HC Deb 02 July 1924 vol 175 cc1359-78
Sir JOHN MARRIOTT

I beg to move, in page 10, line 4, to leave out the words "and sixpence."

I move this Amendment for three main reasons: In the first place, because I have some hope, not a very lively one perhaps, of softening the heart of the Chancellor of the Exchequer regarding an exceedingly deserving and very hard-pressed class of taxpayer. I do so, in the second place, to protest against what I conceive to be the inequity and the unwisdom—the unwisdom no less than the inequity—of the proposals which the Chancellor of the Exchequer has made for certain revisions of taxation. Above all, I move this Amendment in order that I may have an opportunity, and that other Members of the House may have an opportunity, of entering their caveat against certain views as to the incidence of direct and indirect taxation respectively—views which prevail, as I understand it, in certain sections of the House, views which many of us feel to be profoundly erroneous. I will start with a general proposition which was enunciated by no less an authority than Mr. Winston Churchill—and I regard Mr. Churchill as a very great financial authority—when he was addressing a very honourable and responsible association—the Financial Reform Association—at Liverpool some years ago. The right hon. Gentleman then used these words, which I can hardly imagine any hon. Member of this House will object to. He said Taxation, raise it how you may, is a gross and unredeemed evil. Does any hon. or right hon. Gentleman dissent from that proposition? I believe there are certain sections of opinion which still regard taxation from another point of view—which regard it as a convenient and legitimate instrument for equalising the distribution of wealth, or, as some people put it, for depriving the rich of their ill-gotten gains and ameliorating the condition of the poor. I quite admit that the latter half of that sentence does represent a very attractive ideal, but it remains a question, and will remain a question, how far that ideal can be attained by taxation. To deprive the rich of their gains, whether ill-gotten or well-gotten—is a task within the competence of very moderate ability, but, as to making the rich poorer, as I have constantly argued from this place, it is very far from certain that the impoverishment of the rich will alleviate in any way at all the burdens of the poor. But whether that suggestion is feasible or not, it does pre-suppose an entirely erroneous view of the object of taxation, May I quote further words by Mr. Winston Churchill? Certain sections of opinion believe that taxes can be made of themselves a great vivifying and reproductive benefit. There is the view of those who like taxation for spite. I believe it is wrong and unjust to tax any person, however rich, with the object of making him poorer. An attempt was made to do that in every Oriental monarchy and the result in every case where it has been tried has been the same Elusive capital has floated away and no net which the Government can set up has been able to stop it. Scarcity of money has resulted to the State as a result of such taxation and infinite injury has been done to commerce and trade in the process. With that view I desire entirely to associate myself. But I must not now stay to emphasise or elaborate that statement. I will pass, if the Committee will allow me, to my main point which concerns the rate of Income Tax for the current financial year. The Chancellor of the Exchequer will, I am certain, admit that since the reduction of 6d. in last year's Budget, Income Tax payers have done exceedingly well by the revenue. I do not think the right hon. Gentleman will be at all disposed to deny the validity of that statement, although I do not see any sign of his assent which I should have liked to evoke. I repeat I think he will admit that since the reduction 12 months ago of 6d. in last year's Budget Income Tax payers have done exceedingly well by the revenue. The estimate of my right hon. Friend the Member for the Bewdley Division of Worcestershire (Mr. Baldwin), when he introduced his Budget 12 months ago, was that the Income Tax, including Super-tax, would produce a revenue during the last year of £319,000,000. As a matter of fact the present Chancellor of the Exchequer has collected £329,921,000, or £10,000,000 more than the estimate of my right hon. Friend a year ago. For the coming year at the same rate of Income Tax—and during the current year I need hardly remind the Committee the reduction of last year will have full effect, the present Chancellor of the Exchequer anticipates a revenue from this source of not less than £326,000,000, or, actually, £7,000,000 more than the estimate of my right hon. Friend 12 months ago, and in spite of the fact that the remission of last year will have its full effect during the current year. I venture to put this question: Do not these figures by themselves, and without any further argument or comment, supply a conclusive case for the further remission for which I am asking in my Amendment? They prove that the Income Tax in this country is remarkably resilient and that like animals it responds to kindness. Remission is followed by expansion, and you do more for your revenue by lightening the burden, you do more for employment which all parties are largely concerned about, you do more for trade by lightening taxation than by any other means you can possibly devise.

There is another point I want to urge on the attention of the Committee and it is this. That the present rate of Income Tax is really inequitable as between individuals and as between different sections of the community. It is, I think, generally recognised that about one-fifth of the whole burden of indirect taxation is paid by those who are also direct taxpayers. If that estimate is approximately correct it follows that 80 per cent. of the whole fiscal burden in this country falls immediately—and I will ask the Committee to take note of my proviso—falls in the first instance on that small minority. The Committee is well aware that, although there are 5,000,000 persons assessed to Income Tax in this country, Income Tax is not paid by more than 2½ millions, and that some 88,000 of these are payers of Super-tax as well. I venture to submit that it is open to grave question whether on a broader view of national finance it is either politically or economically sound that so large a proportion as 80 per cent. of the whole fiscal burden should fall on a relatively very small class. A great many people are apt to imagine that the incidence of direct taxation is a very simple matter. They assume that it is paid—I mean ultimately paid—by the people who are assessed and that therefore, you are only dealing with the woes of the fortunate few.

I am very far from admitting however that the real burden which is at present borne by the Income Tax payers falls only on 2½ millions of the relatively rich. I do not think that this fallacy is shared by the present Chancellor of the Ex-chequer, and I am quite sure it is not shared by the Financial Secretary to the Treasury, who served on the Commission which dealt with the Income Tax, and which reported three or four years ago. I do not believe that this fallacy is shared by anyone who has really made any serious study of fiscal science, but it is a fallacy widely prevalent that the beginning and the end of direct taxation, particularly the Income Tax, lies with the people who are actually assessed to and pay the tax. My own view is that the solution of the problem of the incidence of this and other similar taxes really depends on the source from which the tax is paid.

Will the Committee allow me to explain what I mean by that rather cryptic sentence. Perhaps I can illustrate it best by quoting a sentence from a pamphlet published a good many years ago by one who was a very respected Member of this House—I mean the late Mr. Keir Hardie. He published a pamphlet called "A Labour Budget," and in the course of that pamphlet he expresesd the opinion that A system of taxation which should secure that the rich should have less to hoard up or to squander on riotous living, whilst the poor should have more wherewith to purchase the ordinary necessaries of life was the ideal of taxation. [HON. MEMBERS: "Hear, hear"] I quite appreciate the meaning of those cheers. Everybody will agree that it is eminently desirable that the poor should have more money to spend upon the necessaries of life, and in so far as the Budget of this year puts it within their power to do that, there is no Member of this House who will challenge the provisions of the Budget. It will not, however, escape notice that Mr. Keir Hardie, and the exponents of the creed to which he there gives expression, appear to be indifferent whether the result of the taxation of the rich be to curtail their expenditure on riotous living or to diminish the amount of what he refers to as their hoard. Of course, if the direct taxes are paid out of revenue which would otherwise be spent on riotous living, no possible harm could accrue to the community, but if they are paid out of the hoard, that is out of actual or potential savings, then the payment must necessarily entail a very grievous loss to the community, and particularly that portion of it which is dependent upon weekly wages. If the State, by its fiscal system or in any other way, can curtail unproductive expenditure, whether of the rich or of the poor, if we can discourage and curtail such expenditure, if we can divert the money obtained from that source into productive channels, then the benefit is unquestionable, indeed it is two-fold.

I will now return to the question of the proportions between direct and indirect taxation. I would like to point out that the present proportion is a matter of very recent fiscal history. It is not so very long ago—and one has to go no further back than the time when Sir Robert Peel was introducing his great Budget in 1841—when no less than 73 per cent. of the revenue was derived from indirect taxation and only 27 per cent. from direct. Ten years later the proportions were, modified, and indirect taxation was then contributing 67 per cent. and direct taxation 33 per cent. That was in the year 1851, just before Mr. Gladstone's great Budget. Ten years later than that, the proportion was 62 per cent. of indirect and 38 of direct taxation. In 1881, the proportion of indirect taxation was further reduced to 60 per cent. and direct was 40 per cent. In 1901 the two sides balanced pretty nearly, and by that time indirect taxation had been brought to 47.5 per cent. and direct to 52.5 per cent. In 1919, when excess profits were taxed, direct taxation went up to 82 per cent. of the whole, and in the present year the proportions are 71 per cent. of direct taxation, as against 29 per cent. of indirect taxation.

What is the Chancellor of the Exchequer doing in the Budget of this year to correct this disproportion? He has had a surplus of £38,000,000. Out of that he has remitted to the payers of indirect taxation no less than £34,000,000 and he has remitted only £4,000,000 to the payers of direct taxation. Of course, we must be grateful to the Chancellor of the Exchequer for his repeal of the Corporation Profits Tax, which is a thoroughly bad tax. That will cost the right hon. Gentleman only £2,000,000 in the present year. It is a thoroughly bad tax, and, from certain points of view, so is the Income Tax itself. On this point I appeal to right hon. Gentlemen and hon. Members below the Gangway on the other side. I am going to appeal to the high authority of one whom I think they will acknowledge as the greatest of all Liberal financiers—I refer to Mr. Gladstone. I would remind hon. and right hon. Gentlemen below the Gangway that when the Income Tax was revived by Sir Robert Peel in 1842 members of their party spent eight nights in the discussion of the Income Tax proposals. I do not know whether the Chancellor of the Exchequer will be prepared to give us eight nights for the discussion of this Amendment, but that is the time which was occupied on that occasion in the discussion of Sir Robert Peel's proposal for a revised Income Tax. Mr. Gladstone was always strongly opposed to this tax, and when he introduced his first great Budget in 1853, while admitting that the tax was an engine of gigantic power for great national purposes,"— he declared, with emphasis, that there were circumstances attending its operation which made it difficult, perhaps impossible, or at any rate not desirable, to maintain it as a portion of the permanent and ordinary finance of the country. What was Mr. Gladstone's reason for objecting to the Income Tax? It was that, as long as you had this convenient device for raising money you would never have real economy in the administration of national finance, and we should never revert to the old spirit it of economy so long as we had the Income Tax. I am not hopeful that the Chancellor of Exchequer, or indeed any Chancellor of Exchequer, will ever part with what Mr. Gladstone called his "engine of gigantic power," the Income Tax, but I am going to appeal to the Chancellor of the Exchequer and the Committee to make the very small remission which in this Amendment I am proposing. What I am chiefly con- cerned with in moving this Amendment is not so much but far less the inequality between these taxpayers, but the fact that the Income Tax is so high. An Income Tax so high as it is at present is inflicting the gravest injury on the community, and it is acting as a deterrent to employment. You cannot enlarge the area of employment unless you promote commercial enterprise, and you will never be able to do that until you have relatively cheap and abundant capital. I know that in certain quarters the impression prevails that capital at present is abundant, and is relatively cheap. I suggest that you will soon find out whether capital is cheap or not when the municipalities have to go to the market to finance the housing scheme of the present Minister of Health. Is it there? Is it abundant? I know that in certain sections people are apt to look at the flotation of new companies, the early closing of subscription lists, and to the over subscriptions for new issues, and to say that these things prove a superabundance of capital.

I suggest, however, that these are not indications of a superabundance of capital. This phenomenon is very gravely misunderstood and very often misinterpreted. What it points to is not an abundance of capital, but a paucity of employment and a slackness of trade. If trade were flourishing or prosperous, you would not have this over-subscription of companies on the Stock Exchange. My view is that trade will not show any substantial recovery, and employment will not show any substantial expansion until you make a tremendous effort to lighten the crushing burden of direct taxation.

It is, therefore, not primarily or exclusively in the interests of the individual taxpayer that I am moving this Amendment, but it is in the interests of better employment and better trade. Above all, it is in the interests of all sections of society, and most of all—I know the Committee will believe in the sincerity of my convictions in this matter—it is in the interests of those who labour with their hands.

The CHANCELLOR of the EXCHEQUER (Mr. Snowden)

In view of the fact that we have 20 pages of Amendments, I do not think I should be justified in speaking on this Amendment at a length proportionate to the time which the hon. Member himself has occupied. I feel quite sure that he himself has no hope that it will be accepted——

Sir J. MARRIOTT

I said I had not a very lively hope.

Mr. SNOWDEN

Every Member of the Committee knows that its acceptance is quite impossible, and I feel that my proposal not to speak upon it at any length is justified by the fact that an Amendment to a similar effect was discussed in Committee of Ways and Means, and most of the arguments which the hon. Member has addressed to the Committee were then put forward, though, I admit, with not so much ability as that with which the hon. Member has presented them to-day. On that occasion I spoke at considerable length in reply, and I do not think it is necessary that I should say more to-day than that this Amendment, if accepted, would cost £28,000,000 in a full year, and £20,000,000 this year. That is a conclusive argument against its acceptance.

Sir J. MARRIOTT

May I ask, does that take into account the natural expansion of revenue which would ensue in consequence of the reduction in taxation?

Mr. SNOWDEN

Certainly. Of course, it is quite impossible that such an Amendment as this, involving such a large sacrifice of revenue, should be accepted. It would completely destroy the Budget.

Mr. A. M. SAMUEL

I should like to say a few words in support of the Amendment which has been moved by my hon. Friend the Member for York (Sir J. Marriott), although I do not suppose for a moment that it can be accepted. In fact, I see the impossibility of accepting it. I think, however, that some discussion upon one aspect of it may be welcomed by the Chancellor of the Exchequer. I should like to call attention, not in any polemical or party spirit, to one point in my hon. Friend's argument, namely, the incidence and the radius of direct and indirect taxation. I admit at once, and I do not want hon. Members opposite to think that I am not fully aware of the fact, that the broader shoulders must bear the greater burden of taxation. I admit that, but I do not understand by what rule the Treasury makes the ratio of direct to indirect taxation 63 to 37. That may be right or it may not, but I think the Chancellor of the Exchequer may welcome the raising of this point, so that it may be discussed and afterwards, considered by his officials, and so that he and we may come to some decision as to what the proper ratio should be, and not rely, as I think the right hon. Gentleman the Member for Paisley (Mr. Asquith) said at an earlier stage of these proceedings was the practice, upon rule-of-thumb. If you are going to do that, to what limit are you going? Are you going to make it 99 per cent. direct and 1 per cent. indirect? It would, by the method we now make the ratio, be quite as logical to say that indirect taxation shall be I per cent and direct taxation 99 per cent., as to say 63 direct and 37 indirect. At present we have a haphazard way of getting at the ratio, and I want, therefore, to draw the attention of the Chancellor of the Exchequer to this ratio point. It is a philosophical and a moral rather than an economic point. There are 22,500,000 voters in this country, and my hon. Friend the Member for York said that only 2,500,000 of them pay direct or Income Tax. If he will permit me to say so, I think his figure is wrong. I should put it at 4,000,000. Very often an Income Tax payer is looked upon as one person. I am myself looked upon as one, but my income includes that of my wife, who also has a vote, so that we two are counted as one direct taxpayer. It may be said that there are only 2,500,000 people who pay Income Tax, but the figure is really nearer 4,000,000 than 2,500,000.

Mr. SNOWDEN

The number is much larger.

Mr. SAMUEL

Therefore, as I thought, it is not correct to say that the number is 2,500,000. Here we have 22,500,000 voters, of whom, say, 4,000,000 pay 75 per cent. of the total revenue of the country It is true that theirs are the broader shoulders, and I agree they ought to bear this heavier burden, but that is not the point I want to take. These 4,000,000 direct taxpayers, who pay 75 per cent. of the revenue as a whole—my hon. Friend put it at 80 per cent.—also pay indirect taxation, while 18½ million voters pay no direct taxation. Is it wise, is it prudent, in their own interests is it right—let the Chancellor of the Exchequer look upon this, not as a party matter, but as a moral matter, let him look upon it as a statesman—that, out of 22,500,000 voters who dominate the policy of this country with regard to expenditure, 18,500,000 should have no direct interest in the direct taxation which would be required to finance 75 per cent. of the cost of the schemes for which they may vote? Is it right to divorce to such a great extent financial responsibilities from political responsibilities? That is a matter which the Chancellor of the Exchequer ought to consider on philosophical lines. Is it for the good of the country, is it for the good of the poor themselves, that they should be excused from having to answer the eternal question which every man, woman and child in this country should ask themselves before they buy a penholder, before they buy a breakfast, before they embark upon any political or financial undertaking," What is it going to cost, and where is the money coming from?" If you put political power in the hands of 22,500,000 elections, and 18,500,000 of them are never called upon to ask themselves what the cost is going to be and where the money is to come from, you may put into their hands an instrument which will injure them and the very people we want most to help, namely, often the poorest of the poor.

I wish to guard myself against anyone saying that I desire to put a greater burden on the shoulders of the, poor. I do not. It must not be thought that I wish to increase their taxation. I wish, however, that the radio or radius should be so arranged that the taxation, as it falls now, should be felt and seen by the indirect taxpayers, although it may involve a remission of their taxes on food and other necessaries, so that in the aggregate the indirect taxpayers may not pay a penny more than they are paying now. I think it is an unhealthy system under which from 2,500,000 in 4,000,000 people pay nearly the whole of the revenue of the country, while the other 18,500,000 do not know what cost their policies may involve. In the second place, I should like to ask, why does the right hon. Gentleman the Member for Paisley say that 50 per cent. of indirect taxation and 50 per cent. of direct taxation should have been thought the right thing; and why does the Chancellor of the Exchequer come along and say that in his opinion 63 per cent and 37 per cent. are the right proportions? These are quite arbitrary figures.

Mr. SNOWDEN

I never said that.

Mr. SAMUEL

The right hon. Gentleman has not said so; but he has given us a Budget in which these figures apply.

Mr. SNOWDEN

I said it was not mine. Surely the hon. Member does not regard my Budget as being finality in regard to the proportion of taxation?

Mr. SAMUEL

That is the point. What is finality? What is N-1 in this matter? It might be made more than 63 and 37. It might be brought up to 99 per cent. on the one side and 1 per cent. on the other. What is to be correct? Hon. Members opposite may take the point, with which I do not wish to deal, that the question is whether the rich or the poor should pay, but I want to look at it from the philosophical side, and consider whether it is really in the interest of the poor to have divorced from their knowledge what the schemes which may be put into operation by their votes are going to cost? If they do not study the cost and the effect of the cost, they may vote for attractive schemes which may do themselves more harm than good. We have to make up, our minds on the matter. If hon. Gentlemen opposite say that one section of the public ought to pay all the taxes and the other section ought to pay none at all, that is a matter, if I may say so without offence, of political spite. Let us get down to economic philosophy, and know what the proper healthy economic proportion and arrangement should be.

Having asked the Chancellor of the Exchequer to give us some information on this particular point as to what should be, on economic grounds, a reasonable ratio—not by rule of thumb, but as a result of investigation by the proper officers—I should like to make one more observation.

It is an observation that I ventured upon when the Budget was introduced. One cannot dismiss from one's mind the fact that is apparent, if one looks up the economic annals of the 19th century, that, as has already been admitted by the Chancellor of the Exchequer at an earlier stage, the curve of real value of wages slowly rose from 1824 to 1900. From 1900 to 1914 it remained stationary. It is no use people saying that the reason why the curve remained stationary, and a man's wages did not buy any more in 1914 than in 1900, was due to the effect of increased discoveries of gold. I do not believe that that is the case. I am taking into consideration the fact that more gold was mined and did come into use in those years, and might have put up the prices of food in some small degree, between 1900 and 1914. But I am not forgetting that much of the gold discovered in those years, which is supposed to be a factor in this real value of wages curve, went to India, that quicksand which has absorbed, and still absorbs, millions upon millions of gold ever since the time of the Roman Empire. There were complaints even then, in the time of Tiberius, that most of the gold in Europe went to India. India has absorbed much of the gold represented by the increased production from the various mines since 1900 When, therefore, it is said that the increased production of gold has put up the cost of living in Western Europe, I say that the argument of the absorption by India will almost entirely sterilise that argument. If it be still urged that I am wrong, I make this further point, that money became dearer from 1900.

The CHAIRMAN

I am afraid that the hon. Gentleman is going very wide of the Amendment before the Committee.

Mr. SAMUEL

I will get away from that and try to put myself in order by Saying that I want to prove that not increase of gold production, but direct taxation from the year 1900 was the cause of the curve upwards of the real value of wages remaining stationary between 1900 and 1914. I quite agree, Sir, that you are perfectly right in rebuking me, for I have got a little out of order in talking about the increased discovery of gold and its effect upon prices. I have given that point its full weight in my argument. When anyone asks me the cause of the curve of wages-value remaining flat, I say that the ratio of indirect to direct taxation has fallen, and that the fall is one of the chief causes injuring the wage-earner, and that, after the year 1900, when we first came to feel the effects of higher Income Tax, Super-tax and Death Duties, money became dearer as a result of this direct taxation, and the effect was then felt by the poor and the real value of wages remained stationary. I hope I have not wearied the Committee in putting these points, but I think my Friend's Amendment gives the opportunity of considering whether we are doing a wise thing in allowing the low ratio of indirect taxation to direct taxation to remain as it is at present and whether it ought not to be brought back to its earlier ratio.

Sir GODFREY COLLINS

If I followed correctly the hon. Member for Farnham (Mr. A. M. Samuel), I understand that in his closing sentences he attributed the high prices that were prevalent in this country from the year 1900 onwards to high direct taxation imposed as a result of the War, which was continued some years after 1900. May I suggest to him, however, that there were other factors at work

Mr. SAMUEL

I did not attribute it to that at all.

Sir G. COLLINS

If I misunderstood the hon. Member, I am sorry. The two hon. Members who have addressed the Committee from the other side have pleaded that the Income Tax is too high, and have moved an Amendment to reduce it by 6d. in the £. May I remind them that, as I have mentioned once before during these Debates, the direct taxpayers, during the last three years, have received relief to the extent of about £92,000,000, while the indirect taxpayers, including the concessions granted by the present Chancellor of the Exchequer, have only received relief to the extent of £46,000,000?

Sir J. MARRIOTT

Are you including the Excess Profits Duty?

5.0 P.M.

Sir G. COLLINS

The Excess Profits Duty I have not included. It was a separate War tax. On the taxes which were in vogue before the War falling on the direct and the indirect 5.0 P.M. taxpayer, the direct taxpayer has received a relief of £92,000,000, and the indirect taxpayer £46,000,000. During the last three years the policy of tax reduction has become possible by successive Chancellors of the Exchequer through a policy of reduced national expenditure. Therefore I am very glad the Chancellor of the Exchequer does not propose for a moment to accept the Amendment. The hon. Gentleman who moved the Amendment pointed out with some force that Income Tax at the present high rate tends to make prices dear, because the amount of liquid capital which people have to improve their business and for fresh investment is to-day, through no fault of their own, being diverted from productive industry to the needs of the State. But he did not suggest, as I think he should have done if he thinks the Amendment should be carried and the Income Tax should be 4s. in the £ during the current year, any alternative method of taxation, and yet, with the Estimates which have been presented and the large sums which are required, the money must be found. Therefore I hope the right hon. Gentleman will not, either to-day or in the future, reduce the level of direct taxation. May I remind him of the course of events in America? America will year by year become a more formidable competitor in the neutral markets of the world, and anything the Chancellor of the Exchequer can do during his tenure of office to lower the rate of interest on the National Debt or to lower the rate of direct taxation will materially help our industrial companies. According to the message of the President of the United States delivered a week or two ago, if the telegraphic reports are correct, the Income Tax in that country is only about 1s. 3d. in the £, while the Super-tax on an individual whose income is £3,000 is only £6 a year, and an individual whose income is £5,000 pays £44. If year by year the present high level of direct taxation is maintained, our industrial companies and the men who are in charge of them will find a greater difficulty in finding money to improve their business and for fresh investment. I know it is the wish of the Chancellor of the Exchequer to cut down certain items in our expenditure, which alone will enable him during the coming years to reduce the Income Tax, and the only regret I have is that the income Tax is so productive that it places year by year at the disposal of the Chancellor of the Exchequer such large sums of money that the spending Departments can point with force to the proceeds of the Income Tax rising yearly and be encouraged thereby to maintain their high rate of expenditure.

I know hon. Members behind the Government stand for a different policy from hon. Members on these benches, but the State to-day is the largest shareholder in the industrial companies of the country. The State is taking 25 per cent. of the profits of every company. I know full well that hon. Members want to take the whole 100 per cent., but if you kill private enterprise you might kill the initiative and the enterprise which make it possible for the Chancellor of the Exchequer to collect these large sums of money, and I have little doubt that the common sense which has always distinguished this country will accept the present state of society and the principle of private enterprise and management and try to curb excesses, while, at the same time, allowing the Chancellor of the Exchequer to rope in for the benefit of the State the very large sums of money which the Income Tax levies to-day. It is extraordinary the large sums which the Income Tax always yields. The Treasury officials always appear to underestimate the amount the Income Tax will bring into the Exchequer, and even this year the right hon. Gentleman anticipates raising from Income, Tax and Super-tax £4,000,000 less than last year. But, according to the returns of the first three months, which I admit are not a very good guide, he has already received £4,500,000 more than last year, while he budgets to receive £4,000,000 less. Last year the amount was up £8,000,000. The most gratifying feature of the Income Tax Returns is not so much the increased yield but rather that arrears are dwindling. Two years ago the arrears of Income Tax and Super-tax amounted to £122,000,000. Income Tax payers during the last two years have not only paid the annual taxation levied during the year, but, according to the figures given by the Financial Secretary, the arrears this year amount to only £62,000,000. Twelve months ago they amounted to £94,000,000. Each year, therefore, our direct taxpayers are not only paying the taxation levied during the year, but are paying into the coffers of the State £30,000,000 of arrears. I make bold to say that there is no country in the world where direct taxation is so heavy, where it is paid with such consent, as it is in this country. According to a new law passed a few weeks ago in America not only have they reduced the rate of Income Tax, but they have given their Chancellor of the Exchequer powers of inquiry and of publicity. Our income Tax is paid because people believe that their secrets are not given away and because they feel that all classes of individuals are treated alike. In France they may have an Income Tax on the Statute Book, but it is not accepted by the people. There are many ways in which it is evaded. Although the Chancellor of the Exchequer is reaping the full reward of the labours of the individuals who make these large amounts possible I sincerely hope, though I am strongly in favour of his Budget, that in the coming year he will so bend his energies that not only the indirect but the direct taxpayer next year may receive the benefit.

Mr. NEVILLE CHAMBERLAIN

The Amendment, even if my hon. Friend does not press it to a conclusion, will have served a valuable purpose, because we have had an extremely interesting Debate and the speeches from the benches behind me have been an interesting discussion of the problem he has raised. The last speaker spoke of the encouraging nature of the Returns in the first three months of the financial year. It would be a very rash thing to base any estimate of what may be the result at the end of the financial year upon what happens at the beginning, for it is in the last three months of the year and not the first three that the bulk of our revenue comes into the Treasury, and it is, therefore, not until quite late in the financial year that any really accurate forecast can be made of what is likely to be the surplus or otherwise. It is true, however, that in the last two years the result at the end of the year has been far more favourable than had been anticipated at the beginning, and although, no doubt, the Chancellor's advisers have made corrections of their estimate for the current year, in the light of this experience in the past, I am disposed to think myself that the right hon. Gentleman, if he still occupies his present office at the beginning of the next financial year, will again find himself in possession of a surplus, which has arisen not so much from the cutting down of expenditure as from the unexpectedly large payments of arrears and the way in which Income Tax and Super-tax have cone in. It strikes me as a very unsatisfactory state of things that we should in this way be over-taxing ourselves year after year and that we should unintentionally impose upon ourselves a rate of repayment of debt so much higher than we had calculated upon at the beginning of the year. I hope the Chancellor has given his personal attention to that matter and that in making his Estimates he has made full allowance for the probable recurrence of the same events as occurred in the last two years.

The last speaker, whilst urging that there should be a further remission of Income Tax at the earliest possible moment, spoke of one way only in which that could be achieved, namely, by the reduction of expenditure. I quarrel with that statement. I protest against the idea that you cannot increase your income by stimulating the trade and commerce of the country and bring about the possibility of further reductions of Income Tax in that way as well as by a reduction of public expenditure. We have been reducing expenditure at a tremendous rate. The nearer you get to the bone the less meat there is still to cut off, and it does not seem to me that really substantial reductions of expenditure can be expected in the future without a very considerable change of policy. Mere economy in administration has got to the point that we shall not get, in the near future, remissions comparable to those we have been able to get in the past. If that is so, why not look to the other side of the account? Why not see whether we cannot, by encouraging and stimulating the action of trade and commerce, increase the income and divide the cost of the expenses of the country over a larger field. That is a course which I am afraid the actions of the Government up to now have not been calculated to encourage us to think they are pursuing. It is to that side of the account that we must look for further reductions of Income Tax, and I hope that this will be borne in mind.

Mr. RATHBONE

A great deal has been said about direct taxation, but I feel that it ought to be so, and must be so for a long time. Surely the heaviness of our taxation must be due to the Great War. The direct taxpayer and indirect taxpayer suffered from the War. Can it be suggested that the direct taxpayer is practically starving? Is it not that the War has weighed heavily on the indirect taxpayer? I, for one, admire the Budget mainly for the reason that the Chancellor of the Exchequer has seen the necessity of removing as far as possible from the indirect taxpayer the necessity of paying anything upon the necessities of life. I welcome for that reason his removal of the taxes on certain commodities because they fall mainly on the indirect taxpayer or the taxpayer who has a small income. We ought to look upon payment of the Income Tax as a privilege. We teach far too little in our schools that the rich people ought to be jolly glad that they are able to contribute. It is a great deal better to pay for the upkeep of our State, if the State is properly managed, and if we see that we are not wasting our money in patching up the anomalies and miseries due to bad administration. It is better to have proper provisions such as old age pensions, etc., than to fill our hospitals and make people depend on charity. Although I dislike paying, I hope the Income Tax will be kept on by all Chancellors of the Exchequer.

Viscountess ASTOR

I would like to make a few remarks on the speech just delivered by the hon. Gentleman. I do not think there is any large class of the country that wants to spare the rich man. Everybody feels he ought to pay all he can, but there is the question of industry, and that is what some of us are trying to fight for. Hon. Members on the opposite benches are talking such rot about the rich man that anybody would think that the rich man's money was at home or in his hand. Much nonsense is talked, but the fact is, that the rich man's money is generally invested in industries of some sort. It seems a simple thing to say, but you have to say simple things to make people understand. When I hear of the rich man being taxed, I should like to point out that we are interested also in the general welfare of the country. The hon. Gentleman has said other countries teach the joys and privilege of paying taxes, and yet he said at the end of his speech that he does not like to pay taxes. I think it is a very funny position.

Mr. RATHBONE

Certainly I do not like to pay taxes, but I do it.

Viscountess ASTOR

I go further. I like paying taxes. I do not mind a bit. I am very glad to have the money to pay taxes. The only thing is that when other countries teach what they do about taxation I should like to remind hon. Members that in no country do the rich pay such taxes as in England. There is no other country in the world that pays such taxes, and it is a great credit for England. But you cannot tax beyond a certain level without hitting the poor. That is what we all feel. Tax the rich, as long as it does not ruin the poor. Some hon. Members have mentioned the question of private enterprise.

The CHAIRMAN

I have not allowed other hon. Members to go into the question of private enterprise, and I cannot allow the Noble Lady to do so.

Viscountess ASTOR

I thought that what was sauce for the goose was sauce for the gander. Let us all remember we do not want to protect the rich but to help the workers of the country. The best way to help them is to let, enterprise go on, to build up the trade of the country. I agree with the hon. Gentleman that the rich ought to be pleased to be taxed, but it may affect the poor as well as themselves, if you go too far, and the greatest suffering may be among the poor. I hope the Chancellor of the Exchequer will bear in mind when he is addressing this side of the Committee that many of us are just as interested, in the poor and feel the responsibility just as much as the Chancellor himself.

Amendment negatived.

The CHAIRMAN

The next two Amendments I am not calling.

Mr. N. CHAMBERLAIN

On a point of Order. The next Amendment on the Paper is, I submit, necessary to save certain new Clauses, which appear on the Paper at a later stage. They are on page 759 and deal with the alteration in the basis of assessments under Schedule E and Schedule D. Unless this Amendment is here inserted, I think it will be contradictory to the particular Clauses.

Sir G. COLLINS

On that point of Order. What part of the Finance Bill have we now reached? Are you calling the Amendment on page 753 on the Order Paper?

The CHAIRMAN

I ruled out the next two Amendments. The third has not been called. I am very much obliged to the right hon. Gentleman for calling my attention to the Amendments on page 759. I do not, however, purpose taking these Amendments, because they would involve a charge; at least there is the difficulty that they may involve a charge. In regard to the Amendments at the foot of page 753 and the three Amendments on the top of page 754, following the example set by my predecessors, I have ruled that these should be put down as new Clauses.

Clause ordered to stand part of the Bill.

Clause 17 (Repeal of Inhabited House Duty) ordered to stand part of the Bill.