HL Deb 23 July 1901 vol 97 cc1254-64

Order of the Day for the Second Reading read.

Moved, That the Bill be now read 2a.

LORD WELBY

My Lords, I know well the limit which constitutional usage puts upon your Lordships in dealing with financial questions, but I believe this House has always reserved to itself the right to offer comments and criticisms upon these matters, and I trust your Lordships will bear with me while I make a few observations with regard to this Bill. One often notices, on the top of a steep hill, that a friendly warning tells that it is dangerous to cyclists. It appears to me that we have been for forty years bowling along a level and easy road in finance, until at last we have become somewhat careless and over-confident, and I think the time has come when some friendly hand should be held up to warn taxpayers against the steep and, I am afraid, long descent in finance upon which we have entered. I observe that the Chancellor of the Exchequer did give a warning to the House of Commons on the subject, but I did not notice that he was abating his pace, or that he gave us any promise of precaution against those dangers of which he warned us. I would ask your Lordships whether the time has not come to consider the direction in and the pace at which we are travelling. I know it is often supposed that the Treasury is able to enforce economy. Some mystical notions are held of the power of the Treasury, but the fact is, the Treasury is a department, organised like any other department, with a Minister, generally a powerful Minister, at its head. But that Minister is subject to the Cabinet, and the Cabinet is influenced by public opinion, and I think the experience of your Lordships will teach you that if public opinion is in favour of economy the Finance Minister is all-powerful. If public opinion is careless about economy, then the Finance Minister is absolutely powerless.

For the purpose of explaining my views I would ask your Lordships to let me divide recent financial history into three periods. The first will be from the beginning of the reign of the late Queen up to 1887, the second period from 1887 to 1897, and the third period the current year. A great part of the first period, from 1837 to 1887, was a period of pressure. We all know that at the close of the great war the resources of this nation were entirely overstrained. We know that people at that time talked seriously as to whether it would not be necessary to apply the sponge with regard to the National Debt, that pauperism was rampant, and that the working classes were discontented and overtaxed. It may be within the memory of your Lordships that at that time Sydney Smith gave a celebrated description of our taxation as a warning to our American cousins against embarking on a course of glory. That condition of things continued for a good many years. Very little change in the condition of the working classes had taken place when her late Majesty ascended the Throne. It is not surprising, therefore, that at that time every statesman and all parties were in favour of economy, and amongst the most earnest advocates of economy was the great party led by the Duke of Wellington and Sir Robert Peel. This country has been fertile in a succession of able Chancellors of the Exchequer, but in 200 years since the Revolution there have been, I think, five pre-eminent, and I think your Lordships will admit that amongst these five Sir Robert Peel was not the least eminent. He was the very incarnation of economy. I have often heard Mr. Gladstone give instances of the sternness with which, when Sir Robert was Prime Minister, he enforced economy on his Ministers. Powerful heads leave influence on their department. The traditions of the department are formed by and learned from their chiefs, and I can remember how completely the Treasury, when I first entered it, was imbued with the lessons which had been learned from Sir Robert Peel. But we must remember that during that time Sir Robert Peel was acting in accordance with, and not in opposition to, public opinion. As far as my reading carries me, I think that the time of pressure lasted until about the year 1845. In that year the tide appears to have turned, and during the period 1845–87 a steady run of prosperity, with occasional sets back, took place, and the condition of the United Kingdom on the whole improved immensely. In fact, there can be little doubt that the desire for economy which prevailed in the earlier years had very much modified in the later years of that period, and, indeed, I think the idea of economy by that time would have died away entirely had it not been for two great reasons which had weight in the public mind. The first of those reasons was the absolute necessity to reduce and readjust taxation. The second was the laudable desire to reduce the weight of the public debt. During the last thirty years a considerable result has been obtained on the second of those heads, but I will confine myself at present to the first. I will take for my purpose the sixty years that passed after the accession of the late Queen. In 1837 our system of taxation was extremely onerous and unequal. One must always remember that the taxation on articles of consumption falls practically upon the working classes. Competent authorities have held, and I think it is a conclusion which is generally accepted, that four-fifths of the taxation on articles of consumption is paid by the working classes. If that is the case, we can judge what the weight of the taxation was when I say that in 1837, 71 per cent. of the revenue was levied on articles of consumption, and 23 per cent. only in taxes which fall especially on the wealthy. Successive Governments addressed themselves during the ensuing sixty years to the great work of readjusting and reducing taxation, and at the close of that time the taxes on articles of consumption had fallen to 44 per cent., and those on the wealthier classes had risen to 40 per cent.

I will give another illustration. During that time the prosperity of the working classes had enabled them to consume double and treble the amount consumed at the outset of the period, yet the actual taxation paid per head on articles of consumption, instead of increasing, had actually fallen, and by no less an amount than 15 per cent. Let us consider for a moment what the figures mean. The working classes pay 85 pence in taxes where in 1837 they paid 100 pence, yet they consume far more of the articles which are or were taxable than in 1837. In the meantime they have been admitted to the franchise, and have become a dominant factor in the State. Yet in 1895 they returned and have maintained a Conservative majority in the House of Commons, and a Conservative Government in power. This may not seem so unmixed a good to us on this side as to noble Lords opposite, but on one point we shall all rejoice. Whereas in 1837 there was a people discontented and in a dangerous mood, fifty years of good legislation, in which reduction of taxation is an important factor, has converted them into a loyal, united, and contented people. The great object of Government is so far attained, and there can be no difference of opinion among us as to the result.

I want now, my Lords, to draw your attention to the increase in expenditure. I confine myself to military and naval expenditure, in order not to weary your Lordships with figures, but what I say of military expenditure applies with equal force to civil expenditure. In 1837 the naval and military expenditure was rather under £12,000,000 sterling. That was the nadir of military expenditure. In 1887 it had risen to £30,500,000, an increase of very nearly 150 per cent. At the same time it must be borne in mind that during the same period the income of the country was increasing at the same, if not at a greater, rate. In fact, I may say that it would have required a greater income tax in 1837 to meet the charge of twelve millions than it required in 1887 to meet the charge of £30,500,000. Our wealth was increasing faster than our expenditure. Otherwise we could not have remitted in that time twenty-two millions of taxation. In the second period of ten years, from 1887 to 1897, the naval and military expenditure rose to a little over forty millions, and I have to add to that certain expenditure on military and naval works which I very much regret to say are now made the subject of loan. That carries the military expenditure at the end of the second period to forty-two millions, an increase in the ten years of £11,500,000. Taxes during this period were no longer in course of reduction; on the contrary, an increase of taxation marked it. I now come to the third period, the current year, and I exclude of course all the war expenditure. The military and naval expenditure, which was in 1897 forty-two millions, has risen to sixty-three millions, including an allowance for those works which are really part of the military expenditure. That is an increase of twenty millions in four years, and in the fourteen years from 1887 the ordinary military and naval expenditure has doubled. I ask your Lordships whether, if this be so, I have not made out my case, that it is time to consider the pace at which we are travelling. Let me point out two or three circumstances connected with our present position. Only ten years ago the revenue derived from taxation was seventy-five millions a year; in the current year it is 122 millions. Therefore, in ten years the revenue from taxation has risen forty-seven millions, and out of that forty-seven millions nearly thirty-three millions is additional taxation. Though this large amount of taxation has been put on, it really, as I shall show, does very little more than cover the ordinary expenditure of the country, apart from the war expenditure; and with the prospect which is now before us it seems almost inevitable that in a very short time the whole of that large amount of extra taxation will be required for the ordinary expenses of the country.

The ordinary expenses of the country now amount to 129 millions. At the end of the war, which, let us hope, will be brought to a speedy and successful conclusion, what will be our position? To these 129 millions we shall have to add, on a very moderate computation, a permanent charge of six millions caused by the war. That carries us up to 135 millions, but is there any sign anywhere that Parliament or the public is alive to the situation? Do you see anywhere that there is the slightest desire for economy? On the contrary, whether one looks to the press or to Parliament, one finds a tendency to favour further expenditure. I think His Majesty's Government must be somewhat dismayed at the prospect of the demands which are now likely to be made, if one may believe the statements of experts. I have carried the ordinary expenditure of the country up to 135 millions, and, considering the rate at which our expenditure has been increasing, must we not expect that the new demands for the Army and the Navy, let alone civil expenditure, will surely carry our ordinary expenditure to close on 144 millions? What will be your position then? You will have added thirty-three millions in the space of something like eleven or twelve years to the taxation of the country, simply to meet the ordinary demands of the public service. But, my Lords, if we approve of such a course as that, are we not running a very great danger? It must be evident that unless some check is placed on expenditure we shall have still further to increase taxation. Within these ten or twelve years we have added £17,000,000 to the income tax, £5,000,000 to the death duties, £1,700,000 to the tea duty; we are now imposing £5,000,000 on sugar; we have added something like £2,800,000 to the beer duty, and between one and two millions to the duty on spirits, and we are levying £2,000,000 on coal. The question is whether, with the large increase of taxation during the last ten years, we have not got very near to the limits of what the country can bear, and whether there will not inevitably come a cold fit which will leave the country with its defensive preparations in a worse condition than they would have been had expenditure gone on at a more moderate rate. Indeed, I can hardly think to what side we could turn for further taxation without running the risk of incurring dangerous discontent. I know it has been said of late that it is time to broaden the basis of taxation, but this is only a euphemistic term for transferring taxes from the rich on to the poor. Directly you put taxation on articles of consumption, on the best evidence that we have, it means that you are putting four-fifths of that taxation on the working classes. But before we accept this as inevitable, ought we not seriously to consider our position? Ought we not to a certain extent to cut our coat according to our cloth? Is it desirable, in dealing with these demands, that we should throw ourselves entirely into the hands of experts? Of course, in dealing with defensive expenditure we must be guided by experts, but we ought to exercise a certain amount of prudence as to the extent to which we are so guided, and, at all events, some proportion should be kept between the rate at which the expenditure is progressing and the rate at which the revenue progresses. Surely it is possible to lay down some rule for the future by which, at all events, the enormous bounds in expenditure can be regulated, and by which, if absolutely necessary, expenditure may be spread over a certain time, so that it shall not be necessary to forestall the natural increase of the Revenue. We have had a period of such prosperity as I suppose has been unheard of in England before. There are not wanting the signs that that prosperity may be approaching a check. When that check comes we must expect a fall in the revenue, and if expenditure increases at the same rate the problem that will be before Parliament and the country is one which I look forward to with the gravest apprehension.

THE PRIME MINISTER AND LORD PRIVY SEAL (The Marquess of SALISBURY)

My Lords, I have only a lay and uninstructed intelligence to bring to bear with reference to the accumulated learning which many distinguished years of public life have enabled the noble Lord to gather. I cannot compete with him in the arguments he has brought forward, and I do not know that your Lordships would very much desire that I should attempt to. I can only express our sense of indebtedness to him for the very valuable contribution to our national counsels and the wish that he had addressed a more powerful Assembly than this. I feel that to much of what he has said no answer can possibly be given. The only consideration that could be offered, to some extent in defence or palliation of that grave imprudence which the noble Lord brings to our charge, is that in the opinion at all events of many competent men that spirit of economy which marked some sixty or seventy years of our financial history is really guilty of a large part of the extravagance to which we have since been forced to yield. It is undoubtedly believed by many that the extreme economy of the year 1837, and all the years which followed it, which reduced this country to a disarmed condition, though it produced no immediate results, and we were able to enjoy the money that we saved, still left our financial conditions and the condition of our armaments in that position that when with the progress of the world danger came nearer and Great Powers multiplied there was reason to apprehend that matters would not remain as peaceful as they had been. Then we found that we had to pay for the economy we had practised, and for the advantages we had derived from it, by entering upon a course of expenditure that may have been thought excessive, but which at all events was the natural effect of the dangers in which we found ourselves. I think that is the real answer, or palliation, or excuse for the very formidable tendency to extreme expenditure which has marked the finance of the last thirty or forty years. I regret to say it is an increasing tendency. Then we must also ask the noble Lord to consider that our political life, like our ordinary social and physical life, is exposed to various incidents of change that we have no power to banish. We are liable to difficulties and dangers which nothing we can do can prevent, and as to which we must make necessary sacrifices and take necessary precautions. At all events the excellent language and teaching which the noble Lord has given us could not prevent, and did not prevent, Mr. Kruger from seeing that in his political future there were advantages which tempted him and induced him to make an invasion of the Queen's dominions in three places. It is impossible to maintain your financial equilibrium if accidents of that kind occur, and that, I think, in the view of posterity, will be our justification for the very large expenditure upon which we have entered. We have no choice; we have to protect ourselves, and we must incur the expense which that protection costs. Whether we have done it wisely this is not the moment to discuss; I should be prepared to discuss it if the question were raised. But you must not consider that it is possible to maintain expenditure or maxims of economy at an equable level; they must be disturbed by those great storms which sweep across the political horizon, and impose on you measures of precaution and defence which otherwise you would gladly have avoided.

The noble Lord has given us a treatise which I hope he will print in a separate form, as it is most valuable for us to study. I hope his teaching will be such as future Chancellors of the Exchequer will not only wish to follow but will be able to follow. But he has to deal with a very awkward and difficult element—namely, the element of public opinion. During all the years of our pacific existence there was no doubt that the feeling of the public was steadily in favour of a pacific policy; and the leaders whom the public followed, and who governed the formation and guidance of political parties, were all men who, like Sir Robert Peel, valued the advantages of peace and the economy it brought above everything else. That state of opinion has passed away; as the noble Lord himself says, the tide has turned, and who is he and who are we that we should attempt to stem the tide? If the tide has turned we shall have to go with it. The noble Lord alluded to a celebrated passage, in which Sydney Smith warned the American Republic against the dangers and discomforts which attach to the pursuit of glory. No doubt it was thought at the time to be a very wise lecture, but has it been successful? Has he induced the American people to adopt his views? On the contrary, we know that it is one of the most powerful political engines in the States to appeal to that national and Imperial sentiment to which we have been so much exposed, and to which we have bowed so much in recent times. We feel in regard to the exhortations of the noble Lord, admirable as they are, and though they ought to be studied by all politicians on both sides of the House, that still we are in the presence of forces far larger than any we can wield or influence, and all we can hope is to take advantage of every opportunity which is consistent with the interests and honour of our country in order to resist and arrest the stream of expenditure which, I entirely agree with him, is one of the greatest dangers that threaten this country.

EARL SPENCER

My Lords, I do not propose to enter at any length into this most interesting and important subject, but I should like to say one or two words in regard to what has fallen from the noble Marquess the Prime Minister. I think my noble friend can have no real complaint against the noble Marquess for the way in which he has taken his remarks. What my noble friend really desired to do, and what has been done in another place by a distinguished member of the Government, the Chancellor of the Exchequer, in pointing out the enormous and rapid increase there has been in all public expenditure, was not to refer to the war expenditure—he referred entirely to the peace expenditure. I wish particularly to deal with that, because we all know that when once this war was embarked on it was necessary to engage in heavy expenditure in order to bring it to a speedy and successful conclusion. When we come to look at the gigantic increase of our expenditure in various ways, I think we want to educate public opinion a little on the grievous events that may follow from a continuance of this policy. We therefore are indebted to my noble friend for giving us the benefit of his vast experience. I feel very strongly on the subject when I think what gigantic strides expenditure has taken and the enormous developments of our revenue. I think I am right in saying that in a few years our revenue has increased by sixteen millions sterling and our expenditure by twenty-eight millions. We feel in regard to all this expenditure that a heavy responsibility lies upon Government to see that such enormous expenditure is applied in the most economical manner and for the full advantage of the public services. There is, I am afraid, an idea in the country—and I think there may be considerable truth in it—that a great deal of the expenditure is not well managed, and that sufficient care is not taken to see that the services get full value. I do not wish to exclude the Navy, with which I have been connected—I hope that there the expenditure is well managed; but there is a strong impression that in recent years expenditure on the Army has not always provided us with the efficiency we ought to have. These are the reasons why my noble friend has brought this matter forward, and I rejoice that he has done so, and that the noble Marquess has agreed in much that he has said. I am certain that if we continue in the course we have begun serious effects will result. Increased taxation, of course, increases the prices of commodities, and will put enormous difficulties in the way of our commercial prosperity, the existence of which is always calling for increased expenditure to defend our commerce in every part of the world. If we have continued and heavy taxation of commodities there is a danger of inflicting a wound on some great industry or other that may lead to the loss of that commercial prosperity and supremacy of which we are all so proud.

On Question, agreed to; Bill read 2a accordingly; Committee negatived; and Bill to be read 3a on Thursday next.