horse-power, and if all his other advice is as wrong as this, I am not surprised to hear on all sides that this is an amateur Budget, and that there is hardly anything in it which is not calculated seriously to injure trade.

I would ask the Chancellor of the Exchequer to listen to the few remarks which I have to make. Every Member has his own ideas as to what taxation should be. It is based to a certain extent generally or the form of taxation which would least injure the business or undertaking in which he is engaged. But I do suggest that the Budget would be infinitely better if these Debates took place before the Budget was fixed rather than after the Budget was fixed, because what is the use of hon. Members making suggestions as to the incidence of taxation when they know quite well that the Chancellor's mind is made up, and that we have got to take his Budget whether we like it or not, and that all this criticism is useless except in so far as it produces the feeling that so far as we are concerned we have done the best we can. There has been a great deal of criticism with regard to the Excess Profits Tax, but no hon. Member seems to see why it has been imposed. So far as I can see, the Chancellor of the Exchequer has imposed it to save his Treasury Bonds. He seems to think that by increasing greatly the Excess Profits Tax he will stop people investing in companies, and that in this way there would be more money to draw for Treasury requirements. He is now in competition with all forms of commercial undertakings from the point of view of the rate of interest which he is offering. As he puts it up so the bank rate goes up, and this tax is not put on with the hope of getting much by the Excess Profits Tax, because it is obvious that you can kill the goose that lays the golden eggs. I was speaking yesterday to a gentleman on the question of the Budget. He said: So far as I am concerned, I have made all that I am allowed to make this year, so I will not trouble to go to the office any further. I am not going to the office every morning to work 12 hours every day purely and simply to increase my profits so as to increase the yield of taxation. That may be moral or immoral, but it is a fact which exists in the minds of business men. In those circumstances I am surprised that the Chancellor of the Exchequer, if he has taken the advice of business men, should have done what he has done. Of course, it is a popular thing with Labour Members, though I think they are much too wise to be caught by so exceedingly obvious a bait, to add 6s. a bottle on champagne, and say, "See what we have done to the profiteer. That in his drink," and to add 50 per cent. on cigars. What is it going to bring the right hon. Gentleman? Why tax the champagne on the bottle? Why not tax it on the vintage or on the price, if he wishes to tax it at all? Personally I am in favour of taxing it, because it puts a tax on the floating population. But he could provide for other taxes on the floating population. Let him tax the hotel bills. Let him put 1d. in the 1s. on the restaurant bills. It has been suggested that there should be a taxation on posters, which would be an admirable thing, and a taxation even on advertisement. These present the human element, because they tax a man at the very moment when he is going out to get his profit rather than when he has got his profit.

If you were to tax the amount of money which a man lays on a horse by a small amount, if you put a tax of say 10 per cent. on the bets he made, he might stand for it. But if you tax him 50 per cent. on his winnings he would not stand for it. Hope springs eternal in the human breast, and the idea is that his winnings would be so great that he can pay the tax on the bets. But if he is told that he is going to lose half his winnings in taxation, that seems to be a terribly heavy burden. The Chancellor would get a greater revenue from 10 per cent. on what a man puts on horses than from a tax of 50 per cent. on what he wins. It is the same in business if you tax at the time. You could tax advertisements in this country. The business firm would put another 10 per cent. on its advertisements, and would say, "That does not matter, we will get it back," and he would still go on working, and still put fresh energy into his business to make larger profits. He would pay direct taxation at the birth of his enterprise. They do not like the certainty of having to give up 60 per cent. or more of all they make when they have made it.

We never expect any consideration for human feeling from this Government, but I do ask the Chancellor of the Exchequer to confer with the Minister of Transport and with other Departments on the question of this fresh taxation of transport. We know that it is absolutely necessary to raise certain money, and the Chancellor has told us that it is not his business to come here and apologise for the way the Government spend it. The fact that he asks for the money is sufficient proof that the Government want it. When all is said and done, no one appreciates more than I do the dignity and responsibility of a Member of His Majesty's Government, but, despite his majority, the Chancellor of the Exchequer must not run away with the idea that he is the master of the people rather than the servant of the people. The people expect to have an account submitted to them. I am convinced that the spending habit has reached such a stage with the Government that the mere question of a few millions here and there is not given any consideration. I appreciate the Chancellor's point of view in regard to the paying off of the indebtedness of the country. We must not forget the extraordinary sales which the Government have made, by which they have been able to realise hundreds of millions of pounds for goods which have been voted for on a War Budget. The magnitude of the Government's transactions overwhelms anything of any firm in the world, and the money so realised should have gone to liquidate debt. The Chancellor of the Exchequer says we are paying off £234,000,000 this year. Were he dealing honestly with the country, he would have paid off last year the money received from the sale of ships or munitions, and this year he would have come to us and told us he had paid off that sum. The Government by their sales have not only got the capital back, but also huge profits, and the whole has been put into a general pool, which the Government have been squandering in keeping up a vast bureaucratic organisation. Had he come to the House and said that he had paid off debt with this money, even if the incidence of taxation had been greater, the public would have had greater faith in the Government than it has to-day. In spite of the money which the Government have realised by the sale of War materials, we are now faced with an immense increase of taxation. I ask the Committee to believe me when I say it is the opinion of a vast number of people that the country is quite as much interested in what the Government propose to do with the money as in the way in which they propose to get it. The country is as much interested in the amount of the money the Government propose to save as in the amount the taxpayers are asked to contribute. Before the Debate closes I hope we shall have something more than platitudes from the Government as to what their policy of spending is to be, as distinct from their policy of budgeting.


I offer my very humble congratulations to the Chancellor of the Exchequer for his very able speech, but with the Budget as a whole I confess I was very bitterly disappointed. From start to finish of the Chancellor's speech there were no words whatsoever about economy. In reply to the charges of extravagance in expenditure in the Government Departments, the Chancellor of the Exchequer to-day said that in a speech on the Budget there was no need for any words on the question of economy. Surely a speech relating to the coming financial year should contain some reference to guarantees that expenditure will be cut down. The right hon. Gentleman said he had seen all the Estimates and approved of them. I should have thought he would have said something about departmental waste and would have assured the House that there was to be a great reduction of expenditure in the coming year. The right hon. Gentleman has proposed a most courageous method for raising money by taxation, but he never thought of or never mentioned an alternative way, which is to reduce expenditure, thereby obtaining a surplus for taking something off the National Debt. I think the Budget is weak where it should be strong and strong where it should be weak. It is very strong on taxation and very weak in the cutting down of expenditure. A right hon. Gentleman, who is no longer a Member of the Government, said he knew that in the Government there was a great deal of room for the cutting down of expenditure. Taxes are mainly aimed at the City or seem to be so aimed. There are the Corporations Tax, the increased duty on the transfer of stock, increased postal rates, and above all, the 60 per cent. Excess Profits Duty.

It is clear to most people that the swift recovery which Britain has made since the War, or is in the act of making, is due mainly to the development of businesses. I should have thought that the Chancellor of the Exchequer would have nursed new businesses and would have done everything he could to increase their prosperity, instead of trying to stifle them at their birth. He proposes that the Excess Profits Duty should be increased 20 per cent. He seems to forget that last year he made some extraordinarily pungent remarks about the Excess Profits Duty, and condemned it very much more skilfully than anyone has done since. Surely his change of position or change of mind must have a great effect in lowering the credit of the Government in the eyes of business men? What guarantee is there that the Chancellor of the Exchequer, in his Budget speech next year, will not raise the Excess Profits Duty another 20 per cent.? Last year one would have thought that the duty would be wiped out altogether, but now it is increased, and next year it may be increased another 20 per cent. It will be impossible for business men who are making a very much larger profit than they made before the War to continue to extend new trade during the coming year and perhaps for years afterwards. We are told that it is no good criticising this Duty unless some alternative is suggested. I will suggest something to put in its place. I will suggest first the cutting down of expenditure. There is no reason why he should not do away with the subsidies. They are an artificial and mischievous form of government, and they mislead the people as to the actual position of the country. Secondly, he should do away with the Labour Exchanges. They are not only enormously costly, but the work they are doing is practically useless. Those two items alone will reduce the expenditure to a very large extent. If the Chancellor of the Exchequer still insists on raising more money by taxation, the new Corporations Tax which he has invented is a far fairer way of taxing companies than is the Excess Profits Duty. I am sure that businesses now doing a great deal more than they did before the War recognise that it is a much fairer way. If it became necessary, the Corporations Tax could be put up another shilling or two shillings.

8.0 P.M.

It has been stated that £234,000,000 is to be used to pay off the Floating Debt and National Debt at the end of the year. I see no guarantee of that. In the first place, I regard expenditure as very greatly under-estimated. There is no saying what further adventures we may undertake in the East or elsewhere. There is no saying how costly may be the upkeep of the garrisons in Mesopotamia and Palestine. It is obvious that the War Office Estimates were too low. The United States were very wise when they refused responsibility in the East. That part of the world is going to cost this country a very great deal more than anyone has calculated in this House or outside of it. The Chancellor told us that with twenty more Budgets such as this we should pay off the whole debt. I submit that that statement is quite obviously ridiculous. There are items of special revenue in this Budget which amount to about £302,000,000. The Chancellor quite fairly wants to take off as against those special items of expenditure. If we do so, that will leave about £280,000,000 of special revenue which we shall not get in future years, and in that case that will leave a balance of £50,000,000 per year, and I do not see how in 20 years Budgets with such a balance are going to wipe off the whole debt. Evidently the Chancellor thinks that the expenditure of the Government will be as great 10 years hence as it is to-day. That special revenue, it has been suggested, should be used as capital instead as of income. If it is used as revenue, it should have been stated more clearly, because from the speech it was rather clear that these items were being used to mislead than anything else. I am still of opinion that the only possible way to reduce taxation in the future is to cut down extravagance and the expenditure of Government Departments which has been going on ever since the War. By cutting down expenditure, you will also decrease prices, while by increasing taxation you immediately increase prices. I am quite sure that great taxation will make world prices and the vicious circle even worse than they have been in the past.


I do not intend to occupy the time of the House more than a few minutes, but I think it would be very undesirable if a great financial measure, of this character were to pass through this House without even a voice being heard from Ireland on a matter which so vitally affects the national interests of that country. In the first place, I desire once again to renew my protest against either the power or the authority of this Parliament to tax Ireland. We have no more to say in the government of our own country than we have in the affairs of China or Japan. To-day we are going to give our votes upon a Budget which proposes to add additional taxation on a country already overburdened, and without the slightest representative power or capacity to determine how the nation's affairs are to be carried on. I listened with very great pleasure to the excellent speech which my hon. Friend (Mr. Harmsworth) has just made, and in which he recited the series of escapades in which the present Government are engaged, and which, if they ceased to operate, might tend towards not only efficiency, but economy, but I was surprised there was one name left unmentioned, and that was Ireland. To-day in Ireland you are maintaining the most costly and most extravagant and most inefficient system of government to be found in the whole world. Last year, in the Budget, there was an addition of £10,000,000 to the taxation of Ireland. Twelve months have come and gone since the Chancellor stood at that table, and I invited him then, as I invite him now, to tell me how he can justify not only the continued taxation of Ireland, but this fresh burden added to her taxation with a system of government which, at the end of the twelve months, is infinitely more unsatisfactory to Ireland and infinitely more dangerous and disgraceful to you than it was when the right hon. Gentleman introduced his Budget last year. The Government of Ireland is a bye-word all over Europe. It is a shame and a disgrace to this Empire. It has aroused the hostility of America. There is no civilised people or race speaking the English language, who, when you mention Ireland's name, are not shocked and astonished at the things which occur there in the name of England


Sinn Fein.


The hon Member says "Sinn Fein." Sinn Fein is of recent growth, as recent in its growth as the political importance of the hon. Gentleman.


Mine will be longer lived.


May I point out that before Sinn Fein ever came into existence there was an Irish question? There was the fundamental question which stands among all civilised and freedom-loving peoples, and that was the fundamental right of the nation to govern itself, to safeguard its own interests, and work out its own destiny. Sinn Fein is of your creation. There were 85 Nationalist Members here speaking constitutionally the voice of the nation. They were not listened to, but you listened to Sinn Fein. For 40 years we have been pleading in this House, and there has been no response to our appeals. Every evil that has sprung up in Ireland, and every danger that faces you, is precisely in direct ratio either to your ignorance or con tempt for the sentiments expressed by the Irish people through their representatives in this House. And now in Parliament where Ireland has no representative at all, or practically no representation at all—


Hear, hear!


And when that representation is almost as small as the party to which the hon. Gentleman belongs, you propose now to put on an additional burden, which I estimate to be £5,000,000, on Ireland. You add to the taxation of beer and of whisky, the only two industries left in three provinces of Ireland. The duty on whisky when I came here first was 10s. 6d. per gallon, and to-day it is £3 12s. 6d. I can see nothing but the destruction of this industry in Ireland, or, if your tax succeeds, it means adding a tremendous additional fiscal burden to the country.

What are we getting for it? The hon. Gentleman below me suggested that you can economise in Ireland. Your army of occupation is costing £10,000,000 a year. You have the machinery of law, with which you are supposed to administer justice, but there is neither freedom nor justice in the country. New tribunals are set up every day, new sets of officials, new organisations, new methods to suppress the people. You can do everything in Ireland but the thing you purpose to do, and you spend vast sums of money upon this object and then fling at the country proposals to solve the Irish problem which are an insult to Ireland, and are recognised to be an insult to Ireland in every part of the world where the Irish race have found a home. So far as I am concerned, I protest against this fresh imposition on Ireland, because Ireland is not entitled to pay anything for the government of that country, and there are a great many Englishmen who think that Ireland is a burden on this Empire. Would it be believed that the entire expenditure, even on the sort of government Ireland is getting, is £13,000,000, and that your revenue was £33,000,000 last year, and this Budget will probably give another £5,000,000, so that you are actually making a profit of something like £25,000,000 out of Ireland, and yet you are always talking about the burden Ireland is to you, the trouble she gives you, and the difficulties you have to contend with in dealing with her. I do not rise for the purpose of doing more than enter my protest as one of the few representatives from Ireland. The country is not considered in any fiscal adjustment between this nation and Ireland. You consider only how far you can bleed her. I think it was the right hon. Gentleman the Lord President of the Council whom I heard say, standing at that bench, that for fifty years the policy of this country was deliberately to destroy Irish industries, and he gave historical proofs for his assertion. There is only practically the distilling and the brewing industry left in three provinces, and you come now and plant upon this industry heavy and almost impossible imposts. You will destroy it along with the rest, and then you talk about a discontented and disloyal Ireland. No country could be other than disloyal and discontented that gets nothing from you but fresh additional burdens and a system of government that no honest man can defend in any country in the world.


May I appeal now to hon. Members to allow us to come to a decision, as there will be many other opportunities for Debate.

Question put, and agreed to.

Resolution to be reported To-morrow.

Committee to sit again To-morrow.