§ 12. "That—
- (a) Interest at the rate of five per cent. per annum without deduction for Income Tax shall be charged on Excess Profits Duty and Munitions Exchequer payments, in the case of any such duty or payments which became payable on or before the first day of January, nineteen hundred and
1842 twenty-two, as from that date, and in the case of any such duty or payments becoming payable after that date, as from the expiration of two months from the date on which the duty or payments was or were assessed; and - (b) In computing profits or income for the purposes of assessment to Income Tax, no deduction shall be allowed in respect of interest so payable."
§ First Resolution read a Second time.
§ Mr. NEIL MACLEANhad given notice of an Amendment to leave out from the word "That" to the end of the Resolution, and to insert instead thereof the words "the Customs Duty now payable on tea shall, on and after the fifteenth day of May, nineteen hundred and twenty-two, be repealed."
§ Mr. SPEAKERThe Amendment standing in the name of the hon. Member for Govan (Mr. N. Maclean) is not in order at this stage, because the proper place to move it is in Committee on the Bill.
Mr. T. THOMSONI beg to move to leave out the word "eight," and to insert instead thereof the word "six."
4.0 P.M.
This is the first of a series of Amendments which have been tabled from this side of the House which raise the vexed question of the proper proportion which is to be divided between direct and indirect taxation. I believe these Amendments have been referred to before as "hardy annuals." Perhaps the proper term would be that they are plants of a perennial nature whose roots have grown deep down in the garden of the Chancellor of the Exchequer, and I hope on this occasion the right hon. Gentleman may consider them worthy of some culture in his garden. The right hon Gentleman said last week that he did not attach very great importance to the time-honoured distinction between direct and indirect taxation. I presume that, following the usual Coalition policy, ancient principles which have stood the test of time are being jettisoned for new-fangled ideas. I do not think that we need apologise for stressing the importance of the relationship between indirect and direct taxation. At any rate, we on this side of the House can look back with pride upon what are known as the Newcastle Resolutions, dealing with the free breakfast table. One can go further back and recall such a recognized economist as 1843 John Stuart Mill, who, writing in the middle of last century and referring to the injustice of indirect taxes, and particularly to the duties on tea, coffee, sugar, beer and spirits, said:
At present these are grossly unjust from the disproportionate weight with which they press upon the poorer classes.That is true with added force to-day. If we compare the burdens of taxation in 1921 with those of to-day, we find that, whereas there have been very great abatements in direct taxation, the abatements made in indirect taxation are very much less. There are some illuminating figures on this point in the White Paper circulated by the Financial Secretary to the Treasury. In 1920–21 the yield from Customs and Excise was £333,000,000. This is reduced in the forthcoming Budget to an estimated revenue of £273,000,000, or a fall of £60,000,000, which is equivalent to 18 per cent. If you turn to Income Tax, Land Tax, Excess Profits Tax, and the series of taxes which are scheduled as total Inland Revenue, all being direct taxes, whereas in 1920–21 the receipts equalled £690,000,000, that figure has fallen to an estimate in the forthcoming year of £445,000,000, a drop of £245,000,000, or 35½ per cent. Whereas the Chancellor of the Exchequer has reduced direct taxation to the extent of 35½ per cent. he has only reduced indirect taxation to 18 per cent., though no one would contend that the burden of indirect taxation in 1920–21 was less than in ought to have been. We all felt that the burden of Customs and Excise—the duties on tea, beer, wine, and spirits—were up to the breaking point. Yet the reduction that he has made this year, compared with three years ago, in indirect taxaton is only half the reduction that he has made in direct taxation. I submit, therefore, that whatever sum he has for reducing taxation this year should be more fairly apportioned between the direct and indirect taxpayer. But while he is remitting £33,000,000 to the direct taxpayer, he is only remitting a paltry £5,000,000 to the indirect taxpayer. I submit that the burden on the poorer classes, as John Stuart Mills says, is infinitely greater than on those who are more fortunately placed.We know perfectly well that the Tea Duty is not an ad valorem duty. If a lady in Mayfair buys tea at 6s. or 8s. 1844 the pound she is charged only 8d. duty, equivalent to about 8 per cent., whereas, if a poor widow in White-chapel buys inferior tea at 1s. 6d. per lb., she has to pay the same amount of 8d., equal to 44 per cent. The incidence of this tax is, therefore, unequal. It means a burden of 8 per cent. on the higher-priced teas and a burden of 44 per cent. on the lower-priced teas. It works inequitably, because it amounts to a much heavier charge on the income of the ordinary worker or person of moderate means. The burden of indirect taxation for the coming year averages something like 10s. 6d. per family of five, which is equal to one-third of an income of 35s. per week. The same taxation of 10s. 6d., where the weekly income is in the neighbourhood of £35 a week, means a tax of only one-sixtieth. I submit, therefore, that the Chancellor of the Exchequer might more fairly apportion the relief which he is giving, so that those who are hit the hardest will get the advantage.
In the old days the question of wages was one merely of supply and demand. Fortunately, we have learned, as the result of the War, that the question of the cost of living comes in as a material factor. Therefore, if the Chancellor of the Exchequer be anxious, as we know he is, to stimulate trade, I suggest that he could not do anything which would help more in that direction than by reducing the charges which go to burden trade. If he would only take more off indirect taxation, he would make the real value of wages much higher, and that would enable a reduction in those charges which are in many ways preventing us getting the trade which we desire. If his object be to stimulate trade, let him reduce much more considerably the burden of indirect taxation, so that the nominal wages received will have more real purchasing power. We know perfectly well that the most fruitful form of expenditure is not on taxes, but on the ordinary requisites of the ordinary household. If there were relief given in this indirect taxation, instead of this 10s. 6d. going to the Exchequer for doubtful purposes, it would go into ordinary channels and help to stimulate trade and add to the well-being of the nation as a whole. I suppose that, having allocated so much relief to Income Tax, he will say that he cannot spare any money for relief in other directions. I 1845 would submit to him, however, that there is a source of revenue which he might very well tap for this particular purpose. He told us that he expects from Excess Profits arrears to get something like £29,000,000 in the coming year. I suggest to him that that figure is likely to be greatly exceeded.
§ Mr. SPEAKEROn the Report Stage of these Resolutions, we can deal only with the particular duty before the House at the moment. We cannot go into every other tax. We must concentrate on the Tea Duty, which for the time being is before the House.
Mr. THOMSONI was anxious to show that the Chancellor of the Exchequer could make this reduction because he would get a larger income from Excess Profits arrears than he has foreshadowed in his Budget. I should like to know whether I should be in order in suggesting a means——
§ Mr. SPEAKERNo; if that were allowed, it could be done on each of these Resolutions, and that would reduce the procedure to an absurdity. When we come to the Report stage, we must deal in a business-like way with each Resolution.
Mr. THOMSONI bow to your ruling, Sir. I was only anxious to anticipate that the reply of the right hon. Gentleman would probably be that they had exhausted all their funds available for remission of taxation, and to suggest a way whereby on his present Budget he can get more to reduce indirect taxation. He has taken off entirely the Excess Profits Duty. I am not quarrelling with that. It was put on because of abnormal profits made during the War. I submit that the Tea Duty was increased owing to the larger wages that were received during the War. War profits have gone, and so has the Excess Profits Duty. I submit that the same reason which has called for the abolition of the Excess Profits Duty calls for a reduction of the Tea Duty which was imposed owing to the higher wages and better capacity of ordinary people to pay. Just as the one, a War charge, has disappeared, so the other, this Tea Duty, should be reduced. The Amendment does not suggest that the Tea Duty should be wiped out altogether, but that it should be reduced to 6d.,so that an extended 1846 benefit might be given to those who are paying such a large sum in indirect taxation. I hope that the right hon. Gentleman will be able to adjust more equitably the two forms of taxation, so as to relieve a burden which presses so hardly on those who are least able to bear it.
This tax of 8d. in the pound is a very heavy burden on those who at present find it difficult to make ends meet. We have nearly 2,000,000 people unemployed, and their families have to scrape along on 25s. per week or even less. It is impossible for them to go on paying these excessive charges. It would be true economy to reduce this amount of indirect taxation and stimulate trade by the circulation of money which would go into more profitable channels than into the pocket of the Chancellor of the Exchequer. I submit that this is sound doctrine and sound principle. It was true in 1865, when John Stuart Mill wrote his "Principles of Economics," and it is equally true to-day. It is sound economy, and it would help to build up a more stable State. I hope, therefore, that the Chancellor of the Exchequer will see his way to make some concession to those who are overburdened by the present amount of indirect taxation which they have to pay.
Dr. MURRAYI beg to second the Amendment. I do not do so because I think more tea should be consumed. People perhaps drink more tea than is good for them. I look upon tea, not as a food in itself, but as something with which to wash down food. It is a necessary article in the food economy of every family in the country, and especially of the working-class family. It is a big mistake to think that indirect taxation of this kind affects only working-class families. It affects all middle-class families, and especially what is conventionally called the lower middle-class families with fixed incomes. It is necessary that they should get a good deal more relief than they are getting in the present Budget. I would much prefer to see a reduction of the sugar duty. From a social and medical point of view it would certainly be of much more value to the population as a whole than a reduction even of the tea duty. We cannot discuss the Sugar Duty upon this Resolution. The only way we have of attempting to reduce the family budget of the working man and the lower middle 1847 class is by asking the Chancellor of the Exchequer to increase the reduction which he proposes to make in the duty upon tea. As has already been said, it may be suggested that there is no money, but from the way in which the Chancellor of the Exchequer received suggestions thrown out by the hon. Member for North-East Derbyshire (Mr. Holmes) the other night as to the likelihood of his having a big surplus up his sleeve for the next Budget, I think the right hon. Gentleman really believed that money could be found for this reduction, and a good deal more than that. I do not know whether or not that is true, but from the general impression one got from the reception he gave to the suggestion of the hon. Member, I think he does feel that his Budget would produce a good deal more revenue than he professed to the House. I am not an authority on these matters, but that certainly is the impression I got from the Chancellor's speech on that occasion. I also notice that the inspired Press, which was able to forecast accurately what was going to take place in the Budget, has been suggesting that the Chancellor has much more money in store than he was willing to profess to us. Therefore, from all this evidence, I am inclined to think the right hon. Gentleman can afford the reduction contained in this Amendment, even from his own point of view.
I understand that a general discussion as between direct and indirect taxation is ruled out of order, but perhaps I may be allowed to make one remark upon that. A point worth remembering in regard to the way the tax falls upon the poorer portion of the population is that wages have been reduced in the last two or three years to the extent of something like £500,000,000 and that 2,000,000 of people are out of employment. Therefore, indirect taxation—and that is the only remark I am going to make upon it—falls much more heavily, relatively, this year upon the working population than it has done for perhaps a generation past. On that ground alone more relief should have been given. Under the Resolution a reduction of the Tea Duty is the only way in which we can suggest relief at the present stage. I am not going to attempt to repeat the arguments put forward with so much eloquence by my hon. Friend, because I do not believe in repeat- 1848 ing other people's arguments, but I do subscribe to all my hon. Friend said. I believe if the right hon. Gentleman could see his way to grant this reduction he would, as has been suggested, stimulate trade. I do not suggest that more tea would be used, but the money saved would be used for other purposes which would in various ways stimulate trade in the country just as much as 1s. off the Income Tax. I beg to second the Amendment proposed by my hon. Friend, with an expression of sentimental regret that I should have taken part in proposing the first amendment opposed to my right hon. Friend on the occasion of his first Budget in this House, although on one occasion he succeeded in defeating a Budget of mine and bringing down a Government.
Sir J. D. REESThe trotting out of hoary old fallacies and the restatement of long exploded theories of obsolete political economy are so constant a feature of these yearly Debates on the Tea Duty Resolution that time is almost wasted in refuting the arguments which the hon. Member for West Middlesbrough (Mr. T. Thomson) has brought forward to support his Amendment. He argued as if the direct taxpayer and the indirect taxpayer were two different units and had nothing in common, and as if the direct taxpayer were not an indirect taxpayer as well, although the only difference is that the direct taxpayer pays out more in indirect taxation. He argued as if the over taxation of the direct taxpayer were of no harm to the indirect taxpayer, whereas it harms him much more than the direct taxpayer. All this has been proved, and the world has had a terrible object lesson in regard to all these fallacies in the case of Russia. The hon. Member, who purports to represent the working classes rather more nearly than myself, though Heaven knows why, should have endeavoured to persuade the Chancellor—if I could persuade him I would try—to make this 4d. reduction a real reduction, operative on the tea grown in the British Empire, which is nine-tenths, and not only in respect of the one-tenth, which comes from foreign countries. I presume that the 3⅓d. is to 10d. as the 4d. is to 12d., and that some kind of obligation is imposed on the Chancellor of the Exchequer to make the relief operative in equal proportions in respect of the two classes of tea, both 1849 that which pays the full 1s. and that which only actually pays 10d. I suppose that that is the reason for the differentiation, which otherwise I should find it rather difficult to understand, and which I have not really seen actually explained, though I have suggested what I think is the explanation.
I am not concerned to oppose the reduction of 6d. which has been moved by the hon. Member. All I know is that the Chancellor cannot do it unless he saves a great deal more money. Therefore time is lost in asking for the 6d. off. I should like to ask the Chancellor of the Exchequer—it is quite cognate to this Amendment—if he is going to postpone the introduction of the new duty until 29th May, or if he is going to introduce it on 15th May. I understood that 15th May was likely to prove too soon for those who had large tea stocks, and though I am not quite clear what is their present attitude in regard to this matter, I do know the right hon. Gentleman must be in possession of the latest information. Perhaps he will take the opportunity of telling the House when he replies upon the reduction which has been moved.
§ The CHANCELLOR of the EXCHEQUER (Sir Robert Horne)The hon. Baronet who has just sat down has asked two question which, I am afraid, are referable to two Amendments on the Paper which have been passed over. The last question which he put was with regard to the date at which the reduction should be brought into operation. No doubt, originally, the people engaged in the tea trade were desirous that the duty should be postponed. Since then they have found it practicable that the matter should be dealt with at once, and the date referred to in the Resolution is the date on which we propose to bring the reduction into force. Accordingly, the hon. Member for Kilmarnock (Mr. A. Shaw), who had an Amendment on the paper, did not appear to move it, and apparently his action is consonant with the view of the tea trade. The other question of the hon. Baronet was in regard to the effect of the fraction on the Dominion tea trade. Again, that Amendment has not been moved, and I am afraid one is not in order in going into any argument on the matter. All I say is that in practice no 1850 difficulty will be found to arise out of the fractional reduction which is brought about by giving to the Empire tea trade its proper proportion of the reduction, so I am informed.
Sir J. D. REESThe suggestion rather is that the Empire trade and the British consumer and the interests of the consumer would be so much improved if the reduction could be the complete 4d.
§ Sir R. HORNEThat Amendment has not been moved, and if the hon. Baronet has any matter to raise on it, he must do so later. I am certainly not entitled to go into the merits of the question. My opinion is that there will be no difficulty arising out of the fraction.
The question has been put before the House as to reducing the tea duty by more than the amount which I proposed. I proposed to reduce it by one-third. My hon. Friend the Member for West Middlesbrough (Mr. T. Thomson), who has made a very eloquent speech on behalf of the indirect taxpayer, proposed that it should be reduced by one-half. I quite agree that we should all of us get considerable benefit by the reduction of taxation, both direct and indirect, but, on the other hand, I must get my revenue. What my hon. Friend proposes would cost in a full year £3,000,000 and in the present year £2,750,000. That loss I quite frankly cannot afford to bear. That, really, so far as I am concerned, concludes the matter, but I should like to ask upon what ground it is suggested that we ought to give this additional relief to that which I have already proposed? There was an argument put forward on the ground of the burdens of the indirect taxpayer, and you, Mr. Speaker, have ruled that the general question is not one which we can discuss upon this particular Amendment. Accordingly, I do not go into it, but I would beg the House to notice that the whole of the taxation which falls upon the indirect taxpayer in respect of tea, coffee and cocoa amounts to 1½d. per head per week. My hon. Friend would seek to reduce that burden to something between 1½d. and 1d., perhaps to 1¼d. Surely it is scarcely worth while having a discussion upon a matter which is so infinitesimal as that. In any case, my first answer is the real 1851 one, I cannot afford to lose £2,750,000 in the year.
§ Mr. MYERSEven at the risk of reiteration of some of the stock arguments which were used in connection with this matter I desire to say a word or two in support of the Amendment. The point which has just been raised by the Chancellor of the Exchequer in respect to the average saving per head of the population that the Amendment would secure, or averaging the tax per head of the population as it is levied upon them, contains the kernel of our argument. Our first point is that this tax upon tea is inequitable in its volume when compared with the reduction of taxes in other directions. We are told that in a full year the reduction of 1s. on the Income Tax is likely to afford to the Income Tax payers a remission of £52,000,000. The whole of the remission in taxation which has been given to the tea drinkers of the country corresponds to something like 1¼d. on the Income Tax. When we compare the two, it seems to me that it is altogether inequitable. If we pursue the comparison a little further, we find that 4d. on the Income Tax is about equal to the entire taxation upon tea, and if, instead of the Income Tax being reduced by 1s., it had been reduced by 8d., the remaining 4d. would have wiped out every penny of the taxation which is imposed by way of duty on tea. We are also informed that the remission of taxation upon tea will not do all that the Chancellor of the Exchequer has suggested, but that only a certain proportion of the tea will secure a reduction of 4d. per lb., while practically 90 per cent. of the tea used in this country will only secure a reduction of about 3½d. per lb. We have heard a great deal about the incidence of indirect taxation upon the poorer sections of the community, and I will not repeat the stock arguments as to the effect of this Tea Duty upon old age pensioners, discharged soldiers, and the like; but there is one particular point which is worthy of consideration in connection with that matter. There are a large number of discharged men in the country to-day who, at least, have done their share, so far as the War was concerned, without being called upon to contribute an unequal proportion towards paying for the War after they have done their bit in other directions.
1852 The important point, however, is the inequity of the operation of this tax upon the working people. Under normal conditions, among the working classes an average family consumes more tea than in any other corresponding section of the community, and, that being so, they contribute a much greater proportion of these tea duties to the Exchequer than any other section. But, paradoxical though it may seem, the worse the times are from the point of view of unemployment and trade depression, the greater is the contribution to the Tea Duty by the working-class population. In a period of unemployment, of trade depression, of low wages, the working-class population of the country are forced back upon a bread and butter diet, and, just in proportion as that low standard of living has to be accepted by the working people of this country, the more tea is consumed. At every meal of the day, morning, noon and night, when that low standard of living prevails amongst the working classes, the teapot is practically working full time, and the worse the period through which the working people are passing, the greater their contribution to the Tea Duties. Therefore, from the point of view of the inequity of its volume as compared with the remission of taxation on the Income Tax, this tax stands condemned. When we compare its incidence and operation in detail upon the working people of the country as against other sections, there is an equally strong case against the imposition of this tax. Therefore, I support this Amendment, which asks that the Tea Duty be 6d., instead of 8d. as proposed by the Chancellor of the Exchequer.
Major BARNESI had an Amendment on the Paper, which has been referred to by the Chancellor of the Exchequer, and which asked for a smaller reduction than that asked for by my hon. Friend the Member for West Middlesbrough (Mr. T. Thomson) in his Amendment. The difference between the two Amendments merely represents the difference between myself and my hon. Friend. I am a realist; he is an idealist. Those of us who are generally associated together on this bench formed the idea that the House might be in a generous mood this afternoon, and that the Chancellor of the Exchequer might be feeling particularly generous, and might be will- 1853 ing to give us the reduction which we are seeking. One cannot see into the Chancellor's brain and know what he would have said had my Amendment been moved, but I suppose it would not be impossible for the Government, at a later stage in this Debate—say through the mouth of my hon. Friend the Financial Secretary to the Treasury—to say that, while they are not prepared to give the remission of 6d. which is now being asked for, they are prepared to go to the length indicated in the Amendment which I did not move. I think there is some reason for their doing that. It would not be in order to go into the whole question of direct and indirect taxation, but I do deplore the attitude of the Chancellor of the Exchequer in regard to this matter. I have no doubt that in private life he is one of the most generous of men, and that any appeal to his feelings receives an immediate response; but I do think that, in his character as a statesman, he shows a certain amount of indifference to the condition of the poor of this country, and that, when we press their claims upon him, they do not meet with the recognition with which they ought to meet. Let me point out what has happened here. The Chancellor of the Exchequer, in a delightful moment of surprise, found that ho had something like £40,000,000 to give away, and out of that sum he has allocated on this particular duty an amount, I think —he will correct me if I am wrong—of not more than about £5,000,000. That is the amount of relief which is coming into the homes of the poor as a result of the reduction already made in the Tea Duty. When he is asked for more, he says, "Well, what do you want me to do? Do you want me to take off another 2d.? What is the burden at present? It is not more than 1½d. per head per week on the average. How trilling! How insignificant! Why should I disturb so light a load?" I would suggest that even 1½d per head per week, when you come to deal with a family receiving the smallest wages, is a consideration. I am sure that in the constituencies represented by some of my hon. Friends who sit near me there are a good many large families where that 1½d. per head per week forms a considerable item in their expenditure.
§ Sir R. HORNEYes, but the Amendment only proposes to reduce it by ¼d.
§ Mr. W. THORNEA farthing counts when there are a dozen people.
Major BARNESIn the constituency represented by my hon. Friend this ½d. would, indeed, be a considerable amount. There has always been in the mind of the country, and in the mind of the House, some sort of distinction between the two kinds of relief that might be given by a Chancellor of the Exchequer —the relief to the direct taxpayer and the relief to the indirect taxpayer. Without going in detail into that question, the right hon. Gentleman seems to be a heretic in this respect, that in his present Budget he has passed clean away from the proportions observed in the past.
§ Sir R. HORNEThere has been no proportion observed in the past. If my hon. and gallant Friend is going into that, he is, I hope, going to give the figures. What has happened in the past has been that steadily year by year the proportion of burden borne by the direct taxpayer has been getting larger, and that borne by the indirect taxpayer has been getting less.
Major BARNESI do not profess that my knowledge of these matters is as profound or as wide as that of the right hon. Gentleman, and one does know, of course, that there has been a change in the whole, movement. If one goes far enough back, one knows that the proportion of the burden upon the indirect taxpayer used to be greater, but the times, happily, have changed, and I am quite prepared to believe what we are told at present, namely, that the proportion is something like 60 per cent. ——
§ Sir R. HORNEMore.
§ Sir R. HORNEIt is 63 at present.
Major BARNESSixty-three per cent. and 37 per cent. Even on that basis, when the right hon. Gentleman was dealing with this sum of £40,000,000, I think he should at least have given a third of it to the indirect taxpayer. Leaving all those questions on one side, I do think that the Chancellor—quite unconsciously, I am sure—has really done something which is not altogether transparent in this matter of the 4d. reduction. It is pre- 1855 sented to the country as 4d. off the tea duty, but as a matter of fact it is not 4d. off the whole consumption of tea in this country; it is only 4d. off a very small proportion of the tea consumed in this country—something like 10 per cent.
§ Sir R. HORNEI do not know whether my hon. and gallant Friend wants to take away the preference given to the Colonies. In that case it would be 4d. off all tea.
Major BARNESI do not propose to be side-tracked at this moment by the Chancellor of the Exchequer on to a discussion upon preference, and I am sure I should not be allowed to enter upon such a discussion.
§ Sir R. HORNEThen the hon. and gallant Member cannot pose as the friend of the tea drinker.
Major BARNESWe will leave the tea drinker to judge between the right hon. Gentleman and myself when this Debate is finished. The fact is that the Chancellor of the Exchequer comes down and tells the House, and through the House the country, that 4d. per lb. is coming off the tea duty. That is circulated, as all the right hon. Gentleman's utterances are circulated, and I have no doubt that in the poorest homes in this country the information was received with relief by people who buy their tea in small quantities like a quarter of a pound at a time, and who will have thought that they were going to get it for 1d. less. The Chancellor of the Exchequer knows, however, that that 4d. in the lb., in respect of 90 per cent. of the tea consumed in this country, is going to dwindle to 3⅔d. I have no doubt that the Chancellor of the Exchequer has high officials at the Treasury who can divide 3⅔d. by four, but when the ordinary grocer comes to divide it he will not make it 1d., and, therefore, what is really going to happen is that a great many of these people—not, I believe, because they want to—will make a profit out of this impossible division of the tax. I suggest to the Chancellor of the Exchequer that he ought to put himself straight with these people, and make this 4d. a real 4d., giving to those people who buy their tea in these small quantities, and to whom the relief, although it is so small, would be the greatest boon, the absolute certainty that they shall get this reduction, and making it 1856 impossible for anyone to put them off by saying that the tax is 3⅔d., and that, therefore, it is not possible to take 1d. off the ¼ lb. They should be able to say that, since 1d. came off the duty, they must be given that 1d. on their ¼lb. of tea. I do not know what the Chancellor was going to say if that request had been put in the form of an Amendment. I do not know what the Financial Secretary will say, but there was an indication, I think, in the Budget statement, that the profit on tea sold by retail was sufficient to enable people to get the full 4d., although the duty was only reduced by 3⅔d. Again, I do not think that that is a proper line for the Chancellor of the Exchequer to take. If this Government think that there is profiteering in the retail tea trade, they ought to deal with it as profiteering, and ought not to come down and attempt, by the manipulation of some sort of tax, to make people disgorge what are believed to be improper profits. We shall have another opportunity of dealing with the matter on the Finance Bill, but I do press upon the Government that they should give this question of making a frank reduction of 4d. over the whole consumption of tea their fullest consideration before finally making up their mind.
§ Mr. MILLSThe Chancellor of the Exchequer has made use of a very misleading statement in his assertion that the tax is merely one of 1½d. per head. I can assure him, if he is not already aware of it, that millions of people are in the position where they are at their wit's end how to spend the meagre pence that are coming in. It can safely be said that farthings are as common in Erith as I.O.U's in Mayfair. I know one man, two of whose sons fought in the War. Both are unemployed, as well as himself, and the unemployed pay is paid back into the Exchequer if a pound of tea is bought. How then can it be a truthful assertion that this is a case where the burden is only borne in the proportion of 1½d. per head of the population? You give the old age pensioner ten shillings. When he buys ½ lb. of tea you call upon him for a direct tax of 8d. How can it be asserted that it is a tax of 1½d. per head of the population? In my view the tax is inequitable. The Income Tax payer who is receiving relief is also receiving relief as a buyer of tea, and I have yet to learn that there is a sliding 1857 scale of taxation for tea. Those who buy tea dust pay as much per pound in taxation as they pay for the best tea the right hon. Gentleman has ever interjected about. Therefore there should be a review. After all, wages followed prices in the upward trend, and they are advancing ahead of prices in the downward trend, as usual. Our people are receiving reductions amounting to £6,500,000 per week, and that is a contribution which deserves some material contribution from the Chancellor when taxes are to be remitted. He ought to give a little more attention to it. We regret that the remission in tax is confined to tea.
We realise that there are very many interests which might have been considered and might have been placated by a more common sense adjustment of the burden of taxation. Nine and a half pounds of sugar go to a barrel of beer. Sugar comes into the manufacture of very many industries, and I know many engineering firms which might have been able to start up if there had been some remission in the duty on sugar, which is 200 per cent. above the pre-War duty. These are things which, if they had been handled by the right hon. Gentleman with a view to securing the widest possible amelioration of the burden of taxation, might have achieved a greater result than he is achieving. Therefore, I support the Amendment. If he cannot accede to it, and if he is sheltering himself behind the failure of the hon. and gallant Member for East Newcastle (Major Barnes) to move his Amendment, even although the Amendment has not been pressed the sense of the House is here. Hon. Members have received the protests of the tea merchants. I do not know whether they reached the Chancellor of the Exchequer or whether they stopped short at his penultimate secretary, but they are part of our correspondence— part of the assertion by the tea trade that they cannot split this burden up into quarter pounds and it means that the very poorest of the population, who buy quarter-pound packets, are those most-likely to escape some recognition of the burdens they bear. After all, the great majority of our people are deluded with the idea that the method by which the cost of Government is borne is the direct method of the assesment of the ability of every individual to pay. They are 1858 deluded by the idea that their poverty is recognised, when as a matter of fact the impositions which are carried on from week to week make an intolerable burden out of all proportion to the amount of taxes which are paid by other sections of the community.
§ Mr. MOSLEYVery powerful arguments have been advanced from these benches in favour of this remission of taxation which the Chancellor of the Exchequer has not sought to refute, but has relied rather on the argument that he cannot afford the loss of revenue which would be involved. I see in this point yet another argument in favour of the reduction of taxation, for any hon. Member who has observed the course of our financial Debates must long ago have come to the conclusion that it is only by limiting this Government to a definite maximum of expenditure that we can hope to obtain economy. It is only by rationing them that we can compel economy in a Government which is notoriously the most profligate in history. That, of course, has now passed without the realm of controversy into the colder sphere of fact. It is precisely by this process that the right hon. Gentleman was compelled to effect great economies in the year that has passed. The revenue declined by £91,000,000 below his Budget estimate, and in order to save our finances from a deficit he was compelled to effect economies during the course of the year of no less than £69,000,000. At any rate that shows that so far from a reduction of revenue being detrimental to the interests of the nation, it has actually been beneficial, and that by refusing the right hon. Gentleman the high rate of taxation which he desires, thus producing a lower revenue, we may compel him to economise in a way we have failed to do in the many Debates of the last few years. In this way alone, by rationing the Government, through a reduction of taxation and a consequent lowering of the revenue, can we induce the economy which we desire, and, therefore, in addition to the other arguments which have been advanced, I shall be animated in voting for this reduction of taxation, and for any other reasonable reduction which may be moved, by the thought that in this way alone, by rationing the Government to a compulsory and arbitrary limit, can we effect that 1859 economy for which we have striven for a very long time past.
§ Lieut.-Commander KENWORTHYI want to bring to the notice of the Chancellor of the Exchequer a communication from the Association of Tea Retailers of Hull. These gentlemen, who are presumably in full possession of all the facts, write as follows:
I am requested to urge you to press the Chancellor to reduce the duty on all tea by 4d. per lb., as in 90 per cent. of imported teas the proposed reduction is only 3⅓d., which will involve serious complications and will be exceedingly unsatisfactory. Consumers will be unable to appreciate what should be the proper price of tea with a reduction of 3⅓d. off the duty.I think that is a very serious statement. The Press announced last week that 4d. was coming off tea. Here I have the Retail Grocers' Association of Hull making the statement in writing that in 90 per cent. of the tea consumed in this country the amount is only a little over 3d. The duty ought to be adjusted, otherwise the charge of deliberately misleading the public can be preferred. There is no reduction of 4d. off tea. It is a little over 3d. in 90 per cent. of the cases. I should also like to ask if the right hon. Gentleman can state the intentions of the Government with regard to the actual date when this duty will come into force on teas held in bond. For example, will it be possible for merchants to clear their stocks seven days before 15th May?
§ Sir R. HORNEI have already dealt with that topic.
§ Sir R. HORNEThis afternoon.
§ Lieut.-Commander KENWORTHYI followed the right hon. Gentleman, but I rather missed that point. I hope he has dealt with it satisfactorily.
§ Sir R. HORNEI have.
§ Lieut. - Commander KENWORTHYThank you. I am extremely obliged. I hope the right hon. Gentleman can also deal satisfactorily with the first point I raised. It has been pressed, I think, by both sides of the House, certainly by every Member on this side, as a very material point. If he promised 4d. he should be compelled to implement that promise and make the reduction 4d.
§ Sir R. HORNEThe hon. and gallant Gentleman must notice that he is dealing now with an Amendment which has not been moved.
§ Lieut. - Commander KENWORTHYThat is so, but we are having a general discussion. This is the only Amendment we are moving on tea, and I am hoping the right hon. Gentleman will sec his way, as an act of magnanimity and not in answer to any representation from this side of the House, to make this reduction. He can do so, and I make this appeal. He talks about the duty on tea only bearing on the population to the extent of 1½d. per head a week, but the Government of which he is such an ornament, when they introduced the relief for the unemployed, only allowed a shilling per head for a child for the whole of its subsistence for the whole of the week, and therefore 1½d. is no negligible sum for the family of an unemployed workman, and there are nearly two millions unemployed persons. Any reduction will undoubtedly relieve them. Furthermore, I noticed that the right hon. Gentleman stated that he could not possibly afford this reduction. That may be so with the ridiculous expenditure that he has been a party to and in which he, as the nominal guardian of the public purse, has very weakly acquiesced. While he was at Genoa, I am afraid Estimates were got out, I suppose with his knowledge and prior approval, which have run us into expenditure which the country cannot afford, and that is why this intolerable burden of taxation is being kept up. It is not our business to tell him how he can make his economies. We say the expenditure is more than the public can bear, and we are supported in that by all classes of the community. The business of the Government is to find out how they can make the reductions and enable taxation to be reduced, or to get out and give way to a Government that can.
§ Sir GODFREY COLLINSThe Chancellor of the Exchequer earlier to-day informed us that this concession would cost the taxpayer £3,000,000. I should like to ask him if in his Budget estimate of revenue he is estimating for an increased consumption owing to the lower duty which he is levying on tea.
§ Sir R. HORNEI have taken all considerations into account.
§ Sir G. COLLINSCan the right hon. Gentleman inform us what is the percentage?
§ Sir R. HORNEI cannot tell you the precise percentage, but that has been taken into account.
§ 5.0 P.M.
§ Sir G. COLLINSThis Amendment, if carried, would lower the duty on Dominion tea to 5d., and under the proposals of the Chancellor the duty will be 6⅔d. It might be of interest on this Amendment to follow what happened through the lower duty on tea which has come from the Dominions during the last three years. What economic effect has Preference in practice brought about? I find that in 1913 the re-exports of tea—Preference will only operate on the re-exports of tea—amounted to 57,500,000 lbs. In 1920, 12 months after the Preference duties had operated, the re-exports of tea amounted to 41,281,000 lbs. It may be said that the depressed conditions on the Continent would be sufficient cause for the re-exports of tea to decrease in that year, but when I come to the following year and find that there is a still further decrease, I think the right hon. Gentleman will see that there are other causes at work to account for it.
§ Sir R. HORNEIs the hon. Member addressing himself to the question of getting rid of the Preference?
§ Sir G. COLLINSI am addressing myself, first of all, to what has really happened, so far as this country is concerned, in the lower duties on tea to the Dominions.
§ Sir R. HORNEWith what object?
§ Sir G. COLLINSWith the object of showing that, although this House has thought that a Preference in practice would be to the interest of the people of this country, that Preference in practice hurts the trade of this country.
§ Mr. SPEAKERThat question does not arise here. The Amendment is simply to leave out 8d., and to insert 6d. There was an Amendment on the Paper that might have enabled the hon. Member to raise this point, but I was informed that that was not to be moved, and this Amendment is taken in lieu of it.
§ Sir G. COLLINSIn the first line of the Resolution there are the words:
That in lieu of the Customs Duties now payable.Under the new proposals there is a duty of 8d. on China tea and 6⅔d. on Dominion or Empire tea. Our object in moving the Amendment is to lower the 8d. to 6d., and then, by consequential Amendment, to lower the duty proposed in the Budget from 6⅔d. to 6d., which would have the effect of making an overhead duty of 6d.
§ Mr. SPEAKERThat Amendment does not raise the whole question of Preference as it stands now. It raises the question of the duty on Indian tea, but it does not raise the whole question of preference.
§ Lieut. - Commander KENWORTHYMay I ask a question of the Chancellor of the Exchequer?
§ Mr. SPEAKERThe hon. and gallant Member has exhausted his right.
§ Captain WEDGWOOD BENNOn the point of Order. I understand that the law at the moment is that 8d. shall be paid on one pound of tea, and the law, of which this Resolution is an amendment, also gives a rebate in respect of Colonial tea. Therefore, I submit that in moving an Amendment to the Resolution my hon. Friend might be permitted to refer to the effect of the preferential duty on the Amendment.
§ Mr. SPEAKERIt would not be in order.
§ Sir G. COLLINSI do not desire to challenge your ruling, Mr. Speaker, but this particular Resolution deals with two duties, one duty on Empire tea and the other the duty on China tea. I am anxious to show that there are different duties on these two classes of tea, and that economic forces are at work which are prejudicial to British trade, and my argument was addressed to that one point.
§ Mr. SPEAKERThat point does not arise.
§ Question put, "That the word 'eight' stand part of the Resolution."
§ The House divided: Ayes, 190; Noes, 55.
1865| Division No. 95.] | AYES. | [5.5 p.m. |
| Adair, Rear-Admiral Thomas B. S. | Gilmour, Lieut.-Colonel Sir John | Parker, James |
| Adkins, Sir William Ryland Dent | Goff, Sir B. Park | Pennefather, De Fonblanque |
| Agg-Gardner, Sir James Tynte | Grant, James Augustus | Percy, Lord Eustace (Hastings) |
| Armstrong, Henry Bruce | Green, Joseph F. (Leicester, W.) | Phillpps, Sir Owen C. (Chester, City) |
| Bagley, Captain E. Ashton | Greig, Colonel Sir James William | Pilditch, Sir Philip |
| Baird, Sir John Lawrence | Gritten, W. G. Howard | Pownall, Lieut.-Colonel Assheton |
| Baldwin, Rt. Hon. Stanley | Gwynne, Rupert S. | Pretyman, Rt. Hon. Ernest G. |
| Balfour, George (Hampstead) | Hambro, Angus Valdemar | Purchase, H. G. |
| Banbury, Rt. Hon. Sir Frederick G. | Hannon, Patrick Joseph Henry | Rae. H. Norman |
| Banner, Sir John S. Harmood- | Harris, Sir Henry Percy | Raeburn, Sir William H. |
| Barnes, Rt. Hon. G. (Glas., Gorbals) | Hennessy, Major J. R. G. | Randles, Sir John Scurrah |
| Barnston, Major Harry | Hilder, Lieut.-Colonel Frank | Rankin, Captain James Stuart |
| Barrand, A. R. | Hills, Major John Waller | Rawlinson, John Frederick Peel |
| Barrie, Sir Charles Coupar (Banff) | Hinds, John | Rees, Sir J. D. (Nottingham, East) |
| Beckett, Hon. Gervase | Hoare, Lieut.-Colonel Sir S. J. G. | Reid, D. D. |
| Bell, Lieut.-Col. W. C. H. (Devizes) | Hood, Sir Joseph | Richardson, Lt.-Col. Sir P. (Chertsey) |
| Benn, Sir A. S. (Plymouth, Drake) | Hope, Sir H.(Stirling & Cl'ckm'nn, W.) | Roberts, Rt. Hon. G. H. (Norwich) |
| Bennett, Sir Thomas Jewell | Hope, Lt.-Col. Sir J. A. (Midlothian) | Robinson, S. (Brecon and Radnor) |
| Bigland, Alfred | Hopkins, John W. W. | Roundell, Colonel R. F. |
| Bird, Sir William B. M. (Chichester) | Hopkinson, A. (Lancaster, Mossley) | Samuel, A. M. (Surrey, Farnham) |
| Blair, Sir Reginald | Horne, Sir R. S. (Glasgow, Hillhead) | Samuel, Rt. Hon. Sir H. (Norwood) |
| Boscawen, Rt. Hon. Sir A. Griffith- | Howard, Major S. G. | Sanders, Colonel Sir Robert Arthur |
| Bowles, Colonel H. F. | Hume-Williams, Sir W. Ellis | Scott, A. M. (Glasgow, Bridgeton) |
| Bowyer, Captain G. W. E. | Hunter, General Sir A. (Lancaster) | Seddon, J. A. |
| Boyd-Carpenter, Major A. | Hurd, Percy A. | Sharman-Crawford, Robert G. |
| Bridgeman, Rt. Hon. William Clive | Hurst, Lieut.-Colonel Gerald B. | Shaw, William T. (Forfar) |
| Broad, Thomas Tucker | James, Lieut.-Colonel Hon. Cuthbert | Shortt, Rt. Hon. E. (N'castle-on-T.) |
| Buchanan, Lieut.-Colonel A. L. H. | Jameson, John Gordon | Simm, M. T. |
| Buckley, Lieut.-Colonel A. | Jesson, C. | Smithers, Sir Alfred W. |
| Bull, Rt. Hon. Sir William James | Joynson-Hicks, Sir William | Steel, Major S. Strang |
| Burn, Col. C. R. (Devon, Torquay) | King, Captain Henry Douglas | Stewart, Gershom |
| Casey, T. W. | Kinloch-Cooke, Sir Clement | Sturrock, J. Leng |
| Cautley, Henry Strother | Lewis, Rt. Hon. J. H. (Univ., Wales) | Sutherland, Sir William |
| Chamberlain, Rt. Hn. J. A. (Birm., W.) | Lindsay, William Arthur | Sykes, Colonel Sir A. J. (Knutsford) |
| Clay, Lieut.-Colonel H. H. Spender | Lloyd, George Butler | Taylor, J. |
| Cobb, Sir Cyril | Locker-Lampson, G. (Wood Green) | Thomas-Stanford, Charles |
| Cockerill, Brigadier-General G. K. | Loseby, Captain C. E. | Thomson, F. C. (Aberdeen, South) |
| Cohen, Major J. Brunel | Lowe, Sir Francis William | Thomson, Sir W. Mitchell- (Maryhill) |
| Colfox, Major Wm. Phillips | Lowther, Maj.-Gen. Sir C. (Penrith) | Thorpe, Captain John Henry |
| Conway, Sir W. Martin | Loyd, Arthur Thomas (Abingdon) | Townshend, Sir Charles Vere Ferrers |
| Coote, Colin Reith (Isle of Ely) | Lyle, C. E. Leonard | Tryon, Major George Clement |
| Craik, Rt. Hon. Sir Henry | Macdonald, Rt. Hon. John Murray | Wallace, J. |
| Curzon, Captain Viscount | Macdonald, Sir Murdoch (Inverness) | Walters, Rt. Hon. Sir John Tudor |
| Davidson, J. C. C. (Hemel Hempstead) | Mackinder, Sir H. J. (Camlachie) | Warner, Sir T. Courtenay T. |
| Davies, Thomas (Cirencester) | M'Lean, Lieut-Col. Charles W. W. | Warren, Sir Alfred H. |
| Davison, Sir W. H. (Kensington, S.) | Macpherson, Rt. Hon. James I. | Watson, Captain John Bertrand |
| Dawson, Sir Philip | Malone, Major P. B. (Tottenham, S.) | Wheler, Col. Granville C. H. |
| Dennis, J. W. (Birmingham, Derltend) | Manville, Edward | Wills, Lt.-Col. Sir Gilbert Alan H. |
| Dockrell, Sir Maurice | Marriott, John Arthur Ransome | Wilson, Capt. A. S. (Holderness) |
| Doyle, N. Grattan | Mond, Rt. Hon. Sir Alfred Morltz | Wilson, Field-Marshal Sir Henry |
| Du Pre, Colonel William Baring | Moreing, Captain Algernon H. | Windsor, Viscount |
| Edge, Captain Sir William | Munro, Rt. Hon. Robert | Winterton, Earl |
| Erskine, James Malcolm Monteith | Murchlson, C. K. | Wise, Frederick |
| Evans, Ernest | Murray, C. D. (Edinburgh) | Wood, Sir H. K. (Woolwich, West) |
| Falle, Major Sir Bertram Godfray | Murray, Hon. Gideon (St. Rollox) | Woolcock, William James U. |
| Farquharson, Major A. C. | Murray, John (Leeds, West) | Yate, Colonel Sir Charles Edward |
| Fell, Sir Arthur | Neal, Arthur | Young, E. H. (Norwich) |
| Flannery, Sir James Fortescue | Newman, Colonel J. R. P. (Finchley) | Young, Sir Frederick W. (Swindon) |
| Foreman, Sir Henry | Newman, Sir R. H. S. D. L. (Exeter) | Young, W. (Perth & Kinross, Perth) |
| Forrest, Walter | Newson, Sir Percy Wilson | Younger, Sir George |
| Foxcroft, Captain Charles Talbot | Nicholson, Brig.-Gen. J. (Westminster) | |
| Fremantle, Lieut.-Colonel Francis E. | O'Neill, Rt. Hon. Hugh | TELLERS FOR THE AYES.— |
| Gardiner, James | Ormsby-Gore, Hon. William | Colonel Leslie Wilson and Mr. Dudley Ward. |
| Gee, Captain Robert | Pain, Brig.-Gen. Sir W. Hacket | |
| Gibbs, Colonel George Abraham | Palmer, Major Godfrey Mark |
| NOES. | ||
| Addison, Rt. Hon. Dr. Christopher | Glanville, Harold James | Jones, Morgan (Caerphilly) |
| Barker, G. (Monmouth, Abertillery) | Graham, W. (Edinburgh, Central) | Kennedy, Thomas |
| Barnes, Major H. (Newcastle, E.) | Grundy, T. W. | Kenworthy, Lieut.-Commander J. M. |
| Benn, Captain Wedgwood (Leith) | Guest, J. (York, W. R., Hemsworth) | Kenyon, Barnet |
| Cape, Thomas | Hall, F. (York, W. R., Normanton) | Lunn, William |
| Clynes, Rt. Hon. John R. | Halls, Walter | Maclean, Nell (Glasgow, Govan) |
| Collins, Sir Godfrey (Greenock) | Hancock, John George | Malone, C. L. (Leyton, E.) |
| Cowan, D. M. (Scottish Universities) | Hayward, Evan | Mills, John Edmund |
| Davies, A. (Lancaster, Clitheroe) | Henderson, Rt. Hon. A. (Widnes) | Mosley, Oswald |
| Davies, Alfred Thomas (Lincoln) | Hirst, G. H. | Murray, Dr. D. (Inverness & Ross) |
| Davison, J. E. (Smethwick) | Hodge, Rt. Hon. John | Myers, Thomas |
| Edwards, C. (Monmouth, Bedwelity) | Hogge, James Myles | Raffan, Peter Wilson |
| Entwistle, Major C. F. | Irving, Dan | Rees, Capt. J. Tudor- (Barnstaple) |
| Galbraith, Samuel | Jones, J. J. (West Ham, Silvertown) | Rendall, Atheistan |
| Rose, Frank H. | Thorne, W. (West Ham, Plaistow) | Young, Robert (Lancaster, Newton) |
| Royce, William Stapleton | Watts-Morgan, Lieut.-Col. D. | |
| Short, Alfred (Wednesbury) | White, Charles F. (Derby, Western) | TELLERS FOR THE NOES.— |
| Smith, W. R. (Wellingborough) | Wignall, James | Mr. Trevelyan Thomson and Mr. T. Griffiths. |
| Spoor, B. G. | Wintringham, Margaret | |
| Thorne, G. R. (Wolverhampton, E.) | Wood, Major M. M. (Aberdeen, C.) |
§ Motion made, and Question proposed, "That this House doth agree with the, Committee in the said Resolution."
§ Lieut.-Commander KENWORTHYMay I ask the Chancellor of the Exchequer a question on behalf of the retailers of tea? Will they, as on former occasions, be allowed to clear the stocks at the new rate of duty, seven days before the new prices come into operation, on condition that the stocks are not retailed before the 15th? I understand that it will be a great convenience to retail grocers if they are allowed to do that, and it will prevent congestion at the bonded warehouses.
§ Sir R. HORNEI do not understand why there should be any ambiguity about it. The Customs authorities have made the same arrangements as on previous occasions, and stocks are being cleared as from to-day at the new rate of duty on condition that they are not sold before the 15th.
§ Lieut.-Commander KENWORTHYAt the lower rate of duty.
§ Sir R. HORNEStocks are being cleared as from to-day at the new rate on condition that they will not be dealt with until 15th May.
§ Sir G. COLLINSThis Resolution levies two rates of duty, one on Dominion tea and the other on tea from China and other countries, and I am anxious to show the effect of these two duties which have been levied for the last three years. I suggest that the best method of judging the effect is to examine as to whether the re-export of tea in this country has increased or decreased during the last two or three years. In 1913–14 our re-exports of tea from Great Britain amounted to 57,000,000 lbs. of tea. In 1920 our re-exports had dwindled to 41,250,000 lbs. While agreeing that that decrease is no doubt accounted for by depressed conditions on the Continent of Europe, and that it would not be fair to attribute it to the preference on tea, yet in the year 1921 our re-exports of tea amounted only to 34,750,000 lbs. I suggest that that decrease is caused partly by the 1866 two duties. As the House knows, there grew up in this country before the War a big tea trade to the Continent. The tea was brought to these shores in British vessels from China and India and other parts of the globe. Our tea merchants blended these teas and shipped the blended tea to different parts of the world, and British industry and finance gained through this tea being brought to this country in British ships, blended, and then re-exported. The amount of that trade must be a considerable one, and the decrease amounts to 6,750,000 lbs. for a year, which might represent a trade worth £1,500,000 to £2,000,000. This is sufficient to show the large amount of trade that has been affected adversely through the tea, instead of coming to these shores, being shipped to-day from distant parts of the globe direct to the Continent of Europe. When this duty was first imposed, no doubt the House did not anticipate that the result of preference in practice would be prejudicial to Great Britain. These figures, taken from the returns of the Board of Trade Statistical Department, show clearly that the re-export trade in this commodity has decreased heavily, and I suggest that these two duties and the diversion of the tea trade from Great Britain to ports on the Continent have been prejudicial to the interests of Great Britain.
§ Question put, "That this House doth agree with the Committee in the said Resolution."
§ The House proceeded to a Division.
§ Colonel Leslie Wilson and Mr. Dudley Ward were appointed Tellers for the Ayes; but no Members being willing to act as Tellers for the Noes, Mr. Deputy-Speaker declared that the Ayes had it.
§ Second and Third Resolutions agreed to.
§ Fourth Resolution read a Second time.
§ Major M. WOODI beg to move to leave out the words
in the case of the duties on dried fruits until the first day of August, nineteen hundred and twenty-two and.1867 There are a great number of people who do not know that there is a special duty on the import of dried fruits. This duty has been in existence for many years. It was dying slowly, and probably it would have been dead before now had it not been for the War which made it necessary to raise money by an expedient which was handy at the time. The result was that in the second Budget, introduced in the year 1915, the duty on dried fruits as well as several other duties were increased by 50 per cent. I am against the whole duty, but for the moment I am merely seeking to reduce it by the additional amount which was imposed in 1915. To some extent I am in doubt as to what fruits exactly are meant by this particular Clause. It speaks about dried fruits. Then it goes on to speak about preserved plums. I understand that plums in this connection are supposed to include other fruits like prunes. I would like the Financial Secretary to tell us whether preserved fruits of all kinds are supposed to be included in this duty or only a certain selected few, because dates and several others are not specifically mentioned. I hope we shall get some further information as to that before we proceed to a Division. I would also like to know whether it applies to all fruits, whether tinned, bottled or preserved in any way. I understand that where fruits are bottled and preserved by means of sugar the fruits are subject to duty in respect of the sugar contained in the bottle or other receptacle. That is not what I am alluding to here, though that is a difficulty which arises out of the duty on sugar.My first reason for asking for a reduction of this duty to the pre-War level is that the additional duty was a War tax which was only put on like many other duties of the same kind as a luxury tax and to safeguard cargo space. All these dried fruits came from overseas and it was thought desirable at the time, in view of the deficiency of shipping, that some restriction should be put on the amount of imports of all kinds. So far as that was a good argument for the increase of the tax in 1915 it is no argument to-day. I hope the Financial Secretary to the Treasury will consider that in this respect, at any rate, the position has entirely changed since 1915. My second reason for reverting to the pre-War level of tax is different. The House will notice 1868 that this duty applies only to dried or preserved fruits. Why should a duty of this kind apply to dried or preserved fruits and not to fresh fruits? What is the difference between the two that should make the one dutiable and the other not? Why should a man who buys fresh grapes at a high price when they are newly come on the market be allowed to get them free of tax, while another man who wants to use the grapes when as raisins they are cheaper, be compelled not merely to pay for the fruit but to pay in addition an extra tax for the benefit of the Exchequer? It seems to me to put a tax on plum puddings and things of that kind, and it is a discrimination against the poorer section of the community. So far as that is the case, it is a bad tax.
I have not asked in the Amendment that the tax should be abolished, because I am prepared to let the Chancellor of the Exchequer down lightly and to allow him first of all to reduce the tax and later on to abolish it. The tax is an unfair discrimination between different countries of Europe and elsewhere. Some countries send us their fruit when fresh. Others dry them and send them to us later. The duty discriminates unfairly against the nearer countries which are able to put their fruit on the market fresh. It is a restriction on trade. I think I am right in saying that the estimate which Mr. McKenna gave to the House when he originally proposed an increase of this tax has not been realised. He said it would bring us in a full year, £180,000. I think I am right in saying that in no year has it brought such a large additional sum to the Treasury. It is a tax on food and not a tax on a luxury food. It is a tax on a food of a wholesome character, used by the poorer sections of the community.
Every time that we advocate the restriction, the abolition, or the reduction of taxes of this kind, we are met by the stock reply, "I cannot afford to give up any taxation which is now imposed." So far as that is a good argument it is an argument against all taxes, and it would be a good argument against any additional tax which the Chancellor of the Exchequer might seek to impose. My last argument against the tax is that it is a small tax, that it is very complicated and must be very expensive to work. The burden and annoyance given to the public by it are not at all commensurate with 1869 the profits of the tax. It is an accepted axiom of all taxation that the proceeds of a tax should bear some relation to the burden and the hardship inflicted on the people who pay. If the Chancellor of the Exchequer is not prepared to accept the Amendment, I hope he will give us some assurance that in the near future the Government intend to tackle this tax and to diminish it.
§ Lieut.-Commander KENWORTHYI beg to second the Amendment. I think the hon. and gallant Member for Central Aberdeen (Major M. Wood) made out a very good case for a reply and explanation from the Treasury. Can the House conceive any reason why a war tax of 3s. 6d. per cwt. extra over and above the peace tax on figs, plums (commonly called French plums), prunellos and raisins should be charged 3s. 6d. a cwt. extra as duty? Why should not dried apricots be taxed and why should raisins be taxed? The system is very much like what happened under the D.O.R.A. restrictions, when you could buy apples only before 8 o'clock, because they were hard fruit, and pears after 8 o'clock because they were soft fruit. You tax raisins and fruits but do not tax dried apricots. At any rate they are not mentioned in the Book. These taxes are food taxes. Tea is not a food; beer is not a food. There have been great outcries about the taxes on sugar and beer, but it is only because the people do not know that they are taxed on dried fruits that there is not an outcry now against taxes on the plum puddings of the people. Of all typical English dishes, the plum pudding is the most typical. I cannot understand why the Government will not reduce these taxes, unless it is that they suffer so much from dyspepsia that they cannot bear to see other people enjoy their plum pudding. When we have so much distress and unemployment these extremely obnoxious taxes on food ought not to exist. The Amendment would reduce the budget of an average working-class family.
§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hilton Young)The hon. Member for Central Aberdeen (Major M. Wood) asked as to the nature of the fruits to which this Resolution and his Amendment would apply. They would apply to figs, to plums and to raisins. The Amendment would not apply to currants, and that is one 1870 substantial argument against it. It would not benefit the most popular and most widely spread of all forms of dried fruits. The reason for that is that the additional duty was not imposed on dried fruits at the time it was raised in 1915, because of a Convention with Greece which prevented an alteration in the amount of the duty. The reduction of the additional duty would, therefore, not benefit the popular currant.
§ Major WOODAre there other fruits affected, for instance, dates?
§ Mr. YOUNGThe duty applies and the additional duty applies to apricots, because apricots, in the eyes of the law, are plums. [HON. MEMBERS: "How is that?"] How that is so I am neither lawyer nor botanist enough to explain, but I am stating how the law is. The duty does not apply to fruits bottled in water. That is because when bottled in water, I take it, they are not dried. Nor does it apply to any form of bottled fruit except plums, which, when bottled remain plums, and are, therefore, liable to duty. The principal exemption from the duty, because they do not fall under the purview of the duty, are peaches, because peaches are almonds; and, finally, there is the practical exemption of great importance—the popular date is not subject to the duty, and it is an article of very wide consumption among the people of the country. That is how the law stands. It has been said that the argument I would use in support of the Resolution and against the Amendment might be used in regard to any tax. The argument of the hon. and gallant Member for Central Aberdeen might equally be used in favour of the abolition of any tax. We are dealing here with the relief which, from the point of view of the family budget, would, I fear, be totally insignificant. The hon. and gallant Member proposes to reduce the duty on these dried fruits by 3s. 6d. a cwt. That would result in a reduction of less than a halfpenny per pound. The total consumption of these dried fruits per head of the population in the year is only 3 lbs., so that the relief to the family budget by the adoption of the Amendment would be only three halfpence per annum, which, I am afraid, would not be any very great encouragement in the economic situation of the family budget.
1871 It may be said, "Why trouble about such a trifling matter?" By adding up the halfpennies, from the point of view of revenue, they become trifles worthy of much consideration. This duty is worth to the revenue £180,000 in a full year, and I fear we are not in such a year as would make it possible, reasonable, or even barely prudent to abandon such a source of revenue. There is a great deal to be said for this indirect tax. It strikes at what is not absolutely a luxury but is certainly not a necessity, and it must be remembered that dried fruits, though not actually a substitute for sugar, are capable of being used in some instances to replace sugar, and as long as we maintain the duty on sugar we must maintain a duty on things which in some way take the place of sugar.
§ Major WOODWhy do you not tax dates?
§ Mr. YOUNGI fear that in the course of this year it would be quite impossible to accept the proposal contained in the Amendment.
Dr. MURRAYI only heard the latter part of my hon. Friend's speech, but I am very sorry to discover that he is not prepared to accept the Amendment. He says that these fruits, if not a luxury, are not a necessity, but I join issue with him there. I think dried fruit is a necessity, and I support the Amendment, not from the point of view of relieving people from taxation, but with the object of encouraging the eating of fruit. We eat far too little fruit in Great Britain, especially in the Northern part, and this duty makes it much more expensive and difficult than it otherwise would be for the poorer people to buy dried fruit. Of course fresh fruit would be better, but we cannot always get that rare and refreshing fruit any more than we can get the new world.
§ Mr. DEPUTY-SPEAKER (Mr. James Hope)That does not come within the scope of this Debate, nor would it be in order to refer to fresh fruit in connection with this Amendment.
Dr. MURRAYAll I desired to point out was that as we cannot get rare and refreshing fruit—that is, fresh fruit— dried fruit is a good substitute, and the more dried fruit we can get into the country the better for the physical condition of the people. I do not often impose any medical opinion upon this 1872 assembly, but, from a common-sense point of view, we should encourage variety in the food of the people, and especially the introduction of fruit, and the more we do so the sooner will we reach that other Government ideal of changing a C 3 population into an A 1 population, which is to be another feature of the new world. I support the Amendment on the ground that it does something towards improving the dietary of the people, and on the ground that it is desirable to encourage the eating of dried fruit as the only kind which the poorer people can readily obtain.
§ Sir G. COLLINSThe hon. and gallant Member for Central Aberdeen (Major M. Wood) showed his moderation in moving the Amendment. As the Financial Secretary to the Treasury reminded the House, if the Government accepted the Amendment the total loss to the Exchequer would only be £180,000. The Financial Secretary, in the course of his speech, showed the difficulty with which Customs officials are faced through the imposition of the present duty. He showed how various articles of food were called by names usually attached to other articles. While on that point, the House will recollect that the cost of the Customs service has largely increased. The number of officials and the cost of collecting are both very great and is that not due to some of the duties imposed during the War for purposes other than Revenue purposes? The object of the Amendment is to repeal a War-time duty which was not imposed for Revenue purposes. In 1915 it was thought that the best way of curtailing the imports of certain articles into Great Britain was by imposing duties. But further experience showed that high prices during the War did not curtail the consumption of articles in this country, and after 1915 the Government adopted another expedient, i.e., that of licensing as a method of restricting imports of foreign goods into this country. I think during the last few years the Government has repealed the system of licensing and having repealed that principle they should at the same time repeal the duties which were imposed, not for Revenue, but for other purposes. On these grounds mainly, I support the Amendment.
§ Mr. RAFFANI think the Financial Secretary, in his defence of this duty, showed that it rested on no logical basis 1873 whatever. I was surprised to hear, after a dissertation which showed how extremely absurd was the duty, the hon. Gentleman's statement that he thought it served a useful purpose. If it does so, why should it not be extended? If it serves a useful purpose to impose this duty on raisins, would it not be equally useful if applied to currants? In its present form the duty is perfectly absurd. Either there should be an extension of it to all fruits of a similar character, or this concession should be made. If we are to choose between an extension and the remission of the duty, I assume the Chancellor of the Exchequer will keep in mind, as his predecessors have done, the extreme desirability of confining indirect taxation to as few articles as possible. The history of the nation as regards direct and indirect taxation shows a gradual lessening of the number of articles subject to indirect taxation for the reason given by the hon. Member for Greenock (Sir G. Collins) when he pointed out that if taxation is diffused over a great number of articles the cost of collecting is very much increased. It is easy to say that the average amount for each family spent on these articles is very small and that the remission of duty would be inconsiderable, but there can be no doubt that if the remission took place there would be a considerably increased consumption, and that in its turn would tend to increase employment in the shipping industry. If we are to have national prosperity and a revival of industry, the Chancellor of the Exchequer could very well afford to allow this small amount to be remitted, because it would really make no difference at the end of the year in the balancing of the Budget, though, in regard to other and larger concessions for which we may ask, he will be able to plead that he cannot possibly afford them.
§ Major WOODMay I exercise the right of replying as Mover of the Amendment?
§ Mr. DEPUTY-SPEAKERI do not think the hon. and gallant Member would be in order at this stage.
§ Mr. RENDALLAfter listening to the speech of the Financial Secretary, I feel that Members of the House have a claim to more consideration from Ministers on matters of this kind than Ministers are giving them. Here we have an explanation given of a certain duty and the Financial Secretary has had to inform the House of various extraordinary definitions put upon certain articles by the Customs. Ho tells us that a peach is an almond or that it is not an almond—I forget which. He made several statements of a technical character which are quite unintelligible, and it seems desirable that we should have either in the Finance Bill or in some other form, a series of exact definitions which will make it perfectly plain to all persons what articles are included under this duty and what are not. At present I fancy it would be easy to go into an expensive shop in the Strand or Piccadilly and find a large number of expensive dried fruits which are not included under this duty. If that be so, then it is a distinct injustice to the great majority of the people of this country. From time to time additional varieties of fruits are being dried and made marketable, and these new fruits, if I may so call them, are coming into the country but do not fall under the existing duty because the definitions are so loosely worded. Instead of relying on definitions, which include only a few fruits—and those the most generally used—it would be better that the Treasury should introduce fresh definitions covering fruits which are being purchased by the well-to-do. If the Amendment only results in clear attention being called to the extraordinary position in which these duties now stand, it will have done good, and I trust the Chancellor of the Exchequer will be encouraged to help the general population to understand the articles that are being taxed and why those articles are selected.
§ Question put, "That the words proposed to be left out to the word "and" ["and in the case"], stand part of the Resolution."
§ The House divided; Ayes, 201; Noes, 59.
1875| Division No. 96.] | AYES. | [6.0 p.m. |
| Agg-Gardner, Sir James Tynte | Balfour, George (Hampstead) | Barrie, Sir Charles Coupar (Banff) |
| Amery, Leopold C. M. S. | Balfour, Sir R. (Glasgow, Partick) | Beauchamp, Sir Edward |
| Armstrong, Henry Bruce | Banner, Sir John S. Harmood- | Beckett, Hon. Gervase |
| Bagley, Captain E. Ashton | Barnes, Rt. Hon. G. (Glas., Gorbals) | Bell, Lieut.-Col. W. C. H. (Devizes) |
| Baird, sir John Lawrence | Barnston, Major Harry | Bennett, Sir Thomas Jewell |
| Baldwin, Rt. Hon. Stanley | Barrand, A. R. | Bentinck, Lord Henry Cavendish- |
| Betterton, Henry B. | Hills, Major John Waller | Rankin, Captain James Stuart |
| Bird, Sir William B. M. (Chichester) | Hoare, Lieut.-Colonel Sir S. J. G. | Rawlinson, John Frederick Peel |
| Blair, Sir Reginald | Hood, Sir Joseph | Rees, Capt. J. Tudor- (Barnstaple) |
| Borwick, Major G. O. | Hope, Sir H. (Stirling & Cl'ckm'nn'n,W.) | Reid, D. D. |
| Boscawen, Rt. Hon. Sir A. Griffith- | Hope, Lt.-Col. Sir J. A. (Midlothian) | Richardson, Sir Alex. (Gravesend) |
| Boyd-Carpenter, Major A. | Hopkins, John W. W. | Richardson, Lt.-Col. Sir P. (Chertsey) |
| Bridgeman, Rt. Hon. William Clive | Hopkinson, A. (Lancaster, Mossley) | Roberts, Rt. Hon. G. H. (Norwich) |
| Broad, Thomas Tucker | Horne, Edgar (Surrey, Guildford) | Robinson, S. (Brecon and Radnor) |
| Buchanan, Lieut.-Colonel A. L. H. | Horne, Sir R. S. (Glasgow, Hillhead) | Roundell, Colonel R. F. |
| Buckley, Lieut-Colonel A. | Hume-Williams, Sir W. Ellis | Samuel, A. M. (Surrey, Farnham) |
| Bull, Rt. Hon. Sir William James | Hunter, General Sir A. (Lancaster) | Sanders, Colonel Sir Robert Arthur |
| Burn, Col. C. R. (Devon, Torquay) | Hunter-Weston, Lt.-Gen. Sir Aylmer | Scott, A. M. (Glasgow, Bridgeton) |
| Casey, T. W. | Hurst, Lieut.-Colonel Gerald B. | Seddon, J. A. |
| Cautley, Henry Strother | Jameson, John Gordon | Seely, Major-General Rt. Hon. John |
| Chamberlain, Rt. Hn. J. A. (Birm. W.) | Joynson-Hicks, Sir William | Sharman-Crawford, Robert G. |
| Child, Brigadier-General Sir Hill | Kidd, James | Shaw, William T. (Forfar) |
| Clay, Lieut.-Colonel H. H. Spender | King, Captain Henry Douglas | Shortt, Rt. Hon. E. (N'castle-on-T.) |
| Cobb, Sir Cyril | Kinloch-Cooke, Sir Clement | Simm, M. T. |
| Cockerill, Brigadier-General G. K. | Lewis, Rt. Hon. J. H. (Univ., Wales) | Smith, Sir Allan M. (Croydon, South) |
| Cohen, Major J. Brunel | Lindsay, William Arthur | Smith, Sir Harold (Warrington) |
| Colfox, Major Wm. Phillips | Lloyd, George Butler | Stanley, Major Hon. G. (Preston) |
| Colvin, Brig.-General Richard Beale | Locker-Lampson, G. (Wood Green) | Steel, Major S. Strang |
| Conway, Sir W. Martin | Loseby, Captain C. E. | Stewart, Gershom |
| Coote, Colin Reith (Isle of Ely) | Lowe, Sir Francis William | Strauss, Edward Anthony |
| Craik, Rt. Hon. Sir Henry | Lowther, Maj.-Gen. Sir C. (Penrith) | Sturrock, J. Leng |
| Curzon, Captain Viscount | Loyd, Arthur Thomas (Abingdon) | Sueter, Rear-Admiral Murray Fraser |
| Davidson, J. C. C. (Hemel Hempstead) | Lyle, C. E. Leonard | Sutherland, Sir William |
| Davidson, Major-General Sir J. H. | Macdonald, Sir Murdoch (Inverness) | Taylor, J. |
| Davies, Thomas (Cirencester) | Mackinder, Sir H. J. (Camlachie) | Terrell, George (Wilts, Chippenham) |
| Dawson, Sir Philip | M'Lean, Lieut.-Col. Charles W. W. | Thomas-Stanford, Charles |
| Dennis, J. W. (Birmingham, Deritend) | McMicking, Major Gilbert | Thomson, F. C. (Aberdeen, South) |
| Dockrell, Sir Maurice | Macpherson, Rt. Hon. James I. | Thomson, Sir W. Mitchell- (Maryhill) |
| Doyle, N. Grattan | Manville, Edward | Thorpe, Captain John Henry |
| Du Pre, Colonel William Baring | Marks, Sir George Croydon | Tickler, Thomas George |
| Edge, Captain Sir William | Marriott, John Arthur Ransome | Townshend, Sir Charles Vere Ferrers |
| Elliot, Capt. Walter E. (Lanark) | Mond, Rt. Hon. Sir Alfred Morltz | Tryon, Major George Clement |
| Erskine, James Malcolm Monteith | Moore, Major-General Sir Newton J. | Wallace, J. |
| Falcon, Captain Michael | Moore-Brabazon, Lieut.-Col. J. T. C. | Walters, Rt. Hon. Sir John Tudor |
| Falle, Major Sir Bertram Godfray | Moreing, Captain Algernon H. | Warren, Sir Alfred H |
| Fell, Sir Arthur | Morrison, Hugh | Watson, Captain John Bertrand |
| Flannery, Sir James Fortescue | Munro, Rt. Hon. Robert | wheler, Col. Granville C. H. |
| Ford, Patrick Johnston | Murray, C. D. (Edinburgh) | White, Col. G. D. (Southport) |
| Forrest, Walter | Murray, John (Leeds, West) | Williamson, Rt. Hon. Sir Archibald |
| Fremantle, Lieut.-Colonel Francis E. | Neal, Arthur | Wills, Lt.-Col. Sir Gilbert Alan H. |
| Gardiner, James | Newman, Colonel J. R. P. (Finchley) | Wilson, Capt. A. S. (Holderness) |
| Gee, Captain Robert | Newman, Sir R. H. S. D. L. (Exeter) | Wilson, Field-Marshal Sir Henry |
| Gibbs, Colonel George Abraham | Newson, Sir Percy Wilson | Windsor, Viscount |
| Gilmour, Lieut.-Colonel Sir John | Nicholson, Brig.-Gen. J. (Westminster) | Winterton, Earl |
| Goff, Sir R. Park | Nicholson, Reginald (Doncaster) | Wise, Frederick |
| Grant, James Augustus | O'Neill, Rt. Hon. Hugh | Wood, Hon. Edward F. L. (Ripon) |
| Green, Joseph F. (Leicester, W.) | Palmer, Major Godfrey Mark | Wood, Sir H. K. (Woolwich, West) |
| Greig, Colonel Sir James William | Parker, James | Wood, Major Sir S. Hill-(High Peak) |
| Gretton, Colonel John | Parry, Lieut.-Colonel Thomas Henry | Woolcock, William James U. |
| Gritten, W. G. Howard | Pease, Rt. Hon. Herbert Pike | Yate, Colonel Sir Charles Edward |
| Hall, Rr-Adml Sir W. (Liv'p'l, W. D'by) | Pennefather, De Fonblanque | Yeo, Sir Alfred William |
| Hambro, Angus Valdemar | Percy, Lord Eustace (Hastings) | Young, E. H. (Norwich) |
| Hannon, Patrick Joseph Henry | Pilditch, Sir Philip | Young, Sir Frederick W. (Swindon) |
| Harris, Sir Henry Percy | Pollock, Rt. Hon. Sir Ernest Murray | Young, W. (Perth & Kinross, Perth) |
| Hennessy, Major J. R. G. | Pownall, Lieut.-Colonel Assheton | Younger, Sir George |
| Herbert, Col. Hon. A. (Yeovil) | Purchase, H. G. | TELLERS FOR THE AYES.— |
| Herbert, Dennis (Hertford, Watford) | Rae, H. Norman | Colonel Leslie Wilson and Mr. Dudley Ward. |
| Hilder, Lieut.-Colonel Frank | Randles, Sir John Scurrah | |
| NOES. | ||
| Barker, G. (Monmouth, Abertillery) | Hancock, John George | Richardson, R. (Houghton-le-Spring) |
| Barnes, Major H. (Newcastle, E.) | Hayward, Evan | Rose, Frank H. |
| Benn, Captain Wedgwood (Leith) | Henderson, Rt. Hon. A. (Widnes) | Royce, William Stapleton |
| Cairns, John | Hirst, G. H. | Shaw, Thomas (Preston) |
| Cape, Thomas | Hodge, Rt. Hon. John | Short, Alfred (Wednesbury) |
| Clynes, Rt. Hon. John R. | Irving, Dan | Smith, W. R. (Wellingborough) |
| Collins, Sir Godfrey (Greenock) | John, William (Rhondda, West) | Spoor, B. G. |
| Davies, A (Lancaster, Clitheroe) | Jones, J. J. (West Ham, Silvertown) | Swan, J. E. |
| Davies, Alfred Thomas (Lincoln) | Jones, Morgan (Caerphilly) | Thomson, T. (Middlesbrough, West) |
| Davies, Rhys John (Westhoughton) | Kennedy, Thomas | Thorne, W. (West Ham, Plaistow) |
| Davison, J. E. (Smethwick) | Kenworthy, Lieut.-Commander J. M. | Waterson, A. E. |
| Edwards, C. (Monmouth, Bedwellty) | Kenyon, Barnet | Watts-Morgan, Lieut.-Col. D. |
| Entwistle, Major C. F. | Lambert, Rt. Hon. George | Wedgwood, Colonel Josiah C. |
| Galbraith, Samuel | Lunn, William | Wignall, James |
| Glanville, Harold James | Maclean, Nell (Glasgow, Govan) | Wilson, James (Dudley) |
| Graham, W. (Edinburgh, Central) | Malone, C. L. (Leyton, E.) | Wood, Major M. M. (Aberdeen, C.) |
| Griffiths, T. (Monmouth, Pontypool) | Murray, Dr. D. (Inverness & Ross) | Young, Robert (Lancaster, Newton) |
| Grundy, T. W. | Myers, Thomas | |
| Guest, J. (York, W. R., Hemsworth) | Newbould, Alfred Ernest | TELLERS FOR THE NOES.— |
| Hall, F. (York, W. R., Normanton) | Raffan, Peter Wilson | Mr. Hogge and Mr. G. Thorne. |
| Halls, Walter | Rendall, Athelstan |
§ Captain WEDGWOOD BENNI beg to move to leave out the words
and in the case of the new import duties until the first day of May, nineteen hundred and twenty-two.The Amendment is to abolish what are known as the new import duties or, as they are more commonly called, the McKenna duties. These are duties on motor-cars, including motor cycles and accessories, clocks, watches, musical instruments, cinema films, and certain other articles. I would like to remind the House briefly of the history of this portion of a tariff. It was introduced in 1915 by Mr. McKenna for certain definite and specific reasons. The argument was this; We cannot increase our exports; therefore, if we are to maintain our exchange, we must diminish our imports, and as it was desirable also to restrict the consumption of luxury articles, it was decided, in regard to these special articles, which were very bulky supplies, to impose a duty of 33⅓ per cent. on their importation as a compromise instead of their total prohibition. That cannot be the argument of the Chancellor of the Exchequer to-day. I assume he would not get up to-day and say, "We cannot increase our exports." I assume he will interrupt me at once if I am saying what is not right; at any rate, he would interrupt me if he could see any good ground for doing so successfully. He cannot say, "We cannot increase our exports." That is the one thing we are all set on doing, and, as I am going to show, to diminish our imports in these cases has the result in many cases of diminishing our exports. The next year the duties gave rise to considerable perturbation among hon. Members who were adherents of the Free Trade cause, and they were in great difficulties. It is perfectly obvious that this set of duties is sheer Protection for one or two selected and favoured industries, and this disturbed the consciences of consistent Free Traders among the supporters of the Government, who put their case to the Government, and the answer then given was: We do not wish to enter into the fiscal issue, but in point of fact we cannot do without the money; we must have this money for the Budget.When that argument was used, these duties were making a very substantial yield to the Treasury. For the year 1920 —the calendar year, not the fiscal year— the yield from motor-cars and motor- 1878 cycles was £5,000,000, from clocks and watches nearly £1,000,000, and smaller sums from the other articles. From the reply which the hon. Gentleman the Financial Secretary to the Treasury gave to-day, it became clear that these duties are steadily declining and threaten to finish altogether in their yield. Instead of £5,000,000, which was the yield from motor-cars and motor-cycles and parts, we have this year £763,000 only. In the case of clocks and watches, which yielded two years ago £944,000, the yield has sunk to less than half that sum, and if the duties continue to be imposed there is no reason to suppose that the decline, which has been regular and sharp, will not continue and their yield become negligible as a factor for the Chancellor of the Exchequer in making up the Budget. Therefore, I submit that the argument that this breach of their Free Trade principles must be tolerated by Free Traders because of the great yield which these taxes make to the Treasury cannot now be substantiated. They do, of course, a positive amount of harm. They raise the prices of these articles in this country, and they afford a very unfair advantage to certain manufacturers. There may be a case for giving the advantage of a tariff to all manufacturers in the country. That is arguable, but there cannot be any case for singling out the manufacturers of motor-cars, or motor-cycles, or clocks, or cinema films, and giving them the advantage which you deny to other manufacturers. The manufacturers, of course, have frankly stated, in some of the inquiries under the Safeguarding of Industries Act, that they are out to get all they can. They are very glad to have this duty, but that is a consideration which cannot weigh with us, whose duty it is to see that the incidence of taxation bears as fairly as possible on all classes of the community.
I could give instances of positive harm which is done by these taxes in detail if it were desirable, but I do not want to weary the House, and also I do not want to mention it because the Chancellor of the Exchequer is probably much more familiar than I or any other private Member with the complaints which are made, and, as it seems to me, justifiably made, by traders in reference to these duties. I had a letter a short time ago in reference to these duties, in which a manufacturer of musical instruments 1879 pointed out that he had actually lost two orders for the export of these goods, which he could not fulfil on account of the duty laid on the component parts of them by the Chancellor of the Exchequer in this Act; and this morning I had a letter from some importers of American organs, who stated that there is no manufacture of this kind in this country and that the people of this country who use organs—churches and chapels, and other institutions which, I am sure, have sympathy in their work from the Chancellor of the Exchequer, and organs for domestic music—this firm point out that the tax has actually destroyed the trade entirely, and from what was a matter of 1,300 organs per annum imported of this type, last year the import had sunk to 14, so that, instead of getting any revenue, the Chancellor of the Exchequer, by the continuation of these duties, is nearly killing the trade, as, indeed, many of the Measures of this Government are well calculated to do and actually do.
So much for the harm which this partial, half-baked tariff does to the interests of this country. Now let us come to the definite promise made, which has been quoted often before, but will bear quotation again. When these duties were imposed, they caused a great deal of anxiety to people holding the free trade view, and the then Leader of the House, the right hon. Member for Central Glasgow (Mr. Bonar Law), speaking of the fiscal issue, said:
Duties of this kind would never be continued, under any circumstances, when the War was over.Nothing, I think, could be more definite than that statement by the right hon. Gentleman who was, till lately, a Member of the Government. I am interested to know what action is going to be taken to-day on this Amendment which I am moving by those hon. Gentlemen who took such a prominent part in the opposition to these duties when they were continued after the termination of the War. I remember reading, during the War, of one hon. Gentleman who brought into this House bagpipes, and you, Sir, very properly explained that his arguments must be confined to an explanation of their powers, rather than a demonstration. That hon. Member said he would never rest content while those duties were on the Statute Book. He has an oppor- 1880 tunity now of showing his discontent by following us into the Lobby when we move the repeal of these duties. He and other free traders were led on from month to month by the Chancellor of the Exchequer, on the plea that this was a little measure which must be continued for a short time, and that if only they would leave the fiscal question quite open, nothing would be prejudged, and the duties would be continued merely as a temporary measure. I remember the hon. and learned Member for Middleton (Sir R. Adkins), when we moved to repeal the duties, moved an Amendment to our Amendment fixing a date, the 1st May, and he explained that by so doing he would fix for ever their temporary character, because they would be taken out of the other duties of the Budget, and would be ear-marked as duties which it was intended to repeal at the proper time. Where have these hon. Gentlemen been led? They have been led year after year from protest into acquiescence, and now, I am afraid, they are going to refuse us the assistance which they proffered three years ago, and are going to sit quiet while these duties become a permanent part, a designed part, of a general tariff system of this country.I remember, six months after this Parliament was elected, many Members of this House went as a deputation to the Leader of the House. The Parliamentary Secretary to the Ministry of Transport was one of the deputation. It was explained at the meeting that they did not desire to raise the question of preference or restriction of trade, but solely to ask the Chancellor of the Exchequer whether it was the policy of the Government, in embodying in the Budget the 33j per cent, duties on motor cars, watches, etc., introduced to restrict the purchase of articles of luxury, to change a temporary war policy into the basis of a permanent peace policy. That was three years ago. The present Leader of the House, who was then Chancellor of the Exchequer, replied:
Let us leave it open until we come to it, and let us come to it with open mind. And in the meantime, if anyone asks whether, by voting for this Budget, he has committed himself to the permanent imposition of those duties, the answer is that he has not.They have been kept on during 1919, 1920, 1921, and now 1922—not permanently, but very nearly. The Parlia- 1881 mentary Secretary to the Ministry of Transport accepted those assurances. What does he say to-day? Is he going to support this in the Lobby, or is he not? He was appealed to to keep an open mind, and, while keeping the open mind, the door was slammed, and the duties were permanently imposed. No one denounced in rounder terms these duties than the right hon. Gentleman the Minister of Health, whose official duties, I very much regret, have made it impossible for him to be here to-night. When they were imposed, he said, they were only a temporary measure, but let them read the history of the American tariffs. It was said in that case that they were only a temporary measure, but once the thing was planted the roots spread, and they could never root it up. The right hon. Gentleman said, with reference to these particular proposals, that the articles selected were ridiculous, the results absurd, and the proposal would not achieve the end which was intended. It is to be regretted that the Minister of Health, whose ability, and, oven more, whose courage we admire in these Free Trade Debates, is not present to explain why he is going to vote for the re-imposition of duties which are absurd, and cannot possibly achieve the object for which they are intended. Those duties in themselves are very objectionable. I think they are objectionable, even from the point of view of a supporter of Tariff Reform, because it cannot be fair, if you believe in Tariff Reform, to single out one industry for protection and leave other industries in the cold. But from the Free Trader's point of view, they are open to far greater objection, because it seems to us—and with good reason—that they are designed as a definite part of the plan, which ultimately will result in imposing a general tariff on all imports into this country, with a preference for the products of our own Dominions. This is not simply a prejudiced or distorted view of someone who is a supporter of Free Trade, and sees all sorts of dangers that do not occur. This is the view of the Tariff Reformers, who say, "Put this, and many other duties altogether, and see what progress we are making. Little by little these 130 Free Traders who are supporting the Government are being wheedled along to keep an open mind, and all the while our edifice is being constructed. 1882 You may not see the plan, but there is a brick here and a cornerstone there, and in time all the structure will be complete." There is a mysterious body called the Tariff Commission. I do not know whether the Leader of the House could give us any information about it.
§ Captain BENNIt seems rather cruel not to admit paternity, because the first, Tariff Commission certainly was very near to the right hon. Gentleman's heart.
§ Captain BENNIt is surely far more cruel for a son to repudiate his father. Parricide is a worse crime than infanticide. This organisation, in a recent publication, puts all these duties together, and points with pride to the fact that little by little we are changing the policy of this country from a Free Trade policy to a policy of Protection. That may be a very desirable thing from the point of view of Protectionists in the House, but my appeal this evening is particularly to Free Traders. Do they know this is going on? If so, are they going to support it, or are they going with us into the Lobby to attempt to abolish these Protective duties?
§ Mr. RAFFANI beg to second the Amendment.
§ Sir R. HORNEI do not know why my hon. and gallant Friend should be so concerned about getting a reply to so skilful a speech as that which he has made. I think he ought to be grateful to the Government for giving him this yearly opportunity of making this speech. I thank my hon. and gallant Friend for the definition of permanence which he has given us this afternoon. He says that this series of duties has now become permanent, because it has been in operation during the last four years. I would remind him that this is a great encouragement to the Government. We have been in existence for just about the same time, and I hope his anxiety is some indication, from his point of view, of the likelihood of our existing for a very extended period.
§ Captain BENNWhen the Leader of the House told the Coalition Liberals to keep an open mind because it was a temporary thing, what it really meant was that it would go on so long as this Government went on.
§ Sir R. HORNEI do not think he necessarily meant that, but, as long as this particular tax yields a revenue, it is very likely to go on as long as the present Government.
§ Mr. MACLEANThat will not be long.
§ Sir R. HORNEThat may be, but I should not like to define the precise period. I cannot understand the anxiety of my hon. and gallant Friend. He has made an appeal to the Liberals, who form a considerable part of the Coalition. He has urged them to notice that they are being wheedled along, and that a brick is being added here, and a corner-stone there, and that they must be aware of this monstrous structure which is going up steadily before their eyes, and evidently without their consciousness. I think if my hon. and gallant Friend is forced into these terms of exaggeration, he must find his case very difficult to maintain, because, so far as I know, not a single addition has been made to these duties since Mr. McKenna first imposed them. He now says that everyone knew that once you started these duties they would necessarily become permanent. He says that the right hon. Gentleman the Minister of Health warned the House as to what the result was going to be at the time they were first proposed. This direct design upon the part of Mr. McKenna is one with which I certainly would never have credited him, or that it was his purpose, as the hon. and gallant Gentleman says now it must have been, to create a permanent addition to the import duties of this country, upon a basis, as my hon. and gallant Friend says it is now, of rank Protection, which cannot possibly be supported by any of those who believe in the pure milk of the doctrine of Free Trade. My hon. and gallant Friend speaks on the one hand against us because of what he calls prejudicial terms, and on the other hand he makes an urgent request to those who have previously sided with him on these fiscal matters that they should return to the Free Trade faith. These appeals leave me entirely cold. I have never been able to understand why the word "Protec- 1884 tion" should affright certain hon. Members, on the one hand, or why, on the other hand, other hon. Members should be wheedled by it. These are matters of business. According to the hon. and gallant Gentleman, Free Trade, or what he calls Free Trade, is an immutable doctrine, applicable in all circumstances and at all times. If so, then it is the only immutable thing I know of in this world.
Let us look at the actual state of things in relation to these particular duties. My hon. and gallant Friend says that we are now getting a diminished revenue, and he points to the amount paid in the year 1920–21 accruing from the import duty upon motor cars and cycles. It is perfectly true that in 1920–21 you had circumstances which gave rise to that. In the first place people in that year had far more money to spend, and, in the second place, it is notable—and my hon. and gallant Friend could not have failed to observe it—that at that time people who desired motor cars could not get their orders carried out in this country. Everyone knows that there were far more orders given for motor cars in this country than the people could get through. Would-be customers were told they would have to wait one, two, or three years for an order to be carried out. Therefore you had in the year 1920–21 a considerable importation of American motor cars, and the import duties ran up to a figure of about £5,000,000 sterling. In the last year that influx has come down very considerably, with the result that we have not collected anything like we did previously. What is the objection of my hon. and gallant Friend? Let me take the case of the motor car industry. Here is an industry which during the last two years has been living from hand to mouth. Here is an industry which has perhaps been as hard hit as any industry in this country, and which to-day is employing tens of thousands fewer people than it did three years ago. Does my hon. and fallant Friend suggest that this is the time to get rid of this 33⅓ duty upon cars which are the luxury cars of people? [HON. MEMBERS: "No, no!"] There is no charge upon industrial motor cars. The duty is placed solely upon the touring car. I mean the ordinary driving car. Does my hon. and gallant Friend suggest that anybody is being injured in 1885 this country to-day by the imposition of this import duty, anyone that cannot afford to pay the duty if it has to be paid?
§ Mr. RAFFANCertainly, hundreds of doctors.
§ Sir R. HORNEOn the contrary. There never has been a duty which has been more justified than the duty upon imported motor-cars, both by reason of the fact that only those pay it who can afford to do so, and, in the second place, because it yields a revenue which, at the present time, we could not afford to forgo. To me it seems theory run mad which induces my hon. and gallant Friend to put forward a proposition of this kind. Similarly with regard to the other duties, what are they? On clocks and watches, and American organs—about which he showed so much solicitude—and pianos. Does he tell me that the masses of the people of this country are suffering in any way from any of these duties? He says you have no right to impose these duties unless you propose duties upon other articles. Is that what he means? Does the hon. and gallant Gentleman suggest that a duty upon motor-cars would be urged by the same arguments before his constituents as, for example, a duty upon food? Is that his argument?
§ Captain BENNI say that if the right hon. Gentleman wants a tax upon luxuries, let him put on Customs and Excise Duty. Otherwise you have a preferential tariff. Be fair, and give everybody the advantage.
§ Sir R. HORNEMy hon. and gallant Friend has not answered my question, and he knows he has not. What I put to him was: Does he maintain the same arguments in connection with the duty upon luxury motor-cars as he would upon food? The fact is, that there is a clear line of discrimination between these various articles. It is unquestionable that, at the time when these duties were first initiated, Mr. McKenna took into careful consideration the nature of the articles upon which he was going to put his duties. I have no doubt he thought that it would be entirely inconsistent with what he desired to achieve if you were to put duties upon the bulk of articles that come here. To-day the justification 1886 for these duties is as great as the time they were imposed.
§ Captain BENNWhy?
§ Sir R. HORNEI will tell my hon. and gallant Friend if he will give me a moment. At the present time we require revenue, and these duties yield a million and a half—the estimate for the current year. Is that nothing? That million and a half represents 1d. of the Tea Duty. Is that not worth while? Is a duty which yields that sum as revenue, and which enables you to take 1d. off the Tea Duty, not worth while? Would my hon. and gallant Friend speak against it before his constituency in order to maintain the pure doctrine of Free Trade? That is the proposition which he has to face. If he is not prepared to maintain that proposition then his arguments are of no value whatsoever. I put it to him that that is the basis of the position he has to maintain before his constituents.
§ Captain BENNBut this million and a half has been spent on red uniforms.
§ Sir R. HORNEWe have taken 1d. off the Tea Duty, and that is a point I should like my hon. and gallant Friend to deal with before his constituents, whose wisdom and sagacity, I think, would appreciate the point. His Majesty's Government discriminates between the articles upon which duties are desirable or otherwise. I read the speeches which my hon. and gallant Friend makes in the country and also those which are made by other prominent members of the party to which he belongs.
§ Sir R. HORNEI hope that, at least, I read the speeches with a certain amount of intelligence. So far as my sagacity carries me, I will tell the House what is the result of that reading. The hon. and right hon. Gentlemen opposite make an attack upon us on account of extravagance of administration, but when they turn to the question of policy they are bankrupt in their criticism. They cannot criticise us except on one ground—Free Trade. They are seeking all the time for a rallying cry and for some flag around which they can gather the brethren whose absence they to-day regret. If there is any one 1887 ground upon which an attack can be made upon the Government it is not certainly the ground of the small, trivial, and unimportant duties which have brought to this country considerable revenue while they have been in existence, and which to-day yield us enough at least to enable us to take 1d. of the Tea Duty.
§ Sir DONALD MACLEANThe speech to which we have just listened is one the enjoyment of which I regret the Chancellor's National Liberal colleagues have not had the opportunity of sharing. It was a speech which showed that the right hon. Gentleman is a regular member of the Tory Protectionist party, born and brought up in the faith. He has never had anything but the pure milk of the word so far as Protection is concerned.
§ Sir R. HORNEMy right hon. Friend must not so misjudge me. I have never at any time in my life been a Protectionist—never!
§ Sir D. MACLEANI was not aware that my right hon. Friend had at any time been a Liberal, or even a Liberal-Unionist, or a Free Trader. I understood him to be a keen upholder of the late Mr. Joseph Chamberlain, and that he has always maintained the pure milk of the word and the pure doctrine, so we have had a speech concerning industry which requires Protection and which brings in a revenue. There we have the whole faith and harmony of the tariff doctrine. He made the sort of speech I expected he would make. I do not know what his National Liberal colleagues think of it, because the right hon. Gentleman anticipates that so long as the Government remains in power, and after the next election, that not only these taxes but other similar taxes will be imposed with the same beneficial objects. That is his point of view—
§ Sir R. HORNEI did not say so.
§ Sir D. MACLEANI know. I was making deductions from the right hon. Gentleman's remarks. I was making the proper and natural deduction from my point of view. The right hon. Gentleman has pointed out the policy of the Government. My right hon. Friend and the Leader of the House and all the regular army intend to stick to it. Why should they not? They have done extremely well. I have congratulated them from this Box 1888 before, and I congratulate them again. Yes, certainly! From their point of view, they have made an excellent beginning. If they did not hold on to these tariffs, we should very soon hear the mutterings of the storm gathering in the various parts of the country where the tariff movement is strongest and its influence most great. Of course they are satisfied. The quotations of my hon. and gallant Friend show what joy there was when these taxes were imposed, and now that they are maintained, and it would appear that, so far as the right hon. Gentleman is concerned, and judging by his speech to-day, the Government fully intend to maintain them because they protect an industry and they also bring in a certain, amount of revenue. I only hope that the National Liberals will, if it is not too late, take warning once again. The danger signal has been raised by my hon. and gallant Friend. They have seen it. It seems to make no difference to them. What does the right hon. Gentleman think of that? Here is a case clearly made, not only on behalf of revenue, but for the protection of these industries. You must therefore go all round when the opportunities come, and they will come.
§ Major-General SEELYWe have just been told by my right hon. Friend that my hon. and gallant Friend (Captain Benn) has held up a danger signal to the Free Trade supporters of the Government. Any one who knew what really was in the Budget and what was the substance of this matter would wonder whatever could be meant by such a statement. I claim to be a Free Trader, and I never shall give up one tittle of what I believe to be the immutable doctrine that taxes should be imposed for revenue purposes only because I firmly believe that any attempt to protect any industry will be fatal to the well-being of the country. What are the facts about this Budget? If I take some of the arguments which the Chancellor of the Exchequer has addressed to us I should at once vote against him with the exception perhaps of his last argument. What are the facts? Really one does not wish to say things which may seem rather hard in regard to Tariff Reformers, but what are the facts? Here we have a purely Free Trade Budget with the solitary exception of the McKenna duties. Any Free Trader would say that these duties are probably not 1889 wise because when you take them off you sacrifice the revenue, and that is the cursed thing in regard to these Protectionist duties.
One argument is that you sacrifice the duties this year, and the other is that it will grossly interfere with these particular industries which have been fostered by these particular duties if you take the tax off now. They say to take off the tax now would be grossly unfair in a period of great depression. The argument against Protectionist duties is that once imposed they are so difficult to get rid of. Fanatical Free Traders, amongst whom I class myself, must admit that it would be grossly unfair to take those taxes off this year, because it is a period of exceptional distress. I am certain if my hon. and gallant Friend the Member for Leith were Chancellor of the Exchequer, as I know he expects shortly to be, he would not take off these duties at present because it would be so unfair to choose this particular moment to do it. The Free Traders in this House have been appealed to to see a danger signal. I must be permitted to say that, as a Free Trader, I thank the Chancellor of the Exchequer, because in spite of all temptations he has continued to produce a Free Trade Budget with the exception of these particular duties which were introduced by Mr. McKenna, and so long as he continues to do that he will have my support.
§ Mr. LYLE-SAMUELI never thought I should live to hear my right hon. and gallant Friend who spoke last stand at that Witness Box and testify to his Free Trade principle, and then congratulate the Chancellor of the Exchequer on his Budget proposals, and upon being such a staunch Tariff Reformer.
§ Major-General SEELYNo, Free Trader.
§ Mr. LYLE-SAMUELMy right hon. Friend said that he had been slightly embarrassed by the speech of the Chancellor of the Exchequer, but he finished up by approving of a series of principles of economics which I myself have heard him denounce in the country. He finished up by referring to the question of revenue and to the fact that a tariff has been introduced—I do not think it was generous of him to say it was introduced by a Free Trade Chancellor of the Ex- 1890 chequer (Mr. McKenna) without going out of his way to remind the House of the circumstances in which Mr. McKenna introduced those taxes and the limitations he imposed. My right hon. Friend went on to voice the well-known Tariff Reform doctrine that to take off these duties would be unfair to the industries concerned.
§ Major-General SEELYAt the present time.
§ Mr. LYLE-SAMUELSince we are all pilgrims for eternity, may I take up that point of time? If we can have an assurance from the Chancellor of the Exchequer that this is only a question of time and not one of economic principle, we should be very relieved on this side of the House. The Chancellor of the Exchequer says he is very glad to provide the hon. and gallant Member for Leith with an opportunity to make an annual speech on the same subject, and I think he rather suggested it was the same good speech supported by the same sound arguments. The right hon. Gentleman suggested that, in giving this advantage, he is enabling the hon. and gallant Member to utter and repeat here the Free Trade faith which he has always professed and still believes. May I ask for how many years is the Chancellor of the Exchequer going to give my hon. and gallant Friend this opportunity? When is this occasion to cease? If this policy is sound at the present moment, it will be sound next year. Is it, or is it not, now to be a permanent part of the fiscal system of this country? That is the real question. The right hon. Gentleman says that our policy on this matter is theory run mad.
Our policy is that taxation should be imposed only for revenue purposes. The Chancellor of the Exchequer's final and most alluring argument was that this represented a penny reduction in tea. Why not extend this relief by increasing the number of articles upon which taxation should be relieved? Why restrict taxation to these few things? The history of this particular little group of taxes is simple. They were imposed because of a shortage of shipping in time of war, and it was distinctly stated then that they were imposed with that object. Under those circumstances they were supported by all sections of the House in 1891 response to the appeal that every man should support the Government to do anything which was necessary to prosecute the War. It is now nearly four years since the War ceased, and here we are in this Budget with the Chancellor of the Exchequer in need of money. What we Free Traders say is, "if this is your principle extend it, but be frank about it and let us know where we are." The fact is that this is a falling revenue, and it is regarded by the Protectionist section as a minor victory to lead to a much greater one.
What is the fact? The Chancellor of the Exchequer knows that pressure is being brought to bear on him from January to December, month in and month out, to increase the scope of the taxation of these particular articles and the Protectionist section not only support him but they want him to extend it. We make our protests not because we are theorists run mad in pursuing them, but because we have been justified on the economic facts in the process of this continued taxation in the view that we have always taken, that it is more necessary than ever in view of the present system of taxation that we should continue our protests.
§ Mr. W. GRAHAMI think there is another side of this problem which is well worthy of our consideration. Hon. Members who have spoken have made it plain that when these duties were introduced there were really two considerations before the country. The first was trying to do something to place a hindrance on imported luxuries, and obtain a revenue from that source; and, secondly, to restrict the amount of those imports into this country.
§ Sir R. HORNEMr. McKenna, in introducing these proposals, said:
In so far as the duties do not put an end to importation, they may be a source of revenue not to be neglected.
§ Mr. GRAHAMLet us take these two points and ask ourselves candidly whether circumstances have changed to such an extent as to make our contention sound. On the first point the purchase of luxury articles is, it is perfectly plain, declining, and so is the revenue. I think it is also true to say that we have 1892 passed in the present day from that period of artificial prosperity due to War conditions in the very early stages of which this kind of legislation was introduced. Surely the Chancellor of the Exchequer is bound to ask himself, has the time now arrived at which we have passed from this luxury condition of affairs and is a continuance of this taxation in fact not producing a revenue from luxury articles, but is actually penalising trade? I think that is important. It is clear that we have now passed that point, and we are bound to reconsider our attitude towards those duties which some of us never supported.
7.0 P.M.
In the second place, I think I have an even stronger argument. The right hon. Gentleman twits some of us on this side with allowing theory to run riot and with opposing proposals which, perhaps, if we were not so strongly tied to theory, we might support. That argument comes strangely from a great representative Scotsman from a country in which we have pushed many of our theological and other theories to an extreme point! This is a case in which the theory is perfectly consistent with a great deal of the facts to which the Chancellor of the Exchequer must have introduced at Genoa and elsewhere. What are the facts? Under the first head we have passed from the luxury condition and we are now considering whether we should continue to impose these taxes or not on imports into this country. The circumstances regarding imports have changed. Let us go back a very few months to the time when we were considering the problem of the foreign exchanges, and when we were discussing very representative reports. It was stated, with reference to the Cunliffe Committee, and in the discussion of reports of other Committees, that we had everything to gain up and down the world at the present day by the greatest possible freedom of interchange of commodities, and that we were under an obligation in this country, however difficult it might be, to make our contribution to that end. That was one of the methods by which the foreign exchanges were to be righted, namely, the removal of these artificial barriers to the free interchange of commodities in order to get back to a healthy state of affairs. I cannot discuss the proceedings at Genoa here, 1893 but many of the documents that have been issued from Genoa lay emphasis on the very same point. I agree entirely. The Chancellor of the Exchequer, if he wore to reply again, would probably say that that was good enough in its way but only if you can get a general policy in this matter, and the Governments of other countries to stand in and agree to arrive at a comprehensive settlement. I agree that the difficulty in this respect is very great indeed, but the fact remains that because of our peculiar fiscal position the duty on us is greater than on other nations to remove this hindrance, and to set an example in the greatest possible freedom of interchange of commodities, which the Chancellor of the Exchequer well knows to be a vital element in the improvement of our overseas trade at the present time. My hon. and gallant Friend below me (Capt. W. Benn) was criticised because he said this was a corner-stone here, a brick there, and that in duo course we should have the completed edifice before we knew where we were. I think what he had in mind was not only that we have these duties in the Finance Bill and the Budget Resolutions from year to year, but that they are only part of a system that is growing up in this country, which is represented by the Safeguarding of Industries Act, either in the first part or in the second part, and that we are embarking on a range of restrictions which is the very thing that the best minds at Genoa and elsewhere deplore. I think it is fair to say that we are really doing the Chancellor of the Exchequer's business to-night in the great task of financial reconstruction in pleading the case for the removal of these duties, because, in the first place, the circumstances under which they were imposed have changed, and, in the second place, the conditions under which he would continue them are no longer consistent with those conditions on which world recovery depends.
§ Mr. A. HOPKINSONSpeaking as a Free Trader, I cannot say that I agree with the arguments that have been advanced from the benches above the Gangway. After all, what is the whole basis of Free Trade belief? It is that it is desirable that there should be plenty and cheapness in respect of useful commodities. At the same time, I do not see that any Free Trader is bound to believe 1894 that it is desirable to have an enormous quantity of very cheap articles, American organs, cinema films, Ford cars, and other things that have to pay duty under this particular Clause. It seems to me that these duties are just like the duties on tobacco or foreign wines or spirits, in that if they have the effect of reducing the imports undoubtedly they are having an effect beneficial to the people of this country. The fewer American organs, cinema films and Ford cars imported into this country undoubtedly the better it is for this country, because they are luxuries which the people of this country ought not to be purchasing at the present time, when it is difficult for so many to get enough food on which to live. Therefore, when Free Trade Members of this House get up and, with voices burning with indignation, denounce this particular Measure, I cannot help thinking that, finding the Free Trade principle a very useful political weapon, they are inclined to think it may be used to cover any sort of attack on the Government. I repeat that the Free Trade principle is to produce plenty of cheapness in those commodities useful to the people of the country, and it is no part whatsoever of the Free Trade principle to have this country swamped with a lot of useless things, such as those on which duties are placed in this particular Clause.
Mr. J. JONESI cannot claim to be Free Trader or Tariff Reformer. Therefore, I can say,
A plague o' both your houses.If the hon. Member who has just sat down, as he generally does, had given us a lecture on economics, it might be possible for some of us to reply. I am one of those who represent the producers and not the sellers of commodities. There is a very great difference between the men who produce things and the men who make profit by soiling them. In this particular instance we are face to face with the problem which was looked upon before the War as one which divided us in political principle. During the War we felt it necessary to circumscribe the possibilities of trade, and so certain legislation was introduced to prevent luxury trades exercising these possibilities. But are there any luxury trades now in the real sense of the term? There are only two luxuries—night clubs and cocaine merchants—but there is no suggestion in 1895 the Budget that they should be taxed. The only suggestion now made in connection with this particular tax is that we should tax imports in particular connections. If you are going to tax imports, how are you going to pay war debt to the nations you are indebted to? They are the nations who are demanding the repayment of money you borrowed from them during the War. How do you stand in this connection?
§ Sir R. HORNEThe only nation to which we are in debt is the United States of America. The fewer of these things we buy from, the United States of America, the more easily do we pay our debt.
Mr. JONESAmerican organ-grinders then will be exempt from debt. We do not want to buy them because, as a matter of fact, in this country you have not the means of providing yourself with certain commodities scheduled in the tax. It is not our fault; it is the fault of the Government of the country who have not been prepared to support their own industries in the way they ought to have done. I am not a Free Trader, but I do not believe in allowing the products of foreign sweated labour to come into this country. I have opposed it. I do not believe in cheap goods for cheap people, but when I hear these arguments for having goods sent into this country at any price, then I want to draw the line. I would rather have international relationships properly established so that better conditions of labour might be enforced on the producers in all countries. We say, whatever your financial arrangements may be, that we want to see the time come when the workers of every country will be guaranteed decent conditions of employment. Let us have a fair deal, not these artificial arrangements by the imposition of taxes, but by international labour regulations, so that if we have to fight each other in the economic field we have a fair chance.
Mr. T. THOMSONThe Debate has produced some extraordinary professions of Free Trade faith, but I think that of the hon. Member for Mossley (Mr. A. Hopkinson) is the most extraordinary of all. He says that the Free Trade principle is the exchange of useful articles, and he suggests that the Government should tell people what are luxuries and 1896 what are not. I understood him to say that people who want to waste their money on luxury articles should be protected by grandmotherly legislation. Surely the tables are turned when we have the hon. Member for Mossley urging us here to introduce grandmotherly legislation to protect people from buying what he calls luxuries. I thought the essence of Free Trade was that for every import you had an export, and whether they are luxuries in the belief of the hon. Member for Mossley or are more useful articles, they call, at any rate, for an export in return, which would mean work for those at home. I think the Debate is also notable for the Chancellor of the Exchequer having told us that these duties are to go on as long as they produce revenue. That surely marks a change in the defence of these duties. They were a war and a temporary measure, but we are told that as long as revenue is forthcoming they will be maintained.
§ Sir R. HORNEThe hon. Gentleman is really not quoting me accurately.
Mr. THOMSONI am exceedingly sorry, and, of course, I accept that correction. At the same time, I took down the words as I heard them—"As long as it yields revenue it will go on."
§ Sir R. HORNEI did not say that.
Mr. THOMSONI am sorry I have misquoted the right hon. Gentleman, but that is certainly what I understood, and I am speaking in the recollection of the House. Of course, if that be not what was intended, it is satisfactory to Coalition Free Traders that these duties are not to go on so long as they produce revenue. I think it is necessary that this annual protest should be made by those who do believe in Free Trade. I would suggest that the very fact that there is distress is surely an additional reason why we should have goods as cheap as possible. It is suggested that because there is distress we must keep these duties on to bring in revenue, but why not a Customs Duty if revenue is the purpose? The greater the distress the greater the need is for cheapness of articles, so that the little money we have may go further.
§ Lieut.-Commander KENWORTHYI wonder if the members of the National 1897 Liberal persuasion who support the Prime Minister and temporary leader of their party in the policy described with great brilliance by our experts in the various Committees at Genoa, have followed them sufficiently to know that one of the principles put forward by bankers and economists at Genoa, and supported by our experts, is that the best thing for the reconstruction of Europe is the breaking down of all artificial barriers to trade. That has happened since the last Budget. It was only a repetition of that other Conference of experts at Brussels in 1920, at which many of the present experts who are at Genoa were also present. Many of the, representatives of nations who were at Brussels are now at Genoa. One of our most distinguished representatives, Mr. Brand, of Lazard's, was at Brussels and is at Genoa. They found unanimously that the principal cure for the ills of Europe is the breaking down of artificial barriers.
§ Mr. A. M. SAMUELWhat about France?
§ Lieut.-Commander KENWORTHYI cannot deal with France. This is not the French Chamber. Let that assembly deal with its elected representatives, and let us deal with ours. If we give a good lead and a good example, perhaps the others will follow.
§ Sir R. HORNEMy hon. and gallant Friend is, I think, referring to me, when he talks about the representatives of our own Government at Genoa. I was one of the representatives of this Government at Genoa during some of the time. I recollect no resolution being arrived at in the terms which the hon. and gallant Gentleman has described. So far as I recollect, the question of the interchange of commodities free from barriers was never raised. The question of the exchange and freedom to deal with the exchange of various countries was raised. As the hon. and gallant Gentleman knows, that is a totally different matter.
§ Lieut.-Commander KENWORTHYNo. I see very little difference, but I quite accept what the right hon. Gentleman says. His Protectionist colleague, the Secretary of State for War, however, will also have his tale to tell. On his Committee that principle was debated, and, I am glad to say, was carried. By the 1898 experts I did not mean so much the right hon. Gentleman the Chancellor of the Exchequer, whose part at Genoa was very important and very brilliant, but the economists and economic experts. I refer to Mr. Brand, who was also at Brussels, and the other bankers of eminence.
§ Sir R. HORNEMr. Brand came home at the same time as I did, and up to that period there had been no such resolution passed.
§ Lieut. - Commander KENWORTHYThe resolution was practically on the same lines as that at the Brussels Conference of two years ago, called by the League of Nations. I am sure I am right that the breaking down of the economic barriers was advocated in the different Committees, and was agreed to as a principle.
§ Sir R. HORNEI am only talking of the period up to the time of my departure.
§ Lieut.-Commander KENWORTHYI am talking about the resolutions which were passed, and which were blessed by no less a person than the Minister of War himself. In any case, however, by the admissions made in an answer to me three or four days ago, the instruction given to our experts at Genoa was to press for the removal of artificial restrictions on trade. That being the case, what is the defence of the National Liberals, who support the Government by voting for these artificial restrictions on trade? I cannot see what it can be. If the luxury argument is brought in; if we are told that the people have no business to buy motor cars, musical instruments, watches or clocks, that they can do without these things, and that times are too hard, why do not we tax other luxuries? How about silks, laces, fine velvets and patent leather, and the rest of it? Why pick out motor vehicles, clocks and watches, and let silks and satins in free? When you speak of the hard times that trade is going through, and, to use the words of the Chancellor of the Exchequer,
these small and comparatively unimportant duties are required to protect them,why do not you protect some of our great industries, such as agriculture, and the whole range of the engineering industries, with their great numbers of 1899 workpeople unemployed? Why do you not safeguard the British industries that count, and, above all, the great shipping industry? The right hon. Gentleman challenged us to point to any people in this country who were suffering from the effects of these tariffs. There are many suffering in my own constituency. I refer to the seamen; to ships' officers, unable to get employment now, and in great distress. They draw no unemployment allowance at all, and have come to the end of their savings. They see their ships lying idle without cargoes. The dockers have not the work to do clearing the ships which might be bringing these articles. The right hon. Gentleman points with pride to the falling off in the import of motor-cars, etc. How much is the loss to the greatest British industry, that of shipping, without which we cannot live? How much is the loss to British shipowners and sailors? The right hon. Gentleman says no one is suffering. Our seamen are suffering, our dockers and our shipping community are suffering, and these duties are doing great harm. They are against the whole conception that will be required if we are to see the reconstruction of the economic system in Europe. They are against the policy which we are supposed to be advocating at Genoa They are doing harm to our shipping, and are the beginning of a system that will ruin this country economically. They should be resisted by us whenever they are promoted by this Government, and we should be failing in our duty if we did not resist them by our votes in the Division Lobby.
§ Lord EUSTACE PERCYI would point out to the Chancellor of the Exchequer how very mistaken he was when he said that he never received any suggestions as to policy from hon. Gentlemen opposite. The hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) is capable of evolving 15 policies on any question of the kind. Whether they are all consistent policies is a question of which my long acquaintance with the hon. and gallant Gentleman has left me somewhat doubtful. Not only he, but all the ardent Free Trade theorists opposite—and I lay the emphasis on "theorists" and not on "Free Trade"—to whom we have had the privilege of listening this afternoon, reminded mc very much of the 1900 mediæval theological problem as to how many angels you could balance on the point of a needle. How many arguments as to Free Trade is it possible to balance on the small pin-point of this particular Resolution is a problem which hon. Gentlemen opposite have been spending the afternoon trying to demonstrate.
I should like to bring the Debate back to a question of fact. I quite agree with the hon. Member for Central Edinburgh (Mr. W. Graham) about the needs of the day and about the Genoa and the Brussels Resolutions, and the necessity of removing artificial restrictions to trade. But are we dealing with restrictions to trade? Is it to be assumed that these duties are really limiting the importation of the commodities to which they apply? There is not, so far as I know, a shred of evidence to that effect. The importation is going down, but as a matter of fact, if hon. Gentlemen will consider the prices at which, for instance, American motorcars are being offered on this market at the present moment, they will see that the idea that this duty is a real restriction, considering that American motor-cars are being landed in this country more cheaply than they can be produced in this country, even now, shows that that is an entire misconception. The same thing is true of American cinema films. Is there a great shortage of films in this country? Whatever our arguments may be against restricting the free exchange of commodities, they do not apply to these duties, which, in fact, at the present moment, are not having any appreciable effect in the way of such restrictions.
Major BARNESI am much obliged to the Noble Lord for advancing the general proposition that the duties are no restriction of trade and are not stopping these things coming in. If that is so, what becomes of the argument of the Chancellor of the Exchequer that you must not take the duties off now on account of the depressed state of trade? The two things will hardly run together in harness. If we had to-day a modern Hosea Bigelow, he would write "The Pious Chancellor's Creed," and he would say,
I du believe in Free Trade's causeEz far away ez Genoa.The hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy), did a real service in bringing up the 1901 question of the relationship of this Resolution to what is going on in Genoa. I understood that the Chancellor of the Exchequer to disclaim having had any part in any of the recommendations which were proceeding from that very interesting city.
§ Sir R. HORNEMy hon. and gallant Friend really must not misrepresent me. I was putting the hon. and gallant Member for Central Hull right as to what actually happened while I was at Genoa. He made a distinct personal reference to myself as a representative of the Government. So far as I know, when I left Genoa, there had been no such resolution passed as that to which he referred.
§ Lieut. - Commander KENWORTHYLast week.
§ Sir R. HORNEIt may very well be that the proceedings which took place afterwards may have contained some such general view as that all artificial restrictions on trade should be removed by all countries. I think, if that were so, it would be adopted by everybody.
Major BARNESIt may very well be, as the right hon. Gentleman said, that some such resolution was passed, because that was one of the very bases of the Genoa Conference. I have here the resolution adopted by the Supreme Council at Cannes as the basis of the Genoa Conference. It deals with economic subjects and is in these words:
The obstacles to revival, however, are economic as well as financial. The Conference will therefore consider how the existing impediments to the free interchange of the products of different countries can be removed, in particular by the abolition, as rapidly and completely as possible, of such new impediments as have resulted from post-War conditions.That is a resolution on which, whatever may have been done when the Chancellor of the Exchequer was at Genoa, the Genoa Conference was based. It is something which preceded the Genoa Conference, and to which, as a member of the Government, the right hon. Gentleman is as much committed as any other member there. If any reality is to come out of Genoa at all, can it come if we are proposing one thing there and practising another here? All the fine words coming from Genoa would be outweighed in the balance by one single act in this House. 1902 If we want to set an example to Europe and bring those countries which are described as suffering from economic depression into a better condition of affairs, we can do it much more effectively by showing the way here than by any amount of pious professions. That makes the subject of the discussion to-night of a great deal more moment than if it were merely the kind of attack the Chancellor of the Exchequer pictures it to be, a sort of annual demonstration of Free Traders against Protectionists. We are fortunate in having in the Chancellor a man who is not committed to any of these fiscal policies. He is not. a Free Trader; he is not a Protectionist; he has the open mind for the open question which the Leader of the House recommended, I think it was to the Coalition Liberals who waited upon him. He says that this sort of thing is a matter of business, and not a matter of theory at all. But whose business? That is really the point of all these questions. Is the restriction of the import of motor-cars a matter of the farmer's business who has to pay £35 more for a Ford chassis than he would have to pay if these duties were not in existence? Is it a matter of the doctor's business, or of any man's business who requires one of these light touring cars for the purpose of carrying on his trade?The Chancellor of the Exchequer thinks about the motor industry and the unemployment there. We can always sympathise with any industry that is in any kind of distress, but we have no right to relieve one industry at the expense of another, and that is what we are doing under those present Resolutions. I think we are justified in making, and that we should be lacking in our principles if we did not make, this annual attack, as long as the Chancellor of the Exchequer stands there to bring forward these Budgets. We have the greatest admiration for his powers. No Chancellor of the Exchequer has more distinguished himself in bringing forward his Budgets. His statements are a model of lucidity. Nevertheless, we cannot hope that he will be standing there for very long bringing in Budgets such as this. I do not share the gloomy views as to our future fiscal policy that are held by some of my friends. I think that events are fighting for Free Trade, especially when I read speeches such as that of the Chancellor of the Exchequer at Glasgow, in which he told his 1903 constituents that, whatever his views were before the War with regard to Tariff Reform and putting on tariffs, he did not think the conditions existing at the present day were conditions in which to do that. I see that the right hon. Gentleman agrees with me. I am far more encouraged by the effect of events upon his mind than by any theories which he may or may not hold. I remember also reading an account of what was said by the Leader of the House at a meeting he had with a number of his ardent supporters, who pressed him very much on the question of Tariff Reform. He told them very much the same sort of thing, namely, that the days for Tariff Reform were not these days; that we should have to wait until we were in a more prosperous condition; and that, while we were going through these difficult times, we must travel light, without the burden of tariffs. These things encourage me to believe that, whatever claim is made with respect to tariffs in these particular proposals, the day is not far off when we shall have a Budget in the House free from, the slightest taint of tariffs, and in that spirit of cheerful optimism I propose to vote against the Government.
Dr. MURRAYThe Chancellor of the Exchequer has said that motor cars are merely a luxury, but I think that if he lived in my part of the country he would find that a motor car was a necessity and not a luxury. It is all very well in London and round about London, where there are plenty of transport facilities, but in these rural areas, where travelling is difficult and where there are no railways, the motor car becomes an absolute necessity to anyone who can afford it. That is especially the case in the Highlands of Scotland. I see that my right hon. Friend the Minister of Pensions is present. He represents a portion of Ross and Cromarty, and I have no doubt that he will come into the Lobby with us in the interests of his constituents, because in the Highlands cheap motor cars are
§ an absolute necessity on account of the restricted facilities for transport in those areas. This is really a big question in the Highlands at the present time, and the Government are doing a very grave injustice to the people of those distant parts and of other parts of England and Scotland far removed from the large centres in maintaining this tax on motor cars. I thought we were going to have this tax removed, because, at the great function of Coalition Liberals which was held some time ago—I refuse to call them National Liberals, because that is a German name, and it would be an insult to apply it to them—we were told by certain Members of the Government that the policy of the Government after this was to be one of full-blooded Free Trade. The retention of this tax is, surely, not consistent with full-blooded Free Trade, and I regret that some of those Liberal Members of the Government are not on the Front Bench now to fight for their own side on this question, I hope that the right hon. Gentleman the Minister of Pensions will get up and tell us in what way this is consistent with full-blooded Free Trade. With regard to musical instruments, I am not so particular, except that we are talking about brightening life—about brightening the City of London and every other part of the country; but to encourage the cultivation of a taste for music, and to brighten the homes of our people, the cheapening of musical instruments ought certainly to be encouraged by the removal of this tax. It has been suggested that even bagpipes were imported from Germany, and if that be so I do not object to the retention of the tax upon bagpipes, because it is an insult to that instrument for anyone to say they are made in Germany; but with that exception I do suggest that the tax upon musical instruments should be removed.
§ Question put, "That the words proposed to be left out stand part of the Resolution."
§ The House divided: Ayes, 170; Noes, 75.
1905| Division No. 97.] | AYES. | [7.40 p.m. |
| Agg-Gardner, Sir James Tynte | Banner, Sir John S. Harmood- | Bird, Sir William B. M. (Chichester) |
| Ainsworth, Captain Charles | Barnes, Rt. Hon. G. (Gias., Gorbals) | Blades, Sir George Rowland |
| Amery, Leopold C. M. S. | Barnston, Major Harry | Blair, Sir Reginald |
| Armitage, Robert | Barrand, A. R. | Blake, Sir Francis Douglas |
| Armstrong, Henry Bruce | Beckett, Hon. Gervase | Borwick, Major G. O. |
| Baird, Sir John Lawrence | Bell, Lieut.-Col. W. C. H. (Devizes) | Boscawen, Rt. Hon. Sir A. Griffith- |
| Baldwin, Ht. Hon. Stanley | Bellairs, Commander Carlyon W. | Boyd-Carpenter, Major A. |
| Balfour, George (Hampstead) | Birchall, J. Dearman | Bridgeman, Rt. Hon. William Clive |
| Broad, Thomas Tucker | Herbert, Col. Hon. A. (Yeovil) | Pownall, Lieut.-Colonel Assheton |
| Buckley, Lieut.-Colonel A. | Herbert, Dennis (Hertford, Watford) | Purchase, H. G. |
| Bull, Rt. Hon. Sir William James | Hilder, Lieut.-Colonel Frank | Randles, Sir John Scurrah |
| Burn, Col. C. R, (Devon, Torquay) | Hills, Major John Waller | Rawlinson, John Frederick Peel |
| Carter, R. A. D. (Man., Withington) | Hoare, Lieut.-Colonel Sir S. J. G. | Richardson, Sir Alex. (Gravesend) |
| Casey, T. W. | Holbrook, Sir Arthur Richard | Richardson, Lt.-Col. Sir P. (Chertsey) |
| Cautley, Henry Strother | Hood, Sir Joseph | Roberts, Rt. Hon. G. H. (Norwich) |
| Chamberlain, Rt. Hn. J. A. (Birm, W.) | Hope, Sir H. (Stirling & Cl'ckm'nn'n, W.) | Roberts, Sir S. (Sheffield, Ecclesall) |
| Child, Brigadier-General Sir Hill | Hope, Lt.-Col. Sir J. A. (Midlothian) | Robinson, S. (Brecon and Radnor) |
| Clay, Lieut.-Colonel H. H. Spender | Hopkins, John W. W. | Roundell, Colonel R. F. |
| Clough, Sir Robert | Horne, Edgar (Surrey, Guildford) | Royds, Lieut.-Colonel Edmund |
| Coats, Sir Stuart | Horne, Sir R. S. (Glasgow, Hillhead) | Samuel, A. M. (Surrey, Farnham) |
| Cobb, Sir Cyril | Hurst, Lieut.-Colonel Gerald B. | Samuel, Samuel (W'dsworth, Putney) |
| Cockerill, Brigadier-General G. K. | Jameson, John Gordon | Sanders, Colonel Sir Robert Arthur |
| Cohen, Major J. Brunel | Jodrell, Neville Paul | Scott, A. M. (Glasgow, Bridgeton) |
| Colfox, Major Wm. Phillips | Johnson, Sir Stanley | Seddon, J. A. |
| Conway, Sir W. Martin | Kidd, James | Seely, Major-General Rt. Hon. John |
| Davidson, J. C. C. (Hemel Hempstead) | King, Captain Henry Douglas | Shaw, William T. (Forfar) |
| Davidson, Major-General Sir J. H. | Lewis, Rt. Hon. J. H. (Univ., Wales) | Smith, Sir Malcolm (Orkney) |
| Davies, Thomas (Cirencester) | Lloyd, George Butler | Stanley, Major Hon. G. (Preston) |
| Dawson, Sir Philip | Locker-Lampson, G. (Wood Green) | Steel, Major S. Strang |
| Dennis, J. W. (Birmingham, Deritend) | Locker-Lampson, Com. O. (H'tlngd'n) | Stewart, Gershom |
| Doyle, N. Grattan | Lowther, Maj.-Gen. Sir C. (Penrith) | Strauss, Edward Anthony |
| Du Pre, Colonel William Baring | Loyd, Arthur Thomas (Abingdon) | Sturrock, J. Leng |
| Edgar, Clifford B. | Lyle, C. E. Leonard | Sueter, Rear-Admiral Murray Fraser |
| Elliot, Capt. Walter E. (Lanark) | McCurdy, Rt. Hon. Charles A. | Sugden, W. H. |
| Evans, Ernest | Mackinder, Sir H. J. (Camlachie) | Sutherland, Sir William |
| Falcon, Captain Michael | Macpherson, Rt. Hon. James I. | Taylor, J. |
| Fade, Major Sir Bertram Godfray | Maitland, Sir Arthur D. Steel- | Terrell, George (Wilts, Chippenham) |
| Farquharson, Major A. C. | Marks, Sir George Croydon | Thomson, F. C. (Aberdeen, South) |
| Fell, Sir Arthur | Marriott, John Arthur Ransome | Thomson, Sir W. Mitchell- (Maryhill) |
| Flannery, Sir James Fortescue | Moore, Major-General Sir Newton J | Thorpe, Captain John Henry |
| Ford, Patrick Johnston | Morden, Col. W. Grant | Townley, Maximilian G. |
| Forrest, Walter | Moreing, Captain Algernon H. | Tryon, Major George Clement |
| Fraser, Major Sir Keith | Morris, Richard | Watson, Captain John Bertrand |
| Fremantle, Lieut.-Colonel Francis E. | Morrison, Hugh | White, Col. G. D. (Southport) |
| Ganzoni, Sir John | Murray, C. D. (Edinburgh) | Wild, Sir Ernest Edward |
| Gee, Captain Robert | Murray, Hon. Gideon (St. Rollox) | Williams, Lt.-Col. Sir R. (Banbury) |
| Gibbs, Colonel George Abraham | Murray, John (Leeds, West) | Wills, Lt.-Col. Sir Gilbert Alan H. |
| Gilbert, James Daniel | Neal, Arthur | Windsor, Viscount |
| Gilmour, Lieut.-Colonel Sir John | Newman, Colonel J. R. P. (Finchley) | Winterton, Earl |
| Goff, Sir R. Park | Newman, Sir R. H. S. D. L. (Exeter) | Wise, Frederick |
| Green, Joseph F, (Leicester, W.) | Newson, Sir Percy Wilson | Wood, Hon. Edward F. L. (Ripon) |
| Greene, Lt.-Col. Sir W. (Hack'y, N.) | Nicholson, Brig.-Gen. J. (Westminster) | Wood, Sir H. K. (Woolwich, West) |
| Greig, Colonel Sir James William | Nield, Sir Herbert | Wood, Major Sir S. Hill- (High Peak) |
| Gretton, Colonel John | Pain, Brig.-Gen. Sir W. Hacket | Young, E. H. (Norwich) |
| Gritten, W. G. Howard | Parker, James | |
| Hacking, Captain Douglas H. | Peel, Col. Hn. S. (Uxbridge, Mddx.) | TELLERS FOR THE AYES.— |
| Hannon, Patrick Joseph Henry | Percy, Lord Eustace (Hastings) | Colonel Leslie Wilson and Mr. Dudley Ward. |
| Hennessy, Major J. R. G. | Pollock, Rt. Hon. Sir Ernest Murray | |
| NOES. | ||
| Barker, G. (Monmouth, Abertillery) | Halls, Walter | Rendall, Athelstan |
| Barnes, Major H. (Newcastle, E.) | Hancock, John George | Richardson, R. (Houghton-le-Spring) |
| Bonn, Captain Wedgwood (Leith) | Hayward, Evan | Royce, William Stapleton |
| Bramsdon, Sir Thomas | Henderson, Rt. Hon. A. (Widnes) | Shaw, Thomas (Preston) |
| Brown, James (Ayr and Bute) | Hirst, G. H. | Short, Alfred (Wednesbury) |
| Cairns, John | Hodge, Rt. Hon. John | Smith, W. R. (Wellingborough) |
| Cape, Thomas | Holmes, J. Stanley | Spencer, George A. |
| Carter, W. (Nottingham, Mansfield) | Irving, Dan | Spoor, B. G. |
| Cecil, Rt. Hon. Lord R. (Hitchin) | John, William (Rhondda, West) | Swan, J. E. |
| Clynes, Rt. Hon. John R. | Jones, J. J. (West Ham, Silvertown) | Sykes, Sir Charles (Huddersfield) |
| Collins, Sir Godfrey (Greenock) | Jones, Morgan (Caerphilly) | Thomas, Rt. Hon. James H. (Derby) |
| Davies, A. (Lancaster, Clitheroe) | Kennedy, Thomas | Thomson, T. (Middlesbrough, West) |
| Davies, Evan (Ebbw Vale) | Kenworthy, Lieut.-Commander J. M. | Thorne, W. (West Ham, Plaistow) |
| Davies, Rhys John (Westhoughton) | Kenyon, Barnet | Wallace, J. |
| Devlin, Joseph | Lambert, Rt. Hon. George | Walsh, Stephen (Lancaster, Ince) |
| Edwards, C. (Monmouth, Bedwellty) | Lunn, William | Waterson, A. E. |
| Entwistle, Major C. F. | Lyle-Samuel, Alexander | Watts-Morgan, Lieut.-Col. D. |
| Finney, Samuel | Maclean, Nell (Glasgow, Govan) | Wedgwood, Colonel Josiah C. |
| Galbraith, Samuel | Maclean, Rt. Hn. Sir D. (Midlothian) | White, Charles F. (Derby, Western) |
| Graham, D. M. (Lanark, Hamilton) | MacVeagh, Jeremiah | Wignall, James |
| Graham, R. (Nelson and Colne) | Murray, Dr. D. (Inverness & Ross) | Wilson, James (Dudley) |
| Graham, W. (Edinburgh, Central) | Myers, Thomas | Wood, Major M. M. (Aberdeen, C.) |
| Griffiths, T. (Monmouth, Pontypool) | Newbould, Alfred Ernest | Young, Robert (Lancaster, Newton) |
| Grundy, T. W. | Parkinson, John Allen (Wigan) | |
| Guest, J. (York, W.R., Hemsworth) | Rattan, Peter Wilson | TELLERS FOR THE NOES.— |
| Hall, F. (York, W. R., Normanton) | Rees, Capt. J. Tudor (Barnstaple) | Mr. G. Thorne and Mr. Hogge. |
Resolution agreed to.
§ Mr. SPEAKERThe two Amendments on the Paper relating to this Resolution—after the word "entertainments" ["ad- 1907 mission to entertainments"], to insert the words
shall, in lieu of the rates imposed by the Finance (New Duties) Act, 1916, as modified by any subsequent enactment, be charged at the rate of fifteen per cent, of the gross receipts for admission and,and to leave out all the words after the word "shall" ["entertainments shall extend to"] and to insert instead thereof the words "be repealed as from the fifteenth day of May, nineteen hundred and twenty-two"—are out of order. One imposes a charge beyond the Resolution and the other is not relevant to the subject matter.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Lieut.-Commander KENWORTHYI want to ask for the consideration of the Chancellor of the Exchequer of some concession to small showmen—the people who have what they call a twopenny show and travel about visiting fairs.
§ Mr. SPEAKERThat does not arise here. This is only a question of definition—bringing in some people who have hitherto escaped the duty.
§ Lieut.-Commander KENWORTHYAm I not in order on the main Question in discussing the duty itself?
§ Mr. SPEAKERNot on this Resolution.
§ Lieut. - Commander KENWORTHYCould I not move to leave out this class of small showmen? They rather stand by themselves. I wish to ask whether the matter could not be considered and to point out that they have a very hard fight in the present circumstances, and to appeal to the right hon. Gentleman to look into their case.
§ Mr. SPEAKERThe Resolution does not affect them at all. Therefore, the Amendment would not be relevant.
§ Mr. G. LOCKER-LAMPSONI beg to move, in paragraph (a), after the word "for" ["shall be charged for the year beginning"], to insert the words "the first six months of."
1908 The result of this Amendment will be that for the first six months the tax will be 5s. and I have a consequential Amendment providing that for the remainder of the year it will be at the rate of 4s. in the £. I will not repeat a word of the arguments which have been used in the last few days in regard to the way in which we are the heaviest taxed nation in the world, nor the way Income Tax is affecting trade and increasing the problem of unemployment, because we are almost unanimous in agreeing that the sooner we get it reduced the better. I only want to show that the right hon. Gentleman, if he makes an effort to do so, can get the revenue to meet this reduction on the present basis of taxation and by improved administration. I am not at all satisfied with the limits of reduction that he has proposed. I believe he can easily get another 1s. off for the last six months of the year. He told us the other day that the remission of the 1s. would cost him £32,000,000. Therefore my Amendment would only cost about £16,000,000 for this year. I believe he can quite easily get this £16,000,000. In the first place, I believe he has considerably over-estimated his expenditure. I have already pointed out that he has taken no account of the decreased cost of living and my right hon. Friend never answered that argument. There is a footnote to every one of the Civil Service Estimates that they are based on a cost of living of 100 per cent, over pre-War. As a matter of fact, the cost of living to-day is not 100 but 82. and there is a difference of 18 points between the cost of living at present and the basis on which my right hon. Friend's Estimates have been prepared. I do not know whether even he can say what that is going to save him in paying salaries and pensions, but 18 points out of 100 is so substantial a proportion that I have not the slightest doubt that the reduced cost of living is going to save a very large sum in expenditure. But that, after all, may be a comparatively small point. I now come to a very much more important point, and that is that I am quite certain that if my right hon. Friend makes an effort to get his Income Tax in, as he should do, properly and on a sound administrative basis, he has very much under-estimated his revenue. I refer to evasion. It is purely a question of administration. This 1909 is what the Income Tax Commissioners said in their Report about three years ago:
Experience teaches us that in order to ensure the success of any tax the public must have confidence that the law is being impartially and firmly administrated and that evasion and fraud are carefully guarded against and severely punished when discovered.Under our present system I believe honest people who make honest returns are being made to pay a far higher Income Tax because of people who make dishonest returns and therefore diminish the revenue which should flow every year to the Exchequer. The hon. Member for Central Edinburgh (Mr. W. Graham) was a very distinguished member of the Royal Commission. He knows the question infinitely better than I do and he will correct me if I am wrong. The Commission examined a great many witnesses. The principal Treasury witness said that in his belief at least £5,000,000 to £10,000,000 was lost every year by evasion. The Association of Tax Surveying Officers says that in their opinion no less than £100,000,000 has been lost during the last few years. One witness said that in his belief no less than £100,000,000 a year escaped assessment for Income Tax. Even putting it as low as £10,000,000, if you get that in it would pay for three-quarters of the benefit I am asking for for the general taxpayer. During the next six months, if my right hon. Friend puts his mind to it, he can set up machinery which will prevent this evasion to a very large extent. But there is a far larger sum in my belief involved than this. I believe Income Tax and Super-tax are far more evaded to-day than most hon. Members have any idea of. The Income Tax Commission said when it reported:The evidence as a whole fully convinced us that there is a serious loss of revenue caused by fraud, negligence, and ignorance, and that there is a considerable minority of taxpayers who, tempted more than ever by a high rate of tax, deliberately seek to cheat their fellows by understating their liability for assessment.8.0 P.M.To give one or two instances, I believe I might almost say the majority of people who get interest on deposit and current accounts at the bank make no return and pay no tax. That was evidence given before the Commission. The banks ought to make a return of all interest on deposit and current accounts that they pay to their clients. After all, it is no 1910 innovation, because directly a bank becomes a trustee for anyone it immediately has to make returns of all interest paid on deposit and current accounts, but directly it ceases to be a trustee and becomes a bank with private clients, it makes no return whatever, and it is left to the good will of the taxpayer to say whether he is assessable or not. I know of a man who is getting no less than £400 a year interest from bank deposits, and he has made no return and pays not a farthing of tax upon it. To my mind, either the banks ought to make a return of the whole of this interest or they ought to deduct tax before paying their clients. There are many ways in which the administration of Income Tax at present is very lax indeed. So far as I have been able to find out, there is practically no proper co-operation whatsoever between the Super - tax Commissioners and the Income Tax Department. They are completely water-tight compartments, one set of gentlemen living at one end of London and the other in a totally different building. Hon. Members know that when they get their Income Tax papers, on page 3 they have to state the total amount of their income from all sources. I suggest that the Chancellor of the Exchequer should make a Regulation that whenever a paper, on page 3, shows an income of over £2,000 a year that that paper should immediately be sent to the Super-tax Commissioners, so that they can assess that person to Super-tax. That seems to me to be only reasonable. To make the system watertight in each Department as it is at the present time enables many people who are liable to Super-tax to escape altogether. There ought to be more co-operation between the Income Tax Department and other Government Departments. I understand that at present the India Office assesses Income Tax merely on pensions, and takes absolutely no notice of any other income that may happen to belong to the person who is receiving the pension. I know of the case of one man who has a pension, and who makes his return to the India Office in regard to that pension, and he has also a private income of £500 from India; but that 500 escapes assessment because the India Office takes no notice of anything except pensions. The thing ought not to be watertight for each Department in this 1911 way, but there ought to be proper co-operation, and directly the India Office sees that there is any income outside the pension, they ought to call in the local inspector and tell him the amount.
The penalty in regard to cases of evasion ought to be far more strictly enforced. The penalty of treble the duty in default of any return ought to be enforced much more frequently. In Australia, 10 per cent. is added to the tax if no return is made on a certain date. A much more summary proceeding ought to be taken than is adopted in this country. I do not know whether hon. Members realise that summary proceedings can only be taken to-day in regard to wage-earners who have a quarterly assessment. Summary proceedings to-day are only applicable to wage-earners, but I do not see why in cases of evasion the summary proceedings should not be made applicable to people who have a larger income. The administration of Income Tax ought to be infinitely simpler. The present forms are excessively complicated, and I believe they are so complicated that they invite evasion. The Commission that sat two years ago suggested, on various pages, that the administration ought to be made much simpler, but, so far as I can see, the Government has done nothing to simplify the administration during the last three years. The Income Tax forms are becoming more and more complicated.
In New Zealand, they have adopted the very recommendations of simplification and inspection that were made by the Royal Commission three years ago. A very interesting document was sent to the Commission, and put in as information, by the Secretary of the New Zealand Treasury. That document was originally drawn up by the Secretary for the information of the New Zealand Acting Finance Commissioner, and it shows that before New Zealand adopted the simplified method of administration of Income Tax, the amount realised by Income Tax was practically insignificant; but when they had adopted the simplified method of administration of Income Tax the New Zealand Minister of Finance said that the revenue was enormously increased. In New Zealand, at the time when the new methods were introduced everybody said that the new methods would be considered inquisitorial, that they would be very 1912 unpopular, and that would lead to no good result. The result in New Zealand has been exactly the opposite. The visits of the inspector and the advice of the inspector to people who are ignorant about these matters have been welcomed, and it is now, I should think, one of the most popular administrations of Income Tax in the world. The strongest evidence for this simplification which came before the Commission did not come from Inland Revenue Commissioners, that might have been suspected, but a great deal of the most important evidence came from a high judicial authority who, over and over again, had been engaged in cases against the Inland Revenue on behalf of clients.
There is one other way in which I believe the Chancellor of the Exchequer could obtain more revenue from Income Tax. A British subject may live in a foreign country for over six months in the year, and he may live for over five months in the year in this country. He may live in some hotel, he may take a furnished house, or he may live with friends, tout if he lives here for less than six months in a year he pays no Income Tax. Many businesses are carried on in hotels. There are many cases where a man has no office at all; he treats the hotel as his office, and no Income Tax is paid on that business. I know of the case of a man who even lives in his own house for nearly six months in the year. He has divided his house and property between his three children, and lives with them as their guest, and does not pay one halfpenny of Income Tax because he lives not quite six months of the year in this country. These people get the whole privileges of British citizenship, and they can also have the whole of their money in British funds. They can invest in 5 per cent. National War Bonds, in 5¾ per cent. Exchequer Bonds, in 4 per cent. Funding Loan, and in 4 per cent. Victory Bonds. They can have the whole of their money in British securities, and yet not pay one farthing Income Tax to the Exchequer. If the Chancellor of the Exchequer would tighten up the Income Tax administration he would get a large amount of extra revenue. If a man lives more than three months in the year in this country he ought not to be considered outside our Income Tax law. I would make another law, that any man who has his main banking account in this country should be 1913 considered a British subject for the purpose of Income Tax law. If these two courses were adopted, the Chancellor of the Exchequer would get far more revenue than he is getting to-day.
There is a multitude of other ways in which evasion takes place. I suggest that the Income Tax should be charged at a lower rate for the remaining part of the year. The Chancellor of the Exchequer may reply that that is impracticable, or that it is difficult, or that it is very awkward, or, perhaps, he will even say it is impossible. I would like to remind the House that it has been done on two recent occasions since the War. In 1914, there were two Finance Acts. For the first half of the year the tax was 1s. 3d., and it was subsequently raised to 1s. 8d. In 1915, there were two Finance Acts, and the tax was raised from 2s. 6d. to start with, to 3s. 6d. in the latter half of the year. In six months from now the Chancellor of the Exchequer will sec how trade is going. In six months' time he will have had ample opportunity to tighten up the Income Tax administration. Let him then come to the House and tell us the results, and I shall be very much surprised if, after making an effort to tighten up the Income Tax administration, he is not able to tell us that he has got sufficient revenue, indeed, a great deal more revenue than is required, for the Amendment that I propose.
§ Mr. W. GRAHAMI beg to second the Amendment.
I do not think the Chancellor of the Exchequer will quarrel with some of us who have raised this question on many occasions, because I know that he agrees that there is no subject more important from the point of view of an efficient Income Tax system in this country. Why do we make this proposal to-night, and why does my hon. Friend submit his arguments in support of a better administration? The Chancellor of the Exchequer will agree that the recent history of this problem in Great Britain has been singularly unfortunate. First of all, in 1919, we had the Royal Commission on the Income Tax, and before that we had various Commissions on the Income Tax, with all the proposals that they made for Income Tax reform. Towards the close of the proceedings in the Royal Commission on the Income Tax 1914 we were urged to get out our recommendations at the earliest possible moment, for one reason above all other reasons, and that was that the Chancellor of the Exchequer of that year could incorporate in the Budget the new abatements, concessions, and family allowances, etc., that we recommended in our Report. The position, therefore, is this, that those recommendations having been adopted in the Budget of 1920, the Chancellor of the Exchequer has adopted, so to speak, the costly side of the recommendations of the. Royal Commission, but up to the presnt time he has not safeguarded himself or the country by introducing the necessary legislation to give effect to all the other proposals of the Royal Commission, which were proposals, in the main, that would have brought revenue to the Exchequer. Under present conditions that is a very important consideration.
There was a subsequent history. There was introduced some time later a Revenue Bill, which incorporated a large number of the proposals which the Royal Commission on the Income Tax had made; but no sooner was that Bill introduced than we had a fierce controversy in the country as to whether the Commissioners, who were described as a buffer between the people and the bureaucracy, should be retained, or whether they should be swept away. In my judgment, many of the most valuable proposals of the Revenue Bill were absolutely lost to view in the controversy which took place upon that particular matter. The Revenue Bill was withdrawn, and we have arrived at this stage in the Income Tax, that we have had the abatements and the concessions, which were welcomed by the taxpayers, but we have had practically nothing done to meet the administrative difficulties, and the great problem of evasion. We have nothing to gain by exaggerating the amount of evasion. I know that one of the witnesses before the Royal Commission put it as high as £100,000,000 in a single year. A figure of that kind is absurd, but there appeared to me to be great force in the statement made by surveyors who argued that over a period of about four or five years the country had lost £100,000,000 in evasion as between Income Tax and Super-tax, or at the rate of from £20,000,000 to £25,000,000 a year. I set beside that the estimate given on the other hand by, 1915 perhaps, too cautious authorities, some of the Chambers of Commerce and other people, who put the evasion variously between £5,000,000 and £10,000,000 per annum. Other witnesses went to the length of saying between £10,000,000 and £20,000,000 annually. It would probably be nearer £20,000,000 if we could only place our finger on a proper solution of the difficulty.
I know of no public Department of this country before the War, but particularly during the War and later, which has been more grossly overworked than the men and women engaged in the assessment and collection of Income Tax in Great Britain. The staff has never been sufficient, and everybody knows how they have conducted their work, very difficult work, and work of increasing intricacy, because of the extra duties imposed during the War, in circumstances of the greatest hardship in many ways from the point of view of efficiency. The Chancellor of the Exchequer knows that they get enormous files of returns in all these offices. It is plain that they can never make an effective test of all. They make a test, here and there, of a very small percentage, in many offices, of all the returns which they receive, and that is the only check in practice which exists at the present time. A very limited number of cases is so treated. In the overwhelming majority of cases they have simply to take the returns, assess the tax and collect it. I am not suggesting that people are, generally, dishonest. Far from it. We know that a very large amount of evasion is what we should call innocent evasion. People simply either do not state the whole case or they misstate the case. They do not set out to do that with the object of defrauding the Exchequer. But there can be no effective test of more than an infinitesimal portion of the whole of the returns.
Another illustration of what seems to be a doubtful practice, from the point of view of efficient collection. Some of the officers, in cases of doubt, when they have not time to investigate, go on increasing the assessment year by year, asking for a little more this year than last year, and a little more next year than this year, and so on. This practice is based on a kind of feeling that they are not getting all the facts on the returns, 1916 and the full amount of revenue to which the State is entitled. All that is going on without protest on the part of the person who receives the increased assessment. If he were able to challenge it he would refuse to pay, or he would lodge a protest, especially in Scotland, and use all the powers of appeal. That is not a satisfactory method of arriving at a solution of the problem. The real remedy lies in the adoption of the proposals of the Royal Commission. The Chancellor of the Exchequer cannot long delay the adoption of these proposals, because, in the first instance, they are just to him, and, in the second instance, just to the taxpayers. The Chancellor of the Exchequer has recognised the importance of meeting some of the difficulties of the situation by what he proposes to do in connection with these one-man companies, and the creation of trusts, and the other devices to which he referred in his Budget speech. But there are much more important things to be taken into account. A very small extra staff in many cases, and more particularly additional power are all that are required to lead to a considerable increase in the collection of the tax.
There are other problems much more important in character. The Chancellor of the Exchequer has still to face that very large problem of assessment for Income Tax purposes in this country of trading by foreign governments. Every day or every week legal decisions are being given. Only a few days ago Mr. Justice Hill made a statement on this point which has an important bearing upon the Income Tax and its collection in this country. I know-that the matter is being investigated, and in due course proposals may be made for the solution of the serious difficulties presented by this problem. The matter of evasion in existing conditions cannot wait longer, because a very serious burden falls upon these people who make a bonâ fide return. For the most part they are people whose income is exposed to public view. It is often easily ascertained; it is provided by some public authority or some easily ascertainable investment. They are for the most part people of small means, and they are paying perhaps a larger amount owing to the evasion which takes place in other cases, which the Chancellor of the Exchequer has a difficulty in reaching because of the 1917 inadequate powers at his disposal. Our appeal is wholly in his interest, and in the interest of the taxpayer. I hope that he will use this Finance Bill to give effect to the recommendations which were made by the Royal Commission, and which have been supported so ably by my hon. Friend the Member for Wood Green (Mr. G. Locker-Lampson).
§ Sir R. HORNEWe have had very admirable and instructive speeches from the Mover and Seconder. I do not wish to minimise the contentions which they have put before the House. Certainly what has been stated by the hon. Member for Wood Green (Mr. G. Locker-Lampson) requires the closest examination, and the only doubt in my mind at this moment is, first, as to whether my hon. Friend is taking the right way to get at this matter, and, secondly, whether we are at this precise point of time really in a position to tackle the interesting question which has been particularly expanded by the hon. Member for Central Edinburgh (Mr. W. Graham) efficiently, and with a chance of making an effective reform. I am clear that we may, by making an attempt and getting very poor results, put obstacles in the way of the ultimate reform which we desire to attain. One would rather see Measures which have a good chance of being fruitful adopted than embark on some sort of temporary plan which might only impede further efforts at a later time.
§ Mr. GRAHAMThe recommendations of the Royal Commission.
§ Sir R. HORNEThe recommendations of the Royal Commission only go a certain way. They do not touch a good many of the points raised by the Mover of the Amendment, or even by the Seconder. On the question that he raised particularly, I would remind him that we introduced a Revenue Bill about a year ago. It would have covered a number of the points to which he referred, points which were also supported by the recommendations of the Royal Commission. The House will remember the salvo of opposition with which the proposals were met.
§ Colonel WEDGWOODBy the vested interests.
§ Sir R. HORNENo, opposition from many quarters in this country. Indeed 1918 it was made obvious that at that period and with the limited time at our disposal it would have been quite impossible to have carried that Revenue Bill, even if we had been able to devote the whole time of the House to it. This is a matter which, when taken up, will require to be carried through, but the amount of support that we got for the Revenue Bill was not such as to justify or encourage us in taking up the time of the House for the purpose of carrying the Bill through. Let me refer to the Amendment. The hon. Member is quite right in saying that I would hold that this was an impracticable Amendment. He proposes that we should confine ourselves, as far as the Income Tax is concerned, to the first half of the year and make the tax for that half-year 4s. 6d., leaving the other half of the year entirely "in the air."
§ Mr. LOCKER-LAMPSONMay I explain? I have a consequential Amendment, which I read out when I started my speech. It is to leave out the words "five shillings" and to insert instead thereof the words "four shillings and sixpence."
§ Sir R. HORNEEven so, the proposal is open to the charge of being entirely impossible, and if my hon. Friend will listen to me I will tell him why. The whole of the machinery on which the Income Tax system is worked, is based upon treating the twelve months as the year. All allowances are given upon that footing. You cannot by any chance split up a year, so as to carry out all the allowances which you must give. My hon. Friend referred to change of Income Tax in the course of the year. How was it managed? It was managed by averaging the amounts and assessing for the full year upon the average for the year. My hon. Friend does not propose that. He proposes that we shall collect upon the basis of 4s. 6d. Income Tax for the first six months, and, having seen the position in which we stand then, we shall go on definitely for the next six months upon the basis of 4s. Income Tax. That is an entirely impracticable proposal which could not be carried out under any system. Whatever my hon. Friend's object may be, his proposal is completely unworkable. What were the grounds on which he made his proposal? He referred, first of all, to the fact that the cost of the Civil Service was based upon the assumption that the cost of 1919 living would be 100 per cent, above pre-War level, and he said he was certain that that made some considerable difference in the expenditure for the year. It makes a very small difference. And for this reason: The only part of Civil Service salaries which is affected by the cost of living is the bonus. The ordinary basic salary is not affected at all. In so far as the Civil Service is concerned, no further change takes place until the month of September, so that so far as this year is concerned half of it will be gone before there is another change. Suppose you were to assume that the cost of living will fall from the figure of 100 per cent. to the figure of 85 per cent, above pre-War level. The whole saving that would be made on the Civil Service bonus would be something like £1,500,000. I agree that that is worth getting, and, of course, we shall get it if we get the lower cost of living. But it does not give anything like the plums which my hon. Friend required in order to make any further reduction in Income Tax.
§ Mr. LOCKER-LAMPSONThat is only one item.
§ Sir R. HORNEIt is an item of very inconsiderable dimensions. My hon. Friend seems to assume that the cost of living is going to remain at somewhere in the region of 80 per cent, above pre-War cost. I hope that may be so, but I have no confidence in those figures There is a tendency, which may be more readily observed in the United States of America than here, for prices to rise at the present time, and undoubtedly one of the consequences of what is going on in the United States now is likely to be a rise in prices. I do not wish to create all sorts of impressions with regard to that matter, and I hope that if it should happen in the United States, it may be some time before it reaches us. But it would undoubtedly have its repercussions here. Accordingly, I do not want to base my estimates upon figures which may not prove to be justified. I am sure that that is the last thing my hon. Friend would wish me to do. Therefore, although I hope we shall not have a rise in prices which will increase the cost of living, and that there may be some time when the £1,500,000 indicated may be available, at present I am not in a position that would justify me in budgeting on any different footing 1920 from that adopted. I ought to make myself safe in the estimate I have put forward.
Let me turn to the other branch of my hon. Friend's argument. It was devoted entirely to the question of evasion. I agree that we ought to take all the means in our power to prevent the evasion by citizens of their proper duty under the Income Tax law. I agree also that we ought, when we can, to put into force the proposals made by the Royal Commission on Income Tax. But I do not agree with many of the points of my hon. Friend. For example, he suggested that any person who lives three months in this country should have imposed upon him the duty of paying the amount of Income Tax which would be payable supposing he was here for the whole year. He said that that suggestion might prove a source of revenue. Even now there is no doubt that the extent to which our Income Tax law is operative deters foreign people of wealth from coming here for a longer period of the year than that for which they stay amongst us. I have had it put to me times innumerable by people from the other side of the Atlantic that they would have every temptation to live here if only the effect of our Income Tax law was not so heavy upon them as to make the burden too great for them to indulge themselves in opportunities to live here longer. That has not been a mere casual observation, but has been made to me by many who have a genuine desire to spend more time in this country.
§ Mr. LOCKER-LAMPSONI said, especially "British citizens," not foreigners.
§ Sir R. HORNEI hope my hon. Friend is not suggesting that we should allow foreigners to have advantages which we are not going to give to our own citizens. If that be his proposal, I am afraid it cannot readily be adopted. When we make laws, we have to make them on the same basis for everybody. Some of his proposals in connection with the scrutinies which will take place are, no doubt, valuable. As the hon. Member for Central Edinburgh (Mr. W. Graham) has said, there is no staff in this country or in the world which is so overworked as the Exchequer Staff. We could only do many of these things by greatly increasing their numbers, because at the present time they are very much overworked. I hope hon. Members who talk about reducing 1921 staffs to pre-War level and so forth, will remember the colossal task imposed on Revenue officials by the changes made during the War, No sympathy is ever shown to them, and what answer should I have got, had I come here during the last year or year and a half, and asked for further staff in order to carry out even the most beneficial reforms? The question of staffing Government Departments at the present time has very little chance of receiving considerate treatment. We must select a proper opportunity for carrying out the kind of legislation necessary to achieve the objects which, I agree with my hon. Friend, are most desirable and which, indeed, must be achieved in the near future. It would be worse than useless to attempt reforms of that kind and to meet with such opposition as would lead to failure. That would only put them back for many years to come. I think with this explanation I may leave the matter there and if my hon. Friend has achieved his object, in his speech, rather than in the act of dividing on the Amendment, I think I may urge him not to press this Amendment at the present time.
§ Lieut.-Colonel Sir J. HOPEI rise to ask the Chancellor of the Exchequer if ho has considered the saving he can make in respect of the uncollected arrears of Income Tax. According to a return given last Monday, the unpaid Income Tax in March, 1921, was £86,000,000, and in this year it is £110,000,000. On the same day it was stated that all of the £86,000,000 unpaid a year ago has since been collected, with the exception of a very small amount, This year there was £24,000,000 additional uncollected Income Tax at the end of April. Surely this will con siderably increase the Chancellor's surplus, and might enable him to agree to this Amendment or give some further concession in remitting taxation. I hope the Chancellor will be able to do something further, and do it quickly, with regard to preventing evasion of Income Tax, as has been suggested both by the hon. Member for Wood Green (Mr. G. Locker-Lampson) and the lion. Member for Central Edinburgh (Mr. W. Graham). The Chancellor of the Exchequer said a Revenue Bill was introduced last year to deal with many of these desirable reforms, and that it met with opposition. Much of the opposition was caused by the fact that in it there 1922 was a proposal to do away with the Commissioners of Income Tax.
§ Mr. YOUNGMay I correct the hon and gallant Member. There was no proposal to do away with the Commissioners of Income Tax. There was a proposal of a very minor character to remove a certain amount of clerical work from the Commissioners.
§ Sir J. HOPEI think there was a proposal in Scotland, at any rate, to remove the Local Income Tax Commissioners—
§ Sir J. HOPE—and thereby deprive the public of the protection to which they were entitled. The public would be only too glad to see some Measure introduced which, while not giving undue power to the bureaucracy and the officials, would secure that Income Tax was paid fairly by everyone and that it could not be so easily evaded. The Income Tax Commission published its recommendations two years ago, and no protective steps have been taken in that direction yet. The hon. Member for Wood Green referred to the question of the deposit receipts at banks. There is a considerable feeling that in that connection there is a method of evasion which can be practised without much difficulty. A man is entitled to recover Income Tax on interest paid on an overdraft at the bank, but there is no means of discovering whether a man has at the same time another account in the same bank, or an account in another bank on which he holds a deposit receipt and for which he is getting—or was getting up to recently, at any rate—a considerable percentage on the money deposited.
§ Mr. LYLE-SAMUELHe must make a fraudulent return.
§ Sir J. HOPEHe does make a fraudulent return, no doubt. Anyhow, he does not make a full return. I only draw attention to a possibility of this evasion, and I am not prepared to state exactly how this loophole can be closed. It might be done by wording the Income Tax return in such a way as to certify specifically that during the past year the person making the return either had no deposit receipt in any bank, or, if he had such a deposit receipt, had received so much interest upon it. If a man specifically had to swear to what was incorrect it 1923 might he a deterrent. That is one detail, but there are many other points which could be dealt with in a Revenue Bill. Now, when everyone is hard pressed by taxation, it should be paid fairly, and there should be no possibility of evasion. There is a special temptation now owing to high taxation to evade it, as the Chancellor recognises in his references to proposals to prevent evasion. The right hon. Gentleman also referred to the number of officials that would be required and to the possible reluctance of the House to increase the staff of the Inland Revenue. I do not think the House has ever suggested that the staff of the Inland Revenue is excessive, but it has suggested that many other staffs are excessive. The time has arrived to consider whether the winding-up, say, of the Food Ministry might not be expedited and the staff thus relieved transferred to the Inland Revenue. There are other Departments, such as the Ministry of Transport and the Disposal Board, created since the War, and to the continuance of which, I think, the House objects, and by bringing those Departments to an end we might get the officials which the Chancellor requires in order to prevent evasion of the Income Tax.
§ Major ENTWISTLEWe are now well in the middle of the dinner hour, so there is an excuse for a small attendance of Members, but when the hon. Member for Wood Green (Mr. G. Locker-Lampson) moved his Amendment I think there were very few more in the House then, if any, than now, and as this is the important Amendment which was much heralded as to an increased reduction of the Income Tax, and in view of the shoals of petitions we have received—Members have been inundated with them—it is rather an extraordinary occurrence. Perhaps it is because former experience of the Government has shown that it is hopeless to expect to get anything more out of them once they have announced their decision, but I would have thought, on this very important subject, there would have been evinced a more general interest than we have seen to-night. I desire to support the hon. Member in his Amendment, and I desire to support it on somewhat wider grounds than he has advanced in favour of it, though I agree with every word he has said. I am rather sorry that the reply of the Minister has been made so early, 1924 because I am quite certain there are much wider considerations which can be advanced in favour of the Amendment. I certainly agree with the hon. Member for Wood Green that this question of evasions is one of very great importance. It is extraordinarily unfair that people should have to pay a larger Income Tax because others are evading their just liabilities. It always seems to me rather similar to the case of the tradesman who has long credits for certain bad customers and has to charge the good customers a higher price in order to make up for the loss he suffers, and I think that is a very reprehensible policy for the Government to adopt. The Chancellor of the Exchequer said it would have needed more staff to have prevented these administrative evasions, but that is a very extraordinary argument. If, as the result of a little more staff, he would have saved the country millions, it is rather an extraordinary confession for the Government to make that they would not have the courage to ask for a little more staff in order to save the country those millions. It brings to my mind a Debate we had on the subject of the pensioning of civil servants on the basis of their present salary plus bonus, because we found out then that, in order to get popular approval by reducing their staff, the Government were persuading civil servants to retire as early as possible and giving them a permanent pension based on a temporary bonus.
If that is the form of economy, it is no wonder we do not get our Budgets down, and I support the Amendment, amongst other reasons, on the principle of inducing the Government to obtain the necessary economies in order to justify this reduction in the Income Tax. I believe that the less we give them in income, the more inducement there will be to economise, and I think that is quite a sufficient ground on which to support the Amendment. We heard from the Chancellor that there was at the present time a larger amount of arrears of Income Tax than there has ever been in the history of this country. I think he said there was about £146,000,000 in arrears of Income Tax. The important period for this country is the next year or the next two or three years, in trade, and any relief which can be given to industry now in taxation is far more important than any which could be 1925 obtained later on. Here we have a capital asset of £146,000,000 of Income Tax which is not taken into consideration at all in the Budget. Not one penny of that £146,000,000 is brought into account. Then we have a sum of £296,000,000 arrears of Excess Profits Duty, of which only £29,000,000 is brought into account, although we know that, with the interest which is charged on the arrears of Excess Profits Duty at the present rate of bank interest, there will be every inducement for more of that money to come in than the Chancellor of the Exchequer has budgeted for. Why should certain people be allowed these long arrears? We know that if certain people know the ropes and are acquainted with their Income Tax surveyor and that sort of thing, they are able, perhaps, not to be pressed so hard as others. I sec the Financial Secretary to the Treasury seems to be rather excited by that statement.
§ Mr. YOUNGNo. I would only like to say that, of course, if the hon. and gallant Member has any instances w7hich he would bring to the notice of Ministers of cases in which any undue preference has been obtained by taxpayers, immediate and searching inquiry shall be made into them.
§ Major ENTWISTLEI am not suggesting that foe a moment, and if I gave that impression I at once withdraw it. I have not the slightest desire to do that, but it is a fact anyway that there are these arrears, and I am only drawing the conclusion from the existence of these arrears. Everyone is not in arrears. Some people have paid up-to-date, so there must be some people who are in arrears, and in face of that it is obvious that if these were brought into account in this year the Government would be allowed to give general relief in the rate of taxation. I have no desire to cast any imputation on the bonâ fides of the surveyors who are collecting the tax. That is the farthest thing from my thoughts, but I am drawing the conclusion that if there are these arrears, there is obviously a source of income, which, if it were utilised to its utmost, would enable a general relief to be given in taxation. As I say, there is another ground on which one can support this, and that is on the ground of economy. I think the Chancellor has probably underestimated his revenue on this occasion for the reasons which I have stated—the large arrears of Excess Profits Duty and the 1926 arrears of Income Tax which can come into account—and I think part of the cause is that the Chancellor of the Exchequer is looking towards his next Budget and is very desirous that if it comes before the next election that Budget should also be able to be a popular one. I have no doubt that in that Budget we may have a reduction in the taxation on beer, so as to provide a good ground for going to the electorate. I am in favour of these reductions being made at the present time.
It is most essential that we should take every step to revive and stimulate trade in this country. If that is not done, no Budget will ever balance whatever the taxation is that is imposed. We have been seeing at the present time a rapid deflation, due, not to healthy causes, but to depression in trade. That is the reason for the deflation of prices which has been going on and the decrease in profits. How on earth would it ever be possible to balance the Budget if we allowed these prices to fall to such an amount—I mean the prices of industrial products, the prices of manufactured goods, not of food—as to get below a profitable margin? The income of the country would be reduced, and it would be quite impossible to balance the Budget. Therefore, I think at this time it is essential to see that industry is stimulated and that the prices which our manufacturers are able to get for their goods are at an economic level, because if the income of the country is not kept up, it is quite impossible to balance your Budget. We have to remember that this money was borrowed to carry on the War, when prices were at a high level, when the purchasing power of the sovereign was only worth about 8s. If we allow the deflation to go on, owing to depression in trade and not to any healthy cause, we shall find that we are trying to pay back debt in the way of interest and redemption in u real value which, if it has its logical conclusion, will be twice as large as the value which we have borrowed. I think it is an obvious proposition that it is impossible to borrow 8s. and pay back a sovereign, and that will be the tendency if this excessive taxation goes on. Therefore, I am in favour of the Amendment I shall vote in favour of proportionate reductions in Income Tax, sugar and tea, and, if an Amendment be moved, in the case of beer. I think also that this Amendment, if carried, would stimulate trade, increase the purchasing power of 1927 the community, and reduce the burdens of taxation, which are at present sapping the life-blood of industry in this country. When, in addition to that, we have the advantage that this Amendment would encourage, and, in fact, necessitate economy on the part of the Government, it is one, I think, which ought to meet with approval from all sides of the House. I hope, therefore, the hon. Gentleman will press the Amendment to a Division, and that it will be carried.
§ 9.0 P.M.
§ Sir J. HARMO0D-BANNERThe point I want to raise particularly is the fact that, in spite of the hugeness of our Debt, in the present Budget no steps whatever have been taken to reduce the Debt, so as to make the interest lighter, and bear with less burden upon the people. I do not follow so much the great cry for economy which has gone on from time to time, except to say that I thoroughly approve of it, but it has been so strongly impressed upon everyone that I do not think there is any necessity for me to speak in support of it. Use the Geddes' Axe where you can, and reduce expenditure: but you have to remember that there is a limit, and that interest upon Debt is now over £300,000,000 a year, and to a great extent we ought to apply our minds to that with a view of getting such a; relief in taxation that we may honestly and fairly ask for a further reduction in Income Tax. To my mind, it is absolutely necessary for all purposes, and the reduction of 1s. is not sufficient to meet the wants of the community. We ought to do more. The first thing I would like to point out is that we have not sufficient inflation, though, perhaps, economists will not agree. We have been going in for deflation too rapidly. I should like to point out the efforts which have been made by the Labour party that Corporations and Local Authorities should be compelled to pay their debts by promissory notes, which T know to my cost. I have had to oppose this constantly as Chairman of the Finance Committee of the Liverpool Corporation. It is a common practice in the South of France, and I have just had some experience abroad, and have come back with a pocket full of these notes. Instead of paying their debts with interest or security they hand everybody notes which are accepted as payment. The matter has been brought up in Liverpool 1928 and Manchester, but there the theory is too local, because you could not pay for your dinner in Manchester with a Liverpool local note or in Liverpool with a Manchester local note. But coming to our national finance, I venture to think we do not make half enough use of the means and facilities which we have for payment of our debt without paying interest. When we had our Commercial Committee upstairs, and the bankers were kind enough to attend, I asked all of them, but none could explain, except one, what was the meaning of ways and means, and he said my construction was right. I understand it to be this. He agreed with my construction that when you are short of money, you go to the Bank of England, and the Bank of England having been paid a fixed sum which covers all interest and charges you can borrow free of interest.
§ Mr. DEPUTY-SPEAKER (Sir E. Cornwall)I dare say the hon. Gentleman can connect his argument with the Amendment, but I have listened for some time and he appears to me to be going rather wide.
§ Sir J. HARMOOD-BANNERWhat I am saying is that you can reduce your rate of interest by this means in such a way as to justify making a large reduction of the Income Tax. I venture to say that ways and means have run up considerably over £500,000,000. At present they are about £120,000,000. Though, probably, the City would say it was wrong and immoral to inflate your currency, I say that inflation, by making a larger use of Ways and Means, would give you such a saving as would enable you very largely to reduce your Income Tax. I say there is a fund which the Government might take to pay off a great deal of their indebtedness, and be able to make a further reduction in the Income Tax. Probably that would be regarded in the City as very immoral, but, undoubtedly, it would put into circulation some £300,000,000 or £400,000,000 more money than at present exists. There is a fund from which we could get a considerable sum of money, as I have endeavoured to show, on interest and which we ought to utilise in order to reduce our charges. The other point is one in which again I may be perhaps going against the record of agreed financial relations. The Chancellor of 1929 the Exchequer ought to have gone to the financial authorities of the kingdom and said to them: "Now, you must assist us in reducing the rate of interest we pay. If you assist us—"
§ Mr. DEPUTY-SPEAKERIt appears to me the hon. Member is taking advantage of his speech to put forward a general thesis in regard to the whole financial position. We are only now dealing with an Amendment on one of the Budget Resolutions. What he says would be in order on the Second Reading of the Finance Bill, but not now.
§ Sir J. HARMOOD-BANNERI quite agree that I am somewhat out of order in dealing with the matter, but I am strictly adhering to the question of the reduction of Income Tax. What I want to say is that if the city financiers would help the Government to reduce the rate of interest on their debts, there might be such a reduction of Income Tax as would enable us to meet the Amendment which has been moved.
§ Mr. DEPUTY-SPEAKERThe same sort of argument might be used to suggest the reduction of the Army or the Navy, and would not be in order on this Amendment.
§ Sir J. HARMOOD-BANNERI have put my point. I am quite certain it is not strict finance, but perhaps the. Liberal party and the Labour party would say what other methods there are of getting money other than this, and of reducing the Income Tax. I certainly feel that at such a time as this, it is the duty of those who guide this country and whose duty it is to enable this country to become great, and financially strong again, to accept any suggestion, even if it be extreme, which might show how the interests of the country can be advanced, so bringing this nation to a better state of financial stability.
§ Mr. WISEI am afraid I do not agree altogether with my hon. Friend the Member for the Everton Division (Sir J. Harmood-Banner). I think any inflation would be fatal at the present time. Countries that have inflated do not make their budgets meet. I feel that inflation would not only increase the cost of living but it would increase the cost of the raw material, and that would never suit this country. I was very dis- 1930 appointed to hear the Chancellor of the Exchequer say that he could not materially alter the figures of the Budget. I know he has to be conservative, and I quite agree that he ought to have his eye on the Budget of 1923–24, but you can be an ultra-conservative. I agree with the Mover and Seconder of the Amendment except as to the method they propose to apply to the £16,000,000 which they think they can raise. Nothing has to-night been said about the cheapness of money. In the cheapness of money we ought to be able to make this £16,000,000 referred to by the hon. Member for Wood Green (Mr. G. Locker-Lampson), and I should like to refer to the White Paper issued on the Budget night.
In that Financial Statement, in the Estimate of Expenditure, it will be found that the Consolidated Fund Services amounted to £363,000,000. In that amount there is National Debt Services £335,000,000. The Chancellor proposed to reduce that amount compared with 1921–22 by £10,000,000. The previous statement of 1921–22 did not contain the United States interest of £25,000,000. If you take this from the £335,000,000 which is in the Estimate for 1922–23, you arrive at the sum of £310,000,000. Leaving out for the moment the United States interest, there is a deduction of £35,000,000 in the Consolidated Fund and National Debt Services. The National Debt Services are made up of interest on War Loans, National Bonds, Treasury Bills, Depreciation, and items of that sort. I propose to take the position of the Treasury Bills, and shall endeavour to show how the £16,000,000—and a good deal more—could be realised by comparing the figures of 31st March, 1921, with the figures of 31st of March, 1922. In the former there were Treasury Bills to the amount of £1,275,000,000, and in 1922 £1,029,000,000. At the end of the financial year there was a difference of £256,000,000, which has again been reduced since then. If you only take this amount of £256,000,000, and take it on the basis of 3½ per cent., you will find that there is saving in interest alone on that amount of nearly £9,000,000.
Last Friday the Chancellor of the Exchequer was borrowing money by Treasury Bills, £50,000,000 at £2 3s. per cent. This time last year he was borrowing money at £6 10s. per cent, on a three 1931 months' basis. If you take the difference in the interest on the £50,000,000 alone, compared with last year, you find in it a difference that totals to £2,000,000 in the interest, and add this to the £9,000,000 already mentioned it gives £11,000,000 odd.
§ Mr. DEPUTY-SPEAKERThe hon. Gentleman is dealing with the general financial position which is not in order on this Amendment. It is obvious that if I allowed a discussion like this on this Amendment, I should have to allow it on other Amendments reducing the sugar or the tea duty, and that would be quite impossible. The only question before us now is whether the Income Tax should be reduced from 5s. to 4s. 6d. As I have pointed out before, the general financial position is only in order on the Budget Resolutions, or the Second Reading of the Finance Bill, and not on each Amendment.
§ Mr. WISEI am sorry, as I was only trying to explain how this amount of £16,000,000, which it was suggested could be put to the reduction of taxation, might be raised. If I am not allowed to explain it in that way, I feel I must leave it to the House in the hope that the reduction may be made in some form or other, so that trade and unemployment may possibly set the benefit of the extra reduction.
§ Mr. LYLE-SAMUELThere are two interesting points arising out of this Amendment, one on the question of the reduction of Income Tax and the other on the question of evasion. In reference to the question of the reduction of the Income Tax and the consideration of this reduction in two parts, I quite agree with the Chancellor of the Exchequer that ii would be perfectly impossible for him to budget at all if he had to divide the Budget into two parts, and, having made a preliminary statement, find it necessary, by the addition of impositions, to balance it by what in effect would be a new Budget. I agree that that would be unworkable. I want to support the other part of the Amendment, namely the reduction in the Income Tax, on the ground that not merely are evasions taking place but, in my opinion, there would have been an actual increase in the receipts to the Revenue had the Government taken the bolder course of reducing the tax not 1932 merely by the amount of this Amendment but by a further shilling. I think the Treasury is acting with very great sympathy at this time both to trading concerns and to private individuals, because they realise that not merely in the case of great businesses but in the case of many private individuals the present burden demands from them a sacrifice which is almost intolerable and which necessitates an alteration of their private way of life and, in the case of many businesses, almost brings it to prostration.
One hon. Member referred to the large amount of Income Tax in arrear—£146,000,000—and the large amount of Excess Profits Duty in arrear. I do not think this is a question of indulgence, but a question of practical fact which I think my hon. Friend will support me in stating that it is perfectly impossible to press for these large sums at this time and therefore it is idle to say that the Government could have made these reductions had they pressed for these arrears within this financial year. As the hon. Member for Mossley (Mr. A. Hopkinson) has said, business men now find themselves in the position that if they are pressed for certain large sums they would have to say, "Take my business." I think that the raising of this question will illustrate from the point of view of any recovery in trade and the preservation of our position as a capital country that we must look to the Government at the earliest moment to reduce the Income Tax.
I went the other day to Christie's famous salerooms and there I saw dispersed one of the great art collections of our kingdom. It was a very tragic thing to me to find that so many of these art treasures were being bought for abroad, and they will never return to this country. This sale was simply because of duties arising out of the death of the late owner and the present, onerous taxation, of which the Income Tax and the Super-tax are the worst expression, to be found in the Budget of this year that compelled the dispersal of these art treasures and the depletion in this country not merely of great artistic treasures but the removal of our capital to a foreign country, and the further continuance of a policy which might ultimately result in our losing the position we have at this moment as one of the great centres of culture existing in Europe. I should strongly have sup- 1933 ported the Government had they seen their way to a greater deduction. I want to make one suggestion. I know that until the end of the financial year it is impossible for the Treasury to know exactly the position of the country and how the balance sheet will work out. It might be that as far as six months before the end of the financial year, and certainly three months, those large sources of revenue might be so fully secured that the Chancellor of the Exchequer could make an anticipatory announcement of a further reduction of Income Tax. This is very vital. I know it has been the custom of this country, and a very precious custom, that there should be absolute secrecy about the Budget. I think we have had a lamentable exception made this year. That tradition, I think, we are all agreed should be observed in so far as it relates to any possibility of affecting the control of trade, but it would be no injury, on the contrary it would be a great incentive to trade and industry, and a great social and economic advantage if arising out of this Amendment, and earlier than the twelve months within the financial year, the Chancellor of the Exchequer between now and then could see his way to announce a reduction in the Income Tax in the next Budget.
§ Mr. REMERI should not have intervened had it not been for the speech made by the hon. and gallant Member for South West Hull (Major Entwistle). He prefaced that speech by calling attention to the very small number of Members in the House at the time his Debate was going on. It is necessary, in view of the campaign on this question of the Income Tax which is going on in the Northcliffe Press, attacking hon. Members in a most scandalous way, to call attention to the fact that hon. Members representing the Northcliffe Press, the Anti-waste party, have not yet intervened in any way in the Budget Debate, and on this most important question of Income Tax not one of them has been present or intervened in the Debate. I think it is a most scandalous thing that their organs should press for a reduction of the Income Tax, and the Anti-waste Members do not give any reason for the extraordinary arguments which from time to time are used in those particular organs. I could not allow this Debate to pass without making that observation as another instance of the dishonesty of the particular attacks 1934 which are made on the Government in those particular organs. I wish to make one observation with reference to the remarks made about the evasion of Income Tax. No doubt there is a very large amount of evasion going on. I happen to have a relation in one of those offices which has to look after the collection of Income Tax.
§ Mr. LYLE-SAMUELHow very nice!
§ Mr. REMERThere is no doubt that there is not the number of staff necessary for the particular work of collection and revising the assessments. I have it on very good authority that not one in one hundred are properly scrutinised, and while that is going on I do think the Treasury might seriously consider a very large increase of their staff for dealing with assessments of Income Tax, because I am sure that would bring in a very large amount of revenue.
§ Mr. A. HOPKINSONI only intervene to express my hope that the Chancellor of the Exchequer will hold out against this Amendment. It is put forward, I understand, on the supposition that a very large reduction on the Income Tax would be of benefit to the industries of this country. I find on inquiry from bankers and others, who have a thorough knowledge of this matter, that the general opinion in financial circles is that the psychological effect of the reduction of Income Tax is very much exaggerated, indeed, and particularly in the public Press. To those in the City and elsewhere who are engaged in the buying and selling of stocks and shares the psychological effect may be very great indeed, inasmuch as those who purchase stocks and shares receive very little except psychology. On the other hand, those who, like myself, are engaged in the manufacture and sale of things made out of iron, steel, and cotton know that the psychological effect counts for very little indeed. If there is a reduction in the rate of Income Tax, unless it is accompanied by an equal reduction in the nonproductive expenditure of the country, industry and trade will not benefit in the very least. I put forward that point of view at the beginning of this Debate on my own authority, but since then I have consulted those who know much more about it. That view has been confirmed, that it is perfectly useless to attempt to assist trade, commerce, and industry by 1935 a reduction of taxation unless at the same time there is a reduction of an equivalent amount of non-productive expenditure You cannot, when all is said and done, however clever you may be, get more than a pint out of a pint pot, and all these methods of squeezing the pot to get more than a pint out of it do not help in the very least.
§ Mr. DEPUTY-SPEAKERThe hon. Gentleman is getting into the general question of the financial position.
§ Mr. HOPKINSONI was endeavouring, as far as I could, to give reasons for not admitting this particular Amendment, and my reason was that this reduction of taxation did not do any good whatever to the business interests of this country.
§ Mr. DEPUTY-SPEAKERThe Amendment deals with Income Tax, and the hon. Gentleman will see that if I allow a general discussion upon it hon. Members can take a very wide field.
§ Mr. HOPKINSONExactly, and I bow to your ruling, Sir. I am afraid it was my own stupidity that caused you to intervene. I was endeavouring to show that we have an Amendment suggesting a considerable reduction in the rate of Income Tax, that other speakers were putting forward, as a proof of the necessity of the Amendment being adopted, the idea that trade and industry will be benefited if that Amendment is adopted, and from the opposite point of view I was putting forward the contention that trade and industry would not be benefited if this Amendment were accepted.
§ Mr. DEPUTY-SPEAKERI cannot allow a general discussion on the effect on trade and industry of one tax as against another, because, if I allowed that on one Amendment, I should have to allow it on another. The only question before us is this Amendment with regard to Income Tax. It is quite in order to discuss Income Tax and its incidence, but not to take a general discussion which should take place whenever opportunity arises for general discussion.
§ Mr. HOPKINSONThen I take the position to be that in discussing the question of Income Tax I shall be in order in pointing out that Income Tax 1936 is a direct reduction of the capital of trade and industry in this country, and that therefore relief of some other form of taxation would probably be better than the relief of Income Tax.
§ Mr. DEPUTY-SPEAKERI do not think so. For instance, hon. Members might want to argue that a levy on capital might be effective. That would not be in order. If the hon. Member is arguing on that line, I must prevent it.
§ Mr. HOPKINSONI will not proceed with my argument after your ruling, Sir.
§ Lieut.-Commander KENWORTHYThe hon. Member for Macclesfield (Mr. Remer) only gets up, I have noticed lately, to draw attention to the delinquencies of the Anti-Waste party. I do not love the Anti-Waste party particularly, but, speaking politically, of course, I love the hon. Gentleman and his friends a great deal less. The Anti-Waste party have supported us in our Motions for the reduction of expenditure, but the hon. Member has never walked into the Lobby once, and he now suggests that we should have a less Income Tax. Hon. Members cheer the idea of a smaller Income Tax, and yet on every occasion they have blindly and blandly supported the Government when we have urged reductions well within the reach of the Departments concerned. We all would like to see a less Income Tax. All taxation is bad. The ideal State would have no taxes at all. People would contribute out of their largesse to the State, and its expenditure would be so small that that would be sufficient. Unfortunately, we must have taxes, and with a Government like this—I hope the business people and all classes are beginning to understand—we are bound to have this crushing burden of taxation. People living on fixed incomes are bound to suffer, working people with this increased taxation are bound to suffer, men who are trying to make their way in the world after the War are bound to suffer and be hampered by this load of taxation. So long as this wicked policy is put forward and supported by hon. Members opposite and below the Gangway we shall have no relief, and the only way is to start afresh. I am afraid that, much as I should like to support hon. Gentlemen in their Motion for the reduction of the Income Tax, I do not see how it can be done. Let us 1937 take two examples. The Government have put aside £25,000,000 for Supplementary Estimate. Last year the Supplementary Estimates were, I believe, £100,000,000.
§ Mr. G. LOCKER-LAMPSON£120,000,000!
§ Lieut.-Commander KENWORTHYThey were £120,000,000 last year, and the Government have started already this year with Supplementary Estimates. They have asked us for £180,000 for Russian refugees.
§ Mr. HOPKINSONOn a point of Order. Is the hon. and gallant Gentleman in order in engaging in a discussion of this sort?
§ Mr. DEPUTY-SPEAKERI think the hon. and gallant Gentleman is getting out of order.
§ Lieut.-Commandor KENWORTHYIf we are to reduce the Income Tax, we will have less money for the Supplementary Estimates. Or, to take another example, as far as I can see, if Genoa is a ministerial success in spite of the credit for Russia—I do not want to develop this argument—we must look forward to extra expenditure. In the circumstances, I do not see how we can very well look for a reduction of Income Tax. If I were in order in discussing how economies could be effected, I could show how we could reduce the Income Tax by another Is. 6d. Unfortunately, I should not be in order in doing so. The hon. Member for the Eye Division of Suffolk (Mr. Lyle-Samuel) told us in his excellent way of the heartrending scenes at Christie's when beautiful family ancestors were put up to auction and passed out of the country, never to return. It is sad that we should lose them, though I have seen many so-called art treasures which I would like to see sent out of the country to the furthest parts of the world. What is really much more important than the dispersal of art treasures is the dispersal of the household treasures of the ordinary Englishman, who at present finds himself without employment. His lares et pennies, his household gods, have been scattered to a much greater extent than those of the people for whom the hon. Member for the Eye Division weeps. These are the people whom we should aim at relieving. In that respect does this Amendment help them? Will the extra 6d. by which it is proposed to 1938 reduce the Income Tax help those people, who are not losing their family pictures, but their pianos, their household goods, and the very beds on which they ought to be lying? As we know, in thousands of households the very family goods are being sold up to-day in order to buy food, to pay the rent, and so on. Will this reduction help them? I very much doubt it. If one shilling off the Income Tax is not going to revive trade, will one and sixpence do it? I cannot see that there is much difference between the two. You will certainly relieve the burden on the middle class, but I think the money could have been applied in other directions. It is not in order to discuss the alternatives of taxation, and I only wish the ruling of Mr. Speaker had not prevented us from drawing attention to the inevitable results of a policy which has been supported by the hon. Member for Macclesfield and others for three years and which I hope will cease.
§ Mr. RAWLINSONI wish to draw attention to a small and minor point, that is, the question of the non-payment of Income Tax. The fact that £146,000,000 are in arrear must have struck everybody in the House as an exceedingly unsatisfactory state of affairs which calls for immediate action on the part of the Treasury. I dealt with the question of the evasion of Income Tax the other night, but this matter is admittedly due, and overdue. The Treasury should attend to it without delay. I should like to make two suggestions. Would it not pay the Treasury over and over again to allow Income Tax payers who make their payments on the 10th December instead of 1st January some small remission, such as 2½ per cent.? Would that not attract people to make some form of payment in advance? At the present moment nobody gets any good by paying their Income Tax before the date it is due. During the War, when the War Loan interest was made payable on the 4th December, a special appeal was made to the holders of War Loan to pay their Income Tax forthwith with the money which they received in interest at that particular time. I do not know whether or not that had any efficacy. It may be worth the Treasury's while to do something to tempt people. Instead of making it the last debt they pay, as people very frequently do, they might make it the first, so that 1939 the Government can have the money in advance. I do not think the Government takes sufficient trouble to tempt people to pay the tax before it is due. The only case in which people can get discount on it at all is in that of professional incomes, the first half of which is payable on the 1st January and the second on the 1st July. If you pay the whole tax on the 1st January you obtain a small discount, but when you try to do that, all sorts of difficulties are put in your way. The collector has no personal interest in it and no collector wants the trouble of working out what the discount is.
An hon. Member talked a good deal about the difficulties in connection with deposit interest at the bankers. Everybody knows there is the possibility of the Treasury losing a good deal of money in that respect. People who have small sums invested in that way are put to a great deal of inconvenience. Might not that be avoided by the Treasury offering people terms similar to those offered by the Post Office Savings Bank? They might offer a very small interest, say 2½ per cent., but absolutely free from Income Tax and Super-tax. Might it not be worth the Government's while to receive sums on deposit, like the Post Office—not limited to £100 and with no limit at all—at a call of something like seven days, provided the money were free from Income Tax and Super-tax during the period of their investment? I believe a very large number of depositors would take advantage of that arrangement and thus save themselves the trouble of having to make returns on small deposit accounts for Income Tax and Super-tax. It would also tempt a very large number of people who, for the moment, use their bankers in the way I have indicated. In only throw out these two suggestions dealing with the evasion of Income Tax. In spite of what has been said, I feel that at the present moment we cannot possibly ask for a reduction of the Income Tax, little though we like it. I hope the Treasury will do all they can in future to make those people who have failed to pay do so.
§ Mr. MYERSI rise to make it clear exactly where the Labour party stands in this matter. In the earlier stages of this discussion, when the House was much thinner than at present, it was understood that the Amendment was moved for the tactical purpose of drawing attention 1940 to the evasion of Income Tax which was taking place. The hon. Member for Central Edinburgh (Mr. W. Graham) spoke from that point of view. Hon. Members, however, have addressed the House very seriously from the standpoint of supporting a reduction in Income Tax as specified in the Amendment. I hope the Mover of the Amendment will not expect the Members of the Labour party to go into the Lobby in support of his proposal, because we are of the opinion that if any further reduction in taxation can be secured, it should not be by way of a larger remission in Income Tax, but ought rather to be directed towards removing the taxes from the food of the people. It might be asserted, as it is asserted, that to effect an improvement in trade a reduction in the Income Tax is necessary. On our side of the House we equally put forward the view that, in order to effect an improvement in the standard of the life of the people, it is essential to reduce the taxation upon the necessaries of life. From that point of view, we shall not go into the Lobby in support of the Amendment should it be pressed to a Division.
§ Sir G. COLLINSHon. Members have been arguing that it might be possible to accept this Amendment and yet balance the Budget, and no doubt they are influenced in that view by the figures presented in the financial statement by the Chancellor of the Exchequer. On that matter I desire to ask the Financial Secretary a question. Hon. Members will recollect that last year the Income Tax and other direct taxes yielded £398,000,000, while in the present year the Chancellor budgets for a yield of £329,000,000. Of that difference, £32,000,000 is accounted for by the 1s. reduction in Income Tax. I desire to ask how much of the direct taxes levied in 1921 will flow into the Irish Exchequer in 1922–23. During his Budget speech the Chancellor of the Exchequer told the Committee that some £18,000,000 of indirect taxes during the year 1921–22 would be transferred to the Irish Exchequer during the coming year, but he gave no figure to show what would be the amount of direct taxes so transferred during the present year. I hope the Financial Secretary will inform the Committee what will be the proceeds of direct taxation levied this year which will flow into the Irish 1941 Exchequer, and which last year passed into the coffers of the British Exchequer. With that figure before them, the Committee will not be so ready to vote for the reduction which has been moved.
The 5s. Income Tax is really the price that the country and the House of Commons must pay for the present policy of the Government. Whether the money is raised by taxes or by borrowing, it must be raised at the expense of this country. During the Debate last week, the Government pointed out that in France the Income Tax was much smaller, and that France was borrowing large sums to balance her Budget; but, whether by taxation or otherwise, the money must be found, and this 5s. tax is the price that will be paid for the policy. Several references have been made to the large amounts of Income. Tax outstanding on 31st March. I think that every Chancellor of the Exchequer who has unfolded a Budget to the House of Commons during the last 30 years has on nearly every occasion found that his receipts from Income Tax were larger than he anticipated. In other words, our Income Tax, year by year, over a long period, has always shown a larger sum at the end of the year than the Inland Revenue officials anticipated. On this occasion, however, the situation is different. For the first time, for some years at any rate, the yield of the Income Tax has fallen in comparison with the estimates of the Inland Revenue officials by as much as £11,000,000.
§ Mr. HOLMESThat will make this year's receipts all the more.
§ Sir G. COLLINSMy hon. Friend thinks that that will increase the receipts this year, but I suggest, in view of the depressed conditions of trade, that until trade revives the inhabitants of this country will be in no better position to pay this year than last year. The decline has set in, and until the tide has turned the arrears will go up rather than decrease. I hope my forecast will be inaccurate, but I desire to draw the attention of the Committee to the fact that as a result of the strain placed upon direct taxation by a high rate levied over a long period, the tax cannot be collected, and that this large sum of £146,000,000 which is outstanding will create, and has created, a real feeling of injustice as between one taxpayer and another. I hope that the 1942 Government, during the coming months, may so direct their attention to the other side of their balance sheet that in the coming year the Income Tax may be reduced.
§ Mr. LOCKER-LAMPSONThe Chancellor of the Exchequer gave us to understand that he was going to do what he could to prevent evasion of Income Tax, and in view of his statement, I beg to ask leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Mr. HOLMESI beg to move, to leave out the words
in the case of the year of assessment in which the profits or income first arise, on the full amount of the profits or income arising within that year, and in the case of subsequent years of assessment, on the full amount of the profits or income arising within the year preceding the year of assessment or, if the profits or income first arose on a day in the year preceding the year of assessment other than the sixth day of April, on the profits or income arising within the year of assessment—and to insert instead thereof the wordson the full amount of profits or income received within the year ending on the fifth day of April preceding the year of assessment.This Resolution probably sounds innocuous and decidedly uninteresting, but I will venture to ask the Committee to allow me to say a few words about it. Case III of Schedule D is the Section under which Income Tax is charged upon persons, firms and companies in respect of interest, annuities or discounts received by them without deduction of tax. The chief sources of income which come under Case III are interest on five per cent. Inscribed War Loan, discount on Treasury bills, and interest received upon bank deposits. The sum nowadays assessed under Case III is far greater, on account of the creation of the five per cent. War Loan and the large increase in Treasury bills, than it was in 1914 and earlier. Under the Income Tax Act, 1918, the method of assessment under Case III as the law now stands is as follows:The tax shall be computed in each case on the full amount within the year ending on that date of the year preceding the year of assessment on which the accounts are 1943 usually made up, or on the 5th day of April preceding the year of assessment, and shall be paid on the actual amount aforesaid without any deduction.In other words, the Inland Revenue are a year behind in assessing incomes under Case III. A holder of £10,000 five per cent. War Loan inscribed in his name at the Bank of England last year will have received in interest £250 on 1st June, 1921, and £250 on 1st December, 1921; but no Income Tax will have been collected in 1921–22, the assessment on the £500 being made in 1922–23. Such has been the procedure for many years, but a bombshell was thrown into Somerset House on 3rd June of last year by the judgment of the House of Lords in the cases of Brown v. National Provident Institution, Brown being a surveyor of taxes. The portion of that case which affects this Resolution was that the National Provident Institution, during the year ending 5th April, 1917, made a profit on the purchase and realisation by sale, discounting or holding till maturity of British Treasury Bills, and the Inland Revenue Department sought to assess them for the year ending 5th April, 1918, on such profit made in the preceding year. The House of Lords by a majority of four to one, Lord Cave dissenting, upheld the decision of the Court of Appeal that the National Provident Institution ought not to be assessed to Income Tax for that year, since during that year they had no transactions in discounts of any kind, either Treasury Bills or otherwise, and there could therefore be no profits arising from the source of "profits on discounts." It is obvious that the Chancellor cannot allow this interpretation of the law to remain, not so much in the interests of the Inland Revenue, but as a matter of justice between one taxpayer and another. As things now stand, one man can buy £10,000 of inscribed 5 per cent, war loan and can receive £500 interest during the year without deduction of tax, and by selling the stock at the end of the year can rid himself of the "source of profits" and can so escape taxation on the £500 in the following year, whereas another man who has bought £10,000 5 per cent. War Loans in bearer bonds suffers deduction of Income Tax when he presents his coupons for payment each half-year. I am not therefore quarrelling with the Chancellor for putting down this Resolu- 1944 tion. He would have failed in his duty had he omitted to do so. I think, however, he is making the procedure in the future unnecessarily complicated and liable to lead to annoyance and in some cases to unfairness, and the object of my Amendment is to bring about both simplicity and justice. The Resolution proposes that when a person commences to have income which comes under Case III, he shall be assessed on the first year's income in that year instead of waiting till the following year, but that in subsequent years he shall be assessed on the income of the preceding years.10.0 P.M.
Let me return to my example of a man who has purchased £10,000 in inscribed 5 per cent. War Loan. In the first year he will receive £500 in interest and will be assessed for tax at £500 in that year. Let us assume that he sells half at the end of the year. He will then in the second year receive £250 in interest, but will be assessed on £500, his income for the preceding year. If he sells half the remaining stock at the end of the second year, he will receive £125 interest, but he will be assessed upon £250. It is true that under another Section of the Income Tax Act he can claim to be assessed on his actual income and can obtain repayment of any over-assessment, but this only causes annoyance and irritation at the Income Tax laws which make such procedure necessary, and it is possible that many, being ignorant of the fact that they can claim re-assessment and repayment, will never get back what they have overpaid. It may perhaps be asked why a person should not be assessed each year upon the income which he receives in that year. Such a procedure would mean that tax would never be either assessed or collected until the end of the current financial year, and it would make the position of the Chancellor of the Exchequer a very difficult one. It is essential from his point of view that in a general way the assessments should be arrived at at the commencement and not at the end of a financial year. With regard to profits on business which are assessed under Case I of Schedule D, the amount of the assessment is arrived at by taking the average of the profits of three years ending prior to the date of the commencement of the financial year in question. For example, the assessment of the profits of a business 1945 for 1922–23 is upon the average of the three years ending not later than 5th April, 1922. The Income Tax thereon is payable in whole or in part in January, 1923; and the assessment can be agreed at any time between 5th April and 31st December, 1922. It is a convenience to the taxpayer and the Inland Revenue that things are so arranged. No doubt it would be equally convenient and agreeable to the taxpayer to await the end of the financial year and then have his assessment made, but if such a procedure were now adopted in Case I, it would mean that for one year the Chancellor would lose a considerable amount of the national income.
In the same way as it is convenient and reasonable that the assessment should be made during the financial year, so that a payment may be made between 1st January and 5th April with regard to assessments under Case I, so it is equally convenient with regard to assessments under Case III. A considerable number of businesses nowadays have investments either in War Loan or Treasury Bills, or have during the year placed money on deposit at their bankers. Such businesses are assessed in a dual way under Case I and under Case III, and it is convenient for them to have their assessments under both headings settled at the same time and in the same way so that they may know at the end of the financial year what their liability to Income Tax may be, and be able to reserve the proper amount accordingly. My Amendment, therefore, suggests that every person, firm, and company should, on the 5th April each year, calculate the amount of income which he or they have received under the provisions of Case III during the preceding 12 months, and should pay tax thereon in the following year, whether or not they have disposed of the source of profit. This principle already exists in the Income Tax law, for Super-tax is paid a year after Income Tax is paid on the same income, and is paid even though the investments which have yielded the income have already been sold by the taxpayer. I believe this Amendment makes for simplicity, since the amount assessed can so easily be arrived at and the date of payment of the tax will never be in doubt, and it will remove a certain amount of the annoyance and irksomenesss which attend the collection of Income Tax, and it will not be necessary under my Amendment, as 1946 it will be under the Government proposal, for people first to pay Income Tax which is not due from them, and then have to pay it back, which only adds to the annoyance and irksomeness of the payment of Income Tax.
§ Mr. RENDALLI beg to second the Amendment.
§ Mr. YOUNGThe hon. Member has explained with great clearness and great fairness the effect of the Resolution put to the House by the Chancellor of the Exchequer. There is no difference, as I understand it, between himself and my self as regards the general principle of the Resolution. It is agreed that this decision of the House of Lords, which relieves the possessors of income from this source from paying tax upon their income for one year less than they hold it, is unfair, and gives them an inequitable preference over other people. The only point of difference, if indeed it be a point of difference, between us, is as to the way in which this obvious defect in the Income Tax law should be remedied. We propose to remedy it by making the holder of income from this source pay, in the case of the year of assessment in which the profits or income first arise, on the full amount of profits or income arising within that year. The suggestion of the hon. Member is that we should make him pay upon the last year instead of the first year. I would point out that I fear the wording of this Amendment would not be effective for the purpose which the hon. Member intends, and, as it seems to me, and as I am advised, the effect of the Amendment would simply be to leave matters as they stand at present, with income escaping tax for one year. Even suppose it were to be effective for the purpose for which he intends it, I do not think that the scheme which he suggests, of taxing the last year instead of the first year, is as satisfactory as that which we propose.
Let the House observe what the general result would be in substance. It would be this, that the taxpayer would have to pay Income Tax upon a source of income in a year in which he derives no income from that source. That is contrary to the most common-sense principle which underlies the Income Tax law.
§ Mr. HOLMESIn the first year the Inland Kevenue will not discover that the man has received income from a new source invested in Treasury Bills until the end of the financial year, and it will be the following year before they can collect the tax from him. They will not get it in the year in which he received the income, because they will know nothing about it.
§ Mr. YOUNGThere is something in what the hon. Member says, but I would not attach so much weight to it as he does. I would rather confront a slight administrative difficulty than impose an injustice upon a taxpayer by making him pay tax on an income which he has not received in that year at all. The administrative difficulty as regards the first year is slightly exaggerated, because as regards the greater bulk of investments to which this tax applies it is not difficult to foresee what the income will be, and subsequent adjustment of tax is very seldom necessary. Let me do what I hope will reassure the hon. Member, as to the way in which this proposal of ours will operate, by giving him a little fuller information. It is proposed in the first year that the Income Tax shall be assessable on the income for that year. As to the second year, the assessment will be based on the figures of the preceding year. In the legislation which will be based upon this Resolution, it is proposed to give the taxpayer the right, the not unfamiliar right, of claiming reduction if the income of the second year is less than that of the first year. If the source of income is not possessed for the whole of the year, he has the right, by way of concession, to claim for reduction of income, which would be extended to including besides the second year even the third year.
In view of these provisions, it will be clear that there is likely to be no hardship on the taxpayer in such possible directions as those referred to by the hon. Member. There will be further opportunity for discussing this matter further upon the Committee stage of the Finance Bill. In the interval I will give full consideration to the views advanced by the hon. Member, but in the meantime the most satisfactory proposal is that contained in the Resolution.
§ Mr. HOLMESHaving regard to what the Financial Secretary has said, I will 1948 await the Finance Bill to see how the matter proceeds, and I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§
The following Amendment stood on the Order Paper in the name of Mr. HOLMES: At the end of paragraph "(c) to insert a new paragraph
(d) Rule 9 of the Rules applicable to Schedule E shall be amended so as to provide that where the expenses necessarily incurred and defrayed in the performance of the duties of the office or employment exceed the emoluments to be assessed the balance of such expenses may be deducted from other assessable income of the holder of an office or employment of profit.
§ Mr. SPEAKERI do not think the Amendment on the Paper in the name of the hon. Member for North East Derbyshire (Mr. Holmes) is relevant to this Resolution.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Mr. RENDALLAs I understand this Resolution, the object is to make persons receiving salaries distinct from persons who derive their income from business. The object is to make those receiving salaries pay Income Tax on their pro spective year's income. In other words, they are to be deprived of the right of averaging their last three years' income. That seems to me to be a very strong measure to take, and it certainly will involve a great deal of injustice on a very large class of persons. It is perfectly true that when you have bad trade and unemployment there may be in certain cases reductions of salary, and people will be able to pay tax on the lesser salary. We have thousands of young men who two or three years ago came back from the War and went into business. To a very large extent they had not learned their business, and they were beginning to learn. They started at comparatively low salaries. Fortunately, through their ability, these salaries have gradually increased, and as a result at the present time they are able, if they are allowed to average the three years' salary, to bring in the £200, £300 and £400 which they may have received, and pay on a lower rate of Income Tax. I know of a case where a man has been 1949 receiving these salaries, and has now received an increase of £100, bringing his salary to £500 this year. According to the obligation which this Resolution will impose upon him, he has to make a new return showing that his income will be £500. He has to pay £50 Income Tax on that income instead of £15. Therefore this alteration in the method of arriving at income is going to mulct this man in an extra sum of £35. If everyone had to pay in this way for next year it might be a perfectly fair tax, but I do not think it fair that you should select salaried persons and apply to them this new method of arriving at the income and allow business people to bring in the lean years of the average. I hope that the Financial Secretary will be able to give some explanation of this point to-night. If he is unable to do so I shall put down the necessary Amendment later on.
§ Sir F. BANBURYI understand that the effect of this Resolution will be exactly what the hon. Member for the Thornbury Division of Gloucestershire (Mr. Rendall) has said. That is, that the person who has been receiving a bonus during the last three years will, now that the bonus has ceased or been reduced, gain the advantage of paying on a less income, and that the income which he had during the two preceding years will not be brought into account, while another person who three years ago was receiving only a small salary, but by his industry succeeded in getting his salary raised, will be penalised, as he will have to pay, not on the average of the three years, but on the income which he has at present. As the hon. Gentleman says, this is to apply only to people who are in receipt of salaries, and not to people who are earning money out of businesses or professions. It seems to be an extraordinary moment to introduce this system. Personally I have always thought that the fair assessment would be on the actual income earned during the year, and I would support a Resolution which would enact that everyone should be assessed upon the income which he has earned in the year, but the Government have not done that, and it is difficult to determine the time at which it should be brought into effect, because it must either be to the benefit of the taxpayer and the detriment of the Government, or the other way about. But why should a change be made suddenly in respect of 1950 people who are in receipt of salaries? Is it because the bonus of the civil servants has been reduced they are trying to diminish the proportion which they have to pay to the State? Has the hon. Gentleman been got at by the Civil Service, and is the only reason for this change a desire on the part of the Civil Service to make up for having their bonus reduced by having to pay less Income Tax?
§ Mr. YOUNGThere is no such sinister intention in this Resolution as that attributed by the right hon. Baronet the Member for the City of London (Sir P. Banbury). The Government have not been got at by the Civil Service, but in, this case there has been such a thing as a Court of Law. The state of the law, as is well known to all students of the administration of Income Tax, was always very illogical on this matter of assessment under Schedule E of salaries on the year in which the salary was received, and under Schedule D on the three years' average. The provisions of the law were made in the old days in circumstances very different, and before the enormous industrial development of the country. They were totally inapplicable to modern conditions and had to be tortured and distorted by interpretation in order to make them work at all in modern times. Even so, they were thoroughly illogical. One class of persons was assessed under Schedule E on the salary of the year of assessment, and another arbitrarily distinguished class was assessed under Schedule D on a three years' average. There was no reason in science or commonsense why the one class should be distinguished from the other at all. The class assessed under Schedule E were all those in public offices and employments, including those civil servants whom the right hon. Member for the City of London has on this occasion referred to with undue suspicion. To distinguish between the two classes was thoroughly illogical. The Income Tax Commissioners thought they knew what the distinction was and they applied a certain definition to one class as being of a public character and coming under Schedule E, and to another class, not of a public character, coming under Schedule D.
Then came the case of the Great Western Railway versus Bater, Surveyor of Taxes, on behalf of a a clerk in the Great Westerns 1951 Railway Company. A decision was given, the effect of which was entirely to break up all the rules and distinctions that the Income Tax Commissioners applied, so that no body of commissioners could know how to apply the rules in future. It was bad enough to have a rule broken up, but unfortunately the House of Lords, admitting the consequences, stated that they were quite unable to provide the Income Tax Commissioners with any criterion how to distinguish for the future what particular taxpayer should come under Schedule D and what under Schedule E. In these circumstances it seemed that the moment had come to carry out what was a very strong recommendation of the Royal Commission, which was that there should be uniformity introduced into this matter, and that all salaries should be subject to one uniform rule. I think that is of enormous benefit from the point of view of the easy administration of the law. This is a part of the law that has to be administered, not by Somerset House and by the Judges, but by bodies of local Income Tax Commissioners, any one of which may differ from another. It was thought that the best thing was to arrange that all salaries should, under the simplified and unified assessment, come under Schedule E, and that is in strict accordance with the recommendations of the Royal Commission
Let me point out how this affects the interests of the taxpayer. In the first place, he knows exactly where he is and under what Schedule he is to come in the future. In the second place, there is the enormous practical advantage that the Income Tax payer, and particularly the small Income Tax payer, knows that he has to pay his Income Tax in proportion to and out of the salary for the year in which it is paid. It is important to the small Income Tax payer. I am sure, in a large degree, his troubles—as is also the case with the large Income Tax payer—are due to his being called on to pay Income Tax in respect of profits made three years ago, which perhaps he has spent long since. In future we are to have a common-sense rule in all cases of paying Income Tax out of, and in proportion to, the actual salary earned in the year of assessment. There may be a hard case here and there. Alas, I fear that it will always be found very difficult in these taxing matters to eliminate every 1952 single hard case, but there can be no doubt that this putting of the salaried Income Tax payer off the three years' average and on to the year of assessment, is in the average case and for the vast majority of Income Tax payers a very great concession. This concession is well worth making for the sake of those simplifications both from the administrator's and of the taxpayer's point of view, to which I have referred. That is really the answer to the hon. Member who raised this interesting question.
§ Mr. RENDALLCan the hon. Gentleman say what it will cost the Government?
§ Mr. YOUNGI shall do so before I sit down. At the present time, in view of the general tendency of salaries and remuneration and profits of that sort to fall, it is a substantial concession to release the taxpayer from the three years' average. It is one which we ought to make and which it is possible to afford in the course of the year for the sake of getting rid of these anomalies. The cost in the course of the present year will be £200,000, and in a full year it may be expected to be as much as £500,000.
§ Colonel GRETTONI agree with the hon. Member who has just addressed the House that this is really a concession to the majority of people in receipt of salaries, but that like all income tax questions, it involves complications. A large number of people, especially old men and women, in receipt of salaries have been able to make savings. They have made investments and they have, be it large or small, some supplementary income in addition to what they earn from their employment. Does this concession extend to such supplementary income or does it apply only to the actual salary received on account of employment? I think I could find cases where towards the end of a life in salaried employment, people may have received a legacy or may have savings bringing the income thus derived to a point nearly equal to or in excess of the salary. If this concession applies to salary only, it will, in a number of cases, only increase the complications because this rule will apply to the actual salary and any additional income will be assessed on the three years' average. Thus salaried persons of this class will not 1953 escape complications; and mystifications. It may be said, of course, that they will benefit because these accumulated savings will increase as years go on, and they will get some advantage from the three years' average. I wish to elucidate the fact whether we are really getting rid of substantial complications by the proposals of the Government. I think the three years' average is a mistake. No doubt it is of advantage to the taxpayer in cases where his income has been increasing, but, on the strict principle of equity and justice, the taxpayer ought to pay neither more nor less than the tax due on the income of the year which is assessed, and I suggest that if the Government are really going to deal with the question on any broad principle, they will have to go very much further than the concession with which we are now dealing. I hope they will seriously consider whether the three years' average is not an injustice both to the individual and to the country, and that the tax should be assessed on the one year only. The three years' average does, of course, provide a certain average stability in the collection of the Income Tax, and avoids any very violent fluctuations, but, oven so, I hope the hon. Gentleman will explain to the House whether the concession refers only to salaries or also to any supplementary income from investments, or legacies, or so forth.
§ Mr. YOUNGThese provisions as regards Schedule E apply only to incomes assessable under Schedule E, that is, to the salary itself, and not to income from investments at all.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Sir F. BANBURYI should like to ask what this Resolution means. It is very involved, and on the face of it it may mean nothing, but I do not believe that such Resolutions were put down with the object of doing nothing, and therefore I should like to know what on earth it does mean. Is the real object to prevent any person making a present or settling 1954 any money on another person? Paragraph (a) deals with any income
of which any person is able, or has at any time since the fifth day of April, nineteen hundred and twenty-two, been able, by the exercise of any power of appointment, power of revocation, or otherwise howsoever, to obtain for himself the beneficial enjoyment.Of course, if a man has settled on him a certain sum, say, £20,000, so as to evade the Death Duties, everybody would agree that that is not a proper thing to do. If, on the other hand, this is intended to prevent A settling £20,000 on B, and leaving the whole power of the income to B and exercising no control over that income itself, then, I think, the House will agree that such a power ought not to be given to the Government. Then we come to paragraph (b), which sayswhich by virtue or in consequence of any disposition whatsoever made by any person after the first day of May, nineteen hundred and twenty-two (other than a disposition made for a valuable and sufficient consideration), is payable to or applicable for the benefit of any other person for any period not exceeding six years.Does that mean that if I make a settlement upon the Financial Secretary to the Treasury, and it is not for a period longer than six years, then I am liable to pay Income Tax and Super-tax, but if it be for a period of seven years I am not so liable? Then, under paragraph (c), apparently, you are not able to settle anything for the benefit of an unmarried infant child for some period less than the life of the child. I do not really know what all this is meant to get at. Should I, for instance, settle on my grandson something for less than the lifetime of that grandson? I should have doubted it, but, apparently, somebody does not. I have had considerable experience of these Clauses, which are unintelligible to the ordinary layman. I would like to ask the Solicitor-General, whom I take this opportunity of congratulating upon his appointment, if he would be good enough to give an explanation, because I am quite certain there is something behind all this. There are certain people who have done something, and yet one of these unintelligible Resolutions is put forward, and the majority of the House, including myself, do not understand in the least what it means, and as we feel a little shy and retiring, we are a little bit afraid to expose our ignorance. But I have suffered from these things in the past, and I have always made up my mind that 1955 whenever we have a Budget Resolution or a Finance Bill in which there is anything I do not understand, I will take very good care I will have an explanation, if possible, from the Law Officers of the Crown.
§ Mr. H. YOUNGThe right hon. Baronet is, of course, correct in his supposition that something is being got at by this Resolution. What is being got at is a certain form of legal evasion of the Income Tax. Let me, if I can, satisfy the right hon. Baronet as to what the actual practical effect of these paragraphs (a), (b) and (c) will be. The effect is—and it is the intention of the Resolution—to provide that when the taxpayer makes, under certain circumstances, trusts and covenants, the funds that he has thus alienated shall continue to be looked upon as his income for the purposes of Income Tax, and that, under other circumstances, they shall not be so looked upon. The reason for that is that it has become a favourite device for evading Income Tax. Paragraph (a) specifies the first circumstances, which are these: If the trust or covenant is revocable at the will of the disponor, then the income under the trust is for all practical purposes his income, and he ought to pay tax upon it. But to leave the matter there would not do. Hence paragraph (b). You could drive a coach and horses through the first paragraph alone. For a man could make a trust irrevocable for a short period, and then start again for another year, and could laugh at the provisions of this Resolution. Paragraph (b) gets at that by making income of an irrevocable trust the income of the disponor for tax unless the period of the trust is longer than six years. It will be just long enough to make sure there is something in the irrevocability of a trust, and so prevent the Resolution being evaded. But it is necessary to go a little further. A man is bound to support his own children, so it would still be a substantial abatement of a man's legal liability if even by an irrevocable trust for his children for more than six years he was able to cut up his income in the way suggested. [An HON. MEMBER: "Why?"] Because he is bound to maintain his own children. Supposing he makes an irrevocable trust for ten years for the purpose 1956 of maintaining the child? Why should it be ceased to be looked upon as his income any more than the income that goes in the working-class household and is spent on the daily food of the child? That surely is evasion to which the practical commonsense of all would object. Let me read the words of paragraph (c):
which by virtue or in consequence of any disposition whatsoever made by any person is payable to or applicable for the benefit of an unmarried infant child (including a stepchild or an illegitimate child) of that person for some period less than the life of the child.Even the money under the irrevocable trust for the benefit of the child is to be looked upon as income of the disponor for the purposes of Income Tax except under the circumstances contained in the last words of the Resolution. If he has made up his mind once and for all to make over this fund to his child for his whole life and for ever and ever, under those circumstances it will appear to the House that it is fair that income disposed of under an irrevocable trust for the whole life should no longer be looked upon as his income.
§ Sir F. BANBURYMay I ask whether the Solicitor-General agrees with that?
§ Sir COURTENAY WARNERDoes it mean that that will only affect limited trusts limited to certain periods and will not prevent people who wish to distribute their money before death, in fact, years and years before death, dividing their money among their children?
§ Sir FREDERICK YOUNGWill the Financial Secretary to the Treasury say how this would apply in the case of the children where there is a provision for the trust to end on some event where the disponor still wished to retain some control. Obviously it would be a trust in that case for a period less than the life of a child. Does paragraph (c) prevent that useful operation?
§ Mr. H. YOUNGThe irrevocable disposition to the man's children for the whole of their life would be considered to take his income out of his own assessment. As for the point raised by the hon. Member for Swindon (Sir F. Young) it is a matter which needs consideration, and I will undertake that consideration shall be given to it.
§ Mr. HOHLERI have listened with interest to the statement just made by the Financial Secretary to the Treasury. I entirely agree with what he has said in regard to paragraph (a). If a man makes a settlement apparently in his own favour he should be liable to the taxation proposed under this Resolution. I do not understand what the words "by the exercise of any power of appointment" mean. It seems to me that under those words you might also get a settlement which has already been made. Personally I very much object to retrospective legislation and I suggest that "power of appointment" might be held to be retrospective. I therefore think that we ought to have some explanation as to what is meant by the Chancellor in regard to these words "by the exercise of any power of appointment." That has not been explained at all.
In regard to paragraph (c), that is wholly retrospective or may be so, and I venture to doubt whether it is desirable in these cases where under the existing law a settlement has been properly made to make that class now retrospective. This provides:
That any income (c) which by virtue or in consequence of any disposition whatsoever made by any person is payable to or applicable for the benefit of an unmarried infant child….. of that person for some period less than the life of the child, shall, etc.,That settlement may have been made years ago, and I want to know whether it is the intention of the Chancellor of the Exchequer to make this entirely retrospective. I wholly object to retrospective legislation. What has been done has been lawfully done under the existing law. I do not understand the use of the word "evasion." There is no such thing. The law is the law, and if you are outside the law you are not infringing it. When a settlement has been made years ago I suggest that this Clause would hit it, and that would not be just. Will the Chancellor of the Exchequer explain whether it is intended to make this retrospective under paragraph (c)?
§ Major HILLSThis Resolution raises a wider public question than the Financial Secretary to the Treasury has indicated. I believe all the House is agreed on two things: first of all, that absolute evasion of the Income Tax— and with all respect to my hon. and 1958 learned Friend the Member for Gillingham (Mr. Hohler) you can evade the Income Tax by certain methods—ought to be prevented, but that a proper settlement by a parent for the benefit of children ought not to be prevented. I am very much afraid that this sort of legislation with other legislation passed recently is going to prevent settlements and gifts by parents to children which the law ought to do its best to encourage. As far as paragraphs (a), (b) are concerned, I am inclined to think the Chancellor of the Exchequer is right, for there a man says, "I will give my property to somebody until such time as I take it back." The gift under those conditions is no gift at all, and the income ought to be assessed on that man's income. I would call attention to paragraph (c), and put one case that occurs to me. Suppose a man under paragraph (c) should make a settlement for the benefit of an unmarried infant who was his daughter, and should settle on her a certain sum to be paid annually until she is married. That would be a settlement "for some period less than the life of the child." It would be quite a reasonable arrangement. The father might say, "I will settle a proper income on my daughter, and when she marries I will then make some other provision. I may give her more money or less money according as she makes a wealthy marriage or marries a poor man."
I am very much afraid that that class of case which you want to encourage, that you will be hitting. I want to see a large distribution in the lifetime of the parent. I do not want to pass any law that makes the parent tend to keep his wealth in his own hands.
Similarly, it would be reasonable for a parent to say, "I will settle a certain allowance on my son until he is 25, to see what kind of a man he turns out." That is quite a reasonable thing to do; I do not want to discourage it. It gives the young man a chance of standing on his own feet, and it is much more reasonable than giving him an allowance. There is a whole series of cases of that sort which I do not think the right hon. Gentleman wants to prevent, and yet this very widely drawn paragraph (c) would do so. I hope that when we discuss this question in Committee at greater length the Chan- 1959 cellor of the Exchequer will listen to what we say, and that between now and that date the matter may be further considered.
§ Mr. D. HERBERTThere is another point I should like the Chancellor of the Exchequer to consider under paragraph (a). That is in regard to the power of revocation. There are a large number of settlements which have been made in which a man cannot tell exactly how his children will turn out and what his own circumstances may be in the future. Take the case of a settlement made in perfectly good faith, with a stranger as a trustee, which contains a power for, say, the father to revoke that settlement with the consent, signified by the execution of the deed, of that trustee, on especial grounds, namely, that it would create a hardship on the settlor to continue the settlement or that for reasons to do with the beneficiary it is inadvisable in the opinion of the trustee to continue it. I hope the right hon. Gentleman will give his attention to this point.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
§ Sir A. WILLIAMSONI should like to ask the Chancellor of the Exchequer exactly what he has in mind in this Resolution. The wording seems to cover the case of a private Argentine company owning a family estancia in the Argentine, or that of a man who has some shares in a private Mexican company——
§ Sir R. HORNEIt is not meant to cover that kind of case at all.
§ Sir A. WILLIAMSONIt does not cover that case at all?
§ 11.0 P.M.
§ Major HILLSThis is a very big question, and I think we should have some information. I believe we are all agreed that we do want to stop evasion, but I am afraid lest this Resolution will go much further.
§ Sir R. HORNEI would ask the House to give me these Resolutions to-night. 1960 My sole desire is to prevent any evasion, and any Amendment that it is desired to move can come on on the Finance Bill.
§ Major HILLSMy point is that under this Resolution, in certain cases, you do a thing that you have never done before, and make the income of a private company itself liable to Super-tax. You do that if a "reasonable proportion" of the profits are not distributed. It may be that you are trying to hit the man who turns himself and his property into a company, and who does not spend his income, but piles it up for the benefit of his family, and thereby escapes Super-tax. But are not you also hitting a perfectly right and proper operation? Suppose that a private company is formed for an estate, as many are being formed now, and suppose that it is determined that that estate has been starved in the past—that too much has been spent out of it and that more should be put back. In that case a "reasonable proportion" of the income may not be distributed, and it may be quite right that it should not be, but, because that property is being well managed for the first time, you come down and make it liable to Super-tax. [HON. MEMBEES: "No!"] I hope not, but the Resolution is entirely unconditional, and the provision on which the income is made liable to Super-tax is that
Where a reasonable proportion of the actual income from all sources … is not distributed to its members in such a manner as to render the amount distributed liable to … Super-tax.My point is quite a short one. I want to encourage the proper management of all sorts of property, and part of that proper management may be just this very non-distribution of profits; but you compel them to spend up to the hilt. Surely there is a case for inquiry. I agree that the hour is now late, and I do not want to keep the House longer, but there is a whole class of companies that have been lately formed, not for the purpose of evading Income Tax, but for the management of estates in this country, and all these will be knocked on the head and prevented from doing the one thing they ought to do, namely, manage the estate on conservative lines. I think I have said enough to indicate that there is a case for inquiry, and I think it should be possible to find a dividing line 1961 between companies formed merely for the purpose of evading tax and companies formed for proper purposes. I earnestly beg the Chancellor of the Exchequer to consider the case, and when we raise it again during the Committee stage of the Finance Bill, I hope we shall be able to find some solution.
§ Sir F. BANBURYAt the beginning of this Parliament, against my wish, the Standing Order was passed which allows the discussion of the Report of Resolutions in Ways and Means to go on after 11 o'clock. As they passed the Standing Order it is only right that they should reply to reasonable arguments advanced by my hon. and gallant Friend, who always, under all circumstances, supports the Government. This is really very important and we ought to have some answer from some member of the Government. I am not at all sure that I quite agree with my hon. and gallant Friend. It is really a very difficult paragraph. There are some estates where it is absolutely necessary, if they are to be saved at all, that a great portion of the income must go to repairs and renewals and things of that sort. A man who does not form his estate into a private company and desires to do what my hon. Friend says will have to pay Super-tax. Why should a person be treated better if he turns his estate into a company than if he manages it himself? Whether or not it goes too far I do not know, but whether the Chancellor is right or wrong he is making an alteration in the law.
§ Sir R. HORNEI surmised that my right hon. Friend would wish to say something on the matter before I replied, and my surmise was confirmed by the alacrity with which he rose to his feet immediately the preceding speaker sat down. I am now in a position to reply to both, having also gained the adventitious aid which my right hon. Friend has afforded, because he gave one portion of the reply asked for by the previous speaker. This kind of evasion by an individual forming himself into a one-man company is one which every reasonable Member of the House will desire to remove. Consider what may happen. An individual who is earning a large income and would be paying a large sum in Super-tax forms himself into a one-man company, and instead of dis- 1962 tributing the revenue which he acquires from his efforts he puts it all to reserve. In that way he escapes the whole of the Super-tax which the less fortunate gentleman who does not form himself into a one-man company has to pay. The matter does not end there. Under that arrangement of a one-man company he can borrow from the reserve fund and never repay, so that he can get the full advantage of the revenue which the one-man company has been making. More than that, he can bring the one-man company to an end at any time he chooses and take away all the reserve fund which has been accumulated as capital upon which he has paid no Super-tax. It moans to honest and decent citizens that they are really paying more by way of Super-tax in order that the man who is successful enough or dishonest enough may pay less than he ought to pay by reason of adopting that method.
The only difficulty is to devise a method by which we can stop it, and the question is, How far are you to go? We are agreed on the general principle that it should be stopped. The method by which it should be stopped is a Committee point. I am much obliged to my hon. Friend for indicating the kind of difficulty which we may possibly encounter. We must be careful not to hit the genuine case, on which too much has been spent in the past. A great deal more ought to be reserved in order to bring the estate with which you are dealing back into a proper financial position. We endeavour to meet that in the Resolution by providing that the distribution to strike at must be one that is unreasonable. The case where an estate has been bled white, and ought to have its revenues made up again, would be met by the words in regard to the distribution being unreasonable. That is the point of view from which we used the terminology. We provide that special commissioners should decide whether the distribution was reasonable or unreasonable. If my hon. Friend desires to strengthen that, I should be glad to meet him, but, so far as the general principle is concerned, there is no dispute.
§ Mr. N. MACLEANIt is necessary that something should be said from these benches with regard to this discussion. We have always been under the impression, at least we have been lead to 1963 believe, that the business of this country, particularly the private business, was conducted upon a very high moral plane, such as no other nation conducts its business, and that we therefore stood in that respect as a beacon for the rest of the world to follow. The speeches of the hon. and right hon. Gentlemen opposite and the reply of the Chancellor of the Exchequer have opened our eyes. We are often twitted with not being business men. Certain business men in this country have to-night been held up to opprobrium as men who endeavour to escape their responsibilities and to escape their fair share of the cost of maintaining the country.
§ Sir F. YOUNGCo-operators!
§ Mr. MACLEANThe interruption of the hon. Member shows how ignorant he is of the methods of conducting co-operation.
§ Sir F. YOUNGIt hit the spot, evidently.
§ Mr. MACLEANNo. The boomerang hit your own head, and showed your own lack of brain.
§ Mr. SPEAKERIt would be just as well if the argument were addressed to me.
§ Mr. MACLEANI would be one of the first to resent any aspersion cast upon Mr. Speaker in this House. The point I was making was that the Chancellor of the Exchequer says that businesses in this country have been taking advantage—[HON. MEMBERS: "No!"]—well, some business men; a section of business men. There is no need for me to segregate them from the honest business men. These men have been taking advantage by forming themselves into one-man companies and have escaped their responsibilities. The arguments on the other side appear to me to show that a case can be made out for that. [HON. MEMBERS: "No!"] The request was made that particular methods of exemption should be granted to those individuals to meet certain cases. In a period of financial depression which makes it necessary for every member of the community, rich or poor, to meet his share of responsibility, if any section of the community is deliberately evading its obligation, then this House should see to it that arrangements are made so that 1964 the individual cannot escape by any process of riding through the letter of the law. Speaking from experience, I have been taxed as a working man and have never had any opportunity of evasion. The employer has to make a return for the working man and the working man has to meet every return that is made in respect of him, with the exception of the necessary rebates that he gets upon children. Apparently, that which can be made watertight with regard to working class incomes has not been made watertight with regard to the higher incomes.
§ Sir R. HORNEThe hon. Gentleman is making a mistake. This is not an Amendment as to evading Income Tax but Super-tax.
§ Mr. MACLEANIs not Super-tax merely an exaggerated Income Tax? I do not see that the interruption has any point.
§ Sir R. HORNEPeople who have more than a certain income are liable both for Income Tax and Super-tax. My hon. Friend has been talking as if people could evade Income Tax as simply as Super-tax.
§ Mr. MACLEANEven with regard to working men who were supposed to be evading Income Tax, in the days when big wages were earned, there were introduced certain restrictions that prevented evasion, by making it necessary for the employer to make a return. I am pointing out that similar restrictions can be made with regard to this particular evasion. Whether Super-tax is Income Tax is beside the point. The point is, that there is deliberate evasion of responsibilities. So far as we are concerned, we want to see the matter tightened up to prevent any evasions being made. I hope the Chancellor of the Exchequer will see that, in spite of the comments made to-night, suitable investigation will be made, that where an alleged hard case is really hard it will be met, but that the law will be framed so as to prevent evasions in the future.
§ Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."
1965§ Mr. RENDALLI am not prepared to allow this Resolution to pass in silence. What the Government are doing by this Resolution is practically totell the debtors of the Government and of the country to the extent of many millions of pounds, that they need not pay that debt for five years. It is well known that many persons who owe Excess Profits Duty have had difficulties to face, and it is perfectly fair that special terms should be made in order that money may not be lost to the State, and that those owing it may not be injured by paying it. But at the same time to pass a Resolution which has no limitation or condition in it, and without getting from the Chancellor of the Exchequer some assurance that the State will have protection, and that the money is not to be lost or wasted, would not be right. The State has no proper means of checking the way in which companies or private individuals owing this money will carry on their businesses.
§ Sir R. HORNEI am very glad to be able to reply. I do not think the House requires to be convinced that in these very difficult times the payment of Excess Profits Duty imposes on manufacturers and others a burden that they are unable immediately to discharge. Accordingly representations were made to me to case that burden to the best of my ability. I tried to meet the case in the way expressed in the Resolution. It is not enough for the person who is indebted to the State in respect of Excess Profits Duty simply to make a claim for payment to be spread over a period of years; he has to make a case to justify the concession being granted to him. That case has to be decided by the Inland Revenue authorities, and if the claimant is dissatisfied with their judgment he can appeal to the Special Commissioners. There is another deterrent. He has to pay interest during all the period he is in default and that interest is at the rate of 5 per cent. He is not entitled to claim as an expense of the business and to escape Income Tax upon that, so it really amounts to 7 per cent. on the money involved. I cannot imagine that any man is going to wilfully default in the payment of Excess, Profits Duty if he has to pay 7 per cent, especially at a time when money is becoming so cheap that he can borrow at much lower rates. I can see no possibility from the practical point of view of anybody being anxious to 1966 defraud the State in this matter and I think the guarantee and safeguards provided are quite sufficient.