HL Deb 03 July 1902 vol 110 cc646-77

Order of the Day for the Second Reading read.

Moved, That the Bill be now read 2a.—(The Marquess of Salisbury.)


My Lords, as this Bill contains an important principle, I think it ought not to be allowed to pass its Second Reading sub silentio. In the first place, I am glad to find that the Chancellor of the Exchequer has revived the Sinking Fund. For many years past the State has made a fair but not over liberal provision for the reduction of the Debt. That, of course, was suspended during the war in South Africa, but the effect of the war has been to add largely to the dead weight of the Debt. We ought, in consequence, to increase rather than reduce that provision, and it would have been a greivous departure from sound finance if the Sinking Fund set aside for the purpose of reducing the Debt had any longer been appropriated to ordinary expenditure, I should like, in order to show the importance of maintaining the Sinking Fund, to refer to the effect of that Fund of late years. It will be remembered that the country emerged from the great war of the last century with a National Debt of £900,000,000. At the breaking out of the Crimean War that had been reduced to £800,000,000, but during the course of that war a large increase was made to the National Debt. The Sinking Fund, as it was then constituted, was not suspended, and the result was that although £40,000,000 or more was borrowed for the purpose of the war the Debt at the end of the war only showed an increase of £31,000,000. For twelve years from that time the country was engaged in paying off the Debt which had been incurred during the Crimean War, and in 1866 the Debt stood nearly, if not exactly, at the point at which it stood in 1854 before the breaking out of the war. Considerable progress was subsequently made in the reduction of the Debt, and between 1866 and 1899 no less than £164,000,000 was paid off. I mention this with more confidence in the presence of noble Lords opposite as the arrangement which enabled that Sinking Fund to be so effective was made by my venerated chief, Sir Stafford Northcote. The Chancellor of the Exchequer calculates the increase in the National Debt as the result of the South African War at £159,000,000, and therefore the provision made by Parliament for reducing the Debt between the years 1866 and 1899 rather more than covered the increase which has now been occasioned by the war in South Africa. If our fathers had not made this sacrifice for us, we should be paying now some £5,000,000 more as interest on debt, and that sum would have been added to our enormous Peace Budget. But that is not all. There can be no doubt whatever that the effect of this reduction in the Debt was to improve very greatly the price of Consols, and I venture to think that without it my noble friend opposite would have had great difficulty in carrying out as effectively as he did that great measure of conversion with which his name will always be connected. I think the facts which I have placed before your Lordships are such as to impress upon the House the extreme desirability of maintaining to the best of our power a liberal provision for the reduction of the Debt.

The interest of this Bill, however, centres in the scheme of taxation which it contemplates; and here again I am glad—if one can ever apply the word glad to increase of taxation—that the Chancellor of the Exchequer has added another penny to the income tax. The income tax is the tax of the well-to-do, and it is an instructive object lesson in finance to note how in times of emergency different generations and different Parliaments have treated that tax. For that purpose, I would ask your Lordships to compare the treatment of the income tax in 1854 with its treatment in 1900. In 1854 the wealth of the income tax payer was relatively very much less than it is at present, and at the same time the tax bore hardly on the lower class of income tax payers. Every income of £100 and upwards was in 1854 subject to the tax, an allowance only being made in respect of incomes between £100 and £150 a year. A man with £150 a year, therefore, paid at the same rate as a man with £100,000 a year; but in 1900 all incomes below £160 a year were exempt, and incomes up to £700 a year received an allowance. Thus, the tax in 1900 was much more equitably graduated than in 1854. When the Crimean War broke out the normal peace income tax had been 7d. in the pound that was the figure at which it had stood ever since Sir Robert Peel introduced the tax. Mr. Gladstone, who was Chancellor of the Exchequer on the breaking out of the war, immediately doubled the, tax, bringing it up to 1s. 2d., and in the following year Sir George Lewis raised it to 1s. 4d. Therefore, the Parliament of that day consented to call upon the income tax payer to contribute a war tax of 9d. in the pound. When the South African War broke out the normal income tax which had been in fore for some time was 8d. The Chancellor of the Exchequer only raised it to 1s. The following year it was raised to 1s. 2d., and in the current year to 1s. 3d., so that whereas, in 1854, the income tax payer was called upon to contribute 9d. in the pound towards the cost of a much less expensive war, he has only been called upon now to pay 7d. in the pound The 9d. in the pound in the case of the Crimean War, was levied in order to meet a total war expenditure of,£80,000,000, but in the ease of the South African War a tax of 7d. in the pound has been levied to meet an expenditure of about £228,000,000. I cannot help thinking, therefore, that the Parliament of today has dealt with the payer of income tax somewhat lightly, and that the middle-class House of Commons of 1854 was severer upon the well-to-do classes than the democratic House of Commons of 1900. The conclusion to which these remarks lead me is this, that if 9d. in the pound was levied during the Crimean War, surely the 7d. which the income tax payers have been called upon to pay by the present Government in respect of this war cannot be said to be a very large sum. The income tax might well have been increased, if the money was wanted, to 1s. 4d. That would have produced the extra £2,500,000 which the Chancellor of the Exchequer required; but, unhappily, as I think, he took another course. He went down into the cellars of the Treasury, and, rummaging among the musty archives of dead taxes, resuscitated the tax on corn which many of us had hoped was dead and forgotten.

Now, before I speak of the corn tax, I might say that I entirely agree with the proposition that the wage earning classes, who now enjoy the franchise, should contribute their share to the expenditure entailed by the policy which they have sanctioned. But I would ask whether they have not already been required to pay a very large sum to that end. The taxes upon tea have been increased by 50 per cent., and a duty has been imposed on sugar which is producing between £6,000,000 and £7,000,000 a year. The Chancellor of the Exchequer has also added to the tobacco, spirit, and beer duties. I reckon the produce of these duties at £10,000,000 or £11,000,000, and, as it is estimated on fair grounds that the wage-earning classes pay ⅘ths of the taxes on articles of consumption, it cannot be said that they have not been called upon to contribute a very considerable sum to the expenses of the war. Before a tax was put upon corn, I think every legitimate method of finding the money should have been exhausted. It is not at all clear that a slight increase of the very taxes I have named might not have been sufficient to provide the money required, and there are many of us who think that a revision of the duties on licences on alcoholic drinks could very properly have been effected with considerable gain to the Exchequer. I have already named the income tax My Lords, I would plead that all such method of raising money should have been examined and exhausted before a tax was laid upon bread. My great objection to this tax is that it violates every sound canon of finance. In the first place, it is a tax on the first necessary of life, which I am sure your Lordships would wish to avoid unless it was absolutely necessary; and, in the second place, it is in the nature of a poll tax, and presses disproportionately upon the poorer classes. It is well known that the very poor are large consumers of bread, and hence it is that the corn tax falls with undue heaviness on the poorest class of all, of whose condition we have learned a great deal in the course of the past few years. It is said that England is very rich. That statement contains a truth, but it covers also a great and misleading fallacy. It is quite true to say that there is great prosperity in the country, and that the wealth of the income tax paying classes has increased considerably, but side by side with this great wealth there is, as we have learned from the searching and exhaustive inquiries of men like Mr. Charles Booth, and Mr. Rowntree, an enormous proportion—nearly 30 per cent.—of our population in the great cities who are unable to procure sufficient nutritive food to keep themselves in bodily vigour. Therefore, there is a dangerous fallacy underlying the statement that England is a rich country. It has been clearly shown by these men who have devoted their lives to investigating the position of the poorer classes that it is with the greatest difficulty that a large class of our population are able to keep body and soul together. The poorer the family the greater its consumption of bread, inasmuch as such a family cannot command other and more expensive articles of food. It is upon these people that the corn tax, though it may be small, will mostly fall, for it will increase the price of their staple food and therefore press disproportionately upon them., The Chancellor of the Exchequer has on this point made a concession to the poor of Ireland. He has reduced the tax on maize, which they consume largely. The Commission on Financial relations between England and Ireland shewed how hardly taxation pressed on the very poor in Ireland. The Chancellor of; the Exchequer did not at that time share our views, and I am glad to claim him now, though late, as a convert to them. But in England there is a mass of poverty as great as exists in Ireland, and to that mass of poverty the Chancellor is blind. Another fault which find with this tax is that it takes a great deal more out of the consumers' pockets than reaches the Exchequer. The Chancellor; of the Exchequer has distinctly disavowed—and I, of course, accept his disavowal—that there is any idea of Protection lurking in the shilling duty. If that be so, then clearly we must judge this tax by the method in which it acts in its collection, and practically if there is no idea of Protection in it, the tax costs between 30 and, 40 per cent, in collection. I will show how this is. The tax on foreign corn from which the Chancellor of the Exchequer expects to get £2,500,000, will also extract the amount of duty from home grown corn which the Chancellor of the Exchequer says he is not endeavouring to protect. Therefore it takes out of the pockets of the consumers £3,000,000 or £4,000,000, while only £2,500,000, reaches the Exchequer. That is a fatal blot on the tax, and one which ought to be borne in mind, assuming as I have said, that in the imposition of the duty on corn there is no ulterior view. Happily, during the last forty or fifty years, owing to the wise legislation of both great Parties in Parliament, discontent among the working classes has been greatly reduced. I believe that that has been largely affected by the manner in which the the burdens on the poorer classes have been removed, and I am afraid that the imposition of the corn tax, which, though a small tax, is capable, when once on, of further expansion, will be followed in time by a revival of that discontent, the disappearance of which has been the cause of such satisfaction. I cannot help thinking, from what has been said in another place, that the com tax has not been put on in order that the working classes should contribute their fair share of the expenses of the war, but has come to stay, and its addition to the already heavy taxes borne by the poor is very much to be regretted.


My Lords, it is with some diffidence that I rise to address your Lordships on this question of finance which is before us to day, because I am afraid of being betrayed into dealing with the matter as if I were still a Member of the House of Commons. But although our relations to finance and the taxation of the country are delicate and platonic, I do not think your Lordships will disagree with me when I say that to us, as much as to the other House, the wisdom or unwisdom of the fiscal policy is a matter of the supremest interest. I consider the financial proposals of the Chancellor of the Exchequer this year are bold, honest, and straightforward. The Government have not yielded to any timid counsels with regard to the imposition of taxes. The noble Lord opposite has properly congratulated the Government on having restored the Sinking Fund; I congratulate them also upon the decision which they came to when they saw that peace was in sight, and afterwards, when peace was declared, their decision still to adhere to the burdens which they had felt compelled to impose upon the people. They faced the situation without any timidity, and without any desire to add to the dramatic conclusion of peace a dramatic remission of taxation, which might have been tempting to a Government. They resisted that temptation, and they knew that they would inspire the people with confidence by strengthening the financial situation generally throughout the country as they have; and they were justified in that belief. If our soldiers have been patient in the field, the taxpayers have been patient at home. The country has endured, with very little grumbling indeed, that load of taxation which it has been necessary to impose; the country recognised that its imposition was necessary in order to carry through that great and difficult task in which we were engaged. The noble Lord opposite alluded to the income tax, but I think he went a little too far. As to the exemptions that have been made, I will remind my noble friend that they were contrary to the policy of his great master in finance, and mine, Mr. Gladstone.

The noble Lord speaks of true, sound canons of finance, but let him ask himself whether his Party are observing at the present day all the sound canons of finance which belonged to the school of which Mr. Gladstone was the head. The income tax now yields £2,500,000 per penny. In the old days it was considered that every penny imposed would diminish the yield per penny of the tax, inasmuch as when the taxpayers were asked for larger sums they relaxed the sternness of conscience with which they paid this self-assessed tax. But that is not now the case. There has been no attempt whatever in the year gone by in any way to shirk the tax. There are three possible causes which maintain the rate per penny of the income tax at the height at which it has stood, and which may increase it; they are, the conscience of the individual who makes his assessment, the prosperity which enables him to keep up his income, and the ruthless system of the tax collectors who make their calculations with increasing accuracy with every year that passes. The result is that every penny now yields, as I have said, £2,500,000. The prosperity of the country has not been suffering, as one might have feared it would, during the last two years. I am glad to think that the Chancellor of the Exchequer's estimates of revenue have been not only realised, but slightly exceeded. Some articles of revenue have not shown the same elasticity; but on the whole the prosperity of the country does not seem to have been deeply affected, as was proved by the Chancellor of the Exchequer in his speech. I repeat that the measures which the Government were honestly and courageously taking were justified both by the willingness of the people to pay the taxation, and by the buoyancy of the economic situation which enabled the taxpayers to pay. Although the income tax now has been exploited so much more in peace time, the noble Lord seemed to think that exactly the same addition to the tax ought to be put on in wartime as formerly. I always thought the income tax ought to be husbanded in time of peace, in order that it might be an engine in time of war. But the noble Lord seemed to think that because the income tax stands so much higher in time of peace, therefore 9d. ought to be paid in time of war, because at the time of the Crimean War 9d. was paid.


I only suggested that it might have been increased to 1s. 4d, the figure at which it stood during the Crimean War.


The noble Lord seemed to think that the income tax might have been still further increased. I should gather from his argument that when the remission of taxation becomes possible, he would be in favour of reducing the duty on corn rather than of reducing the income tax. I will not go into the argument as to indirect and direct taxation, which has been very fully argued in another place. It seems to have been proved that parallel burdens have been imposed on the direct and on the indirect taxpayers. I will now examine what the additional burden is which is placed upon the taxpayers by the revival of the registration duty on corn. In this matter I think arithmetic will be sounder than rhetoric; and I have endeavoured to make inquiries and calculations on the subject, which I hope your Lordships will allow me to place before you. The duty is 3d. per cwt. on corn or Is. a quarter, and 5d. per cwt. on flour. A sack of flour contains 280 lbs., and you will find that the tax upon it amounts to 1s. 0½d. Two hundred and eighty pounds of flour make, when they are turned out, 95 quartern loaves, or 380 lbs. of bread, and the fact that 280 lbs. of flour make that amount of bread is explained by the fact that in every loaf there enter not only flour but yeast and other ingredients. The sum of Is. 0½d. represents 50 farthings or 100 half-farthings, and therefore the tax amounts to 100 half-farthings on 95 loaves, or a trifle over half-a-farthing on the quartern loaf.

Now I will deal with the incidence of the tax. It is said by the noble Lord opposite that the consumer will pay much more than half-a-farthing. It has been argued over and over again in another place and in the Press that the baker cannot recoup himself for the loss of half-a-farthing a loaf unless he putson a halfpenny a loaf—that is to say, unless he reaps 4s. gain on each sack of flour in order to pay the Is. duty which is the real tax. I place these figures before your Lordships because leaflets are abroad, a kind of electioneering literature, in which very different facts are placed before the public. Now what is this tax of 1s. a quarter on corn compared with all those oscillations in price which are due td economic causes? One slight change in the harvest in any one of the; many regions where corn is grown may produce a change compared with which this tax of 1s. is very little indeed. These fluctuations are constantly taking place. How does the baker deal with them? He does not single out each time that the price of flour changes by Is. in order to vary the price of bread. The price of bread generally remains fixed, and is usually only raised by a halfpenny a quartern loaf, or a farthing a 2lb. loaf. The millers, too, keep their prices extremely even. They do not change them with every fluctuation in the market, but only when by a combination of causes there is a distinct rise or fall in the price of wheat. For instance, if corn rose by 2s., the bakers might still hesitate whether they would increase the price of bread; if it rose a little more they would increase it. And now I come to an admission which I intend to make, because I wish to deal statistically and absolutely impartially with this matter. The rise will come a little earlier, and the fall will come a little later in consequence of the imposition of the Is. duty; but it will be a pure increase of half a farthing on the quartern loaf, and not a halfpenny. In fact, to sum it up in one phrase, the fiscal movement is almost lost in the economic movement, but it enters slightly, and perhaps almost imperceptibly, into that movement.

Now, I make the admission that the extra duty is paid by the consumer. No question is more difficult to investigate than that of the incidence of taxation; but in order to deal absolutely fairly with this question I admit that the half farthing, though no more, or very slightly more, will be paid by the consumer. What, then, will be the burden on the working man? The burden will be the number of loaves consumed by him and his family during the year, multiplied by half a farthing. I have gone into the statistics as to the consumption of bread per head of the population, and it comes oat at about four-fifths of a pound, or thirteen ounces a day. If you take this four-fifths of a pound a day and apply to it the calculations which I have quoted, the result will be found to be that each individual of the community will bear an extra burden, owing to the corn tax, of 9½d. a year. This calculation has the highest statistical authority, and it is confirmed by two other tests. If you take the corn which is estimated to be grown and imported, and distribute it over the population, leaving out of consideration the corn consumed by cattle, you get something like the same figure, only rather lower—8½d. Again, if you divide the whole of the tax over the population, you will find that the result per head is between 8½d. and 9½d. I will take it at 9½d., and then we have to see what a family will have to pay. Let us look the matter in the face. It does represent something. To a family of five persons it will represent 4s. in the year. Let us compare that tax for one moment with the tea duty. The tea duty is 6d. a lb., and the consumption per head of the population is estimated at 6lb. Therefore each individual pays 3s. a year for the tea duty. The extra 2d. put on tea represents one-third, or Is., and therefore it costs the individual labourer more than the corn duty. Consequently, if the party which opposes this tax wish to do a financial benefit to the working classes they would do better to abolish the additional 2d. on tea and give relief to the amount of Is. rather than abolish the corn duty, and give relief only to the amount of 9½d. I think the Party opposite may see reasons why, notwithstanding the heavier incidence of the tea duty, they might prefer to abolish this new registration duty, namely, because, as they say, it has been taken—and furbished up again—from those old archive, where possibly there is much that is still sound, but from which the noble Lord opposite regretted that it had been revived.

The noble Lord spoke with pathos and with justice when he recalled to our minds that in the midst of our prosperity, in the midst even of rising wages and of outward signs of prosperity, there is a fringe whose position is always deplorable. These are black patches, if I might call them so, on our prosperity and our civilisation. It is difficult to touch them, and it is equally difficult to hamper your whole system of finance by the effect upon one small class. To do so would be to start a new doctrine, and not a doctrine of the sound orthodox school. You will never find in Mr. Gladstone's teachings any indication that a tax should be abandoned on account of that remote though sad result. But has that class not received some benefits within even comparatively recent years which far outweigh the burden that has now been placed upon them? Let me remind your Lordships of one benefit which they have received, in regard to which there has been no great exultation in the Radical party as if a great boon had been rendered to the working classes. I refer to the Free Education Act passed in 1891, of which I was the humble instrument representing the Government on that occasion, and by which the poorer classes were relieved of the pence they paid for their children's schooling—pence representing, on an average, 10s. per child over the whole of the United Kingdom. Take even the smaller figure of 7s. per child of the very poor, and take one of those families of five to which I have alluded. That was three times 7s., saved out of the scanty earnings of these poor people. That was a boon which has far outweighed the burden which it has been, unfortunately, necessary to place upon them. I think I may say that the conscience of the nation is perfectly alive to do all that can be done in order to improve the condition of the class to which my noble friend alluded. In every direction there is a desire to improve their lives; and that, I think, must be set against what has been done on the other side—namely, that they must take part, in an infinitesimal degree, in the taxation of the country to which they; belong. It is an inevitable necessity.

The burden that is placed on the working classes is not, I think, the only objection which has been taken, not so much tonight by the noble Lord, but by the Party opposite generally, as regards, this registration duty. Why has there been so much more animation in opposition to this tax than there was to the sugar tax or to the coal tax, or any of the other taxes which have been imposed? Why has there been so much more excitement, so many more meetings? Noble Lords opposite will admit the reason. It is because this tax has, in their eyes, a whiff of Protection about it. Had it that whiff of Protection when for many years this duty lived an obscure life in the fiscal system of the country? One never heard of this registration duty. Happy the tax which has no history! This tax had no history for twenty years. I do not wish to repeat the phrases which Sir Robert Peel used when he abolished the tax. He scarcely knew that he had left any tax on at all. He did not consider this a part of the Protective duties. It was simply a 1s. registration duty, and it is a 1s. registration duty now. A whiff of Protection! Do noble Lords opposite really think it is going to protect? Do they think that a single additional acre in the country is going to be cultivated on account of this tax? Do they think that the importation of corn and of flour is going to be diminished by the imposition of this duty? I think not. I do not think that in their hearts they can for one moment contemplate such a result.

Let me interpose here a statement that I ought to have made earlier with reference to the tax increasing the price of bread. Has it in ceased there price of bread? Did the abolition of the registration duty lower the price of bread? On the contrary, in the year when Mr. Lowe took off the duty, owing to economic causes, and the strength of the economic causes compared with the weakness of the fiscal causes, flour continued to rise. The same is happening now. There is no increase in the price of bread and in the price of flour now as compared with former years. At the beginning, no doubt, in April, there was a movement. Why? Because there was a general shortage of corn in the corn-producing countries, and the result was a certain rise of price; but history does not show-that the price of broad has been affected by the infinitesimal duty which has been imposed.

I return to the point of the Protective duty. I draw a distinction. A duty may be Protective, but it may not be imposed for the purpose of Protection. Theoretically, no doubt, this might be called a Protective duty, because it is imposed on foreign produce, and there is no corresponding Excise duty. But practically it is insufficient to protect, on account of its infinitesimal character; and, consequently, so far as it goes, I think noble Lords opposite will agree that the idea that it is Protection cannot be entertained. Are we to reject a duty which may be called Protective, but does not really protect because of the name? Are we to reject a duty of this kind, if it broadens our system of taxation—one of the most important objects which any financier in these days could strive to attain—because it was Protective? I know one merit which this tax has got, and that is that it is easily collected and creates no disturbance of trade. Many other projects might have been devised which might "have been difficult to collect, and which might, at the same time, have disturbed trade seriously. This is, apart from the theoretical question that; has been raised by the noble Lord opposite and by economists outside, an efficient tax—a tax which does not boar heavily on trade and which will not materially increase the burdens of the people. But, it is said, this is but the thin end of the wedge; and I think that if we were to look into the reasons which have animated the objections and influenced the opposition to this tax we should find that it has not been so much the effect of this particular small tax as the fear that it was the beginning of a system, of Protection. Noble Lords opposite admitted that. I wish their arguments had been more directed to that point, not only in this House but elsewhere, and that the other objections had not been so much insisted upon. But the Chancellor of the Exchequer has distinctly denied that this was in any way the beginning of a system of Protection do not believe myself that there is the intention to make this the beginning of a Protective system, and so I am not going to be frightened by a name. In these days, let it be remembered, Free Trade must fight its battle having in view modern conditions and all the economic changes which may have happened in all parts of the world think it was Mr. Asquith who said that Free Trade had made this country the clearing house and the market of the world. Unfortunately, we are no longer so distinctly the clearing house of the world, not in the same proportions, as we used to be; and it behoves us to watch carefully all our economic and fiscal conditions to see whether any other causes are affecting the commercial supremacy which we desire to maintain point out this to noble Lords opposite, that Free Trade was not an isolated principle held by Mr. Cobden, Mr. Bright, and Mr. Gladstone. It was associated with other principles; and, amongst others, it was associated with many forms of freedom—with freedom of contract, freedom to work what hours men desired, freedom in trading, no municipal monopolies. Turbulent iconoclasts, indeed, have invaded every school of economics at the present day. If I am called a heretic because I am in favour of a corn duty which may have a whiff of Protection about it, I am much truer to myself and to the principles of sound finance than many of the noble Lords opposite. Laissez faire was a divinity which was honoured at the same time as the divinity of Free Trade, and now it is only, I am afraid, my noble friend Lord Wemyss who is a belated worshipper at the solitary and deserted shrine of laissez faire. Sometimes the Prime Minister puts in an appearance and looks on at the rites. Therefore, if our prosperity has been built up by a group of principles, some of which have been dethroned, then say the principles which survive must put forth all their strength, must not rely upon phrases or upon formularies', and must not call themselves only "based upon sound canons of finance." Free Trade must go forth and examine all the new conditions in which competition is carried on between this country and other countries; it must inquire into the changes in the economic situation of various parts of the globe; it must, in fact, choose modern weapons in order to maintain its position. I believe Free Trade to be absolutely strong—I believe Free Trade will emerge from any difficulties, if it sinks pedantry and abandons phrases, and looks matters really in the face.

I trust that I shall be pardoned for this lengthy disquisition on some of the fundamental principles upon which our prosperity rests. I have only one more observation to make. This corn tax, with all its faults, or with all its virtues, has at least one special virtue—it broadens our system of taxation. It is difficult to find new taxes. No Chancellors of the Exchequer, and no ex-Chancellors of the Exchequer, can forget how difficult it is to invent a new tax. I tried my hand at it. I proposed a very good tax, which afterwards I was told would have been very satisfactory, but it was impossible to carry it. There is the cheque tax, which the Chancellor of the Exchequer had to abandon. In fact, all broad measures of finance are far easier to carry than small ones. I have heard men in the City say they would rather pay an additional penny on their income tax than have their stamp duty or cheque duty interfered with. When I was at the Treasury I examined to see whether there could be a universal registration duty—not only on corn, but a universal penny registration duty. The question was also examined by Mr. Gladstone, but it was found that it would interfere so much with daily transactions that it could not be done. I mention this to show that in the difficult of finding new sources of taxation those who broaden the basis of taxation will have rendered a public service. One of the foremost leaders of the opposite Party, though he was sorrowing for the imposition of taxes which bore heavily on the working classes, still was jubilant and exultant in his tone when he said that the Government and the Chancellor of the Exchequer were, probably in a moment of madness, signing their own death warrant when they proposed this duty. It may be that, viewed in an exaggerated light; viewed as it may be viewed in the future, after the subject has been well worked up on the platform, this tax may be damaging to His Majesty's Government. I do not know. But I do know this—that the Chancellor of the Exchequer, when he comes to the end of that laborious task through which he has passed with such courage, when he approaches the end of his administrative life in this Government, when that moment comes, he may look back with as much pride to having broadened the foundation on which the colossal pyramid of our expanding expenditure rests—may look back on that broadening of the foundation with as much satisfaction as upon any other incident of his distinguished career.


My Lords, I feel I am under a great disadvantage in following the noble Viscount, who has with great distinction held the office of Chancellor of the Exchequer, and with whoso name one of the great changes in regard to Consols will always be connected. The noble Viscount began by saying that the subject of finance was delicate and platonic in this House. I entirely agree with him; but I also think—and it has been acknowledged—that your Lordships have a right to discuss questions of finance, and even, in moments of extreme difficulty, to throw out a Finance Bill. This has been done before. I am not. I need hardly say, intending to do anything of the sort tonight. It would be ridiculous and impossible for us to make any Motion on the subject. I wish to touch upon one or two points before coming to the main subject of the noble Viscount's speech namely, the particular tax to which, on this side of the House, we feel a very grave dislike. The opposition to a Budget may be based on two grounds. It may be based on the ground that the policy for which the Budget is necessary is not agreeable to those who are challenging it, or they may consider that the ways and means by which the money is to be raised are not the right ways and means for the particular occasion. Neither in this House nor in another place have those with whom I have the honour to act opposed or tried to stop supplies to His Majesty's Government. I do not wish to deny that there have been differences of opinion with regard to the late war, but we never wished to oppose the supplies necessary for carrying out the war to a vigorous and successful issue. We do, however, object to the ways and means by which this Budget proposes to raise the required money. When the Budget was first introduced there was outwardly no sign that the war would soon come to an end, and. the Budget was very properly framed on the assumption that the war might continue for eight months or more. Happily, the war has come to a conclusion, and we who are in opposition to His Majesty's Government rejoice at this happy consummation as much as anybody in the country. That, iii our opinion, made a very considerable difference in what was necessary for the Budget. But, in the main, the Budget stands as it did when the war was expected to go on for many months. In the opinion of those who are versed in finance on our side of the House, the Budget ought to have been to a great extent re-cast. No doubt the Chancellor of the Exchequer stated that, though there was a great diminution in the weekly cost of the war, yet there were certain heavy expenses to be met in connection with the termination of the war, and therefore he did riot feel justified in altering the Budget. The long and the short of it is that the Chancellor of the Exchequer will probably have a balance; at the end of the year of something like £10,000,000 on the loan which he has made. Of this sum ho has very properly devoted £4,500,000 to the reconstitution of the Sinking Fund. I think that that was a most desirable thing. But what is he going to do with the remainder? We certainly thought that some of those taxes to which we had a marked objection might have been dropped in consequence of this change. Now I come to the principal tax to which we take great objection. The noble Viscount has made certain admissions which we welcome. He admitted that this tax was Protective in its character, though he said it was so small that it would not have the effect of real Protection. He alluded to the fact that it had existed for many years in the time of the great Chancellor of the Exchequer whom 1 claim as my leader, Mr. Gladstone. The whiff of Protection which he has alluded to as belonging to this tax, and which he truly said has inspired more than anything the opposition to and agitation against the tax in another place from the opponents of His Majesty's Government—that Protection was one of the very reasons which led Mr. Gladstone to get rid of it in 1869. In referring to this tax, I should like to point out what an enormous difference there is in what the tax produced then rind what it is likely to produce now. At that time two-thirds of the corn was grown in this country, and only one-third came from abroad. The price of wheat also was very nearly double. The consequence is that the same tax which was imposed at that time will come with double force now. The noble Viscount made some interesting remarks with regard to the amount the poor man would pay, but the consumer will not only have to pay what the Exchequer receives, but he will have to pay an enhanced price upon all the corn, whether it comes from abroad or is grown in this country. That is a very important point, and one which is very often entirely overlooked. The noble Viscount quite admitted that this tax was Protective in its character. It is really almost absurd to define why it is so, but in the present day people seem to be wandering so far from, and becoming so forgetful of, the real principles of Free Trade and Protection, that it is almost worth while repeating and making clear what is a Protective tax and what is riot. The noble Viscount stated that a duty on tea was not a Protective duty, and that one upon wine and spirits was not Protective, because we always have the equivalent Excise duty. But the duty on corn is clearly Protective, because there is a considerable quantity of corn still grown in this country. I venture to differ from the noble Viscount when he states that there will not be an increase in the cultivation of corn in consequence of this tax. From my own knowledge, the moment the price of wheat or barley rises, farmers increase the growth of that article. I do not object to their growing as much corn as; they can, but if they do not do this profitably — and I cannot believe this tax will continue and the price of corn increase—I think it wrong to encourage them in carrying on what will eventually be a loss to them. The noble Viscount referred to registration, and he said that Mr. Gladstone had himself thought that there should be general registration. Certainly the tone of his speech pointed directly to increasing taxation, not perhaps heavily, on many other articles.

viscount GOSCHEN



I venture to say that that was so, although he admitted afterwards that it was very difficult. I venture to think that his argument as to this tax being a mere registration tax would apply to numerous other articles and commodities. The nobly Viscount calculated that to the poor man the increased cost of bread would come to about 9d. a year. I am not able to dissect that argument on the spur of the moment, and possibly I might not do it if I had more time, but I want to point out this: that to the poor classes—and they are an increasing number in this country—this is not a mere increase on one article of necessity, but it is an accumulated increase on several articles, which they will all feel. This is a point of the greatest importance. My noble; friend behind me referred to Mr. Charles Booth. I have here some statistics which Mr. Booth prepared on the subject; of the poverty of the people. Out of a population of 904,000 people, 111,000, generally speaking, have not enough to eat, 75,000 are in general want of food, and 129,000 have barely enough for subsistence, making a total of 315,000 persons. Therefore it seems to me a very grave thing to increase in the smallest degree the cost of food to very poor people. I fully admit that the necessity does arise for having a large extra tax on account of the war, but then, I say, you might place it upon other commodities than bread, which is a necessity of the poorest classes in this country. There are tobacco and spirits, which are luxuries; and I agree that I should prefer, although it is a disagreeable burden, even to have an extra penny on the income tax, rather than the imposition of this corn duty. Going back to the state of things which existed before the introduction of Free Trade by Sir Robert Peel, merely to show the courage which he exhibited, I may point out that public affairs were in a state of great difficulty. The state of affairs in our Colonies and abroad was very grave indeed, and at home agricultural depression was of a deeper and worse character than we have it now. There was a cessation of work in the great commercial centres, riots bordering on rebellion were going on, and to many minds it appeared that the country was verging on a state of bankruptcy. When Sir Robert Peel began reducing the duties on various articles, the number of the taxed articles was over 1,200. In one Budget he removed 750 of these duties, and the articles were so minute that he only lost about £350,000 a year. Arc we going back to having registration duties on all these different articles? My belief is that once you begin with one duty the pressure will become so enormous with regard to other articles that it will be almost impossible to resist it.

I must refer to another matter which I think is of very vital importance to our fiscal position. If we have this duty on corn, bow shall we be placed with regard to our Colonies? I am one of those who most ardently wish to strengthen all the legitimate bonds which bind our Colonies to the mother country, but not at the expense of Free Trade. I believe that the principle of Free Trade is the best not only for us, but for our Colonies, and I should rejoice if I could hear that our Colonies had adopted with us that principle. I am afraid that immense pressure will be put upon us in this matter. They will come to us and say, "We have fought with you in South Africa: are we to have no help from the mother country?" It will be very difficult to answer them when once this tax on corn is passed. Will that be the end of it? It is a very grave matter. I believe if we had to give way on this point it would jeopardise our position and our trade with the world. The total of our imports and exports for the year 1900 amounted to,£877,448,917, whilst the trade with the Colonies only amounted to £211,554,689. Are we going to jeopardise this enormous trade—nearly four times as large as the trade with our Colonies—in order to give the Colonies preferential duties? That seems to me a policy which may be fatal to the great commercial interests of this country. I feel that this is a retrograde step from that great policy of Free Trade which has conferred unparalleled benefits on this country. We feel it to be so dangerous a policy that we must protest against it with all the power we have, and, although we cannot expect it to carry any weight in this House, we venture to make this protest today, and I hope it may have an influence on what is done on this great and important subject in the future.


My Lords, the noble Viscount behind me said that he spoke on this subject in your Lordships' House with great diffidence. He has had a long and honourable career as a financier in this country, and perhaps his reputation and credit in that Department stand as high, if not higher, than that of any; other individual. If, then, ho felt diffidence in rising to address your Lordships on this subject, I am sure I may say that I feel a much greater measure of that quality in venturing to intrude in this debate. I think I shall not be wrong in appealing under such circumstances for the indulgence of your Lordships in making the few observations which occur to me in regard to the two speeches we have heard from the other side; and perhaps it might not be thought altogether right if those speeches wore left wholly unanswered by those of us who have the honour of sitting on this Bench. The objections which have been taken to the financial policy of the Government are often very different in character, and sometimes even contradictory. We arc told by some that a larger proportion of the expenditure rendered necessary by the war should have been borrowed, and by other's that a larger proportion should have been raised by taxation. Amongst those who are in favour of paying a larger proportion by the proceeds of taxation there are two schools—some who would increase direct taxation and others who would increase indirect taxation. I have been reminded in the course of this discussion of what a legal friend of mine said the other night on the subject of whether or not it was right to use unsound arguments, and arguments which you know to be unsound. The conclusion which my legal friend came to was this—that it was not right to use unsound arguments, but it was not altogether wrong, to use arguments which might seem to the audience to have a greater force than they have to yourself. I think some of the arguments we have heard tonight can hardly have seemed to have great force to the two noble Lords opposite who used them. At any rate, there is one thing certain—that expenditure has been incurred, and that it must be provided for in some way or another.

The noble Earl the Leader of the Opposition began his speech by suggesting that the Budget of the present year should have been recast when we were brought face to face with the prospect of peace, but the Chancellor of the Exchequer explained over and over again that, although the actual object of the expenditure might not be the same, there would be a great deal of expenditure still necessary, and that it was premature to say there would be much more than would be actually required for the service of the year. In addition, my right hon. friend pointed out that he had arranged to defray part of the expenditure by loan and part by new taxation, that there was a very large deficit under any circumstances to be provided for, and that he, at any rate, would not consent to defray that large deficit wholly by loan, and not impose any new taxation at all. There is this additional fact—that before peace was declared, before the settlement had come, £30,000,000 had been actually raised by the loan. There was also this to be borne in mind—that, owing to the time at which duties are paid into the Exchequer, the first nine months of the financial year are lean months, and it is not till January 1st that the money begins in the main to come in. The actual facts, as understand them, are that of a total war expenditure of £228,000,000, £74,000,000 has been paid by taxation; and I venture to think that that is a fair and satisfactory proportion. The main point in the speech of the noble Earl against this Bill was that he found in the particular tax upon grain and similar articles what has been described as Protection. I venture to deny that it is in effect a Protective duty. To be a Protective duty it must protect, and I contend that this duty is not sufficient in amount to protect the articles which are subject to it. If it was intended as a Protective duty it would be placed wholly upon articles which are produced in this country. But if you look through the schedule of the articles which are subject to this tax you will find that a very considerable proportion of them—such, for example, as maize and rice—are not, in fact, produced in this country. When you look at the amount it will be seen at once that, relatively to the value of the commodities in question, this cannot be in any sense a Protective duty.

Threepence per cwt. is hardly more than 4 per cent, on the present price of wheat. It is only about 2 per cent, on the value of some of the articles. The prices of the articles affected by the tax fluctuate to so much larger an extent than the amount of the duty that the; mere question of the amount of increase involved in the taxis not worth consideration from a Protective point of view. I have in my hand some interesting figures on that point. It is true that there has been a considerable rise in the price of wheat during the present Spring. At the moment when this tax was imposed, the price of wheat was 27s. 5d. per quarter.; For some time afterwards it remained at; that price, but during the first week of last month it had risen to 31s. 6d., or 4s. per quarter more than at the date of the imposition of the tax. I believe the price is now showing a downward tendency. If there has been any increase in the price of bread during these weeks, there are the facts which account for that, much more adequately than the imposition of this almost nominal registration duty. The true position of affairs is this—that though, to a slight extent, this tax might accelerate a rise in price when there was a movement in that direction, and to a very slight extent delay a reduction in price, the effect which that will have must, in the nature of things, be so small that it is not worth calculating at all. I could not help thinking that the noble Lord's speech was a very remarkable instance of that tendency to overstate the abstract arguments in favour of Free Trade which was commented on by the noble Viscount behind me. Some, at any rate, of the advocates of Free Trade—and I certainly wish to range myself among the supporters of Free Trade—are very easily alarmed. If their doctrines will not stand argument and criticism, I think they are not of much value, and it is the fact that this registration duty was in existence for twenty years after Free Trade became the recognised policy of this country, and after all Protective duties were abolished from every kind of grain. Though there wore many changes in our fiscal system during that time, this was deliberately left for twenty years as a duty, the existence of which v.-ax hardly noticed, and no evil effect was ever attributed to it. I have mentioned the question of the fluctuation of prices. The noble Earl made a great point in his speech of the fact that there would be more taken from the consumer than would be paid into the Exchequer; but to wake out that, he must attribute the whole of the half-penny increase on bread to the effect of this tax. Does he mean to say that if this tax were to be repealed to-morrow the half-penny would be taken off?


I said that the price of wheat grown in this country must go up or down with the price of wheat from abroad, and that it would be affected by the tax.


The fluctuation was explained by the noble Viscount behind, who showed, what is the undoubted fact, that the price of-bread is not affected by a fluctuation of a shilling, but only by much larger fluctuations in the price of wheat. The noble Earl the Leader of the Opposition carried his prejudice against this tax so far as to say that he was afraid it might possibly increase the amount of grain grown in this country. My contention is that the amount of this tax is so small that it cannot have that effect. If the price of grain coming from abroad were to vary by 3s. or 4s., I think it would have the effect of increasing the production in this country, but I cannot follow what is in the mind of the noble Earl when he says he is afraid that this duty may have the effect of increasing the amount of grain grown in this country. Personally, I should rejoice very much if movements of price did increase the amount of grain grown in this country, for I think it is one of our dangers that the amount of home-grown grain feeds so small a proportion of the people; but I do not wish to add artificially to the price of grain to increase the amount grown in this country. I understood the noble Lord to say that this was a cowardly tax, which would press very hardly on the poor.


I did not use the word "cowardly."


I should be very sorry to attribute to the noble Earl words ho did not use, but, at all events, it will be seen that owing to the kind of arguments which can be used against the tax, it required a certain amount of moral courage on the part of the Government to propose it. We knew we were opening the door to insinuations of the kind that have been made. We knew there would be diagrams scattered about the country showing a big loaf and a little loaf, whereas if the relative scale of the two loaves was drawn fairly, you would require a microscope to see the difference between them. We have such confidence in the fairness of our fellow countrymen, and in the propriety of all classes bearing their share of the country's burden, that we do not fear the effect of the arguments, if they are fairly put, upon us as a political party. No tax can really be judged by itself. All taxes are part of a great system. If you were to put the whole expenditure of the country on the income tax, it would be unfair to the income tax payers, and if you were to put an undue proportion on indirect taxation, it would also be unfair. The policy we have endeavoured to pursue is to keep up a fair proportion between those who are paying direct and those who are paying indirect taxes. I have had made out a statement showing the relative amount of indirect and direct taxation between the time of the Crimean War and now. In 1855, direct taxation was only 41 per cent, of the whole taxation of the country; last year it was more than 52 per cent. In the former year, direct taxation came to 19s. 8d. per head of the population; last year it was 32s. 11d. Therefore, I do not think it can be fairly charged, either against this Government or any of its immediate Predecessors, that there has been an undue tendency to place the burden 011 the indirect taxpayers.

Admitting that it is right that some part of this year's burden should be borne by indirect taxpayers, no one has suggested any other article which could, with greater propriety, have been selected. The taxable capacity of spirits and beer has been reached. That is universally admitted. Sugar was taxed for the first time last year, and there were certainly great reasons why that trade should not be again disturbed. The same considerations apply to tobacco, which was also the subject of increased taxation the year before last; and, as I have said, no other article has been suggested in the course of this debate which could, with greater propriety, have been selected as the subject of indirect taxation than that which has been chosen. It is very easy and simple to put another penny on the income tax. The noble Lord who initiated this discussion seemed very much grieved that that course had not been taken; but I venture to think the noble Lord omitted to take into consideration the fact that during recent years the income tax has on an average of years stood much higher in peace time than it had ever done before, and it is ridiculous to suppose that because it is higher in peace time therefore it should be more heavily drawn upon in time of war. With regard to the relative position between us and the Colonies, I do not believe that this tax is one which is large enough to afford any preference to the Colonies even if it was desired to give it, and I do not think that anyone has made out that that can be so. The question really resolves itself into this—Have the Government been wrong in their division of the burden between the direct and the indirect taxpayer, or have they put upon the indirect taxpayer a burden affecting the wrong article? I venture to say that the speeches made tonight have not established that case, and I sincerely hope the Bill will be read a second time.


My Lords, I am surprised that the noble Lord opposite, who, as a rule, uses very moderate language, should have thought fit to apply the epithet "insinuations" to the arguments which have been put forward on this side. I do not wish to exaggerate in any way the magnitude, of this duty, but in any case you add to economic fluctuations of price the permanent charge of this tax, and, however small its amount, it has not been denied that it falls on that class of the community which is least able to bear any increase of expenditure. The annual outgoing of 4s. per family, which the noble Viscount opposite admitted the tax to represent, is a burden which cannot be described as unworthy of consideration in the case of the lowest wage earners. The noble Viscount spoke of the advantages of free education, but the Free Education Act did not relieve the class who will principally feel the incidence of this tax—I allude to the class who are verging on pauperism. Before that Act came into operation they could claim free education by a process laid down in previous Education Acts. With regard to the question whether this tax will interfere with trade, I would remind the House that flour enters into the manufacture of cotton and of other articles. I have seen a calculation that one-fifth of the tax will fall on trade. It is a disturbing factor; I shall give you an instance. In the manufacture of feeding stuffs you can use either rice or linseed. Rice is included in the schedule, and will have to pay the duty. You therefore put a premium on the use of linseed. When you introduce a tax of this kind you cannot exactly foretell what disturbances it will cause to trade. The duties on alcohol, tobacco, tea, and sugar have been mentioned. Those are not absolute necessaries of life, but I defy anyone lo point out a substitute for bread. That is the great difference between this tax and those mentioned. The latter you can evade. This duty—unless it causes an increase of wages—must reduce the purchasing power of wages, which are low and often intermittent.

The introduction of the corn tax constitutes a grievance to India and to some of the Colonies, who have hitherto been exempt from this interference with their trade, and if you intend to give them preferential treatment a number of questions will arise. I need only remind the House that in the recent Sugar Convention of Brussels we were obliged to give a pledge that we should not give preferential treatment to Colonial sugar. If you give preferential treatment to Canada for corn, why not to Ceylon for tea, or to India for tea and rice? The imposition of this duty on corn could only be justified by the most critical financial situation. Such a situation has certainly not been reached — indeed, quite recently the noble Viscount opposite made a speech, in which he stated to your Lordships that we might derive legitimate satisfaction from the fact that the credit of this country stood so high, notwithstanding recent loans. What is the use of that credit if you consider that the financial situation requires a duty which is condemned by all economists? All the arguments we have heard on the other side have been to the effect that the duty was so small that it was absurd to protest against it; but if that is the ease, if the duty is so infinitesimal, then the argument falls to the ground that by imposing it you are broadening the basis of indirect taxation, unless you intend to increase this duty when financial pressure will be more severe. What you are doing is simply to re-introduce a vexatious machinery which will produce the maximum of disturbance with the minimum of revenue, and which extracts from the consumer money which will not in every instance find its way into the public Exchequer. This tax will only give joy in one quarter, and I know that there it is greeted with the greatest interest—namely, by the Agrarian Party in Germany. That is not a reason why it should commend itself to us. I do not think that any argument we have heard on the other side has justified its imposition, and I believe that if the Government had sought for other articles to broaden the basis of taxation they could have found them. They could have chosen articles used by the classes best able to bear taxation which are not subject to any Customs duty. I do not say that there would have been no objection to such proposals, but it would have been a much better course than re-establishing a duty which had been repealed and which no one ever expected to see revived.


My Lords, I profess to be a Free Trader, but 1 deny that Free Trade means no that commodity produced in this country ever shall be taxed for revenue. It would appear from the arguments which have been brought forward that any article that is not produced in this country may be taxed for the purpose of revenue, but no article that is produced in the country may be so taxed. Tea, sugar, coffee, tobacco—any article produced outside the country—can be taxed, but it would be considered Protection to tax them if they were produced in this country. If I may be allowed to prophesy, I would say that twenty years hence it is quite possible that wheat will cease to be produced in this country, and in that event the Chancellor of the Exchequer might congratulate the country upon the tact that as wheat was no longer produced at home he would be able to tax it. I call that riding the hobby of Free Trade to an absurd degree. Free Trade is very well in itself, but there are occasions when it is absolutely necessary for the sake of revenue to tax even commodities that are produced in this country. There is no doubt that owing to the declaration of peace, at which we all rejoice, the expenditure will be reduced in the coming year. But we must remember that two or three years ago there was a Report presented by a Commission appointed to consider local taxation, in which it was advocated that several onerous services which have hitherto been paid by rates should be placed on the national Exchequer. In order to do that it is necessary that there should be additional revenue raised, and I am of opinion that there can be no fairer way of raising revenue for these national services than by this registration duty 011 corn. We are told that it will cost each member of the community 9d. or 10d. per head. Is that too much for each individual to pay for education? I think it would not be a bad plan to call this tax on corn the Education Tax. Every member of the community should pay something towards education, and I think that if by placing a registration duty on corn some assistance can be given out of the public funds for education of the people of this country, we have no reason to object to it. It is on those grounds that I gladly support the Second Heading of this Bill, and I am confident that this tax, which has been so much attacked in some quarters, will meet with a great deal of approval from a large portion of His Majesty's subjects in the country.


My Lords, I should not venture to address your Lordships at this late hour were it not that I feel that Members of this House are in the unhappy position of being the only Englishmen who are taxed without being represented, and, therefore, unless an unfortunate Peer may make some remarks in this House on taxes of which he does not approve he has no opportunity of doing so elsewhere. In fact, I have often wondered that some enterprising Member of your Lordships' House has not ascertained whether it is really necessary to pay taxes at all, for since 1297 it has been a constitutional maxim that there shall be no taxation without representation. However that may be, I think it is quite obvious that we who call ourselves Free Traders of the old school ought to make an emphatic protest with regard to the corn tax. I ask your Lordships to consider the history of what we now call Free Trade. It was really the hunger of the people that led to riot and to revolution, and it led governments, who are, after all, influenced by the people, to see that some change must be made in our fiscal policy. I recollect very well my father, who in his early days was very much opposed to a system of complete freedom, told me how as a boy he had seen six people, who were practically starving, condemned to death for stealing oats out of a, stack. Though I admit that the conditions of the country have entirely altered since that date, I do not think we ought to rashly change the basis on which the taxation has rested, and which, I venture to think, has so enormously improved the prosperity of the country. Noble Lords opposite have ridiculed the idea of Protection, but, after reading the speech of the Chancellor of the Exchequer on June 26th, I, for my part, fail to see the difference between this and the ordinary theory of Protection. I do not wish to elaborate the arguments that have been put forward as to this tax pressing heavily upon the very poor. It presses heavily on one class that is not represented at all—the poorest of poor women in the towns. It is admitted by economists that four-fifths of the taxes on articles of consumption are paid by the working classes, and it is, in my opinion, extremely hard to place this additional burden on them at a time when others—I refer, amongst other measures, to the Agricultural Rates Act—are being given exemptions.

There is another objection to this tax, and I do not think it is sufficiently recognised in the country, and that is the danger of the Trust system which is coming among us. For my part I look with very great fear at these enormous corporations. Hitherto every Trust of any importance which has attempted to raise prices in this country has failed because of our Free Trade policy. If we once put a duty, however small, on to many other articles, my opinion is that these Trusts will be enormously helped. There is another objection which has not had sufficient attention paid to it, namely, the extraordinary complication of the Customs system which these taxes involve. Even in this case the Chancellor of the Exchequer has had to elaborate a system of drawbacks and to make differential duties in favour of maize. I do not think we have sufficiently realised the extraordinary prosperity which our system of Free Trade has brought about. I will take the Chancellor of the Exchequer's own figures. The national revenue in 1836 was £52,000,000, and in 1896 £112,000,000; while the population only increased from 24,000,000 to 40,000,000. It is obvious that if that increase had gone on in the same proportion there would have been no reason to change our fiscal system at all. What is the reason that it is necessary? In my opinion it is the reckless expenditure, not only war expenditure, but expenditure of ail kinds, which we are now indulging in. I would call your Lordships' attention to the enormous increase in the Army and Navy Expenditure. In 1837 the Army and Navy cost £12,000,000; in 1857 £25,000,000; in 1887, £30,000,000; and today, excluding altogether the war expenditure, those services cost £61,000,000. During the last two Administrations alone the ordinary Army and Navy expenditure has increased from£33,500,000 to £61,000,000, and the normal expenditure of the year has increased from £94,000,000 to £129,000,000. My own belief is that no nation can possibly stand this ratio of increase, and I maintain that the safest course for us to adopt would be to reconsider our policy in this respect and not add small and irritating taxes to our system of finance. I would point out that this is only going back to the Tory policy of 200 years ago, when the thing that the Tory Party most advocated was a reduction in the standing Army.

On Question, agreed to; Bill read 2a: Committee negatived; and Bill to be read 3a Tomorrow.

House adjourned at ten minutes past Seven o'clock, till Tomorrow, a quarter past Four o'clock.