Sitting of 20 September 1909

Preamble
Mr. SPEAKER Mr. SPEAKER took the chair at a Quarter before Three of the clock.
FINANCE BILL (PETITION).
Mr. E. H. CARLILE Mr. E. H. CARLILE presented a Petition from various parts of the Mid or St. Albans Division of Hertfordshire representing that the Finance Bill now before Parliament "will, if passed into law, impair those resources upon which the country must depend in any national emergency, give a grave shock to confidence and credit, seriously disturb and injure the commerce and industries of the country, discourage enterprise and thrift, tend to diminish employment, and to reduce wages, and prove detrimental to the whole population. Further, that the Bill will still further tend to drive capital out of the country, and apply to annual expenditure monies which are really national capital; and that the Bill also contains proposals which are unconstitutional, revolutionary, and of a partial, inequitable and unjust character, and, moreover, by excessive taxes on tobacco, beer and spirits, adds an unnecessary cost to the comfort of the working classes."

ROYAL ASSENT.
Message to attend the Lords Commissioners.
The House went, and having returned—
Mr. SPEAKER reported the Royal Assent to:—

South Africa Act, 1909,

Labour Exchanges Act, 1909,

Trawling in Prohibited Areas (Prevention) Act, 1909.

Superannuation Act, 1909,

Electric Lighting Provisional Orders (No. 1) Act, 1909,

Gas and Water Orders Confirmation Act, 1909,

Tramways Orders Confirmation Act, 1909,

Buckie Burgh and Buckie (Cluny) Harbour Order Confirmation Act, 1909,

Aberdeen Harbour Order Confirmation Act, 1909,

Clydebank and District Water Order Confirmation Act, 1909,

North-Eastern Railway Act, 1909,

Glasgow Corporation Act, 1909,

Dunoon Burgh Act, 1909,

Taff Vale Railway Act, 1909,

Newry, Keady, and Tynan Railway Act, 1909.

ORAL ANSWERS TO QUESTIONS.

  Royal Military College, Sandhurst (Territorial Force).
  Mr. COURTHOPEasked the Secretary of State for War, whether an officer of the Territorial Force, who desires to enter the Royal Military College, Sandhurst, obtains the same advantages, by having obtained Certificate A, as are obtained by on officer of an officers' training corps in respect of a similar certificate; and, if not, whether he will in future extend these advantages to officers of the Territorial Force?
  Mr. J. M. FULLER (Vice-Chamberlain): The reply to both questions is in the negative. It is not considered to be in the interests of the Territorial Force that candidates for the Royal Military College should be encouraged to join the Territorial Force before going to the College.

  Transvaal Mines (Mortality).
  Sir GILBERT PARKERasked the Under-Secretary of State for the Colonies what was the percentage of deaths of Chinese and natives, respectively, from diseases; and what was the percentage, respectively, of deaths from all causes, including accidents, homicide, and suicide, for the years 1905, 1906, 1907, 1908, and up to the present time for the year 1909?
  The UNDER-SECRETARY of STATE for the COLONIES (Colonel Seely): The approximate figures are as follows, decimal points being omitted, and the figures for the first quarter of 1909 being given, as they are the latest available:—

  (i.)—Death-rate from all causes per 1,000 per annum:—

  1905.

  1906.

  1907.

  1908.

  1909.

  Chinese

  18

  20

  16

  16

  16

  Natives

  46

  34

  32

  33

  35

  (ii.)—Death-rate from disease per 1,000 per annum:—

  1905.

  1906.

  1907.

  1908.

  1909.

  Chinese

  12

  11

  9

  8

  6

  Natives

  41

  29

  27

  29

  28

  (iii.)—Death-rate from accident, homicide, and suicide:—

  1905.

  1906.

  1907.

  1908.

  1909.

  Chinese

  7

  9

  7

  7

  10

  Natives

  5

  5

  4

  4

  7

  Tientsin Post Offices.
  Mr. HENNIKER HEATONasked the Secretary of State for Foreign Affairs
  4
  whether his attention has been called to the announcement made that the British post office in Tientsin, China, would, on the grounds of economy, be closed on 10th October next; whether Germany, France, and Russia had post offices at Tientsin, and if the Governments of those countries had called on the residents there to pay half the cost; whether a petition had been presented by the British residents at Tientsin stating that it was not compatible with our honour and prestige to close our British post office at Tientsin, while Germany, Russia, France, and Japan maintain post offices at that important place?
  Colonel SEELY: I understand that arrangements have now been made for maintaining the British post office at Tientsin for the present. I have no information with regard to the contributions of foreign residents towards the cost of their post offices, nor as to the petition referred to by the hon. Gentleman.

  Agricultural Colleges (Ireland).
  Mr. HUGH BARRIEasked the Vice-President of the Department of Agriculture (Ireland) whether a sum of £7,500 was apportioned by the Department for the providing of an agricultural college for the north-western counties of Londonderry, Tyrone, and Donegal; whether the Tyrone Agricultural Committee had since expressed a preference for a local institute; and would the Department consult the three agricultural committees concerned before sanctioning any change of the original and larger scheme?
  The VICE-PRESIDENT of the DEPARTMENT of AGRICULTURE (IRELAND) (Mr. T. W. Russell): The Department, with the concurrence of the Agricultural Board, apportioned a sum of £7,500 for the purposes of an agricultural school in county Tyrone, intended to serve the needs of the north-west of Ulster. The proposal was subsequently modified, and the present scheme contemplates the establishment of a farmers' institute, (including agricultural education of a non-residential character), to be situated at Strabane, this neighbourhood having been decided upon expressly to meet the requirements of county Derry and county Donegal. The Department are confident that the three counties concerned will cordially co-operate in taking full advantage of the educational facilities thus to be provided.

  Illegal Trawling, Dundrum Bay.
  Captain CRAIGasked the Vice-President of the Department of Agriculture (Ireland) whether his attention had been drawn to recent instances of illegal trawling in Dundrum Bay, county Down; whether he was aware that the inhabitants of many of the villages of that part subsist mainly by line-fishing, and that this constant illegal trawling was ruining their means of livelihood; and could he state if the police, coastguards, and Irish Lights Commissioners co-operate with the Department of Agriculture for its suppression?
  Mr. T. W. RUSSELL: The Department have recently received a report of alleged illegal, trawling in Dundrum Bay, and are taking steps to have the locality more closely watched; but without increased funds the Department find it impossible to give that concentrated attention which seems necessary in this neighbourhood without depriving other localities of their due share of protection.
  Captain CRAIG: With regard to the latter part of the question, can the right hon. Gentleman state whether the police, coast-guards, and the Irish Lights Commissioners co-operate with the Department for the suppression of illegal trawling?
  Mr. T. W. RUSSELL: On that point it is very difficult to do so. Illegal trawling occurs at night, without lights, and the constabulary and coast-guard are powerless in the matter.
  Captain CRAIG: Is the right hon. Gentleman aware that there are a great many complaints made of illegal trawling in broad daylight?
  Mr. T. W. RUSSELL: Yes, and there have been convictions. But in a great many cases the evidence of local fishermen has completely broken down. It is a very difficult matter. We will do our best to meet the difficulty.
  Mr. KILBRIDE: Is the right hon. Gentleman aware that these trawlers sail under the Norwegian flag, and, that, as a matter of fact, they are not only owned largely by Englishmen, but by some Members of this House?
  Mr. T. W. RUSSELL: No, Sir. The hon. Gentleman is quite wrong. These trawlers are owned by local fishermen. That is a peculiarity of the case.

  Old Age Pension (Dumfries Case).
  Mr. SNOWDENasked the Lord Advocate why an old age pension was refused to John Black, of St. Michael-street, Dumfries, and if the reason was that he had received Poor Law relief, was it known to the Scotch Local Government Board when they decided the appeal that Black had entered the poor-house on a medical certificate on account of ill-health, that he remained there only on account of ill-health, and that he left as soon as he was sufficiently well; and will the Local Government Board reconsider the case?
  The SOLICITOR-GENERAL for SCOTLAND (Mr. Arthur Dewar): The whole facts connected with this case were known to and carefully considered by the Local Government Board. John Black made personal application for relief on 3rd September, 1908. He was examined by the medical officer and certified as suffering from general debility. He was admitted to the ordinary wards of the poor-house, where he remained till 3rd May, 1909—a period of eight months. He left of his own accord. The Local Government Board considered that this was not "medical or surgical assistance" provided for in Sub-section (1) (a) (1) of Section 3 of the Old Age Pension Act, but was ordinary poor relief, which disqualifies for an old age pension, and they decided accordingly.

  Central Higher School, Fordyce.
  Sir HENRY CRAIKasked the Lord Advocate whether, in view of the widespread objection on the part of almost all the local authorities concerned to the proposed transfer of the Central Higher School from Fordyce to Portsoy, and to the interruption which would be thereby caused to the work which has been so long and successfully carried on at Fordyce, he will undertake, on the part of the Scotch Education Department, that approval will not be given until all those interested have had full opportunity of stating their objections, and until these have been carefully considered and all necessary inquiries made?
  Mr. ARTHUR DEWAR: The information before the Department upon this subject is not yet complete, and, therefore, full consideration is not yet possible. Perhaps the hon. Gentleman, if he so desires, will repeat his inquiries later—say in three weeks' time.

  Motor Speed Limit (Towns and Villages).
  Mr. HAROLD COXasked the President of the Local Government Board how many applications he has received from local authorities in the past three months for fixing a speed limit to motors in towns and villages; to how many he has assented; how many he has refused; and what were the reasons for the refusals?
  The PRESIDENT of the LOCAL GOVERNMENT BOARD (Mr. Burns): Thirteen such applications have been received. In all these cases correspondence is proceeding?

  Sherborne Union (Infirmary Nurse).
  Mr. T. F. RICHARDSasked the President of the Local Government Board whether he is aware that Lena Steward, recently engaged by the guardians of the Sherborne Union as a nurse, has been compelled to resign her position upon the advice of the medical attendant, G. R. Beckett, M.A., M.D., medical officer, Sherborne Union House, and who has been certified as unfit for such duties in future by H. Collier, L.R.C.P., L.R.C.S., of St. Paul's-terrace, Wolverhampton, and also certified as being unfit for future service as an infirmary nurse by H. Malet, M.D., senior physician, Wolverhampton and Staffordshire Hospital, and that this nurse has been engaged at the Wolverhampton Workhouse five years and eight months, at Wolstanton and Burslem workhouse one year, at Dudley workhouse two years, at Newton Abbot one and two months, and at Rugby workhouse two years, or a total service of eleven years and ten months, and completed fourteen years' service at Sherborne workhouse by last December; that the Sherborne guardians have refused to recommend this nurse for pension in accordance with the Poor Law Officers' Superannuation Act, 1896, Sections 2 and 3; whether he has received an appeal on behalf of this nurse, and what was the nature of the appeal and also the reply, because up to the 10th of the month the applicant has received no reply; and what action he intends to take in the matter to give this nurse the benefit of the Act under which she has been working so long?
  Mr. BURNS: I have received an appeal from Miss Steward against the decision of the Sherborne Board of Guardians that she is not entitled to a pension under the Poor Law Officers' Superannuation Act. The appeal contains representations
  8
  to the effect stated in the question. I am in communication with the parties, and hope shortly to be in a position to determine the matter.

  Inebriates Act (Amendment).
  Mr. SNOWDENasked the Secretary of State for the Home Department if it is the intention to legislate at an early date in the direction of amending the Inebriates Act; and, if so, can he say when the Bill would be introduced?
  The SECRETARY of STATE for the HOME DEPARTMENT (Mr. Gladstone): I hope to introduce a Bill on this subject early next Session.

  Customs and Excise (Birmingham Chief Clerk).
  Mr. SNOWDENasked the Secretary to the Treasury if he has received communications from a firm of solicitors about the case of Mr. Mant, late chief clerk, Customs and Excise, Birmingham, and why he refused to offer them any explanation of the reason why the Treasury have deprived Mr. Mant of pension on the eight months, one week, of service over 39 years; and will he now state why the Treasury thus deprived public servants of allowances they had justly earned?
  The SECRETARY to the TREASURY (Mr. Hobhouse): I have received the communications referred to. There is no question of Mr. Mant's being deprived of any pension which he has justly earned, since Section 2 of the Superannuation Act, 1859, only provides for the award of pension in respect of completed years of service, and the Treasury is therefore precluded from taking into account fractions of years in the calculation of pension.
  Mr. SNOWDEN: Does not the same Act to which the right hon. Gentleman has just referred give the Treasury power to award a larger pension to a Civil servant than he might be entitled to by years of service, where he is called upon to retire for the purpose of facilitating the reorganisation of the Service?
  Mr. HOBHOUSE: No; I do not think that is so.
  Mr. SNOWDEN: May I be permitted to give the right hon. Gentleman the Section of the Act which bears out what I say?
  Mr. HOBHOUSE: Of course; but I am perfectly familiar with the Section.

  Pension Order Books (Breach of Regulations).
  Mr. SNOWDENasked the Secretary to the Treasury if he was able to say how the information as to the number of pension order books undelivered on 1st July was conveyed to the Press before being given in this House; and if the guilty person had been fined £10, or whatever punishment had been inflicted, for the breach of Revenue regulations?
  Mr. HOBHOUSE: Since my reply to the hon. Member in connection with this matter on 11th August full inquiry has been made, but, I regret to say, without discovering by whom this serious breach of the official regulations was committed.

  Portsmouth Dockyard (Overtime).
  Mr. T. F. RICHARDSasked the First Lord of the Admiralty whether he was aware that many of the employés in the new factory in Portsmouth Dockyard were working overtime, while at the same time other employés have received notice of discharge; and whether he would take steps to provide for a better distribution of the work in order to obviate the discharge of workmen and an increase in the number of unemployed in Portsmouth?
  The FIRST LORD of the ADMIRALTY (Mr. McKenna): The average number of men employed on overtime in the new factory is 25, and they are engaged on the special and confidential work connected with the manufacture of an experimental torpedo tube which has to be completed by the end of October, when it will be fitted in a ship and tried under sea-going conditions as preliminary to determining the pattern for the new ships already in hand. As many men as practicable are already engaged on the work, which is of such a character that a larger number cannot be employed on it. The work is very urgent, and it is only in cases of such urgency that sanction for overtime is given.
  Mr. T. F. RICHARDS: Is the right hon. Gentleman aware that last week nine men were discharged, and at the present time there are 40 men working overtime and not 25 as the right hon. Gentleman has stated to the House?
  Mr. McKENNA: I stated 25 in regard to a particular piece of work, but I do not know whether 15 other men were engaged. I will inquire.

  Naval Punishments.
  Mr. T. F. RICHARDSasked the First Lord of the Admiralty whether he was aware that 4,566 cases of flogging with the cane were reported to have taken place in the Navy during 1907; and would he say what action, if any, he intends to take to put an end to this form of punishment?
  Mr. McKENNA: I have been unable to trace the meaning of the figure suggested by the hon. Member as to the number of cases of caning in the Navy during 1907, unless it be the average number of boys borne on board ship. The actual number of canings in 1907 was under 1,000. The hon. Member is further mistaken in using the word "flogging"; flogging and birching, though still in the list of punishments authorised by the Naval Discipline Act, have been suspended by Admiralty Order, the former since 1881, and the latter since 30th January, 1906. The King's Regulations authorise caning on the breech with the clothes on in the case of boys and buglers under 18, but by Admiralty Orders dated 2nd March, 1906, this punishment is only to be inflicted under the actual order of the captain, and is not to be carried out in public.

  Telegrams and Parcels (Redirection to Navy).
  Mr. EUGENE WASONasked the Postmaster-General whether he could see his way to giving instructions that telegrams and parcels sent to a port in accordance with orders received from commanding officers of His Majesty's ships may be readdressed, if the programme of the ship is altered, without charging extra postage; and whether he was aware that officers and men had often paid this re-direction fee three or four times over through no fault of their own?
  The POSTMASTER-GENERAL (Mr. Buxton): The charges for re-direction of telegrams and parcels are made in accordance with statutory regulations. In view of the additional cost of re-transmission (including, in the case of parcels, payment to the railway companies), I would deprecate an amendment of the regulations in this respect. As regards parcels, the Admiralty furnish my Department from time to time with a list of His Majesty's ships and of the port to which indefinitely addressed parcels for each ship should be sent, and this system reduces to a minimum the necessity for re-direction. I am in communication with the Admiralty to

  11
  see whether a similar system can be arranged as regards telegrams; and if any improved arrangements in regard to parcels can be made.

  Dublin Telegraph Office (Complaints by Staff).
  Mr. NANNETTIasked the Postmaster-General if he was aware that a sorting clerk and telegraphist at Dublin sought an interview with the Controller of Telegraphs on 30th August with reference to the bearing of the junior superintendent of the instrument room; whether the superintendent in question had been the subject of complaints from different sections of the staff; and what action had been taken in the matter by the Controller?
  Mr. BUXTON: As the staff are aware any officer who has any complaint to make can appeal to me personally in reference to the matter. I have received no complaint in reference to the subject referred to in the question; and I have no reason to think that the alleged complaint was made to the Controller of Telegraphs at Dublin.

  Kelway Sound-Locating System.
  Mr. GEORGE ROBERTSasked the Postmaster-General if his attention had been directed to the Kelway sound-locating system; whether he had caused inquiries to be made into the effectiveness of that system and, if so, with what result?
  Mr. BUXTON: I have no knowledge of the system beyond what Mr. Kelway has himself furnished; but I am offering him a licence, subject to certain necessary conditions.

  Postal Sub-Engineers.
  Mr. BOTTOMLEYasked whether the delay in promoting the 63 sub-engineers who passed a Civil Service examination held in January last was due to a financial difficulty; and whether the increased expenditure involved had been provided for in the Post Office Estimates for the current year?
  Mr. BUXTON: The delay is not due to a financial difficulty. The increased expenditure has been provided for in the Estimates of the current year.
  Mr. BYLES: The right hon. Gentleman is, no doubt, aware that this deserving class of men feel that they have a grievance,
  12
  which they have represented through their representatives, and will he be good enough to receive, with his usual courtesy, representations from them?
  Mr. BUXTON: I have given specific answers to specific questions, and I have already answered questions in this House, and privately, to hon. Members. I am fully aware of the case and I am expediting it as much as I can. I am in correspondence with the Treasury with reference to the matter, and perhaps the correspondence between the two Departments is sometimes not so rapid as it might be.

  Irish Goods (False Trade Descriptions).
  Mr. GINNELLasked the Attorney-General whether his attention, or that of the Director of Public Prosecutions, had been directed to the recent convictions before a London police magistrate of persons exhibiting and selling as Irish certain articles not of Irish origin or manufacture; and, in view of the prevalence of such offences and the difficulties private persons meet in attempting such prosecutions, would he say why they are not instituted by the Crown?
  The ATTORNEY-GENERAL (Sir William Robson): My attention has been directed to the case to which the hon. Member refers. It was prosecuted at the instance of private persons under the provisions of the Merchandise Marks Act, 1887, and no difficulty seems to have arisen by reason of the prosecutors being private persons. I do not admit that private prosecutors meet with any special difficulties in the institution of such proceedings. On the contrary, they frequently possess special advantages not open to the Crown, and in many cases the matter is better left to them; but, wherever it seems necessary or advisable, the prosecution is undertaken by the Board of Trade.

  Aylmer Estate, County Kildare (Proposed Sale).
  Mr. JOHN O'CONNORasked the Chief Secretary for Ireland whether it is the intention of the Estates Commissioners to make, or have they made, an offer for the purchase of 89 holdings, with bog, on the Aylmer estate, in the county of Kildare; if so, is it intended to take over any un-tenanted land in connection therewith; and have they made any offer for two un-tenanted farms situated at Russelstown and Grangeluggan, respectively, in order to relieve the congestion in the district?
  The ATTORNEY-GENERAL for IRELAND (Mr. Cherry): Proceedings are pending for the sale to the Estates Commissioners of the holding referred to, together with a large area of bog. The Commissioners will make inquiries as to the other lands referred to. No formal offer has yet been made.

  Committee of Privileges.
  Mr. W. PEEL (for Mr. Gretton)asked the Prime Minister if he will state when the Committee of Privileges last met, and when its Report will be presented to the House?
  The PRIME MINISTER (Mr. Asquith): The Committee of Privileges propose to meet to-morrow, and I hope that their Report will shortly be presented to the House.

  Scottish Universities (Committee).
  Sir HENRY CRAIKasked whether the Committee appointed to consider the requirements of the Scottish universities has yet reported; and to what extent will these be met by a grant from the Exchequer?
  Mr. HOBHOUSE: I understand the Committee have signed their report, but some information is still required to complete certain appendices. I am informed it will be sent in very shortly.

  Price of Consols (Government Purchases).
  Mr. FELLasked the Chancellor of the Exchequer if the purchases of Consols on behalf of the Government have been continued on the usual scale; and, if so, if he can account for the continued weakness of that stock and the low price which rules for it?
  Mr. HOBHOUSE: The amount of the purchases and sales by the Government varies very greatly, according to the amount of Sinking Fund and other moneys available. There cannot be said to be any usual scale. The purchases during the last six months have, however, been somewhat above the average for the corresponding periods of the last 10 years. I cannot pretend to deal with the last part of the question within the scope of a Parliamentary answer.
  Mr. FELL: As the purchases have continued on rather a larger scale than usual can the right hon. Gentleman give any explanation of the weakness of Consols, money being cheap?
  Mr. HOBHOUSE: I think one very obvious reason is the enormous amount of Colonial stocks which are open as trustee security to investors.
  Captain CRAIG: Has the Budget anything to do with it?
  Mr. HOBHOUSE: Nothing at all.

  Income Tax, Schedule A, and Woodlands (New Clauses).
  Mr. HICKS BEACHasked when the new Clauses relating to Schedule A of the Income Tax and to woodlands will be upon the Paper?
  Mr. HOBHOUSE: As regards the first part of the question I must ask the hon. Member to wait for the discussion on Part IV. of the Bill, which is to be taken in Committee to-day. My right hon. Friend is giving his attention to the question of woodlands.
  Mr. HICKS BEACH: May I ask why this Clause has not been put down before? Is it not a fact that about two months ago the Chancellor of the Exchequer announced that he was going to make some change of this kind? Is it not fair to the Committee that this Clause should be on the Paper before we come to the actual discussion?
  Mr. HOBHOUSE: The question of woodlands is an exceedingly intricate and difficult one, and proposals were submitted to the Chancellor which came under my own observation, I think, by Friends of hon. Gentlemen opposite, which, had they been adopted, would have increased the probable cost to the estates concerned, and not diminished it, as was clearly the intention of the suggestion made to my right hon. Friend. That is the cause of the difficulty and delay.
  Mr. HICKS BEACH: I was alluding to Schedule A.
  Mr. HOBHOUSE: The question on the Paper is in reference to woodlands, and I thought the hon. Gentleman's question related to woodlands.
  Mr. PRETYMAN: Is the right hon. Gentleman not aware that the Chancellor of the Exchequer undertook a long time ago, with the general assent of the House, to bring in an Amendment himself to deal with the question of Schedule A and Schedule B? This question refers to Schedule A. Can he give no answer as to that? We are on Income Tax to-day, and I should

  15
  like to ask whether the Chancellor of the Exchequer is to make any statement to the Committee before we commence business as to when we are to know what the change is to be in regard to Schedule A and Schedule B?
  Mr. HOBHOUSE:I expect my right hon. Friend will make a statement which will be of a nature very satisfactory to hon. and gallant Gentlemen opposite.

  Irish Railways (Nationalisation).
  Captain CRAIGasked if the fund proposed to be created under the Development and Road Improvement Bill could be utilised for the nationalisation of Irish railways without further sanction of such a scheme by Parliament; if so, whether Treasury officials are specially acquainted with the management of Irish railways; and, if not, what machinery is it proposed to set up to deal with schemes of such magnitude and importance?
  Mr. HOBHOUSE: The answer to this is in the negative.

  Patent Medicines.
  Captain CRAIGasked what is the total value of all medicines on which patent medicine duty was paid, imported into the United Kingdom and manufactured in the United Kingdom, respectively, during the years 1906–7, 1907–8, and 1908–9?
  Mr. HOBHOUSE: My right hon. Friend regrets that this information is not available.

  FINANCE BILL.

    IRISH ADMINISTRATION.
    Mr. GINNELLasked the Chancellor of the Exchequer whether he has made any separate estimate of the addition which the administration of the Finance Bill, assuming it to become law, will make to the general cost of civil administration in Ireland; and, if so, what is the estimated annual increase, and what are the principal items that make it up?
    Mr. HOBHOUSE: I am afraid I am not in a position to give the estimate which the hon. Member asks.

    AGRICULTURAL LAND (SCOTLAND) (ASSESSMENT).
    Sir BERKELEY SHEFFIELD (for Sir Samuel Scott)asked what is the average number of years' purchase at which agricultural lands in Scotland have been
    16
    assessed for the purposes of Estate Duty in 1907–8?
    Mr. HOBHOUSE: The average number of years' purchase at which agricultural lands in Scotland have been assessed for the purpose of Estate Duty in 1907–8 was as follows: Gross value, 18.75 years; net annual value, 24.82 years.

    DEATH DUTIES (SINKING FUND).
    Sir BERKELEY SHEFFIELD (for Sir Samuel Scott)asked at what rate of compound interest it would be necessary to invest 3¾d. in the £ in order to realise a sufficient sum in 30 years to meet the increased Death Duties; whether the 3¾d. applies to all the scales; and what sum in the £, and at what compound interest, it would be necessary to invest in order to meet the full Death Duties?
    Mr. HOBHOUSE: The rate of compound interest at which it would be necessary to invest 3¾d. in the £ of income, calculated at the rate of 3 per cent. upon the capital value of the property, in order to realise a sufficient sum in 30 years to meet the increased Death Duties at the average rate of those duties, is 3 per cent. The 3¾d. does not apply to all the scales, but only to the average rate. It would be necessary to-invest 1s. 2d. in the £ of income at 3 per cent. compound interest in order to meet the full Death Duties—those existing as well as those proposed—at the average rate of those duties.

    COMPARATIVE DUTIES (WINE, BEER, AND WHISKY).
    Mr. JOYNSON-HICKSasked the Chancellor of the Exchequer if a man spends 20s. in the purchase of two bottles of champagne at 10s. per bottle, 20s. in beer, of a specific gravity of 1.055 at a cost of 2d. per pint, and 20s. in whisky, of 25 per cent. below proof, at 4s. per bottle, how much in each purchase would be represented by duties?
    Mr. HOBHOUSE: The duty on two-reputed quart bottles of champagne would be 1s. 3d. The duty on 120 imperial pints of beer, brewed in the United Kingdom, and of a specific gravity of 1.055, would be 3s. 2¾d. The duty on five-sixths of a gallon of whisky, strength 25 per cent. under proof, would be 9s. 2⅝d.
    Mr. HUNTasked the Chancellor of the Exchequer how much out of £100 worth of beer at 33s. for 36 gallons will be paid to

    17
    the State as duty by a retailer of beer after the passing of the Finance Bill; how much out of £100 worth of whisky at 18s. a gallon would be paid to the State as duty by a retailer of whisky after the passing of the Finance Bill; and how much out of £100 worth of champagne at 80s. a dozen would be paid by a wine merchant as duty to the State?
    Mr. HOBHOUSE: I am afraid I can only refer the hon. Member to the answer I gave him to a similar question the other day. He has not given me sufficient data to enable me to furnish him with the information he requires.
    Mr. HUNT: May I ask the right hon. Gentleman how much he wants?
    Mr. HOBHOUSE: I do not think it will take a great deal to satisfy me.
    Mr. HUNT: I think it will take a great deal.

    LICENSED PREMISES (ANNUAL VALUE).
    Mr. B. S. STRAUSasked whether, in case the annual compensation value of licensed premises exceeding £500 annual value cannot be ascertained in time for the present financial year, will the licensees in these cases have to pay duty equivalent to half their annual value?
    Mr. HOBHOUSE: In the cases referred to it will be necessary to provide for the issue of a licence on payment of a deposit. The point is receiving attention.
    Mr. STRAUS: Am I right in thinking that because the Government are unable to let them pay on the annual compensation value, the licensees will not be mulcted with a heavier duty this year than they would have had to pay?
    Mr. HOBHOUSE: I do not think they will be mulcted in any way, but as I have said the point is receiving the attention of the Chancellor of the Exchequer.

  DEVELOPMENT AND ROAD IMPROVEMENT FUNDS BILL.

    PROPOSED APPOINTMENT OF COMMISSIONERS.
    Captain CRAIGasked the Chancellor of the Exchequer whether he is in a position to give the names of the Commissioners proposed to be appointed under the Development and Road Improvement Bill?
    Mr. HOBHOUSE: I am afraid I am unable to give the names of the Commissioners.
    Captain CRAIG: Will they be in a position to give the names before we go into Committee?
    Mr. HOBHOUSE: I am afraid I cannot give the hon. Gentleman any further information.

    SUGAR BEET (HOME CULTIVATION).
    Mr. FELLasked if it is proposed to devote any of the funds to be available from the Development Grant to the encouragement of the growth of sugar beet and the establishment of sugar factories in this country or in Ireland?
    Mr. HOBHOUSE: I may refer the hon. Member to the text of the proposed new Clause for the Development Bill placed upon the Paper by my right hon. Friend, which provides that applications for advances under the Bill are to be referred by the Treasury to the Development Commissioners, who are to consider and report upon them.
    Sir H. CRAIK: Will it not come back to the Treasury in the end to say whether these grants are to be made?
    Mr. HOBHOUSE: Yes; I understand that was said in Committee.
    Sir H. CRAIK: I wish to ask the Chancellor of the Exchequer whether he proposes to devote any of this grant to this purpose?
    Mr. HOBHOUSE: It will depend on the case made out for the necessity of so doing.

    SITTINGS OF STANDING COMMITTEE.
    Captain CRAIGasked the Prime Minister whether he will take steps to secure that the Committee stage of the Development Bill will not be taken on days when the Finance Bill is under discussion in the House?
    The PRIME MINISTER: The question of dates when Committees sit is, by the practice of the House, one for the Committee itself to arrange, and I do not think. I should be justified in taking the step suggested by the hon. Member.
    Captain CRAIG: Is the right hon. Gentleman aware that he promised in the House to communicate with the Chairman of Standing Committee C, so that the Committee would not sit on days on which the Finance Bill was down?
    The PRIME MINISTER: That is not so. I will read the exact terms of my reply:—
    "We shall be glad to communicate to the Chairman of the Standing Committee so far as we can in advance the days on which the Finance Bill will be taken, so as to enable him to consult the convenience of Members as to the days on which the Committee will sit."
    That is all I said.
    Mr. A. J. BALFOUR: Is the right hon. Gentleman aware that, although he may have no technical right to dictate to the Chairman of the Committee, an indication of the views of the Government upon such a point would carry great weight; whether the general impression was not conveyed to the House that arrangements could and would be made which would prevent the Committee sitting when the Finance Bill was down; whether he bears in mind that, according to statements made, there is to be an exceptional pressure put upon the House this week, in the shape of late sittings, to deal with what remains of the Finance Bill, and whether in these circumcumstances the right hon. Gentleman does not think the pressure put upon Committee is out of all proportion to that which hon. Members can bear, and whether better methods than depriving them of food cannot be discovered?
    The PRIME MINISTER: So far as I know, the Committee were certainly not deprived of food, and I assume that if any Member was disposed to somnolence he was able to indulge his inclination. With regard to the question put to me by the right hon. Gentleman, I have to say that when I gave the answer already referred to I was sanguine enough to hope that the three days we had assigned for the sittings of that Committee would be sufficient to dispose of the Committee stage of the Development Bill. That has turned out not to be the case. I was careful to say nothing as regards the future. This week on every effective Parliamentary day the Finance Bill will be taken. It is just possible that something of the same kind may happen in the early days of next week, unless all progress with the Development Bill is to be stayed. It seems to be necessary that the Committee should sit at any rate on part of some of the days on which the Finance Bill will also be taken, but I am told that my right hon. Friend the Chancellor of the Exchequer does not intend to ask the Committee to sit after half-past three unless some special emergency should arise.
    Captain CRAIG: May I ask whether the right hon. Gentleman is aware that this Committee meets at half-past eleven, and that the House does not rise sometimes until five or six in the morning, and whether he thinks that legislation can be carried on under such conditions?
    The PRIME MINISTER: That is a speculative question, and much could be said both ways.
    Sir F. BANBURY: May I ask whether, if we have to sit all day and all night, the right hon. Gentleman will compel the Chancellor of the Exchequer to be present also?
    Lord ROBERT CECIL: May I ask the right hon. Gentleman whether he can give us some precise information as to what he regards as an exceptional emergency?
    The PRIME MINISTER: In general terms, if reasonable progress is made, an exceptional emergency will not arise.
    Mr. JAMES HOPE: If a Member of the Committee dies in the course of the proceedings, will he be accorded a public funeral?

  Vice-Regal Commission on Irish Railways.
  Mr. KAVANAGHasked when the Report of the Vice-Regal Commission on Irish Railways will be issued; and, if it is not ready now, whether the conclusions at which the Commission have arrived could be issued as an interim Report for the information of the Committee now considering the Development and Road Improvement Funds Bill?
  The ATTORNEY-GENERAL for IRELAND (Mr. Cherry): I understand that the Report of the Vice-Regal Commission on Irish Railways is at present under the consideration of the Commissioners, who hope to be able to submit it to the Lord Lieutenant at an early date. The Commissioners do not consider it practicable at this stage to issue as an interim Report the conclusions at which they have arrived.

  Gun Mahony Estate (Mr. Richard J. Walsh).
  Mr. JOHN MURPHYasked whether any official of the Estates Commissioners other than Mr. Howard made a written report on the personal and industrial character of Mr. Richard J. Walsh, of Cordal, county Kerry, and as to the value and condition of his farm as part of the Gun Mahony

  21
  estate; and, if so, who was the official who made such report, and is he still in the employment of the Commissioners?
  Mr. CHERRY: The Estates Commissioners inform me that the answer is in the negative.

  Native School Teachers (Ireland).
  Mr. JOHN MURPHYasked whether the Commissioners of National Education have refused to pay fees for Irish to several teachers in the year 1908–9 for small irregularities, such as the marking of rolls and following the programme of 1907–8, while it was quite clear, even on the reports of their own inspectors, that efficient work had been performed; and, if so, whether the Chief Secretary for Ireland can take any steps to enable these teachers to be paid the money earned by them?
  Mr. CHERRY: The Commissioners of National Education can only pay fees for Irish when the conditions laid down in the rules are complied with. A relaxation of the rules was sanctioned in 1907–8 in certain eases where it was obviously impossible to fulfil all the conditions, or where exceptional circumstances seemed to render it equitable that the fees should be paid in whole or part. No relaxation has been sanctioned as regards the year 1908–9, nor is my right hon. Friend the Chief Secretary in a position to promise any such concession.

  Golby Estate, County Kerry.
  Mr. JOHN MURPHYasked the Chief Secretary in regard to the case of the tenants on the Golby estate, at Ballinahulla, county Kerry, who have been made to pay 3½ per cent. on their purchase money for a period of 18 months, while during the same period the Land Commission were paying only 3 per cent. for this money, would the Chief Secretary, considering that there was no untenanted land on this property and no payment of rates and taxes to be made, and that the tenants expedited the work of the land inspector in every way in their power, direct the Land Commission, when sending their next receivable order, to deduct from the half-yearly payment the overcharge which has been made on these tenants; and will the Chief Secretary give a detailed statement of the special expenses incurred by the Land Commission in regard to this property which rendered this overcharge of the ordinary payment made by the tenants necessary?
  Mr. CHERRY: The Estates Commissioners inform me that the holdings on this estate were dealt with as soon as practicable. All but two have been vested in the tenants and those two will be vested at an early date. No special expenses were incurred in connection with this estate. Section 18 of the Irish Land Act, 1903, provides that the interest in lieu of rent payable in cases of this kind shall be at the rate of not less than 3½ per cent., and the tenants by their purchase agreements contracted to pay interest at 3½ per cent. There was, therefore, no overcharge and my right hon. Friend has no power to direct a refund of any part of the interest paid under the purchase agreements.
  Mr. JOHN MURPHY: May I ask the right hon. and learned Gentleman whether the Estates Commissioners have in their pocket money which they have received and which they have had no occasion to use for other purposes, and, if so, will they give it back to the tenants in these and similar cases?
  Mr. CHERRY: I do not think the Estates Commissioners can have any money except the money they received under the contracts, and such moneys as are apportioned by Parliament for the purposes of the Land Acts.

  National Schools, Ireland (Heating and Cleansing).
  Mr. JOHN MURPHYasked the Chief Secretary whether he has now received full assurances from the different sections of Irish school managers indicating their readiness to provide half the expense of heating and cleansing schools; whether these assurances were given on the understanding that steps would be taken to carry through a suitable arrangement before the winter set in; and whether, seeing the urgent need for dealing with this matter in the interests of the children, he can see his way to guarantee the payment of the Treasury contribution in such manner as would enable the schools to be properly heated and cleansed during the winter of 1909–10?
  Mr. CHERRY: I would refer the hon. Member to the replies given to his previous questions on this subject, and to the letter which my right hon. Friend the Chief Secretary has, I understand, addressed to him.

  Reinstatement Application (Belmont, King's County).
  Mr. REDDYasked the Chief Secretary whether he can state what action, if any, the Estates Commissioners have taken to reinstate Mrs. Rose Egan, of Clonlyon, Belmont, King's County, a tenant of Lord Rosse in that county?
  Mr. CHERRY: The holding in question is being acquired by the Estates Commissioners under the provisions of the Evicted Tenants Act, and the Commissioners hope to be in a position to reinstate Mrs. Rose Egan shortly.

  Colonel Lowe's Estate, Limerick (Untenanted Land).
  Mr. LUNDONasked the Chief Secretary to the Lord Lieutenant of Ireland if the Estates Commissioners have yet acquired the untenanted land on the estate of Colonel Lowe at Sunville, Ardpatrick, county Limerick; and, if so, how soon may the distribution of same take place?
  Mr. CHERRY: This estate will be dealt with by the Estates Commissioners in order of priority. They are unable at the present stage to give an answer to the concluding portion of the question.

  School Inspectors (Scotland).
  Sir WALTER MENZIESasked how many school inspectors there are in Scotland; how many are Scotchmen; how many have been educated in Scotland; and how many possess a Scottish university qualification?
  The SOLICITOR-GENERAL for SCOTLAND (Mr. Dewar): There are 36 inspectors of schools for Scotland, including nine junior inspectors. With but one or two exceptions, I believe, all are Scotchmen, were educated in Scotland, and hold a Scottish university qualification. To give complete and accurate information on these points, however, would necessitate the making of inquiries which may occupy some little time, and perhaps the hon. Member would be so good as to indicate a later date for the furnishing of the information; but I may suggest for his consideration that to press inquiries on this particular line may provoke reprisals.

FINANCE BILL.

  FINANCIAL RESOLUTION.
  Mr. BALFOUR: I wish to ask the Chancellor of the Exchequer when he proposes to take the money Resolution required in
  24
  Ways and Means for the new Clause on minerals?
  The CHANCELLOR of the EXCHEQUER (Mr. Lloyd-George): I am very anxious to consult the convenience of the Opposition about that, because I understand that there are two or three hon. Members interested in the question of mineral royalties who cannot be present for at least some days, and who are very anxious that the Resolution should be put off until it is convenient for them to attend. I am afraid I shall have to take it to-morrow, or on Wednesday at latest, otherwise I shall not be able to proceed with the Clause. I should like to hear what the right hon. Gentleman's views are in regard to that.
  Mr. BALFOUR: Perhaps the most convenient course would be that there should be some consultation through the ordinary channels on the subject.

FINANCE BILL.
Considered in Committee.—[30 th Day.]
[Mr. EMMOTT in the Chair.]
(IN THE COMMITTEE.)

FINANCE BILL.
  PART IV.—INCOME TAX.

    CLAUSE 46.—(Income Tax for 1909–1910.)
    (1) Income Tax for the year beginning on the sixth day of April nineteen hundred and nine shall be charged at the rate of one shilling and twopence.
    (2) All such enactments relating to Income Tax as were in force on the fifth day of April nineteen hundred and nine shall, subject to the provisions of this Act, have full force and effect with respect to any duties of Income Tax hereby granted.
    (3) The annual value of any property which has been adopted for the purpose either of Income Tax under Schedules A and B in the Income Tax Act, 1853, or of Inhabited House Duty, during the year ending on the fifth day of April nineteen hundred and nine shall be taken as the annual value of such property for the same purpose during the next subsequent year; provided that this Sub-section—

    (a) so far as respects the duty on inhabited houses in Scotland, shall be construced with the substitution of the twenty-fourth day of May for the fifth day of April; and

    (b) shall not apply to the Metropolis as defined by the Valuation (Metropolis) Act, 1869.

    (4) Section thirty-eight of the Finance Act, 1894 (which relates to duty on dividends, etc., paid prior to the passing of the Act), shall be applied with respect to the year which commenced on the sixth day of April nineteen hundred and nine, as it was applied with respect to the year which commenced on the sixth day of April eighteen hundred and ninety-four.
    Lord WILLOUGHBY de ERESBY: I beg to move, in Sub-section (1), to leave out the words "twopence" ["shall be charged at the rate of one shilling and twopence"], and to insert instead thereof the words "one penny."
    I do not know that there is any particular merit in the Income Tax standing at 1s. 2d. A large number of people view with great distrust the increased burdens in this country, and no doubt they would be glad to see the Income Tax standing at 1s. instead of 1s. 2d.
    I have listened to a large number of Debates on the Finance Bill in this House, and in those Debates we have had dispelled several of the rules always set up for our guidance. One of the great dangers of increasing the Income Tax, of which the Chancellor of the Exchequer will not have lost sight entirely, is the fact that the higher you go with that tax the less is yielded by a penny in the £. If the Income Tax were ever again so low as a penny in the £, and the Government resolved suddenly to increase it to twopence, I believe that that increase of a penny would produce a far larger sum of money than can possibly be raised by increasing the Income Tax from 1s. 1d. to 1s. 2d. Everybody tries to do the best he can to escape the tax, and some people not of a very conscientious turn of mind succeed to a great extent in evading it altogether. Consequently the higher you go the less is produced by an increase of a penny. But there is another important fact to be borne in mind. There are, I believe, only two precedents for the Income Tax standing at this high figure. I believe that in the second year of the Crimean War it stood at over 1s. 2d. in the £, and also during the South African War. That is to say, the Income Tax has never stood so high except in times of great national emergency. That brings me to a point which should be considered seriously by the Committee. The Income Tax has always been regarded by Chancellors of the Exchequer as the great instrument of finance in times of special crisis and war, and if that tax is low a considerable
    26
    increase can always be made in it in times of crisis, so that it will produce the sums which are necessary to carry the struggle to a successful issue. To my mind, we are running a very grave danger by not only keeping the Income Tax at the very high level of what it was last year, but by even adding to it. I know I shall be told that the figures in the Budget are misleading and that this Clause, which states that the Income Tax for this year is to be 1s. 2d. in the £, is not correct, because the average of the Income Tax will be less. I admit that, owing to the numerous deductions which are made, the average of the Income Tax will be less than 1s. 2d. in the £, but I would like to point out that even on incomes which hon. Gentlemen opposite will admit are moderate the Income Tax reaches a very high figure. Even on incomes of £700 a year the Income Tax will be 12.60d., and on £800 it will be 1s. 2d. I am bound to say that it is a very grave charge on his resources for a man with £800 a year to be compelled to pay 1s. 2d. in the £ Income Tax, and it may necessitate not only his making economies in his luxuries, but even very likely in making economies in providing education for his children and in bringing up his family as he should wish. Therefore, in spite of all the deductions which do reduce the average below 1s. 2d., I still maintain that we are still running a very grave risk of putting the Income Tax at such a figure in times of peace as seriously to deplete the reserve on which you would require to call in times of war. In addition, if we include the Death Duties with the Income Tax, we have the result that the largest incomes in the country will, under the proposals of the right hon. Gentleman, come to an Income Tax of over 6s. in the £; and however far we may advance along the road towards dividing up everybody's goods when 6s. in the £ is taken from a man's income, it is a near approach towards taking one-half of his income from him.
    Mr. JOHN WARD: How do you make out 6s. in the £?
    Lord WILLOUGHBY de ERESBY: By converting the Death Duties on Sir Henry Primrose's calculation, allowing 30 years for a generation, and taking the Death Duties and the Income Tax combined they come to 6s. in the £. [An HON. MEMBER: "These figures are wrong."] I would like to think so, but I believe them to be correct. It was always one of the

    27
    beliefs of Liberalism up to the present Budget that the larger the amount of money taken from the citizens in taxation the more you take away from the capital of the country, and therefore the greater the burden on the trade and industry of this country. I have an extract here from the speech of a Member of His Majesty's Government; perhaps one of those who are departing rather regretfully from the old traditions of Liberal finance. It is an extract from a speech delivered by Lord Wolverhampton in 1904. No doubt the taxation of this country was high owing to the South African War, and the trade and prosperity of the country were not so great as we should all wish to see. Lord Wolverhampton, speaking at Wolverhampton, made a speech which to my mind pointed out the lines on which the Liberal party's policy should run in future. He stated that:—
    "The lesson of to-day was to reduce as far as possible by economy and abstention from rash enterprises the expenditure of public money raised by taxation."
    The Liberal party have certainly left Lord Wolverhampton and his opinions as regards that policy, for I can see no sign of their abstention from rash enterprises in the expenditure of public money raised by taxation. The whole of Mr. Gladstone's policy during the middle of the last century was to keep taxation as low as possible in order that the money of the country should be spent in employing the people. Anyone who has studied the works of Mr. Cobden will find that one of his chief arguments in favour of Free Trade was based on the ground that capital could only employ a certain amount of labour, that it was most important that capital should be employed in this country, and that any taxation which would cause capital to leave this country and lessen its amount must have its effect on labour and increase unemployment and distress. I also think that the Income Tax, standing at the high rate it does, must lead to certain injustices and inequalities. I am not one of those who believe that the injustices have been entirely removed, and although I admit that they are bearable when the Income Tax is low, yet when it is very high these anomalies and injustices become all the greater. In discussing this question it is impossible to leave aside all reference to the Estate Dutes. Sir William Harcourt, when he introduced his graduated scale of Estate Duties, did so largely under the impression that he
    28
    was removing injustices which existed under the Income Tax. These were his words:—
    "The graduated Estate Duty may be, in fact, reckoned in terms as an annual charge on the estate, and in that shape may be regarded as a graduated Income Tax, which is levied only upon realised property, and does not fall upon what are called precarious incomes."
    That is to say, by instituting his Estate Duties he recognised that they were, as he described, graduated Income Tax, and, also, that at the same time they did much to do away with the anomalies and injustices of the Income Tax as it was levied up to those days. I am doubtful in my own mind whether it has been a very wise thing for this Government, and preceding Governments, to have put up the Income Tax to so high a rate as that at which it stands at present, and at the same time to have introduced those abatements and deductions which are now allowed. I saw a letter in the newspapers the other day, written by the brother of one of the Members of the Treasury Bench. It was the letter of Mr. Seely, and it contained, as I thought, a great deal of common-sense. He said:—
    "If successive Chancellors of the Exchequer had not eaten into the Income Tax, but had left it at a low level, and without these different deductions and abatements which have been made, it would have been a much greater instrument of finance than it is at the present time."
    There is no doubt that, largely owing to the deductions and abatements that have been made, the tax does not produce nearly as much as it used to do when it was left at a low figure, and before any of these deductions were made. Under the conditions which obtained when the Income Tax was at a low level, the Chancellor of the Exchequer had power in time of national emergency to raise the tax by a penny or twopence in the pound, and it was at that time a far greater financial lever than it is at the present time. I am, I repeat, very doubtful whether successive Chancellors of the Exchequer have acted wisely in this matter of a high level of Income Tax, accompanied by abatements and deductions. I believe that by maintaining the tax at a high figure it will be found that it will not yield so much as it ought to yield, simply from the fact that to the men who are very wealthy there are means of getting out of it. Mr. Gladstone and other Liberal Chancellors of the Exchequer always recognised that it was a bad thing to raise a tax to such a point that evasion becomes the order of the day; and I feel perfectly certain that by the present method of levying Income Tax on the high level at which

    29
    it is now placed evasion will take place, and that the very men who ought to be caught are the very men who will find it easiest to escape. It will always be one of the gravest objections to the Income Tax that it falls most heavily on those who are most conscientious. That was John Stuart Mill's objection to the Income Tax, and it was also Mr. Gladstone's. Mr. Gladstone stated:—
    "The Income Tax is not adapted for a permanent portion of the fiscal system of this country, unless you can by reconstruction remove its inequalities. Even if you could—
    I draw attention particularly to this—
    there would still remain in my mind objections to it of the gravest character. The objectionable principle of self-assessment can never be satisfactory to the country."
    Lord Morley, in commenting on Mr. Gladstone's action as regards the finance of the country, stated this:—
    "Mr. Gladstone's view of the Income Tax was that while it was an instrument of gigantic power for great national purposes, it was to be deprecated as a permanency, on the ground of the public feeling of inequality, of the inquisition which it necessitated, and the frauds to which it must lead."
    4.0 P.M.
    I believe that every one of the objections mentioned by Lord Morley in his life of Mr. Gladstone are as true to-day as they were then, namely, the inquisition which the tax necessitates (and I may mention that the higher it is raised the greater will be the necessity for inquisition, and the frauds to which it must lead. Although I fully admit the enormous expenditure which we have to meet to-day, yet I think that to the many Members who wish to see the finances of the country placed on a sound basis it must be a cause of very grave disquiet to see the Income Tax at so very high a figure as it is to-day. I say you are depleting your reserves for the time of war and national emergency, and I also believe that you are perpetuating a great many of those inequalities of which Mr. Gladstone and every great Liberal financier have spoken, while at the same time you are encouraging and teaching the people of this country—and the very people you wish to tax—to have resort to fraud, which is the last thing that any Chancellor of the Exchequer should think it desirable to try and inculcate into the minds of His Majesty's subjects. I would very much like to hear that the Chancellor of the Exchequer could see his way to make still more of a reduction in the rate of Income Tax, and I should also, in common with a great many other Members, like to bear what he has to say as regards the assessment
    30
    of land under Schedule A. There can be no doubt that when you have a high Income Tax it falls heaviest on the most conscientious. The man who pays up and makes a clean breast of everything is the man who has got the hardest tax to bear, whereas the man who tries to evade the tax is the man who gets off the easiest. The people to whom it is absolutely impossible to evade this tax are undoubtedly the owners of land. Their rents are there for everybody to see, and every single sixpence has to be paid. Though I do not claim that landowners are as a body more conscientious than any other class of His Majesty's subjects, I would say it is perfectly impossible for them to be anything else. I therefore say that the landowner has to pay the uttermost farthing, and on the high rate he has to pay not only on what he does receive, but on what he does not receive. When the tax is at a penny or twopence people do not mind, and do not go into all those small details; but the moment you raise the rate to 1s. 2d. then everybody looks most carefully into the accounts. If a man finds he is paying rather less he keeps quiet, and if he is paying more then every hour of the day, and unfortunately under our present Rules of Procedure every hour of the night he is, through his representatives, trying to get concessions from the Chancellor of the Exchequer so that he should not pay on more than he has received. It is for those reasons I deplore that the Chancellor of the Exchequer should have found it necessary to place the Income Tax at the very high level, and I most sincerely hope that he may be expected with such a large surplus to display some concession, and accept the lower figure of 1s. 1d.
    The CHANCELLOR of the EXCHEQUER (Mr. Lloyd-George): I regret that the Noble Lord made rather a deliberate attack on the whole of the Income Tax, and demanded that not only should we get rid of the extra penny, but of the whole 1s. 2d. His argument for reducing the 1s. 2d. to 1s. 1d. would apply to getting rid of the Income Tax altogether. If money is to be raised, I cannot imagine any Chancellor of the Exchequer who had £16,000,000 to raise, and necessarily more next year, standing at this box and proposing to leave the Income Tax exactly at what it was last year. Whatever methods he employed to make up the balance, I am perfectly certain he would raise the Income Tax to a certain point. I think this

    31
    addition of 2d. to the Income Tax very moderate. The criticism which I have heard with regard to the Death Duties has been that, instead of resorting to Death Duties, it would have been far better to put up the Income Tax. That is the kind of criticism I have heard, and I am not sure that I did not hear it last week. In a rather sensational criticism of the Budget that was the suggestion put forward that we ought rather to increase the Income Tax than to resort to what was regarded as a charge on capital in the nature of the Death Duties. Therefore, I do not think the Noble Lord (Lord Willoughby de Eresby) seriously put forward the claim that we should reduce the Income Tax from 1s. 2d. to 1s. 1d. He is not quite correct in his statement as to the increase in the Income Tax.
    Lord WILLOUGHBY de ERESBY: I said it had only been exceeded twice.
    Mr. LLOYD-GEORGE: I agree, but that was the war, and I do not think it is altogether a precedent. At any rate I could not possibly agree to even a reduction of one penny, which would involve £900,000 this year and over a million pounds next year. That is a prospect which I could not possibly contemplate, and the Noble Lord did not suggest how I could raise the money. After various deductions that we are making it amounts to that sum. It is not an all round penny, but is only on part. It only begins on £3,000, and the twopence amounts, I am speaking from memory, to £2,230,000. The Noble Lord proposes to take a penny off. That is a very considerable reduction in our estimate, and one I could not possibly face.
    I confess I have more sympathy with the latter part of his speech when he came to deal with the question of charges under Schedule A. That matter has been raised repeatedly in the course of discussions on the Budget, and the very first time it was raised by the hon. and gallant Member for Chelmsford (Mr. Pretyman), I think I replied, and I told him then that I also had come to the conclusion that at any rate the better class of landlord had a grievance so far as Schedule A was concerned, and a very considerable grievance. I then promised definitely that I would look into the matter, and see whether something could not be done even in the course of the discussions on these financial proposals. I received a deputation from the Central Land Association, introduced
    32
    by Lord Onslow. They put an appeal before me, and offered to submit their accounts. They were good enough to submit to me cases of about 20 or 30 typical estates in different parts of the country which I invited them to send in, not necessarily the accounts of great landowners but rather samples of the good landlord, the average landlord, the great landowner, and the small landowner in different parts of the country, so that we might be able to get a fair examination of the way in which Schedule A worked at the present moment. I must say that after examining them very carefully I confess my first impression was confirmed that undoubtedly, in the case of the best landlords, the present system works rather harshly. The proposal which is made for remedying it is to place the whole of the accounts under Schedule A to Schedule D. I think I pointed out in the course of the Debates that in my judgment, and I was acting on the advice of the officials, that is quite impracticable. In the first place, I do not think it is quite Income Tax but it is a property tax. I do not want to enter into that now, but it is not quite on the same footing as the Income Tax. The second reason is that Schedule D involves the examination of 600,000 accounts, and if the accounts under Schedule A were transferred to Schedule D that would mean an examination of two million more accounts. Those are the figures given to me.
    Mr. SNOWDEN: House property as well as agricultural.
    Mr. LLOYD-GEORGE: The removal of all those under Schedule A to Schedule D would involve the examination of 2,000,000 different accounts. Obviously that would be impossible—at any rate, this financial year. The next thing is that we would have a difficulty in arriving at the facts when you have to abandon taxing at the source. That would be a very serious contingency, and I do not think we could possibly face it. At the present moment two-thirds of the Income Tax is collected at the source, and that is why it is so successful as a tax. With the whole of those accounts collected from each individual it would be a very expensive operation, and I doubt very much whether it would be as successful, from a revenue point of view. Therefore there is a great advantage in collecting at the source, where it is possible, and I think it would be quite impossible at the present stage to abandon the collection on properties under Schedule A

    33
    and transfer to Schedule D. At the same time, I have admitted that the present system is not fair to the good landlord. The deduction which is made in respect of repairs and improvements is inadequate, and the good landlord and the bad landlord, or rather the indifferent landlord, are treated exactly in the same way. There is no encouragement as far as the revenue is concerned to the good landlord. If he spends money on improvements and repairs he has got to pay taxes on them, and therefore undoubtedly the present system, to that extent, is a vicious one. I have given my reasons why it would be impossible to transfer from Schedule A to Schedule D; and I certainly could not do it this year, because it would involve such an enormous addition to the machinery, and I think it would involve such a loss of revenue, of an indefinite amount, it is quite impossible to say how much until we actually examined the whole of the accounts, and that, of course, I could not face this year. The Noble Lord talked about a surplus to dispose of, but I can assure him I have no surplus to dispose of, and for any allowance made in respect of Schedule A I am afraid I should have to look to the Sinking Fund, but that is another story I do not wish to turn to now, and I leave it. There is really no surplus. There is absolutely nothing in the suggestion. I wish there were. On the contrary, if anything I have over-estimated the revenue, certainly from whisky. I was criticised very severely at the time for having under-estimated the revenue, and I was probably the only man in the House who thought I had not under-estimated it. As a matter of fact I have over-estimated it there, and therefore there is no surplus. However, we are prepared to make a concession, and I think it is a substantial one, in respect of Schedule A.
    Before I come to consider the amount of it, I should like to say something about the form. I consulted the Central Land Association as to the form in which they would wish the concession to be made, assuming the Government were prepared, having regard to the financial conditions this year, to set aside a certain sum of money, and no more, for the purpose. They were perfectly unanimous that it ought not to be given in the form of a flat rate deduction. They opposed very strongly the mere raising of the datum line of 12½ per cent., for, they said, and I agree, if you simply raise the datum line all round it means that the good landlord and the
    34
    bad landlord are treated in exactly the same way. There is no encouragement to the man who spends money in improving his property, because the man who does not spend gets exactly the same allowance as the man who does. The man who does not spend will get a deduction in respect of what he does not spend, whereas, on the other hand, the man who spends lavishly upon improving his property may not get enough. They infinitely prefer taking their chance of such a sum being next year available for increasing the maximum, and that is the line we propose to take. This is the proposal I shall submit. I cannot put it in the form of an Amendment to the Income Tax; it will have to take the form of a new Clause. This is the form in which we propose to make the alteration in the present Session. We do not propose to alter the datum line of 12½ per cent. in respect of land, and of 16 2–3rds per cent. in respect of cottage property. We propose to leave those exactly where they were, so that all landowners will be entitled to those deductions in the future exactly as they have been in the past. But we propose that on a declaration by a landowner, accompanied by general figures which can be examined by the Inland Revenue, if they think it necessary, in any given case, that he has spent more on repairs and on management, a further deduction shall be made up to 25 per cent. That means that on cottage property, where there is a deduction now of 16 2–3rds per cent., a landlord will be entitled to deduct up to 25 per cent. if he makes a declaration that he has spent on repairs a sum of money which comes up to that maximum. The same thing will apply to land. If a landowner has spent in the course of an average number of years—that is the form which I suggest it should take—up to 25 per cent. of the gross, then he will be entitled to deduct 25 per cent.; if he has spent up to 20 per cent. he will be entitled to deduct 20 per cent. But he cannot get it in the form of a deduction, because the deduction would simply be in the form of the 12½ per cent. He has got to make a claim for the difference between 12½ per cent. and 25 per cent., and it will be returned. Otherwise we should have to abandon the whole of the present method of collection at the source. The only way it can be done is by a claim accompanied by a declaration that the money has been spent. That will involve this year something like half a million of money by way of reduction of Schedule A rates.

    35
    There are one or two points in reference to which I should like to invite the views of hon. Members especially interested in the matter, not so much in the course of the Debate as in the course of the next few days before we put down our Amendments. One is with regard to the basis upon which the deduction should be made. Obviously it would not be fair that the deduction should be made in respect of each individual hereditament. You might get a landlord who spends this year upon one hereditament 50 per cent. spending not 15 per cent. on another. Therefore, if the deduction were made in respect of each hereditament, he would only get 25 per cent. in respect of one hereditament and 15 per cent. in respect of the other; whereas if he was able to bring the whole of his expenditure on all his hereditaments into hotch potch he would bring the whole of it up to 25 per cent. This is really a concession to landowners. A landlord does not spend his money equally during the year upon all his hereditaments. He may spend a large sum of money on this farm this year, and very little upon another—on repairs, for instance. Therefore it is fairer to him to spread the whole sum over the whole estate. The second point is that I think it ought to be over an average number of years—I suggest two or three—otherwise again the good landlord might be damnified. He might spend in one year a very considerable amount of his income upon repairs, and next year considerably less? Over an average of years he might spend probably 25 per cent. or 30 per cent., whereas if he took one year alone he might not spend 20 per cent. This, I think, is really in the interests, not only of the landowners, but of agriculture as a whole. It discriminates between the landlord who spends money upon improving his property and the landlord who does not. It is the first time that any attempt has been made to discriminate between the good and the bad, or, I would rather say, the indifferent landlord.
    As I have said, the Government are prepared to set aside a sum of £500,000 for this purpose. It is quite impossible to estimate quite accurately how far that £500,000 will go; but, at any rate, if it costs more than that, we are prepared to go up to the 25 per cent. An element uncertainty is the Super-tax. We can estimate with some approach to accuracy what it will cost to make this concession
    36
    in respect of the ordinary Income Tax from cottage property and from farms; but when you come to the Super-tax there are two or three elements which introduce considerable uncertainty. For instance, we cannot quite say at the present moment, with the materials at our command, how many landlords will be taken outside the Super-tax altogether by this deduction of 25 per cent. There is no doubt that several will be taken outside the Super-tax altogether, merely owing to the fact that they are entitled to 25 per cent., instead of 12½ per cent.; and we cannot say quite what the effect will be upon the remainder. On the other hand, there will be a certain number of landlords who will be unable to make declarations that they had spent 25 per cent. It is not always a question of the good and the bad landlord. Sometimes it will depend very largely on the class of land. For instance, you may have land on which there are considerable buildings. Obviously, where a very large proportion of the capital is invested in structures and fencing, the percentage would be much higher than on land with comparatively few buildings. On the other hand, there may be landlords who cannot conscientiously claim 25 per cent., because the maintenance of their property does not demand expenditure to that extent. If, therefore, it is found that the £500,000 is not altogether disposed of by this concession, the Government will probably be in a position, at any rate next year, to increase the maximum. If there is any surplus, we propose to increase the maximum to those who are spending more than 25 per cent., and, no doubt, there are several landlords who are spending considerably more. The claim of the Central Land Association is that the average good landlord spends 35 per cent. I am not in a position either to controvert or to verify that statement, and I shall not be until the accounts of all the landowners are submitted under this proposal for the examination of the Inland Revenue.
    That is the proposal of the Government which I propose to put down in the form of a new Clause. I shall not put it down for a day or two, because I should like any suggestions that Members interested in the matter would care to make in regard to the form. All I can say is that at the present time we cannot see our way to go beyond that £500,000. If anyone holds a very strong view that that sum could be better allocated in some other form for the attainment of the same purpose, I shall

    37
    be very glad to consider any suggestions before we finally put down our Clause. All I feel very strongly upon is, and here I agree with the Central Land Association, that it ought not to be a flat rate, but that the landowner who actually spends money on the improvement of his property ought to get the benefit of the concession.
    Mr. BALFOUR: Everybody must have listened with interest to the speech just delivered by the right hon. Gentleman the Chancellor of the Exchequer. He made it quite clear that he is animated by a desire to do away with what he has on more than one occasion admitted to be an injustice. I say it in no grudging spirit when I repeat—what he himself is the first to admit—that the concession does not cover the whole ground which justice seemed to require. As one of a much-abused class, who I suppose will gain certainly something from the Chancellor of the Exchequer's proposals, may I say with what satisfaction I have heard it admitted that we have been overtaxed for so many years. [Several HON. MEMBERS: "No, no."] I was not arguing with hon. Gentlemen below the Gangway, but expressing my gratification that the Chancellor of the Exchequer, in the fairest possible spirit, has admitted that for many years, and in practice in an increasing degree, the owners of land in this country have paid more than their fair share, not merely of rates, but of taxes to the Imperial Exchequer. As I understand him he is not giving to the owners of land this half million as a complete vindication of the equity of the present system. I do not propose to discuss his proposals at present. I think it would not be convenient to discuss to-day the proposals of the right hon. Gentleman in any detail. A more legitimate opportunity will occur when the Clause is on the Paper, but perhaps I may just ask in regard to the right hon. Gentleman's statement one or two questions. I was very much puzzled by his assertion that whilst there was only 600,000 commercial accounts to examine every year, there would have been the large number of 2,000,000 accounts to examine if land were put under Schedule D. At first sight that is a most paradoxical statement. We have always understood that the number of traders in this country was enormous and that the number of landowners was few to the point of public danger. That statement, I repeat, at first sight, must be admitted a most singular one. I have no doubt there is an explanation of it. But
    38
    my ingenuity, on the spur of the moment, is not sufficient to conceive what that explanation may be. Then the right hon. Gentleman in the earlier part of his statement seemed to be under the impression—which he subsequently qualified—that this distinction—the distinction, that is to say, between the landlord who spends a great deal on repairs and the landlord who spends little on repairs—roughly corresponds to the good and the bad, the indifferent or the moderate, landlord. I should think if that is true at all it is true in only the most vague and general way. The right hon. Gentleman, I suppose, has behind him the authority of the Central Land Association, a very highly qualified body. Certainly, if he has behind him the authority of that body, I venture to criticise his statement with the utmost diffidence. But it is not quite in accordance with such experience as I have in the matter, and it does not seem easy to reconcile with what one might suppose are the necessities of the case.
    For example, in some parts of the country which I know best, the Lowlands of Scotland, the practice is for farm buildings to be made on so substantial a basis that although the initial course may be very great the annual repairs are relatively very small. I do not think anybody will say that in that part of the country the farming is indifferent or that the landlords do not recognise their duty to do their best by the land in which they are interested. A landlord might spend the whole of his income for a few years—might have to borrow for a few years—in order to get his estate into thoroughly good order. When he got it so he would be relieved of these annual repairs for a very considerable period. It is no criticism of the right hon. Gentleman when I say that it is a fact that land managed in that way would not get so much advantage as land managed on quite a different system—a system which might be better on estates in other parts of the country, but a system which involved less capital expenditure when buildings are erected, and carries with it greater annual repairs in order to keep these buildings in a proper state to do their work. That, I take it, is true of agricultural land. I would appeal to other Gentlemen more cognisant of the subject than myself whether it is not true to an even greater extent of cottage property. Cottages often involve an immense amount of annual repairs to keep them merely, watertight, and to allow them to scrape

    39
    through the examination of the sanitary authorities. On the other hand, those who are sufficiently wealthy to be able to do full justice to this class of property will have cottages built in so substantial a fashion that perpetual repairs are not required. If I am right, the original de-markation—subsequently qualified by the right hon. Gentleman—between the good landlord who spends much in repairs and the indifferent landlord who does not spend much in repairs again breaks down. But I am not aware that there is any plan by which these inequalities can be avoided. I have no doubt that the interesting speech of the right hon. Gentleman will suggest other comments from other parts of the House.
    I think the Government have a right to claim from us that we do not have too full discussion now upon this particular proposal which they have laid before us. I think I am speaking the general sentiments of the House, and if my hon. Friends behind me agree, then, for my part, I think we will spend our time better if we reserve any criticism until the moment when we actually see the Clause in type. I therefore shall refrain from further observations on this point. I would rather suggest to my hon. Friends, if they will do so, that they should defer their comments until the more convenient and fitting opportunity which will be in ordinary course accorded to us when we get to the new Clause. If that general scheme of discussion be accepted, all that remains for us to discuss now are the actual proposals of this Clause as they stand—the proposals that there should be an extra 2d. upon certain classes of income. I daresay the House was startled to learn that this extra 2d. is going to bring in so comparatively small a sum. The reason is that only a small portion of the income of the country is coming under the purview of the Clause. People are beginning to see more and more the gravity of the situation, and the danger in putting a very heavy tax upon a very small number of people. It may require a very strong Chancellor of the Exchequer to resist the illegitimate pressure to augment that differentiation which is now suggested, the effect of which does not touch more than a very small fraction of the population, and which, therefore, that very small fraction have no power to control. I am in the position of agreeing with a great deal of what my Noble Friend said in his introductory speech, though not agreeing with
    40
    the practical conclusion at which he arrived. I think everybody must admit that it is a serious thing to reflect that we in a time of peace are without any immediate hopes of any alleviation before us, and that the general Income Tax is to be fixed at a point which up to the year 1909 would never have been thought legitimate except in dealing with such a grave national emergency as a foreign war. That is a conclusion which must give us all pause. It is a condition of things which is really alarming from the point of view that it deprives us, or largely deprives us, of the greatest fiscal weapon which any Chancellor of the Exchequer can possess to deal with a sudden national emergency. In time of peace we are blunting the weapon which we require to keep sharp and effective for a time of war. That is a most unsatisfactory condition of things, and if the Chancellor of the Exchequer told us the whole of his thoughts he would not deny that these proposals carry with them something in the nature of national peril, or, at all events, involve national weakness. I am confident that every man who looks forward to the emergencies and possibilities that may arise in our own lifetime in a relatively short period of years, and feels that there is little prospect of the financial burdens of this country diminishing—and, indeed, the prospect is that they may increase—everybody must recognise that we are reaching that point from which we must look back to the happy days when Sir Robert Peel and Mr. Gladstone first proposed a small Income Tax dealing with the temporary emergency, as a position not likely in our time to be repeated, or, at all events, not to be repeated to that extent which most of us would desire. My Noble Friend pointed out also that avoidance is almost sure to increase as you increase the tax, and here, I think, he was not open to the answer given by the Chancellor of the Exchequer. The Chancellor of the Exchequer said if these arguments are true they do not really tell against an Income Tax of 1s. 2d.: they apply against an Income Tax of 8d., or 10d., or 6d., and they apply equally against the whole system. That is the fallacy which this Government tumbles over in every tax they impose. They fail to recognise that a tax may become more objectionable in the regular ratio of its increase.
    A shilling Income Tax may be more than: twice as bad as a 6d. Income Tax, and a 1s. 2d. Income Tax may be more than one-sixth worse than a 1s. Income Tax, and;

    41
    the same is true of the Death Duties and of the Licensing Duties, and of many other taxes which the Government propose. I myself have long recognised, and all upon this side of the House recognise, that the Income Tax is an absolute necessity of modern finance. We have all abandoned the old and happy tradition when the Income Tax was regarded as a temporary stop-tax. But that is no reason why my Noble Friend should be criticised for saying he sees great peril and great danger, and some injustice in a tax of 1s. 2d. in the pound, which would not attach to a tax of the same kind much smaller in amount. I, therefore, accept my Noble Friend's observation in a less critical spirit than the Chancellor of the Exchequer. I think he was absolutely justified in all he said; but here I join, for the first time, with the Chancellor in the Budget discussions in saying that it is an adequate, or at all events a strong, defence of the Government that the money must be found. But that is, in my opinion, no argument for some of the earlier taxes, which seem to me to do a great deal of injustice. This is a tax which does not single out a particular kind of property to be specially attacked. This kind of tax does not, like the Death Duties, diminish ipso facto by the very incidence of its character the available capital of the country. This tax is a grievous and a heavy burden; it is weakening to the finances of the country, but the money must be found, and those who have income must do their full share in finding this money, and, as there is very little hope, I am afraid, of inducing this Government to widen their basis of taxation and see whether other resources cannot be obtained elsewhere less onerous in their incidence to the general community, I recognise that the Income Tax must be increased, and I cannot go into the Lobby with my Noble Friend and ask the Government to cut off this source of their revenue in the present position of our national finances.
    I regret as much as my Noble Friend the necessity which the Chancellor of the Exchequer finds himself in, but it is a necessity. He has to meet these charges, and he is now for the first time in this Budget attempting to meet them by a tax not arbitrary in its incidence. In that state of things I should certainly not criticise the Government upon the subject of this addition to the Income Tax. I regret its necessity, but I recognise in the present condition of affairs that at all events as long as our finances are dealt
    42
    with under the existing principle this, or something like this, is absolutely necessary to meet the charges of the year which have to be met by the Government of the day.
    Mr. LLOYD-GEORGE: I agree with the right hon. Gentleman it would be very undesirable to discuss the proposals of the Government before they are submitted to the House in proper form, and, after all, I do not think it is directly relevant to this Amendment. I thought it would be a great advantage to make an explanation at this stage; otherwise it would not be possible to submit those proposals to the House until practically the whole of the Bill was disposed of and until we had come to the new clauses. It would be very undesirable to have two Debates upon the same proposals. The right hon. Gentleman asked me if there were two millions of owners under Schedule A, and only 600,000 under Schedule D? The two millions includes the whole of Schedule A, and I was arguing against the abolition of it as a whole. It includes not only the owners of land, but of all kinds of property. I should not think that the owners of land come to anything like 2,000,000 in the aggregate. There are 11,000,000 of hereditaments and 2,000,000 of owners, but that is the total which conies under Schedule A. I agree with the right hon. Gentleman it is not altogether a question between good and bad landlords; it is very often a question between one class of property and another, but in the vast majority of cases it represents the difference between the landlord who spends generously upon his property and the landlord who does not. There is a certain class of property that does not require money spent except at certain regular intervals, but these are exceptional cases. We know in the main where they are; but, taking, I should say, nine-tenths of the country, I think in the main there is a difference between good landlords who spend liberally and the landlords who do not. I agree with the right hon. Gentleman these other cases could not be met even by an extension of Schedule D, which only examines the expenditure over an average of three years. That does not in the slightest degree meet the case of the landlord who spends a considerable income upon a large scale.
    Mr. PRETYMAN: Perhaps I may ask a question with regard to the matter of allowances for repairs, which seem to me to be rather indefinite. The point would

    43
    be met if the Chancellor of the Exchequer in making his deductions would allow for what is really new work, but for which no addition is made to the rent.
    Mr. LLOYD-GEORGE: Will the hon. and gallant Gentleman give an illustration?
    Mr. PRETYMAN: Yes. Take the case of a landlord who built a new pair of cottages for which the tenant paid him a rent. That is not to be allowed for because it is entirely new work; but there may be a pair of old cottages for which rent is being paid. The landlord thinks them so bad that they are past mending. He rebuilds these cottages and lets them to tenants at the same rent. There has been no increase for the rebuilt cottages which have been let, say at £4 a year. That is a constant case, and our contention is that that should be included in the allowance.
    Mr. LLOYD-GEORGE: I will consider that point. So long as the cottages are let at the same rent and the money is spread over a certain number of years, obviously you cannot spread it over three years, I agree there is something in the point that when repairs are effected it shall have that effect, and that the expenditure ought to be spread over a considerable number of years. I will look into the point. It seems to me to be quite a legitimate matter, and really it encourages the building of better cottages, which, in itself, is a desirable thing to do, and that is why we extended the Schedule originally intended merely to apply to agricultural land to cottages as well, in order to induce landowners to improve their cottage accommodation. One observation with regard to the amount. I understood the Noble Lord's Amendment was confined to one part of the 1s. 2d. I find it is extended over the whole. It is not only the £900,000 with which it deals, it is the £1,800,000 for this year. I find his Amendment extends to earned as well as unearned increment. The total for the next year would be £2,270,000. He wants to reduce the 1s. 2d. in respect of the whole field of these operations. That is all I wish to say with regard to that matter.
    5.0 P.M.
    Mr. HAROLD COX: The Leader of the Opposition put his point quite clearly, but I am sorry he was not equally clear and precise in explaining what he meant by "widening the basis of taxation." I am in favour
    44
    of widening the basis of taxation by extending the Income Tax so that every man, however poor, will pay his fair share. But that is not the particular point before the House. Let me say how I welcome the concession which the Chancellor of the Exchequer has made to-day, because it seems to me to be based upon the principle of giving fair play even to landowners. That has always been my principle, and that is why I have opposed certain other portions of this Budget. Persons who are supporting this Budget claim that they are doing so because landowners ought to be specially taxed. I have been attacked, contrary to all precedent, in my Constituency by no fewer than five hon. Members sitting on this side of the House because I have not supported this Budget. Now the Chancellor of the Exchequer comes down to the House and tells us these landowners are to have £500,000 a year taken out of the Sinking Fund. I wish to express my gratification at the right hon. Gentleman's recognition that there are 200,000 separate landowner in this Kingdom. I wish to call attention to one detail which I think the Chancellor of the Exchequer has overlooked. As I understand his proposal, he is willing to make an allowance for repairs up to 25 per cent. That is all right in regard to agricultural land, where the custom is for the landlord to do the repairs, but in the case of urban land, supposing the landlord lets his house at a very low rent on the condition that the tenant makes the repairs. I do not see how the Chancellor of the Exchequer proposes to meet that case, and I put that forward as a point to be considered. My main point, however, is that, I think, the Chancellor of the Exchequer has given away too much money in other directions in this Budget. He has given away money by not raising the Income Tax in the case of earned incomes between £2,000 and £3,000. I cannot see why a professional man earning £2,800 a year should be taxed at a lower rate.
    The CHAIRMAN: I think that point comes in on Clause 48, and not here.
    Mr. COX: I think, Mr. Emmott, you will see how it comes in here on this Clause when I finish my point. I cannot see why a professional man, with £2,800 a year; should be taxed at a lower rate than his mother who is getting only £700 a year. If the right hon. Gentleman accepts that argument, he can raise the money which he wants by graduating the scale for earned incomes between £1,500 and £2,000, charging

    45
    the £1,500 man 9d., the £1,600 man 10d., and then the man with £2,000 will pay the full 1s. 2d. In that way the Chancellor of the Exchequer will save a good deal of the money he is now giving away to the landowners of the Kingdom.
    Mr. LLOYD-GEORGE: There is one point which I must make clear, and it is that the 25 per cent. now covers management. Management, therefore, can be deducted in cases where there is no Super-tax charged. That will involve the special 5 per cent. in respect of management under the Super-tax Clause being taken out.
    Mr. J. F. MASON: Holding the views I do in regard to the Death Duties, it would be illogical on my part if I were to support the Amendment of my Noble Friend. If I voted for this increase in the Income Tax I should be open to a charge from the Prime Minister and those who agree with him that I was voting for a capital tax, and I should like to make it clear that certainly, in my view, there is a vast difference between Income Tax and Death Duties. The Prime Minister apparently maintains that there is no difference between the Income Tax and the Death Duties, and it is claimed that the Death Duties are merely another form of Income Tax. I think the right hon. Gentleman takes a view that in the one case you are merely taxing accumulations of wealth that have already been made, and in the other case by the Income Tax you are taxing funds before they have been allowed to accumulate. The whole difference lies in the fact that in the Income Tax you are also taxing funds which if you do not take them will be spent and will not be accumulated, and that makes a very large difference in the incidence of the Death Duties and the Income Tax. Of course, the Prime Minister has given expression to some very surprising views on the subject of what is productive expenditure, and he has gone so far as to say that the expenditure of the State when money is taken from individuals by the State is expended in a productive manner; that is a statement which can hardly have been seriously meant if the word "productive" bears the ordinary significance given to it in economic language. The Prime Minister apparently thinks that money which is taken by the State in these taxes directly from individuals is spent as productively and is as remuneratively employed as if it was left in the pockets of
    46
    the previous owners or transmitted to their children. But the money does not remain in their pockets, because the accumulations of those individuals are employed in all the various industries in the country, producing food in the case of agriculture and in producing iron, steel, and wooden goods or in the distribution of those goods in the form of railways or ships. It cannot be contended that money taken by the State from what is practically capital in the hands of individuals is not destroying the capital of the nation. Having said that much in regard to the question of the destruction of capital, I do not hesitate to say in so far as direct taxation is necessary it is infinitely better to get what is required by increasing the Income Tax than by increasing the Death Duties, because in the case of the Income Tax you are taking the national income for your purposes, but in the case of the Death Duties you are taxing accumulations already made.
    The laws which apply to a nation and to an individual seem to me in this respect to be very much the same. A nation must live on its income in the same way as an individual, and one of the advantages of the Income Tax over the Death Duties is that each individual in paying the Income Tax is annually reminded that he is paying that tax, and he is not left until he is dead to find it out. The Leader of the Opposition again referred to the views, which I think are held by all sides of the House almost, as to the danger of increasing the Income Tax beyond a certain point on the ground that it is a war reserve. We have a great number of expressions on that opinion very strongly put forward by such authorities as the late Mr. Gladstone, who spoke of a high Income Tax as a dangerous instrument in time of peace. Of course everybody regrets that Income, Tax should be so high as it is in time of peace, and that our war reserve should be diminished in any way. I think, however, we are justified in asking whether in the existing conditions of the world you can say that we are really living under conditions of absolute peace. I know we are actually living at peace, but we are undoubtedly called upon to make very large provision for our national defence, and in so far as that goes I think some justification is given for an increase in the Income Tax. For these reasons I think I am fairly justified in saying that I cannot support the Amendment of my hon. and gallant Friend.
    Mr. CHIOZZA MONEY: I think the Chancellor of the Exchequer has been exceedingly generous to the land interest in the concession he has made under Schedule A. Personally I think that Schedule A should not be reviewed without at the same time taking under review the extraordinary effects of Schedule B, which is a tax on the occupation of land or, rather, upon the profits arising out of the occupation of land. As the Committee is well aware, an arbitrary rule is taken with regard to farmers' profits, which are assumed to be one-third of the rental. It therefore follows that a farmer with a fairly large farm at a rental, say, of £480 a year, is assessed at £160 a year, or, in other words, he pays nothing. If he pays no Income Tax it follows that nearly all the farmers are not assessable to Income Tax at all. That means something to the landowners, because a landowner is able by virtue of the manner in which Schedule B operates to obtain more rent than he otherwise would do if farmers were assessed under Schedule B. I cannot help thinking that when you contemplate a City clerk with £200 a year in London—who finds it very difficult to make both ends meet—has to buy an expensive season ticket, upon which he gets no abatement under the Income Tax, when you remember that that man is taxed under the Income Tax Acts while the farmer with £480 rental pays no Income Tax at all, you get a most glaring anomaly and a most glaring injustice. I think, therefore, the landowners are very heartily to be congratulated on the concession made to them. I venture to point out to the Committee that the amount, £500,000, is precisely the same as the amount expected to be yielded by all the three new Land Taxes in the present year. I do not myself think that £500,000 will be realised by the three duties, but, if it is, all of it is being handed back to the landowners by the concession made to them under Schedule A. It is very difficult, therefore, to understand why any landowners should now object to the proposals of my right hon. Friend. The last speaker referred to the question of public expenditure; and it has also been referred to by other speakers this afternoon.
    May I, at a time when the fiscal atmosphere is filled with clamour about Socialism, remind hon. Gentlemen opposite that if they want a reduction of taxation there is only one way to get it, and that is, not by less Socialism, but by more Socialism. If they doubt that fact may I
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    refer them to the Blue Book issued by my right hon. Friend on "Taxation Abroad." Let them turn to "Taxation in Prussia." They will find that Prussia has an Income Tax and a Capital Tax, and that both are rather smaller than the corresponding taxes in this country. Why is that? If they will turn to the beginning of the Official Memorandum, they will find it stated that 47 per cent.—I direct the attention of hon. Gentlemen to this figure—of the public income of the State of Prussia is raised from railways and from other State industrial undertakings. It is, in ether words, raised from Socialism, and purely from Socialism. When hon. Gentlemen opposite are inclined to mention that much misunderstood word, and to dwell on Socialistic tendencies in legislation as raising taxes, let them turn their eyes to the fiscal example of Prussia, and there they will see a very satisfactory means of reducing the Income Tax in a way of which I most heartily approve. I do not want to press the point very far, because I take it the Amendment will not be pressed to a Division, but the Noble Lord who opened the Debate rather exaggerated the extent of the taxation suggested under this Clause. I take it that even next year the Income Tax as suggested in this Clause combined with the Super-tax will not raise more than £38,000,000 or £40,000,000 of money. What is that as an Income Tax taken over the whole income of the nation? It is only an average of 9d. in the £. Surely that shows that the fears of the right hon. Gentleman the Leader of the Opposition with regard to the danger of trenching unduly upon the war reserves of this country and upon that financial strength, which I take it we all desire to extend, are groundless. Just consider for a moment what Pitt's Income Tax at 2s. in the £ would yield to-day! Does the House realise how greatly the nation has grown since the time of Pitt? Pitt's Income Tax was graduated, and did not reach 2s. in the £ until £200 was reached. Pitt's Income Tax on our present income would yield £118,000,000 a year, and so little has the national financial strength been trenched upon by the Income Tax proposals of the present Budget that an additional £80,000,000 a year could, if necessary, be raised to meet a national emergency. I think that is sufficient to dispose of the somewhat vague apprehensions of the Leader of the Opposition. I take it they were not very seriously entertained, because if they were the right hon. Gentleman would obviously be voting against this

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    increase of the tax. The fact that he is not means, I take it, that he really has no very serious apprehensions on that score.
    There is only one other thing with which I will trouble the Committee, and that is the question of making a straightforward graduation of this tax, instead of placing it before the public in the form of Finance Bill proposals, which are so vague and obscure that they cannot possibly be understood without prolonged study. If an intelligent foreigner carne into this country and wanted to acquaint himself with our Income Tax he would have to buy this year's Finance Ball, last year's Finance Bill, and the Finance Bill of the year before that, and all the Income Tax Acts, and only by putting them all together would he gradually arrive at what our Income Tax means. I am perfectly sure the taxpayers themselves do not understand it I must venture to remind the Committee how the matter now stands, and what really stands in the way of a straightforward graduation of the tax. It is, as I have pointed out before, the fetish of collection at the source. It has been held that collection at the source is an insuperable barrier to graduation. I myself hold it is not, and the Chancellor's own proposals show it is not. Let us take earned income. In the first place, the tax on earned incomes is graduated up to £700 by the grant of abatements. It is graduated further on incomes of over £700 and up to £2,000 by the grant of a 9d. rate; between £2,000 and £3,000 a year it is graduated further stall by the grant of a 1s. rate; and to get those rates the taxpayers have to declare their incomes. If they do not, if they are too proud to declare, they do not get the rates reduced. At £3,000 a year there is a gap, and there no further declarations are demanded until a man is fortunate enough to earn £5,000, or rather just over £5,000 a year. He is then called upon, if the Super-tax Commissioners think he is a very rich man, to make a personal declaration. How will these special Commissioners find out whether a man has £5,000 a year? I take it they will proceed in the obvious way. They will apply to people who either by reputation or by manner of living appear to them to have £5,000 a year or more; and it is obvious that to do their work properly they will have to apply to many more than have £5,000 a year. The Commissioners therefore will come into possession of declarations of those with not merely £5,000, but of many who have incomes below that line. It follows that,
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    with regard to earned incomes, personal declarations of total incomes are now demanded from practically all taxpayers, except a very small group with incomes over £2,000 and under £5,000. Let us pass to the unearned side of the scale. There declarations are demanded up to £700 if the taxpayers require the abatements, but over £700 and under £5,000 if they do not declare, because there is a flat rate of 1s. 2d. between £700 and £5,000. That obviously is a great misfortune. It is certainly not just, or anything approaching it.
    The CHAIRMAN: I do not quite see how this arises on the Amendment before the Committee.
    Mr. CHIOZZA MONEY: I beg pardon if I have trespassed, but I understood we were discussing the rate of the tax, and I thought that, in accordance with the ordinary custom, I should be able to raise the larger issue on the question of decreasing the tax from 1s. 2d. to 1s. 1d. Of course, I bow to your ruling.
    The CHAIRMAN: The hon. Member is really introducing questions which do not seem to me relevant. Of course, he could raise this discussion on the question that the Clause stand part of the Bill, or the Committee might by general consent take the general discussion now. Otherwise it is not strictly relevant.
    Mr. CHIOZZA MONEY: I will bow to your ruling. I have really concluded my remarks on that point. With regard to the unearned part of the scale, the number of personal declarations are obviously very much smaller than in the case of the earned part of the scale. Yet, taking the Income Tax as a whole, the Chancellor of the Exchequer now, in effect, demands from the taxpayers in, I should say, 10 cases out of 11 personal declarations of income. Why should not the odd one out of the 11 declare? The poor declare, the middle class declare, and the very rich declare, but the middling rich are not to declare. Surely that is a most anomalous situation! Whilst I entirely sympathise with the object of the present Finance Bill in regard to the Income Tax, and whilst I should be the first to admit that it gives me more than half the loaf I have asked for, yet it does seem an extraordinary thing that we should reduce the tax to a state of muddle and confusion in which it cannot be easily understood by any member of the public, I earnestly hope that the Chancellor of the Exchequer will see his way next year at any rate to revise

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    the whole tax, so that we shall never again I hope bring in a Finance Bill saying the Income Tax for the year—[Interruption.] Yes, I hope hon. Gentlemen opposite, if they are in power, will not commit the folly of bringing in a Finance Bill which states that the Income Tax for the year so-and-so shall be charged at the rate of 1s. 2d. in the £, when, as a matter of fact, there are few taxpayers who are called upon to pay at that rate. I plead for a straightforward statement of the taxes which are imposed upon His Majesty's subjects, and I say again what I have said before, if these rates were plainly stated, and if concessions were made tempering the wind to the taxpayer, we could easily make the Income Tax, I will not say more popular, but a very much juster and much more easily collected tax than is the case at the present moment.
    Mr. SAMUEL ROBERTS: I wish to say a very few words to the Committee on the general subject of a high Income Tax. My Noble Friend behind me (Lord Willoughby de Eresby) moved that the Income Tax should be at the rate of 1s. 1d. When the present Government took office three and a half years ago, and the present Prime Minister was Chancellor of the Exchequer, the tax stood at 1s., and he distinctly said in his Budget speech that he could not justify the maintenance of that 1s. rate. He said it was a burden upon trade, profit, and wages, and tended to destroy the most readily available resource, but he declared that a return to a more fruitful administration was the first paramount duty of the Government. What did the Income Tax bring in? In 1906 it brought in £31,350,000. It is now estimated to bring in £37,400,000, an increase of £6,050,000 on this tax alone.
    May I ask the Government is that a return to the better method of administration which they promised? I think it is a sign of the extravagant and reckless finance which has brought about this Budget, and if care had been taken to secure a proper administration of financial matters we should not have had this great deficiency to provide for.
    Now I come to the rate of 1s. 2d. in the pound. It has been said this afternoon that only twice since the Income Tax was really imposed by Sir Robert Peel, I think it was in 1842 or 1843, has the rate been higher? It was higher in 1855, when it went up to 1s. 4d. in the pound, but then
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    it was raised from 7d. What a different thing is that to what would occur if the rate were raised to-day from 1s. 2d. to 2s. 4d.! It makes all the difference when there is a low rate to start with. Again, during the Boer war, the Income Tax was raised to 1s. 3d. from 8d.—it was very nearly doubled. But what would it mean if the Income Tax to-day were doubled—if it went from 1s. 2d. to 2s. 4d. The Chancellor of the Exchequer, in his statement, justified this increase of Income Tax on the ground that the taxable income of the country had increased. He said that in the five years from 1902–1907 the aggregate incomes upon which the tax was payable had increased by more than what the tax is bringing in, and he argued, therefore, that people were just as well off now if they had to pay a double tax on certain incomes in the aggregate, as they were five years ago. But how can one imagine the Chancellor of the Exchequer going to the large class of small Income Tax payers and saying that "while we double your Income Tax you will be no worse off than five years ago"? The idea is quite absurd. The Chancellor of the Exchequer must know that out of 1,100,000 Income Tax payers three-fourths come under the class entitled to abatement under £700 a year. They are a large class. They have borne this burden with patience. One Chancellor of the Exchequer after another has promised that they should be the first entitled to relief when the war was at an end, but that relief has never reached them. Now take the case of a man with an income of £300 a year. He is entitled to a deduction of £160. He therefore pays on £140 net. That works out at 6.5 per cent. On £400 it works out at 8.4 per cent., and on £500 at 9.8 per cent. How many of these people are living on earned incomes, on money which has been earned, just as much as if they were being paid by salary? They earned the money, they accumulated their savings, and invested them, and yet, under this Budget, they are to have no consideration at all. I submit that they are entitled to a deduction to almost the same extent as those who are having salaries paid to them. I can quote the case of a lady now over 80 years of age. She was the mistress of a large girls' school; she lost her husband when young. All her life she has toiled. She saved a small sum, on the income of which she now lives. Surely that money is earned money, and very hardly earned money. So long as the school was going she was entitled

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    to have her income treated as earned income. Now it is treated as unearned income, and the result is she pays a higher Income Tax. I should like to draw the attention of the Committee to the general trend of direct taxation in this country in proportion to income. The trend is that it is very largely increasing. I know my hon. Friends below the Gangway approve of that. I believe their principle is to make the whole taxation of the country come from direct taxation. Now in the year 1905–6 the proportion of direct taxation to indirect taxation was about equal. It was 50.4 direct and 49.6 indirect. In the present year it is 57.1 direct and 42.9 indirect.
    Mr. SNOWDEN: What do you mean by direct taxation?
    Mr. SAMUEL ROBERTS: Direct taxation includes Income Tax, the Death Duties, Stamps, and so on. We all know what indirect taxation is May I compare this state of things with that which obtains in the United States? Almost the whole of the revenue there is obtained from indirect taxation.
    The DEPUTY-CHAIRMAN (Mr. Caldwell): Surely that is rather a question for a Second Reading Debate. This is a specific Amendment to leave out 2d. and insert 1d., and obviously it is not the occasion to go into comparisons between direct and indirect taxation.
    Mr. SAMUEL ROBERTS: I thought that in the Debate this afternoon a little latitude had been allowed. The Chancellor of the Exchequer has certainly gone beyond the scope of the present Amendment, and my hon. Friend the Member for North Paddington also alluded to questions which could not be said to properly come within the purview of the Amendment. I thought I was not trespassing on the Rules of the House when I was drawing a comparison with regard to the proportion of direct and indirect taxation in other countries. I wanted to comment on the fact that in this country the proportion was far too large. I was only going to point out that in America almost the whole of the revenue is produced by indirect taxation. There is no Income Tax at all. In France the proportion is one direct and four indirect. In Germany, out of a revenue of 121 millions, no less than 107 millions is obtained from indirect taxation.
    Next I come to the general question of the effect of a high Income Tax. I think
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    there can be no doubt that at the present moment people who have money to invest are looking to other fields than British in which to make their investments. They are not only doing that: they are selling what English securities they hold. And why? For two reasons. In the first place they do not like this large increase in the Income Tax and Death Duties combined, and, in the second place, they see that the spirit of Socialism is spreading in this country, and that under it their capital will not be secure. I think they are right. The result is that they are selling out their English securities, and, in consequence of that, the value of English securities is depreciating and people engaged in large trading concerns are being placed at a great disadvantage. Their shares are going down. There is another reason why people in this country are investing their money abroad. They are putting them iii good, sound foreign bonds, from which they get a rather larger percentage. It is now perfectly easy to get 4 per cent. on a first-class foreign bond, and their argument is this, that by this small increase in interest they will be enabled to pay the increased taxation. In my opinion that is a sound argument from their point of view; They see that the taxation is going to fall very heavily upon them. They see the necessity for making provision so as to get more money, and they realise that by investing in these foreign bonds they may get ½ per cent. more interest, and by rear son of that they will be able to pay the increased taxation. I think these are very cogent reasons why a high Income Tax in times of peace is a danger to the country, I think I have shown good grounds for the Income Tax payers of this country feeling that they have a grievance. They have been promised a reduction by one Chancellor of the Exchequer after another and no reduction has yet come. My Noble Friend has moved the reduction of this; tax, but, after what has fallen from our. Leader, I shall not feel myself justified in voting for the Amendment, because we admit that, whether for well or for ill, this money has to be found, and we are not going to have it said that the Income Tax payers of this country are unwilling to pay their share of this money. I hope the Government will bear this point in mind in the future, and will realise that the, Income Tax cannot be raised year after year without great danger to our National Emergency Fund or without inflicting great injustice on the Income Tax payers.
    Mr. HARMOOD-BANNER: We have had an interesting discussion, in the course of which the Chancellor of the Exchequer has made certain statements with respect to the taxes on land, and if I venture to deal with another part of income which I think deserves to be considered in connection with this case I hope it will not be considered that I am infringing your ruling or interfering with points which may arise in future discussions. So far as regards the proposal to put the Income Tax at 1s. 2d. in the pound, I should like to say, representing a great number of traders, that while we naturally dislike to see the tax raised to this figure, we yet feel we must accept the position in view of the necessities of the case in regard to defence expenditure and other matters. We certainly would welcome it as a very good alternative to the destruction of capital which it is to be feared must result from some other parts of the Government proposals. If a man's Income Tax is put up he naturally strives to do the best he can to meet the claims of the Chancellor of the Exchequer, and he works all the harder in order that, after paying Income Tax, he may have sufficient for his own requirements. But when capital is destroyed it is undoubtedly a different matter, because it seriously affects the source from which provision is made for large industries—mining and otherwise—provision which can only be obtained from the capitalised savings of the nation. With regard to land, the Chancellor of the Exchequer to-day has made considerable abatements, and he has done it on the ground that the income was not properly assessed on the present basis, and that there are deductions which ought to be allowed in respect of the expenditure which attaches to that income. On behalf of the traders I would ask the right hon. Gentleman whether it is not quite right and correct that he should also consider the question from their point of view, and particularly whether he should not take into consideration the subject of wasting assets. He has given the landowners this abatement when it was brought to his notice that the Income Tax was improperly calculated upon the assessment of land. That having been brought to his notice the Chancellor of the Exchequer has, very wisely, met the case and allowed the abatement, and we traders are quite willing to welcome this change, and are glad to see the adaptability of the Chancellor of the Exchequer in regard to complaints. The complaints of the traders
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    are, I think, however, more serious than those of the landowners in regard to these wasting assets. I am sorry I do not see many Members opposite who are engaged in trading operations, for I am sure that those who are must feel the pinch of these wasting assets quite as much as we do who sit upon these benches. We have among us many members of the agricultural interest, and it is a very clear and distinct injury that is done to trade that income is considered in a different light from profits and gains. I do hope the Postmaster-General or the Secretary to the Treasury will take note of this matter, because it is quite as much in the interest of the traders as it is in the interest of the agricultural community that the concession should be made. At the present instant a distinction is drawn between income and profits and gains. I cannot understand the distinction.
    I cannot understand why a man's income should not be considered the same as his profits and gains, which, as I understand it, will be the amount that he has over to spend in dividing in dividends. No provident director would ever divide any income coming from his business without making provision for wasting assets, and it is not only wasting assets as regards mines and manufactories that I am concerned with, but it is also the wasting assets of copyrights, patent rights, terminable annuities, and leaseholds. If you pay money for a leasehold, and pay £10,000 for it, and £1,000 a year in regard to your assessment, only the £1,000 a year is allowed, and nothing is allowed for the £10,000 which you lose at the end of ten years. If you buy a nitrate ground out in Chili, and you have 20 years to work out the material, when the material is gone at the end of that time your profit is not the amount which has come to you during those 20 years, but the amount less deduction of the original cost of material. If you sink a mine the cost of that mine is not only the annual cost but the expense of sinking the pit shaft and the erection of the machinery which you have to put up, and the cost of the roadways and tunnels which you drive ought to be taken into account for the purpose of arriving at your income; and yet under the present law of Income Tax you are not allowed to deduct anything in respect of that expenditure, so that you may spend £100,000 for sinking a shaft, you may get for forty years £10,000 from the business, and you have to pay Income Tax on the whole of that £400,000, whereas your profits ought to be estimated

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    at the end of that time as being the £400,000, less the £100,000 which you have spent in opening up that mine.
    I venture to think if the Chancellor of the Exchequer makes this tax permanent, as it is perfectly plain he intends to do—if he makes it permanent and makes it high, so that it is of considerable importance to those who have to pay it, then his first duty is to do that in this case, which he is doing in connection with land—his first duty is to make the fund upon which he exacts this high tax fair and reasonable, and such as a man would make up his own statement in regard to when he was dealing with profit and loss, and not base it upon a fictitious profit which does not represent any system of trading, and which a judge, if a man paid dividends upon that basis, would make the director personally responsible for, for not having paid dividends out of profits only. This is a matter of far greater importance than this question of the land. The fairness of the Income Tax upon every industry in the kingdom and the basis upon which it is assessed are based upon it, and I do appeal to the Chancellor not to go upon that old plea of precedent, and say that our Chancellor of the Exchequer did not do it when he was in office, and, therefore, he will not do it now. But I do hope we shall hear from our late Chancellor of the Exchequer that he takes this view, and that if he comes into power again he will adopt this basis of assessing Income Tax which I am advocating. I am sure it will give him very good help from the traders of the country, but I do entreat the Chancellor of the Exchequer to look into this question very closely, and before we start to-morrow to try to bring in some Amendment by which he will meet the traders of the country by providing for depreciation and wasting assets. I hope that some of the hon. Members on the other side of the House will take up this line also, in order that the right hon. Gentleman may know that it is not a question of politics, but of fairness to trade in all the communities of the country.
    Mr. LEVERTON HARRIS: I wish to ask a question. The Income Tax is averaged for three years, and in the last three years there were two very good years and one very bad year. We have heard a good deal from Gentlemen on the Front Bench opposite of how very low a rate the Income Tax averages at. Do they take it over all the income of the three years, and can the Secretary to the
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    Treasury tell us what the Income Tax would be in the last year only, and if it was not averaged with the other two-years? We are told that the last three years it averages between 9d. and 10d. What would be the average charge of the Income Tax payment if it were taken for the last year only instead of for a period of three years?
    Mr. HOBHOUSE: I have not the figures with me, but I understand that the difference will be very small.
    Mr. LEVERTON HARRIS: Are we to understand that the last year was smaller in comparison with the two previous years?
    Mr. HOBHOUSE: I understand that there was a small diminution but not a substantial one.
    Mr. A. B. MARKHAM: I should like to join in the appeal in respect to the position of traders which the hon. Member for the Everton Division (Mr. Harmood-Banner) has made. The hon. Member has pointed out with a great deal of force that in respect to wasting assets the Chancellor of the Exchequer takes a much larger sum in regard to Income Tax than he is entitled to. Take the case of a very deep mine which, in a certain number of years, sells £400,000 worth of the product of the mine. The whole of that sum is treated as income, whereas out of the £400,000, £100,000 was expended in sinking the shaft and opening up the mine. In point of fact, that is not income, but it is a wasting asset. I do not see why the landowners should be treated more advantageously than the great trading community of the country. After all, the landowners pay a very small wages bill, whereas the trading interest pay enormous sums in the way of wages, and keep hundreds of thousands of families.
    The CHAIRMAN: I think if the hon. Gentleman wants to object to the concession to landowners, he should do it When it comes before the Committee in a definite form. As to concessions to traders, they cannot be raised as an Amendment to this Clause, but only as a new Clause.
    Mr. MARKHAM: I will deal with the matter at a later stage, and, for the present, I will merely utter my protest against this concession being made to the landowners. We on this side of the House have been reproached for the high Income Tax, which it is said is due to our want

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    of foresight. But I may remind hon. Gentlemen opposite that the high level of the Income Tax Duty dates from the time of the War, and that the party opposite were responsible for that War.
    Mr. AUSTEN CHAMBERLAIN: My hon. Friend the Member for the Everton Division of Liverpool (Mr. Harmood-Banner) made an appeal which I understood was directed to me, which I should not like to pass without notice, but I understand, Sir, that you rule that it would be undesirable that we should discuss on the Income Tax Clause as it stands the questions of deductions in regard to trade and industry. It is a question in which I am very much interested, and one which is very complicated and difficult, but, much as I admit it requires the attention of the Committee, I understand you to say that it can only properly be raised on a new clause, and, if so, I should prefer to reserve any observation I may have to make until that new clause is reached.
    The CHAIRMAN: Exemptions and abatements from the Income Tax—I have been looking into the matter—have always been put into a Finance Bill, whenever they are put into the Bill, as new clauses, and I think the Amendment should be made as a new clause, and not as an Amendment to this Clause.
    Amendment, by leave, withdrawn.
    Question, "That the Clause stand part of the Bill," put, and agreed to.

    CLAUSE 47.—(Super-tax on Incomes over £5,000.)
    (1) In addition to the Income Tax charged at the rate of one shilling and twopence under this Act, there shall be charged, levied, and paid for the year beginning on the sixth day of April nineteen hundred and nine, in respect of the income of any individual, the total of which from all sources exceeds five thousand pounds, an additional duty of Income Tax (in this Act referred to as a Super-tax) at the rate of sixpence for every pound of the amount by which the total income exceeds three thousand pounds.
    (2) For the purposes of the Super-tax, the total income of any individual from all sources shall be taken to be the total income of that individual from all sources for the previous year, estimated in the same manner as the total income from all
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    sources is estimated for the purposes of exemptions or abatements under the Income Tax Acts; but, in estimating for the purpose of Super-tax the income in respect of any land on which Income Tax is charged upon the annual value estimated otherwise than in relation to profits, there shall be deducted (in addition to any other deduction) any sum by which the assessment is reduced for the purposes of collection under Section thirty-five of the Finance Act, 1894, and a sum for the expenses of management not exceeding five per cent. of the annual value of the land, and also in the case of a person in the service of the Crown abroad, any such sum as the Treasury may allow for expenses which in their opinion are necessarily incidental to the discharge of the functions of his office.
    6.0 P.M.
    Mr. WALTER GUINNESS Mr. WALTER GUINNESS moved, in Subsection (1), to leave out the word "for" ["and paid for the year beginning"], and to insert the word "during."
    The Amendment should be read in combination with a later Amendment to leave out "nine" and insert "ten." The object of the two Amendments is to prevent this Clause being retrospective in its action. As it stands, those who are liable to Super-tax will have to pay this tax on the income received in the year previous to the year dealt with generally in the Finance Bill. That would lead to very great injustice, because there is no doubt whatever that in the case of large incomes there is a very great variation between one year and another. Sir Henry Primrose, in his evidence before the Select Committee on the Income Tax, mentioned the very great discrepancies in relation to large incomes particularly. He said:—
    "Year by year there are a certain number of people who earn £5,000 or £10,000, but they do not do it every year. They are not always the same people. That is especially true of perhaps the larger incomes. A man may make £40,000 in one year and perhaps he makes nothing for two and three years and so on."
    I think if these incomes are now to be charged Super-tax, not on this year, but on the year which ended at the beginning of April last, a very great injustice will be caused. I ask that the year of charge for Super-tax shall be the same as the year of charge for Income Tax, and as according to Sub-section (2) of this Clause you are to take the whole completed year, you should take the whole of the present year and charge your tax at the beginning of next year. I think the Chancellor of the Exchequer can afford to agree to this, because if he will amend the Clause which

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    lays down the date for serving the notice, and if he will make it the duty of taxpayers to state their incomes during April instead of during September, he will be able to get the Super-tax in quite early in the next financial year instead of waiting till the end of this financial year. As he has stated that even under the best circumstances he only expects to get half a million from Super-tax this year, and as we also heard this afternoon that the concession which had been made to agricultural owners will affect the figures of the Super-tax, and he does not quite know how much he will get, he can well afford to grant this exemption, which will take away a very heavy grievance from this new Super-tax.
    Another great injustice will arise from the fact that, as the Super-tax is to be levied, it is to be on the total income as arrived at for the purposes of abatement. If that is so, people may fairly ask to have a year's notice, so as to know during the current year that they will be charged Super-tax on their incomes. The particular case which I have in mind is where a man has a large loan from a bank. Of course, in the case of ordinary Income Tax, he is entitled to deduct the interest which he pays to the bank from his total income, and he gets back his Income Tax on that amount; but he is not to have that same benefit in the case of Super-tax, and there may be many men who in the last completed year will have had a far smaller total income than appears, owing to the fact that they had a heavy overdraft at their bank. If they were told they were going to pay the Super-tax, not on their pet income, but on their gross income, they would have taken very good care not to have had a heavy overdraft. They would have liquidated some of their assets, and their gross income would have been very much closer to their net income. There is no precedent whatever for making your Income Tax retrospective. In every previous Income Tax Act it has always been made applicable to the current year. Section 176 of the Income Tax Act of 1842 says:—
    "Every assessment to be made under this Act within the year appointed for making the same shall be deemed to be for the current year, and shall be in force for that year."
    This is, therefore, only in accordance with the precedent of the Income Tax in former years. Further, until 1907, even where people were assessed under Schedule D on the three years' average, they
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    could get back any surplus of Income Tax by which the income of the year fell short of the average. The right hon. Gentleman's predecessor took away that advantage, but I think this particular case will certainly involve a very great hardship. If the right hon. Gentleman wishes to avoid injustice he ought to take steps not to tax income which has already been spent. If a man is warned that he has to pay Super-tax at the time he is first receiving the income he will have far less grievance, because he will know he has to meet the payment, and he will keep back the Super-tax until it is required, and, in view of the comparatively small amount of money involved in the matter, and the fact that he will only be about two months out, I hope he will accept the Amendment.
    The FINANCIAL SECRETARY to the TREASURY (Mr. Hobhouse): The answer to the hon. Gentleman is that in nearly every Finance Act the word has always been "for," and not "during." What I understand him to propose is that the Super-tax should be based for the following year upon the income of this year. That would not be an ascertainable fact, and the Super-tax must be based upon ascertainable facts. The ascertainable facts in this relation are the average on which Schedule D has been calculated for the past three years. The hon. Member is basing the Super-tax on something which is not definitely ascertainable, but on something hypothetical.
    Mr. WALTER GUINNESS: I do not ask that it should be based on an average, but that next April you should charge your Super-tax on the actual income arising in the same way as income for abatements and exceptions received during the present year of charge of the Income Tax.
    Mr. HOBHOUSE: Schedule D is only arrived at on a three years' basis. I regret that we cannot accept the Amendment.
    Sir EDWARD CARSON: I never object to Income Tax. I think it is a fair tax. A man knows where he is, and can regulate matters accordingly. I understand by the Bill that I shall have to pay Super-tax this year upon the income that I made last year—an average on the three years up till last April. Every professional man will have to pay Super-tax upon income at the rate earned in the last three years—earned before the Bill came into operation. That is what I object to. Take my own case. Supposing I had not been able to go on with my

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    profession this year, or supposing I had been ordered abroad, or supposing the labours of the House had knocked me up—take the case of a man who is not able to earn anything like the income he made in the last three years. I ask the Chancellor of the Exchequer, is it fair to ask him now to pay a Super-tax on an income calculated, as you say, on a three years' average if he does not make anything like the average in the year in which you are raising the tax? There must be cases in which that will work out extremely unfairly. There must be many men whose incomes may be very largely reduced through illness or other reasons during this year. I suggest to the Chancellor of the Exchequer that the fairest way to do is to charge the Super-tax upon the actual earning of this year. If you say to me, "I charge you Super-tax on anything you have earned over £3,000, your income being over £5,000," surely the fairest way is to ask me to make a return for the year in which I have to pay the Super-tax. I do not think anyone will object to that, but it will be a great hardship if a man should have to pay in respect of income which he has spent or dealt with in the year prior to the date at which the Super-tax is imposed. I think the right hon. Gentleman will find many cases to which that would be applicable.
    Mr. LLOYD-GEORGE: I think a good deal could be said against the present method of taking a three years' average for the purpose of assessing Income Tax, but, on the whole, the balance is distinctly in favour of that average. I am not sure, from the individual point of view, that a much better method could be found. By taking the average income for three years you assess a man at a certain amount instead of on an income which fluctuates from year to year. But of this I am perfectly clear, that from the point of view of the revenue it is undoubtedly a good method. It enables us to get a steady income derivable from Income Tax. Otherwise, in times of good trade, our income from this tax might rise beyond what the country requires, and in a year of bad trade it might fall far short of our requirements from the point of view of the Exchequer. Therefore, from the point of view of the Exchequer, it is infinitely better to have the three years' average in order to get a steady income. The right hon. and learned Gentleman (Sir E. Carson) said you cannot follow that principle
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    with respect to the Super-tax. I do not see why there should be any difference in connection with the Super-tax.
    Sir E. CARSON: The new tax only applies in respect of the last six months.
    Mr. LLOYD-GEORGE: This is the only way in which you can arrive at the amount on which to assess. It is simply a date at which you are able to ascertain the basis on which you are to get your tax. The right hon. Gentleman says, "Supposing I am unable to earn my income this year," but there is also another side to this. Supposing the right hon. Gentleman had doubled his income, he would only pay on the average of the last three years. I put it in another way. Supposing that last year a concern in which a man held shares paid 5 per cent., and this year it pays 6 or 7 per cent. the Revenue would undoubtedly suffer. On the whole, this three years' average has been found to work well for the individual taxpayer and the revenue. Next year, if a man's income goes down he will not pay more than the average of three years. I hope the Committee will not disturb this principle on which Income Tax has been levied for 50 or 60 years. It has worked uncommonly well. If there was any real hardship at present I might say that there might be a case for altering the method of assessment, but as that does not apply I do hope it will not be altered.
    Mr. AUSTEN CHAMBERLAIN: I do not think the Chancellor of the Exchequer quite appreciated the request made by my two hon. Friends. My hon. and learned Friend (Sir E. Carson) did not object to the assessment taken on the three years' average, and for my part I agree with the Chancellor of the Exchequer that it is certainly a great advantage to the revenue, not because it gives us more money on the whole, but because it gives a steadier income than would otherwise be the case. It will protect the revenue in lean years, when money is most wanted, at the cost of some sacrifice in fat years, when it is less wanted. I agree also that in the bulk of cases it works quite fairly to the taxpayer, always subject to the consideration that it does work hardship, especially since the change which was made by the Prime Minister when Chancellor of the Exchequer, in the case of incomes which steadily decline, not merely in periods of depression as the result of fluctuations up and down. In the case of a steadily and permanently rising income the advantage is

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    with the taxpayer. If it is a steadily falling income, because business is coming to an end, or in the case of an individual whose exertions are put an end to by sickness, or any other cause, then it does work with very great hardship. That hardship is all the greater when you come to a special tax like the Super-tax we are now discussing. It assumes that a man has a large income to start with of not less than £5,000 before the tax can be levied at all, and then it is levied on so much of the income as exceeds £3,000. My right hon. and learned Friend supposed the case of a professional man who is making a big income, and whose activities are suddenly arrested by ill-health, or it may be by his retirement from business, having arrived at an age when he thinks he may enjoy rest and recreation. In that case this method of assessing the Super-tax will weigh very heavily. While that man was earning his income he was laying by capital which now produces his present income. He made at that time a much higher income, and, therefore, you are now going to tax his smaller income at the rate which was chargeable on the higher income. That is a hard case. It is a hardship which exists to a certain extent under the present law, but it will be aggravated by the new proposal of the Super-tax. That was not exactly the point which my hon. Friends raised. They did not ask the abolition of the three years' average as I understood them. What they asked was that we should assess for the purpose of the Super-tax the income of this year, and not the income of past years. Take the income of the present year and levy your new tax upon that.
    Mr. LLOYD-GEORGE: How are you to ascertain the amount?
    Mr. AUSTEN CHAMBERLAIN: I do not quite see why you should not tax on the income of the present year, even if some rectification had to be made afterwards. The Financial Secretary to the Treasury said that the proposal of my hon. Friend would necessarily involve abolition of the three years' calculation. It might involve some modification of the original proposal, but at any rate you should take the income of the current year as the basis of your new tax. The Super-tax should be assessed on the income of the year in which you impose the tax. That may be a good or a bad proposal, but it is not a proposal on which the Chancellor of the Exchequer said one word in the reply he made. He devoted himself entirely to the three years'
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    average which my hon. Friends do not propose to dispense with. I agree with the Chancellor of the Exchequer that it is necessary to maintain the three years' average in the interest of national finance.
    Sir F. BANBURY: I should like to have this matter cleared up. As I read the Bill, I do not gather that the three years' average is to come in. Will the Chancellor of the Exchequer explain Sub-section (2), which says: "For the purposes of the Super-tax, the total income of any individual from all sources shall be taken to be the total income of that individual from all sources for the previous year, estimated in the same manner as the total income from all sources is estimated for the purposes of exemptions or abatements under the Income Tax Acts.…" I may be wrong, but I believe that the manner of calculating every year for the purposes of exemptions or abatements is not the same as the manner of calculating for the payment of the tax upon the income. Therefore it seems to me that the Super-tax will be calculated upon the amount of the previous year's income, without any respect to the income of the present year. I hope the Chancellor of the Exchequer will clear that up. As far as I know the system of averaging only applies to incomes derived from professional sources or business. Of course, the Super-tax will be charged on the incomes of a large number of people whose incomes are derived from investments. It might very easily arise that a person who had invested in 1908 has received a dividend of 6 or 7 per cent., but in 1909 the dividend might be reduced to 3 or 4 per cent., or it might be non-existent. That might happen if the capital was invested in the ordinary stocks. An hon. Friend reminds me that in the case of preference shares or debentures in breweries the Chancellor of the Exchequer is going to charge on revenue derived in 1908, while the revenue derived in 1909 will be very different. Therefore, I maintain that the Amendment of my hon. Friend has very great point if only for that reason alone. There might be another case where quite honestly, and without desire to evade the Super-tax, it might be that someone had given away a considerable portion of his fortune to his daughter or his son, but he will have to pay Super-tax upon that income which was derived from that portion of the property which he has already given away. Therefore I think, as this is a new tax put upon an old basis, that the Chancellor of the Exchequer

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    ought to accept the Amendment of my hon. Friend to substitute ten for nine, which will leave the Clause as regards the averages in exactly the same position as it stands at present.
    Mr. LLOYD-GEORGE: No doubt as the Clause now stands you calculate your Super-tax according to the same rule as that on which you calculate your 1s. 2d. Income Tax. You apply the three years' average to Schedule D, and to Schedule D alone. With regard to the others, you take the dividends in the ordinary course. The right hon. Gentleman said the point is not any question of three years at all. He submitted that the income on which you collect your Super-tax ought to be the income returned for the present year. The effect of that would be obviously to postpone the Super-tax altogether. You are only going to take the present year. You must have several returns after the close of the year. As the right hon. Gentleman knows very well, we send out papers inviting those whom we propose to tax to give an account of their income. In Scotland these papers are sent out in September, and in England somewhat later. You have got to alter all that. If we are going to charge Super-tax for the first year in respect of this year's income, you will only send your papers out after 1st January next. If you sent your papers out after 1st January you cannot expect to get any returns until the end of that month, and then these returns have to go through the usual processes, so that there would be considerable delay. I do not think that is quite the object of the right hon. Gentleman in this matter. At any rate, the only way in which you can raise revenue for the present year is to proceed on the ordinary basis—that is, by taking the income for the previous year as the basis as far as four or five are concerned and taking a three years' average as regards the other.
    Mr. AUSTEN CHAMBERLAIN: The right hon. Gentleman spoke of the difficulty of getting information about the tax if my hon. Friend's Amendment is accepted, and if you are to attempt to levy a tax on the income of the current year instead of the past year. For the moment I set aside the question of averages altogether to avoid complexity; I treat it simply as a case of this year, not last year. He said that in Scotland you usually send out your papers inviting a statement from the taxpayer in the month of August or
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    September, and that in England it is later. I have had about three applications already from his officials, two two or three months ago, so that he will see that his officials have been far more active and far more early in the field than he imagines. No doubt they imagine it is the early bird that catches the worm, and they will doubtless do the same in as many cases as they can. Accordingly these papers have already been sent out to large numbers of people. What are sent out in January are what are called threatening notices, the notices saying that you have not made your return, and now you have got to pay or worse will happen. What I want him to consider is, of what earthly use for the purpose of the Super-tax are the notices he has hitherto sent out? All the information which he has obtained is no doubt contained on forms of request to assess a person for his ordinary Income Tax; but that will not disclose whether he is assessed for Super-tax or not. I will give the Chancellor a personal case. I have filled up, I believe, some forms this year. Two of them would be filled up in other places, and in one case where I made my return it was filled up nil, because I had no income to declare for Income Tax from which the tax had not been deducted before it reached me; so that as evidence to the Chancellor, of the Exchequer when he wants to decide whether I am a person on whom to levy Super-tax or not that information is useless, and until his Budget passes, be it on the 30th September, or October, or November, or December, or in January, he will not get me to answer any form as to my total income or to give him any information which will enable him to say whether I am assessable for Super-tax or not. And everybody else will do the same thing.
    Why should they give the Chancellor of the Exchequer any account of their total income for the purpose of levying a Super-tax before Parliament has approved of that Super-tax at all, and before the Chancellor of the Exchequer or his officials have any right to ask for any such thing? Clearly he will not get the information, and accordingly the Chancellor, who is basing himself upon the assumption that all this while his Inland Revenue officials are collecting information which will enable him to levy the tax, is, if I may say so, living in a fool's paradise. He cannot collect that information until he has got Parliamentary authority to demand it and to enforce the supplying of it by the taxpayer. Accordingly he must wait until

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    the Bill is passed before he can get that information. That will be very near to the close of the year. Under those circumstances, the taxpayer will presumably be able to answer with very close accuracy what his income for the year is likely to be, and there are provisions known to the existing Income Tax, and, I doubt not, known to the Chancellor of the Exchequer, by which, if there be an error in the calculation one way or the other, it can be readjusted later on. There are such provisions in the case of new businesses, I think, started within the year, and other cases of the kind, and that is what I had in my mind when I suggested to the right hon. Gentleman that he can get his money this year on the income received this year, with any slight adjustment which might be necessary owing to full information not being the possession either of the taxpayer or the Government at the close of the year. I hope I have made it clear to the Chancellor of the Exchequer that the procedure cannot be that which he appeared to think in the speech which he delivered just now. I think he may have some difficulty in applying any procedure so as to collect the whole of his money within the financial year, but I do not see that there need be any greater difficulty, considering that he cannot do anything until the Bill is passed, if my hon. Friend's Amendment is accepted than if the Bill were left as it now stands.
    There is one point as to the question of the average of the last three years. The Chancellor of the Exchequer said that the three years' average as it now exists will continue to exist and to be applied to the Super-tax. I confess that that statement surprises me, and for two reasons: In the first place, I understood the Chancellor of the Exchequer to say—no doubt wrongly; I am trusting to my memory—that the three years' average would not apply to the Super-tax, and ought not to apply to the Super-tax. The second reason it surprises me is because I do not see any way by which the Chancellor of the Exchequer can apply the three years' average to the Super-tax in the same way and to the same extent as it is applied to the ordinary Income Tax. You can apply it to the Super-tax of the professional man if the whole of his income is derived from his personal exertions. But take the case of a man whose income is derived from business. How are you going to apply the three years' average there? His income is received from a business of his own or a number of businesses in which he holds
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    shares. They declare their dividends free of Income Tax, and the Income Tax is calculated on the three years' average; but when you come to the Super-tax he has got to return the income which was received, and the three years' average can no longer be applied, although his income is derived from ordinary businesses to which in ordinary circumstances the three years' average is applicable. I would ask the Chancellor of the Exchequer to describe to us how the man's income, which is derived from businesses assessed under Schedule D, is to get the benefit of the three years' average when he makes his return for the Super-tax? Take the case of a person like myself, whose present return is nil, all his Income Tax being deducted at the source. Suppose that the total income is over £5,000, how is he to apply the three years' average, applicable to all the income which he has received, to the Super-tax? He has no knowledge of the annual profit, and is he to be allowed to substitute for the triennial average of the concern the triennial average of his own income? I think that that might be rather valuable to the taxpayer, but I do not see how the Chancellor is going to do it, and I do not see anything in the Bill which would give the taxpayer the power to insist upon it. I hope the Chancellor of the Exchequer will give us light on both these points before we part with the Amendment.
    Sir EDWARD CARSON: The Chancellor of the Exchequer said that there would be a difficulty in adopting any rule except the rule applicable in the ordinary triennial period. May I call his attention to two sub-sections of the Act of last year? I think they are merely repeating the sections of the Act of 1842. I refer to Section 24, Sub-sections (2) and (3). The first sub-section deals with where a man really starts within the triennial period, or within the three years' assessment. In that case there is no difficulty whatsoever in effecting a settlement. The settlement may be made at the end of the year, or, at all events, by making such an arrangement, that it would not work unjustly in a case of that kind. That is one case which is very appropriate to the point raised on this Amendment. There is a more appropriate one, namely, Sub-section (3), where a man discontinues business during the course of the year. In those circumstances it would be, of course, very unfair that after the previous two years the assessment should be in relation

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    to the year in which he discontinued his business. The provision in that case is this: If it worked out unduly the Commissioners would consider the matter, and having regard to the fact that he had discontinued business, they would make an allowance. Take the case of a man who had a large income last year which would have brought him under the Super-tax if it had been in force. Take it that he had retired from business at some time during the present year, so that he lost a considerable amount of money compared with what he had in previous years. In that case, surely the proper way of assessing him would be to take the three years from the time he started, but to have some provision such as you have as regards the triennial period, in order to deal with his having discontinued business during the year, so that even if he did pay on the average of the three years, at the end of the year in which he discontinued business the matter could be adjusted in such a way that no injustice would be done, and you could make him pay the tax in conformity with the income he had received. I am perfectly sure that the Chancellor of the Exchequer will find that many cases will arise where very great hardship would be put upon a man by having to pay Super-tax this year in relation to income which he had last year. I think these provisions of the Income Tax Act to which I have referred will show the right hon. Gentleman that it is a matter which has been actually laid down in relation to the triennial period where a partner has discontinued business during the year.
    Mr. PRETYMAN: May I ask the right hon. Gentleman two questions? There may be confusion caused by this Clause. The three years' average for the purpose of the ordinary Income Tax is for the current year and for the two previous years. This proposal for a Super-tax is not for the current year at all. It is for the previous year, and for two years before that. There will be no basis at all for the tax. You take the total income of the individual from all sources for the previous three years. It is pretty plain that it refers to incomes. The income of the year is to be taken, and to be considered in relation to two years before that, so that you have got to go back four years instead of three years. I certainly cannot see the object of bringing in the three years' average in relation to the Super-tax. It is going to
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    introduce an element of unnecessary confusion; it will be of no advantage to the Government that I can see; and if I may venture upon a general criticism of all this new taxation proposed in this Budget, it is that it is extraordinarily complicated, and will be difficult for the individual taxpayer, who has not got the whole of the resources of a staff at his disposal It is perfectly easy, no doubt, for the right hon. Gentleman the Chancellor of the Exchequer and the right hon. Gentleman the Secretary to the Treasury, though I have observed during these Debates that not infrequently the Chancellor of the Exchequer himself has had to go and consult the officials of the Treasury as to what this taxation really does mean, and as to what exactly is the interpretation of these words. Will they apply their own difficulty, with all the technical knowledge they possess, to a consideration of the position; of the ordinary taxpayer? I believe the interpretation of these words for the purpose of exemption or abatement under the Income Tax Acts is extremely difficult. It is extremely difficult to know whether they involve the three years' average at all. I cannot see myself how these words can cover or quite distinctly enact that there is to be a three years' average. In regard to the present year it is clearly a great hardship. Any income which a man receives this year would be subject to pay tax, and a man would be justified in reserving a portion of his income to meet the tax owing to the State; but, in regard to a past income, there could be no possible expectation of that kind; yet you are going back three years, and you propose to impose a retrospective tax upon income which has been received and which has been properly expended in the past two or three years. The Secretary to the Treasury defended his proposal by reference to the provisions of the Budget, but I think he will admit that no other Budget has ever resembled this one. You cannot lay down what has been proper in regard to an old tax as being proper in regard to a new tax of this kind, and no tax ought to be retrospective on income which has been properly spent. I do hope that the Chancellor of the Exchequer will adopt such a course as will enable the person who has to pay the tax to know where he stands, and I trust that he will abandon this really most complicated and, I think, ridiculous provision that this tax is to be levied on the three years' average in regard to some parts of a man's income.
    Mr. LLOYD-GEORGE: The hon. and gallant Member's speech is based on a wholly false assumption. He assumes that when you calculate the three years' average it includes the current and the preceding two years. If he looks at the Income Tax rules he will find that we really have followed precedent. The rule says that the duty shall be charged upon the full amount of profit on a fair and just average of three years ending with the year immediately preceding.
    Mr. PRETYMAN: I said the current year of this tax, and you have to go a year further back.
    Mr. LLOYD-GEORGE: That is not the impression the hon. and learned Gentleman conveyed, though it may be that it was the impression he desired to convey; but, certainly it is not the impression he did convey. The whole point was that we were departing from precedent, and that we were charging in respect of the preceding year, and to that extent we were departing from precedent. We are doing exactly what Schedule D does. The first time Schedule D was imposed it was imposed exactly in the same way as the Super-tax will be imposed. When it was first set up it was charged on the past year. It is the only way to do it; otherwise we would have to wait until 1st January before the notices could be sent out. No man can tell you on 1st January what his profit was on 31st December. He has first of all to make up his general accounts.
    Sir F. BANBURY: Supposing I started business on 5th April, 1909. Am I to return my Income Tax in the annual return when I was not in the business last year?
    Mr. LLOYD-GEORGE: That is the point which has been raised by the right hon. and learned Gentleman (Sir E. Carson), and with which I mean to deal. But the general case presented here is that we ought not to charge in respect of the past year. I say it is the only way in which you can do it. When Schedule D was first set up, the assessment under it was on the previous 3 years. As I said, no man can tell on 31st December what his actual profits were for the preceding year; he cannot do it. He has got to make up his accounts; it will take a long time and some calculation before he has any notion of what his profits were in previous years. We would send out our notices and we could not expect any replies until the month of February. We have got to
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    examine them and to send them back for explanation it may be, and 31st March would be upon us before we got a penny of the Super-tax. The Super-tax would be in regard to businesses and some of them very considerable businesses.
    Mr. AUSTEN CHAMBERLAIN: This is what I understood the Chancellor of the Exchequer to say: that it was to be a tax on individual income over a certain amount. It has nothing to do with businesses, but merely with individual incomes. A business may be earning enormous profits which may be divided among a number of people with small portions, and the Super-tax only becomes payable when an individual has an income of over £5,000. If that be so, what on earth have businesses to do with the matter? It is the income of the individual and not the profits of a business.
    Mr. LLOYD-GEORGE: Let me point out that a man may be engaged in business, and he pays Super-tax in respect of the share he derives from the business, as well as in respect of any other part of his income. He would have his share of the profits whatever they amount to, and however large the number among whom those profits might be divided. If he pays Super-tax it shows that the business is an enormous one, and there would be all the greater difficulty in ascertaining its profits before they could arrive at the amount of an individual share of those profits. Take the case of a man engaged in a big trading concern and who wants to find out whether he has to pay Super-tax. He has declared what his income is during the current year. He has got his returns from investment, and yet he wants to find out what he will derive from the business in which there are other partners. Before he knows what his share of the profits is it must be ascertained what are the profits of the whole concern, and he cannot get to know the amount of his share until the whole of the profits have been ascertained. It is quite impossible for this to be done unless the Super-tax is imposed in respect of the past year. Therefore, we have just followed precedent in what we propose. It is the only way in which we could do it. The right hon. Gentleman put another point as to a case where a business is stopped, say in April, and where there is not a full year. There is special provision for that.
    7.0 P.M.
    Mr. AUSTEN CHAMBERLAIN: Take the case of partners in business, which is

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    really the case I had in my mind. Assuming they have incomes over £5,000 they will pay a Super-tax on so much of that as is above £3,000, whether derived from business or not. Does the right hon. Gentleman mean to say that that will be on the undivided profits of their business? I assume they will pay on what they receive in the year, and that therefore they would know what they received from their business in the year just as much as what they received from other sources. If their business had earned some more, and if it had not yet been divided, that would fall into the next year, not this year; am I right or wrong in that assumption?
    Mr. LLOYD-GEORGE: They do exactly as under Schedule D. Whatever the method is there that is the method which we apply now. We follow strictly the principle of Schedule D. All we want is to follow exactly the lines of Schedule D, and I think we have done it in that respect. Whatever benefit is now given to the trader under the sections quoted by the right hon. and learned Gentleman will be given in respect of the Super-tax in exactly the same way.
    Sir E. CARSON: That is not in the Bill.
    Mr. LLOYD-GEORGE: We treat them in the same manner as the total for the Income Tax is now estimated. That is the intention of these words, and if the right hon. Gentleman can point out to me that they do not follow that case—
    Sir E. CARSON: I do not think they do. It never even occurred to me that the exemptions and abatements are exemptions and abatements which you would take into account in coming to the three years' average.
    Mr. LLOYD-GEORGE: I think the right hon. Gentleman is wrong. Supposing the case of a man whose income is only £600, and therefore counts exemptions as it is under £700, does the right hon. Gentleman doubt that a man who could claim these exemptions could not do so under this provision? The person paying the Super-tax ought to get the full benefit of these Clauses, and that is undoubtedly the intention. I am advised by those who are responsible for its drafting that they will get the whole benefit of whatever claim an ordinary Income Tax payer can possibly put forward. The right hon. Gentleman (Mr. Austen Chamberlain) says, "Suppose
    76
    you have not got replies to the returns in September or October?" Then in that case, we would have to send them out in November, when the Bill has passed, because we must get our returns. There is a great difference in inviting returns in December and November in respect of last year, and in sending out those returns in January in respect of incomes which could only be calculated as to 31st December. In the first case we can get them—we cannot get them all, but I have made an allowance for that.
    Mr. CAVE: I think most people who read Sub-section (2) of this Clause understood that the income was to be taken as the income for the previous year, without any average at all. I know many gentlemen who are experts in Income Tax Acts, and who read it in that way, that there would be no average. I assume, of course, that the Bill must be read as the Chancellor says, and that you are to take an average of three years; but there remains this point, which has not been mentioned, and that is what three years are you to take. According to the Chancellor, you are to take your income for last year on the average of the three preceding years. In other words, you are to go back four years in all for the purpose of ascertaining your Super-tax for this year. It you were taking the income for Schedule D this year, I quite agree you must go back for the last three years preceding this year; but to ascertain the Super-tax for this year you are not to go back the three years preceding this year, but the three years preceding last year. I do not see the sense of that or why it is done. I am quite sure it is not fair. Surely the simple plan to ascertain the Super-tax of this year is to call upon the man to make a return as if he was making a return for Income Tax for this year—that is, under Schedule A, which gives the actual income, and then under Schedule D, under which he gives the average for the three years expiring April last. That is the simple practice, which might be perfectly well followed. As has been said, you might have had a loss last year, or you might have had land which you have given away, and in that case it would be a gross injustice to go back. Surely the point is a very simple one. It ought to be the average up to the end of last year, and not up to the end of the year before last. Sub-section (2) says the total income is to be "the total income of any individual from all sources…for the previous year."

    77
    That is referring to last year, and the income for last year must be estimated on the average for the preceding three years. I am quite sure I am right in my reading of the Bill—at least the Bill would be read by other people as I read it—and if it does not mean what I take it to mean it ought to be altered. The farther you go back the greater would be the injustice.
    Mr. LLOYD-GEORGE: I understand the point is a matter of drafting. This means not three years' average but four, because it means three years taken from the end of the year before. I am advised that is not to be the case, but it is a point of drafting, and that is not the meaning which the Government intends it should have. I will be perfectly ready to alter it if there is any doubt, and the mere fact that the hon. and learned Gentleman (Mr. Cave) has a real doubt about it is quite enough to make it necessary to make it all the more clear. It ought to be made quite clear that that is not the operation to be carried out by the Bill.
    Sir FREDERICK CAWLEY: I think this requires a little consideration, and I do not think the three years' average is fair. There are many cases in which there would be no question of a three years' average at all. This three years' average for Super-tax will tell very hardly upon mill owners in Lancashire. They had abnormal years in 1906–7, but many of them previous to that were losing money, and they are losing money now. In many of the cotton mills in Lancashire they are not making a penny at the present time, and it is rather hard that they should have to pay a Super-tax en the year 1907 when now they are making nothing at all. I understand that the Super-tax is not to be retrospective; but if the Chancellor of the Exchequer takes a three years' average he will certainly make it retrospective, and in many cases its retrospective action will operate very hardly indeed. I quite agree that the right hon. Gentleman cannot take this year, but he could take last year. If he took 1908 for the Super-tax, next year he could take the average of two years, and after that he could take the three years' average. That, I think, would do away with a great deal of hardship. There will be a certain amount of hardship in taking 1908, but it will be a great deal less than the hardship involved in taking the average of the three years 1906–7–8. It would also do away with the confusion as to which three years are to be taken. There has been considerable confusion already between the Front
    78
    Benches as to whether the three years are 1906–7–8 or 1905–6–7. I hope, therefore, the Chancellor of the Exchequer will consider the suggestion I have made.
    Lord ROBERT CECIL: After the speech just made the Chancellor of the Exchequer must feel that a real hardship may arise in this case. His answer is that he is applying precisely the same machinery as was applied in 1842. I would point out, however, that in 1842 the Income Tax was a new tax, and special provisions were put into the Act to deal with this very point. Section 133 enacted that the taxpayer was to be entitled to pay on his last year's income if it was less than the average of the three years. That continued for 65 years as the law with regard to Income Tax in this country. It was only in 1907 that that was abolished. Cases have come under my own knowledge where the three years' average is a hardship, not only in the case of business men but in the case of professional men, who for some reason do not earn anything like their previous income in a particular year; but they have to go on paying as if they were earning a much larger income. No doubt, taking the whole of a man's life, it works out fairly; but it is often much harder later in life than earlier. Under this proposal you are really going to tax a man upon a previous income which has nothing to do with this year. It would be a fair and just way of dealing with the difficulty to say that Section 133 of the Income Tax Act, 1842, should apply at any rate to three years until you have three years' working under the new system. After that it might be fair enough to say that a man must pay on a three years' average.
    Mr. A. B. MARKHAM: The great majority of people who will have to pay this Super-tax have no idea what their incomes are. I am a business man, and keep proper business books; but privately I have not the remotest idea what my income is. I have asked several friends who will have to pay the Super-tax how they will calculate their income; they say that all the books they have are their bank pass books, and they will have to take out what items they can. Lawyers have an idea that an ordinary individual can tell where he was three months ago at a certain hour. I have not a memory like that. My memory does not go back more than 24 hours, and I am not able to form the remotest idea—and most people who will have to pay the Super-tax will be in the same position—from my pass book of four

    79
    years ago which will enable me to make an accurate return. If the return has to be made for four years there will be endless trouble with the Commissioners, and I am certain that at the finish neither the Commissioners nor I will be able to arrive at what my income really is. Under these circumstances I suggest that it would be much better to take 1908 as the basis on which this tax should be calculated. The hon. Baronet (Sir F. Cawley) made a very fair suggestion, namely, that you should take 1908 as the basis this year, and then progress year by year, so that the Chancellor of the Exchequer would be able to get his three years' average in time. I have no objection to the three years' average itself. My difficulty is that people with incomes over £5,000 a year will not in the majority of cases know what their incomes have been, because in private life they do not keep books as they do in business. If the right hon. Gentleman will accept the suggestion which has been made, he will eventually arrive at his three years' average without inflicting hardship upon anybody.
    Mr. HICKS BEACH: I agree with the hon. Member opposite (Mr. Markham) that a great many people who have £5,000 a year, as well as many who have less, will find the greatest difficulty in ascertaining what their incomes were four years ago, and it would be a great improvement if the Chancellor of the Exchequer would take into consideration the suggestion which has been made on that point. I wish, however, to ask on what basis incomes derived from the holding of agricultural land will be assessed. Is the owner of agricultural land to be assessed for Super-tax on his Schedule A assessment? It is a very important point, because, if so, they will, according to the hon. Gentleman's own showing, be paying Income Tax on incomes which they do not receive.
    Mr. LLOYD-GEORGE: That will be dealt with later on.
    Mr. HICKS BEACH: If the three years' average is taken—
    Mr. LLOYD-GEORGE: The three years' average does not apply at all to Schedule A.
    Mr. HICKS BEACH: But you are going to have a three years' average for Super-tax.
    Mr. LLOYD-GEORGE: The hon. Gentleman is quite wrong. I only take the three
    80
    yeans' average under Schedule D. I certainly do not propose to take a three years' average in the case of Schedule A.
    Mr. HICKS BEACH: I am glad to hear that; but I think the whole Committee were under the impression that a three years' average was to be taken for Super-tax.
    Mr. LLOYD-GEORGE: Only in respect of Schedule D.
    Mr. CHIOZZA MONEY: With regard to the point of drafting, I would suggest that it is only necessary to take out the four words "for the previous year."
    The CHAIRMAN: We have really been discussing all this time what is the meaning of Sub-section (2). I think the point was raised quite properly, but we must wait until we get to the Sub-section before actual Amendments can be suggested.
    Mr. CHIOZZA MONEY: With regard to the three years' averaging, Members who have spoken on it have really been attacking the three years' averaging system. That system may be good or bad, but, at any rate, the question was examined before the recent Income Tax Committee, and the verdict went in favour of the averaging system. Personally, I am opposed to the averaging system, because when profits have been made, whether large or small, in the previous year the taxpayer is in the best condition to be taxed upon them. That point, however, cannot be raised now. In this connection we must tax on the same income. I do not know whether Members are aware how many persons are taxed on over £5,000 a year already. According to the Inland Revenue Report, about 800 persons are taxed as individuals on over £5,000 a year in respect to trade—that is, not mixed incomes—while another 950 firms—that is, containing partners—are taxed on over £10,000 a year. So that probably there are something like 1,500 persons engaged in trade, either as individuals or as partners, without reference to mixed incomes taxable for Super-tax. That being the case, it would manifestly be absurd to tax them in two different ways—that is to say, at fourteenpence on the average of three years, and then for Super-tax on the income either of the current or of the previous year. We must do either one thing or the other.
    Earl WINTERTON: The system proposed in this Clause is quite different from

    81
    anything we have had to deal with before. It would not be in order to discuss whether the present system is good or bad, but it is ridiculous to say that the proposal in regard to Super-tax is the same as under the existing Income Tax. The great objection to making this tax in any way retrospective is that the Super-tax is altogether a novel proposal. The man taxed under it has to consider altogether the whole question of his expenditure for the year. This, as it seems to me, is altogether a novel proposal, and is not, as the hon. Member for North Paddington suggests, merely an extension of the present rule. I think it is exceedingly undesirable that this tax should be retrospective. There is no emergency to-day that requires it. There is also a great objection to making this tax retrospective, as it is as the Clause stands, because it affects the whole question of a man's expenditure, and I do not think the State ought to interfere in the way suggested with the owner of an income.
    Mr. SAMUEL ROBERTS: I simply want to ask the Chancellor of the Exchequer to adopt the suggestion of the Noble Lord the Member for Marylebone (Lord R. Cecil). I was going to make the same suggestion before the Noble Lord arose. I have an Amendment on the Paper much to the same effect. It says: "For the purposes of the Super-tax, if within, or within twelve months after, the year of assessment any person charged to the Super-tax, whether he shall have computed his profits or gains on the amount thereof in the preceding year or on an average of years, shall find and prove to the Special Commissioners that his profits and gains during the year for which—"
    The CHAIRMAN: What has that got to do with it? I do not see why we should have it raised now. It is discussing these things twice over.
    Mr. SAMUEL ROBERTS: It gets over the present difficulty. The point is this—
    The CHAIRMAN: Yes; but the point is raised on another Amendment handed in by the hon. and learned Gentleman the Member for Dublin University (Sir Edward Carson).
    Mr. AUSTEN CHAMBERLAIN: I must confess that I had not understood altogether what is the Chancellor's intention. He says that where a three years' average is employed for calculating the normal income,
    82
    the three years' average is to be employed for calculating the Super-tax. That I understand to be his general statement. The method of calculating income for the Super-tax will be exactly the method employed for calculating income for ordinary Income Tax purposes. Take the case of a man who derives his income or a portion of it from shares in industrial companies. His income pays ordinary Income Tax before it reaches him, because the company takes the average profit of three years, and makes its return to the Commissioners, and pays Income Tax on whatever is the amount at which they are assessed. Very well. Now the income comes into the hands of an individual or individuals, one of whom is liable to the Super-tax. Is he to pay the Super-tax on the income which he actually receives in whatever year you choose for the assessment, or is he to pay Income Tax on the average of the income that he received from such sources during three years?
    Mr. LLOYD-GEORGE: He will pay the Super-tax in respect of that amount of his income that exceeds that which has paid ordinary Income Tax, and the three years' average would be taken into account. Supposing he pays one year on £120, that is taken into account in the Super-tax. Perhaps in the previous years he has paid upon £150. That, too, would be taken into account. It is purely the amounts in respect of which he pays ordinary Income Tax that are to be woven into the general account for the Super-tax.
    Mr. AUSTEN CHAMBERLAIN: I think I understand. An individual will not be permitted to average his receipts of the Schedule D character for three years, but it will be assumed, whatever those receipts were, in so far as he pays Income Tax on what he received from the company, that this represents a three years' average?
    Mr. LLOYD-GEORGE Mr. LLOYD-GEORGE assented.
    Mr. AUSTEN CHAMBERLAIN: Yes, but what is divided amongst shareholders by no means represents a three years' average. The profits of a company may be divided partly between the reserve fund and dividend. The average is on the whole. The tax is on the whole. The Chancellor of the Exchequer thinks he is getting the same assessment. He is really getting a quite different assessment by this method. As I understood him at the very commencement of the

    83
    Budget discussion, you could not apply the system which you apply to the normal Income Tax to the Super-tax, because the normal tax was collected on institutions and trading firms' profits as a whole, and not upon individuals, whereas this tax is going to be collected upon individual incomes. For the purpose of assessment and collection of the normal tax you have nothing to do with the distribution of profits. It is quite true that the distribution of profits may give rise to subsequent claims for repayment, but for the purpose of the assessment and collection you have nothing to do with the distribution of the profits. For the purpose of the Super-tax it is of no assistance to you to know how much profit there is made. What you want to know is what profit went to every individual, and what other income he has from all sources. Under those circumstances I think you have got into an extraordinarily complicated piece of draftsmanship and a complicated piece of machinery, and to attempt to apply the Super-tax by the machinery of the normal tax will make the matter, complicated and difficult though it be to understand, more difficult and more complicated to work.
    Mr. A. FELL: There seems to be a misconception about the matter, and it arises, I think, from the fact that firms and businesses are assessed on the three years' principle, the three years' average, and that a private individual is not assessed in that way, but on an estimate of the income which he will receive for the current year. I do not think this point has been apprehended by the Committee. I
    think if it had been the Chancellor of the Exchequer would not have maintained his attitude. The Chancellor of the Exchequer's chief argument that a business would not make up its account till the end of the year, and that it would be impossible to estimate what the year's profits are until the end of that year. May I say that a private individual is in the month of July or August called upon to fill up a form giving his estimate for that current year? On that return he pays Income Tax. He makes it generally in August, and pays about Christmas or soon after. The Chancellor of the Exchequer, I believe, has slightly mixed up the question of firms and businesses and private individuals.
    Mr. JOYNSON-HICKS: I want to join the appeal made by the hon. Baronet the Member for Prestwich (Sir F. Cawley) that the Chancellor of the Exchequer should make the date of his three years' average from the present time. It is not a part, as the hon. Member for North Paddington suggested, of the principle of three years which—
    The CHAIRMAN: That point is specifically raised in a much better form on another Amendment.
    Mr. JOYNSON-HICKS: On a point of Order. I was simply joining an appeal which you allowed the hon. Baronet the Member for Prestwich to make; but I will not press it now.
    Question put: "That the word proposed to be left out stand part of the Clause."
    The Committee divided: Ayes, 200; Noes, 84.

    Division No. 682.]

    AYES.

    [7.45 p.m.

    Abraham, W. (Cork, N.E.)

    Bowerman, C. W.

    Cullinan, J.

    Adkins, W. Ryland D.

    Bramsdon, Sir T. A.

    Curran, Peter Francis

    Agnew, George William

    Brunner, J. F. L. (Lancs., Leigh)

    Dalziel, Sir James Henry

    Alden, Percy

    Burns, Rt. Hon. John

    Davies, Ellis William (Eifion)

    Allen, A. Acland (Christchurch)

    Burnyeat, W. J. D.

    Dewar, Arthur (Edinburgh, S.)

    Allen, Charles P. (Stroud)

    Burt, Rt. Hon. Thomas

    Dilke, Rt. Hon. Sir Charles

    Ashton, Thomas Gair

    Buxton, Rt. Hon. Sydney Charles

    Dobson, Thomas W.

    Atherley-Jones, L.

    Byles, William Pollard

    Duncan, J. Hastings (York, Otley)

    Baker, Sir John (Portsmouth)

    Carr-Gomm, H. W.

    Dunn, A. Edward (Camborne)

    Baker, Joseph A. (Finsbury, E.)

    Causton, Rt. Hon. Richard Knight

    Dunne, Major E. Martin (Walsall)

    Balfour, Robert (Lanark)

    Cawley, Sir Frederick

    Edwards, Sir Francis (Radnor)

    Barker, Sir John

    Chance, Frederick William

    Erskine, David C.

    Barlow, Sir John E. (Somerset)

    Cherry, Rt. Hon. R. R.

    Essex, R. W.

    Barnard, E. B.

    Cleland, J. W.

    Everett, R. Lacey

    Barran, Rowland Hirst

    Clough, William

    Findlay, Alexander

    Barry, Redmond J. (Tyrone, N.)

    Clynes, J. R.

    Fuller, John Michael F.

    Beaumont, Hon. Hubert

    Cobbold, Felix Thornley

    Fullerton, Hugh

    Beck, A. Cecil

    Collins, Stephen (Lambeth)

    Gibb, James (Harrow)

    Bell, Richard

    Collins, Sir Wm. J. (St. Pancras, W.)

    Ginnell, L.

    Bennett, E. N.

    Corbett, C. H. (Sussex, E. Grinstead)

    Gladstone, Rt. Hon. Herbert John

    Berridge, T. H. D.

    Cory, Sir Clifford John

    Glendinning, R. G.

    Bethell, Sir J. H. (Essex, Romford)

    Cotton, Sir H. J. S.

    Glover, Thomas

    Bethell, T. R. (Essex, Maldon)

    Cox, Harold

    Gooch, George Peabody (Bath)

    Black, Arthur W.

    Craig, Herbert J. (Tynemouth)

    Grayson, Albert Victor

    Boulton, A. C. F.

    Crosfield, A. H.

    Greenwood, Hamar (York)

    Gulland, John W.

    Lloyd-George, Rt. Hon. David

    Rowlands, J.

    Harcourt, Rt. Hon. L. (Rossendale)

    Lundon, T.

    Runciman, Rt. Hon. Walter

    Harcourt, Robert V. (Montrose)

    Macdonald, J. M. (Falkirk Burghs)

    Russell, Rt. Hon. T. W.

    Hardie, J. Keir (Merthyr Tydvil)

    Mackarness, Frederic C.

    Samuel, Rt. Hon. H. L. (Cleveland)

    Hardy, George A. (Suffolk)

    Maclean, Donald

    Samuel, S. M. (Whitechapel)

    Harmsworth, Cecil B. (Worcester)

    MacVeagh, Jeremiah (Down, S.)

    Seely, Colonel

    Harmsworth, R. L. (Caithness-shire)

    MacVeigh, Charles (Donegal, E.)

    Sherwell, Arthur James

    Haworth, Arthur A.

    McKenna, Rt. Hon. Reginald

    Shipman, Dr. John G.

    Hazleton, Richard

    M'Laren, H. D. (Stafford, W.)

    Sloan, Thomas Henry

    Hedges, A. Paget

    Maddison, Frederick

    Smyth, Thomas F. (Leitrim, S.)

    Henderson, J. McD. (Aberdeen, W.)

    Mallet, Charles E.

    Soares, Ernest J.

    Henry, Charles S.

    Markham, Arthur Basil

    Stanley, Hon. A. Lyulph (Cheshire)

    Herbert, Col. Sir Ivor (Mon. S.)

    Masterman, C. F. G.

    Steadman, W. C.

    Higham, John Sharp

    Mond, A.

    Stewart, Halley (Greenock)

    Hobhouse, Rt. Hon. Charles E. H.

    Money, L. G. Chiozza

    Stewart-Smith, D. (Kendal)

    Hodge, John

    Montgomery, H. G.

    Straus, B. S. (Mile End)

    Hogan, Michael

    Morgan, J. Lloyd (Carmarthen)

    Strauss, E. A. (Abingdon)

    Holt, Richard Durning

    Muldoon, John

    Summerbell, T.

    Hope, W. H. B. (Somerset, N.)

    Myer, Horatio

    Tennant, Sir Edward (Salisbury)

    Horniman, Emslie John

    Nicholson, Charles N. (Doncaster)

    Thomas, Sir A. (Glamorgan, E.)

    Howard, Hon. Geoffrey

    Nolan, Joseph

    Thomasson, Franklin

    Idris, T. H. W.

    Norman, Sir Henry

    Tomkinson, James

    Isaacs, Rufus Daniel

    Nuttall, Harry

    Travelyan, Charles Philips

    Jackson, R. S.

    O'Brien, Patrick (Kilkenny)

    Verney, F. W.

    Jardine, Sir J.

    O'Connor, John (Kildare, N.)

    Vivian, Henry

    Johnson, John (Gateshead)

    O'Connor, T. P. (Liverpool)

    Wadsworth, J.

    Jones, William (Carnarvonshire)

    O'Donnell, John (Mayo, S.)

    Walker, H. De R. (Leicester)

    Jowett, F. W.

    Partington, Oswald

    Ward, John (Stoke-upon-Trent)

    Joyce, Michael

    Pollard, Dr. G. H.

    Wardle, George J.

    Keating, M.

    Ponsonby, Arthur A. W. H.

    Wason, Rt. Hon. E. (Clackmannan)

    Kekewich, Sir George

    Power, Patrick Joseph

    Wason, John Cathcart (Orkney)

    Kilbride, Denis

    Radford, G. H.

    White, Sir George (Norfolk)

    King, Alfred John (Knutsford)

    Reddy, M.

    White, J. Dundas (Dumbartonshire)

    Laidlaw, Robert

    Richards, T. F. (Wolverhampton, W.)

    White, Sir Luke (York, E. R.)

    Lamb, Ernest H. (Rochester)

    Ridsdale, E. A.

    Whittaker, Rt. Hon. Sir Thomas P.

    Lambert, George

    Roberts, G. H. (Norwich)

    Wiles, Thomas

    Lamont, Norman

    Roberts, Sir J. H. (Denbighs)

    Wilkie, Alexander

    Layland-Barratt, Sir Francis

    Robertson, Sir G. Scott (Bradford)

    Wilson, P. W. (St. Pancras, S.)

    Lea, Hugh Cecil (St. Pancras, E.)

    Robinson, S.

    Wilson, W. T. (Westhoughton)

    Lehmann, R. C.

    Robson, Sir William Snowdon

    Lever, A. Levy (Essex, Harwich)

    Roch, Walter F. (Pembroke)

    TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton.

    Levy, Sir Maurice

    Rogers, F. E. Newman

    Lewis, John Herbert

    Rose, Sir Charles Day

    NOES.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Fletcher, J. S.

    Magnus, Sir Philip

    Anson, Sir William Reynell

    Forster, Henry William

    Mason, James F. (Windsor)

    Balcarres, Lord

    Foster, P. S.

    Mildmay, Francis Bingham

    Baldwin, Stanley

    Gardner, Ernest

    Oddy, John James

    Balfour, Rt. Hon. A. J. (City, Lond.)

    Gooch, Henry Cubitt (Peckham)

    Parker, Sir Gilbert (Gravesend)

    Banbury, Sir Frederick George

    Gordon, J.

    Pease, Herbert Pike (Darlington)

    Banner, John S. Harmood-

    Gretton, John

    Peel, Hon. W. R. W.

    Beach, Hon. Michael Hugh Hicks

    Guinness, Hon. R. (Haggerston)

    Pretyman, E. G.

    Beckett, Hon. Gervase

    Haddock, George B.

    Randles, Sir John Scurrah

    Bowles, G. Stewart

    Hamilton, Marquess of

    Ratcliff, Major R. F.

    Bridgeman, W. Clive

    Harris, Frederick Leverton

    Rawlinson, John Frederick Peel

    Bull, Sir William James

    Harrison-Broadley, H. B.

    Renton, Leslie

    Butcher, Samuel Henry

    Hay, Hon. Claude George

    Roberts, S. (Sheffield, Ecclesall)

    Carlile, E. Hildred

    Hill, Sir Clement

    Ronaldshay, Earl of

    Carson, Rt. Hon. Sir Edward H.

    Hills, J. W.

    Rutherford, Watson (Liverpool)

    Cave, George

    Hope, James Fitzalan (Sheffield)

    Salter, Arthur Clavell

    Cecil, Evelyn (Aston Manor)

    Hunt, Rowland

    Sheffield, Sir Berkeley George D.

    Chamberlain, Rt. Hon. J. A. (Worc'r.)

    Joynson-Hicks, William

    Smith, Hon. W. F. D. (Strand)

    Channing, Sir Francis Allston

    Keswick, William

    Stanier, Beville

    Clyde, J. Avon

    Kimber, Sir Henry

    Starkey, John R.

    Coates, Major E. F. (Lewisham)

    King, Sir Henry Seymour (Hull)

    Walker, Col. W. H. (Lancashire)

    Courthope, G. Loyd

    Lambton, Hon. Frederick William

    Warde, Col. C. E. (Kent, Mid)

    Craig, Captain James (Down, E.)

    Lee, Arthur H. (Hants, Fareham)

    Willoughby de Eresby, Lord

    Craik, Sir Henry

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Wilson, A. Stanley (York, E. R.)

    Dickson, Rt. Hon. C. Scott

    Long, Col. Charles W. (Evesham)

    Winterton, Earl

    Douglas, Rt. Hon. A. Akers

    Lonsdale, John Brownlee

    Younger, George

    Duncan, Robert (Lanark, Govan)

    Lowe, Sir Francis William

    Faber, George Denison (York)

    Lyttelton, Rt. Hon. Alfred

    TELLERS FOR THE NOES.—Mr. Walter Guinness and Mr. Felt.

    Faber, Captain W. V. (Hants, W.)

    M'Arthur, Charles

    Mr. JOYNSON-HICKS Mr. JOYNSON-HICKS moved, in Subsection (1), after the word "the" ["In addition to the Income Tax charged at the rate of one shilling and twopence under this Act there shall be charged, levied, and
    86
    paid for the year beginning on the sixth day of April nineteen hundred and nine, in respect of the income of"] to insert the word "separate."
    This Amendment raises the question

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    whether for the purposes of the Super-tax a husband and wife should be considered as one or should be treated separately. Under the present Income Tax the income of the husband and wife is added together for the purposes of that tax, and if a similar course is pursued with regard to the Super-tax it will lead to a very considerable hardship. In the Act of 1842 a clause was put in which undoubtedly rendered the position of the husband and wife and a married woman different from what it is now. For the purposes of securing a better return of the wife's income and a proper estimate of the tax to be put upon it a clause was put into the Act of 1842 enacting that the wife's income should be inserted with the husband's, and that the husband should make a dual return. In the Finance Act of 1894 a general exemption was made when the joint income was under £500. If the two incomes together were less than £500 it was permitted by what I consider an advance in modern law that the husband and wife should have a higher basis. I have never been able to see why that provision should not be extended to all incomes. I am not proposing, to argue that at the present time. I am proposing simply to argue the question of separate payment of the income of the husband for the purposes of the Super-tax.
    As the law now stands the husband and wife for the purposes of Income Tax are treated as one, and thereby the earnings of the husband and wife, who may be both earning small incomes, are added together for the purposes of assessing Income Tax. I need not go very much into this subject, because the Chancellor of the Exchequer had a letter the other day from Mrs. D'Oyley Carte giving some cases of great hardship inflicted upon the husband and wife because they were married, and pointing out that this is really a tax upon matrimony rather than a tax upon bachelors. The present position is undoubtedly a considerable hardship on the husband and wife, and the hardship is increased now when the graduation of the Income Tax is increased, and when this new principle of Super-tax is added to the existing taxes. The object of the Super-tax is to place relatively high taxes upon all men with large spendable incomes. The idea is that a man with an income of £5,000 a year or upwards to spend has an income not absolutely necessary to the existence of life, and, therefore, you have a right to place a higher tax upon that income, because it is an income a man may spend for
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    his own purposes and may be used for the purpose of luxury. It is really very hard in the case of professional men and business men, who work hard and earn their incomes of £2,500 or £3,000, where they would be entitled to the small rate of Income Tax, that if he happen to marry a woman with money of her own that he should be regarded as the possessor of unearned income. If such a man marries a woman who has money he is charged Super-tax upon the total of both, which includes his earned income. Surely it is not the desire of the Government to penalise, as it undoubtedly does penalise, earned income. The object of the Liberal party, I take it, has been to place a higher tax upon unearned income, and, to an extent, the Finance Bill of this year does so; but here you are trying because a man has contracted matrimony to place a tax of 6d. in the £ upon a considerable part of his earned income. I cannot see the slightest justification for that.
    8.0 P.M.
    Last week in this House we were discussing the question of the husband and wife being treated separately for the purposes of Legacy Duties and as one for the purpose of Estate Duties. The Chancellor of the Exchequer said he was not responsible for that. I then ventured to suggest that before this week was out he would have an opportunity of defining his responsibility by making the matter effective in one direction or the other. It cannot be fair to take a husband and wife as separate persons for Legacy Duty when one is dead, and to treat them as one and the same person for the purpose of Super-tax when one is alive. Since the Women's Property Act was passed I never heard it disputed that the married woman is not able to look after her own property and to spend what she likes, and to prevent even her husband knowing what she spends if she likes. There was a remarkable letter in "The Times" a fortnight ago from a remarkable lady. I wish she were a Member of the House, in order that she might put her views before the Committee. She could put very clearly the extraordinary hardship of treating the income of the wife the same as the husband's, where the wife has no possibility of sending a representative to Parliament in order that her case might be put with the force with which she could put it before the Committee. I am not going to drag in the case of woman suffrage, but it does seem to me, without expressing any opinion, an important subject. It is an injustice to the husband and to the wife, but it is a double injustice to

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    the wife, because she is taxed in this matter while she is deprived of the slightest representation in this House. I have spoken in the early part of my remarks from the point of view of the husband whose income is increased above the limit by the wife's income. What of the case where the wife's pin-money of £400 or £500 a year has to pay a Super-tax, and she has not the slightest control whatever in the matter? The husband has very little control nowadays over the income of his wife, but the wife has no control over the income of the husband. If it is hard that the husband's income should bear Super-tax because of his wife's income being joined to it, it is harder that the wife, who has no representation in this House, should be charged a Super-tax because of the income of her husband. I think this is a point upon which we might remedy an injustice. I am not asking the Government to differentiate in regard to joint incomes, but where you are putting this new Super-tax on I do say there is a good deal of justice behind a proposal not to perpetuate the injustice of the Act of 1842. When you are putting on a new tax, you should realise the new conditions of modern society, and you should treat these incomes separately instead of jointly.
    The POSTMASTER-GENERAL (Mr. Sydney Buxton): Whatever may be the merits of this question as regards the Income Tax as a whole, it certainly ought not to be dealt with as a matter primarily affecting the Super-tax. There is a new Clause upon which the merits of this question can be discussed. The argument up to now has always been that in the case of small incomes the husband and wife's income should not be put together for the purposes of the Income Tax. That has nearly always been considered to be a hardship on the small incomes. The hon. Gentleman is not proposing to get rid of that anomaly, but he is proposing that on the larger incomes up to £5,000 the system in regard to the smaller incomes should be reversed and the larger incomes should be left free. As far as the Government is concerned, if this disqualification is to exist at all, and if it can be defended upon its merits, it would be much better defended as regards the Super-tax than as regards the lower scales of the Income Tax. In the case of incomes of £5,000 or £6,000, or even up to £20,000, I do not think this principle can be considered to
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    be a great hardship. The amount of additional taxation will not be great, and certainly, in proportion to the income, it would be far less felt than in the case of persons who come under the lower scale of income. I am not now discussing the general question on its merits, because that would be out of order, and I presume we shall have another opportunity of doing so. I admit this is a very arguable question as a general proposition as to whether the income of the husband and wife should be separated. It is a question which has been most carefully considered by successive Chancellors of the Exchequer. The other day, in connection with the Death Duties, the Chancellor of the Exchequer stated that the difficulty in regard to this proposal was that it would lead to evasion, because it would lead to the dividing of the income of husband and wife in order to escape taxation. That is the conclusion come to by every Chancellor of the Exchequer, and that is the position which the Government still maintain, and which they are prepared to defend when the question is raised on its merits. At all events, it is quite clear there is no particular reason for allowing this concession in regard to the Super-tax, which does not prevail to a far greater degree in the case of those smaller incomes at the lower scale of the Income Tax. The argument used by the hon. Gentleman in regard to the representation of women applies really far more effectively to the lower scale of the Income Tax than it does to the case of the Super-tax.
    Mr. BALFOUR: The right hon. Gentleman says that if there be a hardship in this proposal it is greater in the case of the smaller incomes than with the larger ones. I am rather inclined to agree with that proposition—at all events I would like to see it threshed out. My instinct is that the Postmaster-General is right. The Government have created in this Bill a new-hardship. It may be a small one, but it is a new one. For this reason I think the Government are bound to give some defence of their policy. If that defence includes the smaller incomes, well and good; then we shall know how to deal with the smaller incomes when we come to them. But if we follow the advice of the right hon. Gentleman and pass this proposal by, we shall not be able to argue the question unfettered at a later stage. The right hon. Gentleman will then be able to turn round and say, "Why did you not raise this point during the discussion of the earlier part of

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    this Clause?" We have already agreed as to the proper way of dealing with the large incomes, and I would like the right hon. Gentleman to show me any difference in principle in regard to this matter between the large and the small incomes. Does the right hon. Gentleman say there is a distinction? The right hon. Gentleman admits that the principle is the same when we are dealing with the aggregate income of husband and wife up to £5,000, as in the case of the smaller incomes. This is the first time the question comes up, and, therefore, my hon. Friend is perfectly justified in raising it. I think my hon. Friend has grounds for complaint in regard to the right hon. Gentleman's reply that when the time comes for discussing another tax the Government will rely upon that as the occasion upon which to deal with the question of its merits. Because this is the smaller grievance the Government have no right to pass it by without offering a single argument in its defence. That is an entirely novel method of dealing with a Finance Bill. I think the only Member of the Government who has been spared by his colleagues, and has spared us in regard to this Finance Bill, is the First Lord of the Admiralty. We have now had the Postmaster-General. We have had all the legal representatives of the Government, we have had the Chancellor of the Duchy of Lancaster, in fact we have had the whole gamut of ability on the Treasury Bench, and everybody has spoken on this Bill except the Secretary for the Treasury and the First Lord of the Admiralty. We are told on the first occasion when this question of principle comes up "we will not discuss this matter on its merits now but we will wait until it comes up in another form." The Government will not now condescend to give us the reasons they rely upon for defending their policy.
    Mr. RIDSDALE: It seems to me there is an essential difference between the case of husband and wife in regard to the Super-tax and the ordinary Income Tax. In one case it is to the interests of both parties to try and get the abatement, but in the other case the Government have got to enforce their tax upon two people, and I do not see how the husband is to find out from his wife what her income is if she does not choose to tell him. In the first case obviously it is to the interest of both parties to tell the other what their respective incomes are in order to obtain from the Government the abatement they both desire,
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    but when both parties know that this principle means so much money to be taken out of their pockets, I can conceive that each party, however devoted they may be to each other in their ordinary married life, will at once button up all sources of information. The only person who will profit by this is the Government. It seems to me that there is a most essential difference, and I hope the Government will not take up this non-possumus attitude, and say this is not the proper place to discuss it.
    Mr. RAWLINSON: Year after year the joining together of incomes for the purpose of Income Tax has been attacked in this House, but no answer has ever been given from the Treasury Bench. The difficulties of finding the money have been put forward. Year by year I have raised the point, and the arguments have been kept back for the last two or three years. There has never been an attempt to defend the principle of joining together the incomes of husband and wife for the purposes of the Income Tax. The Government have now gone further on this evil course. They certainly ought not to extend the injustice unless they can defend their proposal. They have not attempted to do that by argument to-night, or upon any previous occasion. If we lose this Amendment, the Government, when we come to the new clause standing in my name dealing with this point, will surely at once say that the Committee decided there was no injustice in the matter at all, and, if the husband and wife are to be taken as one for the purpose of the Super-tax, then they ought to be taken as one for the purpose of the other tax as well. We ought for that reason to press this upon the attention of the Government. Since I brought the matter before the House on a previous occasion various people have written to me upon the subject, and it has really been a revelation to me to learn of the possibilities of the future. I have had in my professional capacity a certain amount of experience in matrimonial disputes, but, even with that knowledge, I have been perfectly surprised at the cases laid before me during the past year showing the general ignorance of the husband as to the income of the wife. I can give cases where the husband has literally gone so far as to refrain from asking his wife the amount of her income sooner than give the information in order to apply for the exemption.
    Mr. RIDSDALE: Perhaps they lived separately.
    Mr. RAWLINSON: No, they were not separated. There is a separation of income for all purposes except for the purpose of taxing them. I ask the Government to deal justly in this case, and I think a strong case has been made for not extending the present injustice.
    Mr. ALFRED LYTTELTON: I think the point raised by the hon. Member for Brighton (Mr. Ridsdale) deserves an answer from the Government. I derive my information on this matter almost entirely from a letter that appeared in "The Times" from Lady MacLaren, in which she dealt with this question with great knowledge and an apparent wide source of information from other ladies. The point made in that letter was that made by the hon. Member opposite very strongly. It was that a duty is cast upon the husband by the present Bill to return his wife's income for the purpose of ascertaining whether the aggregation of the two incomes renders them subject to the Super-tax, whereas there is no reciprocal obligation on the part of the wife to return, and therefore to ascertain her husband's income. I understand the fact that the husband conceals the amount of his income from his wife and the wife has no opportunity of concealing her income from the husband, is a source of great indignation and grievance to a part of a numerous section of the community. It is said that the wife is often induced to sacrifice the entirety of her income for the common good, whereas the husband, enjoying a much larger income, conceals the amount, and spends the greater portion of it on himself. I express no opinion as to whether this practice is largely extended or not. I understand from those who know a good deal about it that it is not very uncommon, but, whether it be common or uncommon, it is certainly a matter which requires the consideration of the Government, and, I think, an answer by its representative now—certainly, at any rate, so far as this matter is concerned. How are you going to enforce the obligation upon the husband to return his wife's income? You impose upon the husband a statutory obligation, not merely to return his own income of which he has knowledge, but also his wife's income of which he may have no knowledge. I see no answer to the problem put by the hon. Gentleman opposite. Notwithstanding the utmost devotion and tenderness existing between the pair, the wife may, out of that very devotion to the husband, say: "Most certainly I shall not tell
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    you what the amount of my income is, because, by telling you, I might make you as well as myself and my children suffer." The Postmaster-General, from his knowledge lately acquired upon this subject, may give us information as to how they are going to prevent this Statute becoming ridiculous by the steady refusal of wives to impart that information to their husbands, which it is the husband's statutory obligation to impart to the tax-gatherer.
    Mr. WALTER GUINNESS: One of the arguments used by the Postmaster-General was that this was a small amount, and that the additional taxation would not be great. The greatest hardship will arise in the case of those couples who have incomes only just above the Super-tax limit. If one partner has £2,000 and another £3,000, it is very hard, just because they are married, that they should pay an extra tax of £50 a year. After all, they do not get the full benefit of the joint incomes. They benefit, no doubt, to some extent in household expenses, but that only applies to husband and wife living together. If they are separated, I believe, there is no possible redress, and they will still be looked upon as one for the purpose of the Income Tax, and presumably also for the purpose of the Super-tax. Surely, if it is fair to lump the incomes of husband and wife together for the purpose of the Income Tax, you ought to lump the incomes of brother and sister when they live together. As it is at the present time it is a very great discouragement of marriage. The partners have their own private expenditure—the husband perhaps on sport and business, and the wife on dress—and I do not see that it can be argued in any way that the other partner gets any benefit. Unquestionably the bachelor living alone is very much better off than a married couple, if he has the same income, and it seems to me this is a direct discouragement of marriage. I think it is most inadvisable to continue this punishment. I can only imagine the Government foresee that Radical finance is going to land half the population in the workhouses, and that it is a good thing to keep the population down. We have had no answer as to how the Revenue authorities are going to enforce this new duty on the husband. Surely if the wife becomes a passive resister, and refuses to tell the husband, it would be most unjust to have the husband up and fine him £50, and also £50 for every day he fails to produce the return. I think it would be so unjust to

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    do that that no court would impose the fine, and the whole provision would become a farce. You may get cases where possibly a man's whole income will be absorbed in paying the Super-tax on his wife's income. If he has only £150, and if, owing to his wife's income, they are subject to the Super-tax, how are you to get the wife to pay? Presumably the obligation will be upon the husband, and there will be no way of getting it back from the wife. The right hon. Gentleman stated that this was not a new point, that it had been brought forward for many years, and therefore it might be allowed to continue a little longer as an old standing grievance, but I think there is a far greater case made out for dealing with it now. It is a very much heavier tax which is now being imposed.
    Mr. CAVE: I do not think the Postmaster-General has quite correctly represented the attitude taken up last week by my right hon. Friend the Member fox East Worcestershire (Mr. A. Chamberlain), who suggested that the incomes of husband and wife should either be treated as one for all purposes or as separate for all purposes. He was in favour of making them one for all purposes, both Income Tax and Legacy Duty. But if you make a wife pay Death Duties on a legacy from her husband you greatly strengthen the argument for making the incomes separate for all purposes. I hope we shall get an answer to our question on its merits. I do not look on this as a question of the rights of women. It is really a question of the rights of man. The husband does not receive his wife's income, yet he may be called upon to pay Super-tax in respect of it. He may never touch that income. And yet he is to pay the tax upon it? He may be unable to recover a farthing from his wife, who may have £5,000 income, whereas his income is only £500. Surely it would be far better to make the incomes separate for all purposes. I quite understood from the Postmaster-General that the Government have an open mind on this question.
    Mr. BUXTON: If so, I am afraid I gave a wrong impression to the hon. Gentleman. This is a question of very considerable magnitude. It is a question of such complexity that really any Amendment of the law should not be introduced here. I am sorry if I have in any way misrepresented
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    the view of the Chancellor of the Exchequer. What I did say was that the right hon. Gentleman had emphasised the view that there was great objection to the proposal to divide the incomes instead of aggregating them. I quite agree that the proposal with regard to Death Duties has made it somewhat more difficult to do that. Our real object is that if you have a joint household, that household shall be taxed on the whole income. That is really the most important object, and if you allow a separate system, there is nothing to prevent incomes being divided between husband and wife in order to reduce or escape Income Tax. The hon. Member asked this question: Supposing husband and wife each have a separate income, the two together being above £5,000? The income of the husband, being very much below, he returns his own income, and the wife—out of wifely affection—declines to give him any information with regard to her income. He therefore returns the income as under £5,000 instead of over. No difficulty whatever would arise in such a case. The Inland Revenue authorities, if they were aware of it, as no doubt they would be, would assess the husband at what they considered to be the joint income, and, if he declined to pay, and declared that the joint income was below £5,000, he would have to give proof of it. If it were shown that it was below, of course he would be free; but, on the other hand, he would be called upon to pay the tax and a fine. That is the real remedy and that is the answer to the hon. Gentleman.
    Mr. RAWLINSON: I put the perfectly honest case of the husband who was unable to obtain from his wife information as to her income: How can he get it?
    Mr. BUXTON: If the two incomes together are, in the opinion of the Inland Revenue authorities, above £5,000, they assess him at that amount, and the onus of proof lies with him to show that it is below. If he is unable to show that, the assessment stands. There may be a certain number of cases in which it is not possible to give such proof; but, as a fact, these conundrums solve themselves, and the Commissioners believe that under the ordinary system they will be able to obtain the proper information.
    Mr. PRETYMAN: I sympathise with the Postmaster-General in the position in which he finds himself. He cannot answer the question put to him. That question

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    was: What means can possibly be taken to force a husband to make a return of his wife's income when she refuses to say what it is?
    Mr. BUXTON: Assess him.
    Mr. PRETYMAN: On what?
    Mr. BUXTON: On what they believe to be the joint income. Then the onus of proof rests with him.
    Mr. PRETYMAN: How can he prove it? He honestly returns his own income at £2,000 a year. He does not know what his wife's income is. I cannot imagine that any proposal to assess him at over £5,000 would be supported in a court of law. It is an extraordinary situation in which to put a man. He honestly says, "My income is £2,000 a year. I do not know what my wife's income may be." If you assess him beyond £5,000 who is to pay the Super-tax?
    Mr. BUXTON: On the present Amendment no question of partnership income is raised. As I have said, it is open to the Income Tax Commissioners to fix the amount, and the man can appeal against the amount at which they have assessed him. These difficulties have not arisen in the past, although the husband's and wife's incomes have been aggregated together, and I have very great doubts indeed whether they will arise in the future; if they do the House has given full powers to the Commissioners to settle the matter satisfactorily.
    Mr. PRETYMAN: The right hon. Gentleman's own answer has shown that there are difficulties which have arisen. He said that a difficulty had arisen in cases in which the husband did not know his wife's income. If these cases have arisen in the past therefore they may arise again.
    Mr. BUXTON: What I had in my mind was that the man returns his income and then he is assessed, and he pays on the assessment. Then I had in my mind one special case in which a husband did return his own income, but declined to give that of his wife. He was assessed on the two, however, and ultimately paid the two.
    Mr. PRETYMAN: Those were cases where doubt had arisen under the present law, where a man has to return his income in order to obtain an abatement. In, this case the matter is different, because if a man returns his income he is super-taxed, and it does seem to me a curious point of
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    view to take that the Committee cannot deal with this point this year because the Super-tax is being imposed this year. If next year we raise this question we shall be told that this House has assented to the principle of the matter, and we shall get no redress. This point has created a very strong feeling of indignation at the unfairness throughout the country. Everybody can see that there are a good many injustices in this Bill which are rather difficult to understand, but in this particular case the injustice is perfectly obvious. Here in one and the same Bill you are proposing two new taxes. The first is a Super-tax on households, and for that purpose you treat the household as one and tax everything that goes into it, but if one member of that household dies, the very sum which you have aggregated for the purpose of Income Tax and of Super-tax, under a proposal introduced by this very same Bill, is to be treated as a legacy from one part of the household to the other, and both these proposals are entirely new. That is the gravamen of our charge, and it really is not touching our point at all for the right hon. Gentleman to talk about the position under the existing Income Tax. The point we make is this, that in this particular Bill these two new charges, both taking a diametrically opposite point of view of the income or capital of the household—these two new departures are being made against the subject, and in one case you treat the income as a whole for the purpose of taxing it, and in another case you say if one member of the household dies it is to be treated as separate. It is a new injustice in both cases, and it does not touch the old injustice at all, and because you can show that a subject has suffered in the past, I should say that is a reason for relieving him in the future; but instead of doing that you bring in a new tax which accentuates the vice of the old tax, and makes it a great deal worse.
    Mr. P. F. CURRAN: The hon. Member for North-West Manchester (Mr. Joynson-Hicks), in a most eloquent speech, not only put in a plea for giving women votes, but also for giving them a seat in this House, so that they could speak for themselves when matters of income came up. I earnestly hope that in some dim and distant future his party will take his advice and see that it is carried out. The hon. Baronet the Member for the City of London (Sir F. Banbury) spoke in a highly humorous way, more humorous than usual,

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    on this matter, and while he is an authority on many questions, I do not see why he should be an authority upon wives' incomes, because, I am credibly informed, that he is a bachelor, and, therefore, all that he has said must be purely in an amateurish sense. We on the Labour Benches listen to these discussions with a good deal of amusement. We know our wives' incomes, because they get them from us, and it does not enhance the rich people in our estimation to hear of wives endeavouring to conceal from their husbands the amount of money they have per annum. I feel, as far as I am concerned, that the husband, if he is the Income Taxpayer of the house, ought to know the amount that he is paying that Income Tax for, and in that sense I should say that a woman who has property and who marries a husband who has property and capital, ought to have sufficient confidence in that gentleman, seeing that she has married him, to allow him to understand exactly the amount of money she has as an income, and if she has not that confidence in him why did she marry him? The hon. Member for the City of London says she did not find him out.
    Sir F. BANBURY: No; I said she might have found him out afterwards.
    Mr. CURRAN: Then, again, there is the Divorce Court. We never hear of the Divorce Court, except from the newspapers. You do not hear much about working-class ranks in the Divorce Court, but we do hear of the Divorce Court in regard to the wealthy classes, but that, of course, is nothing to do with the point at issue. My point is this, that when a man and a woman are prepared to join hands for the purpose of bringing forth a rising generation they ought to have sufficient confidence in each other, not only the wife to allow the husband to understand how much income she has, but also the husband to allow the wife to understand how much income he has. Hon. Members above the Gangway say all legalised methods of introducing restrictions are grandmotherly legislation, but I should say it is the essence of grandmotherly legislation to introduce into any statute any law to compel either a woman or a man to reveal their income when they ought to have sufficient confidence in themselves to be prepared to be honest with each other, and if they are not honest with each other they cannot be honest with anyone else.
    Sir F. BANBURY: The Postmaster-General wound up his speech by saying that the Inland Revenue had no doubts upon the matter. I do not suppose they have. They are not going to pay the Super-tax. All they have to do is to collect it, and they have not any doubt that they will be able to collect it, and the more they collect the better for them. Whether or not the people who have to pay are justly taxed does not matter in the least to them. I think, therefore, that part of the right hon. Gentleman's argument falls to the ground. The right hon. Gentleman never answered the point which was put to him, that if a wife does not choose to tell her husband what her income is, and the Income Tax Commissioners assessed him at an arbitrary amount, how is he to disprove it? The hon. Member (Mr. Curran) says she ought to. We are not legislating for what ought to be done, but for what is done, and we cannot legislate for every one who is perfect. Whether or not a wife ought to tell her husband is a matter between the husband and the wife, and it does not concern anyone else. But does the right hon. Gentleman remember the Married Women's Property Act. For a great number of years steps have been taken to give to the married woman her property absolutely. Before the Married Women's Property Acts were passed the property of a woman when she married became the property of her husband. Then no doubt this Bill would have been of value, but under the Married Women's Property Act her property is her own, just as much as the husband's is his own, and if she likes to say, "It is my property, and I will not allow you be interfere with it," what legal power has the husband to say, "I intend to investigate your property, because the Inland Revenue have assessed me at such and such a sum." He has not the power to prove that the assessment is wrong. The right hon. Gentleman passed over very lightly what is the real gravamen of the wrong-doing of this Clause, and that is that under the Death Duties husband and wife are treated as two separate entities, and under the Income Tax they are treated as one. I defy hon. Members to say that is right. The right hon. Gentleman said he could not make any alteration in this Budget. Why not? The Super-tax is a new tax. If it can be proved that the manner of levying it is wrong, there is no difficulty in altering it. The real answer which the right hon. Gentleman

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    ought to have made, if we had been able to see into his heart, or rather into the heart of the Inland Revenue officials, is that they want to get as much money as they can, and they will get more money if in the Death Duties they treat husband and wife separately, and if they treat them as being one person for the purposes of Income Tax. That is the only answer. Is it possible that any right hon. Gentleman, even in this House of Commons, can attempt to justify a tax which is imposed so as to take the utmost possible farthing out of two people in one case and impose it absolutely in a different way in the other case with the same object of taking the largest amount of money they can extract? The thing will not hold water for a moment. Either the right hon. Gentleman must alter his Death Duties or he must alter this tax. I do not know that we should have very much to say if the two taxes were made similar, but with the two taxes different, it is impossible that they could be passed except by a mechanical majority which will vote anything that they are told to.
    I would seriously put to the right hon. Gentleman whether he cannot see his way to give way upon this point. It is really a very serious point, and it is serious because it is so unjust. It is not a question of the payment of the amount, but of the injustice which arises from the two different cases, the Death Duties and the Income Tax, being dealt with in two different ways. There really is nothing to justify it, and the only argument which the right hon. Gentleman put forward, that he could not alter it this year, was absurd on the face of it, because he is imposing the tax, and he can impose it in any kind of way he chooses, and we are still only on the Committee stage, and there is plenty of opportunity to alter it. It is perfectly evident that the cases which have been given by my hon. Friend beside me are almost bound to arise. I do not see how it can be avoided. If the Liberal party wishes it to go forth that where a man has £500 a year, because his wife has £4,600 a year, all of which she keeps to herself, he is to be taxed on £5,000 a year, it is quite possible that we may be gaining a few more votes than hon. Gentlemen opposite expect we shall. Personally, I am not at all sure that I should be very much hurt if the right hon. Gentleman does not remedy the injustice, because I think the more injustice there is in this Bill the better for the country.
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    [Laughter.] Certainly; because it will open the eyes of people to what they are being exposed to by hon. Members opposite. If they can be soothed over by being led to believe that the thing is not so very bad after all, they may be deceived another time, but when the injustice is so flagrant, as in this case, I am rather glad that the right hon. Gentleman has not accepted the Amendment.
    Mr. SNOWDEN: My hon. Friend expressed himself strongly in favour of "votes for women," and even of the right of woman to sit in this House. I am afraid that, notwithstanding the enthusiasm in regard to that question, he does not quite understand what is the motive behind the present agitation for the enfranchisement of women. The motive is that women may belong to themselves, that they may own their property, and they may not be in the eyes of the law economic ciphers. The right hon. Gentleman opposite gave two reasons which he described as strong reasons against the acceptance of this Amendment. The first was that for the purpose of assessing for Income Tax the household is regarded as a unit. I do not think that is the case at all. I have always understood that the Income Tax was a personal tax. It is only where husband and wife are assessed together that Income Tax can be regarded as a household tax. In the case of a son over 21 years of age his income is not taken as that either of the husband or of the wife. The other reason which the right hon. Gentleman gave in support of the present system was that there might be temptation for the husband to divide his property with his wife, and thus evade the tax altogether, or have it assessed at a lower rate. But I do not think that is the ease at all. It is an easy matter for the surveyor of taxes to discover if something of that kind has been done. He has before him the particulars of the woman's income, and he is able to ascertain whether it is derived from a profession or business which is her own, or whether it is derived from investments she has had for a number of years in her own possession. I do not think the reasons given by the Postmaster-General are a sufficient answer against the acceptance of this Amendment. It is not often I agree with the hon. Baronet the Member for the City of London (Sir F. Banbury), but I think he hit the nail on the head when he referred to the Married Women's Property Act. The Postmaster-General said that this system

    103
    of regarding the wife's income and the husband's income together had been followed since the Income Tax was first introduced. But it should be remembered that at the time it was first introduced a married woman had no right to own property. This system, therefore, is a survival of that principle, and it ought to be repealed. If I could have my way in this matter, I would certainly support an Amendment going further and having the effect on all occasions of treating the income of the wife separately from that of the husband. If the hon. Member divides the Committee on this Amendment, I will go into the Lobby in support of it.
    9.0 P.M.
    Mr. W. PEEL: The remarkable thing about the answer of the Postmaster-General is that he has made no attempt whatever to defend the principle of the tax. He gave us two reasons in support of the present system, and why the Amendment should not be accepted, namely, practice and expediency. I agree with the hon. Member for Blackburn (Mr. Snowden) in his objection to this form of assessment. The suggestion of lumping the two incomes together is not so much against the principle of the Married Women's Property Act as it is absolutely against the principle of this tax in itself. It cuts at the root of the whole of the tax, which is that it is an individual tax. It is because it is an individual tax that you have this new system of assessment which involves making a man assess himself. The rest of the tax is collected at the source. Therefore, the contradiction involved in putting together the incomes of husband and wife is not a mere contradiction of expediency or practice, but of the root principle of the whole tax. One of the practical objections stated to the Amendment is that in the case of husband and wife there might be an arrangement by which property could be transferred from one to the other. The suggestion was that there might be fraud. Are you going to lump their incomes together for the purpose of this tax, because there may be fraud? That seems to me to be far too large and broad a reason for supporting the system. In all cases there might be fraud. If there really is a division of property between husband and wife it seems to me that that is not a thing that could be seriously objected to, considering that there is the clear position which women have obtained under the Married Women's Property Act.
    104
    To say that you object to a genuine dividing of the property because it might reduce the yield of this new tax, is to give a strong argument against the tax altogether. The only reason brought forward in support of this system is that the household should be treated as a unit. The hon. Member for Blackburn has pointed out that that is not a reason at all. There are cases where sister and brother live together in the same household. Yet even in that case if that principle were applied you could lump the whole thing together. Why should you select this particular case as one of a joint household, and say that in that case, in order to avoid fraud, you are going to tax them altogether? The fraud may arise in the same way with brothers and sisters, yet you do not say in that case you are going to lump them together. I have not the slightest doubt that this would never have been enacted in this way if it had not been that the tax had started in a particular way. The Super-tax has grown out of the Income Tax, and if the Income Tax had not started in this form 60 or 70 years ago, when totally different views prevailed as to the relations of man and woman towards each other, this proposal would not be made. It is very much the same kind of principle as that which we heard of in the previous discussion on the licences when the question was whether the premises of the publican should be taken in the assessment, and then we were told that that was to be done because it was started in the year 1825, absolutely forgetting the enormous changes that had taken place in the law of this country during the last 70 years. To say that because this was the state of things in 1842, with a totally different tax under totally different conditions, therefore this is a singularly opportune moment for introducing this change, I feel would require all the ingenuity of the Postmaster-General to defend. It seemed to me—I may be wrong—that his sympathies were really with us, and that he looked upon the proposal as indefensible in principle and only to be defended on the ground of temporary expediences.
    Mr. EVELYN CECIL: I want to enforce the arguments which have been addressed to the Government, because I have looked up what the Chancellor of the Exchequer himself said upon his particular matter as recently as last Tuesday. On that occasion we were discussing the relative positions of husband and wife as regards Estate Duty. We pointed out from this

    105
    side of the House very much the same objections which have been urged upon the Postmaster-General to-night. We urged, as has been urged by my hon. Friends this evening, that it was very unfair that the incomes of husband and wife should be lumped together for the purpose of Income Tax, and that they should be taken separately for the purpose of Legacy and Succession Duty. The Chancellor of the Exchequer said that he was not responsible for the difference that had been made and that he proposed to continue it. But this is quite a different case. Here is the new tax which has been imposed with a new situation which is entirely within the control of the Chancellor of the Exchequer himself, and it is not, therefore, in the least necessary for him to impose this injustice. If he chooses he can perfectly well avoid it. He said: "The hon. Member" (that is myself) "thinks that the wife ought to be exempt from this additional impost on the ground that husband and wife are treated as one person so far as Income Tax is concerned. I agree that on the face of it it does seem unfair that where the State can charge increased Income Tax by treating husband and wife as one it should do so, but where it can, as in the case of Death Duties, get greater taxation by treating them separately then it deals with them in that manner. I quite agree that the State is rather unfair, but I am not responsible for that; I am not making a new law. I am not differentiating for the first time." That may have been a good defence last Tuesday, but it cannot possibly be now, because here the Chancellor is making a new law, and is differentiating for the first time. Under those circumstances I cannot help appealing to my right hon. Friend the Postmaster-General as to whether they are carrying out logically the defence of the Chancellor of the Exchequer of last Tuesday, and whether they are on this occasion differentiating for the first time, because the Chancellor of the Exchequer is really making a new law. I appeal to the Government, in view of the Chancellor of the Exchequer's statement—and I wish that he was here himself to hear me; it would very much assist the Debate—to make this alteration. If they cannot do so on the spur of the moment, because they have not the Chancellor of the Exchequer to consult, I would very humbly suggest that they should send for him. At any rate, it does seem very unsatisfactory to come to a decision on this Debate and to take a Division without the Chancellor of the Exchequer being thoroughly aware
    106
    that in this matter the defence of last Tuesday is in no way applicable to-day.
    Mr. JOHN WARD: I hope that those who are responsible for the decision with reference to this matter will not take any notice of the appeal that has been made by the hon. Gentleman who has just sat down. While we were debating incomes under £5,000 this afternoon the Motion was carried that the law relating to these incomes shall remain as it has always been, and I suppose the income of the household to be taxed will be treated as one except where there are sons over 21 years of age. But directly we get to the higher degrees of wealth, to incomes over £5,000 a year—because there is no doubt that that is what the Motion is now—we hear the squealing again. We pass without a Division the Clause dealing with incomes under £5,000. [An HON. MEMBER: "On all incomes."] We are dealing now with incomes of over £5,000 a year, and then the squealing begins again. My hon. Friend the Member for Blackburn (Mr. Snowden) was swayed by some sentimental reason with which I sympathise to a very great extent—that is, the wish of women, the greater part of the human race, for economic freedom. I sympathise with that, and I am sure he and the Member for Jarrow, who spoke before, also does. But, at the same time, that sentimental reason is not in the least going to take me into the Lobby with the idea of aiding people whose income is over £5,000 a year by a manipulation or transference of their wealth to another member of the family to escape this tax. It is a mere attempt on the part of the extremely wealthy to evade their tax. I trust, therefore, the Government will not give way on this matter. They have given way quite enough to the wealthy members of our community to-day—a great deal more, I think, than they are justified in doing. I thought they were going to stick to the Budget, but evidently every attack made by the most wealthy portion of our community is met immediately by concessions. I hope, at least on this occasion, at any rate, there will be no further concession.
    Mr. BUXTON Mr. BUXTON rose in his place, and claimed to move, "That the Question 'That the word "separate" be there inserted,' be now put."
    Question put, "That the Question be now put."
    The Committee divided: Ayes, 170; Noes, 82.

    Division No. 683.]

    AYES.

    [9.16 p.m.

    Agar-Robartes, Hon. T. C. R.

    Gladstone, Rt. Hon. Herbert John

    Norman, Sir Henry

    Agnew, George William

    Glendinning, R. G.

    Nuttall, Harry

    Alden, Percy

    Glover, Thomas

    O'Brien, Patrick (Kilkenny)

    Allen, A. Acland (Christchurch)

    Gooch, George Peabody (Bath)

    O'Connor, T. P. (Liverpool)

    Allen, Charles P. (Stroud)

    Gulland, John W.

    Partington, Oswald

    Ashton, Thomas Gair

    Harcourt, Rt. Hon. L. (Rossendale)

    Pearce, Robert (Staffs, Leek)

    Atherley-Jones, L.

    Harcourt, Robert V. (Montrose)

    Pickersgill, Edward Hare

    Baker, Sir John (Portsmouth)

    Hardie, J. Keir (Merthyr Tydvil)

    Pollard, Dr. G. H.

    Balfour, Robert (Lanark)

    Hardy, George A. (Suffolk)

    Radford, G. H.

    Barker, Sir John

    Harmsworth, Cecil B. (Worcester)

    Rea, Walter Russell (Scarborough)

    Barran, Rowland Hirst

    Harmsworth, R. L. (Caithness-shire)

    Richards, T. F. (Wolverhampton, W.)

    Barry, Redmond J. (Tyrone, N.)

    Haworth, Arthur A.

    Roberts, G. H. (Norwich)

    Beck, A. Cecil

    Hedges, A. Paget

    Robinson, S.

    Bell, Richard

    Henderson, J. McD. (Aberdeen, W.)

    Roch, Walter F. (Pembroke)

    Bennett, E. N.

    Henry, Charles S.

    Rogers, F. E. Newman

    Berridge, T. H. D.

    Herbert, Col. Sir Ivor (Mon. S.)

    Rowlands, J.

    Bethell, T. R. (Essex, Maldon)

    Higham, John Sharp

    Runciman, Rt. Hon. Walter

    Black, Arthur W.

    Hobhouse, Rt. Hon. Charles E. H.

    Russell, Rt. Hon. T. W.

    Bottomley, Horatio

    Hodge, John

    Samuel, Rt. Hon. H. L. (Cleveland)

    Boulton, A. C. F.

    Holt, Richard Durning

    Samuel, S. M. (Whitechapel)

    Bowerman, C. W.

    Hooper, A. G.

    Schwann, C. Duncan (Hyde)

    Bramsdon, Sir T. A.

    Hope, W. H. B. (Somerset, N.)

    Sherwell, Arthur James

    Brigg, John

    Horniman, Emslie John

    Shipman, Dr. John G.

    Brunner, J. F. L. (Lancs., Leigh)

    Howard, Hon. Geoffrey

    Snowden, P.

    Burnyeat, W. J. D.

    Idris, T. H. W.

    Soares, Ernest J.

    Burt, Rt. Hon. Thomas

    Isaacs, Rufus Daniel

    Stanley, Hon. A. Lyulph (Cheshire)

    Buxton, Rt. Hon. Sydney Charles

    Johnson, John (Gateshead)

    Steadman, W. C.

    Byles, William Pollard

    Jones, William (Carnarvonshire)

    Stewart, Halley (Greenock)

    Carr-Gomm, H. W.

    Jowett, F. W.

    Stewart-Smith, D. (Kendal)

    Causton, Rt. Hon. Richard Knight

    Kekewich, Sir George

    Straus, B. S. (Mile End)

    Cawley, Sir Frederick

    King, Alfred John (Knutsford)

    Strauss, E. A. (Abingdon)

    Cherry, Rt. Hon. R. R.

    Laidlaw, Robert

    Summerbell, T.

    Cleland, J. W.

    Lamb, Ernest H. (Rochester)

    Thomas, Sir A. (Glamorgan, E.)

    Clough, William

    Lambert, George

    Thomasson, Franklin

    Clynes, J. R.

    Lamont, Norman

    Thompson, J. W. H. (Somerset, E.)

    Collins, Stephen (Lambeth)

    Layland-Barratt, Sir Francis

    Tomkinson, James

    Collins, Sir Wm. J. (St. Pancras, W.)

    Lea, Hugh Cecil (St. Pancras, E.)

    Toulmin, George

    Corbett, C. H. (Sussex, E. Grinstead)

    Lehmann, R. C.

    Trevelyan, Charles Philips

    Cory, Sir Clifford John

    Lever, A. Levy (Essex, Harwich)

    Verney, F. W.

    Cotton, Sir H. J. S.

    Levy, Sir Maurice

    Vivian, Henry

    Cox, Harold

    Lewis, John Herbert

    Walker, H. De R. (Leicester)

    Craig, Herbert J. (Tynemouth)

    Lloyd-George, Rt. Hon. David

    Ward, John (Stoke-upon-Trent)

    Crosfield, A. H.

    Macdonald, J. M. (Falkirk Burghs)

    Wardle, George J.

    Curran, Peter Francis

    Maclean, Donald

    Wason, Rt. Hon. E. (Clackmannan)

    Dalziel, Sir James Henry

    MacVeagh, Jeremiah (Down, S.)

    Wason, John Cathcart (Orkney)

    Davies, Ellis William (Eifion)

    MacVeigh, Charles (Donegal, E.)

    White, Sir George (Norfolk)

    Dewar, Arthur (Edinburgh, S.)

    McKenna, Rt. Hon. Reginald

    White, J. Dundas (Dumbartonshire)

    Dobson, Thomas W.

    M'Laren, H. D. (Stafford, W.)

    White, Sir Luke (York, E. R.)

    Duncan, J. Hastings (York, Otley)

    M'Micking, Major G.

    Whittaker, Rt. Hon. Sir Thomas P.

    Dunn, A. Edward (Camborne)

    Maddison, Frederick

    Wiles, Thomas

    Edwards, Sir Francis (Radnor)

    Mallett, Charles E.

    Wilkie, Alexander

    Essex, R. W.

    Markham, Arthur Basil

    Wilson, Hon. G. G. (Hull, W.)

    Everett, R. Lacey

    Mond, A.

    Wilson, P. W. (St. Pancras, S.)

    Fiennes, Hon. Eustace

    Money, L. G. Chiozza

    Wilson, W. T. (Westhoughton)

    Findlay, Alexander

    Morgan, J. Lloyd (Carmarthen)

    Fuller, John Michael F.

    Muldoon, John

    TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton.

    Fullerton, Hugh

    Myer, Horatio

    Gibb, James (Harrow)

    Newnes, F. (Notts, Bassetlaw)

    NOES.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Craik, Sir Henry

    Hill, Sir Clement

    Arkwright, John Stanhope

    Dickson-Poynder, Sir John P.

    Hills, J. W.

    Barcarres, Lord

    Douglas, Rt. Hon. A. Akers

    Hope, James Fitzalan (Sheffield)

    Baldwin, Stanley

    Duncan, Robert (Lanark, Govan)

    Joynson-Hicks, William

    Banner, John S. Harmood-

    Faber, George Denison (York)

    Keswick, William

    Baring, Capt. Hon. G. (Winchester)

    Fell, Arthur

    Kimber, Sir Henry

    Beach, Hon. Michael Hugh Hicks

    Fletcher, J. S.

    King, Sir Henry Seymour (Hull)

    Beckett, Hon. Gervase

    Forster, Henry William

    Lambton, Hon. Frederick William

    Bridgeman, W. Clive

    Foster, P. S.

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Bull, Sir William James

    Gardner, Ernest

    Lonsdale, John Brownlee

    Butcher, Samuel Henry

    Gooch, Henry Cubitt (Peckham)

    Lowe, Sir Francis William

    Carlile, E. Hildred

    Gordon, J.

    Lyttelton, Rt. Hon. Alfred

    Carson, Rt. Hon. Sir Edward H.

    Gretton, John

    M'Arthur, Charles

    Cave, George

    Guinness, Hon. W. E. (B. S. Edm'ds.)

    M'Calmont, Colonel James

    Chamberlain, Rt. Hon. J. A. (Worc'r.)

    Haddock, George B.

    Magnus, Sir Philip

    Clive, Percy Archer

    Hamilton, Marquess of

    Mason, James F. (Windsor)

    Clyde, J. Avon

    Hardy, Laurence (Kent, Ashford)

    Meysey-Thompson, E. C.

    Coates, Major E. F. (Lewisham)

    Harris, Frederick Leverton

    Mildmay Francis Bingham

    Courthope, G. Loyd

    Harrison-Broadley, H. B.

    Morpeth, Viscount

    Craig, Captain James (Down, E.)

    Helmsley, Viscount

    Oddy, John James

    108

    109

    Parker, Sir Gilbert (Gravesend)

    Renton, Leslie

    Thomson, W. Mitchell- (Lanark)

    Parkes, Ebenezer

    Roberts, S. (Sheffield, Ecclesall)

    Walker, Col. W. H. (Lancashire)

    Pease, Herbert Pike (Darlington)

    Ronaldshay, Earl of

    Warde, Col. C. E. (Kent, Mid)

    Peel, Hon. W. R. W.

    Rutherford, John (Lancashire)

    Willoughby de Eresby, Lord

    Powell, Sir Francis Sharp

    Rutherford, Watson (Liverpool)

    Pretyman, E. G.

    Salter, Arthur Clavell

    Randles, Sir John Scurrah

    Sheffield, Sir Berkeley George D.

    TELLERS FOR THE NOES.—Sir

    Ratcliff, Major R. F.

    Stanier, Beville

    F. Banbury and Mr. Evelyn Cecil

    Rawlinson, John Frederick Peel

    Starkey, John R.

    Question put accordingly.
    The Committee divided: Ayes, 87; Noes, 176.

    Division No. 684.]

    AYES.

    [9.25 p.m.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Foster, P. S.

    Oddy, John James

    Arkwright, John Stanhope

    Gardner, Ernest

    Parker, Sir Gilbert (Gravesend)

    Balcarres, Lord

    Gooch, Henry Cubitt (Peckham)

    Parkes, Ebenezer

    Baldwin, Stanley

    Gordon, J.

    Pease, Herbert Pike (Darlington)

    Banbury, Sir Frederick George

    Gretton, John

    Peel, Hon. W. R. W.

    Banner, John S. Harmood-

    Guinness, Hon. W. E. (B. S. Edmunds)

    Powell, Sir Francis Sharp

    Baring, Capt. Hon. G. (Winchester)

    Haddock, George B.

    Pretyman, E. G.

    Beach, Hon. Michael Hugh Hicks

    Hamilton, Marquess of

    Randles, Sir John Scurrah

    Beckett, Hon. Gervrase

    Hardy, Laurence (Kent, Ashford)

    Ratcliff, Major R. F.

    Bowles, G. Stewart

    Harrison-Broadley, H. B.

    Rawlinson, John Frederick Peel

    Bridgeman, W. Clive

    Helmsley Viscount

    Renton, Leslie

    Bull, Sir William James

    Hill, Sir Clement

    Ridsdale, E. A.

    Butcher, Samue Henry

    Hills, J. W.

    Roberts, S. (Sheffield, Ecclesall)

    Carlile, E. Hildred

    Hope, James Fitzalan (Sheffield)

    Ronaldshay, Earl of

    Carson, Rt. Hon. Sir Edward H.

    Keswick, William

    Rutherford, John (Lancashire)

    Cave, George

    Kimber, Sir Henry

    Rutherford, Watson (Liverpool)

    Cecil, Evelyn (Aston Manor)

    King, Sir Henry Seymour (Hull)

    Salter, Arthur Clavell

    Chamberlain, Rt. Hon. J. A. (Worc'r)

    Lambton, Hon. Frederick William

    Sheffield, Sir Berkeley George D.

    Clive, Percy Arthur

    Lane-Fox, G. R.

    Snowden, P.

    Clyde, J. Avon

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Stanier, Beville

    Coates, Major E. F. (Lewisham)

    Long, Col. Charles W. (Evesham)

    Starkey John R.

    Courthope, G. Loyd

    Lonsdale, John Brownlee

    Thomson, W. Mitchell- (Lanark)

    Craig, Captain James (Down, E.)

    Lowe, Sir Francis William

    Walker, Col. W. H. (Lancashire)

    Craik, Sir Henry

    Lyttelton, Rt. Hon. Alfred

    Warde, Col. C. E. (Kent, Mid)

    Dickson, Rt. Hon. C. Scott

    M'Arthur, Charles

    Willoughby de Eresby, Lord

    Douglas, Rt. Hon. A. Akers-

    M'Calmont, Colonel James

    Duncan, Robert (Lanark, Govan)

    Magnus, Sir Philip

    Faber, George Denison (York)

    Mason, James F. (Windsor)

    TELLERS FOR THE AYES.—Mr. Joynson-Hicks and Mr. Leverton Harris.

    Fell, Arthur

    Meysey-Thompson, E. C.

    Fletcher, J. S.

    Mildmay, Francis Bingham

    Forster, Henry William

    Morpeth, Viscount

    NOES.

    Abraham, W. (Cork, N.E.)

    Clough, William

    Grayson, Albert Victor

    Agar-Robartes, Hon. T. C. R.

    Clynes, J. R.

    Gulland, John W.

    Agnew, George William

    Collins, Stephen (Lambeth)

    Harcourt, Rt. Hon. L. (Rossendale)

    Alden, Percy

    Collins, Sir Wm. J. (St. Pancras, W.)

    Harcourt, Robert V. (Montrose)

    Allen, A. Acland (Christchurch)

    Corbett, C. H. (Sussex, E. Grinstead)

    Hardle, J. Keir (Merthyr Tydvil)

    Allen, Charles P. (Stroud)

    Cotton, Sir H. J. S.

    Hardy, George A. (Suffolk)

    Ashton, Thomas Gair

    Cox, Harold

    Harmsworth, Cecil B. (Worcester)

    Atherley-Jones, L.

    Craig, Herbert J. (Tynemouth)

    Harmsworth, R. L. (Caithness-shire)

    Balfour, Robert (Lanark)

    Crosfield, A. H.

    Haworth, Arthur A.

    Barker, Sir John

    Cullinan, J.

    Hedges, A. Paget

    Barran, Rowland Hirst

    Curran, Peter Francis

    Henderson, J. McD. (Aberdeen, W.)

    Barry, Redmond J. (Tyrone, N.)

    Dalziel, Sir James Henry

    Henry, Charles S.

    Beck, A. Cecil

    Davies, Ellis William (Eifion)

    Herbert, Col. Sir Ivor (Mon. S.)

    Bell, Richard

    Dewar, Arthur (Edinburgh, S.)

    Higham, John Sharp

    Bennett, E. N.

    Dilke, Rt. Hon. Sir Charles

    Hobhouse, Rt. Hon. Charles E. H.

    Berridge, T. H. D.

    Dobson, Thomas W.

    Hodge, John

    Bethell, T. R. (Essex, Maldon)

    Duffy, William J.

    Holt, Richard Durning

    Black, Arthur W.

    Duncan, J. Hastings (York, Otley)

    Hooper, A. G.

    Bottomley, Horatio

    Dunn, A. Edward (Camborne)

    Hope, W. H. B. (Somerset, N.)

    Boulton, A. C. F.

    Edwards, Sir Francis (Radnor)

    Horniman, Emslie John

    Bowerman, C. W.

    Essex, R. W.

    Howard, Hon. Geoffrey

    Bramsdon, Sir T. A.

    Evans, Sir S. T.

    Idris, T. H. W.

    Brigg, John

    Everett, R. Lacey

    Isaacs, Rufus Daniel

    Brunner, J. F. L. (Lancs, Leigh)

    Fiennes, Hon. Eustace

    Johnson, John (Gateshead)

    Burnyeat, W. J. D.

    Findlay, Alexander

    Jones, William (Carnarvonshire)

    Burt, Rt. Hon. Thomas

    Fuller, John Michael F.

    Jowett, F. W.

    Byles, William Pollard

    Fullerton, Hugh

    Kekewich, Sir George

    Carr-Gomm, H. W.

    Gibb, James (Harrow)

    King, Alfred John (Knutsford)

    Causton, Rt. Hon. Richard Knight

    Gladstone, Rt. Hon. Herbert John

    Laidlaw, Robert

    Cawley, Sir Frederick

    Glendinning, R. G.

    Lamb, Ernest H. (Rochester)

    Cherry, Rt. Hon. R. R.

    Glover, Thomas

    Lambert, George

    Cleland, J. W.

    Gooch, George Peabody (Bath)

    Lamont, Norman

    Layland-Barratt, Sir Francis

    O'Connor, T. P. (Liverpool)

    Straus, B. S. (Mile End)

    Lea, Hugh Cecil (St. Pancrat, E.)

    Partington, Oswald

    Strauss, E. A. (Abingdon)

    Lehmann, R. C.

    Pearce, Robert (Staffs, Leek)

    Summerbell, T.

    Lever, A. Levy (Essex, Harwich)

    Pickersgill, Edward Hare

    Thomas, Sir A. (Glamorgan, E.)

    Levy, Sir Maurice

    Pollard, Dr. G. H.

    Thomasson, Franklin

    Lewis, John Herbert

    Power, Patrick Joseph

    Thompson, J. W. H. (Somerset, E.)

    Lloyd-George, Rt. Hon. David

    Radford, G. H.

    Tomkinson, James

    Lundon, T.

    Rea, Walter Russell (Scarborough)

    Toulmin, George

    Macdonald, J. M. (Falkirk Burghs)

    Richards, T. F. (Wolverhampton, W.)

    Trevelyan, Charles Philips

    Maclean, Donald

    Roberts, G. H. (Norwich)

    Verney, F. W.

    MacVeagh, Jeremiah (Down, S.)

    Robinson, S.

    Vivian, Henry

    MacVeigh, Charles (Donegal, E.)

    Roch, Walter F. (Pembroke)

    Walker, H. De R. (Leicester)

    McKenna, Rt. Hon. Reginald

    Rogers, F. E. Newman

    Ward, John (Stoke-upon-Trent)

    M'Laren, H. D. (Stafford, W.)

    Rose, Sir Charles Day

    Wardle, George J.

    M'Micking, Major G.

    Rowlands, J.

    Wason, John Cathcart (Orkney)

    Maddison, Frederick

    Runciman, Rt. Hon. Walter

    White, Sir George (Norfolk)

    Mallet, Charles E.

    Russell, Rt. Hon. T. W.

    White, J. Dundas (Dunbartonshire)

    Markham, Arthur Basil

    Samuel, Rt. Hon. H. L. (Cleveland)

    White, Sir Luke (York, E. R.)

    Mond, A.

    Samuel, S. M. (Whitechapel)

    Whittaker, Rt. Hon. Sir Thomas P.

    Money, L. G. Chiozza

    Schwann, C. Duncan (Hyde)

    Wiles, Thomas

    Morgan, J. Lloyd (Carmarthen)

    Sherwell, Arthur James

    Wilkie, Alexander

    Muldoon, John

    Shipman, Dr. John G.

    Wilson, Hon. G. G. (Hull, W.)

    Myer, Horatio

    Smyth, Thomas F. (Leitrim, S.)

    Wilson, P. W. (St. Pancras, S.)

    Newnes, F. (Notts, Bassetlaw)

    Soares, Ernest J.

    Wilson, W. T. (Westhoughton)

    Norman, Sir Henry

    Stanley, Hon. A. Lpulph (Cheshire)

    Nuttall, Harry

    Steadman, W. C.

    TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton.

    O'Brien, Patrick (Kilkenny)

    Stewart, Halley (Greenock)

    O'Connor, John (Kildare, N.)

    Stewart-Smith, D. (Kendal)

    Mr. JOYNSON-HICKS Mr. JOYNSON-HICKS moved, in Subsection (1), after the word "the" ["in respect of the income"], to insert the word "unearned."
    I think I ought to have a good deal of sympathy from hon. Members on bath sides of the House for this Amendment. This is not the case, as the hon. Member for Stoke (Mr. John Ward) said on the last. Amendment, of the rich squealing, though it is quite possible we may have the same kind of appeal to the mob on this Amendment as we had on the last, not that that will have much effect. This raises the question whether it is desirable to tax at the same rate the man who by his energy, brain power, and exercise of capital, is able to make a considerable income at the same rate as the man who simply lives on unearned income. I know there are differences of opinion with regard to the distinction to be drawn between earned and unearned incomes. I know there are differences how to distinguish between that which is in the ordinary acceptation of the term unearned and that which represents the savings of prior earned incomes. That point does not arise on this Amendment. This Amendment seeks, and I think rightly, to exempt from Super-tax the man who is earning an income of £5,000 by the sweat of his own brain. [Laughter.] I have often laid traps for public meetings, and they have often fell into them, but I did not think that would happen here. No one suggests it should; only those who work with their hands. I venture to suggest that men who work with their brains work just as hard as men who work with
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    their hands, and that while the man who works with his hands is entitled to consideration, the man who works with his brains is entitled to the same consideration. While I am prepared to give every consideration to those who work with their hands, I, as a brain worker, claim the same consideration. There seems, again, to be some difference of opinion as to whether the work of a lawyer is that of a brain worker. I do suggest the work of any brain-worker, the big physician who devotes his life to the well-being of the community, or the head of a large business organisation, that such men deserve well of the country. The men who could, if they liked, stop earning four or five thousand, but are prepared to go on extending their business and employ more men, and, incidentally, make a large income. I venture to suggest that those men should be undertaxed and not overtaxed. While there may be something to be said in favour of a Super-tax on large unearned incomes, there is no justification whatever for a Super-tax on earned incomes, even though they rise to £5,000, £10,000, or £20,000. The bigger they are the better for the country, because they must employ large numbers of men.
    Mr. HOBHOUSE: This is a practical Amendment, which has obtained practical support, and I think it requires only a practical reply. The reason why small incomes are exempted from the higher rate of Income Tax is that their possessors may be in a position to put by something considerable for the support of their families.

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    I do not think anybody who is enjoying an income of over £5,000 can be said to be in such a position that he is not able to put something by for the support and maintenance of those who come after him. Five thousand pounds is an income which is envied by many and possessed by comparatively few; but I think the margin of saving possible in such an income is so great that there is no special need to exempt such cases from the operation of the Super-tax.
    Mr. JAMES HOPE: Will official incomes be aggregated to private incomes for the purpose of the Super-tax?
    Mr. HOBHOUSE: Certainly.
    Mr. JOYNSON-HICKS: Having heard the explanation of the right hon. Gentleman, and knowing the impossibility of carrying a Division, I ask leave to withdraw the Amendment.
    Amendment, by leave, withdrawn.
    Mr. SAMUEL ROBERTS Mr. SAMUEL ROBERTS moved, in Sub-section (2), after the word "the" ["the total income of any individual"] to insert the word "net." My object in putting down this Amendment was to exclude the Income Tax itself of 14d. before the Super-tax is calculated, so that a man who is paying the ordinary Income Tax should pay the Super-tax only on the balance. I am told, however, that there are certain legal payments included in the term "net" which might give my Amendment a wider significance than I originally intended. Why should a man have to pay Super-tax on a tax? Under this Clause he will have to pay Super-tax at 6d. on the amount which has been taken at 14d. I do not think that that is fair. The hon. Member for Mansfield (Mr. Markham) said that he did not know what his income was. A man's bank pass-book will generally tell him what his income is. It is quite a simple thing for a man to make a return from his bank pass-book, but it would be a very different thing to take the items from your pass-book and have to add what has been deducted for ordinary Income Tax at 14d. In fact, the difficulties are so great that I think the Chancellor of the Exchequer will accept my Amendment. I referred to the fact that there are certain legal obligations which come under the term "net." I do not know exactly what they are. I believe that interest on an overdraft at the end of the year would be one; but that where a man had arranged
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    the interest on a loan with his bank that would not be included. At all events, I think the word "net" ought only to include that income which is received, and it is in that sense that I move the Amendment.
    Mr. HOBHOUSE: The hon. Member raised the point whether interest on an overdraft was included within the scope of the Income Tax while interest on a loan was not. The answer is quite clear that interest on an overdraft which is not arranged for any time is not deducted, while you are entitled to recover Income Tax upon any interest paid upon a loan which is running for any time. The hon. Member has moved this Amendment in order to find out whether or not it would be possible to deduct from the net amount of income that amount which has been paid for Income Tax at 1s. 2d. in the £. I do not think that that would be so. A man would have to pay on the gross amount of income, and it would not be possible to allow that deduction. The amount assessable for the purpose of the Super-tax would have to include the 1s. 2d. That, as far as my information goes, is at present the case with regard to the Super-tax, and I do not think it will be possible to accept the proposal of the hon. Gentleman.
    Mr. AUSTEN CHAMBERLAIN: When the right hon. Gentleman concludes his speech by saying that, as far as his information goes, that at present is the case with regard to the Super-tax, one wonders what he means. At present there is no Super-tax; therefore there is nothing applicable to the Super-tax. If the right hon. Gentleman refers to the fact that the Committee have already passed three or four lines of this Sub-section, it is still in the power of the Committee to modify that decision by any abatements that it thinks just, and it is even possible for the Committee to come to the conclusion, before we have done with it, that this Clause really is an unworkable Clause, and that it should be rejected as a whole. But, putting that on one side, let me come to the substance of the matter. It is divided into two parts. The first part of the hon. Gentleman's speech was a confirmation of the fact of the existence of what I think everyone must agree to be an anomaly, not an anomaly created by the right hon. Gentleman opposite, I freely admit, but an anomaly which I cannot explain the origin of. If I go to my banker at the beginning

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    of the year and ask for the loan of £1,000 for the year I may deduct interest, let me say of £50, which he charges for the loan of that money for the year.
    Mr. HOBHOUSE: There must be securities deposited against the loan.
    Mr. AUSTEN CHAMBERLAIN: If I lodge securities, and the banker deducts the tax from my securities, one payment of the tax frees the whole transaction. If, on the other hand, I take an overdraft without security, which, in other words, is on my personal security, I am taxed twice over. I am taxed on my dividends, and he is taxed on the profit which he makes. The point my hon. Friend specifically wished to raise was the question: on what are you going to charge the Super-tax? Is it on an income received by a man, or is it on that income (plus the tax) which the individual has never received? I put this to the Government, not as a matter of justice, because as a matter of justice I can see that you may assume that the income a man has is the gross figure before he has paid any of his tax, or the net income after he has paid them all. I put it as a matter of convenience to the taxpayer, and I think of some convenience to the Inland Revenue, because, where a matter really serves the convenience of the taxpayer and facilitates his return, you may be sure it will facilitate the operations of the Inland Revenue Commissioners. Where you have to exact from the taxpayer something that is complicated and in many cases is a matter of some difficulty to get out, you will force the Commissioners to verify calculations which will frequently otherwise in perfect good faith be inaccurate. I urge it further on the Government on the ground that whilst it will tend to simplicity and tend to avoid friction, it will not affect very much the revenue. I am not now thinking of a case of a private firm or of a private trader who draws his income wholly from that source and declares the whole of it, and has it assessed as a whole for the purpose of the normal Income Tax, and has nothing to do for the purposes of the Super-tax but to transfer from one column of one return to another column of another return. I take the case of the ordinary individual taxpayer—a great number of taxpayers, almost everyone of whom will be affected by this tax. They will receive a great portion of their income from income from which the normal tax has already been deducted. Nominally receiving a £, they
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    only receive 18s. 10d. Take the ordinary person: what are you asking of him—the ordinary person suspect of having an income of over £5,000? I refer to not merely the person who has it. You have to ask three—I believe that is the lowest return for everyone you tax. The late Chairman of the Board of Inland Revenue, I think, puts the figure as high as 10. You demand returns as to their income from these in order to find the one who is taxable. What are you going to ask these 10 persons to do? You are going to ask them to take every dividend which they have received, and add it to their income for the purpose of a tax which was deducted before they received the income! I do not pretend to be clever at figures, but I do not think I am more of a fool at a simple arithmetical calculation than most of my fellow countrymen. I have had to make calculations of that kind recently, and they are really very troublesome. The Inland Revenue suspect me of being a person with £5,000 a year. You are going to ask me, and others, to make these calculations. Among those people there will be a great number who cannot do it, and the Inland Revenue officials will have to check every one of the calculations to see whether what the people have returned has been in fact—as most of them will think it their duty to return—all those who are not business people and who do not follow our discussions—what they believe they really have to return—that is, what they receive. Then the Inland Revenue will have to ask those people, "Did you really receive 1s. 2d. in the pound more?" and they will have to point out that to the other 18s. 11d. that they received there would have to be added this 1s. 2d. I submit that that is to make your tax quite unnecessarily unpopular. It will be quite unpopular enough without adding to its unpopularity by circumstantial details of this kind. If you really follow this up and undertake to investigate in each case whether you have got this tax of 1s. 2d. which has already been taken you will spend as much in the Inland Revenue in calculating machines and reckoners as you will ever get from the tax itself. I put it to the Chancellor of the Exchequer—this is one of those proposals which, whatever be its logic and whatever arguments you adduce in favour of it, is not worth the trouble and irritation and expense, and I ask him would he not be better advised to accept the Amendment of my hon. Friend in the spirit if not in the words. It is not worth while to cause

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    every taxpayer to make this calculation as to what his income would have been if he had not paid upon this tax.
    Mr. LLOYD-GEORGE: This is not a question of logic—it is a question of cash. I want the Committee to realise that this is not quite so trivial a matter as the right hon. Gentleman very ingeniously tried to demonstrate to the Committee. It is a matter of £150,000.
    Mr. AUSTEN CHAMBERLAIN: What is that among so many?
    Mr. LLOYD-GEORGE: Yes, but I am constantly pressed to accept Amendments making reductions of £50,000, or £150,000, or £500,000, but all that comes to a considerable sum of money, and I conceive a concession could be used much more usefully than by cutting off this £150,000 in a concession such as the right hon. Gentleman asks for. I do not think this is such a very complicated question as he represents it to be. An hon. Member behind him said it represented five decimal three recurring. There is a simpler matter than that. Why not call it five and one-third—
    Mr. LEVERTON HARRIS: It is not five and one-third. It is 5.3 recurring of a £.
    Mr. LLOYD-GEORGE: I am dealing with the point purely that five with decimal three recurring sounds very complicated, but when you put it into vulgar fractions it comes out to be very simple.
    Mr. AUSTEN CHAMBERLAIN: In addition to the difficulty of calculation you have to go back to find out what your income would have been if this sum was not deducted.
    Mr. LLOYD-GEORGE: I was coming to that, but I must deal with one difficulty at a time. I have now got rid of the recurring decimals. The difficulty of the right hon. Gentleman is that you have to go backward to see what you would have received. There is no difficulty once you find the figure with which you have to operate. There is only one figure that applies to the whole. The right hon. Gentleman seems to imagine that if you get three separate dividends that you have one to which this recurring decimal applies, another to which another figure applies, and so on over the whole of your bank-book. Not at all. They have the whole of their dividend, and all they have to discover is the figure by which you want to multiply them by. If it is this year it is
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    in the receipts and dividends of this year, and it is 1s. 2d. If the right hon. Gentleman asks me now at once whether it is five and a third or five and a half or five and four-fifths I could not give him the figure, but there is no difficulty about it. He could turn on a clerk in his office at a moment. When the figure is discovered it will appear in the Press; everybody will know it, and all difficulty vanishes. The whole point really is this, whether it is worth our while giving away £150,000, not to redress any real anomaly or real grievance, but to get rid of a small clerical difficulty. If the right hon. Gentleman wishes to press for the remission of some item in the Budget I should have thought he might find a much better subject on which to spend £150,000 than by getting rid of it in this way. The difficulty is really not a great one. The people affected have all clerical staffs or managers to do this for them. There are very few people who have over £5,000 a year who have not got clerks or a secretary or manager.
    10.0 P.M.
    Mr. PRETYMAN: What about the people who have not got £5,000, but who are suspect of having £5,000 a year? [An HON. MEMBER: "The great majority of them."]
    Mr. LLOYD-GEORGE: I agree to this extent that men with incomes somewhere approaching £5,000 a year may be called on for a return, but as a matter of fact it is well-known who are the people who are likely to be affected by this tax. Notices will not be showered upon every man who has a £5 note. Sir Henry Primrose pressed that point. Men supposed only to be exceptionally well off will be notified, but you must operate within that area. Surely all men in that category can afford to keep a private secretary or agent, and if they have not got a private secretary or agent then they are men of leisure, and a little sum of this sort would not do them any harm in the world as mental exercise. It is not mental exercise that they would have to indulge in every year. Once they understand this sum it would last them for a lifetime To make this concession would mean £150,000 in cash, and surveying the whole field, and seeing the other claims that have been pressed upon us from time to time, I do not think I would be justified in making any such concession.
    Sir HENRY KIMBER: The Chancellor of the Exchequer has met us with the usual argument, "I want the cash." He

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    says he does not object to the righteousness of our principle. The Prime Minister used the same argument on a celebrated public occasion recently when he thought he was answering Lord Rosebery. The Chancellor of the Exchequer says it would cost him £150,000 to do this small item of justice, but what is the principle upon which the Super-tax is levied? It is that, after paying and discharging all liabilities and duties to the State, a man has still something left above £5,000. I will assume that I am approached by the Commissioners with a notice requiring me to state the whole of my income for the purposes of assessment. What is the natural thing I am entitled to do? It is to draw a line at the taxes I have paid up to £5,000, and make a new profit and loss statement showing how much income I have left on which the 6d. duty is chargeable. Here the Secretary to the Treasury has raised another more important point, because he draws a distinction between the interest upon a loan from a banker and the interest upon an overdraft. It do not know what an overdraft from a banker is if it is not a loan. I think on this point the right hon. Gentleman gives an additional argument for this Amendment. Clearly it is only the commonest justice that a man before he pays Income Tax upon his income should be allowed to deduct the interest he pays to earn that income, and there is no distinction in that case between that and the interest on a loan. There are many other charges below the level of £5,000 which have to be submitted to the tax collector, but which are, nevertheless, real payments out of income. Take, for example, those items disallowed to any landowner under Schedule A. In Schedule A and Schedule D there are many payments made by the landowner which he is not allowed to deduct when paying his Income Tax on the revenue from his land which the ordinary business man is allowed to deduct under Schedule D. Before he has levied upon him a Super-tax of 6d. in the £ after paying other taxes, he ought to be allowed in a profit and loss account to charge the payments he has actually made under Schedule A, but which he has not been allowed under that Schedule. I could quote some concrete examples of landowners whose income from land amounts to £2,000 or £3,000 a year. In such a case the landlord's disbursements on Schedule A will be as much as £1,500, and I could quote cases in which the amount comes up
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    to the full £3,000 of the income. In paying Income Tax on that £3,000 he is allowed certain deductions, and the Chancellor of the Exchequer has told us he intends to allow us something more. May I point out that the landlord is not allowed all the deductions on Schedule D, and those deductions disallowed under Schedule A amount to so much that it will sweep away the whole of his income over £5,000, and in that case he ought not to pay any tax upon a surplus which does not really exist. For these reasons I think this Amendment should be supported, and it ought to be conceded by the Chancellor of the Exchequer in bare justice. It is unconscionable that we should be met in regard to all these propositions with the argument, "I want the cash." That is what I believe an old friend in "Dick Turpin" said to the men in the coach.
    Mr. T. G. ASHTON: I hope the Chancellor of the Exchequer will reconsider this question. It is only a matter of five or six per cent. difference to him if he gives way upon this point. When you consider what an advantage it is in matters of taxation that you should levy taxes in a way that causes the least friction and the least irritation I feel the Government would be doing a wise thing if they gave way on this point and levied this tax upon the net amount instead of upon the gross amount. The Chancellor of the Exchequer talks of this proposal merely as a matter of adding up a sum and applying the tax to it, but that is not entirely the case. I know from personal experience there are items in my bank-book from which the Income Tax has not been deducted at all, and you will have to find out those items, and that is not always a very easy thing. We have heard from the hon. Member for Mansfield (Mr. Markham) that he does not even know what the amount of his annual income is. He knows it is large enough to have to pay the Super-tax, but he says he does not know how much it is. Every man with £5,000 a year income does not always keep books, and he does not always know the total amount of his income. The point raised by the right hon. Gentleman the Member for East Worcestershire (Mr. Austen Chamberlain) from the point of view of the Inland Revenue itself is' a very strong one. I believe it will be easier for the Inland Revenue to investigate accounts if they have to deal only with the net amount.
    Mr. WALTER GUINNESS: The Mover of the Amendment dealt with the comparatively

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    small point as to whether the Super-tax was to be paid on the income after paying the ordinary Income Tax or not. I think the word "net" raises a very larger question than that. It raises a question which would have been raised under the Amendment of the hon. Member for Hitchin (Mr. J. Bertram): whether Super-tax is to be paid on the whole income or on the free and unencumbered income. I want to say a word about the injustice which will result to encumbered estates unless the Chancellor of the Exchequer does something to meet that case. There are a great many cases where the apparent income is very much larger than the real income, where the owner of an estate, not from his own free will, but owing to covenants and mortgages, gets very much less than his apparent income. Is he to pay on the gross income or on the income that he receives after the deduction of these charges from which he cannot in any way escape? The right hon. Gentleman shakes his head, but I am afraid that under the Bill as it stands people will have to pay.
    Mr. LLOYD-GEORGE: They do not now.
    Mr. WALTER GUINNESS: I am glad to hear they will not have to pay on mortgages.
    Mr. LLOYD-GEORGE: The hon. Member is quite wrong. Income Tax is not paid on mortgages at present, and it will not be under the Bill.
    Mr. WALTER GUINNESS: I quite agree that mortgages are deducted now. The Income Tax is deducted from the recipient of the interest on mortgages, but it does not follow it will be the case with the Super-tax. I am glad to learn that it will be so, and I hope the right hon. Gentleman will make it plain. Then we come to the question of insurance premiums, which are not premiums paid by the owner of an estate of his own free will, but from the necessity of his having inherited an encumbered estate. The right hon. Gentleman stated that insurance premiums could be deducted before paying the Super-tax, but if he will look at Clause 54 of the Income Tax Act of 1853 I think he will see he is wrong. It is there expressly laid down that insurance premiums are not to be brought in for the purpose of abatements of Income Tax. The words are: "Nor shall any such deduction or abatement entitle any such person to claim total exemption or any relief from the duty
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    on the ground of his profits and gains being thereby reduced below £100 or £150, as the case may be." Of course, the limit of exemption has been raised since then, but under that Clause it is quite clear insurance premiums are not deducted from income when claiming abatements, and I think that is a point which arises on "net income," and on which we ought to have some answer. Another point I should like to raise is the question of covenants. The right hon. Gentleman has told us it will be all right in the case of mortgages; but what will be the case with regard to covenants? I will not give an imaginary case; I will give a case embodied in a private Act last year—the Tollemache Estate Act. The gross income of that estate was £24,000. £8,000 was paid on interest on mortgage, and, from what the right hon. Getleman says, that will be deducted. Another £8,000 was paid in insurance, and £5,000 was paid under covenants to children. That reduced the £24,000, which was apparently enjoyed by the promoter of the Act, to only £3,000. It would be a very great hardship if the promoter of that Act has to pay Super-tax on the £8,000 paid as insurance premiums, and on the £5,000 paid to children under covenants. If these incumbrances are excepted, if they can be deducted from the gross income before the assessment for Super-tax, the promoter would not pay the Super-tax at all. I say that is a great injustice, and I hope the right hon. Gentleman will give some assurance that cases of this kind where the income is reduced by covenants and insurance will be met.
    Mr. P. J. POWER: I am well aware that this Super-tax hardly applies to Ireland at all. A great deal of Income Tax is, in fact, paid in Ireland which need not be paid, except that people, to avoid the trouble of correspondence, pay the money. But I want to know whether allowances are made in the case of overdrafts where a promissory note is signed. Surely that ought to be taken into account?
    Mr. J. McD. HENDERSON: Is the Income Tax to be returned upon a loan where there are securities deposited? Take the case where the bank takes the coupon off the security and collects the interest. Would that not be a case of paving twice over? With regard to the Amendment proposed, it would subvert the whole system of Income Tax if a trader or any man is ever allowed to deduct last year's tax and charge it to his disbursements

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    against this year's income. He is bound to pay his Income Tax on his full net income, and he is not entitled to deduct last year's tax, because he might go on deducting it for ever; and if you were to allow the 1s. 2d. to be deducted you would have to allow everybody to deduct, it, whether they had £5,000 or not. You could not allow the man with £5,000 to deduct it and not the man with £1,000. That would be impossible. The case put by the right hon. Gentleman the Member for Worcestershire (Mr. Austen Chamberlain) and my hon. Friend near me as this: What a trouble it would be to look at your bank-book and find an item there, and have to calculate what that was for. I say a man does not deserve to have £5,000 a year if he does not know what his investments are and what they are fetching. Every banker gives his customer the information when he credits his account. All the items are there, and the man has only to put them down and lump them together. [HON. MEMBERS: "No."] Every banker is quite prepared to put in particulars of the gross amounts in the pass-book if the customer likes to ask for them; and I would suggest that any hon. Member who has any trouble should simply ask his banker on every occasion that he makes an entry to show the gross amount and the amount of the tax.
    Mr. MARKHAM: Can the hon. Member tell me how a bank can tell the amount of the tax when the tax is deducted from the amount before it reaches the bank?
    Mr. McD. HENDERSON: As a matter of fact no coupon is ever paid to the bank unless the tax is shown.
    Mr. WALTER GUINNESS: A dividend warrant does not always show the Income Tax.
    Mr. McD. HENDERSON: I beg the hon. Member's pardon; a Consols dividend warrant shows the tax. I am afraid the hon. Gentleman is not so familiar with these things as I am. There is no dividend warrant that I ever saw which does not give the tax. At all events, it must be admitted that in the great majority of cases it is shown, and therefore that a man with £5,000 a year should make any trouble about knowing what he gets his income from and how he gets it seems to me to be somewhat ridiculous. The great objection to the proposal is that you must allow the 1s. 2d. to be deducted in the case of the small amount just as much as in the case of the large amount.
    Mr. HICKS BEACH: I should be glad if the right hon. Gentleman would clear up one point, that is about the assessment of landowners to the Super-tax. As far as I understand, the landowner will be assessed for Super-tax on the Schedule A assessment with an additional deduction of 5 per cent.
    Mr. LLOYD-GEORGE: The new proposal will be a deduction of 25 per cent.
    Mr. HICKS BEACH: That is not in the Bill at present.
    Mr. LLOYD-GEORGE: That is the new Clause that I propose to put down.
    Mr. CAVE: May we have an answer to the point about premiums on life assurance policies? What is to be the rule as regards Super-tax?
    Mr. LLOYD-GEORGE: It will be exactly the same as in the case of the Income Tax. The premium will not be deducted with a view to establishing a claim for exemption from Super-tax, but it will be deducted in order to ascertain the Income Tax to be paid.
    Mr. LEVERTON HARRIS: May I call the Chancellor's attention to an answer given by the Financial Secretary to the Treasury? My question was:—
    "I desire to ask the Chancellor of the Exchequer whether in calculating income for the purpose of Super-tax a deduction will be made in respect of payment for life assurance premiums."
    The Financial Secretary's answer was—
    "Yes, Sir."
    Mr. HOBHOUSE: That is precisely the point with which the Chancellor of the Exchequer has dealt. He has explained that they will not be allowed in the case of exemptions; but, for the purpose of income, they will be allowed.
    Mr. CHIOZZA MONEY: Surely the Amendment will not be pressed to a Division. We have had one proposition from the benches opposite to make Super-tax apply to unearned incomes only. The present proposition is the very reverse of that. If you take the case of a trader trading as an individual making £6,000 a year he will pay Super-tax on the whole of his income, while a man drawing £6,000 from rents or dividends would pay Super-tax at a lower rate under the Amendment of the hon. Member. That is differentiating against earned incomes—the very converse of the proposition which is moved by the hon. Gentleman opposite. Surely that anomaly is sufficient to dispose of the Amendment before the House!
    The EARL of KERRY: May I remind the Chancellor of the Exchequer of an answer given to me some time back on this question of insurance premiums? The question was whether in arriving at the total income for the purpose of Super-tax that part which is represented by premiums paid on policies of life insurance would be de-ducible. The answer was "Yes." My object in asking that was to know whether the assessment would be reduced below the Super-tax level. The answer was understood as meaning that the actual assessment for Super-tax would be reduced below the level if there were insurance premiums.
    Mr. RIDSDALE: I think the Amendment could be more conveniently made on Sub-section (2). I hope that, in saying so, my right hon. Friend will not again accuse me of attacking the Government. I cannot see how this tax is going to be fairly applied unless it is done in the way proposed in the Amendment. The hon. Member for North Paddington (Mr. Chiozza Money) seemed to think that it would be an unfair differentiation in favour of the man with an unearned income, but that is not so. If a man has an income of £6,000 he will only be liable for the Super-tax on the difference between £3,000 and £6,000. In the great bulk of cases Super-tax would be charged on incomes derived from accumulated capital. One of the reasons for the Super-tax is that incomes of £5,000 and over are, in many instances, derived from large accumulations of capital. How are you to ascertain what the exact income is for the purpose of making an accurate return? We have learned this evening that the average income of three years is to be taken. Is a husband to review all the items in his pass-book for three years in order to find out on what items Income Tax has been paid? Is he to find out whether the different sums paid into the account were less Income Tax or cum income Tax? Are the entries in the wife's book to be gone through in a similar manner? We have just learned that for the purpose of this tax the husband's income and the wife's income are to be aggregated. If you are to get a return which will put them on a fair footing the only way in which you can do it is by giving them the means of ascertaining what their incomes respectively are. Fancy, in the case of a woman who has become liable for this tax, what a process she has to go through in order to make a return of her
    126
    income. She has to add up her pass-book and find out whether every pound represents a sovereign, or only 18s. 10d. That is a very complicated process. If there is a single entry which has paid Income Tax, and which she has treated as if it had not, then her whole sum is vitiated. The only possible way of dealing with this matter is to allow the Amendment to be carried. I hope my right hon. Friend will accept it.
    Mr. CAVE: On the question of premiums the Government are receding from their previous statement. The right hon. Gentleman was asked whether, in arriving at the total income for the purpose of ascertaining whether he is subject to Super-tax, a man could, or could not, deduct life insurance premiums; and the answer he gave to my hon. Friend was quite the opposite of that which he has now given. The answer given to my hon. Friend was that premiums paid on policies of insurance could be deducted. Surely the Government will not recede from their former answer.
    Mr. LLOYD-GEORGE: It is a question of the interpretation of the Bill, which is perfectly clear. It must be estimated in the same manner as the whole income of all sorts estimated for the purpose of exemption or abatement of Income Tax. I never had any doubt in my mind it ought to be deducted for the purpose of ascertaining the amount which is to be paid, but for the purpose of exemption it is not deducted.
    Mr. AUSTEN CHAMBERLAIN: The Bill may be perfectly clear, but so is the answer which was given on behalf of the Chancellor of the Exchequer. I think he is answering without really appreciating what was said in his name, and, of course, with his approval. The interpretation of a Bill such as that now before the House is a matter of considerable difficulty, even for lawyers. We know that lawyers in this House not infrequently differ upon the probable interpretation of words which are contained in this Bill, and for laymen it is a much more difficult thing. Accordingly, from time to time, Gentlemen put down questions in order to elucidate what is the intention of the Government in the words which they have put into a Bill, and if they get from the Government a statement that their intention is a certain thing, and if afterwards their legal advisers, gentlemen learned in the law, inform them in effect that the Bill is different, they are not dis-

    127
    appointed, because they say, "The moment we point that out the Chancellor of the Exchequer will make his Bill conform to what he has declared to be his intention"; and what is accepted by every Member of this House, wherever he sits, as being the determining factor is not the words of the Bill as introduced, the meaning of which is often subject to great doubt, but the answers given by the Chancellor of the Exchequer to the statements made by him. I do ask the Chancellor of the Exchequer to notice this question. It was asked on Wednesday, 23rd June, 1909: "The Earl of Kerry—To ask the Chancellor of the Exchequer whether, in arriving at the total income for the purposes of the Super-tax, the part which is represented by premiums paid on policies of life insurance will be deducible if less than one-sixth of the whole?" The governing words are "the total income for the purposes of Super-tax," and the answer is the one word, "Yes." I am quite certain that when the Chancellor of the Exchequer looks at that answer he will not rely on the words of the Bill, but he will say, "The answer which I gave, if not embodied in the Bill, must be embodied in the Bill, and if the Bill does not conform with it now I must make it conform with it, and I stand by the answer given in my name." I do not think that any Minister could do otherwise than that. A case of this kind is perfectly clear. It is susceptible of no doubt, and I hope that the Chancellor of the Exchequer will adhere to it.
    Sir E. CARSON: In reply to a question put to the Chancellor of the Exchequer, the right hon. Gentleman said they were to arrive at the total taxation after deduction of these premiums on policies of insurance. May I call the right hon. Gentleman's attention to the lines of Section (2): "For the purposes of the Super-tax the total income of any individual from all sources shall be taken." If this is the definition of "total income," then you have to deduct the premiums on policies of insurance.
    Mr. LLOYD-GEORGE: I agree that the point raised by the right hon. Gentleman (Mr. Austin Chamberlain) is one that I should look into. My attention was called to it by the Noble Lord (the Earl of Kerry), and I should like to give it further consideration before giving an answer. But in any event I could not accept the Amendment. At the worst it was not a pledge. It may be that the answer conveyed to the
    128
    House an interpretation which is not in accordance with the views that the Government take of what it really means. At the same time, I agree with the right hon. Gentleman that it does raise an element which should be taken into serious consideration. With regard to the point raised by the right hon. and learned Gentleman (Sir E. Carson), I have not the slightest doubt about the meaning of the Section, that premiums on policies of insurance are to be deducted for the purpose of arriving at the amount of the tax to be paid, but not for the purpose of ascertaining whether or not a man is liable to pay the tax.
    Mr. AUSTEN CHAMBERLAIN: This question arose—it is a very important issue as a side issue in the middle of another discussion. I think it is distinctly raised on another Amendment, but I quite understand that the Chancellor of the Exchequer should have a little time to consider it.
    Mr. LLOYD-GEORGE: I think an answer was given expressly pointing to the fact that it was to be treated as a matter of deduction. I think it was the answer given by my right hon. Friend the Secretary to the Treasury.
    Mr. LEVERTON HARRIS: The answer to my question was capable of a different interpretation, but about the answer given to the Noble Lord there can be no doubt.
    Mr. AUSTEN CHAMBERLAIN: I think what my hon. Friend says is that the answer he received is capable of another interpretation, and that it is not conclusive. All I can say is that I do not think we can settle it at this moment. We must take a Division on this Amendment, the question being whether the income on which the Super-tax is to be levied is to be calculated with the Income Tax already deducted before the recipient got his income added to it, or whether it is to be the income which the recipient actually gets. That is the question on which we are now going to divide. The other question must be reserved for another Amendment, and should not be confused with the point on which we must take a Division, and which was the one originally intended by the Amendment now before the Committee.
    Mr. E. H. CARLILE: I would urge the Chancellor of the Exchequer to accept the Amendment, which is an eminently reasonable one. I do not believe that any man in this country whose income is such as to

    129
    bring his under this tax would in the least shirk his responsibility, or, in any way, try to evade it. At the same time, I think it is only fair we should ask that, in imposing this new tax, it should be done in a way which is calculated to give least inconvenience to those who have to pay it. It seems to me, if the Chancellor of the Exchequer would accept this Amendment, then those who pay the tax would be relieved of a considerable amount of inconvenience, and a great deal of calculation. I am certain many of those men who will have to pay the tax will find it extremely difficult to make the actual return. The difference is not a serious one. I think the Chancellor of the Exchequer pointed out himself that it would amount to £150,000, and when we consider that next year it will produce 2½ millions, I think really by making this concession he would only be fairly meeting those who would be called on to pay this new tax. There will be all kinds of inaccuracies and difficulties, and the authorities will have to go into the details, and I suppose also examine the bank accounts. There is an inquisitorial side to this tax that does not obtain in any other tax. The Chancellor of the Exchequer might meet us on this occasion, and by accepting my Amendment he will be to some extent removing the impression which obtains largely in the country at the present time that many of the taxes contained in this Finance Bill are of a vexatious and inquisitorial character. It is a very modest request we are making in some respects. We might be expected hardly to press it, because it might be contended that the more objectionable this Finance Bill is as it leaves us the less
    likely it is to come into law. Notwithstanding that I am sure of this, that hon. Gentlemen sitting on this side of the House have honestly done their level best to improve the Bill.
    The CHAIRMAN (Mr. Emmott): The hon. Member does not appear to be speaking to the Amendment.
    Mr. CARLILE: I will confine myself to the Amendment before us, and I do urge on the Chancellor of the Exchequer to accept this—
    The CHAIRMAN: The hon. Member is now repeating himself.
    Mr. CARLILE: On a point of Order. May I ask whether an hon. Member who is addressing the House is not allowed to draw together and focus his remarks by a single sentence from him at the close, with that one object in view at the close of his observations? I would like a ruling on that.
    The CHAIRMAN: I warned the hon. Member that he was repeating himself.
    Mr. ROBERT DUNCAN: The calculation of the small details connected with this tax will involve much labour on the part not only of officials of the State, but also of people whose minds ought to be given up to a more productive form of business. Therefore the simpler the method of making up the sum payable, the better for all concerned.
    Question put, "That the word 'net' be there inserted."
    The Committee divided: Ayes, 94; Noes, 199.

    Division No. 685.]

    AYES.

    [11.0 p.m.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Duncan, Robert (Lanark, Govan)

    Keswick, William

    Anson, Sir William Reynell

    Faber, George Denison (York)

    Kimber, Sir Henry

    Balcarres, Lord

    Faber, Captain W. V. (Hants, W.)

    King, Sir Henry Seymour (Hull)

    Baldwin, Stanley

    Fell, Arthur

    Lambton, Hon. Frederick William

    Banbury, Sir Frederick George

    Fletcher, J. S.

    Lane-Fox, G. R.

    Banner, John S. Harmood-

    Forster, Henry William

    Lee, Arthur H. (Hants, Fareham)

    Baring, Capt. Hon. G. (Winchester)

    Foster, P. S.

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Beach, Hon. Michael Hugh Hicks

    Gardner, Ernest

    Long, Col. Charles W. (Evesham)

    Beckett, Hon. Gervase

    Gooch, Henry Cubitt (Peckham)

    Lonsdale, John Brownlee

    Bowles, G. Stewart

    Gordon, J.

    Lowe, Sir Francis William

    Bridgeman, W. Clive

    Gretton, John

    Lyttelton, Rt. Hon. Alfred

    Bull, Sir William James

    Guinness, Hon. R. (Haggerston)

    M'Arthur, Charles

    Butcher, Samuel Henry

    Guinness, Hon. W. E. (B. S. Edmunds)

    M'Calmont, Colonel James

    Carlile, E. Hildred

    Haddock, George B.

    Magnus, Sir Philip

    Carson, Rt. Hon. Sir Edward H.

    Hamilton, Marquess of

    Mason, James F. (Windsor)

    Cave, George

    Hardy, Laurence (Kent, Ashford)

    Meysey-Thompson, E. C.

    Cecil, Evelyn (Aston Manor)

    Harrison-Broadley, H. B.

    Morpeth, Viscount

    Chamberlain, Rt. Hon. J. A. (Worc'r.)

    Hay, Hon. Claude George

    Oddy, John James

    Clive, Percy Archer

    Helmsley, Viscount

    Parker, Sir Gilbert (Gravesend)

    Clyde, J. Avon

    Hill, Sir Clement

    Parkes, Ebenezer

    Coates, Major E. F. (Lewisham)

    Hills, J. W.

    Pease, Herbert Pike (Darlington)

    Courthope, G. Loyd

    Hope, James Fitzalan (Sheffield)

    Peel, Hon. W. R. W.

    Craig, Captain James (Down, E.)

    Hunt, Rowland

    Powell, Sir Francis Sharp

    Craik, Sir Henry

    Joynson-Hicks, William

    Randles, Sir John Scurrah

    Douglas, Rt. Hon. A. Akers

    Kerry, Earl of

    Ratcliff, Major R. F.

    Rawlinson, John Frederick Peel

    Sheffield, Sir Berkeley George D.

    Willoughby de Eresby, Lord

    Remnant, James Farquharson

    Smith, Abel H. (Hertford, East)

    Wilson, A. Stanley (York, E. R.)

    Renton, Leslie

    Smith, Hon. W. F. D. (Strand)

    Younger, George

    Ridsdale, E. A.

    Stanier, Beville

    Ronaldshay, Earl of

    Starkey, John R.

    TELLERS FOR THE AYES.—Mr. S. Roberts and Mr. Leverton Harris.

    Rutherford, John (Lancashire)

    Thomson, W. Mitchell- (Lanark)

    Rutherford, Watson (Liverpool)

    Walker, Col. W. H. (Lancashire)

    Salter, Arthur Clavell

    Warde, Col. C. E. (Kent, Mid)

    NOES.

    Adkins, W. Ryland D.

    Gladstone, Rt. Hon. Herbert John

    Partington, Oswald

    Agar-Robartes, Hon. T. C. R.

    Glendinning, R. G.

    Pearce, Robert (Staffs, Leek)

    Agnew, George William

    Glover, Thomas

    Pickersgill, Edward Hare

    Alden, Percy

    Gooch, George Peabody (Bath)

    Pollard, Dr. G. H.

    Allen, A. Acland (Christchurch)

    Gulland, John W.

    Ponsonby, Arthur A. W. H.

    Allen, Charles P. (Stroud)

    Harcourt, Rt. Hon. L. (Rossendale)

    Priestley, Sir W. E. B. (Bradford, E.)

    Atherley-Jones, L.

    Harcourt, Robert V. (Montrose)

    Radford, G. H.

    Balfour, Robert (Lanark)

    Hardie, J. Keir (Merthyr Tydvil)

    Rea, Walter Russell (Scarborough)

    Baring, Godfrey (Isle of Wight)

    Harmsworth, Cecil B. (Worcester)

    Reddy, M.

    Barker, Sir John

    Harmsworth, R. L. (Caithness-shire)

    Richards, T. F. (Wolverhampton, W.)

    Barnes, G. N.

    Haworth, Arthur A.

    Roberts, G. H. (Norwich)

    Barran, Rowland Hirst

    Hedges, A. Paget

    Roberts, Sir J. H. (Denbighshire)

    Barry, Redmond J. (Tyrone, N.)

    Hemmerde, Edward George

    Robinson, S.

    Beaumont, Hon. Hubert

    Henderson, J. McD. (Aberdeen, W.)

    Robson, Sir William Snowdon

    Beck, A. Cecil

    Henry, Charles S.

    Roch, Walter F. (Pembroke)

    Bell, Richard

    Herbert, Col. Sir Ivor (Mon. S.)

    Roe, Sir Thomas

    Bennett, E. N.

    Higham, John Sharp

    Rogers, F. E. Newman

    Berridge, T. H. D.

    Hobhouse, Rt. Hon. Charles E. H.

    Rose, Sir Charles Day

    Black, Arthur W.

    Hodge, John

    Rowlands, J.

    Bottomley, Horatio

    Holland, Sir William Henry

    Runciman, Rt. Hon. Walter

    Boulton, A. C. F.

    Holt, Richard Durning

    Russell, Rt. Hon. T. W.

    Bowerman, C. W.

    Hooper, A. G.

    Rutherford, V. H. (Brentford)

    Bramsdon, Sir T. A.

    Hope, W. H. B. (Somerset, N.)

    Samuel, Rt. Hon. H. L. (Cleveland)

    Brigg, John

    Horniman, Emslie John

    Samuel, S. M. (Whitechapel)

    Bright, J. A.

    Howard, Hon. Geoffrey

    Scarisbrick, Sir T. T. L.

    Brunner, J. F. L. (Lancs., Leigh)

    Idris, T. H. W.

    Schwann, C. Duncan (Hyde)

    Burnyeat, W. J. D.

    Isaacs, Rufus Daniel

    Schwann, Sir C. E. (Manchester)

    Burt, Rt. Hon. Thomas

    Jardine, Sir J.

    Soddon, J.

    Byles, William Pollard

    Johnson, John (Gateshead)

    Seely, Colonel

    Carr-Gomm, H. W.

    Jones, William (Carnarvonshire)

    Sherwell, Arthur James

    Causton, Rt. Hon. Richard Knight

    Jowett, F. W.

    Shipman, Dr. John G.

    Cawley, Sir Frederick

    Keating, M.

    Smyth, Thomas F. (Leitrim, S.)

    Channing, Sir Francis Allston

    Kekewich, Sir George

    Snowden, P.

    Cherry, Rt. Hon. R. R.

    Kilbride, Denis

    Soares, Ernest J.

    Cleland, J. W.

    King, Alfred John (Knutsford)

    Stanley, Hon. A. Lyulph (Cheshire)

    Clough, William

    Laidlaw, Robert

    Steadman, W. C.

    Clynes, J. R.

    Lambert, George

    Stewart, Halley (Greenock)

    Cobbold, Felix Thornley

    Lamont, Norman

    Stewart-Smith, D. (Kendal)

    Collins, Stephen (Lambeth)

    Layland-Barratt, Sir Francis

    Strachey, Sir Edward

    Collins, Sir Wm. J. (St. Pancras, W.)

    Lehmann, R. C.

    Strauss, E. A. (Abingdon)

    Cooper, G. J.

    Lever, A. Levy (Essex, Harwich)

    Summerbell, T.

    Corbett, C. H. (Sussex, E. Grinstead)

    Levy, Sir Maurice

    Tennant, Sir Edward (Salisbury)

    Cory, Sir Clifford John

    Lewis, John Herbert

    Thomas, Sir A. (Glamorgan, E.)

    Cotton, Sir H. J. S

    Lloyd-George, Rt. Hon. David

    Thomasson, Franklin

    Craig, Herbert J. (Tynemouth)

    Lough, Rt. Hon. Thomas

    Thompson, J. W. H. (Somerset, E.)

    Crosfield, A. H.

    Lupton, Arnold

    Tomkinson, James

    Crossley, William J.

    Maclean, Donald

    Toulmin, George

    Cullinan, J.

    MacVeagh, Jeremiah (Down, S.)

    Trevelyan, Charles Philips

    Curran, Peter Francis

    MacVeigh, Charles (Donegal, E.)

    Verney, F. W.

    Dalziel, Sir James Henry

    McKenna, Rt. Hon. Reginald

    Villiers, Ernest Amherst

    Davies, Ellis William (Eifion)

    M'Laren, Sir C. B. (Leicester)

    Vivian, Henry

    Dewar, Arthur (Edinburgh, S.)

    M'Laren, H. D. (Stafford, W.)

    Ward, John (Stoke-upon-Trent)

    Dilke, Rt. Hon. Sir Charles

    M'Micking, Major G.

    Wardle, George J.

    Duffy, William J.

    Maddison, Frederick

    Wason, Rt. Hon. E. (Clackmannan)

    Duncan, J. Hastings (York, Otley)

    Markham, Arthur Basil

    Wason, John Cathcart (Orkney)

    Dunn, A. Edward (Camborne)

    Massie, J.

    White, Sir George (Norfolk)

    Dunne, Major E. Martin (Walsall)

    Masterman, C. F. G.

    White, J. Dundas (Dumbartonshire)

    Edwards, Sir Francis (Radnor)

    Menzies, Sir Walter

    Whittaker, Rt. Hon. Sir Thomas P.

    Erskine, David C.

    Mond, A.

    Wiles, Thomas

    Essex, R. W.

    Money, L. G. Chiozza

    Wilkie, Alexander

    Evans, Sir S. T.

    Montgomery, H. G.

    Wilson, Hon. G. G. (Hull, W.)

    Everett, R. Lacey

    Morgan, J. Lloyd (Carmarthen)

    Wilson, P. W. (St. Pancras, S.)

    Ferguson, R. C. Munro

    Morrell, Philip

    Wilson, W. T. (Westhoughton)

    Fiennes, Hon. Eustace

    Muldoon, John

    Findlay, Alexander

    Myer, Horatio

    Fuller, John Michael F.

    Newnes, F. (Notts, Bassetlaw)

    TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton.

    Fullerton, Hugh

    Norman, Sir Henry

    Gibb, James (Harrow)

    Nuttall, Harry

    Mr. CHIOZZA MONEY: I wish to move an Amendment which, unfortunately, is
    132
    not on the Paper, but which is, in Sub-section (1), to leave out all the words after

    133
    the words "five thousand pounds," and to insert instead thereof the words "a Super-tax or additional Income Tax at the following rates—Over £5,000 and under £6,000, twopence in the pound; over £6,000 and under £7,000, threepence; over £7,000 and under £8,000, fourpence; over £8,000 and under £10,000, fivepence; and over £10,000, sixpence."
    The rates I suggest are almost precisely similar to the effect of the tax as proposed by my right hon. Friend in this Clause. I have always contended, and I now contend that the rates of the Income Tax should be made as plain as possible. I regret that my right hon. Friend, while giving effect to the desire of so many of us that the Income Tax should be further graded, has chosen the method of having a nominal rate of Super-tax, and then graduating that nominal rate by making deductions of so much of the income—in this case £3,000—and levying the tax upon the balance. To discover what the amount which is to be subject to the tax may be, each taxpayer has to deduct £3,000 from his income and has to pay sixpence in the pound upon the balance. The result is this. If we take an income of £5,000 to £6,000 the real rate of Super-tax ranges from 2¼d. to 2⅓d. and up to 3d. in the pound, and if we take an income of £10,000 the rate is 4¼d. I appeal to my right hon. Friend to adopt this plainer method of grading the Super-tax. The old argument with regard to the graduation of the In come Tax used to be that the graduation by plain rates was impossible. Of course, that does not apply to the Super-tax, because you are here demanding personal declarations from those with large incomes, and as they have a definite amount of income in their possession there is no reason why you should not levy a perfectly plain rate of taxation.
    Mr. LLOYD-GEORGE: I think I have reason to complain of an Amendment of this magnitude being moved in manuscript. After all, it is a proposal which requires very careful consideration. I do not know what its effect will be. If it produces an increase it will probably be out of Order, and, therefore, it must either involve a decrease or produce exactly the same amount. How am I to say what it will produce? It is an Amendment which will require the most careful investigation. If I were disposed on behalf of the Government to substitute this scale at all I should like to know exactly what it means. I cannot even accept the responsibility of expressing an opinion upon its effect
    134
    unless I have some better opportunity of considering it. My hon. Friend will realise that it is quite an unusual thing to call upon me straight away to express an opinion upon a proposal of this magnitude, and I hope he will withdraw his Amendment.
    Mr. CHIOZZA MONEY: Under the circumstances, I ask leave to withdraw my Amendment. With regard to the Chancellor of the Exchequer not having seen my Amendment before, I am sorry he has not received the letter I sent to him explaining my Amendment.
    Amendment, by leave, withdrawn.
    The CHAIRMAN: The next Amendment standing in the name of the hon. Member for Blackburn (Mr. Snowden)—to leave out of Sub-section (1) from the word "pound" to the end of the Sub-section—is not in order, because it is outside the scope of the Resolution.
    Mr. JOYNSON-HICKS Mr. JOYNSON-HICKS moved, in Subsection (1), to leave out the word "three" ["three thousand pounds"], and to insert instead thereof the word "five." Under the Clause as it stands an income of £5,001 would have to pay a considerable sum as a Super-tax, amounting to £50 in respect of that £1. We have admitted the theory of a Super-tax, and that it is right to make a very rich man pay a higher sum by way of Super-tax than a man who is not so rich. Having selected £5,000 as the limit, it is not fair on the first pound over that limit to take the huge lump sum which is provided for under the Clause.
    Mr. LLOYD-GEORGE: This Amendment would make a very serious inroad upon the revenue to be raised by this tax. It means that a man with an income of £5,001 would only pay 6d., whereas now he pays 6d. in the £ on the difference between £3,000 and £5,000. That would alter the whole scale very considerably. I could not tell the Committee what the loss to the revenue would be, but it would be very considerable, and probably would beat least one-third of the amount we propose to raise. Consequently, I cannot assent to the proposal.
    Amendment negatived.
    Mr. EVELYN CECIL Mr. EVELYN CECIL moved to insert at the end of Sub-section (1) the following words, "Provided always that the Super-tax shall only be chargeable to such an extent as shall not reduce the income below £5,000." The object of my Amendment

    135
    is simply this: If a man has £5,010 he is subject to the Super-tax of 6d. on £2,010, which equals £50 5s. If the sum of £50 5s. is deducted from £5,010, it will leave £4,949 15s. That will make him a poorer person than the man whose income is exactly £5,000, and who pays no Super-tax. I think the Chancellor of the Exchequer will appreciate that point, and will not penalise the man whose income is £5,010 for being honest over a man whose income is exactly £5,000. The whole object of this proviso, which I should like to move, if I am in order, is to obviate that unfairness, and so arrange this Clause that any man who has an income just over £5,000 should not be penalised by the Super-tax so as to render him a poorer man than the man who has just £5,000 and therefore pays no Super-tax.
    The CHAIRMAN: I do not think I can allow that. It seems to me that is covered by the word "net."
    Mr. AUSTEN CHAMBERLAIN: May I very respectfully submit that is not the ease. The arguments on the word "net" are at once wider and narrower than on this Amendment. It would have affected a great number of cases which are not touched by this Amendment, and, quite conceivably, a great number of cases would be touched by this Amendment which were not affected by the proposal to introduce the word "net." The object of this Amendment is that, whilst every man with more than £5,000 shall be subject to the Super-tax, no man shall be worse off by reason of the Super-tax, and of his having over £5,000 than the man who has just £5,000. It really is, if I may respectfully say so, a point quite distinct from any we have had raised during the discussions to-day.
    Mr. LLOYD-GEORGE: I agree there may be a shade of difference in the presentation, but I submit that substantially it is the same point, and the word "net" really covered all these cases.
    Mr. AUSTEN CHAMBERLAIN: The Chancellor of the Exchequer has not really understood the point. The proposal under the word "net" was that the Super-tax should be taken on the income after the normal tax had been paid.
    The CHAIRMAN: I need not trouble the right hon. Gentleman further. I am not quite clear that the actual 6d. Super-tax was discussed on the last Amendment, and therefore, although we cannot go over
    136
    the ground of the last Amendment, I will allow it.
    Mr. AUSTEN CHAMBERLAIN: This is really, I think, the most justifiable form of the graduation of the tax you can have. You fix a datum line, below which the tax is not due. The moment the income passes that line, the tax becomes due. You necessarily take an arbitrary point, if you do not accept the Amendment, and the result will be that there will be incomes slightly over £5,000, which, after the tax is paid, will be of less value than £5,000 to the owner. If he has just £5,000 he does not pay the tax, but if he has just over £5,000 he actually pays, and may thereby reduce his income to less than £5,000. My hon. Friend proposes that in this case he shall pay so much tax as will not bring him below £5,000, and he will not in that case be worse off than the man whose income is exactly £5,000. There are both moral and practical arguments to be adduced in support of this Amendment. If you have an arbitrary line of this kind the taxpayer will naturally try to bring himself below it.
    Mr. LLOYD-GEORGE: The right hon. Gentleman must see that the same argument applies at all stages—it is equally true where you draw the line between 9d. to 1s., or between 1s. and 1s. 2d. Undoubtedly it is an inducement for a man when he arrives at that point to make his income a little lower. This is a proposal really to charge a man the Super-tax only when his income reaches £5,050. But at whatever point you fix it it cannot matter, for it will always be worth the while of a man to bring himself under limit, and thus avoid the Super-tax. I do not think that an ingenious arrangement of this kind will meet the difficulty.
    Mr. WALTER GUINNESS: The fact that there has been very great injustice under the existing system of graduation seems to me to be no answer in this instance. Graduation is apparently a new principle. I think it is time something was done to meet cases such as we are discussing. There is a very small amount involved—not more than £5,000 or £6,000. Surely the right hon. Gentleman can well afford to make this concession. It is perfectly absurd that a man with a nominal income of £5,001 should be £49 odd worse off than a man with an income of £1 less. I do think it is an injustice, and it is no answer whatever to say that in former cases of graduation, when we had very little experience in the matter, this point was overlooked.
    Question put, "That those words be there inserted."
    The Committee divided: Ayes, 89; Noes, 188.

    Division No. 686.]

    AYES.

    [11.30 p.m.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Foster, P. S.

    Morpeth, Viscount

    Anson, Sir William Reynell

    Gardner, Ernest

    Parkes, Ebenezer

    Balcarres, Lord

    Gooch, Henry Cubitt (Peckham)

    Pease, Herbert Pike (Darlington)

    Baldwin, Stanley

    Gordon, J.

    Peel, Hon. W. Robert Wellesley

    Banbury, Sir Frederick George

    Gretton, John

    Randles, Sir John Scurrah

    Banner, John S. Harmood-

    Guinness, Hon. R. (Haggerston)

    Ratcliff, Major R. F.

    Baring, Capt. Hon. G. (Winchester)

    Haddock, George B.

    Rawlinson, John Frederick Peel

    Beach, Hon. Michael Hugh Hicks

    Hamilton, Marquess of

    Remnant, James Farquharson

    Beckett, Hon. Gervase

    Hardy, Laurence (Kent, Ashford)

    Renton, Leslie

    Bowles, G. Stewart

    Harris, Frederick Leverton

    Renwick, George

    Bridgeman, W. Clive

    Harrison-Broadley, H. B.

    Roberts, S. (Sheffield, Ecclesall)

    Brotherton, Edward Allen

    Hay, Hon. Claude George

    Ronaldshay, Earl of

    Bull, Sir William James

    Helmsley, Viscount

    Rutherford, John (Lancashire)

    Burdett-Coutts, W.

    Hill, Sir element

    Rutherford, W. W. (Liverpool)

    Carlile, E. Hildred

    Hills, J. W.

    Salter, Arthur Clavell

    Carson, Rt. Hon. Sir Edward H.

    Hope, James Fitzalan (Sheffield)

    Sheffield, Sir Berkeley George D.

    Cave, George

    Hunt, Rowland

    Smith, Abel H. (Hertford, East)

    Chamberlain, Rt. Hon. J. A. (Worc'r.)

    Joynson-Hicks, William

    Smith, Hon. W. F. D. (Strand)

    Clive, Percy Archer

    Kerry, Earl of

    Stanier, Beville

    Clyde, James Avon

    Keswick, William

    Starkey, John R.

    Coates, Major E. F. (Lewisham)

    King, Sir Henry Seymour (Hull)

    Walker, Col. W. H. (Lancashire)

    Courthope, G. Loyd

    Lambton, Hon. Frederick Wm.

    Warde, Col. C. E. (Kent, Mid)

    Craig, Captain James (Down, E.)

    Lane-Fox, G. R.

    Willoughby de Eresby Lord

    Craik, Sir Henry

    Lee, Arthur H. (Hants, Fareham)

    Wilson, A. Stanley (York, E. R.)

    Dickson, Rt. Hon. C. Scott

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Wodehouse, Lord

    Douglas, Rt. Hon. A. Akers-

    Long, Col. Charles W. (Evesham)

    Younger, George

    Duncan, Robert (Lanark, Govan)

    Lonsdale, John Brownlee

    Faber, George Denison (York)

    Lowe, Sir Francis William

    Faber, Capt. W. V. (Hants, W.)

    Lyttelton, Rt. Hon. Alfred

    TELLERS FOR THE AYES.—Mr. Evelyn Cecil and Mr. Walter Guinness.

    Fell, Arthur

    M'Calmont, Colonel James

    Fletcher, J. S.

    Mason, James F. (Windsor)

    Forster, Henry William

    Meysey-Thompson, E. C.

    NOES.

    Adkins, W. Ryland D.

    Cotton, Sir H. J. S.

    Henderson, J. McD. (Aberdeen, W.)

    Agar-Robartes, Hon. T. C. R.

    Cox, Harold

    Henry, Charles S.

    Agnew, George William

    Craig, Herbert J. (Tynemouth)

    Herbert, Col. Sir Ivor (Mon. S.)

    Allen, A. Acland (Christchurch)

    Crosfield, A. H.

    Higham, John Sharp

    Allen, Charles P. (Stroud)

    Crossley, William J.

    Hobhouse, Rt. Hon. Charles E. H.

    Ashton, Thomas Gair

    Cullinan, J.

    Hodge, John

    Balfour, Robert (Lanark)

    Dalziel, Sir James Henry

    Holland, Sir William Henry

    Baring, Godfrey (Isle of Wight)

    Davies, Ellis William (Eifion)

    Holt, Richard Durning

    Barker, Sir John

    Davies, Timothy (Fulham)

    Horniman, Emslie John

    Barran, Rowland Hirst

    Dewar, Arthur (Edinburgh, S.)

    Howard, Hon. Geoffrey

    Barry, Redmond J. (Tyrone, N.)

    Dilke, Rt. Hon. Sir Charles

    Idris, T. H. W.

    Beaumont, Hon. Hubert

    Duncan, J. Hastings (York, Otley)

    Isaacs, Rufus Daniel

    Beck, A. Cecil

    Dunn, A. Edward (Camborne)

    Jardine, Sir J.

    Benn, W. (Tower Hamlets, St. Geo.)

    Dunne, Major E. Martin (Walsall)

    Johnson, John (Gateshead)

    Bennett, E. N.

    Edwards, Sir Francis (Radnor)

    Jones, William (Carnarvonshire)

    Berridge, T. H. D.

    Erskine, David C.

    Jowett, F. W.

    Black, Arthur W.

    Essex, R. W.

    Kekewich, Sir George

    Bottomley, Horatio

    Evans, Sir Samuel T.

    Kilbride, Denis

    Boulton, A. C. F.

    Everett, R. Lacey

    King, Alfred John (Knutsford)

    Bowerman, C. W.

    Falconer, James

    Laidlaw, Robert

    Bramsdon, Sir T. A.

    Ferguson, R. C. Munro

    Lamb, Ernest H. (Rochester)

    Brigg, John

    Fiennes, Hon. Eustace

    Lambert, George

    Bright, J. A.

    Findlay, Alexander

    Lamont, Norman

    Brunner, J. F. L. (Lancs., Leigh)

    Fuller, John Michael F.

    Layland-Barratt, Sir Francis

    Buxton, Rt. Hon. Sydney Charles

    Fullerton, Hugh

    Lehmann, R. C.

    Byles, William Pollard

    Gibb, James (Harrow)

    Lever, A. Levy (Essex, Harwich)

    Carr-Gomm, H. W.

    Gladstone, Rt. Hon. Herbert John

    Levy, Sir Maurice

    Causton, Rt. Hon. Richard Knight

    Glendinning, R. G.

    Lewis, John Herbert

    Cawley, Sir Frederick

    Glover, Thomas

    Lloyd-George, Rt. Hon. David

    Channing, Sir Francis Allston

    Gooch, George Peabody (Bath)

    Lough, Rt. Hon. Thomas

    Cherry, Rt. Hon. R. R.

    Grey, Rt. Hon. Sir Edward

    Lupton, Arnold

    Cleland, J. W.

    Gulland, John W.

    Maclean, Donald

    Clough, William

    Harcourt, Rt. Hon. L. (Rossendale)

    MacVeagh, Jeremiah (Down, S.)

    Clynes, J. R.

    Harcourt, Robert V. (Montrose)

    M'Kenna, Rt. Hon. Reginald

    Cobbold, Felix Thornley

    Harmsworth, Cecil B. (Worcester)

    M'Laren, H. D. (Stafford, W.)

    Collins, Stephen (Lambeth)

    Harmsworth, R. L. (Caithness-shire)

    M'Micking, Major G.

    Collins, Sir Wm. J. (St. Pancras, W.)

    Haworth, Arthur A.

    Markham, Arthur Basil

    Cooper, G. J.

    Hedges, A. Paget

    Massie, J.

    Corbett, C. H. (Sussex, E. Grinstead)

    Helme, Norval Watson

    Masterman, C. F. G.

    Cory, Sir Clifford John

    Hemmerde, Edward George

    Menzies, Sir Walter

    Mond, A.

    Roch, Walter F. (Pembroke)

    Taylor, Austin (East Toxteth)

    Montgomery, H. G.

    Roe, Sir Thomas

    Tennant, Sir Edward (Salisbury)

    Morgan, J. Lloyd (Carmarthen)

    Rogers, F. E. Newman

    Thomasson, Franklin

    Worrell, Philip

    Rose, Sir Charles Day

    Thompson, J. W. H. (Somerset, E.)

    Muldoon, John

    Rowlands, J.

    Tomkinson, James

    Myer, Horatio

    Runciman, Rt. Hon. Walter

    Toulmin, George

    Newnes, F. (Notts, Bassetlaw)

    Russell, Rt. Hon. T. W.

    Trevelyan, Charles Philips

    Nicholson, Charles N. (Doncaster)

    Rutherford, V. H. (Brentford)

    Verney, F. W.

    Norman, Sir Henry

    Samuel, Rt. Hon. H. L. (Cleveland)

    Villiers, Ernest Amherst

    Partington, Oswald

    Samuel, S. M. (Whitechapel)

    Ward, John (Stoke-upon-Trent)

    Pearce, Robert (Staffs, Leek)

    Scarisbrick, Sir T. T. L.

    Wason, Rt. Hon. E. (Clackmannan)

    Pickersgill, Edward Hare

    Schwann, C. Duncan (Hyde)

    Wason, John Cathcart (Orkney)

    Pollard, Dr. G. H.

    Schwann, Sir C. E. (Manchester)

    White, Sir George (Norfolk)

    Ponsonby, Arthur A. W. H.

    Seddon, J.

    White, J. Dundas (Dumbartonshire)

    Priestley, Sir W. E. B. (Bradford, E.)

    Seely, Colonel

    Whittaker, Rt. Hon. Sir Thomas P.

    Radford, G. H.

    Sherwell, Arthur James

    Wiles, Thomas

    Rea, Walter Russell (Scarborough)

    Smyth, Thomas F. (Leitrim, S.)

    Wilkie, Alexander

    Reddy, M.

    Snowden, P.

    Wilson, Hon. G. G. (Hull, W.)

    Rendall, Atheistan

    Stanley, Hon. A. Lyulph (Cheshire)

    Wilson, P. W. (St. Pancras, S.)

    Richards, T. F. (Wolverhampton, W.)

    Steadman, W. C.

    Wilson, W. T. (Westhoughton)

    Roberts, G. H. (Norwich)

    Stewart, Halley (Greenock)

    Roberts, Sir J. H. (Denbighs)

    Stewart-Smith, D. (Kendal)

    TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton.

    Robinson, S.

    Strachey, Sir Edward

    Robson, Sir William Snowdon

    Summerbell, T.

    Mr. CAVE: I beg to move in Sub-section (2) to leave out the words "for the previous year" ["from all sources for the previous year"].
    This is a very simple Amendment, arising out of the previous discussion. The effect of the Bill as it stands is that in stating your income for the purpose of the Super-tax this year you take it at last year's income, and on the average of the previous three years, so that you must go back four years in order to ascertain your income for the present year. The right hon. Gentleman said that the Government did not intend that to be the effect of the Bill, and he said that he would deal with the matter sooner or later. We have already discussed the matter, and I do not propose to repeat the arguments. I think the best way to deal with it will be to leave out the words "for the previous year."
    Mr. LLOYD-GEORGE: I am very much afraid of the leaving of these words out because the Amendment might have an effect which neither the hon. and learned Gentleman nor the Government has in view. I think the hon. and learned Gentleman agrees, at any rate, that for the purpose of this Amendment, the income must be on the basis of last year and not the current year.
    Mr. CAVE Mr. CAVE was understood to indicate dissent.
    Mr. LLOYD-GEORGE: It would be obviously out of order to raise the other question now. The point raised by the hon. Member is a totally different point. He was contending that it was unnecessary to insert the words "previous year," inasmuch as the income of the previous year would be the basis on which the Income Tax would be raised.
    Mr. CAVE: Take the income of the present year on the average of the last three years, but I want it to be the income of the last three years, and not of the three years before last year.
    Mr. LLOYD-GEORGE: Yes; but the hon. and learned Member has forgotten for a moment that Schedule D is only a very small part of the income, and that is the only part of the income to which the three years' average applies. I want to make the other schedules for the previous year, and not for the present year, for the simple reason that if you wait until the end of the current year you will never get any tax this year at all. Therefore I would like Schedules A, B, C and E for the previous year and not for the current year, as otherwise there would be no Super-tax at all to be paid the present year. That is why I cannot at this stage accept the omission of these words, because I can quite conceive that the hon. Member wants to go much further than I do. I shall be prepared, perhaps, to agree that it is desirable that the last three years should be taken in arriving at an average, but he does not agree with me that in the other schedules the income of the previous year must be taken into account. For that reason I could not at this stage agree to the omission of these words; but if he wishes to limit it to the point which he put to me we could easily find words. But I am afraid that the omission of these words would be dangerous.
    Mr. AUSTEN CHAMBERLAIN: I understand the right hon. Gentleman to say that in the case of the three years' average it is to be the average of the last three years, and that he will find words to make it the last three years.
    Mr. CAVE: Perhaps I had better not press the point now as the Government wall deal with it later on.
    Amendment, by leave, withdrawn.
    Mr. ARTHUR A. HAWORTH (for Mr. H. Nuttall)Mr. ARTHUR A. HAWORTH (for Mr. H. Nuttall) moved in Sub-section (2), after the word "year" ["all sources for the previous year"] to insert the words "excluding any portion thereof retained or used for trade or business purposes."
    The object of my hon. Friend's Amendment is this. The Bill discriminates between private firms and limited companies. Supposing a limited company has made a profit of £10,000, and a private firm with a similar capital has also made £10,000, and each decides only to distribute £5,000, retaining in the business £5,000 for extensions. In each case for the purpose of Income Tax they would pay exactly the same, but the individual shareholders, be they many or be they few, would only pay their Income Tax on the £5,000 distributed, and when you come to the Super-tax, in the case of the shareholders of the company, they would only pay on their part of the £5,000 contributed in the limited company; but in the case of the private firm the individual's Income Tax is to be reckoned on the whole of the £10,000. Therefore, the private firm is handicapped to this serious extent compared with the limited company. The Amendment of my right hon. Friend proposes to place private firms simply in the same position as the shareholders of any limited company would be placed in under this Bill. Unless this Amendment be made, it will be penalising private firms, and I do not thank that anybody, whatever may be the merits or demerits of limited companies, desire to penalise private firms. It does seem to me that there is an obvious, simple, and clear inequality and injustice against private firms.
    Mr. LLOYD-GEORGE: I think the Amendment a very complicated one, which may involve far-reaching consequences. It might have been put upon the Paper instead of being sprung upon us in manuscript, so that hon. Members might have had an opportunity of considering it. As far as I understand the proposal, it would simply mean that a private firm, so long as it places its profits to reserve, or sinks them in business extensions, would not pay any Super-tax at all. That is, obviously, very unfair. I do not agree with my
    142
    hon. Friend that private firms are at a disadvantage. As a matter of fact, when you convert these concerns into a limited liability company, as a rule probably more money is distributed in dividends than is desirable. Private firms very often sink their profits in business extensions, and frequently do not distribute one-third of their profits. In a case of that kind they would not pay any Super-tax at all. It is impossible, therefore, to accept my hon. Friend's Amendment.
    Mr. JOYNSON-HICKS: I feel bound to support the Amendment of the hon. Member for Stretford (Mr. Nuttall), who, I believe, is one of my own constituents, and I think it is the duty of a Member to support a constituent. There is more in the Amendment than the Chancellor of the Exchequer has suggested. It really is to prevent a very unfair discrimination between private firms and limited liability companies. I do not think the Chancellor of the Exchequer realises the great difference between private firms and limited liability companies. There are in Manchester a considerable number of private limited companies and private firms. A man, say, converts his business into a private limited company, and that company makes £10,000 profit. That is the profit upon which he pays Income Tax. He does not pay the whole £10,000 in dividends, but leaves £5,000 for depreciation, reserve, and so forth. He only divides £5,000, and that may all go to one person, who may be the only real shareholder in the company. Though the limited company pays its Income Tax on £10,000, the one shareholder, or the five or ten, will only pay Super-tax, not on the £10,000 profit, but on the £5,000 dividend. If the same man, instead of converting his business into a private limited company continues to run it as a private firm, he would pay his Income Tax on the £10,000 and the Super-tax, as well, on the £10,000. I do not think the Chancellor of the Exchequer has really appreciated the unfairness of the difference between the private firms and the private company. The hon. Member has moved it in a very clear speech, which demands more attention than it has received. From the point of view of revenue this would not make a very large inroad on the proceeds of the Super-tax, and it would be fair to the man who continues his business as a private firm with all the advantages to the workpeople of a private firm, rather than if the man converts

    143
    it into a private limited company and ceases all that close association between master and men, which happily still exists in the case of private firms. If my hon. Friend goes to a division I shall support him very strongly as a protest against the way in which the Chancellor of the Exchequer has treated this, emanating as it does from a large body of commercial men in Manchester.
    Mr. MARKHAM: I hope the Chancellor of the Exchequer will really reconsider this. I am the owner of two collieries with which, unfortunately, I am bound to trade as a private owner, because the landlord having had security from my grandfather has always refused to accept the security of a limited company, thinking he had better security from individuals. Assuming that the profits of these two collieries are £1,000 per year each—I see that the Chancellor smiles—but as a matter of fact one has not paid a dividend for twenty years. My grandfather (who was a Member of this House) took one of those collieries for purposes of his constituency; that is sixty years ago. At all events, so far as that colliery is concerned, it has not paid a dividend for sixty years. The effect of this Amendment is that all private owners trading as private companies are to be penalised, whereas the moment an owner turns his concern into a limited liability company he escapes the tax. What will happen in my case if this Amendment is rejected? I shall immediately form a company, under some such name as the "Catch Me if You Can Company," and then I shall be exempt. If a man who has a private business is a Member of this House he is disqualified from taking a Government contract, but that restriction is removed the moment he turns his business into a limited company.
    To place these disqualifications upon private firms and private owners is unfair, and is, in a way, giving a bonus to large limited companies and trusts. The whole tendency of these large concerns is to divide employers and workmen. The shareholders in large limited liability companies never come into contact with their workmen, whereas a private owner is in daily touch with his employés. Why should he be penalised? In my own case, why should I be penalised because my landlords want my security for their leases in preference to that of a limited company? So far as the justice of this tax is concerned, I
    144
    can meet it by turning my concern into a limited company. The landlords are the Ecclesiastical Commissioners, the largest landlords in the country. I fail to understand the argument of the Chancellor of the Exchequer. He said that a private company might put half its profits to reserve. Why should it not? Some limited companies do not divide 10 per cent. of their profits; others divide too much. The Chancellor of the Exchequer surely wants to encourage commerce. ["No."] I believe that this is his object, and it is proved by all the concessions he has made. It is to the benefit of trade and of employment that employers should put as much money as they possibly can into their concerns, and thereby find more employment for their workmen. If an employer makes £10,000 out of his concern, and puts £5,000 to reserve, employing more labour by so doing, he ought surely not to be prejudiced or put in a worse position than the man who divides the whole £10,000 in the way of dividends. I hope the Chancellor of the Exchequer will see his way to meet this Amendment; otherwise he will put me to the expenditure of a few shillings in going to a lawyer and forming a limited company to get over the difficulty.
    12.0 P.M.
    Mr. HAWORTH: I am sorry the Chancellor of the Exchequer feels he has not had full notice of this Amendment. It is only fair to say that there was on Friday on this very point a deputation which I understand was exceedingly favourably received. I believe also that my hon. Friend (Mr. Nuttall) wrote to the right hon. Gentlemen. It is not quite fair to assume that private firms would evade the Super-tax in this way. Because there are perfectly genuine firms holding large quantities and machinery, and that machinery has to be renewed just as much as that of a limited company has. It is a fact that at the present moment limited company shareholders do not become liable for Super-tax on amounts not distributed, whereas a member of a private trading concern does become liable for all amounts, whether he has actually received them or they are left in the business. That is a perfectly clear issue. If the Chancellor of the Exchequer does not see his way to make a statement on the subject at the present time, I trust that he will give us some hope that the favourable reception of the deputation on Friday afternoon on this point will tend to some statement on a future occasion.
    Mr. AUSTEN CHAMBERLAIN: The right hon. Gentleman the Chancellor of the Exchequer said that this Amendment struck at our whole Income Tax system. For the purpose of the ordinary Income Tax the private trader and the limited liability companies were treated alike. They are charged Income Tax on their profits, whether they are divided or undivided. In the case of the Super-tax the Chancellor has created a distinction between the two classes. I am sure there is no equity in the distinction. Their position is the same in the long run; the Treasury has nothing to lose by recognising the position. If they will treat the private manufacturer or trader in the same way as the limited liability company, if he puts a fair or large proportion of his profits to reserve, and probably therefore into his business, the Government will get their tax when he thinks it wise to divide his profits. The Chancellor of the Exchequer is wrong in saying that the Amendment—really moved from the other side of the House—would strike at the root of the Income Tax system, or introduce any anomaly into it. I hope the hon. Member will go to a Division, and if he does I shall certainly vote with him.
    Mr. EBENEZER PARKES: I think the reply of the Chancellor of the Exchequer on this Amendment shows he does not fully appreciate the point made, and I sincerely hope he will give the Amendment further consideration. It is well known that many great private concerns of this country still carry on their business, and I do not see why anyone should try to discourage the existence of private enterprise. No doubt some of these are in certain respects limited liability companies, and if a tax like this is insisted on it will simply result in private firms turning themselves into limited companies. I quite sympathise with the Chancellor when he says he has not had sufficient notice of this Amendment. Therefore, I appeal to the right hon. Gentleman to defer it to some future stage of the Bill, and I think when the right hon. Gentleman does look into it he will appreciate the justice of the matter.
    Mr. HARMOOD-BANNER: It must have been a principle of the Super-tax, based upon this Clause, that it would give an enormous preference to limited liability companies as against private traders. The effect of it is absolutely plain. Those who know the case of the limited liability
    146
    companies know that this is the first step towards supporting the principle of allowance for wasting assets, because it creates this position, that immediately the company makes up its balance sheets—and I do not agree with the Chancellor that that is done in a careless manner; it is done by most of the limited companies with the greatest care—they make their calculations of profits based upon proper provision for wasting assets and for the necessary reserves of business, and they divide the remainder. That is why you so frequently see profits amounting to £60,000 or £70,000, and merely a sum of £35,000 distributed. The remainder has been put to wasting assets. The sum of £35,000 is the sum upon which the Super-tax will have to be paid, and nothing will have to be paid on the other sum put to wasting assets. A private individual under the old system would make no provision for wasting assets. The profit of £70,000 would be divided between the partners, be they many or few. The whole of the £70,000 will have to pay Super-tax. That is so plain upon the face of the Bill that it is astonishing to me that neither the draftsman nor the Chancellor considered it.
    I should like to join my hon. Friend in appealing to the Chancellor of the Exchequer that he will not come to a decision upon the point until he has further considered it. It is a matter of immense importance. Of course, it can be avoided if every business will turn itself into a limited liability company, and only pay dividends out of certain sums, but surely it is not the desire of the Government to crush private enterprise by imposing disabilities on it which it does not impose upon limited liability companies. It is perfectly true that it brings to the front the question of providing for wasting assets. It creates this frightful distinction between a limited company and a private individual. It is a great injustice, and I hope the Chancellor of the Exchequer, who throughout these proceedings has desired to deal properly and fairly with the trader, will take this matter into consideration and ascertain whether he can form a basis upon which to establish a fair arrangement between the two. I do not say the terms of this Amendment are exactly what I should like to accept, but the principle of it is right, and we shall be committing a gross injustice on private individuals if we pass

    147
    the Clause in its present shape. The difficulties in dealing with this Clause has been immense, because very often we had to put down our Amendments in the form of new clauses. The rulings of the Chair have also swept away a great many of the points which ought to have been raised in the course of these Debates. For these reasons I appeal to the Chancellor of the Exchequer to take this question into consideration and not give a decided negative to this Amendment now.
    Mr. LYTTELTON: I thought there would have been some response from the Treasury Bench to the appeals which have been made from both sides of the House. There is the case of the colliery company with one more year's coal in the colliery. It has been decided that the £5,000 which has been produced from the colliery in the previous year shall be taken to be the profits and the Income Tax to be paid on that amount, although any prudent manager would set aside a large sum to meet the wasting assets. I think it is a distinct disadvantage in this case if you take the prudent management of a colliery into consideration. Surely, it is still more unbusinesslike to place a heavy additional burden upon an individual firm, carrying on a business as distinct from a company. I cannot see that any attempt has been made to answer the argument put forward. I agree with my hon. Friend behind me, that, speaking broadly, it is desirable to keep as many private firms in close relation with their employés as possible, and if that be so, why should private firms be penalised to such a very heavy extent as regards the Super-tax as compared with a limited company. I am afraid I cannot enforce the argument any further than it has been already made with absolute clearness, but I think we are entitled to some answer. The Chancellor says he has given an answer, but I must point out that the whole basis of his answer was an appeal ad misericordiam, because it was a manuscript Amendment and took him by surprise, whereas, as a matter of fact, correspondence had taken place.
    Mr. LLOYD-GEORGE: The right hon. Gentleman cannot possibly have listened to what I said. That was the first observation I made. I went on afterwards with what I considered to be a good answer. After all, a private firm could easily get out of the Super-tax by paying part of its profits to reserve. That may or may not
    148
    be a sufficient answer, but I have at any rate given it.
    Mr. HARMOOD-BANNER: A private firm might do it; but, as a matter of fact, the Income-tax Commissioners would not let them.
    Mr. MARKHAM: I quite see the point of the right hon. Gentleman that an individual might try to escape the tax by putting to reserve; but is he aware that a private company is treated for the purpose of the Income Tax qua company. In collieries each company is taken on the five years' average and treated qua collieries. It would therefore be impossible for these evasions to take place. I hope the Chancellor will consider the point before the Report stage.
    Mr. LLOYD-GEORGE: There are two ways of considering it. One is to consider it from the point of view of the private owner, and the other is to consider it from the point of view of the revenue. I have absolutely no doubt at all on the question whether the private firm ought to escape. With regard to the other case put by the hon. Member, it may be argued whether we ought to amend the position, and that I quite agree to consider.
    Mr. AUSTEN CHAMBERLAIN: The Chancellor makes suggestions in a light-hearted way which forces comment from me. If he has said anything, it is that this is a tax upon individuals whose incomes rose above £5,000. If he stands by that, how is he going to apply this to a limited liability company? What is placed to the reserve of a company is not the income of an individual. It may be, the property of the shareholders as a whole. The Chancellor cannot, in my opinion, do what he has just promised to consider. If he did, he would turn this tax inside out and propose a new tax. The discussion will take long enough if he sticks to the taxes as they are. For Heaven's sake do not let him withdraw this and introduce another tax even more objectionable!
    Mr. ROBERT DUNCAN: I think a certain amount should be permitted to be placed to reserve for extensions. Otherwise, you remove what makes for the stability of a business and the productive interests of the country.
    Question put, "That those words be there inserted."
    The Committee divided: Ayes, 82; Noes, 151.

    Division No. 687.]

    AYES.

    [12.22 a.m.

    Acland-Hood, M. Hon. Sir Alex. F.

    Duncan, Robert (Lanark, Govan)

    Markham, Arthur Basil

    Anson, Sir William Reynell

    Faber, George Denison (York)

    Mason, James F. (Windsor)

    Arkwright, John Stanhope

    Faber, Captain W. V. (Hants, W.)

    Meysey-Thompson, E. C.

    Balcarres, Lord

    Fell, Arthur

    Oddy, John James

    Baldwin, Stanley

    Forster, Henry William

    Parkes, Ebenezer

    Banbury, Sir Frederick George

    Foster, P. S.

    Pease, Herbert Pike (Darlington)

    Banner, John S. Harmood-

    Fullerton, Hugh

    Randles, Sir John Scurrah

    Baring, Capt. Hon. G. (Winchester)

    Gooch, Henry Cubitt (Peckham)

    Ratcliff, Major R. F.

    Beach, Hon. Michael Hugh Hicks

    Gordon, J.

    Remnant, James Farquharson

    Beckett, Hon. Gervase

    Gretton, John

    Renton, Leslie

    Bridgeman, W. Clive

    Guinness, Hon. W. E. (B. S. Edmunds)

    Renwick, George

    Bright, J. A.

    Hardy, Laurence (Kent, Ashford)

    Ridsdale, E. A.

    Brotherton, Edward Allen

    Harris, Frederick Leverton

    Roberts, S. (Sheffield, Ecclesall)

    Burdett-Coutts, W.

    Harrison-Broadley, H. B.

    Ronaldshay, Earl of

    Carlile, E. Hildred

    Hay, Hon. Claude George

    Rutherford, John (Lancashire)

    Carson, Rt. Hon. Sir Edward H.

    Helmsley, Viscount

    Rutherford, Watson (Liverpool)

    Cave, George

    Hill, Sir Clement

    Sheffield, Sir Berkeley George D.

    Cecil, Evelyn (Aston Manor)

    Hope, James Fitzalan (Sheffield)

    Smith, Abel H. (Hertford, E.)

    Chamberlain, Rt. Hon. J. A. (Worc'r)

    Hunt, Rowland

    Smith, Hon. W. F. D. (Strand)

    Clive, Percy Archer

    Kerry, Earl of

    Stanier, Beville

    Clyde, J. Avon

    Keswick, William

    Starkey, John R.

    Coates, Major E. F. (Lewisham)

    King, Alfred John (Knutsford)

    Walker, Col. W. H. (Lancashire)

    Corbett, C. H. (Sussex, E. Grinstead)

    King, Sir Henry Seymour (Hull)

    Warde, Col. C. E. (Kent, Mid)

    Courthope, G. Loyd

    Lambton, Hon. Frederick William

    Wilson, A. Stanley (York, E. R.)

    Craig, Captain James (Down, E.)

    Lane-Fox, G. R.

    Craik, Sir Henry

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Dickson, Rt. Hon. C. Scott

    Long, Col. Charles W. (Evesham)

    TELLERS FOR THE AYES.—Mr. Haworth and Mr. Joynson-Hicks.

    Doughty, Sir George

    Lyttelton, Rt. Hon. Alfred

    Douglas, Rt. Hon. A. Akers

    M'Calmont, Colonel James

    NOES.

    Adkins, W. Ryland D.

    Edwards, Clement (Denbigh)

    M'Laren, Sir C. B. (Leicester)

    Agar-Robartes, Hon. T. C. R.

    Edwards, Sir Francis (Radnor)

    M'Laren, H. D. (Stafford, W.)

    Agnew, George William

    Erskine, David C.

    Massie, J.

    Allen, A. Acland (Christchurch)

    Essex, R. W.

    Masterman, C. F. G.

    Allen, Charles P. (Stroud)

    Evans, Sir S. T.

    Mond, A.

    Ashton, Thomas Gair

    Everett, R. Lacey

    Montgomery, H. G.

    Balfour, Robert (Lanark)

    Falconer, J.

    Morgan, J. Lloyd (Carmarthen)

    Baring, Godfrey (Isle of Wight)

    Fiennes, Hon. Eustace

    Morrell, Philip

    Barker, Sir John

    Findlay, Alexander

    Myer, Horatio

    Barran, Rowland Hirst

    Fuller, John Michael F.

    Nicholson, Charles N. (Doncaster)

    Barry, Redmond J. (Tyrone, N.)

    Gladstone, Rt. Hon. Herbert John

    Norman, Sir Henry

    Beaumont, Hon. Hubert

    Glover, Thomas

    Partington, Oswald

    Beck, A. Cecil

    Gooch, George Peabody (Bath)

    Pickersgill, Edward Hare

    Bern, W. (Tower Hamlets, St. Geo.)

    Grey, Rt. Hon. Sir Edward

    Pollard, Dr. G. H.

    Bennett, E. N.

    Guest, Hon. Ivor Churchill

    Ponsonby, Arthur A. W. H.

    Berridge, T. H. D.

    Gulland, John W.

    Priestley, Sir W. E. B. (Bradford, E.)

    Black, Arthur W.

    Harcourt, Rt. Hon. L. (Rossendale)

    Radford, G. H.

    Boulton, A. C. F.

    Harcourt, Robert V. (Montrose)

    Rea, Walter Russell (Scarborough)

    Bowerman, C. W.

    Harmsworth, Cecil B. (Worcester)

    Rendall, Atheistan

    Bramsdon, Sir T. A.

    Harmsworth, R. L. (Caithness-shire)

    Richards, T. F. (Wolverhampton, W.)

    Brunner, J. F. L. (Lancs., Leigh)

    Hedges, A. Paget

    Roberts, G. H. (Norwich)

    Buxton, Rt. Hon. Sydney Charles

    Helme, Norval Watson

    Roberts, Sir J. H. (Denbighs)

    Byles, William Pollard

    Hemmerde, Edward George

    Robinson, S.

    Carr-Gomm, H. W.

    Henry, Charles S.

    Robson, Sir William Snowdon

    Causton, Rt. Hon. Richard Knight

    Herbert, Col. Sir Ivor (Mon. S.)

    Roch, Walter F. (Pembroke)

    Cawley, Sir Frederick

    Higham, John Sharp

    Roe, Sir Thomas

    Channing, Sir Francis Allston

    Hobhouse, Rt. Hon. Charles E. H.

    Rogers, F. E. (Newman)

    Cherry, Rt. Hon. R. R.

    Holland, Sir William Henry

    Rowlands, J.

    Cleland, J. W.

    Horniman, Emslie John

    Russell, Rt. Hon. T. W.

    Clough, William

    Howard, Hon. Geoffrey

    Rutherford, V. H. (Brentford)

    Clynes, J. R.

    Isaacs, Rufus Daniel

    Samuel, Rt. Hon. H. L. (Cleveland)

    Cobbold, Felix Thornley

    Jardine, Sir J.

    Samuel, S. M. (Whitechapel)

    Collins, Stephen (Lambeth)

    Johnson, John (Gateshead)

    Scarisbrick, Sir T. T. L.

    Collins, Sir Win. J. (St. Pancras, W.)

    Jones, William (Carnarvonshire)

    Schwann, C. Duncan (Hyde)

    Cooper, G. J.

    Keating, M.

    Schwann, Sir C. E. (Manchester)

    Cory, Sir Clifford John

    Laidlaw, Robert

    Seddon, J.

    Cotton, Sir H. J. S.

    Lambert, George

    Seely, Colonel

    Cox, Harold

    Lamont, Norman

    Simon, John Allsebrook

    Craig, Herbert J. (Tynemouth)

    Layland-Barratt, Sir Francis

    Smyth, Thomas F. (Leitrim, S.)

    Crosfield, A. H.

    Lehmann, R. C.

    Stanley, Hon. A. Lyulph (Cheshire)

    Crossley, William J.

    Lever, A. Levy (Essex, Harwich)

    Stewart-Smith, D. (Kendal)

    Davies, Timothy (Fulham)

    Levy, Sir Maurice

    Summerbell, T.

    Dewar, Arthur (Edinurgh, S.)

    Lloyd-George, Rt. Hon. David

    Tennant, Sir Edward (Salisbury)

    Dilke, Rt. Hon. Sir Charles

    Lough, Rt. Hon. Thomas

    Thomasson, Franklin

    Duncan, J. Hastings (York, Otley)

    Lupton, Arnold

    Thompson, J. W. H. (Somerset, E.)

    Dunn, A. Edward (Camborne)

    Maclean, Donald

    Tomkinson, James

    Dunne, Major E. Martin (Walsall)

    MacVeigh, Charles (Donegal, E.)

    Toulmin, George

    150

    151

    Trevelyan, Charles Philips

    White, J. Dundas (Dumbartonshire)

    Wilson, W. T. (Westhoughton)

    Villiers, Ernest Amherst

    Wiles, Thomas

    Wason, Rt. Hon. E. (Clackmannan)

    Wilkie, Alexander

    TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton.

    Wason, John Cathcart (Orkney)

    Wilson, Hon. G. G. (Hull, W.)

    White, Sir George (Norfolk)

    Mr. HOBHOUSE Mr. HOBHOUSE moved, in Sub-section (1), to leave out the words "and a sum for the expenses of management not exceeding 5 per cent. of the annual value of the land," and to insert instead thereof the words, "or on which duty has been repaid under the provisions of this Act relating to the repayment of duty in respect of the cost of maintenance repairs, insurance and management."
    The preceding words cover the one-eighth abatement which is allowed under the Finance Act, 1894. The words I have read out will cover the other one-eighth which is being given by the new Clause.
    Mr. AUSTEN CHAMBERLAIN: The Government propose to strike out the words alluding to the 5 per cent. for management. How then does the deduction come in at all?
    Mr. LLOYD-GEORGE: It comes in under the new Clause, which will enable a deduction of 25 per cent. to be made, which includes management. A much larger deduction will be made in the new Clause, not merely from Income Tax but from Super-tax.
    Mr. CAVE: May not an estate which cannot claim 25 per cent. lose some allowance by striking out these words?
    Mr. LLOYD-GEORGE: I cannot conceive any estate which could not, at any rate, claim an addition to the 12½ per cent. which is made at the present moment. Supposing there was an estate which could only claim 18 per cent. including management, it could claim it under the new deduction which I propose.
    Amendment agreed to.
    Further Amendment made: In Sub-section (2) after the word "and" ["and also in the case"] to insert the words "the estimated total income there shall be deducted, and the amount of any fee in respect of which relief from Income Tax may be allowed under Section 54 of the Income Tax Act, 1853, as extended by any subsequent enactment and."—[Mr Hobhouse.]
    Mr. HICKS BEACH: I beg to move in Sub-section (2) to leave out the word "abroad."
    152
    I suppose the intention of the Subsection is to grant an allowance to officers of the Crown serving abroad. I presume that under this head will be included persons like Ambassadors, Ministers, and General Officers. I think there are various other officers of the Crown whose duties keep them at home, and who are as much entitled to have this allowance made to them as those who are serving abroad. I agree that officers of the Crown serving abroad have to spend a large amount of their income in keeping up the proper status of their offices, but in that matter I do not think there is much distinction between the case of the General in command say at Malta and to an Admiral stationed at Chatham. I may be told that by leaving out the word "abroad" the allowance provided for in the Clause would include Cabinet Ministers. I would not object under the circumstances to the allowance being made to Cabinet Ministers. I do think that General Officers, Admirals, and Judges serving at home are just as much entitled to have this allowance for the proper maintenance of their offices as some of the gentlemen who are serving abroad.
    Mr. LLOYD-GEORGE: I think the hon. Member will see that it is impossible to exempt Cabinet Ministers. The object of the Sub-section is rather to protect Ministers who are serving the Crown abroad, and who have to undertake expenditure in entertaining and other matters incidental to the positions they hold. In charging Super-tax to them I think it is right that this allowance should be made to cover the expenses incidental to the discharge of the functions of office. I think they have a very strong case for the allowance, but I do not think we ought to protect those at home who have to incur expenditure of a similar character. I think the general feeling is that they are not in quite the same position as Ambassadors abroad, who are compelled by the exigencies of their offices to undertake this expenditure. Nominally the money is paid to them by way of salary, but it is really intended that it should be spent in incidental expenses.
    Mr. HICKS BEACH: Surely the right hon. Gentleman will see that General Officers at home have to incur large expenditure in entertaining in the same way as Ambassadors abroad.
    Mr. LLOYD-GEORGE: I do not think their salaries will come under the Super-tax.
    Mr. HICKS BEACH: Their salaries taken with other sources of income will, I think, come under the Super-tax. When a very large portion of the salary is devoted not to his own personal comfort but to entertaining, some allowance should be made.
    Question, "That the word proposed to be left out stand part of the Clause," put, and agreed to.
    Amendment made: To add at the end of the Clause the words "and for which an allowance has not already been made."
    Mr. SAMUEL ROBERTS Mr. SAMUEL ROBERTS moved to add at the end of the Clause the words, "For the purposes of the Super-tax, if within or within twelve months after the year of assessment any person charged to the Super-tax, whether he shall have computed his profits or gains on the amount thereof in the preceding year or on an average of years, shall find and prove to the Special Commissioners that his profits and gains during the year for which the computation was made fell short of the sum so computed, the said Commissioners shall cause the assessment made for such year to be amended and reduced to the amount of the actual profits and gains made during the year for which the computation was made, and in case tax shall have been paid on the sum assessed, the sum overpaid shall be repaid by the Commissioners of Inland Revenue, and in case the amount of the actual profits and gains made during the year for which the computation was made does not exceed £5,000 then no Super-tax shall be payable, and all Super-tax (if any) which has already been paid in respect of such year shall be repaid by the Commissioners of Inland Revenue."
    The 133rd Section of the Act of 1842, which was repealed by the present Government with regard to ordinary Income Tax in the year 1907, was a most useful section. It provided that where an Income Tax-payer in any year found that his profits did not amount to the assessment for which he was assessed, either on the average of the three years or in the preceding year, he might apply to the Commissioners, and if they were satisfied of the correctness of his statement they might reduce the assessment or order the repayment of the amount overpaid. In assessing this Super-tax, if you have no
    154
    such provision, and a man happens to have a reduction in his profits, you will make him pay a Super-tax on an income which he did not receive, and which was calculated on the three preceding good fat years. As an Income Tax Commissioner I had experience of this, and when people complained that they were assessed on incomes which they had not received our answer always was, "You can apply under the 133rd Section to get a return," and they were generally satisfied. All I ask now is to revive the powers of the 133rd Section of the Act of 1842.
    Mr. SYDNEY BUXTON: What the hon. Member proposes is that the taxpayer, in the event of one year of the average of three falling below the £5,000, he should be able to take that year separately instead of having it assessed on the three years' basis. I do not think it would be fair that the taxpayer should have that additional advantage, and that the State should not have the additional advantage the other way. The object of the three years' average is that the taxpayer should pay on the whole, and during that period he pays as much taxation as he would otherwise have paid if each year had been taken separately. It seems very unjust from the point of view of the State that the individual should be allowed when it suited his purpose to take the three years, but when it was to his disadvantage to take a single year. The 133rd Section was fully discussed in 1907, and the House as a whole entirely agreed with the position taken up by the Government that this Section was unfair to the Exchequer and ought to be repealed. I do not think that the hon. Member has shown any reason why the Section should be revived for the purpose of the Super-tax.
    Sir F. BANBURY: For sixty-five years this injustice was perpetrated, and no Chancellor of the Exchequer and no person ever complained that an injustice had been done. It was not until 1907, or sixty-five years after this Section was first introduced, that the present Prime Minister came down and repealed it.
    Mr. LLOYD-GEORGE: It was agreed to without a division.
    Sir F. BANBURY: I strongly protested against it, and I cannot tell why it was not divided upon. I presume I must have been out of the House at the time. I remember that one of the Prime Minister's arguments was that the three years' average righted itself in the long run, and that though there might be an injustice

    155
    done in one year, yet in all probability, if the business continued, the following two years would right the injustice done before. I put to him the case of a business gradually decaying, and which could not have the good years which would enable it to right itself. The Chancellor then said he practically admitted he could not answer that point, that the question of a failing business was an injustice. Of course he could not meet it, because the only way was to re-enact Section 133. This will cause another injustice, quite apart from the three years' average system, where an income which is derived from investments gave a larger yield last year than it is giving now. The Chancellor of the Exchequer never gave me an answer to that point at all. I asked him what would happen if a person had given away to his son or daughter in a perfectly legitimate way a considerable sum of money last year, reducing his income for this year. I asked him whether he would not be charged on the income of last year, while there might be a reduction in dividend this year over the dividend of last year, but to neither of these questions did he give any answer.
    The only way out of the difficulty is to re-enact the provision my hon. Friend wishes to re-enact, so that where a man
    finds his income is not £5,000 he shall not be charged Super-tax. Does the right hon. Gentleman desire to charge a man on what he has not received? I do not believe even hon. Members below the Gangway would wish to do so. Therefore, unless the right hon. Gentleman accepts this Amendment two things will result. In a failing business injustice will occur, and in the cases such as I have mentioned, where income has decreased, he will be unjustly charged on income he has not received. I believe the only reason why the Chancellor of the Exchequer in 1907 repealed Section 133 was because people were beginning to understand it and take advantage of it. The Inland Revenue was rather afraid. A good deal of revenue would be lost, and therefore the Section was repealed. I fail to see why a Section which for sixty-five years was considered just should now be considered unjust, and at a time when we are largely increasing the Income Tax. Under those circumstances the least that ought to be done is to ensure that people shall only be charged on the incomes they actually receive.
    Question put, "That those words be there added."
    The Committee divided: Ayes, 55; Noes, 126.

    Division No. 688.]

    AYES.

    [12.55 a.m.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Craik, Sir Henry

    M'Calmont, Colonel James

    Anson, Sir William Reynell

    Dickson, Rt. Hon. Charles Scott

    Mason, James F. (Windsor)

    Arkwight, John Stanhope

    Doughty, Sir George

    Oddy, John James

    Balcarres, Lord

    Douglas, Rt. Hon. A. Akers-

    Parties, Ebenezer

    Baldwin, Stanley

    Duncan, Robert (Lanark, Govan)

    Ratcliffe, Major R. F.

    Banner, John S. Harmood

    Fell, Arthur

    Remnant, James Farquharson

    Baring, Capt. Hon. G. (Winchester)

    Foster, Philip S. (Warwick, S.W.)

    Renwick, George

    Beach, Hon. Michael Hugh Hicks

    Gordon, J.

    Ronaldshay, Earl of

    Beckett, Hon. Gervase

    Guinness, Hon. W. E. (Bury St. Edm.)

    Rutherford, Watson (Liverpool)

    Bowerman, C. W.

    Hardy, Laurence (Kent, Ashford)

    Stanler, Bevilie

    Bridgeman, W. Clive

    Harrison-Broad Icy, H. B.

    Starkey, John R.

    Brotherton, Edward Allen

    Hay, Hon. Claude George

    Walker, Col. W. H. (Lancashire)

    Carlile, E. Hildred

    Helmsley, Viscount

    Warde, Col. C. E. (Kent, Mid)

    Cave, George

    Hill, Sir Clement

    Wilson, A. Stanley (York, E. R.)

    Cecil, Evelyn (Aston Manor)

    Hunt, Rowland

    Younger, George

    Clive, Percy Archer

    Kerry, Earl of

    Clyde, James Avon

    King, Sir Henry Seymour (Hull)

    TELLERS FOR THE AYES.—Mr. Samuel Roberts and Sir Frederick Banbury.

    Coates, Major E. F. (Lewisham)

    Lamont, Norman

    Courthope, G. Loyd

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    Craig, Captain James (Down, E.)

    Long, Col. Charles W. (Evesham)

    NOES.

    Agar-Robartes, Hon. T. C. R.

    Berridge, T. H. D.

    Clynes, J. R.

    Agnew, George William

    Black, Arthur W.

    Cobbold, Felix Thornley

    Allen, A. Acland (Christchurch)

    Boulton, A. C. F.

    Collins, Stephen (Lambeth)

    Allen, Charles P. (Stroud)

    Bramsdon, Sir Thomas A.

    Collins, Sir Wm. J. (St. Pancras, W.)

    Ashton, Thomas Gair

    Brunner, J. F. L. (Lancs., Leigh)

    Cooper, G. J.

    Balfour, Robert (Lanark)

    Buxton, Rt. Hon. Sydney Charles

    Corbett, C. H. (Sussex, E. Grinstead)

    Baring, Godfrey (Isle of Wight)

    Carr-Gomm, H. W.

    Cotton, Sir H. J. S.

    Barran, Rowland Hirst (Leeds, N.)

    Causton, Rt. Hon. Richard Knight

    Craig, Herbert J. (Tynemouth)

    Barry, Redmond J. (Tyrone, N.)

    Cawley, Sir Frederick

    Crosfield, A. H.

    Beaumont, Hon. Hubert

    Channing, Sir Francis Allston

    Crossley, William J.

    Beck, A. Cecil

    Cherry, Rt. Hon. R. R.

    Dewar, Arthur (Edinburgh, S.)

    Benn, W. (Tower Hamlets, St. Geo.)

    Cleland, J. W.

    Dilke, Rt. Hon. Sir Charles

    Bennett, E. N.

    Clough, William

    Duncan, J. H. (York, Otley)

    Dunn, A. Edward (Camborne)

    Jardine, Sir J.

    Robinson, S.

    Dunne, Major E. Martin (Walsall)

    Johnson, John (Gateshead)

    Robson, Sir William Snowdon

    Edwards, Clement (Denbigh)

    Jones, William (Carnarvonshire)

    Rogers, F. E. Newman

    Edwards, Sir Francis (Radnor)

    King, Alfred John (Knutsford)

    Russell, Rt. Hon. T. W.

    Erskine, David C.

    Laidlaw, Robert

    Samuel, Rt. Hon. H. L. (Cleveland)

    Essex, R. W.

    Lambert, George

    Samuel, S. M. (Whitechapel)

    Evans, Sir Samuel T.

    Layland-Barratt, Sir Francis

    Scarisbrick, Sir T. T. L.

    Everett, R. Lacey

    Lehmann, R. C.

    Seddon, J.

    Falconer, James

    Lever, A. Levy (Essex, Harwich)

    Seely, Colonel

    Fiennes, Hon. Eustace

    Levy, Sir Maurice

    Simon, John Allsebrook

    Fuller, John Michael F.

    Lough, Rt. Hon. Thomas

    Smyth, Thomas F. (Leitrim, S.)

    Fullerton, Hugh

    Lupton, Arnold

    Stanley, Hon. A. Lyulph (Chesh.)

    Gladstone, Rt. Hon. Herbert John

    MacVeagh, Jeremiah (Down, S.)

    Stewart-Smith, D. (Kendal)

    Glover, Thomas

    M'Laren, H. D. (Stafford, W.)

    Summerbell, T.

    Gooch, George Peabody (Bath)

    Markham, Arthur Basil

    Thomasson, Franklin

    Guest, Hon. Ivor Churchill

    Massle, J.

    Thompson, J. W. H. (Somerset, E.)

    Gulland, John W.

    Mond, A.

    Tomkinson, James

    Harcourt, Rt. Hon. L. (Rossendale)

    Montgomery, H. G.

    Toulmin, George

    Harcourt, Robert V. (Montrose)

    Morrell, Philip

    Trevelyan, Charles Philips

    Harmsworth, Cecil B. (Worcester)

    Partington, Oswald

    Villiers, Ernest Amherst

    Harmsworth, R. L. (Caithness-shire)

    Pickersgill, Edward Hare

    Wason, Rt. Hon. E. (Clackmannan)

    Haworth, Arthur A.

    Pollard, Dr.

    Wason, John Cathcart (Orkney)

    Hedges, A. Paget

    Ponsonby, Arthur A. W. H.

    White, J. Dundas (Dumbartonshire)

    Helme, Norval Watson

    Priestley, Sir W. E. B. (Bradford, E.)

    Wiles, Thomas

    Henry, Charles S.

    Radford, G. H.

    Wilkie, Alexander

    Herbert, Col. Sir Ivor (Mon., S.)

    Rea, Walter Russell (Scarborough)

    Wilson, Hon. G. G. (Hull, W.)

    Higham, John Sharp

    Rendall, Atheistan

    Wilson, W. T. (Westhoughton)

    Hobhouse, Rt. Hon. Charles E. H.

    Richards, T. F. (Wolverhampton)

    Horniman, Emslie John

    Roberts, G. H. (Norwich)

    TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton.

    Howard, Hon. Geoffrey

    Roberts, Sir J. H. (Denbighs.)

    1.0 A.M.
    Mr. HARMOOD-BANNER Mr. HARMOOD-BANNER moved to insert at the end of the Clause a new Sub-section: "(3) For the purposes of the Super-tax, in addition to the deductions authorised by the preceding Sub-section, the following deductions shall be permitted—Where the income is derived from capital which has been invested in leasehold property, mines, or other wasting subject matter, there shall be allowed as a deduction (under whatever schedule the said income may be assessed), such a sum as fairly represents the loss or destruction of capital during the year of assessment incident to the wasting nature of the subject matter in which the said capital is invested."
    I should like to refer to a speech of the Chancellor of the Exchequer in which he said:
    "As the Prime Minister so well pointed out two years ago, inequalities which cannot be tolerated in a tax designed for the purpose of meeting a temporary emergency are intolerable in a permanent part of our fiscal machinery."
    I venture to think that this question of wasting assets under this Super-tax, which is to be permanent, is an intolerable burden. It is quite true that the discussion to some extent touched upon this subject when we were dealing with the deductions from the profits of private companies, and therefore I do not propose to amplify the matter to any great extent. I feel, however, that it is important to raise this point of wasting assets, inasmuch as it was mentioned earlier in the Debate on the ordinary Income Tax, and my right hon. Friend the Member
    158
    for East Worcestershire (Mr. A. Chamberlain) then spoke of the subject as one upon which it would be desirable to have a discussion later on. The question of wasting assets as regards Income Tax has been decided so far against the ordinary Income Tax payer. On what grounds of equity or principle that decision was taken I really cannot understand, because a man's gains or profits represent the amount which he requires over and above his original capital owing to his entering upon trade. It is absolutely essential that he should bring into account the stock of money he has at the commencement of his enterprise and the stock of money he has at the termination of his enterprise.
    So far as the Income Tax for ordinary purposes is concerned, the Government has not accepted that principle, although I am glad to see we are coming near it, and that in connection with the Super-tax it has been allowed in the difference between private individuals and companies. It is a matter of prime importance for an individual, in the first place, in order to put himself on an equality with limited companies; and, secondly, as an ordinary point of fairness, that you should take into account the wasted assets. You have only to look at the report of the Departmental Committee on Income Tax to find that the question is raised by Sir Henry Primrose and others to a great extent. In none of their reports is there any objection to this principle, except that the Income Tax is not a question of gains and profits but of income to be dealt with in a different

    159
    way—a distinction I am unable to comprehend. Wasted capital represents all the capital which is put into a business in the shape of the erection of buildings. It represents money put into business in order to start a patent; money which is paid for a leasehold property without a short or long term to run; and it also represents the amount of money paid for guano or phosphorous works abroad, and even for mines in this country of every sort and description—those amounts which are capital having been taken out of the ground and then wasted. They represent a loss to the owner; the difference between what a man has at the commencement and the amount he has at the end of his venture. I ask the Chancellor of the Exchequer to take this into very serious consideration and to accept this Amendment so far as the Super-tax is concerned. It does not affect the principle of limited companies, but it does affect the question of the individuals who are trading on the same basis as limited companies, and who are, as prudent men, equally entitled to make provision for wasting assets in order to protect their property by replacing that which goes out of existence. For instance, a lease has 14 years to run. It becomes 10 years, the 10 years becomes 5, and the 5 lapses into nothing. What is the position of a man who, having paid £5,000 for a leasehold, at the end of the term has nothing whatever to represent the value he originally paid for? That is only one illustration, but it represents the enormous transactions which are going on every day in regard to investment in wasting property. For the purposes of this Super-tax I would even appeal to the Labour Members to consider it as a fair point as between man and man in calculating profits.
    Mr. HOBHOUSE: The hon. Gentleman has brought this matter to the notice of the Committee in a most reasonable and moderate speech. He quite truly said that it raises a very important question of principle, but I do not suppose he will imagine that at this stage the Government can possibly take into favourable consideration the Amendment which he has put upon the Paper. If the question of wasting capital were introduced in connection with the Super-tax it would be quite impossible not to take it into consideration in the matter of the ordinary Income Tax, and at this period of the Session that could not be attempted. Besides the reason which I have given there are practical considerations
    160
    which point to the extreme difficulty of dealing with this Question at any time. The apportionment between that capital which may be considered as wasted, or rather that profit which may be considered as capital which is wasted, and that portion of the profit which may be considered as profit truly earned, would involve a very close examination of accounts. It would also involve a close and careful scrutiny of all the transactions of the companies concerned. If that were to be carried out it would, as everybody will recognise, require a very large addition to the staff of the Inland Revenue. Therefore the Committee will see that from the purely practical point of view there are considerable difficulties in the way of adopting the Amendment, and those difficulties may not have occurred to the hon. Gentleman. At the present moment, very largely, I think, on the recommendation of the Committee to which the hon. Gentleman has referred, there is an allowance in respect of the wear and tear of machinery, but that allowance is strictly confined to questions of machinery only. I do not propose to argue the question at any length at this hour of the morning, but I can assure the hon. Gentleman that there are considerable practical difficulties in the way of the acceptance of his Amendment, and I hope he will not press it to a division.
    Mr. AUSTEN CHAMBERLAIN: I agree with one observation which fell from the hon. Gentleman opposite, namely, that this is a very difficult subject to deal with. It is difficult from the point of view of obtaining theoretic justice, and difficult also from the point of view of practical administration. At the same time, I think the hon. Gentleman may have over-exaggerated the difficulties, for, as he has reminded us, what is here proposed is allowed already in the case of machinery, and the Commissioners will have to make in the case of machinery the same class of inquiries as they would have to make in this case. Indeed, I think the inquiries that will have to be made in respect of some of the deductions which are provided for will be even more difficult than they would be in many of the cases covered by the Amendment of my hon. Friend.
    I have never thought that the old Income Tax law was satisfactory on this point. I hoped when I was Chancellor of the Exchequer that I should have further guidance and assistance on the matter from the committee which I appointed to inquire into the working of the Income

    161
    Tax laws, but I do not think they were very much impressed by the importance of it. I have never thought it right that you should force a man to treat his property for taxing purposes in a manner contrary to every sound business principle and instinct. Suppose a man has a lease of a property for which he has paid £14,000 and which has fourteen years to run. The Income Tax Commissioners say that he may not write any part of that capital expenditure off his profits, and yet, as every business man knows, if he does not do so he is on the high road to bankruptcy. The lease is to expire in 14 years—it may very easily be rendered valueless in less than 11 years—and the least he can do is to write off one-fourteenth of his capital expenditure upon it. Any prudent man would do more than that, and would try to write off the whole amount in less than the fourteen years. If he is in any bind of fiduciary position as a director of a company or anything of that kind he may find himself in great peril from the bankruptcy laws for having declared profits which he has not made. Yet he is branded as a fraudulent person, who is avoiding his duty to the tax-gatherer if he does not treat it as profits when he makes his return to the Income Tax Commissioners. I think the Committee will agree that the system is not right, and, as he is now making a change, I would press the Chancellor of the Exchequer very strongly to deal with the matter. We are putting a new Income Tax
    on the top of the old, and for the new tax we have to have a new system, which is embodied in the Bill. I do not see why we should perpetuate in the new tax an injustice we committed under the old tax, and I do not see why we should introduce into the new tax an anomaly which I do not think anybody could defend in connection with the old tax. Although this is a wasting investment, the annual return is higher, because it includes both capital and interest, and yet you treat it as though the whole were interest. That will result in a special class of hardship in relation to this tax. Not merely will it unduly swell the Super-tax of many people who ought to pay the Super-tax, but it will make liable to Super-tax a great many people who ought not to be liable at all, and who certainly ought not to be liable on the basis on which this tax is defended, because they have not the money to spend. We are all anxious at this hour of the morning to bring this discussion to a close as quickly as we can, but the right hon. Gentleman must not on that account expect that we should refrain from calling attention to so important and, as I think, so unjust an anomaly as that which my hon. Friend is trying to remove, and if my hon. Friend goes to a division, as I hope he will, I shall feel bound to support him.
    Question put, "That those words be added."
    The Committee divided: Ayes, 52; Noes, 121.

    Division No. 689.]

    AYES.

    [1.24 a.m.

    Acland-Hood, Rt. Hon. Sir Alex. F.

    Craik, Sir Henry

    Mason, James F. (Windsor)

    Anson, Sir William Reynell

    Dickson, Rt. Hon. Charles Scott

    Oddy, John James

    Arkwright, John Stanhope

    Doughty, Sir George

    Parkes, Ebenezer

    Balcarres, Lord

    Douglas, Rt. Hon. A. Akers-

    Ratcliffe, Major R. F.

    Baldwin, Stanley

    Duncan, Robert (Lanark, Govan)

    Renwick, George

    Banbury, Sir Frederick George

    Foster, Philip S. (Warwick, S.W.)

    Roberts, S. (Sheffield, Ecclesall)

    Baring, Capt. Hon. G. (Winchester)

    Gordon, J.

    Ronaldshay, Earl of

    Beach, Hon. Michael Hugh Hicks

    Guinness, Hon. W. E. (Bury St. Edm.)

    Rutherford, Watson (Liverpool)

    Bridgeman, W. Clive

    Hardy, Laurence (Kent, Ashford)

    Stanler, Seville

    Brotherton, Edward Allen

    Harrison-Broadley, H. B.

    Starkey, John R.

    Carlile, E. Hildred

    Hay, Hon. Claude George

    Walker, Col. W. H. (Lancashire)

    Cave, George

    Helmsley, Viscount

    Warde, Col. C. E. (Kent, Mid)

    Cecil, Evelyn (Aston Manor)

    Hill, Sir Clement

    Wilson, A. Stanley (York, E. R.)

    Chamberlain, Rt. Hon. J. A. (Wore.)

    Hunt, Rowland

    Younger, George

    Clive, Percy Archer

    Kerry, Earl of

    Clyde, James Avon

    King, Sir Henry Seymour (Hull)

    Coates, Major E. F. (Lewisham)

    Lockwood, Rt. Hon. Lt.-Col. A. R.

    TELLERS FOR THE AYES.—Mr. Harmood-Banner and Mr. Remnant.

    Courthope, G. Loyd

    Long, Col. Charles W. (Evesham)

    Craig, Captain James (Down, E.)

    M'Calmont, Colonel James

    NOES.

    Agar-Robartes, Hon. T. C. R.

    Barry, Redmond J. (Tyrone, N.)

    Bowerman, C. W.

    Agnew, George William

    Beaumont, Hon. Hubert

    Bramsdon, Sir Thomas A.

    Allen, A. Acland (Christchurch)

    Beck, A. Cecil

    Brunner, J. F. L. (Lancs., Leigh)

    Allen, Charles P. (Stroud)

    Benn, W. (Tower Hamlets, St. Geo.)

    Buxton, Rt. Hon. Sydney Charles

    Ashton, Thomas Gair

    Bennett, E. N.

    Carr-Gomm, H. W.

    Baring, Godfrey (Isle of Wight)

    Black, Arthur W.

    Causton, Rt. Hon. Richard Knight

    Barran, Rowland Hirst (Leeds, N.)

    Boulton, A. C. F.

    Cawley, Sir Frederick

    Channing, Sir Francis Allston

    Harmsworth, R. L. (Caithness-shire)

    Rendall, Atheistan

    Cherry, Rt. Hon. R. R.

    Haworth, Arthur A.

    Richards, T. F. (Wolverhampton)

    Cleland, J. W.

    Hedges, A. Paget

    Roberts, G. H. (Norwich)

    Clough, William

    Helme, Norval Watson

    Robinson, S.

    Clynes, J. R.

    Henry, Charles S.

    Robson, Sir William Snowdon

    Cobbold, Felix Thornley

    Herbert, Col. Sir Ivor (Men., S.)

    Rogers, F. E. Newman

    Collins, Stephen (Lambeth)

    Higham, John Sharp

    Russell, Rt. Hon. T. W.

    Collins, Sir Wm. J. (St. Pancras, W.)

    Hobhouse, Rt. Hon. Charles E. H.

    Samuel, Rt. Hon. H. L. (Cleveland)

    Cooper, G. J.

    Horniman, Emslie John

    Samuel, S. M. (Whitechapel)

    Corbett, C. H. (Sussex, E. Grinstead)

    Howard, Hon. Geoffrey

    Scarisbrick, Sir T. T. L.

    Cotton, Sir H. J. S.

    Johnson, John (Gateshead)

    Seddon, J.

    Craig, Herbert J. (Tynemouth)

    Jones, William (Carnarvonshire)

    Seely, Colonel

    Crossley, William J.

    Keating, Matthew

    Simon, John Allsebrook

    Dewar, Arthur (Edinburgh, S.)

    King, Alfred John (Knutstord)

    Smyth, Thomas F. (Leitrim, S.)

    Dilke, Rt. Hon. Sir Charles

    Laidlaw, Robert

    Stanley, Hon. A. Lyulph (Cheshire)

    Duncan, J. H. (York, Otley)

    Lambert, George

    Stewart-Smith, D. (Kendal)

    Dunn, A. Edward (Camborne)

    Lament, Norman

    Summerbell, T.

    Dunne, Major E. Martin (Walsall)

    Layland-Barratt, Sir Francis

    Thomasson, Franklin

    Edwards, Clement (Denbigh)

    Lehmann, R. C.

    Thompson, J. W. H. (Somerset, E.)

    Edwards, Sir Francis (Radnor)

    Lever, A. Levy (Essex, Harwich)

    Tomkinson, James

    Erskine, David C.

    Levy, Sir Maurice

    Toulmin, George

    Essex, R. W.

    Lloyd-George, Rt. Hon. David

    Trevelyan, Charles Philips

    Evans, Sir Samuel T.

    Lupton, Arnold

    Villiers, Ernest Amherst

    Everett, R. Lacey

    MacVeagh, Jeremiah (Down, S.)

    Wason, Rt. Hon. E. (Clackmannan)

    Fiennes, Hon. Eustace

    Markham, Arthur Basil

    Wason, John Cathcart (Orkney)

    Fuller, John Michael F.

    Massle, J.

    White, J. Dundas (Dumbartonshire)

    Fullerton, Hugh

    Mond, A.

    Wiles, Thomas

    Gladstone, Rt. Hon. Herbert John

    Morrell, Philip

    Wilkie, Alexander

    Glover, Thomas

    Partington, Oswald

    Wilson, Hon. G. G. (Hull, W.)

    Gooch, George Peabody (Bath)

    Pickersgill, Edward Hare

    Wilson, W. T. (Westhoughton)

    Guest, Hon. Ivor Churchill

    Pollard, Dr.

    Gulland, John W.

    Ponsonby, Arthur A. W. H.

    Harcourt, Rt. Hon. L. (Rossendale)

    Priestley, Sir W. E. B. (Bradford, E.)

    TELLERS FOR THE NOES.—Mr. Joseph Pease and Captain Norton.

    Harcourt, Robert V. (Montrose)

    Radford, G. H.

    Harmsworth, Cecil B. (Worcester)

    Rea, Walter Russell (Scarborough)

    Mr. YOUNGER Mr. YOUNGER moved to add at the end of the Clause the words "and also in the case of any person who is a tenant for life, or has a limited interest in any inimical royalties, such part of the income from such royalties as is not available for his personal use."
    I am only moving this Amendment in order to bring under the Chancellor of the Exchequer's notice a point of some considerable importance, which he will perhaps be good enough to consider between now and the Report. It is well known to the Chancellor of the Exchequer that in the case of certain estates a considerable portion of the income from mining royalties is obliged to be treated as capital. The tenant for life gets no benefit whatever out of that part of the income except such interest as he gets on the money, and in the case of glebes and church lands no portion whatever goes to the tenant for life, and it seems perfectly ridiculous to charge a Super-tax on income of that kind which is no income at all. There is a very strong case for consideration, though I do hot know whether the Chancellor of the Exchequer agrees, because he does not want to exempt anything, the principle of the tax being to rope in everything, whether the individual enjoys it or not. I do not press this Amendment at this stage, but I merely raise it in order that the right hon. Gentleman may be able to give it consideration.
    Mr. LLOYD-GEORGE: Of course, I will undertake to consider very carefully any representation made by the hon. Member, but I really do not see that there is any substantial difference between this—in principle, at any rate—and the Amendment of which we have disposed. The reason why the tenant for life is obliged to make some sort of arrangement of this kind is because it is a wasting capital, and he is not entitled by the terms of his trust to take it as income; and, after all, it is regarded by those who are responsible for the administration of the trust as something in the nature of capital and not of income. That seems to be the same principle. I agree there is a good deal to be said for considering the whole question of wasting securities, but I do not see how I could draw a distinction between the case of a tenant for life and the other case. It is substantially the same case. It is purely a wasting security, and you are treating something which may be exhausted in the course of 20 years as if it were a permanent income derived from something which is lasting. That is the real principle which underlies it. In the case of a mineral royalty the thing is more obvious, but there may be hardships in other cases. I will, however, consider whether there is any distinction between this case and the other.
    Mr. AUSTEN CHAMBERLAIN: The case we were discussing just now in the absence of the Chancellor of the Exchequer was also the case of a wasting capital, and though there was no doubt that any prudent man would replace the asset as it wasted, it was within the individual's option to do so or not. In the case put by my hon. Friend it is not an option, but the law compels the tenant for life to set apart a portion of the annual rent, and in some cases even the whole.
    Mr. MARKHAM: No.
    Mr. YOUNGER: The case of church lands in Scotland.
    Mr. MARKHAM: Not otherwise.
    Mr. AUSTEN CHAMBERLAIN: Why say in no case if you admit it in the case of church lands? My hon. Friend has asked that the case may be raised at a later stage, and, therefore, all that I wish is to call the attention of the Chancellor of the Exchequer to what I conceive to be the difference between this case and the other case. I thought the other case was a fair one, but this is a stronger case, because here a man is bound by law not to treat this as income, and he is restrained by law if he attempts it. I think, therefore, this is a special case for consideration.
    Mr. MARKHAM: The case quoted by the hon. Member opposite requires a little further consideration. Many tenants for life who apply for the sanction of the court are allowed to derive the whole of the income because the court puts a very wide construction upon the matter.
    Amendment, by leave, withdrawn.
    Question proposed, "That the Clause, as amended, stand part of the Bill."
    Mr. HICKS BEACH: I do not think it is quite proper that an entirely new tax of this description should be passed sub silentio even if the hour is late. The Select Committee appointed two years ago reported that graduation by a Super-tax was practicable, but that is a very different thing from saying or for thinking that in addition to the Death Duties now existing you should impose a further additional Super-tax. I think it is only fair, in discussing this question, that the Committee should consider one or two paragraphs in the Select Committee's report in which they refer to the bearing which the Death Duties have upon the graduation and differentiation of Income Tax. Sir
    166
    Henry Primrose and Mr. Mallet submitted to us various calculations of the effect of a special additional Income Tax on the incomes of estates which are liable to Estate Duty. And then they go on to state:—
    "Sir Henry Primrose calculates that if the State had levied a special additional Income Tax on the income of estates which are liable to Estate Duty with the object of raising in each year the average amount of revenue which has been annually received from the duty during the ten years 1896–1905, and that Income Tax had been graduated as the Estate Duties are, the tax so imposed would have ranged from 6d. in the £ on estates yielding an income of from £40 to £400 a year to 1s. in the £ on estates yielding an income of from £4,000 to £6,000 a year, and 1s. 3¾d. in the £ on estates yielding an income of £40,000 and upwards a year."
    And then there is another calculation. Sir Henry Primrose considered that an estate yielding an income of from £40 to £400 a year the Estate Duties were equivalent to an Income Tax of 9d. in the £ per annum during the life of the inheritor; an estate yielding an income of £4,000 to £6,000 a year of 1s. 6d. in the £; and an estates yielding an income of £40,000 a year and upwards of 2s. in the £.
    These calculations were based at a time when the Death Duties were comparatively small; but if these calculations were made up-to-date it would be shown that instead of the duties becoming equivalent to an Income Tax of 1s. 3¾d. in the £, at the present time they amount to an Income Tax of 2s. 6d. in the £. And on the other table, which showed that on estates of £40,000 a year it amounted to 2s. in the £, it will be shown that there is existing now what is equivalent under Estate Duties alone to a Super-tax of 3s. 9d. in the £. That is only on the Estate Duties; it takes no account whatever of the incidence of the Legacy and Succession Duties. And, therefore, if these are taken into account, it can be shown that there is levied at the present moment a Super-tax very much greater than 2s. or 3s. 9d. in the £, and my Noble Friend, the Member for the Horncastle Division of Yorkshire (Lord Willoughby de Eresby) was not very far wrong when he said that the total equivalent of Income Tax now levied on very large incomes was not far short of 6s. in the £. What in 1906 was the attitude of the Inland Revenue officials as regards the desirability of imposing a Super-tax? Sir Henry Primrose, the Chairman of the Board of Inland Revenue, gave some very important evidence before the Committee, and I think I am justified in quoting one or two passages. They will be found on page 194 of the report. He estimated that the total

    167
    number of people with incomes over £5,000 a year as 12,000. He declined to go into figures as to the people with incomes of £2,000 a year and upwards. He said:—
    "Seeing that I am convinced that it would be beyond our powers effectively to levy a Super-tax even on persona with incomes in excess of £5,000 a year, it seems useless to explore further the incomes between £2,000 and £5,000."
    With regard to the question of the number of people to whom it would be necessary to send out forms, Sir Henry said that he agreed with Mr. Gayler's estimate that in order to get at 10,000 people with incomes of over £5,000, they might have to send out forms of inquiry to no less than 100,000 people. Then as regards the mode of the inquiry Sir Henry Primrose said:—
    "It has been suggested in the course of the inquiry that the Super-tax return would so far resemble the returns now made by traders under Schedule D, that there is no good reason why it should be more distasteful than they are. But the difference is immense, and is a difference not of degree only, but of kind. As already explained, the Schedule D return is of gross income only, and avoids all enquiry into the distribution of the income. Moreover, where there is investigation of details, the details investigated are mostly of an impersonal character, and relate to matters of business and of the proper reading of the law as regards deductions and so forth. The Super-tax return will be for the purpose of ascertaining net personal income, and must of necessity enter into details in regard to individual and family obligations of the most intensely personal and private nature. Full disclosure will be necessary in all cases, for although a taxpayer might be willing to overstate his income rather than disclose obligations, it would be against the interests of the Revenue to allow him to do so, because it might thereby lose what would afford a valuable clue to other taxable incomes."
    Then as regards the verification of these returns, Sir Henry pointed out that it would be necessary to go through the list of shareholders of practically every company in the United Kingdom, and also to undertake the examination of the instruments constituting the charges, mortgages, settlements, contracts, etc. Further, that a very large increase in the staff of the Board of Inland Revenue would be required, and finally Sir Henry said (on page 196):—
    "Having regard to all these objections, it would seem clear that a Super-tax ought not to be attempted, unless it offered a prospect of an increase of revenue of really substantial amount, sufficient to outweigh its many manifest drawbacks. I am unable myself to see any such prospect."
    That is pretty damning evidence on the part of the Chairman of the Board of Inland Revenue against the desirability of imposing an additional Super-tax on people with large incomes, and I do wish to emphasise the point that this tax is being proposed absolutely contrary to the official evidence given at the inquiry. This does introduce, for the first time, a most un-pleasant
    168
    form of inquisition into the personal income of a large number of people, and this inquisition is imposed not for the purpose of giving some benefit to the person of whom the inquiry is made, as in the case of people with incomes under £700 for the purpose of abatement, but this is a very different matter, being for the purpose of imposing upon the person approached an additional burden of taxation, and this is very much emphasised when 90,000 people, according to the official estimate, have got to make these returns simply for the purpose of proving to the Inland Revenue that their incomes do not come within the sum to which the Super-tax is to be applied. And these returns are to be of a most abstruse and mathematical kind. I cannot help thinking that the financial result from this tax will be remarkably small. The Chancellor of the Exchequer estimates an additional £500,000 this year, and I think he puts the total additional yield of this Super-tax to the Exchequer at 2½ millions.
    I should be very much surprised indeed if the estimate of the Chancellor of the Exchequer is anywhere near realised. I cannot help feeling that a great many people will evade this tax in a perfectly legitimate manner. It is a very simple thing to transfer a certain amount of capital to some of your children for the purpose of bringing your income below £5,000 a year. That is a perfectly legitimate thing to do. There are undoubtedly cases of men who have made large sums of money themselves, and those are the people who object to this Super-tax more than anybody else. They do not see why they should be taxed to an additional amount simply because they have been successful in business and made money for themselves. A lot of people possessing, so to speak, superfluous capital which they have been accustomed to invest in the securities of this country and by so doing have added to the economic wealth of the country, will be constrained or induced to transfer a great many of their investments abroad and leave them to be reinvested there.
    For that reason I cannot help thinking that the total net yield to the Exchequer of this Super-tax will be a comparatively small amount. You will not in the first place get the total amount of Super-tax upon the total incomes of these people who have over £5,000 a year, on account of its being transferred abroad; and, secondly, you will lose on the ordinary Income Tax you are now receiving on the money which

    169
    is invested here and which naturally will be invested abroad. When you combine in this tax the maximum of irritation to a very large number of people with a comparatively small yield to the Exchequer, I say it is an undesirable tax for the Chancellor of the Exchequer to introduce into his Budget this year. When you take into account the ultimate effect of the Death Duties, I think you must admit that at the present moment an indirect Super-tax is already imposed on large incomes which is quite sufficient to meet the ordinary case of fairness and justice.
    Mr. STEPHEN COLLINS Mr. STEPHEN COLLINS rose in his place, and claimed to move "That the Question be now put."
    The DEPUTY-CHAIRMAN (Mr. Caldwell)The DEPUTY-CHAIRMAN (Mr. Caldwell) rose to put the Question.
    Mr. AUSTEN CHAMBERLAIN: It must have escaped your notice, Sir, that only one speech has been made on the Question "That the Clause stand part of the Bill." This is a proposal in the Budget which has received very little consideration. I certainly do not propose to delay the Committee at any length, but I think it would be an unheard of thing that the Clause should be put after a single speech from the Opposition, and without even a single speech from the Government.
    The DEPUTY-CHAIRMAN: I understand that it has been very fully debated. The question of principle was debated.
    Mr. AUSTEN CHAMBERLAIN: May I remind you, Sir, that the Chairman has ruled on his Clause, as on so many others, that we might not move to omit the first Sub-section, because that raised the whole principle of the tax, which, he said, we must discuss on the Question "That the Clause stand part of the Bill."
    The DEPUTY-CHAIRMANcalled upon
    Sir HENRY CRAIK: For the first time we are discussing a principle entirely new in the practice of English finance. [Interruption.] I know quite well I am speaking against what is enthusiastically supported by hon. Members below the Gangway, and, from feelings of generosity, supported by many Members on this side of the House, but surely when we are beginning a new thing in English finance we may be permitted to ask some explanation of the grounds upon which it is put forward. The hon. Member who has just spoken (Mr. Hicks Beach) pointed out
    170
    very clearly the complications and difficulties in the operation of the tax and the small amount of money which, for the present year at all events, can come from it. I ask, is it not open to other objections? We are all willing on this side of the House that taxation should fall on the luxuries of the rich, but what we do ask is: Is this the best way to put it upon them? Is it not the way which will interfere most seriously with liberty, and is it not establishing a most serious inquisition against which a great feeling will be aroused throughout the country? My hon. Friend (Mr. Hicks Beach) has quoted evidence from the Departmental Committee to show that the strongest part of the financial evidence is against this taxation. We have only to go a few years back and we find that not a single financier of repute in this country would ever propose such a tax. We are now to start upon what has hitherto been considered a heresy and an unwarranted novelty in finance, and to do so silently.
    2.0 A.M.
    There is one man more often quoted by hon. Members than any other—John Stuart Mill. What did he say of such a proposal? That it was a mild form of robbery. Hon. Members opposite are not only superior to authority; they are superior to logic. We are told as regards the object of the tax that it is to equalise the burdens imposed on all citizens. Is that the case? Will hon. Gentlemen opposite give me an answer to this question? A man has £10,000 a year. You may put a Super-tax of 15s. in the £ and leave him more able to bear the burden than I am. Are hon. Members willing to do so? That is the logical outline of the tax you are now imposing. I am unwilling to go into other arguments against the tax—there are arguments in abundance which it is hard to urge upon an impatient House at this hour of the morning. I can only say that were I a Socialist I should look upon this tax as the main instrument to propagate my faith. I am perfectly certain that in a few years time it will be found that this is an instrument that you are giving to hon. Members below the Gangway—an instrument which will be carried further than any bon. Members opposite would like to see. We know quite well that this proposal, like many others in this Budget, is defended from very different motives by different sections of the party that supports Ministers upon the Front Bench. We have the moderate section, expressed in the speech at Bingley Hall, but the Bingley Hall speech does not please

    171
    the hon. Member for Merthyr Tydvil (Mr. Keir Hardie). He wants some higher note. He not only calls the tune; he wishes to control the pitch at which it is to be played. Hon. Members who have supported this as a moderate, a temperate, and a very gentle graduation of the tax, which is merely to afford a little ease to the poor man and to put a slightly larger burden on the rich man, will find that the proposal is now being pressed with very different objects by hon. Members below the Gangway, and will be used in future in a very different way by those hon. Members whose desire is to put an end to the private ownership of property. I feel it is impossible for me to give a silent vote on a subject of this sort, because I believe that the Government are for the first time entering on a new and dangerous principle. You are telling a man that so much of his income as does not exceed £5,000 he may hold, and be taxed in respect of it on general principles, but in regard to all your income above that amount we say we have a right to depart from general principles. That is the position which the Committee has to face, and I hope the importance of the question will be fully realised when the Division is taken.
    Mr. LLOYD-GEORGE: I cannot agree with the hon. Member (Sir H. Craik) that the principle of the tax has never been discussed at all. The Committee will recollect that it was discussed on the Budget Resolution with regard to the Income Tax, and, if I mistake not, was discussed at some length. At any rate, it is wrong to say that it has not been discussed at all. I must say that I do not think the hon. Member had any novel argument to bring before the Committee. His last argument appears to be that the proposal introduces some new principle of a revolutionary character, which would eventually end in the complete destruction of property. He said: "If you discriminate between incomes of £5,000 and incomes under £5,000 there is the beginning of a very drastic discrimination." I would ask him: Is there no discrimination at the present moment? Take incomes of £800 and £500—is there no discrimination there? Take £500 and £200. Take £200 and £100. I say it is a graduated scale at the present moment. It is true that you do not graduate up to £5,000. We propose to do so. We propose, that is to say, to carry the graduation still further. The hon. Member says
    172
    that this is putting an instrument in the hands of hon. Members below the Gangway which they can use later on for the purpose of exterminating the private ownership of property. Nothing of the kind. The Income Tax would be just as ready an instrument. What is the difference? Really if you wanted to exterminate property the way to do it is not by raising the Super-tax but by raising the Income Tax to 20s. in the £.
    I should have thought the hon. Member would indeed have seen that the Income Tax is the most effective weapon you could have for such a purpose. But, after all, what does his argument amount to? You might as well say, "Here you are charging 9d. in the £ for Income Tax. That is only a beginning. Somebody else will come along and raise it to 1s. 2d. Somebody else will raise it to 2s., and then it will go up to 5s." The idea is absurd. The hon. Member scents Socialism in this proposal. After all, a tax is pro tanto a transference of property from the pocket of the individual to the pocket of the community. Every tax is. You may say that you socialise the property of the individual. Every tax is a socialisation of the property of the individual as far as it goes. It is argued that this is the thin end of the wedge of Socialism. The thin end—it is really becoming very thin indeed. In the course of the discussion we have heard it stated that the tax will not produce the money we expect to get from it, that there will be enormous difficulties in the way of its collection, that it will not work, and so on. Sir Henry Primrose's name has been quoted. There have been able men at the head of the Inland Revenue since Sir Henry Primrose. They certainly did not take that view, and it was not the view taken by the Committee. And, remember, that was not a Committee of Socialists. There were men on that Committee as anti-Socialist as the hon. Member for Glasgow University (Sir Henry Craik) or the hon. Baronet the Member for the City of London (Sir F. Banbury). I do not think I can go much further than that. Hon. Members opposite must surely recognise that those who constituted the committee were practical and sensible men. Yet, after seeing Sir Henry Primrose and hearing his views, they came to the conclusion that this was a practicable scheme, and recommended it. [HON. MEMBERS: "No, no."] I think they did. There was no discussion at all among them on the point.
    Mr. HICKS BEACH: They said it was practicable, but they did not recommend it.
    Mr. LLOYD-GEORGE: That is a condemnation then of the views of Sir Henry Primrose. But let us leave that question. I repeat that this is purely an extension of the principle of graduation, and what is more, a very fair one. I do not agree with the hon. Member for Tewkesbury (Mr. Hicks Beach) when he says that business men will regard it as unfair. I do not think they do.
    Mr. HICKS BEACH: I said some people.
    Mr. LLOYD-GEORGE: There are some men who object to taxation in any shape or form. It does not matter what taxes you put on others, but the moment you impose a tax which they themselves have to bear, they object to it. They tell you, and they will always tell you, that they object to it in principle. But, as a matter of fact, I do not believe that business men object to this tax. I think the hon. Member (Mr. Hicks Beach) will agree with me that if the whole Budget had been confined to the Super-tax the business men would not have made the fuss about it that they are doing. That does not quite confirm the view of the hon. Member that they have a great deal of objection to the Super-tax, and I do not believe they have. What I hear in the City is that they do not object to the Super-tax. They do object to other parts of the Budget. For instance, there are men who object to the Death Duties, and complain that we did not put a heavier charge on the Super-tax, which they do not regard as unfair. If a man has an income of £5,000, I think he may very well be asked to make a larger contribution to the revenue of the country than the man who is making £1,500 or £2,000, or even £3,000. Therefore I think it is a perfectly fair tax, and I believe it is regarded as such by the vast majority of people.
    Sir F. BANBURY: May I ask the right hon. Gentleman if he has read the speech of the hon. Member for Merthyr Tydvil (Mr. Keir Hardie) on Saturday, in which he approved of the Super-tax and the Land Duties on the ground that they would tend to the total absorption of all unearned incomes, whether accruing from land or whether from capital. That is what we are afraid of when we find a man like the hon. Member for Merthyr Tydvil, who has considerable influence below the Gangway, and, some of us think, considerable influence on the other side of the House, openly saying he is in favour of
    174
    this Super-tax because he believes it is going to make for the total absorption of all unearned incomes from capital; then naturally those of us who regard the keeping of capital in this country as being very necessary, both for working men and for capitalists, look on this tax with some fear. I object to the tax for the reason which I have just given—that I believe it would be used later on as a weapon to enforce these Socialistic doctrines which I believe would ruin the country, but which some hon. Gentlemen think would have the reverse effect. I object for another reason, and that is that it is penalising thrift and industry. I have always thought that thrift and industry should be encouraged, and I have always thought that the larger the amount of capital in this country the better for the country. Now this Budget comes along, and it says: "If you have been hard-working, if you have been industrious, if you have been saving and not extravagant, and have so arranged that you have managed to have an income in excess of £5,000 a year; because you have that £5,000, and because a great many people have not got it and would like to have it, therefore we are going to take away from your superfluity what we consider right."
    May I ask the right hon. Gentleman why 6d., why £5,000? Why not 1s., why not £4,000? It is because we believe that this is a fatal doctrine and will lead to expansion that we are opposed to it. To my mind this is a very dangerous innovation, and it is advocated on very wrong grounds. The Chancellor of the Exchequer told us that he saw no reason why a man with £5,000 a year should not pay more than a man with a lesser amount. What we say is that he should pay more but should only pay in proportion; that there is no reason why he should pay a larger proportion because he has been hard-working, more industrious, or more able. Therefore we object to this tax. There are a great number of people whose opinions I value who disagree with the Chancellor of the Exchequer, and believe, with me, that this is an extremely bad tax. Had the right hon. Gentleman put 3d. in the £ on the Income Tax he would have raised nine millions, whereas by this proposal he is only going to raise 4½ millions. I venture to say that had he made the Income Tax 3d. higher there would have been far less objection to his Budget than there is now. I myself should have been only too glad to have paid 3d. more as would large numbers of people.
    Mr. J. R. CLYNES: I would not intervene at this stage but for the repeated allusions to a few of us who are present in this part of the House. May I say, with what pleasure I now hear that hon. Members above the Gangway are beginning to fear the hon. Member for Merthyr Tydvil? I have observed, in connection with these discussions, that not one of the various ways for raising revenue for national purposes, proposed in this Finance Bill, is acceptable to hon. Gentlemen above the Gangway. Not one of the plans proposed in this Bill would appear to be the right one. The first few lines are, I think, a conclusive answer to all the objections which have been raised as to the harmful character of this particular Clause. The first Sub-section declares that where an income exceeds £5,000 an additional duty, at the rate of 6d. per every pound of the amount by which the total income exceeds £3,000, shall be paid. How hon. Members can rise and allege that that is to be destructive of industry, and that it is to be beyond the ability to pay of men in receipt of, let us say, an income of a million, passes one's comprehension. It would appear that on the one hand the tax is a crushing tax which the rich cannot carry, and that on the other hand it is so small and trifling that it will scarcely yield anything whatever. I think we ought to have some attempt to reconcile those absolutely opposite statements. We cannot overcome these serious claims for national revenue by merely repeating, in this House or out of it, the word "Socialism." I would warn hon. Members that they are assisting in the propagation of Socialism by familiarising the people with the real meaning and understanding of the term.
    There are two ways, so far as I can see, of raising national revenue in this country at the present time. You must either raise your revenue from the rich people who, I submit, can afford it, or you must seek to try and squeeze more from the poor people, who obviously cannot afford it. A third way just now suggested is one that cannot be referred to at this stage, but one that in another place and at the right time no one will shrink from dealing with. The Germans have recently shown their inability to raise their revenue by taxing the foreigner, and the Americans have found it similarly impossible. If we in this country were capable of devising means of raising our revenue by taxing the foreigner, surely the Germans and Americans would show themselves as cute
    176
    and capable as ourselves, and be able to find a revenue from the same source. We have given pensions for the aged poor, and rich men who possess, as I believe them to possess in this House, the sense of British independence, should rather despise the idea of dipping into the pockets of the Germans or other foreigners for the purpose of raising our revenue to pay old age pensions to the British poor. There is this remaining fact against what is said in opposition to this plan for raising the tax, that the incomes of the richer classes grow greater than the taxes upon them. The Chancellor of the Exchequer, in outlining his Budget to this House, made a statement which has never been questioned—namely, that if the whole of the taxes proposed in this Budget were doubled, the richer classes would still enjoy greater incomes to-day than they enjoyed five years ago. We believe, then, that a good sound principle with respect to national taxation is that you should tax classes in our country to the degree of their ability to pay taxes. This particular Clause goes to the level of meeting that principle.
    Mr. WALTER GUINNESS: The hon. Gentleman who has just sat down assumed that because hon. Members on this side oppose this particular form of Income Tax, therefore they are unwilling to meet any further burden. He seems to forget that the Committee which has been referred to several times in this discussion did not by any means lay down that a Super-tax was the right way of raising Income Tax, but they also spoke of the alternative of raising further Income Tax by degression. We feel there is much less danger of vindictive taxation if the old system of Income Tax is increased to a higher figure, and abatement is given by degression because, as that Committee pointed out, there is a limit to the size of taxes you can impose in that way when the rate becomes so large as to inconvenience taxpayers. There are one or two points I should like to mention with regard to this Committee which arise out of the statment of the Chancellor of the Exchequer. He gave us to understand that this Committee reported in favour of the Super-tax. The very first words of the Report are:—
    "Your Committee have deemed it to be beyond the scope of our inquiry to consider the desirability or equity on general grounds of public policy of the various proposals which have been placed before us, and the questions of principle which they raise."
    They only went into the machinery question as to whether it was possible to

    177
    raise a Super-tax. The right hon. Gentleman speaks as if it were only a matter of carrying graduation a little further. It is a far larger matter. It is a new form of taxation, which was opposed by every expert witness before that Commititee—I mean witnesses who have had practical knowledge of taxation in this country. There were four chief witnesses—Sir Henry Primrose, Mr. Bernard Mallet (who is a Commissioner of the Board of Inland Revenue), Mr. Gayler (Chief Inspector of Stamps and Taxes), Sir Thomas Hewitt and Mr. Gyles (who were in the Inland Revenue)—and all of whom pointed out the insuperable obstacles to raising Income Tax by means of Super-tax. I think the right hon. Gentleman, in forming his estimate, ought to remember the opinions expressed by officials of the Inland Revenue. One other word I should like to say on this subject, and that is the danger we foresee if this tax is passed. In the "Socialists' Budget" the hon. Member for Blackburn (Mr. Snowden) points out that if this recommendation is carried out each individual would be required to give a return of his total income whether taxed or not, and that we should then have material for putting each individual into his proper compartment, and the way to graduation would be open. The evidence given before the Committee by one or two members below the Gangway was an favour of the 7s. Super-tax, and one hon. Member even stated that every income beyond a certain figure should be absolutely confiscated. It would be only a matter of time before that class would be taxed out of existence. If, however, there is a Super-tax by degression there is no danger of that. We do not, I am certain, object to the extra 6d., but we object to the principle. If there had been degression no objection would have been taken. I think a Super-tax in this form, knowing the objects of those who promote it, would be a danger signal to those with capital to shorten sail and make for countries with sunnier skies.
    Sir CHARLES W. DILKE: As Chairman of the Committee mentioned, I may say that the effect produced on my mind throughout the proceedings was not in the least that produced on the hon. Member who has just spoken. As he has relied very largely upon the somewhat retrograde evidence of Sir Henry Primrose, which, naturally, coming from the head of the Board of Inland Revenue affected the evidence of his subordinates,
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    the opinions of one of whom were clearly the other way, I ought to add that Sir Henry Primrose distinctly opposed the mode of degression which the hon. Member prefers. The mind of the Committee was quite open, I think, as to the best method in the event of such a principle being at any time adopted—open, I mean, between degression and the plan which is now adopted. But Sir Henry Primrose and all the City witnesses, I think without exception, gave as a fatal objection to this method of degression the locking up of capital which they said would take place. Personally, I was not persuaded that that locking up of capital would be a fatal objection to the plan. The weight of evidence for the plan of the Government, as against degression, was overwhelming from the official and from the City witnesses.
    Mr. EVELYN CECIL: One or two points have not been mentioned, but which are very serious as regards the imposition of this new kind of tax. Something has been said about collection at the source, and one hon. Member mentioned Income Tax from dividends before they are paid into the banking account. Earlier in the evening the Chancellor of the Exchequer said that the abandonment of collection at the source was a very serious contingency which the Inland Revenue could not possibly face. But in this case he is making them face it. I quite agree with him that it is a very serious thing. I think it is perfectly proper that those with very high incomes should pay up to a certain amount more than others; but I do not think it is proper to introduce a tax which is open to such a serious objection as the abolition of collection at the source. The Committee states:—
    "It is interesting to recall the fact that 100 years ago we abandoned direct personal assessment, and collection at the source was substituted, with the result that the yield of the tax was almost doubled, immediately. In 1803 an Income Tax of 5 per cent. collected at the source yielded within a very small amount as much as a tax of 10 per cent. did in 1801, when it was assessed and collected direct from each taxpayer."
    That is a most interesting fact, and I am afraid it is a fact with which the Chancellor of the Exchequer is bringing himself face to face again, and he is almost certain to find that just as it occurred 100 years ago, if he substitutes this method of direct personal assessment in place of collection at the source there is sure to be a great leakage. I am very sorry that we should set aside a very good system. I am bound

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    to say that I regret the right hon. Gentleman's course very much. I do not think it is a wise financial policy, and I fear it will lead to a considerable leakage as against the Treasury. But there is another point, not mentioned in this Debate, which seems to me from an economical point of view a very serious one. We have already got a complete set of machinery for the present Income Tax. We have got the whole system of officials set up, and it has been a work of general satisfaction, roughly speaking. Now we are going to have quite a different set of machinery set up which necessarily requires salaries, more expense, more supervision, and I cannot for the life of me see that anything stated in the evidence, or anything which appears in the individual opinions of the members of the Committee, is sufficient to outweigh the great disadvantage of having two sets of machinery for the collection of the tax. I feel strongly from both points of view—whether you consider that the collection at the source is to be the future policy or whether you are setting up a fresh set of machinery for the collection of the tax—(whereas one set of machinery would be much better) it brings you to the conclusion that this new innovation and these new taxes are bad.
    I should like to call attention of the Committee also to one statement which the Chancellor of the Exchequer has repeated
    before. He has told us to-night that differentiation already exists for the purposes of taxation and therefore, in that respect, this tax is nothing new. But it is something new, because the differentiation previously was for the benefit of the taxpayer. This differentiation does not offer any benefit to the taxpayer, but compels him to pay an extra tax. Only two years ago when the Prime Minister was Chancellor of the Exchequer, he was fully alive to the difficulty, and feared to face it; but the present Chancellor of the Exchequer is ready to rush in where the Prime Minister has feared to tread, and I do not think he has done so with very successful results. I should like to read to the Chancellor of the Exchequer precisely what the Prime Minister said. He said: "The moment you tell a man 'you are to declare your income, not for your benefit, but in order to pay a higher rate of taxation,' you find yourself confronting a good many formidable difficulties." I quite agree with the Prime Minister's remarks; but the Chancellor of the Exchequer has thrown all that to the winds. It only shows us that the Prime Minister has been dragged at the heels of the Chancellor of the Exchequer and others who agree with him.
    Question put, "That the Clause stand part of the Bill."
    The Committee divided: Ayes, 107; Noes, 26.

    Division No. 690.]

    AYES.

    [2.40 a.m.

    Agnew, George William

    Duncan, J. Hastings (York, Otley)

    Laidlaw, Robert

    Allen, A. Acland (Christchurch)

    Dunn, A. Edward (Camborne)

    Lambert, George

    Allen, Charles P. (Stroud)

    Dunne, Major E. Martin (Walsall)

    Lamont, Norman

    Baring, Godfrey (Isle of Wight)

    Edwards, A. Clement (Denbigh)

    Layland-Barratt, Sir Francis

    Barran, Rowland Hirst

    Edwards, Sir Francis (Radnor)

    Lehmann, R. C.

    Barry, Redmond J. (Tyrone, N.)

    Erskine, David C.

    Lever, A. Levy (Essex, Harwich)

    Beaumont, Hon. Hubert

    Essex, R. W.

    Levy, Sir Maurice

    Beck, A. Cecil

    Evans, Sir S. T.

    Lloyd-George, Rt. Hon. David

    Benn, W. (Tower Hamlets, St. Geo.)

    Fiennes, Hon. Eustace

    Markham, Arthur Basil

    Bennett, E. N.

    Fuller, John Michael F.

    Massie, J.

    Black, Arthur W.

    Fullerton, Hugh

    Mond, A.

    Boulton, A. C. F.

    Gladstone, Rt. Hon. Herbert John

    Morrell, Philip

    Bowerman, C. W.

    Glover, Thomas

    Partington, Oswald

    Bramsdon, Sir T. A.

    Gooch, George Peabody (Bath)

    Pickersgill Edward Hare

    Brunner, J. F. L. (Lancs., Leigh)

    Gulland, John W.

    Pollard, Dr. G. H.

    Buxton, Rt. Hon. Sydney Charles

    Harcourt, Rt. Hon. L. (Rossendale)

    Ponsonby, Arthur A. W. H.

    Carr-Gomm, H. W.

    Harcourt, Robert V. (Montrose)

    Priestley, Sir W. E. B. (Bradford, E.)

    Cawley, Sir Frederick

    Harmsworth, Cecil B. (Worcester)

    Radford, G. H.

    Channing, Sir Francis Allston

    Harmsworth, R. L. (Caithness-shire)

    Rea, Walter Russell (Scarborough)

    Clough, William

    Haworth, Arthur A.

    Rendall, Atheistan

    Clynes, J. R.

    Hedges, A. Paget

    Roberts, G. H. (Norwich)

    Cobbold, Felix Thornley

    Helme, Norval Watson

    Robinson, S.

    Collins, Sir Wm. J. (St. Pancras, W.)

    Henry, Charles S.

    Rogers, F. E. Newman

    Cooper, G. J.

    Herbert. Col. Sir Ivor (Mon. S.)

    Russell, Rt. Hon. T. W.

    Corbett, C. H. (Sussex, E. Grinstead)

    Higham, John Sharp

    Samuel, Rt. Hon. H. L. (Cleveland)

    Cotton, Sir H. J. S.

    Hobhouse, Rt. Hon. Charles E. H.

    Samuel, S. M. (Whitechapel)

    Craig, Herbert J. (Tynemouth)

    Horniman, Emslie John

    Scarisbrick, Sir T. T. L.

    Crosfield, A. H.

    Howard, Hon. Geoffrey

    Seddon, J.

    Crossley, William J.

    Johnson, John (Gateshead)

    Seely, Colonel

    Dilke, Rt. Hon. Sir Charles

    Keating, M.

    Simon, John Allsebrook

    Stanley, Hon. A. Lyulph (Cheshire)

    Trevelyan, Charles Philips

    Williams, W. Llewelyn (Carmarthen)

    Stewart-Smith, D. (Kendal)

    Villiers, Ernest Amherst

    Wilson, Hon. G. G. (Hull, W.)

    Summerbell, T.

    Wason, Rt. Hon. E. (Clackmannan)

    Wilson, W. T. (Westhoughton)

    Thomasson, Franklin

    Wason, John Cathcart (Orkney)

    Thompson, J. W. H. (Somerset, E.)

    White, J. Dundas (Dumbartonshire)

    TELLERS FOR THE AYES.—Mr. Joseph Pease and Captain Norton.

    Tomkinson, James

    Wiles, Thomas

    Toulmin, George

    Wilkie, Alexander

    NOES.

    Banbury, Sir Frederick George

    Harrison-Broadley, H. B.

    Ronaldshay, Earl of

    Carlile, E. Hildred

    Helmsley, Viscount

    Rutherford, Watson (Liverpool)

    Cave, George

    Hill, Sir Clement

    Stanier, Beville

    Cecil, Evelyn (Aston Manor)

    Lock wood, Rt. Hon. Lt.-Col. A. R.

    Walker, Col. W. H. (Lancashire)

    Chamberlain, Rt. Hon. J. A. (Worc'r.)

    Long, Col. Charles W. (Evesham)

    Warde, Col. C. E. (Kent, Mid.)

    Craig, Captain James (Down, E.)

    M'Calmont, Col. James

    Wilson, A. Stanley (York, E. R.)

    Duncan, Robert (Lanark, Govan)

    Oddy, John James

    Foster, P. S.

    Ratcliff, Major R. F.

    TELLERS FOR THE NOES.—Mr. Hicks Beach and Sir Henry Craik.

    Gordon, J.

    Remnant, James Farquharson

    Guinness, Hon. W. E. (B. S. Edmunds)

    Renwick, George

    Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.

    CLAUSE 48.—(Further Belief in Respect of Earned Incomes. 7 Edw. 7, c. 13.)
    Section nineteen of the Finance Act, 1907, shall apply to any individual who claims and proves, in manner provided by that Section, that his total income from all sources exceeds two thousand pounds and does not exceed three thousand pounds, as if one shilling were substituted for ninepence, and as if, as respects any such individual, the thirtieth day of September nineteen hundred and nine were substituted for the thirtieth day of September nineteen hundred and seven.
    Amendment made: To leave out the word "September" ["thirtieth day of September nineteen hundred and nine"] and to insert instead thereof the word "November."—[Mr. Lloyd-George.]
    Question proposed, "That the Clause, as amended, stand part of the Bill."
    Mr. HICKS BEACH: I should like to ask the Chancellor of the Exchequer if there is to be any fixed proportion between the rate of the tax on the earned income as compared with the unearned income. Last year the tax on the earned income was said to be three-fourths of that on unearned income. It is now proposed to be six-sevenths, while by this Clause it is nine-fourteenths. I do not know whether it is the intention of the Treasury to fix any particular proportion between earned and unearned income.
    Mr. LLOYD-GEORGE: It was 9d., next 1s., and then we come to 1s. 2d. It is really some form of graduation. I agree it is an imperfect form of graduation, but on the whole I think it is fair.
    Mr. AUSTEN CHAMBERLAIN: I have not attempted to amend the Clause in any way, but I cannot allow it to go through
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    without saying that the distinction which the Chancellor of the Exchequer makes here does increase the real hardship which already existed in respect to the unequal sum charged on unearned incomes. I expressed my views on that last year or the year before last when the Prime Minister introduced the distinction. Certainly, if I may judge by the correspondence I receive, which is, I suppose, typical of that received by other hon. Members, it is felt to be an enormous hardship by people with small incomes, even much below £2,000 a year, earned by their own exertions in the first instance, but now derived from money which they have invested and on which they have retired. By the widows, and especially the daughters of such people, it is felt to be a great hardship that their small incomes, derived from the exertions of the man who was the breadwinner of the family, should be taxed more than the higher incomes of those who with better fortune and better health have been able to secure them. I thought that when the Prime Minister entered upon this path he was entering upon a path certain to bring greater hardship and create as many anomalies as he thought he had removed. I am afraid that by the extension of the principle embodied in this Clause the Chancellor of the Exchequer is only further increasing those anomalies and adding to the hardship.

    CLAUSE 49.—(Relief in Respect of Children.)
    (1) If any individual who has been assessed or charged to Income Tax, or has paid Income Tax either by deduction or otherwise, claims and proves in manner

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    prescribed by the Income Tax Acts that his total income from all sources, although exceeding one hundred and sixty pounds, does not exceed five hundred pounds, and that he has a child or children living and under the age of sixteen years at the commencement of the year for which the Income Tax is charged, he shall be entitled, in respect of every such child, to relief from Income Tax equal to the amount of the Income Tax upon ten pounds.
    The expression "child" and the expression "children" in this provision includes stepchild or stepchildren, but does not include illegitimate child or illegitimate children.
    (2) Any relief under this Section shall be given either by reduction of the assessment, or repayment of the excess which has been paid, or by both those means, as the case may require.
    (3) Sub-sections (2) and (3) of Section nineteen of the Finance Act, 1907, shall be construed as if this Section were mentioned therein as well as Section eight of the Finance Act, 1898, and Section fifty-four of the Income Tax Act, 1853, and the provisions of the Income Tax Acts, which relate to claims for exemption, relief, or abatement, or the proof to be given with respect to those claims shall apply to claims for relief under this Section, and the proof to be given with respect to those claims.
    Mr. HICKS BEACH Mr. HICKS BEACH moved, in Subsection (1), to leave out the word "ten" ["he shall be entitled, in respect of every such child, to relief from Income Tax equal to the amount of the Income Tax upon ten pounds"].
    If you are going to make any concession at all you should make it fairly substantial. I do not know what is the name given by the Chancellor of the Exchequer to this Clause, but I think it introduces a rather curious definition of the value of a child. If you take the actual meaning of the Clause, it is that a man with an income under £500 a year is allowed an abatement for each child of £10. The tax on that amounts to 7s. 6d., which is the exact equivalent to the Dog Tax. You are in this position: In the eyes of the Treasury Officials the value of each child under 16 is the exact equivalent of the Dog Tax. I should like to see a child accounted as of more value than a dog in our system of taxation, and therefore I propose to give a child the value of two dogs.
    Mr. LLOYD-GEORGE: I agree there is a good deal to be said for increasing the age from 16, but, after all, that would involve a much larger sum than I can possibly afford to give up, after the very numerous concessions I have made in regard to other matters.
    Mr. HICKS BEACH: This is not an Amendment to increase the age, but to raise the amount of the deduction allowed from £10 to £20 per child.
    Mr. LLOYD-GEORGE: Very well, the same argument will do for that as if it were a case of altering the age of the child. It is purely a question of money. If you raise the amount of the deduction to be made in respect of each child under 16 from £10 to £20, naturally it would involve doubling the total cost of the allowance. I think it is within the recollection of the Committee that I said this would cost the State half a million, and I cannot possibly consent to make the loss into a million. I think this allowance was first of all recommended by Mr. Pitt, and now that I have given it practical effect, I think hon. Members will find that in its results it is a more substantial allowance than they imagine.
    Mr. HICKS BEACH: I should like to ask leave to withdraw my Amendment.
    Amendment, by leave, withdrawn.
    Mr. HICKS BEACH (for Lord Willoughby de Eresby)Mr. HICKS BEACH (for Lord Willoughby de Eresby) moved at the end of Sub-section (1) to insert the words "Provided that where the parents of any illegitimate child or children shall, after the birth of such child or children, have married each other, such illegitimate child or children shall be included in the expression 'child' and 'children.'" I move this Amendment because I think we ought to treat England and Scotland in the same way.
    Mr. LLOYD-GEORGE: I am prepared to accept this Amendment.
    Question proposed, "That the Clause, as amended, stand pant of the Bill."
    Mr. YOUNGER: I wish to ask the Chancellor of the Exchequer whether he will take particular care to see that this concession is not hampered by stringent conditions in regard to application for the allowance of £10. Anybody who knows

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    anything about the Inland Revenue is aware that they generally issue instructions about such matters, and create as many difficulties as possible, in order to prevent full advantage being taken of a concession. We have had an experience of those difficulties in regard to the two-and-a-half per cent discount. I do not want to see the same kind of thing repeated in the ease of this allowance, because you will be dealing with people who are not so sure of their ground as those who claim discount in regard to Income Tax. I do hope the Chancellor of the Exchequer will see to it that this concession is not hedged round and restricted by too many stringent conditions.
    Mr. JAMES MASON: I wish to raise a question of some little importance which arises out of the somewhat exaggerated amount of legislation by reference contained in Sub-section (3) of this Clause. The point I want to call attention to is this. I think the Sub-section carries out something which is not entertained by the Government, and certainly is not indicated on the fact of the Clause itself. The Clause professes to give to everybody who has an income of under £500 a certain allowance per child. In Sub-section (3) we have a reference to the Finance Act, 1907, Clause 19, which again contains references to the Finance Act of 1898 and the Income Tax Act, 1853. If you look at Section 19 of the Finance Act, 1907, you will see that the whole of the latter pant of that Clause, in which it is proposed to include a reference to the Section we are now discussing, is governed by the word "acceptance," and that clearly limits the application of the Clause, so far as I read it, to earned incomes only. The question I want to ask the Chancellor of the Exchequer is whether he intends that Clause 49 of the present Bill should be limited to earned incomes only? Probably I am wrong, but I believe the effect of these references backwards and forwards is that Clause 49, being referred to in the way it is, is limited in its operation to earned incomes.
    Mr. LLOYD-GEORGE: That is not the case. This Clause is intended to include both earned and unearned incomes. As a matter of fact it does include them. The Clauses referred to by the hon. Member certainly do not have the retrograde effect suggested, and therefore no apprehension need be entertained on the point. If the hon. Member can point out to me either here or later on that it will have that effect I shall be very glad to put the matter
    186
    right. With regard to the hon. Member for Ayr (Mr. Younger) who raises the question of the 2½ per cent. discount, and states that difficulties are placed in the way of people obtaining it, may I say that I think Scotchmen are the only people who get that 2½ per cent. They manage somehow or other to circumnavigate all the regulations of the Inland Revenue; but what Scotchmen can do seems to be beyond either the intelligence or the energy of poor Southerners.
    Mr. YOUNGER: The right hon. Gentleman knows why. It is because our notices asking for payment are issued in October, while notices to Englishmen are never issued until the end of the year.
    Mr. LLOYD-GEORGE: I am very glad to hear that we are getting some advantage over the Scotchmen. As to the regulations, I think they are as simple as they possibly can be, and I am very anxious that they shall be sympathetically administered. I am certain also that that is the view of the Inland Revenue.
    Mr. LLOYD-GEORGE: I beg to move "That the Chairman do report Progress, and ask leave to sit again."
    Committee report Progress; to sit again to-morrow (Tuesday).

POLICE BILL.
Considered in Committee.
(IN THE COMMITTEE.)

POLICE BILL.

  CLAUSE 1.—(Annual Contribution towards Expenses of Metropolitan Police.)
  In addition to the sums payable out of moneys provided by Parliament for specified services of the Metropolitan Police, and as salaries under the Metropolitan Police Act, 1899, there shall be paid in each year out of moneys provided by Parliament in respect of services rendered by the Metropolitan Police for Imperial and National purposes such sum as the Secretary of State, with the appoval of the Treasury, may determine.
  Question put, "That the Clause stand part of the Bill."
  3.0 A.M.
  Mr. CLAUDE HAY: I wish to move "That the Chairman do now report Progress and ask leave to sit again." The Second Reading of the Bill was taken in the very early hours of last Thursday morning, and on that occasion the Secretary of State for the Home Department made a speech in which he gave a great deal of information necessary to the understanding of this Bill. Owing to the lateness of the hour his speech did not appear in any of the newspapers, and only appeared in the OFFICIAL REPORT on Friday. Then on Thursday the Money Resolution relating to this Bill was taken, and again, owing to the lateness of the hour, the speech of the Home Secretary, also one of importance, was not available to be studied by Members of the House until Saturday.
  Attention called to the fact that forty Members were not present. House counted, and forty Members being found present,
  The SECRETARY of STATE for the HOME DEPARTMENT (Mr. Herbert Gladstone): It is unnecessary to make this Motion now, as I am quite ready to meet hon. Gentlemen opposite. We quite realise this is a very late hour, and that we have previously discussed the Bill at late hours. We do not, however, wish to press it on unfairly, and I shall be quite ready to assent to putting the Bill down for a subsequent day, but I think hon. Members ought not to put any undue difficulties in the way.
  Mr. HAY: In view of what the right hon. Gentleman has said, I am sure we feel satisfied. We do not want to do anything to impede the progress of the Bill. What I, and those for whom I act, were anxious for was that the various local authorities and other persons interested in the Bill should have an opportunity of reading the discussions and communicating their views on this question to the House. If the right hon. Gentleman will put down this Bill next week every facility will be given.
  ADJOURNMENT—Resolved: That this House do now adjourn.—[Mr. Joseph Pease.]
  Adjourned accordingly at Ten minute after Three o'clock a.m. (Tuesday, 21st September).

  Yang-tse-Kiang (British and German Gunboats).
  Yang-tse-Kiang (British and German Gunboats).
  Naval Establishment (Writing Staffs).
  Naval Establishment (Writing Staffs).
  Naval Prize Money.
  Naval Prize Money.
  Midland Railway Company (Carriage of Milk).
  Midland Railway Company (Carriage of Milk).
  Midland Great Western (Carriage of Animals).
  Midland Great Western (Carriage of Animals).
FINANCE BILL.
  INCREMENT VALUE DUTY.
  INCREMENT VALUE DUTY.
  Clerks to Surveyors of Taxes.
  Clerks to Surveyors of Taxes.
  Gun and Game Licences (Ireland).
  Gun and Game Licences (Ireland).
  Foreign Spirits (Importation into Ireland)
  Foreign Spirits (Importation into Ireland)
  Argentina Cattle.
  Argentina Cattle.
  Ordnance Survey (Civil Assistants.)
  Ordnance Survey (Civil Assistants.)
  Illegal Trawling (Scotland).
  Illegal Trawling (Scotland).
  Lord Rosebery's Glasgow Speech (Telegraphic Arrangements).
  Lord Rosebery's Glasgow Speech (Telegraphic Arrangements).
  Army (Recruits (Drill).
  Army (Recruits (Drill).
  Metropolitan Districts (Post Office Index Numbers).
  Metropolitan Districts (Post Office Index Numbers).
  National Telephone Company.
  National Telephone Company.
  Post Office Store Porters.
  Post Office Store Porters.
  Dublin Post Office.
  Dublin Post Office.
  Trunk Telephone System (Ireland).
  Trunk Telephone System (Ireland).
  Wireless Telegraphy Act (Renewal).
  Wireless Telegraphy Act (Renewal).
  Postal Facilities, Mandistown Cross, Meath.
  Postal Facilities, Mandistown Cross, Meath.
  Housing and Town Planning Bill.
  Housing and Town Planning Bill.
  Old Age Pensions Cancelled (Ireland).
  Old Age Pensions Cancelled (Ireland).
  Game Licensing Laws (Prosecutions).
  Game Licensing Laws (Prosecutions).
  Agriculture in Denmark (Official Publications).
  Agriculture in Denmark (Official Publications).
  Seeds and Weeds Bill (Ireland).
  Seeds and Weeds Bill (Ireland).
  Technical Instruction Grant, County Longford.
  Technical Instruction Grant, County Longford.
  Alleged Illegal Trawling, Sheephaven Bay.
  Alleged Illegal Trawling, Sheephaven Bay.
  Intermediate Examinations (Ireland).
  Intermediate Examinations (Ireland).
  Land Purchase, Ireland.
  Land Purchase, Ireland.
  Evicted Tenants Act, Ireland.
  Evicted Tenants Act, Ireland.
  Dr. Hayes' Estate, Watergrasshill, Cork.
  Dr. Hayes' Estate, Watergrasshill, Cork.

COMMISSION.
The following Bills received the Royal Assent—

South Africa.

Labour Exchanges.

Trawling in Prohibited Areas (Prevention).

Superannuation.

Electric Lighting Provisional Orders (No. 1).

Gas and Water Orders Confirmation.

Tramways Orders Confirmation.

Buckie Burgh and Buckie (Cluny) Harbour Order Confirmation.

Aberdeen Harbour Order Confirmation.

Clydebank and District Water Order Confirmation.

North Eastern Railway.

Glasgow Corporation.

Dunoon Burgh.

Taff Vale Railway.

Newry, Keady, and Tynan Railway.

LOCAL GOVERNMENT PROVISIONAL ORDERS (No. 6) BILL.
Report from the Committee of Selection, That the Earl of Stamford be proposed to the House as a Member of the Select Committee on the said Bill in the place of the Lord Farnham; read, and agreed to.
IRISH LAND BILL.
Brought from the Commons; Read 1a; to be printed; and to be read 2a on Tuesday the 28 th instant (The Lord Privy Seal (E. Crewe)). (No. 177.)

DISTURBANCES AT BUDGET PROTEST MEETINGS.
THE EARL OF MALMESBURY*THE EARL OF MALMESBURY rose "to call attention to the recent disturbances which have occurred at meetings arranged to protest against the Budget; which disturbances, it is alleged, have been systematically organised for the purpose of unfairly influencing public opinion in favour of the financial proposals of His Majesty's Government."
The noble Earl said: My Lords, I feel that I owe your Lordships some apology for at this late period of the session calling attention to a matter which might, perhaps, at first sight seem to be of no very great importance, but I am sure your Lordships will grant me your kind indulgence even if I fail to make good my case. Your Lordships have very little time at your disposal, and therefore I shall put my case before you as briefly as I can. I was reminded the other day by a contemporary that a question of this sort was somewhat unusual, but perhaps I may be allowed to reply that proceedings of the kind to which my Notice refers have, I am thankful to say,

3
been most unusual in the past. There is no attempt on my part to anticipate the discussion of a measure which is still being considered in another place. That forms no part of my argument. It is a matter of perfect indifference to me what is the cause for which these meetings have been held. It is a matter of moment to me that freedom of speech is being curtailed and open expression of opinion suppressed.
It is altogether distasteful to me to bring before your Lordships a question which may in any way be taken as showing a want of courtesy or want of consideration to noble Lords who sit opposite. I assure noble Lords opposite that I wish to treat them with every courtesy, and that anything I may say, either as regards their own utterances or as regards any course of action which members of His Majesty's Government may have taken is put with the very best intent on my part. That these things have occurred cannot be denied. There is hardly a day when we take up a newspaper that we do not read of disorderly scenes and of speakers being interrupted, and that resolutions in favour of the object for which the meetings were held have not even been able to be put. Such scenes and such disturbances as have occurred introduce a weapon of the very grossest tyranny, and they seriously endanger freedom of thought and speech in this country.
I do not for a moment wish to suggest that the noble Earl opposite or other noble Lords who sit with him are responsible for these disturbances, but at the same time it is rather difficult to persuade oneself that after so much mud has been thrown some mud should not attach itself to some of those in high office. Noble Lords will say, What has this got to do with these disturbances? I do not suggest for a moment that any member of the Government has been directly responsible for saying, "Go and break up these meetings"; but what I do maintain is this, that certain allegations have been made over a long period of time which have never been denied by those in responsible positions in the Budget League. The Budget League, which has been directly challenged, as I hope to prove in a moment, on more than one occasion, has remained perfectly silent. Its chiefs have expressed no regret, no apology for things which have occurred. I quite admit it may be difficult to prove direct interference on the part of the Budget League, but your Lordships
4
know perfectly well that the Budget League has a very close connection with those who at the present moment enjoy the confidence of His Majesty. Sir Henry Norman, who I believe is the moving spirit of that League, has used words to this effect. He spoke, in taking over the care of the Budget League, of the "honourable burden which had been laid upon him by the Prime Minister."
Then we go a step further. Who is the President of the Budget League? The President of that League, as far as I am aware, has not come out into the open to express regret for anything which has occurred at meetings held to protest against the financial schemes of the Government. Challenge after challenge has been hurled down, allegation after allegation has been made, and not one single responsible Minister of the Crown has come forward to deny them. I might go further and say that neither the noble Earl opposite nor any other Minister, not even the Prime Minister himself, has ever said, "We prefer to leave this measure, irrefutable in its excellency, to rest upon its own merits, and we therefore deeply deplore the disturbances to which our opponents have been subjected." It is a strange thing that those in high office should be so dead to the higher responsibility which rests upon them, that they should not come out to condemn, which they might have done long ago, disturbances and acts which have directly interfered with the peace and good order of this country.
I have before me—it has just come into my hands—a document which, with your Lordships' permission, I will quote. The noble Earl who sits on the Front Ministerial Bench and other noble Lords opposite need have no fear whatever although this document is headed "Votes for Women." That heading is followed by the words, "What is sauce for the goose is sauce for the gander"; and then follows a conversation—an imaginary conversation, I take it—in which two distinguished members of the present Government are made to discuss the recent disturbances at political meetings. They are congratulating themselves on the result and one of the Ministers observes—
"Very glad these meetings have been interrupted, but do not let any one hear us say so. We tell the suffragettes that such action is an attack on the sacred rights of free speech and displays a degree of moral turpitude incompatible with the possession of a vote."

5
I venture to hope the noble Earl will tell us afterwards that all those who have taken an active part in interrupting our meetings are likewise not fit to have possession of a vote. But, instead of this, it seems to me that the supporters of the financial policy of His Majesty's Government have themselves donned those habits which have been woven by more fairylike hands. These political disturbances, therefore, must either be taken as the direct outcome of the Budget League, which is closely associated with His Majesty's Government, or else they are what may be called political riots of the utmost gravity—riots which I venture to think His Majesty's Government, as representing the highest authority, should deal with as being against the peace and good order of this country. I was told only yesterday by a working man that night after night when he walked round to enjoy his pipe he saw meetings called to protest against the Budget invariably broken up, whilst meetings convened by the most extreme partisans of the Government were allowed to be held without molestation.
I pass to the character of these organised riots. I have here a short summary of the principal points which show the similarity of the character of these disturbances. There is a similarity of questions and interruptions; there is the same rule of procedure; there is the fact that these demonstrators go about in groups, many of them in the majority of cases imported from elsewhere; and there is also the evidence of forged tickets. The Budget Protest League and other kindred leagues which have for their object the holding of meetings against these proposals have on all occasions declined to allow retaliatory measures to be adopted. I can tell your Lordships on the best authority that on every occasion when the leaders of the Party of noble Lords who sit on this side of the House have protested against the conduct to which they have been subjected and have been asked by their supporters for permission to go and do the same at their opponents' meetings, they have returned a stern refusal—that has been the case from the President of the Protest League, Mr. Walter Long, down to the most junior ward chairman. Although possibly there may have been instances—I do not know of any—in which noble Lords opposite or members of the Government who sit in another place have suffered from inconvenience of this sort, may I assure them that I have evidence, and know it to
6
be true, that on all occasions the promoters of such meetings as I have referred to have given strict orders that those of their opponents were not to be interrupted?
I have here a host of evidence of the more important meetings which have been interrupted, but as time is short I will deal with one which has a most serious aspect—the meeting at Bournemouth. In connection with that meeting forged tickets were used. There was no reason for these forged tickets; in fact, originally the meeting was convened irrespective of politics; and it was possible for members of either side to obtain tickets to listen to the speakers without going to the trouble to which they did. I have always understood that it was an invariable law that when you held a ticket given to you by the promoters of a meeting you went there as guests and with a determination to behave in a perfectly constitutional and orderly manner. May I say that since I came into the House to-day I have been reminded that a sub-agent of the Liberal party in the neighbourhood was at this meeting. That is sailing near the wind. Another point is that after a certain time the meeting was an open one. I was not there myself, but I believe the meeting was billed for eight o'clock, and after a quarter to eight the hall was thrown open without tickets; but in order to secure their presence in the hall these gentlemen, who made speech impossible in spite of the fact that they were only about twenty per cent. of the audience—these gentlemen, by means of forged tickets, forced their way into the room and took up the most prominent positions. I have here a letter giving particulars, in which the writer says—
"I have been informed that the forged tickets could be had at the Liberal Club."
In another passage he says—
"A quarter to eight was the time fixed for opening the doors, but long before that time over one hundred Liberals came in, and these were the gentlemen who held the forged tickets."
I could go on quoting indefinitely to show that the majority of those who held the forged tickets were not extreme Socialists but bona fide Liberals and members of the Liberal Club in the constituency in which the meeting was held.
I have the forged tickets here. They are of three kinds. The platform tickets were white, the gallery tickets yellow, and the tickets for the body of the hall pink.

7
Here are the genuine and the forged tickets, and they are so near one another in colour and appearance that it would be quite impossible at night for the stewards taking the tickets at the door to distinguish the difference. I feel inclined to suggest that these tickets should be handed over to the librarian for safe custody among the relics kept in the Library of your Lordships' House. Now I come to other meetings. The case of the meeting at Bournemouth is by far the worst, and I hope we shall hear from the noble Earl the Leader of the House, or from whoever replies on behalf of His Majesty's Government, something which may remove the impression which many of us must necessarily hold in connection with this matter.
There was also the meeting in Wales at which a distinguished ex-Minister spoke and of which various accounts are given. That is one serious aspect of this matter, that not only do you have meetings interrupted, but you have a willing Press distorting into an entirely false and visionary anecdote an account of those proceedings, and in fact imposing upon all those who read the accounts of those meetings a gigantic hoax. It is very easy to break up meetings, and it is still easier to write what account you choose of them. That is, as I say, one of the most serious aspects of this question, that not only are meetings broken up, but accounts appear in the Press which lead the general elector, the man in the street, to believe that those who held these meetings against the Budget had no support whatever on their side. Then I come to the meeting which was held at Portsmouth, and which was also addressed by a very distinguished Member of the other House. I have it from the distinguished Member himself and from others who were these that at this meeting method, were adopted exactly similar to those adopted at other meetings. There were the usual four gangs posted at stated intervals over the hall. At certain moments you had exactly the same form of interruption, and, although I do not wish directly to accuse His Majesty's Government of being a party to these proceedings, we have heard that remarks such as we were taught in the days of our childhood were the cause of the death of Sir Thomas a'Beckett are sometimes useful.
I could quote without number the meetings which have been interrupted by those who officially, or, at all events, morally,
8
represent His Majesty's Government in the country. I have already cited Bournemouth and Portsmouth and the meeting in Wales. I could give instances of meetings at Barrow, Manchester, and other places. One of the most important for my purpose was a meeting to have been held at Market Harborough, and I should like to read this quotation from a letter signed by a gentleman who lives at Market Harborough—
"A few days ago you published a paragraph with the above heading, referring to the police having refused to allow a Budget protest meeting to be held in Market Harborough."
Apparently a meeting was proposed to be held at that place, but the police declined to allow it to be held. The writer continues—
"What happened? Only last night a Socialist meeting was held at this very spot, and the promoters had the assistance of a gramophone. It was impossible to walk on the pavement on account of the crowd, and three policemen watched the proceedings without either protest or interference."
I venture to think that such a state of things is a very serious breach of freedom of speech and an entire breach of personal liberty, and in the interest of purity of public life it ought to be stopped.
I have, I hope, to some degree justified my bringing this matter before your Lordships' House. We live in days when we are governed by the group system. Day by day that group system is being extended, and surely it is all the more important that popular and free discussion should be allowed. In these days, too, when Parliamentary discussion has been so greatly curtailed, it is all the more important that public opinion should be free and open. And may I say, my Lords, that it is doubly important that this should be so in the interests of your Lordships' House, because it has always been held that your Lordships should know public opinion without hindrance and without interference. Your Lordships have ever in the days that have gone by been regarded as the final court of appeal, and I venture to think that, for this reason, this is a very proper time for your Lordships to hear the views of the people of this country openly expressed. There have been in the past great giants of Liberalism, whose doctrines we all admired—Liberalism which has won for this country freedom of speech, freedom of action, and all those other blessings which a free country enjoys. I speak with the greatest respect of those giants of

9
Liberalism who have gone. But to-day we live under the œgis of a Liberal Government. Liberalism and liberty were once synonymous. Freedom from molestation is one of the first principles of liberty, and I venture to think that if these scenes are to continue, if the subjects of the King are not to be allowed to hold meetings under whatever conditions they choose, whether with ticket or without ticket, then liberty in this country is altogether doomed. I have to thank your Lordships for the kind indulgence and the generous hearing you have given me, and I hope that what I have said has justified my bringing forward this matter.
THE LORD PRIVY SEAL AND SECRETARY OF STATE FOR THE COLONIES (THE EARL OF CREWE): My Lords, I am obliged to the noble Earl opposite for having communicated with me to know whether this was a convenient day on which he should bring this matter forward. We also, I think, have to be obliged to him for the restraint which he put upon himself in not entering at any length into the details of the financial proposals of the Government, because I should not have been able to follow him had he done so. Nor do I propose to follow him in the somewhat general disquisition on liberty with which he concluded his observations. We also have to thank the noble Earl for being so kind as to say that he absolves us on these Benches from having given direct instructions to any bodies of people in the country to break up meetings attended by the noble Earl and his friends. That is very kind of him.
But at the same time there ran through his speech a tone of innuendo which conveyed a degree of offence of which I think he was himself hardly conscious, because he seemed to indicate that although His Majesty's Ministers ought not to be held directly responsible for these unhappy occurrences yet there was some soft of central organisation or body which, so to speak, gave the word for the disturbance of these meetings. The central body which has been carrying on a propaganda in the country on the Government side is the Budget League, and that body has already been directly accused of having taken some part in the disturbances at meetings held by the opposite organisation, the Budget Protest League. That charge appeared, amongst other places, in a distinguished paper, the Pall Mall Gazette, and on August 20 Sir
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Henry Norman, a distinguished member of Parliament, I think generally respected by all parties, who is the hon. secretary of the Budget League, wrote to the Pall Mall Gazette as follows—
"Sir,—I have read with amazement your article to-night on what you call the methods of the Budget League. A more preposterous and baseless charge as far as our knowledge goes has never been made. Never directly or indirectly, by ourselves or by our agents, by letter, word, suggestion, or hint, has the Budget League been a party to the disturbance of any public meeting. Free and uninterrupted public speech I personally always held to be one of the most precious of our common rights, and I have never in my whole political life done otherwise than discourage in the strongest manner, both privately and from the platform, any attempt to disturb an opponent's meeting."
Therefore when the noble Earl says that no person in any responsible position has expressed disapproval of the practice of disturbing meetings he is not accurate. Sir Henry Norman continued—
"So far as Mr. Arthur Lee's Portsmouth meeting is concerned, if the charge could be more ridiculous in one case than another it would be in this case, for Mr. Arthur Lee has been an intimate and much-valued friend of mice for twenty years. I cannot sufficiently express my astonishment that a paper of the standing of the Pall Mall Gazette should publish such a statement."
Then the editor wrote this note—
"We have never for a moment intended to convey that Sir Henry Norman or the central committee were guilty of such tactics, but that the members of the League in the provinces have organised such disturbances cannot be seriously disputed."
Now, my Lords, it is important to notice the terms of the noble Earl's Notice. It runs—
"To call attention to the recent disturbances which have occurred at meetings arranged to protest against the Budget; which disturbances, it is alleged, have been systematically organised for the purpose of unfairly influencing public opinion in favour of the financial proposals of His Majesty's Government."
That I take to be a repetition of the charge of systematic organisation by a central body, and not merely to mean that certain people in a particular locality in respect of a particular meeting have combined together to take the course of disturbing the meeting. It is important to draw the distinction because, as I say, throughout the noble Earl's speech there ran the innuendo that there was some central systematic organisation for the purpose of breaking up these meetings.

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The noble Earl mentioned various meetings. He mentioned the Portsmouth meeting, to which Sir Henry Norman has alluded. He also mentioned a meeting in Wales at which Mr. Long attended, and which has been the subject of acute controversy, the controversy apparently being that some Liberal speakers or newspapers maintained that the meeting had been seriously interfered with, while Mr. Long all through maintained that it had not. Consequently whatever may be the facts in that case, from the noble Earl's point of view that particular meeting does not appear to support his case. Then he mentioned the case of a Budget protest meeting which ought to have been held at Market Harborough but which was not, whereas a Socialist meeting was held in the same place some time after. I confess I do not see what that has to do with His Majesty's Government. We do not give the orders to the police at Market Harborough in respect of how they should keep order or what meetings they think it necessary to prohibit, I suppose on the ground that they are likely to cause a breach of the peace; and I can only say that if these are the only instances which the noble Earl can produce, his case is not a very strong one.
I do not hesitate, or, if I do hesitate, it is only because it seems to me so absolutely needless and superfluous, to say that I regard the breaking up or disturbance of meetings with the strongest disapproval. The noble Earl was good enough to administer to us what I can only call a lecture on the ground that we had not made formal repudiation of these proceedings. I say that is entirely unnecessary. We all agree that to disturb the meeting of an opponent is both wrong and foolish. It is wrong because it is an offence against fair play, and it is foolish because it is always bound to give the impression that your case is one which cannot be supported by argument and needs, therefore, to be supported by violence. Those are the merest truisms, and represent the opinion of all responsible people on both sides of this House and all responsible people in politics generally. And I may say, in conclusion, that the very last set of people who could be supposed to look without the strongest condemnation on the disturbance of meetings are His Majesty's present advisers, because, as the noble Earl pointed out in the course of his speech, there are those who make it a systematic practice to endeavour to prevent us from making speeches at all. I hope I have dealt finally
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with the suggestion that there is anything like an organised system of disturbance of these meetings. I regret it greatly if they have been disturbed at all. There was a leading article in a paper of very strong party views—the Daily News—a few days ago, making the same protest on the same grounds which I have just stated.
It is, of course, undeniable, and there are many previous instances of it, that, in a particular district, a meeting held to advocate a cause which is not popular and to which a great many people are opposed is liable to interruption, unless the greatest care is taken to confine such a meeting to those who are known to be in support of the speakers of the evening. That has often happened before when party politics have run high. It happened, as we all know, in a very extreme form during the progress of the South African war. Meetings were broken up then, and speakers were almost, and in some cases actually, subjected to personal violence. That I am certain was greatly regretted by noble Lords opposite, although they thought the speakers wrong. I am afraid, therefore, that it cannot be denied that in particular cases when feeling does run so high disturbances may occur; but I protest once more very strongly and indignantly against any sort of suggestion or innuendo that such proceedings have our sympathy, and still more against any suggestion that we are in any way responsible for them.
THE MARQUESS OF LANSDOWNE: My Lords, I am sure the House must have listened with satisfaction to the emphatic words with which the noble Earl who leads the House condemned the practice of interfering with public meetings held by one's opponents in political life. His statement left nothing to be desired in that respect, and I think the noble Earl who put this Notice on the Paper must think himself fortunate in having elicited such a declaration from the noble Earl. Of course, it never entered into the heads of any one on this side of the House to charge the noble Earl and his colleagues with any responsibility for these proceedings, but as to the facts there is no doubt. It is unfortunately the case that of late the practice of breaking up public meetings has assumed most alarming proportions. What takes place is not the kind of interruption that sometimes rather agreeably varies the monotony of a political gathering—the

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kind of interruption which gives the speaker an opportunty of relieving his speech by a well-placed retort. What has taken place in these cases has been the interruption of proceedings by apparently organised bands of persons imported from a distance, sometimes obtaining admission by means of those forged tickets of which the noble Earl produced interesting specimens for the inspection of the House. So far as I am aware, these practices, which have attracted a great deal of attention, have not, until this evening, received the kind of emphatic condemnation which the noble Earl has given them.
Nothing could be more appropriate than the terms in which the noble Earl denounced such conduct, or the way in which it was denounced by Sir Henry Norman in the passage from his letter which the noble Earl quoted. Of course, it is the case that sometimes people suffer from the want of discretion and the excess of zeal of their political adherents, and I have no doubt that the words which have been spoken by the noble Earl to-night will have a salutary effect out of doors and will be attended to by some of those who have been responsible for the occurrences which we so much deplore. I venture to think that it is beyond all doubt the duty of both political parties to do what they can to put an end to proceedings of this kind, and perhaps I may say that, at this moment, we, as the weaker political party of the two, have a special right to claim that nothing should be left undone in order to relieve those who desire to make their opinions known in the country from such molestation as they have lately undergone.
I say this because it seems to me that we are living in times when our opportunities of making our feelings known to our fellow-countrymen are becoming more and more limited. Those opportunities are of two kinds—they are Parliamentary and they are extra-Parliamentary. Our Parliamentary opportunities, so far as the other House of Parliament is concerned, are becoming daily more restricted. You have Bills like the two great Bills which are at this moment before the House—I mean the Irish Land Bill and the Housing and Town Planning Bill—brought before Parliament under circumstances which render their adequate discussion quite impossible. The noble Earl himself went very near admitting that the other evening. The whole of the Com-
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mittee stage of the Irish Land Bill was dealt with in eight days, four of which days were Fridays, days which are not very propitious to full debate.
Then when we come to this House we find that our work reaches us at the very end of the session, when it is notoriously difficult for us to find sufficient time to get through the business that lies before us for transaction. Therefore, my Lords, those being the limitations upon our Parliamentary opportunities, it seems to me doubly necessary—and I think the noble Earl who brought this matter forward had that feeling strongly in his mind—that our opportunities for extra-Parliamentary discussion should be as full and uninterrupted as possible. For that reason I am extremely glad that we have had this short conversation, which I think goes to show that there is no difference between those who sit on that side of the Table and those who sit on this side of it in their detestation of the kind of tactics which deprive our political controversies of that element of fair play and mutual consideration which has been the pride of our political life in this country.

NAVAL GERMAN INTERPRETERS.
LORD ELLENBOROUGH: My Lords, I rise to ask the Government whether on the 1st July out of 1,779 lieutenants on the active list only eight had passed as interpreters of the German language, and of these only one was receiving additional pay for having done so; whether at that date only one out of 246 captains and three out of 365 commanders had passed in German, none of whom were receiving any extra pay in consequence; what amount of extra money had been paid to executive officers in their capacity of interpreter of the German language during the last financial year; whether any money had been paid to any executive officer for instructing officers in German during that period, and if so, how much; and whether the Government are not of opinion that a larger proportion of executive officers, more particularly those who have specialised in gunnery, torpedo, wireless telegraphy, and other technical subjects should be acquainted with that tongue, and if so, whether they will consider the advisability of revising the regulations so as to give executive officers greater opportunities for studying, and

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increased remuneration for the time and trouble involved in the acquisition of that language.
Only twelve out of 2,390 captains, commanders, and lieutenants on the Active List have qualified as German interpreters, and of these only three appear to be receiving any reward for having done so. I am not in favour of a very high standard of German for naval officers. What some people call a courier knowledge of the language is almost sufficient. It is not necessary for them to attain to the high literary standard required by the Foreign Office. On the other hand, they ought to be well acquainted with the technical terms used in chemistry and electricity, in gunnery and steam which are unnecessary for a diplomatist. It is quite a mistake to think that a knowledge of German is of no use at sea except when a senior officer wishes to communicate with some German vessel. The chief value of such knowledge is to my mind the capacity to assimilate German thought in technical matters. A naval officer may well read Goethe, Schiller, Heine, and Schopenhauer for amusement or as a rest from the study of professional subjects, but he ought also to read Von Treitsche and other German historians, so as to know the trend of German thought towards England, and he should study such scientific and engineering works as bear on naval matters. I am not by any means one of those who think that all naval officers ought to be linguists; but if five per cent. of our executive officers could add to their attainments the power of reading and understanding the German language, it would, I think, increase the efficiency of the Service as a whole. I look upon it as a matter for regret that so few of our specialists in gunnery, torpedo, or wireless, should be capable of studying German technical books and be able to draw their ideas from foreign countries as well as their own.
THE EARL OF GRANARD: My Lords, in reply to the noble Lord I have to say that on July 1, eight lieutenants had qualified as interpreters in German; of these, two were receiving additional pay as interpreters and one more had very recently been holding such an appointment. On the same date, there were one captain and three commanders qualified in German; of these latter one was holding an appointment as interpreter. Interpreter's allowance to the amount of £73 18 s. was paid to executive
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officers in their capacity of interpreter of the German language during the financial year language. 1908–09. No payments were made during 1908–09 to executive officers for instructing officers in German. Forty-seven officers of all ranks were qualified as interpreters in German on July 1; forty-eight are now qualified, and eleven officers (including one captain and four lieutenants) have proceeded abroad to study German since that date. Specialist officers are least able to spare the time for purposes of study of foreign languages abroad, since they are so constantly employed. Steps have recently been taken to extend the facilities for naval officers studying foreign languages in their own time; under existing conditions, if an officer takes lessons in his own time, actual outlay on travelling expenses and tuition fees is payable within an amount of £35. At present not more than five officers in any year may be given the benefit of these facilities. It has, however, been found that the exigencies of the service render it impossible always to have the full number (twenty) of officers studying abroad, and accordingly steps have been taken to increase the number of officers who may be granted facilities for studying in their own time. The Treasury have sanctioned the proposal that the number of officers who are thus given opportunity for the study of foreign languages in their own time shall not exceed twice the difference between the number of officers authorised to study abroad—i.e., twenty—and the number actually studying at any one time. German is included in the curriculum of studies at Osborne and Dartmouth. I may add that apart from the executive officers who have actually passed the qualifying examination there is a considerable number of officers who have a more or less thorough knowledge of the German language.

OATHS BILL.
[SECOND READING.]
Order of the Day for the Second Reading read.
THE LORD STEWARD (EARL BEAUCHAMP): My Lords, this Bill deals with a matter which is not very important in itself although it is one which enters very largely into the social life of the country. The Bill was first brought into Parliament not as a Government Bill but as a private Member's Bill, but the Home Office approved of it

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and it is on their behalf that I ask your Lordships to give it a Second Reading to-day. I think it will be generally agreed that there is real cause for a reform of the present practice. The present practice has been objected to on the ground that it is insanitary, and, in the opinion of many people even rather disgusting. Again, it is far from being dignified, as any of your Lordships who sit often in a Police Court and have seen the oath administered can readily testify. It is the opinion of the Home Office that the oath administered in the fashion prescribed in this Bill would be more welcome and would probably impress a witness more than the present rather hurried way in which it is administered generally in the Courts. The form and manner of administering the oath are detailed in the Schedule, and I may say that this is not introducing a new principle. It was always possible that oaths could be taken in this way, but it was not very much taken advantage of. There was some question whether it was possible to invite the witness to take the oath in this form. Some authorities thought that a witness must suggest it first of all. Your Lordships will see from the Schedule that the officer administering the oath is required to address the person taking the oath in the following form, "You swear by Almighty God to tell the truth, the whole truth, and nothing but the truth." The witness would reply, "I do." Your Lordships will see that that adds something to the ceremony of taking the oath. At the present moment the witness says nothing himself or herself, and it is not unlikely that the new form will impress the witness more than the present method. In accordance with a promise given, I shall have some Amendments to propose when we reach the Committee stage.
Moved, That the Bill be now read 2a—(Earl Beauchamp.)
On Question, Bill read 2a, and committed to a Committee of the Whole House on Wednesday next.

CINEMATOGRAPH BILL.
[SECOND READING.]
Order of the Day for the Second Reading read.
EARL BEAUCHAMP: My Lords, this is a small Bill to make better provision for securing safety at cinematograph
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and other exhibitions. I dare say your Lordships are aware that the films used in these cinematograph exhibitions are very inflammable, and special provisions are therefore necessary in order to safeguard the audience. Several serious fires have occurred not only in London but throughout the country. This Bill will, we hope, secure and safeguard the safety of the public. It has been asked for by a deputation from the London County Council, and so far as regards the theatres under his authority the Lord Chamberlain has expressed his approval of the measure.
Moved, That the Bill be now read 2a—(Earl Beauchamp.)
On Question, Bill read 2a, and committed to a Committee of the Whole House on Wednesday next.

TRADE BOARDS BILL.
Read 3a (according to order), with the Amendments, and, passed, and returned to the Commons.

BOARD OF TRADE BILL.
[SECOND READING.]
Order of the Day for the Second Reading read.
THE EARL OF CREWE: My Lords, this is another Bill which is concerned with the reorganisation of a Government Department. It is one of some little importance, but I think your Lordships will not expect me to explain it at any great length. The Office of the Board of Trade still remains what it was when appointed in 1786. The Board includes various high personages; it includes the Archbishop of Canterbury, Secretaries of State, Mr. Speaker in another place, and also the Speaker of the Irish House of Commons. The salary of the President—and consequently according to custom of the other officials of the Board—was fixed in the year 1826, and has not been changed since then. Since those days the work of the Board of Trade has grown enormously, as your Lordships know, and various new duties have been thrown upon it. When the salary was fixed there was no suggestion of the existence of a railway, and all the railway work has been thrown upon the Board of Trade. Also, its purely commercial work has vastly increased since those days. New duties have continually

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been thrown upon it by such Acts as the Patent Act of two years ago, and now a still further extension has been made in its duties by the relations in which the Board of Trade enters with the Foreign Office in respect of the work of our Consuls abroad. Then the two Bills which have been brought up this year—the Bill which has just been read a third time and the Labour Exchanges Bill—also increase both the work and the responsibility of the Board of Trade. This Bill is the outcome of a Committee which sat, I think, in 1904, under the presidency of the noble Earl, Lord Jersey. That Committee recommended that the Board of Trade should become a first-class Department, that the salary of its President should be made equal to that of the heads of first-class Departments, and that fact will also, as your Lordships know, carry some additions of salary to the secretary and others in the Department. The annual increase of cost worked out at the mean of the scale of salaries will be something under £3,000 a year, and the immediate increase will be somewhat less than that. The only other point to which I have to call attention is that the provisions of this Bill do not come into operation during the tenure of office by its present occupant. That carries out a rule which I am bound to say I think is one more of sentiment than common sense, because if the status of the Department ought to be raised the postponement of the operation does not seem to be altogether rational. Still it has been the custom, and on the whole I think a laudable custom, that such increases should not take place in favour of those who are partly responsible for bringing them about, and it has been the particular wish of the present occupant of the Presidency of the Board of Trade that the change should not take place during his tenure of office. I beg to move that the Bill be read a second time.
Moved, That the Bill be now read 2a—(The Earl of Crewe.)
THE MARQUESS OF SALISBURY: My Lords, as your Lordships well know, we on this side of the House could have no manner of objection to the Bill which has just been submitted to your Lordships for Second Reading, because it had been our intention, had we survived long enough, when we were in office to pass a precisely similar measure. But it is, as the noble Earl has intimated, more than a purely departmental question.
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It has, of course, a departmental aspect, because, as the noble Earl has justly said, the work of the President of the Board of Trade has increased, is increasing, and is likely to increase still further, and it has become, if the holder of the office is willing to undertake the burden, one of the most laborious offices under the Crown. But there is more than a departmental aspect, because owing to the fact that a smaller salary attaches to the office of President of the Board of Trade a lower status is supposed also to attach to it. I do not imagine that any of your Lordships, whether in office or likely to come into office in future, would shrink from public duty on any such ground as that; but some difficulty may arise in getting the best man to occupy the position of President of the Board, because, even if he does not regard it in that light, his friends often think that if he has held the office of a Secretary of State he is going down in the official hierarchy in accepting the Presidency of the Board of Trade. Therefore, great difficulties may arise in putting the best man into this position because of its alleged inferior status. What the public require is that the best man should fill the office, and I am sure it will be much easier for a Prime Minister forming a Government not to be hampered by such considerations as those to which I have called attention. Therefore, on these general grounds, as well as on the grounds put forward by the noble Earl that the weight and burden of the office have greatly increased since it was established, this measure can receive nothing but hearty support from those Members who sit on this side of the House.
On Question, Bill read 2a, and committed to a Committee of the Whole House on Wednesday next.

COLINTON TRAMWAYS ORDER CONFIRMATION BILL. [H.L.]
A Bill to confirm a Provisional Order relating to Colinton Tramways—Was presented by the Lord Denman (for the Lord Pentland) (pursuant to the Private Legislation Procedure (Scotland) Act, 1899, sections 8 and 9); read 1a, and to be printed. (No. 178.)
House adjourned at twenty-five minutes before Six o'clock, till To-morrow, a quarter past Four o'clock.