HL Deb 26 June 1905 vol 148 cc31-51

[SECOND READING.]

Order of the Day for the Second Reading read.

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

LORD AVEBURY

My Lords, before-this Bill is read a second time I hope your Lordships will allow me to call your attention for a few minutes to the enormous and growing expenditure of the country, both national and municipal. As chairman of the English Bankers, and president of the Associated Chambers of Commerce for the last four years, I have had exceptional opportunities of observing how these great burdens weigh upon and injure our trade and commerce. This Bill, of course, does not deal with rates, but it is obvious that the pressure of rates is aggravated by the increase in our taxation, and the burden of the taxation by that of the rates.

Twenty years ago, in 1884, our national expenditure was £86,000,000; in 1894 it was £92,200,000; in 1904 it was no less than £154,200,000. But even this does not show the real amount. No doubt in any exact comparison various allowances would have to be made, which it would take too long to go into completely now. On the whole, moreover, they would only make the matter really worse. For instance, in 1884 the amount allocated to the National Debt was £29,650,000. In 1904 it was only £27,000,000. If we had applied as much to debt in 1904 as in 1884 our expenditure would have been even greater. Indeed, we have to add on, as Mr. Bowles has shown in a very able and convincing pamphlet, the revenue intercepted and not paid into the Exchequer which is not included in the £154,000,000, but which is really expenditure, and which last year amounted to no less than £22,600,000. In fact, the total State revenue was not £154,000,000, but in reality £176,953,000, showing an addition of over £80,000,000 in ten years. Moreover, what makes matters worse is that in spite of our heavy taxation we do not make both ends meet. It is true, no doubt, that mainly by the action of the terminable annuities we may be said to have reduced our debt in one direction by £7,600,000, but then we borrowed for Army and Navy purposes £9,800,000, so that in the year we have actually increased our National Debt by £2,238,000.

Now, how has this enormous increase arisen? The Civil Services, including education, have increased £9,500,000, and the collection of revenue £8,300,000 That the cost of the Civil Services should increase is inevitable, but the actual growth is excessive. Sir M. Hicks-Beach on more than one occasion called attention to and deplored it. The cost of collection of revenue also demands the serious attention of the Chancellor of the Exchequer. But the most serious item of all is undoubtedly the increase in our military and naval expenditure, which has risen from £36,600,000 ten years ago to no less than £86,600,000, an increase of £50,000,000. I am glad to see that there is this year some reduction in the Naval Estimates against increases in the Army and Civil Services. As, however, we always have supplementary expenditure it is safer to take actual results.

We did not murmur at the taxation in time of war, but the present expenditure and the present income-tax in time of peace are altogether excessive. Of course it is necessary to be well armed. But assuredly the present portentous expenditure is excessive and unnecessary. We have no important question open with Russia. She is not likely to pick a quarrel, and her fleet has been seriously weakened. France is friendly; she knows that we are her best customers, and that no other nation would take her clarets and her silks. There can surely be no question of war between us and Germany. Yet we are arming as we have never armed before. In doing so we not only weaken ourselves, but incur the moral responsibility—I might say the guilt—of additional armaments in Europe.

In 1841, when our expenditure on the Army and Navy together was only £11,000,000, Sir Robert Peel thought it much too great. More recently Lord Beaconsfield spoke of our "bloated" armaments. What epithet would he find strong enough to describe them now? In 1899 Mr. Goschen, then First Lord of the Admiralty, and speaking on behalf of the Government, threw out an important suggestion to other European States. He said— We have been compelled to increase our expenditure as other nations have increased theirs, not taking the lead, not pressing on more than they. As they have increased, so we have increased. I have now to state, on behalf of Her Majesty's Government, that, similarly, if the other great naval Powers should be prepared to diminish their programme of shipbuilding, we should be prepared on our side to meet such a procedure by modifying ours. The difficulties of adjustment are no doubt immense, but our desire that the Conference should succeed in lightening the tremendous burdens which now weigh down all European nations is sincere. That was a wise and statesmanlike suggestion. Unfortunately, however, it has not been acted on.

If other countries were increasing their armaments as we are there might be some justification for the course we are adopting. But this is not so. What are the figures? In Italy the expenditure on the army has increased in ten years from 264,000,000 of lire to 296,000,000, and of the navy from 118,000,000 to 124,000,000, or, taking the two together, an increase of 37,000,000 lire£1,500,000. In Russia the expenditure on the army has increased from 280,000,000 roubles to 343,000,000, and of the navy from 55,000,000 to 100,000,000; taken together, an increase of 107,000,000 roubles, or about £10,800,000. In Germany the expenditure on the army has risen from 618,000,000 marks to 649,000,000, and on the navy from 78,600,000 to 222,000,000, an increase of 174,000,000 marks or about £8,700,000. In France the expenditure on the army has risen in ten years from 648,000,000 francs to 726,000,000, and of the navy from 274,200,000 to 344,000,000, an increase of 149,000,000 francs or about £6,000,000.

In our own case there has been—on the Army an increase of £24,800,000, and on the Navy an increase of £25,000,000; or, taking the two together, in round figures an increase of no less than £50,000,000, of which, however, only £39,000,000 is shown in the ordinary Estimates. In other words, while Italy has increased her naval and military expenditure by £1,500,000; Russia, £10,800,000; Germany, £8,700,000; and France, £6,000,000; we have increased ours by £50,000,000. Thus these four great countries put together show an increase of £27,000,000, while ours by itself is £50,000,000, or nearly double that of Russia, Germany, France, and Italy put together. My noble friend Lord Brassey has always been a powerful advocate for a strong Navy, but regards our present force as excessive and involving the nation in intolerable burdens, and has suggested various ways in which we might effect economies.

As regards the protection of commerce at sea, not only ours, but that of the whole world, the real remedy would be the extension of the Declaration of Paris, and the placing of private property at sea on the same footing as property on land. This policy has, I understand, been now adopted by Mr. Roosevelt and the Government of the United States, who have proposed it as one of the subjects to be considered at a conference of the Powers. I trust our Government will give him their supportat—least I know that the late Lord Salisbury would have done so—and I hope that France and Germany will also agree.

One result of our enormous expenditure is that we have to a considerable degree lost the elasticity and financial reserve which were so great a strength to the country. If we are spending £177,000,000, paying Is. income-tax, and borrowing over £2,000,000 in time of peace, what is the prospect in time of war. The only way to remedy this state of things is to reduce these crushing burdens and lighten the springs of industry. Some years ago Mr. Atkinson, the eminent American economist, said— The burden of national taxation and of militarism in the competing countries of Europe, all of which must come out of the annual product, is so much greater that, by comparison, the United States can make a net profit of about 5 per cent, on the entire annual product before the cost of militarism and the heavy taxes of the European competitors have been defrayed. Such is the burden of militarism, which must be removed before there can be any competition on even terms between European manufacturers and those of the United States in supplying other continents, and in sharing in the great commerce of the world. This was written some time ago, and matters are now far worse. The difference now probably gives manufacturers in the United States and our Colonies an advantage of something like 15 per cent, over those at home. If the United States had not, unfortunately for themselves, adopted a policy of so-called protection, and deprived themselves as far as they could of the advantage of cheap materials, it would have been almost impossible for our manufacturers to have competed with them in neutral markets.

Your Lordships, of course, have no control, and recent changes have very much weakened the House of Commons' control over rational expenditure and the opportunities of enforcing economy. The proportion of permanent Votes, i. e. those levied under standing Acts of Parliament and not requiring to be annually voted by the House of Commons, has greatly increased. Appropriations-in-aid have much increased. These do not require a House of Commons vote. The amount for capital expenditure for works is formed by loans authorised under various Acts, once for all. In fact, so far from our annual expenditure requiring the annual sanction of the House of Commons, as I believe is still popularly supposed, a comparatively small part of it now does so. In these and other ways the power of the House of Commons over expenditure and the forces tending to economy have been fatally reduced.

Unless some serious effort is made, not only can we not hope for any reduction of taxation, but we must be prepared for an addition to our present very heavy burdens. This is a serious position, and the moral aspect of our present policy is also most grievous. Of course, my Lords, we know that we are not going to attack any foreign country. We are sincerely anxious to maintain the peace of the world. But let us suppose for a moment that France or Germany had increased their armaments as we have increased ours. What should we have said? What an outcry there would have; been. We should have inevitably have felt, that we must also increase our forces. If one nation raises its armaments, others follow suit, and so on. This is, in fact, not merely a British question; it is an European question. I have more than once quoted Gambetta's saying to me that if the military mania of Europe were to continue we should all end by being" beggars in front of barracks." Little did he then think, little did I think, that we should be the greatest sinners; that we, who claim to occupy a position in the front rank among civilised nations, should incur the responsibility—I had almost said the guilt—of setting so evil an example to the rest of the civilised world.

The position of Europe is most serious. Even without any war European nations will be crushed by the weight of their own armaments. A Japanese statesman is reported to have said that as long as they only sent us beautiful works of art, we looked on Japan as a semi-barbarous country; now that they have shot thousands of Russians we recognise them as a truly civilised nation. Unfortunately, we are the country which of late has taken the lead in the mad rivalry of armaments. Europe is an armed camp; we have most of the evils of war (except bloodshed) even in times of peace. In fact, it is not really peace; it is only a truce, embittered by jealousy and suspicion. Unless we retrace our steps, unless our neighbours also reduce their expenditure, it will be impossible for European manufacturers to compete with those of America and other countries.

We do not sufficiently realise what great interests the European nations, and, indeed, the whole civilised world, have in common. Moreover, the enormous increase in expenditure of recent years affects all classes, the poor perhaps even more than the rich. It has been a surprise to many that while our commerce is undoubtedly flourishing the number of those out of work last winter should have been above the average, and some of the supposed remedies are likely, I fear, to make matters worse. But that it has been above the average can hardly, I think, be doubted. It is also an unfortunate fact that pauperism is on the increase. I cannot doubt that both these unsatisfactory features are in great measure due to the increase in our national and municipal expenditure. We ought to take these warnings seriously to heart. Being once more, happily, at peace with all the world, our policy should be to reduce expenditure, pay off debt, increase our financial reserves, and lighten the taxes which now press so heavily on the springs of industry.

LORD WELBY

My Lords, there is great uneasiness throughout the country among financial authorities and thinking people as to the state of our finance at the present moment, not only as to its actual condition but also as to its prospects, and I am very glad that my noble friend has expressed that uneasiness to your Lordships, because his wide experience and great authority in almost every branch of finance make his remarks of particular weight both here and elsewhere, and entitle him to the serious attention, not only of your Lordships' House, but of the public generally. I venture also to think that it would be an omission of duty on the part of your Lordships' House if you were to pass without any comment whatever the Finance Bill of the present year.

The Budget of the present year is what I should call a hand-to-mouth Budget. It just provides for the current wants of this particular year, and so far it can hardly be regarded as satisfactory in presence of the enormous amount of taxation which we have to bear. In fact, my Lords, I can only describe it as a Budget of drift. We have now been three full years at peace. In the year 1903 all reasonable people would willingly have granted the Government time to reconsider the financial situation in order to place our peace expenditure again upon a sound and moderate footing, but that plea will not apply to 1904, and still less will it apply to 1905. Here in 1905—three years after the establishment of peace—we find ourselves with a load of war taxation upon us, imposed only since 1899, amounting to no less than £25,000,000 a year.

The criticism which I venture to make of His Majesty's Government is this, that with this immense weight of taxation. Budget after Budget passes without any general review of our financial position, which certainly ought to be the first duty of the Government. There has been no endeavour to lay down the lines upon which our peace expenditure should be regulated; there has been no endeavour to co-ordinate the ways and means of the country, the financial power and resources of the country, with the demands of those experts who naturally wish for large expenditure and to whom the Government appear to have given carte blanche. I have heard it said that much of the present embarrassment of Russia is due to certain debility of mind in the nation—a debility of mind which is represented by the expression "Nicheoo": It is no matter; things will come all right" I ask your Lordships whether there are not some symptoms, in financial matters, of that kind of listlessness in this country—not only in the great Departments of the State, but also, I think, to a great extent in the country itself. But surely listlessness on this important branch of our policy is a fatal thing for this country. If it is bad for Russia, how much more so is it for a country which holds the commercial supremacy of the world? If this country is careless about its finance, about the taxes which weigh upon its industries and upon the well-being of all classes, surely it is neglecting the great means which it has in its power of maintaining that commercial supremacy.

I should like to draw your Lordships' attention to two points showing the effect upon the country of this tremendous taxation. The first point to which I wish to call your attention is this, that this immense weight of taxation which has been placed in the last six years upon the tax-paying public has checked consumption, and the second point is that it has hampered the springs of industry and is, therefore, most ominous for the future of this country. With regard to the first point, I would remind you that from 1842 to 1899 this country pursued a very sound policy. It endeavoured during that time to promote the welling of all classes by a reduction of taxation on articles of consumption, and it is impossible to look at the Reports before parliament without seeing what an admirable effect that had, and how the poorer classes of our countrymen, who at the beginning of that time were really sunk in misery, emerged from that state, and to what extent comfort and well-being increased among them. But since 1899, that policy has been reversed, and out of the £25,000,000 of taxation which has been imposed no less than £15,000,000 has been derived from indirect taxation, and £8,000,000 of that sum is derived from the two great articles of prime necessity to the country—namely, tea and sugar.

Now, what is the result of that? The result has been to increase the price of prime necessaries of life. Not only do I apply that to tea and sugar; it also applies to all the other articles which have been made the subject of increased taxation. It is curious to observe that in almost every case the effect of this has been to check increase of consumption. It has checked an increase of consumption of beer and spirits—matters in regard to which many of us do not care very much; but it has also diminished the consumption of the first articles of necessity, and if you look down the whole line you will see that whereas the consumption of these articles up to 1899 was steadily increasing—the consumption was increasing year by year, and in a larger proportion than the population increased—since that time it has beer a question of retrogression, not of progress, and the amount consumed per head of the most important articles of consumption has actually diminished.

That is a very serious matter for us to consider, especially when we reflect that the highest financial authorities and statisticians who have studied the state of the working classes have told us that a very large proportion of our population is insufficiently fed. Of course, there are differences of degree in these calculations, and I am not in the least wishing to press the view taken by such an eminent man as Mr. Charles Booth, who has calculated that in London something like one-third of our enormous population is insufficiently fed. But, at any rate, it must be admitted that there is a very large proportion of our immense population insufficiently fed. The remedy for that is very difficult to find. We see the difficulty which His Majesty's Government have experienced in dealing with the question, we see the difficulty which besets Bills like that for the unemployed but, at all events, there is one simple thing which the Government could do and which they have not done. They ought not to increase the taxes on the articles of prime necessity. At the first opportunity they had they ought to have regulated the expenditure of the country so as to enable them to relieve the working classes of that war taxation, which I think I have shown has already checked the progress and well-being of our population. I think most of your Lordships will agree with me that the first object of statesmen, the first object of the Government of this country, ought to be, as far as lies in their power, the advancement in comfort and well-being of all classes of His Majesty's subjects. Can we ever look at a situation otherwise-than as most unsatisfactory in which we are obliged to admit that a large proportion of our countrymen are absolutely underfed? If we only think of that as applied to the younger generation we must come to the conclusion that we who are taking year by year larger Imperial duties upon our shoulders ought to spare no effort to secure that the rising generation shall be efficient to undertake those duties.

I turn to the second point to which I wish to call your Lordships' attention—that excessive taxation hampers our industries. The population of Germany and the United States is increasing very rapidly and faster than our own, but this curious fact accompanies it, that in Germany in the last fifteen years or more the whole of the increased population have gone into the towns, and that in the United States a very large proportion of the increased population have gone into the towns. Now, what does that mean? It means that a very large proportion of the increased population of these two great countries are turning their attention to manufacture; the result, of course, is that our competitors are increasing in number and the competition they are bringing against us becomes more serious. But that is a natural development which no act of ours could possibly check. What, then, can be done? I venture to think that the first duty of His Majesty's Government is to take care that the traders and the manufacturers of this country have a perfectly free hand, and that, having a free hand, they shall be able to produce as cheaply as possible, bearing in mind the maxim, which I think is now pretty well established, that "Trade follows the price list."

Consider for a moment what has been the effect of our legislation of late years. I do not deny the necessity during a war of imposing considerably increased taxation, but after the war we ought to be in a position to reduce that taxation. I notice that the actual taxes, apart from those additional sums to which my noble friend has referred, have risen from £89,000,000 in 1899 to £118,000,000 in the current year after the reduction which the Chancellor of the Exchequer has made in the tea duty. That is really an increase of nearly £30,000,000. That £30,000,000 has been diverted from employment which might have been of very great use to our traders and manufacturers, to uses which, at all events, are not remunerative. I am not supposing for a moment that the whole of that could have reverted, if I may say so, to the pockets of the people, but at all events a very large proportion of it might, and to whatever extent that could have been done it would have had a tendency to make production easier and cheaper. The whole question is, Can our manufacturers and traders produce and carry on their business cheaper than those in other countries? If we load them with taxation so that they have very little margin left which they can employ use fully in the improvement and extension of trade the case will go very much. against us.

My noble friend alluded to Mr. Atkinson's statement of the burden of national taxation. I have interested myself in a calculation which shows that the taxes levied by the United States come to about £1 7s. per head, whereas the taxes levied in this country come to £3 per head. I notice that both those calculations omit our local expenditure, to which my noble friend alluded, and also the local expenditure of the United States; but as the local expenditure in both countries very nearly balances, the position is left thus, that in the United States, with their enormous advantages as our competitors—happily they do a great deal to tie up their own legs and arms—they are only hampered by Government taxation to the extent of £1 7s. per head, while we are hampered to the extent of £3 per head. I look with very great alarm at such a situation. I may say at the same time that I have read, though I do not accept it without confirmation, that German taxes are only £1 7s. 6d. per head.

If there is any force in what I have ventured to lay before your Lordships, may I ask whether the Government have really done their duty in the manner in which they have dealt with finance? If there are these dangers before us—and I think they are real dangers, dangers which affect the well-being of our population and the progress of our trade and our means of competing with our neighbours—ought not the Government, within the time which has elapsed since the war came to an end, to have taken serious review of the whole financial situation, to have suggested to the country the lines upon which a peace Budget ought to be established, and to have made it clear to the country that the expenditure, so far as it is incurred, is really required? After what we have heard elsewhere can we really say that what I call the surrender of the expenditure of our great Departments into the hands of the experts has been a success, at all events economically? When we remember the Return which was placed before us at the beginning of this session, which showed that something like 120 ships had been taken off the active list—some of them barely finished and most of them in what I may call the prime of life—may we not fairly put forward the argument, until it is disproved, that there has been an expenditure a great deal in excess of what was actually necessary?

I do not want to touch upon other subjects to-night, but I was struck very much, on reading the other day the Report of the Comptroller and Auditor-General on the South African expenditure, to find one page, consisting of fifteen or sixteen paragraphs, every one of which calls attention to grave matters connected with the administration of funds in the South African War. I think it is not quite creditable to the Government and to the War Office that, although three years have elapsed, not one of those important references have been answered by the War Office. I fear that that is proof that, at all events under present arrangements, the country has very little security that when this great expenditure is being carried on there is due regard to that economy which ought to be proved and shown to us to exist before the country consents to bear longer the enormous load of £25,000,000 of war taxation.

THE SECRETARY OF STATE FOR FOREIGN AFFAIRS (The Marquess of LANSDOWNE)

My Lords, both noble Lords who have addressed your Lordships this evening speak with special authority upon financial questions, and I am sure that the House has listened to them with the respect to which they are entitled. I have certainly done so, and I go further and say that I am not here to differ from either of them with regard to what I conceive to be the main point of the argument which they have addressed to us. Both of them have dwelt upon the rapid increase of the national expenditure; both of them have warned us of the serious results which may arise to the country if some means are not found of arresting that increase. Up to that point I do not think there will be any difference of opinion on either side of the House; but, my Lords, I feel that the two noble Lords have not, perhaps, been so successful when they attempted to show us in what direction we should look for the retrenchment which they consider so essential. The fact is, that retrenchment in the abstract is always popular and easy to suggest; it is when you get to close quarters with the expenditure, and endeavour to find the particular points at which a million or so may be saved here or there that the difficulty of the task commences.

When one looks at the principal heads of expenditure, I think one is struck with the feeling that, after all, the area which is offered for retrenchment is a comparatively small one. Take the great heads into which our national expenditure is divided. You have, in the first place, the service of the Public Debt. That is an expenditure of which we are not masters. The noble Lord suggested, I think with great force that we should endeavour to reduce the Debt as rapidly as possible, but a more rapid reduction means, of course, an increase of the annual appropriation for the reduction of the Debt. Then there is the Civil Service expenditure. I think my noble friend Lord Avebury, if I correctly understood him, admitted the great difficulty of making a reduction under that head. I, at any rate, am persuaded that the difficulty is very great. I believe there is not a single Department of the Government service in which the work has not steadily increased for many years past, and in. which a claim may not be made out for the assistance of a staff larger than that which used to suffice in bygone years.

The noble Lord opposite, Lord Welby, told your Lordships that in his opinion the reduction should be made in the military and naval expenditure of the country, and he gave your Lordships figures showing how expenditure of that class has mounted up. With regard to the Navy, I may remind your Lordships that the Naval Estimates this year do show a very considerable reduction over the Naval Estimates of last year. The difference in favour of this year's Estimates is no less than £3,500,000 sterling—a saving arrived at by the courageous scheme of Lord Selborne, adopted by His Majesty's Government, before he left this country, a scheme which had for its main object the getting rid of a large number of vessels which were costly to the public, but added little or nothing to the fighting efficiency of the Navy. The noble Lord (Lord Avebury) reminded us of the proposal which was once made by my noble friend Lord Goschen, who suggested that it might be possible for this country to reduce its naval expenditure if an understanding could be arrived at with other great naval Powers for a similar reduction. My recollection is that that proposal, the spirit of which, I think, everyone must appreciate, did not meet with any response sufficiently definite to enable us to take action upon it; and I am afraid that one must add that since the time when that proposal was put forward the tendency of other Powers has been to add largely to their naval strength and their naval expenditure. And, my Lords, it is surely our duty to remember, when we compare our naval expenditure with the expenditure of other Powers, that there is no country in the world to which a strong Navy is so vital and so essential as it is to this country.

In respect of Army expenditure, the noble Lord (Lord Welby) suggested that when the war came to an end some means should have been found for at once making an impression on the Army Estimates. Those who have had anything to do with Army administration, however, know only too well that rapid and sudden reductions of Army expenditure are so difficult as to be virtually impossible. You cannot suddenly get rid of men, and, if you do, it can only be on terms which will be really extravagant and costly to the country. We are obliged as a Government to do what we can to effect a reduction in the expenditure on the Army, and my right hon. colleague who has charge of the War Office is, I know, deeply impressed with the necessity of keeping down the Estimates for the Army; but I notice that whenever he puts forward a proposal for applying the pruning knife with any approach to vigour there is an immediate outcry, not from the Army so much as from the public Press and the public generally, in defence of that particular section of our military machinery with which it is proposed to interfere. I do not think I am wrong in saying that if it had not been for pressure of that kind my right hon. friend would have been able to submit to the country proposals more economical than those which are actually embodied in this y ear's Army Estimates.

I take one other item of increased expenditure which is perhaps typical—the increase, which, I think, reaches to about £500,000, in the Post Office Vote. Some of your Lordships may recollect the history of that question. There was a Committee presided over by Sir Edward Bradford, and that Committee' recommended a considerable addition to the emoluments of the Post Office employees. Here, again, there was a general demand, certainly not from one side in politics alone, but a general demand pressed from both sides, in support of that proposal, and the Estimates went up by the sum which I have mentioned. The fact is that the age in which we live is, I will not say an age of extravagance, but it is an age in which the Government of the day is expected to do more and more for the people of this country, and to do that more and more in a more costly and expensive fashion.

I was very much struck by what was said by the noble Lord who spoke first (Lord Avebury) who reminded your Lordships that we have to bear in mind not only the growth of Imperial taxation, but the growth of local taxation also. To my mind the growth of local taxation is at least as serious as that of Imperial taxation, for, after all, the country has only one pocket, and, although there may be two sets of hands at work at that pocket, there is only one pocket which has to pay in the end. I noticed the other day a statement which goes to show that while in the last forty years our Imperial expenditure has increased from. £70,000,000 to £140,000,000, our local ex-expenditure has increased from £36,000,00) to £144,000,000; that is to say, that while the Imperial expenditure has doubled within that period of forty year local expenditure has quadrupled. In that connection I would venture to make an appeal to the noble Lord who spoke second, Lord Welby, who has been extensively, I might say expensively, concerned with the financial administration of the London County Council. I am not fully convinced that he has always been found a successful advocate of economy in administering the large resources with which that body has to deal.

LORD WELBY

I beg the noble Marquess's pardon for interrupting, but I could show him that the increase there has not been so great. I would also like to remind him that Parliament withheld from London municipal rights for something like fifty years after granting them to the rest of the country, and London then had to make up very great arrears.

THE MARQUESS OP LANSDOWNE

In spite of that I cannot help thinking that the London County Council will be found to have allowed itself a very considerable number of certainly not inexpensive luxuries—I refer to such matters as tramways, buildings for housing the working classes, and I am Even under the impression that the noble Lord has allowed himself a little navy of his own which will run into a good deal of money.

LORD WELBY

But they all pay.

THE MARQUESS OP LANSDOWNE

With regard to the actual proposals of the Chancellor of the Exchequer I do not gather that either of the noble Lords were disposed to criticise them at all severely. It is true that Lord Welby described the Budget as a Budget of drift. I should have been inclined to describe it as a transition Budget, intended to deal with a period of transition which must take place at the end of a great war and before the national finances revert to their normal condition. At any rate, the two main features of the Budget—I mean the reduction of the duty on tea and the additional contribution to the Sinking Fund—fall well within the canons which the two noble Lords have impressed so earnestly on the House.

I wish to say one word before I sit down upon a point which was touched in passing by the noble Lord who spoke first. He told your Lordships that although under the financial arrangements of the year the fixed debt was diminished by £7,500,000 owing to the operation of the Sinking Fund, we have, so to speak, with the other hand increased our indebtedness by additional borrowing for the purpose of naval and military works. His argument, therefore, is that we have not really reduced the Debt, but that the net result of our operations has been to increase our indebtedness by something like £2,000,000. Of course it is possible, if the noble Lord likes to do so, to refer to those two transactions in juxtaposition, but I submit that they should be treated as entirely distinct, and that the connection between them is not as close as the noble Lord would have us believe. Borrowings for special works, usually of a naval and military kind, have always been treated as something outside the normal financial arrangements of the year.

This is what happens. Some expenditure of a novel kind is suddenly found necessary. Let us say that the developments in the art of naval warfare render it necessary, for the safety of our commerce, to build a new harbour; or let us say that a proper feeling for the comfort and welfare of the soldier impels us to embark upon an expensive scheme of building barracks. In these cases you have to find an amount of money which it is impossible to throw on the Estimates of the year. It would not be fair to the taxpayers of the country that the whole of that expenditure, which represents a more or less permanent improvement, should be thrown upon the finances of a single twelve months; nor, on the other hand, is it right that for such expenditure the fixed debt of the country should be permanently burdened. Accordingly the custom has grown up of providing for the necessary expenditure, in cases of that kind, by means of loans repayable in a comparatively short term of years by an automatic sinking fund. That is what has been done in the present case. Each of these loans gives effect to a policy which has been submitted to, and sanctioned by, Parliament, and each of them provides for a sinking fund by which the loan will eventually be paid off. The sums thus raised ought not to be set against the reduction of the permanent Debt by means of the natural operation of the sinking fund. I do not know that there are any other points that I can usefully notice. I admit that it is right and proper that the financial proposals of the Government should be criticised as they have been criticised by the two noble Lords who have spoken, and I can only say that, so far as I was able to follow their remarks, they criticised them in a spirit to which none of us need take exception.

EARL SPENCER

My Lords, I reel that we owe a debt of gratitude to my noble friends behind me for having initiated this discussion. The noble Marquess who has just sat down admits, the importance of the subject and applauds in a sense the fact that they have brought it before the House. When we look around we must deplore the emptiness of the benches to-night, and the apparent want of interest which the House feels in this great subject; but perhaps the House did not realise that my noble friends were going to speak this evening on the Finance Bill. We on these benches view the enormous increase in the expenditure of the country with the deepest concern. We think that His Majesty's Government have been remiss in not making a difference between the expenditure in peace and the expenditure in war.

I quite admit that there has been apathy in the country with regard to this. There has been apathy on the part of the Government. That has been shown on more than one occasion, and in its latest phase it has been shown in connection with what are called the stores scandals in South Africa. We may hear more of that. An important debate is going on at this moment in another place with regard to the heavy responsibility which rests on the Government itself, apart from the individuals who may have had the administration of these funds in South Africa. There is also considerable apathy in the Houses of Parliament. This House has not the charge of finance, though it has, as the noble Marquess admitted, full right to express its opinions. But in another place there does not seem that desire for economy and vigilance over public expenditure which used to prevail there in old days. I remember well that during the short time I was in the other House—it is nearly fifty years ago—there were always one or two Members who made it their particular business to bring financial matters continually before the House. There is nobody who fills that rôle now. There is also apathy in the country itself. It is very often carried away by a warlike feeling, or by a desire to spend money on some particular object, without recognising the need of economy, which is so necessary if we are to increase our commercial prosperity.

The noble Marquess alluded to the question of retrenchment. He referred to expenditure generally and he began with the Civil Service, and to the difficulty there was in retrenchment in that service at the present day. He said that we were living in an age when the Government were more than formerly expected by the people to lay out money in a costly way. That may be so to a certain extent; but it is, however, none the less the bounden duty of the Government to try and retrench in the various branches of the public service. The noble Marquess referred to the difficulty there was in carrying out Lord Goschen's policy of inviting other Powers to reduce naval expenditure. One of the difficulties was that we had ourselves so largely increased our expenditure, in far greater proportion than any other Power. As regards the Army, the noble Marquess said very truly that sudden and rapid reductions were often very disastrous. I quite agree; but no one has asked for a sudden and rapid reduction. We have asked that some difference should be shown between a peace establishment and a war establishment. We look in vain for a sign of retrenchment. Perhaps I may say there was one indication. The Prime Minister recently made a notable speech in another place. A good deal may be said as to whether it was politic for the Prime Minister to make a clean breast of everything that was felt on the most delicate matters connected with the question of defence, but the speech may have been an indication that the Government did not intend to make larger demands for military expenditure. That speech, however, has been followed by no practical result in the direction of reduced expenditure.

I do not propose to go at length into this matter. My two noble friends have shown the great necessity there is for retrenchment, and I hope that the wisdom of their words will be taken to heart, not only in this House but elsewhere. The noble Marquess referred to local expenditure, which is a matter of the highest importance. Local expenditure has no doubt increased enormously, and requires careful watching, but, at the same time, we may say that a large part of this local expenditure is made for purposes which are remunerative. I know there is a difference of opinion on that point, but still that circumstance must be borne in mind. In his reference to the London County Council the noble Marquess forgot that my noble; friend behind me (Lord Welby), in his financial statement, which was one of great lucidity, pointed out that, with the exception of the education rate, there was hardly any increase in the county council rate this year. I associate myself with the opinions of my noble friends who have brought forward this subject, and consider that the thanks of the House are due to them for the clear and able way in which they have done so.

THE EARL OF WEMYSS

y Lords, I think it would be as well that we should have clear statements of the growth of these large items. Take the Army. The Army Estimates in 1853 were £9,000,000; in 1870 they had risen to £17,000,000; and noble Lords know what they are at the present time. I think it would be very useful and interesting if we could get a Return from the War Office and from the other Departments setting forth the causes of these extraordinary increases of expenditure, and what we have to show for them.

On Question, Bill read 2a; Committee negatived and Bill to be read 3a tomorrow.

House adjourned at five minutes before Seven o'clock, till Tomorrow, half-past Ten o'clock.