FINANCE BILL.

HL Deb 26 July 1927 vol 68 cc881-923

Order of the Day for the Second Reading read.

THE EARL OF PLYMOUTH

My Lords, it is not usual, I gather, to discuss this Bill at any very great length in your Lordships' House, or to go into any great detail with regard to it. Naturally it covers an enormous field, and I find it rather difficult to know how to compress what I ought to say within a very short space, as I am sure your Lordships would like rue to do. I think that what I had better do is very briefly to draw attention to the main features in which the present Bill differs from previous Finance Bills and the methods that the Government have employed to meet the present very difficult situation. Your Lordships will then have an opportunity of directing attention to those points which may particularly interest the House.

I will deal first with the Customs and Excise clauses. Clause 3 repeals the exemption of motor tyres from the McKenna Duties imposed upon motor cars, motor cycles and various parts and accessories. It is estimated that the gain to the Revenue in a full year from this duty will be £750,000. After the withdrawal last year of the exemption of commercial cars this was a natural and logical sequel, as tyres were the only parts or accessories of cars which remained exempt from duty. In so far as the effect is concerned in the three months during which this duty has been in operation, there has been, as regards British tyres, no increase in the price of 96⅔ per cent, of the present production and in the small remaining amount of production there has been a very small increase indeed. So far as foreign tyres are concerned, already one foreign firm has begun to build premises and another foreign firm has acquired premises for manufacturing tyres in this country. That is all to the good, and it will furnish employment for a considerable number of British employees.

Clause 5 increases the main rates of Customs Duties upon light and heavy wines respectively, and at the same time lowers the point in the wine scale at which the dividing line for duty purposes is drawn between light and heavy wines. It is estimated that these changes will produce an additional revenue of £1,500,000 in a full year. I will not go into the details of this duty, but I think I ought to explain that the heavy wines naturally pay a heavier duty than the light wines, and that, whereas the dividing line in the scale for non-Empire wines is lowered from 30 to 25 degrees of proof spirit., for Empire wine it is lowered only from 30 to 27. The reason for this is that these Empire wines tend to develop a rather greater natural alcoholic strength than European wines, and accordingly Empire wines thus gain a further advantage to which, I think your Lordships will agree, they are entitled from that point of view alone. Clause 7 increases Customs and Excise Duty upon tobacco by 8d. per lb. on the main rate. The additional revenue from this duty in a full year is expected to be about £3,400,000. With regard to the effect of this duty, I will only say that, in so far as concerns cigarettes, which represent something like 70 per cent. of the total consumption of tobacco, there has been no alteration in price, size or quality over practically the whole field. With regard to pipe tobacco, this is true only to a very small extent.

Clause 8 deals with the duty on matches. It increases that duty by nearly 20 per cent. and alters the basis of the tax from the number of matches as the fiscal unit to the number of boxes or containers. The gain to the Revenue is estimated in a full year at £700,000. The reason for altering the basis of the tax is mainly because of the practice of some foreign manufacturers of putting fewer matches in a box than the British manufacturers generally put. This is obviously unfair to the British manufacturer, and I am glad to say that already we have been informed that some foreign makers are taking steps to increase the contents of their boxes; this is to the benefit not so much of the manufacturers as of the consumers of this country. I need not dwell upon Clause 9 except to say that it imposes a duty of 28s per cwt. on imported translucent or vitrified pottery. The duty is imposed under the Safeguarding of Industries procedure in accordance with the recommendation of a Majority Report of a Committee duly appointed under that procedure. Clause 10 reduces by a month—namely, from two months to one month—the average period of credit allowed to brewers for the payment of Excise Duty on home brewed beer. This is merely a return to the procedure which obtained prior to 1914. The effect, of course, will be that the Treasury will receive thirteen months' Excise Beer Duty in 1927–8, which is estimated to produce an additional sum of something like £5,000,000. This is naturally a non-recurrent receipt.

I do not think that I need say anything more until I come to Clause 18, which concerns the Betting Tax. Here there is only one small alteration, which is of no great importance. The reason why the Chancellor of the Exchequer has made no important change is because he wishes to give the tax a fair trial and to be able to examine the results of a full year's working. The Betting Tax has not been a failure, as has been suggested in some quarters. It is working, on the whole, very smoothly, and it will probably produce something between £3,000,000 and £4,000,000 in the whole year. Although, of course, this falls considerably short of the £6,000,000 that was hoped for, at the same time it is much better than nothing at all, and I think it is quite fair to say that the causes of its having fallen below expectations are probably, to a very large extent, temporary.

I now come to the Inland Revenue clauses, with which I shall deal very briefly indeed. There are several important changes in the law relating to Income Tax and Super-tax contained in this year's Bill. From the point of view of raising the necessary Revenue without recourse to increased taxation, the most important of these is undoubtedly contained in Clause 21, which provides for the collection of tax under Schedule A in respect of the annual value of property in one sum on January 1, instead of in two equal instalments on January 1 and July 1. This proposal brings in for this year—but, of course, for this year only—an additional sum of £14,800,000. It has, however, the further justification that the system of payment in two instalments dates back only to the year 1918, when the rate of tax was considerably higher than it is now and when, in consequence, the continued payment in one sum would have inflicted considerable hardship. There are a number of minor alterations with which I will not trouble the House. I am sure the proposal to exempt from Income Tax the trading profits of public schools and other charities will give general satisfaction.

There are, however, two further important sets of proposals which I must mention before I finish. The first aims at dealing with the avoidance of Super-Tax and the second aims at simplifying the method by which Income Tax and Super-Tax are charged. I am sure your Lordships will not wish me in this House to go into complicated details as to these matters in moving the Second Reading of this Bill, as there will no doubt be an opportunity at a later stage of further explanation if necessary. The only other clauses that I think I should refer to are Clause 48, which raises the Sinking Fund to £65,000,000 for this year only instead of keeping it at £50,000,000, as originally anticipated, and Clause 49, which proposes that out of the balance standing to the credit of the Road Fund on March 31 last £12,000,000 shall be transferred to the Exchequer. In this respect I understand that the Chancellor of the Exchequer has given an undertaking that there shall be no further transfers from the Road Fund to the Exchequer during the lifetime of the present Parliament. In conclusion I would merely say this. I have no doubt that the House has remarked that a considerable sum of money, something over £31,000,000 in all, is being raised this year by methods which cannot be employed again; but they have been employed to meet a special and abnormal situation. They have the great advantage of making it unnecessary to increase taxation to the extent indicated, and in the circumstances I feel sure your Lordships will agree that they are wholly justified and will give the Bill your general support. I beg to move.

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

VISCOUNT HALDANE

My Lords, it is not your Lordships' practice to consider this Bill in detail. It is not our practice to oppose it and we are precluded from amending it. But when I say that I do not intend to convey that I have any considerable criticisms to make upon the Bill. No doubt in the Customs provisions, which form Part I, there are things, like the imposition of the McKenna Duties on motor tyres, which embody the principle of Protection, but then on that principle to some extent the Government have already embarked. It comes in again in another form in the way of protection of Empire trade when we get to tobacco and other articles subject to the provisions of Part I. That is a matter of general principle which has already been decided by the Government and for which they must be responsible.

When we get to the Excise provisions, the Inland Revenue provisions, the position is, I think, much more satisfactory. There are a variety of clauses in the Bill which are designed to close the loopholes through which taxation has been escaped. I have myself had to take part very often in the decision of appeals on the existing law and I can testify to the technical loopholes through which the subject has been able to creep. Reading that Part of the Bill I am glad to see that some at least of these loopholes have been stopped. The vigilance of the Inland Revenue and the result of their protests, not always successful, to this House on the judicial side have brought to light various parts in which the Finance Act required amendment. So far as I can see that has been done in the proper spirit in the Bill, and although, no doubt, it is annoying to people to find themselves taxed for the first time, still the taxation imposed upon them is just taxation, and is imposed on a principle which applies also to their neighbours. Therefore on that part of the Bill I have no comment to make. On the whole I think it is well intended, and I hope that it will succeed. As to the Bill as a whole, we are here to accept it and not to throw it out, and of course we offer no opposition to the Second Reading.

THE EARL OF MIDLETON

My Lords, I do not suppose that the Government have greatly appreciated the speech of the noble Viscount, for when he tells them that on the greater proportion of their Bill he has no objection to offer or any comment to make, I cannot doubt, considering the difference between their views and his, that they must feel that he is damning them with very faint praise indeed. For myself, I find myself in great difficulty, because while I do not in the slightest degree challenge the rights of the House of Commons, or for one moment suggest that your Lordships should take, with regard to the question of taxation, a position which was abrogated hundreds of years ago, there are points about this measure which caused the greatest possible heart-searchings in the House of Commons, and have by no means been cleared up by the hasty changes made, in some of the most important clauses, during the last few days that the measure was dealt with in another place.

I do not doubt that if it were possible, or desirable, which I quite admit it is not, that this particular class of measure should be reviewed here clause by clause, as is the case with other measures, that not only would interpretations which are likely to be most damaging to the taxpayer, and most troublesome to the Government in the future, have been avoided, but I do not doubt that in the nineteen pages which deal with the assessment of certain taxes very great changes would have been made, with the consent of the Government themselves. I apprehend, not to use exaggerated language, that this Bill will be found, as I will show your Lordships in a few moments, most oppressive, most troublesome and most difficult for the taxpayer. I have made some study of the clauses, and I would ask the Government, on certain definite questions, to tell us what is really their position.

Take the case of settled agricultural land. The Prime Minister made a speech the other day of great, importance with regard to the intentions of the Government in respect to agriculture, and we have heard in this House strong pronouncements in the same direction. At present we all know that landed estates are in the greatest possible jeopardy. We see in The Times every day, on its last page, large and small estates for sale or for lease in almost every part of the country. We know that practically no profits are being made out of such estates. Will your Lordships believe it? The Government have seized this particular opportunity for greatly increasing the taxation on land, which they decided themselves to remit a short time ago. Take a case of this kind. Take a moderate estate of £30,000 of settled land and £7,000 personalty. Hitherto the whole was assessed in this way—they were treated as different estates, and the settled land estate paid 10 per cent., and the personalty 4 per cent. By this Bill they are now aggregated and they pay 12 per cent. I ask the noble Marquess below me [Lord Salisbury] how does he square that extraordinarily unjust treatment with the professions of the Government?

Let us take another case, the case of a landed estate to which a man succeeded before the War. Put it at any sum you like. Large estates do not attract the slightest sympathy, but let us suppose that a man had a landed estate worth £5,000 a year. He may settle on his children when they marry, let us say, £15,000, or three times the annual value of the estate, and towards that he may have made up his mind that he will by hook or by crook save one-fifth of his income every year—£1,000 a year. Thus in fifteen years he will have paid the whole amount of the settlement. There comes the War and, instead of £5,000 a year, he probably receives only £3,000. Taxation reduces that to £1,500, out of which he has to pay £1,000 towards making up obligations into which he has legally entered. Now, what is he to do? What is the position of a man whom the Lord Chancellor and all the Judges can force, when a case is brought before them, to make good his settlement, when the Chancellor of the Exchequer comes in and says: "There is no method by which you can put that income aside so that I will not get at you for, say, 7s. 6d. or 8s. in the £ before you do it"? If he assigns the revenue to trustees for the purpose of carrying out his settlement Somerset House comes down on him and says: "No, if you choose to give the money away altogether, not assigning it to carry out your legal obligations. You are relieved of Super-Tax, but if you assign it for the purpose of carrying out your legal obligation we will have Super-Tax." And they get it.

That is, I think, a real case in which settlements legally made before the War, and legally enforceable, should not be regarded as evasion if money is set aside for the simple purpose of carrying them out. These things are seriously against public policy. I also think that they are the absolute negation of the whole of the promises which the Government have made with regard to the landed interest. And they are merely playing into the hands of those who are trying to teach the farmers that if they wish to improve their position and to get better wages for the labourers you can only do it by impoverishing the landlord.

My second complaint is that throughout this measure there runs the apparent desire of the Government not to decrease the enormous and irritating correspondence which goes on between the assessor of taxes and the taxpayer, but to increase it in every direction. The Lord Chancellor is not on the Woolsack and there are not many legal Peers in the House, but I do appeal to the lay members of your Lordships' House to resist the tendency in legal enactments to force very great expenditure upon the taxpayer; it is a tendency which has increased and ought to be diminished. I could give one or two instances of what is being done. I do not wish to attack anybody at Somerset House. I have had some dealings with Somerset House, and have received the greatest courtesy and, as far as is possible, the greatest fairness from Sir Richard Hopkins and his staff. But that enormous staff, dealing with a great number of cases, is by no means always fair.

I have here a case given me by the National Institute of Manufacturers, an association for the protection of manufacturers. The letter was in The Times three days ago. A manufacturer apparently returned among the expenditure on the business, which should be free of Income Tax and Super-Tax, the sums expended in making an application under the Safeguarding of Industries Act or the Merchandise Marks Act. The Somerset House authorities said: "These applications, which you have to make if you desire to get the advantage, are not proper expenditure out of your income; they are capital. You must pay the tax." The matter is carried further, counsel are called in, enormous expense is gone to. If a man makes an application for the furtherance of his business in order to increase the profits of a given year or to secure some advantage for succeeding years, every bit of that is as much expenditure out of income as is the sending out of travellers. That is the sort of question on which a dispute goes on for months, involving any number of letters and great legal expense.

I wish Lord Decies was in the House to-day because I want to cite a case which appeared in the Press over his signature, and he could give your Lordships the facts, and show that I am not drawing on my imagination. He stated that a poor woman, who had an income of about £100 a year, had also some investment. Having had the Income Tax on this deducted at the source, she applied, as she was entitled to do, to have the Income Tax refunded to her. What was the answer of the official? He said: "The Lords Commissioners would like to be informed how it is, with that income of £100 a year, you manage to have investments which bring you in another £40 or £50 a year. How could you save that sum?" That has nothing whatever to do with them. The poor woman was left the money or given it by somebody. That led to a correspondence which was only terminated, apparently, by the influence of my noble friend and his association.

I will relate another case which I consider to be one of the most unfortunate instances of what the Government should not do to the taxpayer. Everybody knows that if you are in receipt of, say, £1,000 a year from investments, you pay the tax on that, but when you pay Super-Tax you are regarded as not having received an income of £1,000 a year, but £1,000 plus the Income Tax which had been deducted before you were paid. Call it £1,300 a year. But an unfortunate individual, counting on the fact that he was receiving £1,000 a year free of tax, had made a settlement on his children undertaking to pay them £1,000 a year free of tax. He made a return for Super-Tax of his income plus the Income Tax. In the one case he received it; in the other he paid it out and by the Statute he was relieved. But that did not do for the Treasury. The Treasury, in the Finance Act of 1918, or 1920, put into the Schedule a provision stating that any undertaking to pay income free of tax or to pay sums free of tax shall be void for the purposes of assessment to Income Tax. When you go and ask Somerset House authorities how this ever can have been devised, they say: "Well, if instead of paying free of tax you had said you would pay such a sum of money as after deduction of tax would produce that amount you would escape the mesh." That is simply a trap into which the wealthy taxpayers, like some of your Lordships, will not fall. But everybody who cannot afford to be up to every turn of the game does fall into it. That section ought to be repealed. It is not fair as between man and man, as the noble Viscount said just now.

There is another point in regard to which it is most unfortunate that Somerset House has again to be introduced. This is the matter of accrued interest. Nobody wishes persons to escape who are habitually selling enormous quantities of stocks in order that the interest they would have received should not be assessable to Income Tax but should fall into capital, but how are the Government going to prevent the other persons who sell stocks in the ordinary way from being harassed with the demand to make out what the accrued interest was from day to day? I myself, as a trustee of a public fund, sold £40,000 worth of stocks last week and I said to myself: "Who is going to make out what the accrued interest would be." Some of the stocks the trustees signed for a fortnight before, some they signed for a fortnight later. The whole thing has to be gone into by an accountant at the expense of the unfortunate person to whom the money goes, and he finds himself with a considerable legal bill in order to make out these facts. I notice that the law especially says that until the Commissioners are satisfied they should continue to make inquiries and are entitled to make any number of inquiries. I cannot help hoping that this question, as well as the question of tax-free securities, will be considered. The old system left largely to local persons the task of intervening between the Government and the taxpayer. I am not going to trouble your Lordships with a matter of machinery as to how far the Government have been right in changing that arrangement, but I will say that they have practically obliterated the old system, that they have left the shell and have put the kernel into the hands of Somerset House.

In all these questions we should remember that if there is avoidance it is due, not to any innate wickedness or cunning on the part of tie taxpayer, but to the enormous and overpowering effect of high taxation. We have higher taxation than any country in the world and it seems likely to continue for an indefinite period. The only possible relief we can hope for is by reduced Expenditure. Your Lordships, in a debate which lasted two nights laid it down in no uncertain way, about four months ago, that Expenditure ought to be reduced and the Government agreed that the time had come for most vigorous efforts to be made to decrease Expenditure. We have heard nothing, or very little, since then of any efforts to decrease Expenditure. We have heard the somewhat jejune promises by the Chancellor of the Exchequer to abolish three Ministries, but I think already, in regard to two of those Ministries, the promised abolition has been withdrawn. Every word that was said in this House—and those who spoke know something of what is going on in the Public Offices—has received strong confirmation from the Report of the Public Accounts Committee published only four days ago. The Committee pointed out that one department after another of the War Office (which was criticised in this House) was greatly overmanned and that immediate reductions were necessary. But we do not hear from the Government that they are going to do anything.

I ask the Government to consider that the gains which they are going to make by the changes made by this Bill are comparatively infinitesimal. I have tried to get the figures from the speeches which have been made. I see it is stated that in regard to the question of avoidance they hope to gain £500,000. I am by no means inclined to belittle an amount of £500,000. They say that the figures they could really put their fingers upon come out at an average of 0.30 per cent. I understand the taxpayer will spend two or three times that £500,000 in legal expenses in order to meet this enormous and increasing burden. I may have over-estimated, but if your Lordships will look at one of the speeches of the Chancellor of the Exchequer, you will see that he says he is constantly obliged to make fresh increases to the Somerset House and Commissioners staffs because of the enormous amount of correspondence. I see that public companies are now to be forced in many cases to explain why it is that they have put money to reserve which they ought to have distributed in dividends. In the case of public companies, I know instances where discussions have been going on for years with regard to the changes which have been made.

Is it worth doing for £500,000 If it must be done, could it not be done in a simpler manner? Could not some of these irritating provisions have been smoothed down? As it is impossible for us to do anything in this House, I would ask the noble Marquess, who always desires to act fairly, especially in matters of agriculture, to consider whether these questions cannot be quietly reviewed, as I believe the Chancellor of the Exchequer has promised to review them, before they actually come into operation. I would ask that they should be reviewed in an atmosphere produced by a desire to arrive at a settlement. I want them to reach all cases of actual and flagrant evasion, but to avoid bringing into the mesh thousands of innocent persons who can ill afford the time, trouble and expense involved. If that atmosphere is produced I do not think this House will have done any harm in discussing the matter.

EARL BEAUCHAMP

My Lords, it is obvious that the ground covered by the Finance Bill is so large that it would be quite impossible to deal with all points at any length which would be at all tolerable to your Lordships on an afternoon at the end of the Session. It is only possible to take three, four or five of the more important points in the hopes of getting from His Majesty's Government some assurances upon them. The first point I would take is that of economy, which has already been touched upon by the noble Earl who has just sat down.

I venture to remind your Lordships that in 1923–4 the Expenditure of the country was £788,000,000 a year. It is estimated that during the present year it will be no less than £833,000,000, in spite of the fact that as every year goes on there ought to be a certain amount of automatic saving, because as War Pensions and other items decrease less money should be spent. The automatic saving during the current year ought to have been no less than £14,000,000, instead of which we find a very large increase in Expenditure as compared with 1923 4. I desire, therefore, to take this opportunity of inviting the noble Marquess who leads the House to say what he can to reassure those of us who are concerned as to the largely increasing Expenditure of this country. More than once he has assured us of his anxiety to reduce Expenditure. I hope he will be able to indicate to us this afternoon some practical measures which he proposes to take. On previous occasions we have heard something about some of the public Departments which may be abolished. The question is a little vague and, if he can tell us something about the Overseas Trade Department and the other Departments which are threatened, your Lordships' House will be glad to hear him.

There is another small point I should like to raise, for we need to go to the smallest items of expenditure. Nothing could be too small for the consideration of your Lordships' House. I would take as my next topic the matter of the Government Hospitality Fund. It is not so much the actual amount spent, but the principles on which it is spent. There was a time when I had the honour of being connected with the expenditure on that Fund. At that time it was very little over £3,000 a year. I notice that the Estimate this year practically amounts to the sum of £14,000 a year. I do not wish to criticise the way it is spent, but I ask the noble Marquess whether he can tell me what are the principles on which that money is now spent and whether the old principles that obtained before the War are still observed. Those principles were, first, that on every invitation card it should be stated that the invitation was issued by His Majesty's Government, perhaps by an individual on behalf of His Majesty's Government, but that the name of His Majesty's Government should clearly appear on every invitation card, and, secondly, that money should not be spent unless the entertainments were held in a public place of entertainment, in an hotel but not in a private house, a matter of some very real importance. If His Majesty's Government can reassure us with regard to that, I should be very glad.

The second matter of importance to which I should like to call the attention of your Lordships' House is with regard to the expenditure of the Road Board. The Chancellor of the Exchequer has told us that he is taking the surplus that existed at the end of March. It is very important to point out that, if he had raided the Road Fund three months earlier, that is at the end of December last year, he would not have found anything like the amount of money in that Fund which there was at the end of March. On December 31, 1926, there was £4,750,000 in the Road Fund. Owing to the fact that many people paid the taxes on their motor-cars in the first three months of the year, the Fund amounted on March 31 to no less than £12,000,000. This increase proves that there is not much accumulation in the Road Fund. What really happened was that the Chancellor of the Exchequer was taking to a very large extent the taxes collected during the first three months of the year. This amount of money, £12,000,000, which he is taking, is vary largely a working balance and not a reserve, a working balance upon which all the local authorities will wish to draw during the remaining nine months of the year. As a matter of fact, I believe we need to spend more money, and not less money, upon the roads. The money which has been allocated for so many years to the service of the roads should still be spent upon the roads. The Treasury attitude of disapproval of the transport programme has been used to retard improvements and to discourage new enterprises. The local authorities apply to the Minister of Transport and he is only too ready to turn them down because of the attitude of His Majesty's Treasury, who do not readily see their way to sanction this expenditure.

One of the chief diseases from which this country is suffering to-day is the amount of unemployment. I would say that, if all the money belonging to the Road Fund had been spent upon the roads, it would have gone far towards reducing unemployment in this country. If these schemes put up to the Ministry of Transport had been agreed to by the Treasury, there would have been a large field on which people might have found work. Your Lordships must have seen in the descriptions of the newspapers yesterday how thousands of men appeared the moment Piccadilly Circus was taken up, in the hope of getting work. There are thousands of men unemployed to-day who are anxious for work. If the Treasury and Ministry of Transport had allowed the schemes of local authorities to go forward, we would not have found these large numbers of people congregated in Piccadilly Circus yesterday all anxious for work. The figures regarding the increase of motor traffic are remarkable. Since 1921 the number of motor vehicles has doubled. Yet the County Councils Association has said that there are no fewer than 750 bridges on the main roads which are unsuitable for modern traffic and that less than 50 per cent. of the roads in sixteen counties are adequate for the traffic that passes over them. They also state that no less than £25,000,000 is needed for the reconstruction of roads and no less than £40,000,000 for the widening and deviation of roads.

It must be within the experience of your Lordships who use motor transport very much that in most cases the arterial roads end where they ought to begin. Surely the ideal principle which we ought to follow is that these arterial roads should run, taking London as an example, straight up to the bridges. Thus, they should enable people to go from the bridges either north or south, whichever they wish to do. There should not be arterial roads stopping where the traffic becomes at its worst, in the circle of London, but they should go right across London to the bridges so as to provide complete access both from north and from south right across London for the enormously increased traffic there is to-day. I think that the Road Board might have contributed to this without any further expenditure from public funds. In this matter I am only urging that the money which belongs to the Road Fund should be spent upon roads; I am not suggesting any further expenditure beyond that. There is a measure by which the Road Fund might largely have increased its income, by using a provision which was specially made when the Road Fund was instituted and of which full advantage has not been taken. The Board were empowered to buy up the land on, each side of those arterial roads. They could then have sold it again at a somewhat advanced price, or at least as building land for a price that would have repaid them more than the money that they had to pay as interest on what they had paid. In this way there would gradually have been accumulated larger funds to be spent upon the roads of this country without any further expenditure falling either upon the rates or the taxes, and it is much to be regretted that the Road Board have not seen their way to take steps of that kind. That is the third point to which I wish to refer.

The fourth point is rather on the Preferential Duties which are included in this Finance Bill. Some of your Lordships may remember that, in a discussion the other day, the noble Marquess the Leader of the House expressed his admiration for the value of the preferences given to us by some of the self-governing Dominions. I would venture to ask him to give his further opinion upon the subject, in view of the figures which I gave the other day. Naturally it would have been out of order if he had said anything upon that occasion, but I would invite him this afternoon to say whether he really thinks—

THE MARQUESS OF SALISBURY

Which figures? I am afraid I do not remember them.

EARL BEAUCHAMP

I will repeat them. This is not a new controversy. These figures were given in 1923, in February I think it was, when the Labour Government was in office. The Colonial Office at that time said the figures were correct. There is no doubt at all about the figures. I hold in my hand a sheet from the official Year Book of Canada and I invite your Lordships' attention to these figures with regard to the Import Duty raised upon British goods going into Canada as compared with the Import Duty which is raised upon United States goods going into Canada. The average ad valorem rate of duty charged upon British goods going into Canada is 18.2 per cent., but the average ad valorem rate of duty charged upon United States goods going into Canada is only 13 per cent. That is to say, although there is a so-called preference upon British goods going into Canada, as a matter of fact British goods pay no less than 5 per cent. more than United States goods going into that country. That fact, in spite of reiteration, I think is not fully realised in this country. It shows that, though we may speak rather glibly of the preference which is given us by the self-governing Dominions, it is necessary sometimes that we should look the gift- horse in the mouth. I repeat that I shall be much interested to hear any comments the noble Marquess is good enough to make now upon the so-called preference given us by the Canadian Government when United States goods have a 5 per cent. advantage over British goods.

We may well wonder whether we are getting an adequate return for the advantages which we give to Canadian goods coming into this country. We give them a great preference. We are always told that that is a bond of Empire. I ask myself very seriously whether these same preferences in the form in which they are given to us by Canada can still be called "bonds of Empire." At this moment there is going on in this country a movement exhorting people all over the world to come to Britain. The Colonial Secretary, who is just starting upon a pilgrimage in which we all wish him success and prosperity round the self-governing Dominions, is one of the most fervent advocates of the "Come to Britain" movement. It is a sad fact that if he includes in his luggage any advertisements in favour of the "Come to Britain" movement, he will find that they are heavily taxed in Australia, in Canada, and in New Zealand, and that in South Africa the duty upon these advertising pamphlets asking people to come to this country has lately beers increased by no less than 17½ per cent. It was only the other day, when we started a discussion upon these preferences, that we reminded Your Lordships that we are spending no less than £500,000 a year to advertise goods coming from the self-governing Dominions, things like apples which enter into competition with the produce of our own farmers. But when we in our turn try to send advertising pamphlets into the self-governing Dominions, pointing out the advantage of paying a visit to this country, we find that the pamphlets we send are subject to a very large tax.

I have the last figures of the suggestions which are made with regard to the Canadian Tariff. These are the proposed duties: On books, including novels and similar literature, the duty is to be increased in the case of British imports from 15 per cent. to 30 per cent. The duty charged on United States imports is to be increased from 25 per cent, to 35 per cent. You will see, therefore, that the advantage which we now have of 10 per cent. is to be reduced to 5 per cent. The duties on Bibles, prayer books, photos, pictures, music and scientific works are to be increased, I think, by the same proportion. The duties on books, printed periodicals and pamphlets not otherwise provided for, are to be raised to 30 per cent. in the case of British goods, and again we are to have an advantage of only 5 per cent. as against goods going in from the United States. Then there is a new special category to include advertising printed matter, which of course really operates to check the entry, among other things, of pamphlets or catalogues advertising British goods. The duties are to be increased from 10 cents per lb. to 12½ cents per lb.

Wherever one looks through the list you find the duties are to be very largely increased and that the so-called preference is to be cut down. The result of the preference, so-called, in regard to printing is already bad. In 1925 Canada's imports of books and printed matter from the United Kingdom were valued at $1,853,000 but from the United States they imported goods of the value of $9,444,000. Yet, in spite of that overwhelming preponderance, the United States is to be given a still larger benefit if you compare the proposed tariff with the existing tariff If the Overseas Trade Department is to be of any use, I think it might very well have protested, or have hinted that there were objections on the part of manufacturers in this country to an increase in the duties upon goods going into Canada.

I turn now for two or three moments to the increased duties upon pottery. On a previous occasion the noble Marquess the Leader of the House, in defending duties which appeared in the Budget—I think it was when the McKenna duties were being imposed—told us that he did not really mind whether they were protective or not, what he wanted was revenue. I quite understand his position. He wanted revenue. But if that was so I hope he will explain to us why he did not at the same time support the imposition of Excise Duties as well as Import Duties. The imposition of Excise Duties would have given a larger revenue, and the only result of remitting the Excise Duties is to give a protective effect. With regard to pottery, may I express regret that the duty is being imposed by weight? The result is that the heavier the pottery the more is the duty paid on it. The pottery which is generally used in the poorest homes in this country is the heaviest pottery because it lasts longer. Poor people do not buy thin egg-shell china, but the thickest they can get, because it is more likely to be serviceable and therefore, in the end, most economical for them. It is that pottery, used by the poorest people, which is subject to the highest rate of duty proposed by the Government.

It really is not possible to speak of these things as being finished goods. Pottery is not really a finished article. It is the raw material of other industries, and it is also the raw material for most of the cottages and homes of this country. You must have pottery in order that people may live acording to a comfortable standard. You must have pottery in order that tea-rooms and hotels in this country can be properly furnished. To the pottery manufacturer pottery is a finished article, but it is not a finished article to the man who wishes to furnish himself a new home, and still less to the hotel proprietors or to the people trying to make a living out of tea rooms. It is raw material in both these cases, and provides an illustration of the difficulty of making a distinction between raw materials and finished goods.

With regard to the general position of safeguarding I do not wish to say anything to-day. I think it is difficult at the present moment to get any definite conclusion from the figures that have so far been published with regard to the safeguarded industries, and it would, be better to postpone for the present any discussion as to whether safeguarding has been a success or not. I think we want a little more information before either one side or the other can come to a very well-proved conclusion upon the subject. The noble Earl, who has left the House, made an appeal to His Majesty's Government that money spent in applying for safeguarding should not be subject to Income Tax. If the noble Marquess wants any support against the noble Earl, I shall be happy to provide it. I think that money spent in applying for safeguarding should certainly be subject to every penny of Income Tax that it can possibly be made to incur. Nor, indeed, is it very necessary, I think, to say anything with regard to the remarks of the noble and learned Viscount, who has also left the House, the Leader of the Opposition, with regard to the clause in the [...] that deals with evasion. I am sure that nobody in this House tries to evade illegally his duties in regard to taxation, and accordingly it is unnecessary to say more.

One further point is suggested to me by the remarks of the noble Earl with regard to the taxation of land. The noble Marquess the Leader of the House, speaking the other day, twitted us upon these Benches with having in past days imposed taxation upon land that had gone a very long way towards making the position of the landlord a difficult one at the present time. I know that this view is very generally shared by noble Lords who follow the noble Marquess. May I point out to him, however, that the last and the heaviest impositions that have been placed upon land have been placed by his own colleagues? I put on one side the last imposition, made by Mr. Winston Churchill last year: but take the much heavier imposition made by Sir Austen Chamberlain when he was Chancellor of the Exchequer, the last and the heaviest duties that were put upon land. The noble Marquess must really allow me to say that in future, if he ventures to twit us upon this Bench with having put impositions on the land, he must remember that his own colleagues have put the heaviest impositions on the land and that rather than twit us he should try to persuade his own colleague to reduce, instead of increasing, the impositions that already exist. Your Lordships' House has no power to reject this Bill, nor do I wish that it had, but I think that it is right and useful that each year as this Bill is presented to your Lordships we should be allowed an opportunity of making some slight criticism of its provisions. It is for that reason that I have ventured to trouble your Lordships this afternoon.

THE DUKE OF BUCCLEUCH

My Lords, with reference to the remarks of the noble Earl who has just spoken, it it rather curious, I think that he should have referred to the debate that took place a few days ago on the powers and composition of your Lordships' House Those powers were lost many years ago through the rejection by your Lordships of the Finance Bill of the year, which was commonly called the People's Budget. I believe that one of the chief reasons for that rejection was that the Budget was considered to threaten much harm to the landed and agricultural interests. I have no hesitation in saying that the Finance Act of 1900 was nothing in comparison with the taxation and the disadvantage to landed and agricultural interests involved in the present Bill, which has been introduced and, I presume, will be passed by a Conservative Government. I should also like to remind your Lordships that in the Finance Bill of 1909 Mr. Lloyd George was the first Chancellor of the Exchequer who admitted or recognised the unfair conditions of Income Tax on landed property, and gave certain rebates, or allowed certain items to be deducted from Income Tax which are now comprised in what is commonly called the maintenance tax.

My noble friend who moved the Second Reading of this Bill spoke of obtaining increased Revenue without increasing taxation. There are two instances of this. One is the £12,000,000 that has been taken from the Road Fund, and the other is dealt with in Clause 21. The money taken from the Road Fund is not money saved. The £12,000,000 will, of course, have to be made good by the ratepayer, and at the best you are, relieving the taxpayer at the expense of the ratepayer. I do not thing that any argument could show that there will be any other result in the end. I have considerable experience of certain county councils, and it has been most difficult to know how to carry on work on the roads because of the impossibility of getting a definite undertaking from the Ministry of Transport as to what grants were going to be paid and what works sanctioned. It is not their fault, of course, and I presume that it is largely the result of their not knowing how far the Road Fund had to be accumulated for the sake of helping to balance the Budget.

I turn to the question of Clause 21, which I think I am right in saying that my noble friend described as obtaining Revenue without increasing taxation. I maintain, and I do not think that it is open to argument, that in regard to Schedule A there has been an increase in taxation of 50 per cent.—namely, from 4s. to 6s. in the £. It is said that this is only going back to the previous system of Income Tax on land and houses. Formerly the Tax was always paid as a whole at the beginning of the year, and it was only afterwards that it was paid every half-year. The reason is that it was proved at the time that having to pay it, all at once caused great injustice and that owners of land and houses had to pay Income Tax under different conditions from those imposed upon practically every other payer of Income Tax. Accordingly the payment was divided and paid in the two half-years, so as to make the position the same for the Income Tax payer under Schedule A as for those who paid in other categories. It is true that shareholders paying Income Tax on their dividends sometimes have to pay four times a year, but those who paid in regard to land and houses were practically the only people who had to pay at this early period.

What has been done in this case? The second part of the year, which is the first part of the financial year, brings the same payment as before, and 4s. in the £ for the whole year has to be paid in the second part of the financial year, making a total of 6s. in the £. Nothing can alter that. But it is even worse than that, because the 4s. in the £ that has to be paid in the early part of next year, but in the latter half of the financial year, makes 8s. in the £ on that half year. In addition to that (and I speak more particularly of Scotland), in that same half-year the whole of the ministers' stipends have to be paid—a very heavy amount, far larger generally than the tithe in England—and the whole of the rates have to be paid, and it will be perfectly impossible for any one to pay all of these and also his Income Tax for that half-year. The result will be that to pay at all the taxpayer will have to go to the banks, or somewhere else, to borrow money, and your Lordships, most of you unfortunately, are well aware that it is not so easy now to borrow money on land as it used to be.

I rather doubt as regards land whether there will be any very great increase in revenue from this additional 2s. in the £, because I cannot see where the owners of land will be able to find the money to pay, and I suspect that the Treasury will find at the end of the financial year that the arrears of Super-Tax on landed estates have considerably increased. Whilst dealing with this, I should like to make some other remarks. It is not only that there is this 6s. in the £ on land and houses, and only 4s. in the £ on other forms of income, but your Lordships know that the Income Tax that has to be paid on land is not on the net return but on the gross, less certain deductions which the Treasury is pleased to grant. In reality, therefore, it will come to a great deal more than 6s. in the £, and will hit hard, especially landed estates which have been well managed and kept up to date.

Consider this question of the maintenance claim. All land and houses have to pay Income Tax in advance, and the maintenance claim is sent in about a year afterwards, and it is repaid in five instalments over five years. The owners of land and houses are the only taxpayers, I believe, who have to pay a large amount of Income Tax which the Treasury are kind enough to repay them at the expiry of six years. I think that is a point which, if the Government really wish to do anything for land and agriculture, should be considered, anyhow in the next Budget. It would be much simpler, and would save the Inland Revenue authorities a great deal of trouble, if the maintenance claim were repaid in one instalment. The simplest way would be for the Income Tax claim to be made out, and, when it is approved, to have the amount of maintenance deducted from the Income Tax notice, which is issued probably a short time afterwards. I know there are a large number of landowners who do not trouble to send in a claim, or are late in sending one in. If so, it is their own fault, although one must say this in justification of them, that it is so difficult, and you have to fight the inspectors of taxes so hard, that a considerable number of smaller people give it up as a hopeless job.

There is another point which I would suggest to the Government. They are very anxious to help agriculture. They are anxious that the land should be kept up to a proper standard, and not go out of cultivation, and that there should be plenty of employment on it. There is one way in which that can be assisted, and that is by allowing all necessary expenditure out of income, for the purpose of maintaining and increasing the production of the land, or in properly cultivating the land, to be included in the maintenance claim and deducted from the amount on which tax has to be paid. It is perfectly impossible at the present time, with Income Tax and Super-Tax at their present rates, to lay out a lot of money on land, when you have not only the pleasure of paying for the improvements but also Income Tax and Super-Tax on the amount so spent. In other words, for every £100 spent on new drains or improvements which are absolutely necessary to keep a farm going, you have to pay £100 taxation. For every £1 I spend on one of my farms I shall have to pay another £1 in Income Tax and Super-Tax. It cannot be done.

As this Conservative Government, which has great interest in agriculture and the development of land, has put on this 50 per cent. increase of taxation, and in the future is going to compel the landowners to pay Income Tax in advance of nearly every other taxpayer, I think that it might at least give some consideration in the next Budget to the points which I have mentioned; because as long as you are going to follow the policy of the Treasury—not the Treasury of the present time but of the Treasury as long as I can remember—you are going to penalise those who try to equip their land properly and keep it in proper order, and to let off more cheaply those who take lower rents and let their land go to waste or to grass. That is entirely against the interests of the country. I am sorry that I have been so long, but these are important points which are hitting the agricultural interest very hard at the present time.

In conclusion, I would like to put one other point. I think everyone will agree that the forms of agriculture are changing, and are bound to change. You may have a farm absolutely equipped as an arable farm, but it may be found that the only way of keeping up the production of that land is to turn it into a dairy farm. Every single penny spent on turning that farm into a dairy farm will be liable to Income Tax and to Super-Tax. These are the things which hit the agricultural industry so hard. I do not agree with what Lord Parmoor said the other day as to the keeping up of estates. My estates have been as well kept up as ever, but it is only with the greatest difficulty, and it is simply because I have a larger estate than my neighbours, and therefore the on-cost charges are less.

LORD PARMOOR

My Lords, I wish entirely to support the view of the noble Duke as regards the evil effect of this Budget upon agriculture and upon agricultural land. There is no doubt that there has been a long-standing complaint that the Income Tax charged on the income of agricultural land is really charged on the gross income and not on the net income. Every one who is interested in agricultural land knows how exceedingly hard that form of taxation is. I do not, like the noble Duke, speak of a large estate, but, speaking of a small estate, I am charged on an income of between £2,000 and £3,000 from an estate, the net income from which at the present time is practically nil. In those circumstances how are you to carry out the necessary improvements in order to keep land at the proper level? It really is impossible. But I would go a little further than the noble Duke. I said the other day that the time would come when the land would have to be taken over by the State because it would be impossible for individual owners to expend upon it the money which was required. Of course, with an estate such as the noble Duke's, such expenditure may be possible, but in regard to the vast number of the smaller estates in this country the time is coming when, if you are to keep agriculture up to its proper level, by means of proper expenditure, you will have to realise the fact that, from taxation and other causes, a large number of the land owners have been so impoverished that they can no longer be, as it were, the bankers of their tenants, and they are no longer in a position to expend the money necessary to keep the land in the highest state of efficiency.

I agree with a great deal of what the noble Earl, Lord Midleton, says, but there was one exception. He seemed to think that I and those with whom I act are advocates of higher taxation on agricultural land. That was not my view at all. I said that such taxation had become so high that it was really impossible to preserve the ordinary principle of private ownership, and at the same time have regard to the interests of agriculture. It appears to me that this Budget sacrifices agriculture in every possible way, in spite of what has been said in Lincolnshire, in Somerset and in other counties. Take the question of the Road Fund. It is clear that the Road Fund ought to be used to relieve rates, particularly in agricultural districts, and should not be diverted for Exchequer purposes.

The principle that expenditure on our main roads should be wholly borne by the central Exchequer, because it is not in any sense expenditure for local purposes, was originally laid down in the Report of the Royal Commission on Local and Imperial Taxation. Roads, which are a source of enormous expenditure from the rates, become a direct charge on agriculture, and the rates have to be paid whether agriculture is profitable or not; and yet on every occasion when a chance arises funds which ought to be expended locally for local purposes are diverted for central expenses and for the purposes of the National Exchequer. That is always going on. It is true that the assistance given for the maintenance of the main roads has increased, but that is not enough. Under modern conditions the main roads possess no local feature at all. And when a Road Fund has been constituted it ought to be applied to the maintenance of those roads, and not diverted to other purposes. Agriculturists have every reason to complain when that is done.

At the present time we are spending money on advertising Dominion produce in competition with our own; yet, while we are doing that, if we send out advertisements for publicity in our Dominions a high tax is placed on such advertisements. Surely there can be no justification whatever for that. I have always been against protection for agriculture, but how can you justify an unfair advantage of that kind given to the Dominions? May I refer to what the noble Marquess said the other day in answer to myself on this point. He said in effect: Yes, but we are getting certain advantages from preferences and you have to please the Dominions one way or the other. That is no answer. If a preference is valuable to our industries you ought not on that account to fine the agriculturist. I do not see how that can be justified, particularly when the Prime Minister, in his speeches in the country, is never tired of saying that if our agriculture is to flourish it must have better marketing conditions than it enjoys at present.

I turn to the subject of economy. I do not see any chance of large economies except in the direction of disarmament. Of course, I do not want to go into questions that may be under critical discussion at the present time, and I do not intend to touch on what is going on at Geneva now. But I do want the noble Marquess to tell us what other avenue there is in which you can get economy in Expenditure. And it is no good for the noble Earl and those who support him to clamour for economy unless at the same time they can point out where economy can be made—and there is no other direction except that of disarmament. I have seen it suggested that you could save £40,000,000 or £50,000,000 a year on that alone.

LORD BANBURY OF SOUTHAM

My Lords, the noble Lord has taken the opportunity of the speech made by my noble friend the Duke of Buccleuch to advance the theory of the Labour Party that the only solution for the problems concerning the future of land lies in the acquisition of the land by the State. I think that everyone on this side of the House, and probably nearly everyone who has thought on the matter in the country, will agree that if agriculture is as bad as the noble Lord says the only result of transferring land from the landlords to the taxpayers will be to put the burden on the taxpayers and immensely to increase the burdens of the country.

My noble friend the Duke of Buccleuch has made a great point about the three instalments of Income Tax payable in one year. No doubt that does inflict a very great hardship upon the people who are called upon to pay, but I rather want to put that in another way. Is it not rather like the owner of an income who, in a given year, makes up his mind to spend 50 per cent. more than he has got and in order to do that borrows on the income which he will get in the year to come and then says he has made both ends meet? What is the Chancellor of the Exchequer going to do next year, when he will not get three half-years but only two half-years in one year? He will then have to meet the revenue which he is apparently collecting now by taking what belongs to next year and spending it in this year. I am sorry that my noble friend Lord Inchcape is not in the House, because I venture to say if any man of business or any director of a large company were to carry on business in that way he would soon find himself in the Bankruptcy Court. My noble friend the Duke of Buccleuch also alluded to the very great difficulty there is in obtaining a remission of taxation when you endeavour to point out to the surveyor of taxes that the repairs on your land have cost you more than the one-eighth, or whatever it is that is allowed you by law. There is great difficulty in getting a return in that way. The only real alteration which would meet that—and I do not understand why it never has been done—is that the taxation of land should be upon the net income and not on the gross, subject to certain deductions which the Income Tax authorities choose to allow.

My noble friend Lord Midleton alluded to certain difficulties which the ordinary Income Taxpayer finds himself confronted with when he has to pay his Income Tax. I have read the Finance Bill. I admit I am only a person of ordinary intellect, but I suppose that the majority of people in this country are also of ordinary intellect and I defy any one to understand the jumble of words which is to be found in this Bill. It is quite impossible to understand what on earth they do mean and what they do not mean. That is one of the reasons why it is necessary to have such a very large staff at Somerset House. The ordinary person does not in the least know whether he is rightly charged when the surveyor sends in his demand note, or whether he is wrongly charged. With regard to the particular instances to which my noble friend alluded, I think they were the companies' clause and the clause dealing with selling securities and buying them back ex-dividend. There is no doubt that when this Bill was introduced those clauses inflicted a very great hardship upon the taxpayer, but as far as I can understand them those clauses have been very much modified, and I do not think at the present moment they really do very much harm. In some eases at any rate they will catch the tax evader, which they are intended to do.

THE EARL OF MIDLETON

My point was that they leave so much in doubt, that the taxpayer, and especially the small taxpayer, will be in great difficulty in understanding them.

LORD BANBURY OF SOUTHAM

I agree, I do not think they ore easy to understand, but if the noble Earl will look at Clause 33 he will find on page 25 these words:— For the purposes of this section, the expression 'asset' means—

1. (a) stocks or securities entitled to interest or dividend at a fixed rate only, not being stocks or securities the interest or dividend on which is dependent on the earnings of a company; and
2. (b) any other stocks or securities and any shares, if transactions in relation thereto have been effected by the individual otherwise than through a stock exchange in the United kingdom and by a transfer on which duty has been paid"—

I may be wrong, but as far as I can understand it that means that if I sell securities through a stockbroker or through a bank nothing happens. I have a right to sell my securities through a stockbroker or a bank, and as long as I satisfy Somerset House that this has been done nothing happens. Of course, that means that I have to write a letter and, it may be, that I shall have to produce the broker's contract, but at any rate, provided I do that, nothing happens as far as I understand it. I do not think there is any real hardship in that clause now, but as it was originally drawn it would have affected business all over the country and would have inflicted very great hardship upon every person who was unfortunate enough to possess any money in securities.

There is one other point which I would like to bring to the notice of my noble friend Lord Salisbury, and that is in regard to Clause 43. I admit that I do not understand this clause very well, but my attention has been called to it by a member of another place. Clause 43, as I understand it, does prevent the assessor, who, I believe, is generally appointed by the general Commissioners, from making the assessment and it transfers in every case the making of the assessment from the hands of the assessor to the surveyor. I myself do not think that there is any very great hardship in that, provided that it does not mean that the Inland Revenue authorities intend next year, or the year after, to bring in another Revenue Bill similar to the one they introduced in the year (I think) 1921. That Bill in 1921—if that is the right date—sought to do away with the general Commissioners. At that time I took a small share in defeating it. The general Commissioners, as your Lordships know, were appointed when Income Tax was first instituted and they have been the buffer which stands between the Inland Revenue authorities and the taxpayer. I feel certain that anything which would deprive the ordinary taxpayer of the protection which he has from the general Commissioners would be a great disaster and would cause immense friction and justifiable grievances on the part of the taxpayer.

Before I sit down I would like to say one word on economy. I do not see in this Bill any indication that the Government desire to make any economy in any direction. The tendency of the Bill is rather to increase Revenue in order to meet Expenditure and not to do what I think ought to be done, decrease Expenditure in order to meet a decreased Revenue. The noble Lord, Lord Par-moor, said that there were no means of decreasing Expenditure to any substantial extent except on the defences of the country—the Army and the Navy. I will not go into the question of whether there are not other means, because it would take too long, but I think there are plenty of other ways of reducing Expenditure. I would recall to the noble Lord's mind the fact, that if the Government of the day between 1910 and 1914—I am sorry the noble and learned Viscount, Lord Haldane, is not here—had spent a little more money on armaments and a little less on social reform we should not have been in the position in which we are now. If there had been war, which is very doubtful, we should have defeated the Germans in about half the time, if not less, than we did, and consequently we would not have had half the debt we have. Si vis pacem, para bellum, I would remind the noble Lord.

LORD OLIVIER

My Lords, I anticipate that the noble Lord will have very little difficulty in justifying the attack made upon him by the Duke of Buceleuch and Lord Banbury for charging up the Income Tax on January 1, because that is only charging the Income Tax on the income for the year 1927–28 within the year. It is only taking back a special concession made in 1918 in special circumstances. Of course, it does inflict upon us all a special blow at Christmas time and I can quite understand that, in the financing of an estate, it will be often impossible to meet it on the date when it falls due. It is, however, sound finance. The criticism of the noble Lord, Lord Banbury, would be apposite, if it were not for the fact that this is income in arrear, which the Government have allowed to get into arrear. I do not think his criticisms on finance are applicable to this reversal, which is quite a proper principle of finance.

With regard to some of the criticisms of the noble Earl, Lord Midleton, as regards the collection of inland revenue, when I retired from the Public Service I applied myself to dealing with the Income Tax Commissioners, both on my own account and on account of friends of mine. At that time the business was in a gross and unparalleled state of confusion, and incidents such as he described occurred within my own observation. Since then there has been a great improvement in the methodical and businesslike procedure of the Inland Revenue Department. At the present time, if you get on a good understanding with your local surveyor and local inspector, you find that the business is now done very well. I must give them that testimonial, but I agree that it takes someone who knows how to do these things to get on a good understanding with them. But, having once got there, he will find that things are done with a great deal of good will.

With regard to the question of maintenance, we have a real grievance here and I wish the Government would pay attention to it and that the Treasury would meet us reasonably and equitably. They take everything they can at the source and give us a lot of trouble in getting it back. They have improved now in punctuality, but, in regard to these maintenance claims, it is an iniquitous matter that, having paid your tradesman's bill, you should not be able to deduct it from your next return but should have to make a maintenance claim and wait until the surveyor has time to look into it. Personally, I make up my maintenance claim—and the repairs always exceed the amount allowed—and when I get my next demand note, I say to the local surveyor, "I am not going to settle this until you meet my maintenance claim," and he soon sees to it. There is no reason why properly vouchered maintenance claims should not be paid immediately. Of course, the Treasury like to get as much money in hand as possible and pay it out as long after it is due as possible, but in this case they act inequitably. We have paid the money and got the tradesmen's bills to prove it, and I strongly support the plea of the noble Duke that the Government should remove this perhaps not very considerable but still very real grievance.

THE LORD PRIVY SEAL (THE MARQUESS OF SALISBURY)

My Lords, I think the member of your Lordships' House who is called upon to reply upon the Finance Bill of the year is an individual entitled to a certain limited amount of compassion. I have been asked a large number of questions on a large number of very intricate topics. I am exceedingly obliged to the noble Earl, Lord Beauchamp, that he was good enough to inform me beforehand of most of the points on which he was going to question me. May I say that I wish other noble Lords had been equally well advised or, shall I say? equally compassionate. I cannot promise to reply on a great many of the questions put to me.

I will deal in the first place, in order to sweep it out of the way, with the small point which the noble Earl raised with respect to the Hospitality Fund of His Majesty's Government. He asked me certain questions upon that. All the invitations are issued in the name of His Majesty's Government, or in the official name of the Minister who is acting for His Majesty's Government. That appears to fulfil all that is required in the case. I need not tell your Lordships that this Hospitality Fund or allowance was not established by the present Government but by a Government of which I think the noble Earl was a member in 1908, and I do not think that, if you exclude the great charges for hospitality of the Imperial Conference, for example, if you exclude those which really come outside the ordinary rule, there has been any excess as compared with those days when the noble Earl was responsible for affairs. He asked me also whether these entertainments were ever given in private houses. I believe that the answer is that they are never given in any houses except houses belonging to the State, or official residences, and that they have been confined to those particular directions.

I then turn to the very substantial fare which has been provided for me. First, as regards the land. The noble Earl says I have no right to find fault with the Liberal Party for their attitude towards the taxation of land. The gravamen of the charge which I make against the Liberal Party is not that they have taxed the land—we are all subject to taxation and I will have a word to say on land taxation in a moment—but that they, or at any rate their leaders, taxed land with a view to driving the present owners of land out of the ownership of it. It was with the express object of doing so that it was announced by that Government. If that was his intention, and presumably the intention of his colleagues, it does not lie with him to complain that landowners are not able to do their work. That was the gravamen. But it is perfectly true that land is taxed, and I think over-taxed. I am sure my noble friends will believe that I share with them a feeling of dismay when I see how difficult it is for landowners of the present day to do their duty by the land because of the heavy weight of taxation, but we who belong to the land have always thought that it did not become us to make complaints.

We were parties, as every loyal subject of His Majesty was, to the War. We knew what it would entail and we are not going to make complaints because we have to pay the bill. That the weight is heavy I agree, but whether it would be possible to shift the burden a little from the land on to other forms of wealth is a very difficult and very intricate question. The burden has got to be discharged—I am going to say a word or two upon economy, but the big burden of the War has to be discharged by somebody. The question is who is to discharge it? It may be thought that it is inequitably distributed at the present moment, that more ought to be thrown upon industry and less upon land. I am not going to pronounce any opinion upon that to-day. The one thing of which I am sure is that it does not become us to complain, that having spent the money we must pay the bill.

Then there was the speech of my noble friend the Earl of Midleton. He did not, as Earl Beauchamp did, give me any notice of the questions he was going to put to me. They were very intricate and dealt with all sorts of things like taxes in regard to settlements, in regard to accrued interest and so forth. Those are matters of the most technical kind. If my noble friend would wish a letter to be written to him from the Treasury conveying a reply upon each of these points I will see that it is sent to him, but he cannot expect me to answer unless he is kind enough to give notice beforehand of the points on which he is going to put questions.

THE EARL OF MIDLETON

I think the noble Marquess might except the question of the increase in taxes on land in a year when taxation is not increased in other directions. That is a case I gave.

THE MARQUESS OF SALISBURY

I think it would have been wiser to have signified beforehand the points on which questions were going to be put. Let me say a word upon the question which has been raised on the efforts in the Budget to deal with evasion. I am not quite sure that I followed fully the line of criticism, but I think it was that although it is a first-rate thing to check evasion, yet you cannot do it except by inflicting injustice upon perfectly innocent persons, and that in doing it you spend more money than you gain by stopping the evasion. All those things may be perfectly true—I know that there is an element of truth in them because the matter has been brought officially under my notice—but I will venture to say that the country expects the Government to prevent evasion of taxation and is entitled to expect it. The matter was raised in the House of Commons, not this year only, but last year, and I think, if I am not mistaken, that my right hon. friend the Chancellor of the Exchequer entered into an engagement last year that he would see what could be done.

I apologise for using the word "evasion," but it is a short, quick word which explains what I mean. It may be said that there is no such thing as an evasion of the law, that the law says what it does say and that unless it covers a particular point no complaint can be made of people who take advantage of the omission. That may be true. I use the word "evasion" broadly. There is no doubt that there has been a tendency for those who are called upon to pay taxes to use loopholes in the law in order to escape the burden which falls upon their neighbours. That is very unjust. It is very unjust that a man should be allowed to escape a burden which his neighbour in like circumstances has to pay, I do not think that the Government should be criticised, or that my right hon. friend should be criticised for doing his best to stop evasion.

I am told it is done on a very large scale, that it is increasing and that the loopholes found have been so numerous and so large that unless something is done the loss to the Revenue will be very substantial and, indeed, very formidable. Something must be done. I agree that every effort must be made to prevent the infliction of hardship upon deserving persons. That is perfectly true, but I am afraid that it is the painful experience of all administrators that in amending the law it is almost impossible to avoid a certain amount of hardship. I am afraid that must necessarily be so. Let us do, everything we can to mitigate hardship, but from considerable experience I cannot believe any reform possible without a certain amount of hardship. That is a universal experience.

Several of my noble friends have criticised the anticipation of the Income Tax so as to bring the payment of three half-years within one year, an expedient which my right hon. friend has adopted in the present Budget. I would ask my noble friends to realise that this Budget is necessarily an emergency Budget. Please let your Lordships remember the frightful difficulties under which the country laboured in the last financial year. It was not merely that the industrial unrest cost the country a large sum directly in the money given directly in the coal dispute. It arrested the whole industry of the country and that was reflected, most disastrously reflected, in the Income Tax returns. Your Lordships know that Income Tax returns now depend on one year and not on three years, so the reaction is immediate and the effect is very disastrous. My right hon. friend adopted several expedients, of which this is one. The taking of the Road Fund accumulation was another and there were several others—I need not go through them all—which were avowedly emergency expedients, which could be done no doubt this year and which, as my noble friend Lord Banbury said, cannot be repeated.

We never intend to repeat them. Of course not. We earnestly hope that the emergency will not be repeated and that therefore the remedy will not be necessary. It is easy to criticise these emergency provisions, but all that my right hon. friend could do when he was faced with this very serious state of things was to see whether he could not find devices that would press less heavily upon the taxpayers upon the average than any others, and he found these various expedients, which he adopted. You may say that he ought to have increased Income Tax instead. That was the alternative.

THE DUKE OF BUCCLEUCH

The whole Income Tax.

THE MARQUESS OF SALISBURY

My noble friend, the noble Duke, would evidently approve of that. But what we had to think of was whether we could not get through this crisis without throwing one further disastrous chill upon reviving industry. That was what we were afraid of. Industry showed signs, and is still showing signs, of recovery. To increase Income Tax might have resulted in a setback and sent us once more back to the disastrous conditions through which we have passed. My right hon. friend—but not my right hon. friend alone, for, of course, this was the act of the Government, having been submitted to them expressly—thought that it would be better to avoid, if we possibly could, recourse to the general Income Tax, with its very unfortunate reaction upon industry and upon the recovery which we earnestly hope is in process of taking place.

I quite agree with my noble friend Lord Midleton and others that what we want is economy. Nobody believes that the Government are in earnest about economy. That is because they do not see immediate results. But economy cannot be attained with a stroke of the pen. My noble friends are labouring under a complete delusion if they think that it can. Take, for example, the point that was pressed by my noble friend Lord Midleton and others, when the debate on economy took place in this House, concerning the restriction on the numbers of civil servants. That is being done, but you cannot turn people out of the Civil Service. What you have to do is to say that you will not let any more in, or at least not so many.

THE EARL OF MIDLETON

Have no more been brought in?

THE MARQUESS OF SALISBURY

We are in process of doing our utmost to restrict the new entries. It will take time, but something has been done, not only by this Government but by successive Governments. Your Lordships are probably aware that the administrative staff of the Civil Service—I am not quite sure that the figure is confined to the Civil Service, but I think it is—has been reduced since 1920 by 100,000 persons. In the War Office itself, my noble friend's happy hunting ground, there is a reduction of staff going on now, and of course that will bear fruit in its season. But it cannot be done by a stroke of the pen. Let me give one figure of the economies that have been carried out by this Government alone—not, I am aware, on a balance, but absolute economy. Economies to the extent of £13,000,000 have been carried out by this Government alone. They must be balanced, of course, against certain increases of expenditure—expenditure, for example, on widows' pensions. That cost a large sum of money, but I think that on the whole the country is of opinion that the Widows', Orphans' and Old Age Contributory Pensions Act was a very great benefit to the community. As for agriculture, of which many of my noble friends are thinking, very considerable sums of money have been spent on the beetroot industry. I believe the figure is £4,000,000, and I think it was a direct help to agriculture. That, no doubt, must be set off against our economies.

I turn with your Lordships' permission, to the question of roads. I do not quite understand the attack on the road issue. Take the noble Earl opposite, the arch-economist of your Lordships' House. All honour to him! Please do not let him think that this is said by way of reflection upon him. I detected, unless I am very much mistaken, in the noble Earl a strong desire to spend money upon roads. Up to a point I agree with him. In so far as good roads are requisite for the agriculture and industry of this country, by all means let us have them. But I am afraid that I do not share the enthusiasm for these new roads that some people possess. They appear to me already to have gone a long way beyond what is required by industry and agriculture. It is the pleasure motor car and the interests of the pleasure motor car that seem to me to have a great deal too much influence in this road policy. I think it is a most astonishing thing that, at a time when the country is simply bending under the burden of taxation, the land crying out and industry suffering, we should be constructing some of the most expensive arterial roads that exist in any part of the civilised world.

I must say that I do not share the enthusiasm for the policy of the Road Board that some people seem to possess. I am not saying that the Government design to alter it. We must respect, of course, the condition of things as we find it. But to say that the whole question must be looked upon as sacrosanct seems to me in the highest degree an exaggeration. A great charge is made against us that this £12,000,000 is a banking reserve of the Road Fund for the purposes of their administration. I think that the noble Earl used some such phrase as that. In so far as it is a banking reserve, the road administration has not suffered in the least by the change because, instead of having behind them this particular Fund, they have the whole wealth of the Exchequer. The Exchequer has become their bank and their banking reserve, and they have not suffered in the least by the change. I know that this is not true quite of the whole £12,000,000, but it is true of far the larger part of it, and therefore that particular charge must be greatly mitigated if it is to be sustained. On the other hand, we have done a great deal for legitimate road expenditure, for non-extravagant road expenditure. We have done a great deal this year for the rural roads, and I would ask my noble friends who are specially interested in the land to consider how much we have done for those roads.

In the last two years the new grants for the maintenance of the rural roads amount to £1,400,000 per annum, which is sufficient to defray 25 per cent. of the cost of those rural roads. They are not all the rural roads, but they are particular rural roads which have been selected according to a certain schedule. That is a very large figure, and it is devoted especially to roads which are useful for agriculture. Beyond it, in the financial arrangement of the present year, there is an increase in the percentage grant to another category of roads. I ought perhaps to explain that for this purpose the roads may be divided into three classes. Class 1 includes the great big roads, Class 2 the lesser roads, and there are the scheduled roads to which the £1,400,000 a year to which I have referred is given. As to Class 2, the middle class of roads, the grant was formerly a quarter of the cost, and now, under the financial arrangement of the present year, it will be increased to one-third of the cost, thus increasing the assistance from the Government by a sum of no less than £500,000 a year. These are very big figures, and I think the Government deserve some credit for it, and some gratitude from those who are interested in rural life. I hope your Lordships will observe that this comes under no criticism which I have heard delivered this evening. These are roads required for the agricultural industry of this country, and upon them the Government have shown that they are ready and willing to spend money. I do not say that we are going to dock the money for the big arterial roads, but I repeat that I have no enthusiasm for them.

I am sorry to have had to detain your Lordships for so long but I must say a word upon the Canadian tariffs, which formed part of the noble Earl's speech. I do not think that I need detain your Lordships long about this matter. I think the figure of the noble Earl was that the taxation on imports from the United Kingdom to Canada was 18 per cent., and from the United States 13 per cent. The noble Earl has forgotten that from the United States the largest part of the imports are either raw material, which goes in free, as in many other countries, or else massive, less highly-finished goods, which necessarily bear a less rate of taxation than the highly-finished imports from this country. It is necessary that ours should be the highly-finished imports, because of our geographical position. When you have a long distance overseas to carry goods it does not pay to export heavy, less highly-finished goods. The result is that the great mass of the American imports into Canada are raw material or these less highly-finished articles, whereas from the United Kingdom they are more highly-finished articles. If you take away the commodities which go in free, then the noble Earl will find that the comparison is not between eighteen and thirteen but much more comparable figures. They are really practically about the same, so that he will see that his figures depend upon a fallacy. As to the printing, that is really a rather small point. It is quite true that "Come to Britain" advertisements are taxed on their entry into Canada, but they only in that respect suffer the fate of all other printed matter, under the Protectionist Tariff which prevails in that Dominion.

I would like to say on that point that the noble Earl must not think that the policy of preference has not been valuable to this country. I should be very sorry if I left that impression on your Lordships' minds. The preference which Australia gives us is of the greatest value. He probably knows that the enormous mass of imports into Australia come from the Empire. I will not say the whole, but much the greatest part come from this country. In the same way the New Zealand and South African preference is very valuable. I hope I have dealt in sufficient detail with at any rate some of the topics which have been submitted to us. I can only conclude by striking once more the note of economy, and I do suggest, to your Lordships that economy is not to be effected by His Majesty's Government alone. They can help, but in order to produce real economy you must produce public opinion in favour of economy. That that exists in certain quarters, I am glad to say, is true, but there is no such general pressure of economy as is necessary if you are to have a real economical policy in this country.

VISCOUNT ELIBANK

My Lords, I do not intend to detain your Lordships' House very long, but there is a clause of this Bill which has not been mentioned in the course of this debate, and which I think ought to have special notice, and should not go by default, in case it be thought that there is no member in this House who considers this clause of sufficient importance. Perhaps it is just as well that I was not able to address my remarks to your Lordships' House before the noble Marquess had spoken, because he might have suggested to me, as he has to one or two others of your Lordships, that notice of this point to which I am referring should have been sent to him, in order that he might have been able to consider it before giving a reply. I wish to refer particularly to Clause 31 of the Bill, which refers to provisions relating to Super-Tax, and specifically to Super-Tax in connection with companies controlled by five persons.

In the past the trade of this country has very largely been built up by private companies, and by private companies which have started from very small beginnings indeed. These private companies have perhaps started with a few thousand pounds, but through activity, energy and thrift they have set aside from their earnings certain moneys to reserve, and from those reserves they have gone on building up, and increasing, until in some instances they have grown into very large concerns indeed. For some time it has been the law that such reserves should be subject to ordinary Income Tax. But under this clause, which has aroused a great deal of opposition in the City and in the House of Commons, it is now proposed that these reserves shall be subject not only to ordinary Income Tax but to Super-Tax as well. Not only that, but it is suggested that the question as to whether the moneys set aside for reserve are properly set aside shall be put into the hands of the Special Commissioners, and that the Special Commissioners shall say whether a company has set aside too much money to reserve, or whether the amount is equitable or not.

We have heard this afternoon from the noble Lord, Lord Olivier, whom I am sorry nut to see in his place, how easy it is to come to an arrangement with a surveyor of taxes. Lord Olivier is an old civil servant, and no doubt he understands all the artifices and the inner ideas of the surveyors of taxes, but the ordinary business man is not so acquainted with surveyors of taxes, and I venture to suggest that the surveyors of taxes and Commissioners of Taxes are likewise not very well acquainted with business, and what business means. The noble Marquess stated that this was an emergency Budget. I agree with that, and I also agree that any Government to-day will have the greatest difficulty in making both ends meet and in finding ways to economise. But he went on to say that it was not the intention of the Government to cast any disastrous chill on the revival of industry under this Budget. But by Clause 31 the Government will be doing exactly what the noble Marquess desires should not be done.

I understand that it is intended that this clause shall not come into force until some time in 1928, but that during the interval the Chancellor of the Exchequer will look into it to see in what way he can ameliorate its provisions. That is a most dangerous method of legislation—to pass a provision which must do great injury to industry, and with which the Government apparently is not altogether in agreement, with an understanding that in nine months time it may be altered. How do we know that in 1928 this Government will be in power? I personally hope and believe it will be, but nothing in this life is certain, and if this Government is not in power I venture to say that the Labour Party will seize with avidity on this clause, and upon the clause which the noble Duke, the Duke of Buccleuch, so ably analysed a little time ago; and the Labour Party will not amend them to the advantage of industry, but will probably strengthen them in a direction which will be more disastrous to industry than ever.

On the question of economy, I am one of those who believe that for the next generation we shall see a Budget in the vicinity of £750,000 to £800,000 per annum. I believe that the Government is doing everything it can possibly do to economise. But I do not believe that the people of this country desire the Government to economise in the direction in which some noble Lords would like to see economy. Take the question of disarmament. I do not believe the country wishes to see disarmament on any larger scale than is being practised to-day. Take the question of social reform. Any member of the House of Commons or any candidate for Parliament who suggests, say, the repeal of widows' pensions has very little chance of being returned. Education is costing us £100,000,000 per annum to-day. I believe that that is far too large a figure for the conditions of the country, but I venture to say that there is no Government which will go to the country and include in its programme a reduction of expenditure on education. Thus, if you go through the various items of expenditure, I think you will find it exceedingly difficult to get the economy which everyone wishes to see. If that is the case, instead of trying to place more difficulties in the way of industry, instead of trying to throttle industry, as this clause does, it would be much better if the Government would look into this particular question and see how it can release industry from all the difficulties which are being placed in its way to-day.

On Question, Bill read 2^a.

Committee negatived