FINANCE BILL. (Hansard, 30 July 1914)

*THE MARQUESS OF CREWE

My Lords, your Lordships will remember that it has not been for many years past the custom, in introducing the Finance Bill in this House, to make anything in the nature of a 297 Budget statement. In fact, the usual procedure which I have myself often followed, and which I have seen followed by others for many years, has been simply to move the Second Reading of the Bill; and in case any noble Lord, as generally happened from the Front Bench opposite, has desired to make certain observations of a general character, then to reply on whatever may have been said; but anything like a protracted or continuous debate has been unusual in your Lordships' House. On this particular occasion, however, as the Finance Bill contains certain provisions of a novel character some of which are of particular interest to your Lordships' House owing to the composition of our Assembly, I think my best course will be to make one or two short observations of a quite general character and then to touch upon one or two points in the Bill which may be taken to be of especial interest to your Lordships.

The marked fact which must strike everybody in connection with our national expenditure during the period of the last five or the last ten years has been its perpetual increase. During that period the increase in our national expenditure has amounted, roughly speaking, to something like £50,000,000, of which, also speaking roughly, some 00,000,000 may be put down to extra expenditure on national defence, and some £30,000,000 to expenditure on various schemes of reform. Against this has to be set a certain repayment of Debt which has taken place. So far as the repayment of Debt is concerned we, as a Government, have nothing of which to be ashamed. Going back to the latter years of the last century it will be found that on the different sides the Chancellors of the Exchequer —taking Mr. Goschen and Sir William Harcourt as instances—achieved about the same measure of success in the repayment of Debt, something over £6,000,000 a year on an average. Of course, I leave out all the financial complications which ensued from such events as the South African War or some other occasions on which special Loans and expenditure were necessary. But, speaking generally, the credit to be claimed by the Chancellors of the Exchequer of either Party was about equal. During the last ten years we have as a Government paid off somewhere about £9,250,000 a year of Debt, amounting in the gross to something over £100,000,000; 298 and therefore, as I have stated, we do not feel that we have anything to be ashamed of in that respect.

As to how far the country can bear this increase of £50,000,600 in expenditure it is most natural and proper that questions should be asked. But on the evidence of those statisticians who are best competent to judge, pant passu with that increase has gone on a colossal increase in the national wealth. It is estimated, I think, that the national income since the year 1909—that is to say, since the imposition of the fresh taxes in the Budget of that year—has gone up by something like £150,000,000; and I think the evidence of all our eves tends to bear out that fact. There can be nobody, I think, in this House who has reached even middle life who would not say, with the certainty of not being contradicted, that since his youth the evidence of general wealth diffused practically through all classes in the country has become more and more marked as the years go on. I do not know that there is now any elms in the country of whom that cannot be said. There was a time when we should have been tempted to. except the agricultural community, in particular the farmers, in making such a statement; but during the last ten years or so nobody, I think, who has had an opportunity of judging can doubt that in that business, too, there have been renewed and increasing evidences of prosperity.

In the meantime, however, in this Budget, as the House is well aware, various new liabilities have to be met. The task of the Chancellor of the Exchequer has been to find something between £9,000,000 and £10,000,000 for the expenditure of the current year, with the certainty that, except in some special items, that expenditure is not likely to be decreased in the following years. And the House is doubtless generally aware of the methods by which that large increase has to be met. For the current year an addition of a penny is made to the Income Tax. In speaking of the 1s. 3d. Income Tax it is important to note that the proportion of Income Taxpayers who pay the total amount of 1s. 3d. is an exceedingly small one. There are about 1,250,000 payers of Income Tax in this country, and of those only 160,000 pay the full rate. of 1s. 3d. And that is a fact which has to be borne in mind in view of the principle which now, I think, is 299 accepted by all parties and by most people in reference to taxation—namely, that taxation cannot now be only levied in respect of the particular services which are performed by the State in its different capacities and the results enjoyed by different individuals, but it also has to be levied with some reference to the ability of the person who pays to hear an extra burden of taxation.

Then there is, as the House will remember, a new impost which has become the subject of a good deal of criticism in regard to some of its details, into which I will not, or course, attempt to enter— - namely, that of charging Income Tax on income accumulated abroad. Hitherto it is only such proceeds of foreign investments or foreign property as have been remitted home that have become chargeable for Income Tax; but in view of the general principle which I have stated it is now recognised that it is only the wealthier members, at any rate con paratively speaking, of a community who can afford to reinvest the proceeds of foreign securities or foreign property, and it is those who have been able to escape this burden of taxation and not the smaller holders of property even though they hold in some foreign country or in some parts of the Empire outside these islands.

On this matter of Income Tax there are one or two facts of special interest to this House where so many of us derive our incomes from land. In the first place—and I think this should be regarded as a really valuable change in the system of levying Income Tax—the limit of 25 per cent. which was imposed upon improvements is now swept away altogether, and a landowner is entitled to deduct for purposes of Income Tax and Super-Tax whatever outlay he may make in the improvement of his property. That is one change of an important, and to many of your Lordships, I am sure, a substantial character. And in the same relation there is a further change the importance of which will be recognised by most landowners—namely, the change from £8 a year limit for cottage property to £12 entitling the owner to similar remission. It was found—I am sure a great many of your Lordships have found—that the £8 limit did not give the landowner the benefit in a great number of cases of houses 300 inhabited by those who might not be actually agricultural labourers but who were fully engaged in the business of agriculture, such as blacksmiths, wheelwrights, and many others, and it will be found, I hope, that this change is also a substantial advantage.

I have no desire to go through the whole Bill, and I need say nothing on the subject of the further graduation of the Super-Tax, which must seem to many a formidable alteration. But it is again important to remember that of all the payers of Super-Tax there are only a half, it will be found, who will pay more than 1s. 6d. in the £ both in respect of Income Tax and Super-Tax put together, and therefore the more humble class of Super-Tax payers will not find that this heavy demand makes much difference to them. Then we have also heard comments of a highly critical character upon the steeper graduation in Death Duties, and we know there are not a few who consider that Death Duties are an altogether undesirable form of taxation, and that it would be both fairer and simpler to raise by way of Income Tax, or possibly of Super-Tax and Income Tax combined, the whole sum which is produced annually by means of Death Duties. I think it is not impossible that some day, although it may not be a very near day, some kind of Income Tax applicable both to rich and to the quite poor, including the wage-earning class, may be practically the only direct tax levied throughout the country. It is not, I think, inconceivable that such a state of things might be arrived at, although there are complications and difficulties which are well known to all those who have studied these subjects. But so far as existing taxpayers are concerned, the substitution of Income Tax or Super-Tax payments to raise the whole amount now available from Death Duties would involve so serious a diminution of income to many people that I greatly doubt whether any Chancellor of the Exchequer could be found who would he prepared to face it. On the other hand, there are certain cases in which the Chancellor of the Exchequer has been able in this matter of Death Duties, too, to attempt to meet hard cases. He has endeavoured to do something in the difficult and vexed matter of rapid succession. We have all recognised the hardship belonging to frequent successions. There are few of us who have not had under our own personal observation some cases of our 301 friends who have suffered severely, and one cannot help thinking unfairly, in that respect, and I should hope that the relief which is promised in this Finance Bill may prove to be, as far as it goes—and it goes tolerably far—a real relief. That Applies both to real property and to many kinds of business in which the hardship of repeated payments at short intervals is not less marked than it is in connection with land.

Then there is another point which I have no doubt will have exercised the minds of many members of this House, and that is the complete abolition of the benefit which in the case of realty was allowed to attach to settled property. I think it will be admitted that speaking in a mixed assembly it would be difficult to offer any logical defence of the difference which, since the early 'nineties—since Sir William Harcourt's Budget—has been permitted to exist in respect of settled property, and specially, of course, of settled land. The arguments in favour of such an arrangement are of a general or social character appealing forcibly to some, but it can hardly be supposed that they would appeal to the ordinary man who is not himself interested in landowning. I will not trouble the House with a description of how the Chancellor of the Exchequer has endeavoured to avoid anything which can be described as a breach of faith towards those who settled their property in consequence of the former legislation on the subject, but merely state that the method in which that is done is to treat the property as having been franked by the settlement to the present date—to the 15th of August next, in fact—and from that time until the next duty becomes payable the trustees of the settlement will be entitled to receive three per cent. simple interest upon the amount paid under the first settlement.

In respect of this matter of Death Duties there is another point on which I should expect to find that many members of this House would feel strongly. It cannot be disputed that where the assets of an estate are not liquid, not easily realisable, the difficulty of meeting the sum payable for Death Duties, particularly on the higher scale, may in some cases be exceedingly great and in a few almost impossible. I know that the Chancellor of the Exchequer 302 has been very anxious to find some method of meeting that hardship. It might possibly be met by a further extension of the time of payment or by some method of facilitating by State assistance the raising of the sum required, because it is the raising of the money which is often the practical difficulty for the successor to the estate. I am well aware that the Chancellor of the Exchequer is anxious to meet this if he can, and he is giving his attention, although the matter is by no means an easy one, to various methods that have been suggested for meeting this particular hardship.

I need only say a word on one more subject, and that is upon the relation between local and Imperial finance, with which it is attempted to deal in this Finance Bill. I see sitting above the Gangway my noble friend (Lord Balfour of Burleigh) who is so honourably remembered in connection with the Commission which sat from 1896 to 1901 on this question of local rating. Ever since then successive Governments have tried to deal with the question. I am sorry to say that I myself, standing at this Table four years ago, stated quite categorically that we would attempt to deal with the matter in the following year. That, I am afraid, is a case in which, though I was fully authorised to make the statement—I hope noble. Lords opposite will admit it is the only case—we have rot been able to act precisely up to the letter of the pledges we have made. The matter is, of course, one of extreme complexity; but every year the necessity for some such dealing has become more and more patent. We have gone on year after year placing a load of fresh duties upon the different grades of local authorities. The policy which has inspired the imposition of those loads will in some cases have the enthusiastic approval of noble Lords opposite, because they themselves have been responsible for a large part of the imposition. In other cases they will no doubt criticise the action of those who placed those burdens on the localities. But the fact remains that the burden is on the shoulders of the local authorities and of the ratepayers whom they represent. We have always held, and we are proposing to act on our belief, that the only possible method of proceeding is to alter the basis of rating, and to relieve as far as possible improvements, Is such, from a rating charge.

303 We hope that for this year, with an increasing amount for subsequent years, somewhere about £4,000,000 will go to the local authorities in relief partly of education charges, and partly and not inconsiderably for main roads, in addition to a large sum in respect of public health, an almost equivalent sum, not to mention a smaller amount for such items as cattle disease, and so on. I hope that when the time comes we shall have the full cooperation of the Party opposite in achieving this great and most necessary reform in relieving the ratepayers of the vast and most unequally distributed burden which rests upon their shoulders. The case of both the urban ratepayer and the rural ratepayer is one which needs close attention, although in quite varying degrees according to the part of the United Kingdom in which the ratepayers live. When we proceed, as I hope we soon shall be able to do, with the further details connected with these proposals, details which will have to be carefully thought out in order to ensure for one thing that the money is wisely distributed, and, in the second place, that it is not likely to be wasted, we shall have an opportunity then of going into a great number of questions which I will not attempt to touch upon to-day. All that I will do now, having run over some of the most salient points of this Finance Bill, is to ask your Lordships to give it a Second Reading, and, in view of the necessities of the situation, to suspend the Standing Order in order that it may pass through its different stages.