Sitting of 6 May 1914

Preamble
The House met at a Quarter before Three of the clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.
Norwich Electric Tramways Bill,
As amended, considered; to be read the third time.
Dee Fisheries Provisional Order Bill (by Order),
Read a second time, and committed.
Electric Lighting Provisional Orders (No. 4) Bill,
"To confirm certain Provisional Orders made by the Board of Trade under the Electric Lighting Acts, 1882 to 1909, relating to Banstead Walton-on-the-Hill and Kingswood, Beeston and District, Bradford-on-Avon, Feltham and District, Gelligaer (Bedlinog and Fochriw), Heanor Eastwood and District, Midhurst and District, and Rickmansworth and Chorley-wood." Presented by Mr. ROBERTSON; read the first time; to be referred to the Examiners of Petitions for Private Bills, and to be printed. [Bill 226.]

EDUCATION (SCOTLAND).
Copy presented of Regulations as to Grants to Secondary Schools [by Command]; to lie upon the Table.

SHOPS ACT, 1912.
Copy presented of Orders by the Secretary for Scotland, dated 23rd March, 1914, affecting certain classes of Shops in the burgh of Barrhead [by Act]; to lie upon the Table.
Copy presented of Order made by the Council of the borough of Dudley, and confirmed by the Secretary of State for the Home Department [by Act]; to lie upon the Table.

ALIENS ACT, 1905.
Copy presented of Return of Alien Passenger Traffic to and from the United Kingdom during the three months ending 31st March, 1914, together with the number of Expulsion Orders made during that period requiring Aliens to leave the United Kingdom [by Command]; to lie upon the Table.
BOARD OF EDUCATION.
Copy presented of Order amending Final Order No. 120 made under Section 11 (8) of The Education Act, 1902 [by Act]; to lie upon the Table, and to be printed. [No. 213.]
CIVIL SERVANTS (RETIREMENT AT THE AGE OF SIXTY-FIVE).
Return presented relative thereto [ordered 5th May; Mr. Montagu]; to lie upon the Table, and to be printed. [No. 214.]
ULTIMUS HÆRES (SCOTLAND) (ACCOUNT AND LIST OF ESTATES).
Return presented relative thereto [ordered 5th May; Mr. Montagu]; to lie upon the Table, and to be printed. [No. 215.]
CROWN'S NOMINEE ACCOUNT.
Abstract Account presented of Receipts and Payments of the Treasury Solicitor, in the year ended 31st December, 1913, in the Administration of Estates on behalf of the Crown, and Alphabetical List of Intestates' Estates in respect of which Letters of Administration were granted to the Treasury Solicitor as Crown's Nominee, and of other cases (partial intestacies, etc.) in which accounts were opened in the Books of the Treasury Solicitor in the same year in respect of moneys received by him as Crown's Nominee [by Act]; to lie upon the Table, and to be printed. [No. 216.]
ORAL ANSWERS TO QUESTIONS.

  Government Employés (Minimum Wage).
  Mr. BARNESasked the First Lord of the Admiralty whether his attention has been drawn to the intimation of the

  253
  Postmaster-General of his intention to raise the minimum wage of adult men servants of the Post Office to 22s. per week; whether he can make a similar statement with respect to adult men serving under his department; and how many men in his department are now paid under 22s. per week?
  Sir GODFREY BARINGasked the First Lord of the Admiralty whether there are any employés of his department, other than men on the active list of the Navy, on full time and twenty-three years of age earning less than 22s. a week; and whether he proposes, on the lines of the Post Office, to raise their wages to that amount?
  The PARLIAMENTARY SECRETARY to the BOARD of ADMIRALTY (Dr. Macnamara): The minimum wage for labourers in dockyards and naval establishments was raised to 23s. (22s. at Haulbowline) last year. There are 116 pensioner messengers, labourers and packers employed at the Admiralty on wages of less than 22s., of whom six are on a scale enabling them to proceed by increments to 24s. a week. The subject of their wages is under consideration. There are, further, a number of men employed at the colleges whose emoluments are less than 22s.; their cases are also under consideration. In addition, sixteen men employed under the Admiralty Works Department receive less than 22s., their rates being based on hourly local rates.
  Mr. BARNES: Can I take it that the hon. Gentleman is not in a position to make a statement promising the same measure of relief to these poorly paid men as has been granted by the Postmaster-General to the men in the Post Office?
  Dr. MACNAMARA: Well, we have about 55,000 employés. There are, as I said, 116 pensioner messengers, labourers, and packers at the Admiralty getting less than 22s. There are also a number of men at the colleges, servants and gardeners, and so on, getting less than 22s. I have said these cases are under consideration. There are also sixteen works men, thirteen at Shotley and three at Alderney, getting less than 22s.
  Mr. BARNESasked the Chancellor of the Exchequer, if he can sanction the establishment of a 22s. per week minimum wage to adult men in the departments;
  254
  and if he has already sanctioned such a rate for the Post Office?
  The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George): The matter referred to in the first part of the question is now under consideration. As regards the second, I would refer my hon. Friend to the statement on this subject made on Thursday last by my right hon. Friend the Postmaster-General.
  Sir GODFREY BARINGasked the President of the Board of Education whether there are any employés of his Department twenty-three years of age and on full time earning less than 22s. a week; and whether he proposes, on the lines of the Post Office, to raise their wages to that amount?
  The PRESIDENT of the BOARD of EDUCATION (Mr. Pease): The answer to the first part of the question is in the affirmative. The employés in question (I assume the hon. Member to refer to male employés only) are all temporary messengers, and as this class is common to a number of Departments of the Service their rates of pay are fixed by the Treasury on a uniform basis for the Service as a whole. I have called the attention of the Treasury to the rates of pay for temporary messengers, and the hon. Member may be aware that the Royal Commission on the Civil Service have recommended a substantial increase in the rate of pay for this class of officer.
  Mr. BARNES: May we take it there are no men in this Department permanently employed on less than that wage?
  Mr. PEASE: I should like to have notice of that question.
  Sir GODFREY BARINGasked the President of the Local Government Board whether there are any employés of his Department twenty-three years of age and on full time earning less than 22s. a week; and whether he proposes, on the lines of the Post Office, to raise their wages to that amount?
  The PRESIDENT of the LOCAL GOVERNMENT BOARD (Mr. Herbert Samuel): There are no such employés in my Department receiving from the State less than 22s. a week. There are five messengers who receive from the Department less than 22s. a week, but they also receive naval or military pensions.
  Mr. JOHN WARD: Why should that be taken into account in arriving at the wages of these men?
  Mr. HERBERT SAMUEL: They are a class of pensioner messengers.
  Sir GODFREY BARINGasked the Secretary of State for the Home Department whether there are any employés of his Department twenty-three years of age and on full time earning less than 22s. a week; and whether he proposes, on the lines of the Post Office, to raise their wages to that amount?
  The SECRETARY of STATE for the HOME DEPARTMENT (Mr. McKenna): The only persons of twenty-three years of age employed on full time under the Home Office who are earning less than 22s. a week are two pensioner messengers, who receive 21s. a week as wages in addition to their pension, and one female personal clerk to a lady inspector, who is on a scale of pay which will shortly bring her salary above 22s.
  Mr. ROBERT HARCOURT: Does my right hon. Friend approve of the system of subsidy in aid of wages? Does it not tend to depress wages?
  Mr. McKENNA: If my hon. Friend refers to the payment of pensioners, I would remind him that a Royal Commission recently reported in favour of that system.
  Mr. TYSON WILSONasked the President of the Board of Agriculture if he is aware that the labourers employed at the Royal Gardens, Kew, are only being paid at the rate of 5½d. per hour, with 6d. per hour for overtime and Sunday duty; if he is aware that the labourers employed by the Office of Works are paid at the rate of 7½d. per hour, and the labourers employed by the Richmond Corporation at the rate of 27s. per week; and whether, in view of the high cost of living at Kew, he will bring the wage of the labourers at Kew Gardens up to the rate paid by the Office of Works?
  The PARLIAMENTARY SECRETARY to the LOCAL GOVERNMENT BOARD (Mr. Herbert Lewis, for Mr. Runciman): The labourers employed at Kew Gardens are paid at the rate of 24s. per week, rising after five years' satisfactory service to 25s. per week; these rates are equivalent respectively to 5½d. and 5¾d. per
  256
  hour. The rate for overtime is 6d. per hour, and for Sunday duty 2s. 6d. for any period not exceeding five hours, with 6d. for every hour or part of an hour in excess of five hours. I am informed that the labourers employed by the Office of Works at Bushey Park, Richmond Park, and Hampton Court are paid at the same rates. The Board have no knowledge of the rates of wages paid by the Richmond Corporation. The Treasury last year sanctioned an increase of 1s. per week in the wages paid to all labourers employed at Kew Gardens.
  Mr. TYSON WILSON: Could the hon. Gentleman make inquiries with regard to the wages paid at different parks by corporations; and, if the figures are correct, will he use his best efforts to induce the Treasury to grant something like a living wage to these men?
  Mr. H. LEWIS: I have already informed the hon. Member that in places properly comparable, at Bushey Park and at Richmond Park, the same rates of wages are being paid.
  Mr. TYSON WILSON: Is the hon. Gentleman aware that the Office of Works labourers when employed at Kew Gardens are paid 7½d. per hour?
  Mr. W. THORNE: Does the hon. Gentleman think that 5½d. per hour is a living wage?
  Mr. H. LEWIS: That was not the question put to me.
  Mr. BARNES: Do I gather that the men are to remain at the minimum wage for five years before they get a rise of 1s.; and, if so, will the hon. Gentleman consider the advisability of altering that?
  Mr. H. LEWIS: The Treasury considered it very carefully twelve months ago.
  Mr. CROOKS: Is it any use asking some of the permanent officials who advised the giving of this wage to endeavour to live on it for a week?
  Mr. BARNESasked the Secretary of State for War whether his attention has been drawn to the intimation of the Postmaster-General of his intention to raise the minimum wage of adult men servants of the Post Office to 22s. per week; whether he can make a similar statement with respect to adult men

  257
  serving under his Department; and will he state how many men in his Department are now paid under 22s. per week?
  Sir GODFREY BARINGasked the Secretary of State for War whether, in his Department, there are any employés twenty-three years of age and on full time, apart from men in the Regular Army, earning less than 22s. a week; and whether he proposes, on the lines of the Post Office, to raise their wages to that amount?
  The FINANCIAL SECRETARY to the WAR OFFICE (Mr. Harold Baker): I hope shortly to make an announcement on this subject.
  Mr. LEACHasked the Postmaster-General the number of men, over twenty-one years of age, who are employed in any capacity in the Post Office at a wage of less than 6d. per hour?
  The POSTMASTER-GENERAL (Mr. Hobhouse): I regret that the information asked for is not available. The collection of the necessary particulars would involve considerable labour and expense and time, and, perhaps in the circumstances, the hon. Member will not wish to press the question. I may, perhaps, refer the hon. Member to the announcement which I made last Thursday, when introducing the Post Office Estimates, on the subject of a minimum wage for Post Office employés at the age of twenty-three years.
  Mr. JAMES HOGGE: Is it not the case that, at any rate in the Edinburgh General Post Office, the temporary help in regard to sorting letters is employed at 5½d. an hour?
  Mr. HOBHOUSE: I must ask for notice of that question.

  Tasmania.
  Lord ALEXANDER THYNNEasked the Secretary of State for the Colonies, whether the Colonial Office were aware of the intended action of the Governor of Tasmania in the recent governmental crisis in Tasmania before such action was taken; and whether any telegrams were exchanged between the Governor and the Colonial Office prior to or during such crisis?
  The SECRETARY of STATE for the COLONIES (Mr. Harcourt): The Governor did not inform me of his intentions beforehand. As I stated on Monday, I have been in communication with him since.

  Shadwell Park.
  Lord A. THYNNEasked the Chancellor of the Exchequer the amount of the Stamp Duty assessed on the transfer of the land required for the new public park at Shadwell, and on which party to the transaction does this charge fall?
  Mr. LLOYD GEORGE: So far as I am aware, the conveyance to which I understand the Noble Lord alludes, has not yet been presented for stamping.

  Income Tax.
  Mr. NORMAN CRAIGasked the Chancellor of the Exchequer whether he is aware that many persons desiring to pro vide for their old age purchase annuities; that other persons to the same end insure; that in the case of annuities the whole capital is paid at the time of effecting the purchase, while in the case of insurances a partial and annual premium is paid; that if the transaction takes the form of the purchase of an annuity Income Tax is exacted, whilst exemption is given to the extent of partial premium payments; and whether he will take steps to get rid of this inconsistency and injustice?
  Mr. LLOYD GEORGE: The concessions under the Income Tax Acts in respect of insurance policies are limited to annual premiums. They were made at a time when these Acts did not differentiate between earned and unearned incomes, and are less required now that this differentiation has been made. The reason for these concessions having now largely disappeared, I should not be prepared to contemplate any extension.

  FINANCIAL BILL.

    GRANTS TO LOCAL AUTHORITIES.
    Mr. ORMSBY-GOREasked the Chancellor of the Exchequer whether the proposed new Grant to local education authorities in necessitous school areas will be shared by all local education authorities whose rate for all education purposes exceeds 1s. 6d. in the £, or whether it will be confined to those authorities which have already participated in the necessitous school areas Grant?
    Mr. J. A. PEASE: The answer is in the affirmative, but I hope to have an opportunity in the course of the Debate to-day of giving fuller information than is possible within the limits of an answer to a question.
    Sir J. D. REESasked what relief will be afforded to Nottingham by the Grants proposed to local bodies under the Budget?
    Mr. HERBERT SAMUEL: My right hon. Friend the Chancellor of the Exchequer promised to give the figures for Nottingham and these are now being prepared. I regret, however, that I cannot undertake to supply similar figures for other places generally. Calculations have been made with respect to a small number of typical localities, but the House will realise that in view of the variety of the present Grants, and the fact that the new Grants which will be made to Education, Poor Law, Public Health, and Road Authorities, need to be worked out on various bases of distribution, the calculations involved are necessarily laborious. The data at present available for the purpose of computation are incomplete, and estimates which are now being given can only be approximate.

    Unemployed Workmen Act, 1905.
    Mr. HOAREasked whether it is intended to continue the Grant under the Unemployed Workmen Act?
    Lord HENRY CAVENDISH-BENTINCKasked whether, in view of the fact that no provision has been made in the Estimates, it is the intention of the Government not to ask for any money this year in connection with the Unemployed Workmen Act, 1905?
    Mr. HERBERT SAMUEL: The Estimates have in this matter followed the procedure of previous years. It has been usual to wait until later in the summer before deciding whether the Unemployed Workmen Act shall be further continued, and, if so, what provision by way of Grant should be made. No decision has yet been arrived at this year.
    Mr. HOARE: Is it contemplated that if the Act is continued a Grant will be made?
    Mr. HERBERT SAMUEL: No decision has been arrived at on the matter at all. I am following precedent.

    Agricultural Labourers' Wages.
    Mr. LEACHasked the President of the Board of Agriculture what is the minimum and maximum wage paid to agricultural labourers for a full week's work, and the respective counties in which such wages are paid?
    The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Mr. J. M. Robertson): The lowest average earnings—including all allowances and extra payments—are those in Ireland, and the highest are those in the north of England and south of Scotland. As, however, these averages vary somewhat according to the different classes of labourers employed and to the conditions under which they serve, I am sending my hon. Friend a copy of the latest report, in which he will find full particulars of the average earnings in each county.

    Swine Fever.
    Mr. STANIERasked the President of the Board of Agriculture whether he has received a resolution from the Berks and Oxon Chamber of Agriculture to the effect that further research in swine fever should be undertaken at one or more university centres, as well as at the Government laboratory at Appleton; and if the Board will give consideration to this request, seeing that many agriculturists think this should now be done?
    Mr. H. LEWIS: A copy of the resolution has been received and is under consideration.

  NATIONAL INSURANCE ACT.

    TUBERCULOSIS.
    Mr. F. HALLasked the hon. Member for St. George's-in-the-East, as representing the Insurance Commissioners, if he is yet in a position to state what is the total number of insured per sons in Great Britain and Ireland who have been certified to be suffering from tuberculosis; the number of those who are receiving residential treatment in sanatoria; and the total number of beds in sanatoria which are at the disposal of in surance committees for the reception of such patients?
    Mr. WEDGWOOD BENN (Lord of the Treasury): I would refer the hon. Member to the Return as to the administration of sanatorium benefit, of which I am sending him a copy.

    COUNTY INSURANCE COMMITTEES (ACCOUNTS).
    Mr. GRETTONasked when the arrears of payment due from the Insurance Commissioners to close the accounts of county insurance committees to 31st December, 1913, will be paid?
    Mr. W. BENN: I would refer the hon. Member to my reply of the 4th May to the hon. Member for Oldham.
    Mr. GRETTON: Can the hon. Member indicate when the arrears will be paid?
    Mr. W. BENN: The reply to which I referred the hon. Member indicated that calculations were involved, and they are being made as quickly as possible.

    RUTLAND INSURANCE COMMITTEE.
    Mr. GRETTONasked for what reason the Insurance Commissioners sent £600 only in response to a requisition by the Rutland Insurance Committee, made in the regular way, for the sum of £900; if the committee is in consequence unable to pay the accounts, less certain deductions as required by the Commissioners, due to doctors, chemists, and others; and when the money required will be paid?
    Mr. W. BENN: The sum of £600 was placed to the committee's account pending reconsideration by them of the basis of their advances. The matter has already been fully explained to the committee.
    Mr. GRETTONasked a series of supplementary questions which were inaudible in the Press Gallery, and the replies of Mr. W. Benn were also indistinct.

    LABOUR EXCHANGE (UNEMPLOYMENT INSURANCE DEPARTMENT.
    Mr. BRIDGEMANasked the President of the Board of Trade how many times the Civil Service Commissioners have sat to pass temporary clerks engaged in the Labour Exchange Unemployment Insurance Department for examination for permanent clerkships; how many clerks have come before them on each occasion; how many have been passed; and what was the last occasion upon which the Commissioners sat for this purpose?
    Mr. ROBERTSON: The Civil Service Commissioners have sat on five occasions to interview applicants for appointment in the Labour Exchanges and Unemployment Insurance Service. The total number of temporary clerks interviewed was 1,791. The numbers interviewed on each occasion were two, 642, 147, 577 and 423, respectively. In all, 960 were passed by the Commissioners at the interviews, subject to passing the subsequent written qualifying examination. The last occasion upon which the Commissioners sat was in March, 1914.
    Mr. BRIDGEMAN: Will the hon. Gentleman say how many passed on the last occasion?
    Mr. ROBERTSON: I have only the number interviewed. I will try and get the figures.
    Mr. BRIDGEMAN: I will put the question down on an early day.
    Mr. HOARE: Are any now being appointed without an interview?
    Mr. ROBERTSON: I am not aware of any.

    Sheriff Officers (Scotland).
    Mr. WATTasked the Lord Advocate whether his attention has been called to the fact that sheriff officers in Scotland frequently follow the occupation of debt collectors, etc., in addition to their avocation of officers of the Court; whether he is aware that the latter position is utilised in the furtherance of the former; and whether any arrangement can in future be made whereby sheriff officers will be whole-time servants of the Courts in order to prevent the official power of these officers being misused?
    The LORD ADVOCATE (Mr. Munro): I am informed on inquiry that sheriff officers are sometimes employed to collect debts, and that instances have occurred of the kind referred to in the second part of the question. Such cases can be brought to the notice of the sheriff, who has power to deal with the offender by suspension or dismissal. In few, if any, localities is there sufficient work to occupy the whole time of a sheriff officer, and the answer to the last part of the question is therefore in the negative.
    Mr. WATT: Can the right hon. Gentleman say whether the cases referred to were brought to the notice of the Department?
    Mr. MUNRO: Not so far as I am aware.

    Inland Revenue Collection (Scotland).
    Mr. WATTasked the Secretary to the Treasury whether he is aware that expenses and costs have been charged in the collection of Inland Revenue Taxes in the county of Dumfries; will he say whether a similar process has yet been thought of or adopted in any part of England and Wales; and will he in future take steps to ensure that costs in the collection of taxes will be incurred on the same date

    263
    in every part of the United Kingdom so as to ensure equality of treatment to all citizens?
    The FINANCIAL SECRETARY to the TREASURY (Mr. Montagu): The answer to the first two parts of the hon. Member's question is in the affirmative. With regard to the last part, I would again refer him to answers given in this House on 22nd April and 5th May of last year.
    Mr. WATT: May we understand the hon. Gentleman is trying to bring about equality of treatment throughout the United Kingdom in this matter?
    Mr. MONTAGU: There is no differentiation between different parts of the United Kingdom, but the actual dates must vary according to the circumstances of each locality.

    Civil Service Assistant Clerks (Increments).
    Mr. GOLDSTONEasked the Secretary to the Treasury when it is proposed to give practical effect to the recommendations of the Royal Commission on the Civil Service, contained in the 4th Report, urging the immediate concession of an additional increment to the assistant clerks and the raising of their present maximum of £150 to £200?
    Mr. MONTAGU: I am not yet in a position to name a date, as this recommendation cannot be adopted without reference to other changes recommended by the Royal Commission, whose Report is now under consideration.
    Mr. HOARE: Has any provision been made for a possible change in this year's Estimates.

    Land Court (Scotland).
    Mr. HICKS BEACHasked the Secretary for Scotland how many cases of appeal against the Land Court decision are awaiting a hearing in the Court of Session at Edinburgh, and what is the cause of the delay in their being heard?
    The SECRETARY for SCOTLAND (Mr. McKinnon Wood): Three special cases, having been adjusted by the Scottish Land Court, were lodged with the clerks of the Court of Session in March and are now awaiting a hearing. The Court of Session has been in vacation since 20th March.
    Mr. HOGGE: Does it really matter whether these cases are heard or not, seeing that in all cases in which there have been appeals the decision of the Land Court has been upheld?
    Mr. McKINNON WOOD: I am not prepared to say it does not matter, but the facts are, I believe, as stated by the hon. Member.
    Mr. HICKS BEACHasked the Secretary for Scotland whether he is aware that Appendix F of the Report of the Scottish Land Court, 1913, shows that the percentage of reduction of the rents of ninety-nine holdings in 1912 as compared with the first fair rents was 19.5; whether the first fair rents were arrived at after hearing all the evidence in support of a reduction of the old rent; and what circumstance?, have arisen since then to justify a further average reduction of 19.5 per cent.?
    Mr. McKINNON WOOD: The answer to the first and second parts of the question is in the affirmative. It is no part of my duty to explain the grounds upon which the Scottish Land Court, which is an independent tribunal, arrives at its decisions.
    Mr. HOGGE: Can my right hon. Friend say whether during the same period in which these reductions of 19 per cent. has taken place on these holdings on large farms the rents have been reduced by 40 per cent.?
    Mr. McKINNON WOOD: I cannot answer that question without notice.

    School Attendance.
    Mr. KINGasked the President of the Board of Education whether his attention has been called to statements made by Mr. L. C. Elmslie, a Birkenhead magistrate, that when he was on the bench hearing attendance cases the excuse was constantly made that the child had attended school but was sent back for not having its penny, and that the attendance officer, Mr. Thompson, confirmed this excuse; and whether he will now urge that fees should be abolished in the eleven voluntary schools of Birkenhead which charge fees and also receive the fee Grant?
    Mr. J. A. PEASE: I have no knowledge of the statements referred to by the hon. Member, and I have no information which would justify me in taking the action which he suggests.
    Mr. KING: In view of the many serious allegations I have brought before him, will the right hon. Gentleman send down an inspector to inquire?
    Mr. PEASE: I am inquiring of the local authority, and before taking other steps I will wait and see what they have to say.
    Mr. KING: If it proves unsatisfactory, will the right hon. Gentleman accompany me there?
    Mr. GEORGE ROBERTSasked the President of the Board of Education if he is aware that school attendance officers generally are desirous that a superannuation scheme should be established on their behalf; and whether he will consider the desirability of his Department formulating such a scheme, or, if preferred, will he set up a Committee charged with the preparation of a scheme in like manner to that appointed to provide for the superannuation of officers of reformatory and industrial schools?
    Mr. PEASE: It is difficult to deal with the question separately from the similar question which arises in the case of other employés of local authorities, and I am not in a position at this moment to take the steps indicated by the hon. Member. I may add that some local authorities have obtained powers to adopt superannuation schemes for their employés, amongst whom school attendance officers may be included.
    Mr. KINGasked the Secretary of State for the Home Department whether he has considered the statement made by Mr. L. C. Elmslie, a Birkenhead magistrate, that when he was on the bench heaving school attendance cases he heard cases where children had attended at school yet were sent away because they had not brought school pence, and that in such cases parents were summoned and could be fined; and whether he. will introduce into the Criminal Justice Amendment Bill a provision to ensure that in such cases parents shall not be liable to fine or imprisonment?
    Mr. McKENNA: Neither the Home Office nor the Board of Education have heard of this statement. If it was made, it must, I presume, have referred to a state of things existing before the Elementary Education Act, 1891, which required education authorities to provide sufficient public school accommodation without payment or fee. I see no necessity for further legislation on this matter.

    School Endowments (Lancaster).
    Mr. KINGasked the President of the Board of Education whether the Board wrote to the managers of the boys' national school, Lancaster, on the 14th February, 1905, directing the managers to pay the income of Pyper's Endowment to the local education authorities; whether for nine years the managers ignored this direction and accumulated the endowment money in the bank; whether the Board again wrote on the 3rd January, 1914, stating that all accrued interest must be paid over to the local education authorities; whether the managers have complied with the Board's direction; and, if not, what steps will be taken to carry out the provisions of Section 13 of the Education Act, 1902?
    Mr. PEASE: In the first letter referred to by the hon. Member the Board expressed the opinion that the income of Pyper's Endowment was payable to the local education authority. I understand that the trustees have accumulated the income. On the 3rd January last the Board wrote a letter to the effect stated by the hon. Member. I do not know whether the accumulations have yet been paid to the local education authority, but I have reason to believe that this will be done. If no payment is made the Board will be prepared, on the application of the authority, to authorise them to take legal proceedings in the matter.
    Mr. KING: If the trustees for ten years, in spite of the Act of Parliament and its clear definition and in spite of the Board of Education, continue to accumulate the money, are they not guilty of a breach of trust?
    Mr. PEASE: That is a matter for consideration if necessary, but I hope the necessity will not arise.

    Old Age Pensions.
    Sir JOHN SPEARasked the President of the Local Government Board the number of old age pensioners residing in the workhouses of England and Wales on 1st January, 1913, and 1st January, 1914, respectively?
    Mr. HERBERT SAMUEL: The Returns show that there were, on the 4th January, 1913, and 1st January, 1914, respectively, 2,847 and 3,069 old age pensioners in work-houses and other Poor Law establishments in England and Wales who were receiving

    267
    relief which did not disqualify for an old age pension, namely, medical or surgical assistance only.

    Workhouse Administration (Aged Couples).
    Mr. LEACHasked how many workhouses there are in Great Britain in which no provision is made for aged couples over sixty years of age to live together as allowed by law?
    Mr. HERBERT SAMUEL: The Poor Law Institutions Order provides that in every workhouse in England and Wales a separate sleeping apartment shall be appropriated to the use of each married couple above the age of sixty who wish to live together. For information in regard to Scotland I must refer my hon. Friend to the Secretary for Scotland.
    Mr. LEACH: Am I to infer from that reply that in all workhouses provision is actually made for these aged couples to live together?
    Mr. HERBERT SAMUEL: There is an obligation on the guardians to do so, and I am not aware of any cases of failure to provide the accommodation.
    Mr. HOGGE: How many of these aged people desire to take advantage of the privilege?
    Mr. HERBERT SAMUEL: It is beyond my power to answer that question.

  BEITISH ARMY.

    ROYAL FLYING CORPS.
    Lord CHARLES BERESFORDasked the First Lord of the Admiralty whether, in the event of his wishing to use a flying machine, he sends a requisition to the Commander-in-Chief for such a machine?
    The FIRST LORD of the ADMIRALTY (Mr. Churchill): The Noble Lord may rest assured that all necessary steps are taken.

  POST OFFICE.

    RADIO-TELEGRAMS.
    Mr. NORMAN CRAIGasked the Postmaster-General what are the relative rewards taken by the British and French Governments, respectively, in regard to the transmission of radio-telegrams through their respective coast stations?
    Mr. HOBHOUSE: The British coast station charge for radio-telegrams in the case of ocean-going ships is 6d. per word, which is reduced to 3d. (with a minimum of 1s. 6d. per message) in the case of ships making regular voyages of between 200 and 1,000 miles, and to l½d. (with a minimum of 1s. 3d. per message) in the case of packets making regular voyages of less than 200 miles. The corresponding French charge is 40 centimes per word, which is reduced to 15 centimes in the case of packers making regular voyages between France and England, or between France and Corsica, Algeria or Tunis.
    Mr. NORMAN CRAIGasked the Postmaster-General whether the charge for a radio-telegram sent from a ship to an address in this country is greater if sent through a British coast station than if sent through a French coast station and the Anglo-French cables; and whether he will consider the advisability of revising rates in this country, so far as the Post Office is concerned, with a view to counteracting the tendency to use the French wireless stations to the detriment of the British wireless stations?
    Mr. HOBHOUSE: I am aware that the charge for a radio-telegram sent from an ocean-going ship to an address in this country through a British coast station is ½d. a word more than if sent through a French coast station—namely, 10½d. a word, as compared with 10d., including in each case the ship and wire charges. I have recently considered the question of reducing the British coast station charge, but I do not think that a reduction is warranted at present. I am not aware of any general tendency such as that suggested in the latter part of the question, and I should be surprised if it existed, in view of the greater delay which radio-telegrams sent by an indirect route would usually sustain.

    TELEPHONE SERVICE.
    Viscount WOLMERasked the Post master-General whether Messrs. James Howarth, having opened a factory in Earlestown, Lancashire, and having applied for a telephone service, have not been successful in obtaining one; whether he is aware that the application was made so long ago as 28th January, and that the refusal of the authorities to supply a telephone service, if persisted in, may render it impossible for Messrs. Howarth to continue their factory in Earlestown, and that a number of hands will thereby be thrown

    269
    out of employment; and whether he will, in view of this, see that a telephone service is supplied to this firm at once?
    Mr. HOBHOUSE: I will make inquiry as regards the facts of the case, and communicate with the Noble Lord.

    HOLT COMMITTEE'S REPORT (BIRMINGHAM).
    Mr. NEWDEGATEasked the Postmaster-General whether, as a sequence to the Holt Report, the postmen at Sutton Coldfield and Erdington, offices under Birmingham, are now to receive the same scale of pay as at the following offices: Harborne, Moseley, Selly Oak, and Hirchley, which are equally offices under Birmingham, and where the cost of living is similar?
    Mr. HOBHOUSE: The classification of offices for scales of pay does not depend primarily on the cost of living. The cases of Sutton Coldfield and Erdington will receive consideration in connection with the general review of classification which is being taken in hand in accordance with the recommendations of the Select Committee on Post Office Servants, but, as was contemplated by the Committee, it may be some considerable time before the matter can be decided.
    Mr. NEWDEGATE: Will the right hon. Gentleman consider the transfer of these men from Class III. to Class II.?
    Mr. HOBHOUSE: The whole of the circumstances surrounding these two places, with other places, will be considered. It may result in their going up one class, or it may result in their going down. I cannot make any promise.

    NORTH WALES POST OFFICES (HOLIDAYS).
    Mr. ORMSBY-GOREasked the Postmaster-General whether he has received complaints from the indoor staff of post offices in North Wales with regard to the existing holiday arrangements whereby the employés are compelled to take their holidays in the winter months; whether he is aware that at one office, containing a staff of six or seven, not one of these will get any summer holidays this year; and whether, with a view to economy, as well as to meet the wishes of the staff, the former practice will be reverted to whereby the holiday arrangements were made locally and the work made up by overtime, instead of by introducing a stranger unacquainted with the work of the office in question?
    Mr. HOBHOUSE: I have no knowledge of the complaints referred to; but at some holiday resorts the heavy pressure of post office business during certain of the summer months renders it necessary to exclude these months from the period of holidays for the staff. The recent Select Committee remarked that it was obvious that Post Office servants at such resorts must take their holidays in the slack season. If, however, the hon. Member will give me the name of the office which he has in mind I will inquire into the arrangements and see whether they admit of improvement.
    Mr. ORMSBY-GORE: Is the right hon. Gentleman aware that the greatest grievances in this matter occur not at the post offices at summer resorts, but at inland offices where there is practically no tourist traffic?
    Mr. HOBHOUSE: I am not aware of that. I am aware that there are certain inland places in the hon. Member's own country which are great holiday resorts.

    Moneylenders Registered (United Kingdom).
    Mr. LEACHasked the Secretary of State for the Home Department the number of moneylenders in the United Kingdom; and how many of the same trade as limited liability companies?
    Mr. MONTAGU: The number of moneylenders effectively registered in the United Kingdom is 6,130, of whom 408 trade as joint stock companies.

    Whitsuntide Recess.
    Major WHITEasked the Prime Minister if he can now state the probable date on which the House will adjourn for Whitsuntide, and the duration of the adjournment?
    The PRIME MINISTER (Mr. Asquith): I fear I cannot yet make any statement on this subject, but I hope to do so early next week.

    Redistribution of Seats.
    Mr. KINGasked the Prime Minister whether he has received any response to the offer made by the Government, that if there were no party opposition, boundary commissioners could be appointed for the purposes of the Plural Voting Bill and could report in two or three months on a

    271
    scheme of Redistribution, and that before the next General Election the anomalies of the present electoral areas might be redressed?
    The PRIME MINISTER: The speech of my right hon. Friend was only made on 27th April, and, so far as I am aware, there has not been a suitable opportunity in the House for a reply from those to whom the offer was addressed.
    Mr. KING: Might not the reply be made privately, and is not a good deal of important work between the two parties going on privately?
    The PRIME MINISTER: I do not know about that.

    Prison Treatment (Girls).
    Mr. NORMAN CRAIGasked the Secretary of State for the Home Department whether, in the case of juvenile female adults, no serious effort is being made in the direction of separation by classification of offences, and that a young woman charged with or guilty of a first and relatively venial offence is not separated from young women already old in crime; and whether he will take steps to enforce classification by the nature of offences, with a view to the reclamation of the young woman who may be reclaimed?
    Mr. McKENNA: Very full provision is made already in the Prison Act and the prison rules for the classification of all convicted prisoners, chiefly with the object of separating young persons and first offenders from old and hardened criminals. The case of every female prisoner between sixteen and twenty-five received in prison is specially considered, and the benefit of treatment under the Modified Borstal System is given to all except those who show themselves incapable of profiting by it, and those who exercise an evil influence on other young prisoners.
    Mr. NORMAN CRAIGasked the right hon. Gentleman whether young girls of fourteen years of age and less are sent on remand for varying periods, extending in some cases to many weeks, to the Wards of the remand hospital in Holloway; whether after conviction young girls re main in Holloway for considerable periods before removal; whether young girls accused of a first offence and relatively
    272
    trifling offences are in these circumstances brought into association with degraded and habitual female criminals; and whether he will take steps to prevent the continuance of so dangerous and undesirable state of things?
    Mr. McKENNA: The Children Act, 1908, absolutely prohibits the committal to prison of children under fourteen, and it prohibits the committal of young persons between fourteen and sixteen unless the Court certifies that the young person is of so unruly a character that she cannot be detained in a place of detention for children or of so depraved a character that she is not a fit person to be so detained. Since that Act passed no girls of fourteen or less have been received in Holloway, and the number under sixteen is extremely small; last year there were only two.
    Mr. NORMAN CRAIGasked the right hon. Gentleman whether the Borstal system or any corresponding system is in operation for girls; whether the system can be extended so as to comprise girls; and whether he will initiate legislation to this end?
    Mr. McKENNA: The Borstal system is in operation for females between the ages of sixteen and twenty-one. I would refer the hon. Member to the Annual Reports of the Prison Commissioners, in which he will find much information on the subject. I am proposing legislation which will extend further the operation of the Borstal system for males and females alike.
    Mr. NORMAN CRAIGasked the right hon. Gentleman whether girl convicts are largely sent to Aylesbury Prison; whether capital punishment is carried out at that prison; whether many inveterate criminals are sent to that prison; and whether he will take steps to prevent the environment and association involved upon young girls by being sent to such a prison from affecting them injuriously by devoting some prison to the reception of young female prisoners deemed capable of reclamation?
    Mr. McKENNA: All females sentenced to penal servitude are sent to the Aylesbury Convict Prison, but at present there is only one convict who is under the age of twenty-two. Capital punishment is not carried out at that prison. The Borstal institution at Aylesbury for females convicted between the ages of sixteen and

    273
    twenty-one and sentenced to a term of Borstal detention under the Prevention of Crimes Act, 1908, is entirely separate from the convict prison.

    Outdoor Belief.
    Mr. LEACHasked the President of the Local Government Board if the time has now come when he will issue instructions to boards of guardians to give relief in deserving cases to prevent destitution and thus save many homes from being broken up and honest people from being driven into the workhouse?
    Mr. HERBERT SAMUEL: I do not think that there is any need at the present time to issue fresh instructions to boards of guardians as to their general powers and duties in regard to relief. I am, however, considering the question of issuing a circular dealing especially with the subject of relief to certain classes.

    Westgate-on-Sea Parish Council.
    Mr. NORMAN CRAIGasked the President of the Local Government Board whether, upon the passing of the Local Government Act, 1904, the Westgate-on-Sea Parish Council became entitled to a sum of £95, being the proportion duo to Westgate-on-Sea in respect of the value of the parochial offices, Margate; whether the parish council have made some and what applications for permission to apply that sum to some and what objects, respectively; whether, in June, 1913, the parish council applied for permission to use the said sum towards the purchase of a steam fire-engine to replace an existing manual engine in bad condition; whether the application was refused, and for what reason; whether the Local Government Board has been asked to indicate a purpose to which the said sum may be devoted; and whether any and what purpose has been indicated in response to such request?
    Mr. HERBERT SAMUEL: The parish council became entitled to the sum of £95 as stated, and have made applications for permission to apply the money to the provision of a shelter-seat in a pleasure ground, a band-stand in a similar position, and the purchase of a steam fire-engine. The first two proposals were held not to be purposes for which a parish council could apply these moneys, and, as regards the fire-engine, the object seemed not to be of a sufficiently permanent character to justify the proposed application of the
    274
    capital sum in question. If the parish council make a proposal to apply the sum to any capital purpose within their powers which would have a probable useful life of not less than twenty years the matter shall be favourably considered.

    Port of London (Housing Workmen).
    Lord ALEXANDER THYNNEasked the President of the Local Government Board whether the Government have made any inquiries into the conditions under which the men employed on new construction in the Port of London are housed; and whether the existing housing available in the vicinity of such works is suitable and adequate?
    Mr. HERBERT SAMUEL: Inquiries are now being made.
    Sir A. GRIFFITH-BOSCAWEN: Has any provision been made in the contract for housing the people employed?
    Mr. HERBERT SAMUEL: I believe that no such provision has been made. The contract was made prior to the Act of Parliament, which requires such provision to be made in future contracts.

    Marlborough Borough Council (Inspector of Nuisances).
    Mr. JAMES PARKERasked the President of the Local Government Board whether, notwithstanding the letter sent by his Department to the town clerk of the borough of Marlborough on the 4th March last, the borough council have decided to determine the appointment of their pre sent inspector of nuisances and to make other arrangements which will not be so useful for continuous inspection of the district for the detection and abatement of nuisances; and whether he will take action to prevent this step being taken?
    Mr. HERBERT SAMUEL: The town council inform me that they propose to adhere to their resolution to determine the appointment of their present inspector of nuisances, and they have given him notice accordingly. I have no power to prevent their doing this.

  ROYAL NAVY.

    YARDCRAFT MEN (PAY).
    Sir C. KINLCCH-COOKEasked the First Lord of the Admiralty whether he can see his way, in view of the increased cost of living, to make some addition to the pay of yardcraft men of all grades?
    Dr. MACNAMARA: As the hon. Member is aware a Committee appointed to inquire into the conditions of service of yardcraft men has recently made its Report. That Report is now under consideration, and I cannot give any undertaking as to what decision may be arrived at as a result.
    Sir C. KINLOCH-COOKE: When does the right hon. Gentleman think the Report will be considered, and when some decision will be arrived at?
    Dr. MACNAMARA: I am hopeful that we may be able to issue the decision in connection with the replies to petitions of this year.
    Sir C. KINLOCH-COOKE: When will the replies to petitions be issued this year?
    Dr. MACNAMARA: I should not like to say.

    Established Church (Wales) Bill.
    Mr. ORMSBY-GOREasked whether the expression all churches in Clause 8 (1) (a) (i) of the Established Church (Wales) Bill includes the precincts of all churches, parochial as well as cathedral?
    Mr. McKENNA: The answer is in the negative. The expression "church" includes the precincts in the ease of the cathedral churches only.
    Mr. ORMSBY-GORE: What is to happen to all those monastic ruins and the various buildings round about parish churches in Wales, and to what authority will they be transferred? I could give instances of a number.
    Mr. McKENNA: The hon. Member had better give me the particular instance which he has in mind.
    Mr ORMSBY-GOREasked what authority under the Established Church (Wales) Bill will decide whether the grounds and monuments surrounding St. Asaph Cathedral are precincts or a burial ground transferable to a secular authority under Sub-section (b), Sub-clause (1), Clause 8 of the Bill?
    Mr. McKENNA: The question whether the grounds and monuments surrounding St. Asaph Cathedral are in fact part of the precincts of the cathedral, or a burial ground transferable to a secular authority under Clause 8 of the Bill will be decided by the Welsh Commissioners.
    Mr. ORMSBY-GORE: Would there be any appeal from the Welsh Commissioners to a Court of Law on this all-important matter?
    Mr. McKENNA: As I read the Appeal Clause there will be no appeal.

    Church Doctrines.
    Mr. KINGasked the Secretary of State for the Home Department whether he has considered the petition presented to the Upper House of Convocation, signed by divines and scholars, making a claim for complete intellectual freedom to restate and interpret the traditional doctrines of the Church; and whether, taking into account the advance of the higher criticism, he will cause letters of business to issue to Convocation with the object of freeing the Church of England from doctrinal fetters?
    Mr. McKENNA: I have read the report of this petition which has appeared in the Press. No useful purpose would, in ray opinion, be served by issuing letters of business as suggested. The Upper House of Convocation discussed the general question at their recent sittings and adopted resolutions which my hon. Friend has no doubt seen. In any case no change of the kind suggested could be made without the authority of Parliament.

    Westmeath County Council.
    Mr. GINNELLasked the Chief Secretary for Ireland whether the Local Government Board have yet ascertained from the Secretary of the Westmeath County Council, in respect of the county-at-large account for the half-year ended 31st March last, the amount of the agriculture Grant, other Government Grants, proportion of poor rate lodged, and other receipts; and also for the same period the amount of the charges to which urban districts contribute, and the amount of the charges from which urban districts are exempt?
    The CHIEF SECRETARY for IRELAND (Mr. Birrell): The answer is in the negative. The particulars cannot be obtained until the accounts for the half-year have been fully prepared and balanced. This work is necessarily delayed pending the completion of the audit of the September accounts, which was only finished on the 2nd instant.
    Mr. GINNELL: Does the right hon. Gentleman know whether the return required by the owner to be lodged within a month has been lodged?
    Mr. BIRRELL: Yes, I think that has been done.
    Mr. GINNELLasked at what dates the secretary of the Westmeath County Council complied with Article 25 of the Public Bodies Order, 1904, and lodged with the Local Government Board copies of Forms 24 and 25 for the half-years ended 31st March and 30th September in the years 1912 and 1913, respectively; and what action, if any, the Local Government Board took in this matter?
    Mr. BIRRELL: The forms referred to were received on 10th June, 1912, 27th November, 1912, 7th June, 1913, and 4th December, 1913, respectively. No action was taken or considered necessary by the Local Government Board in the matter.

    Land Purchase (Ireland).
    Mr. GINNELLasked the Chief Secretary if he is now in a position to state what the Estates Commissioners have recently done towards acquiring for distribution among the landless and congested people the untenanted lands on the Reid and M'Endoo estate, near Rathowen, Westmeath; what the area of the land in question is; and whether there is any prospect of its being acquired and distributed?
    Mr. BIRRELL: Proceedings have been instituted for the sale of the estate referred to under the Irish Land Act, 1903, including 143 acres of untenanted land which the owner proposes to sell to the Estates Commissioners for distribution and 70 acres of turbary to be vested in trustees for the benefit of the tenants. The Commissioners are not in a position at present to say when this estate may be reached in its order to be dealt with by them.

INFANTS' MILK.
Mr. DOUGLAS HALL: I beg to move, "That leave be given to bring in a Bill to ensure the supply of pure milk to certain persons."
This is a Bill to ensure the sale of pure milk to certain mothers of infant children at a price they can afford to pay. It is not a pauperising Bill, and it does not interfere with any private traders. It will increase the supply of pure milk from dairy farmers and will cost the community but a trifling sum, if anything. It is proposed to make use of the local authorities and the medical officers of health as agents for groups of mothers in districts to enable them to obtain milk at a price which they can afford to pay. In the event of there being any jobbery or corruption it is proposed that the Local Government Board shall fix the price of the milk to be thus sold. It is stipulated that it is to be pure milk. This is very difficult to be found. The best definition is that contained in the Sale of Milk Regulations Act, 1901, and we propose that this definition shall be altered in future if there is a statutory definition better describing what pure milk is. I think the reasons for the Bill are best explained by reading an extract from a pamphlet which was read before several Members of Parliament a little time back by a lady who is intimately acquainted with the poor and their needs, and whose name is a household word amongst the poorer classes amongst whom she labours. In talking of the budget of the poor she refers to milk and says:—
"Milk is an item apart; the same price—5d. a quart—is being charged in Lambeth as in Kensington, but even when 4d. a quart milk is far out of the reach of a poor family. Not one of our Lambeth children ever tasted milk. The anxious mothers spend from 3d. to 6d. a week on third quality separated tinned milk, that quality which bears round the tin in large red letters, printed by the manufacturer, 'This milk is not recommended as food for infants.' As soon as they are weaned this milk is all the Lambeth children get. Many of the women can nurse but for a comparatively short time: that is the result of their own poor feeding. Common sense teaches them that the man must be fed. He is the wage-earner: his strength has a market value: his strength must be kept up. Common humanity teaches them that little growing children need all the food they can get. The children, therefore, get as much as can be allowed after the husband is fed. A nursing or pregnant mother often lives on what is left when the children are fed. Her milk, therefore, is not always the elixir of life which it might be—which it should be under different circumstances. The idea that the mothers in the poorer classes feed their babies on potatoes and bread instead of at the breast out of sheer light-hearted wantonness and ignorance is a mistaken one. They feed them on these things because they often cannot nurse them, and those things are all that they have, or because when they do nurse them the children are miserably unsatisfied."
The Bill provides that the local authority, through their officer of health,
290
shall provide milk to certain mothers in their district belonging to the poorer classes, and the way we have defined poorer classes is mothers who come under the maternity benefit of the National Insurance Act as being the most readily and easily defined way of getting out of the difficulty, and the Local Government Board will fix the price at, which these mothers can obtain the milk. The time during which they can obtain it is a limited period of, say, three months after the birth of the child, and the quantity is limited also, so that the mother could obtain more than she might reasonably expect from this cheap service. Even now in the country districts, as I know from experience, it is extremely difficult for mothers to obtain milk. You would imagine that mothers surrounded by dairy farms would have no difficulty in obtaining milk for their offspring, but in many districts farmers send the whole of their milk for sale in the larger towns, and it is almost impossible to get milk at any price. If this Bill passes, the local medical officer could make arrangements with some dairy farmer and make it worth his while to keep back sufficient milk to be sold to these mothers. At present it is not worth while for the farmers to keep back the small quantities required for isolated and intermittent cases which in the ordinary way would be a very precarious means of disposal. If there is a slight loss on the purchase—and we do not believe that there will be any loss—it will be borne by the local authority, because we think that if the medical officer of health is able to get milk to supply to the mothers in the district, he will be able to do so at no loss at all to the community, but at an enormous advantage to the mothers. There is nothing pauperising or disfranchising in the Bill, for it in no way disqualifies anybody from the use of the franchise. I recommend this Bill to the House as a short, simple, practical, and inexpensive contribution to the great question of public health and the physical fitness of the nation. I believe the subject was sympathetically mentioned by the representative of the Local Government Board in connection with the Bill of last year.
Question put, and agreed to.
Bill ordered to be brought in by Mr. Douglas Hall, Lord Henry Cavendish-Bentinck, Mr. Charles Bathurst, Mr. Astor, Mr. Grant, and Mr. Joynson-Hicks. Presented accordingly, and read the first time; to be read a second time upon Monday, 18th May, and to be printed. [Bill 227.]

PROFIT-SHARING WITH EMPLOYÉS OF LOCAL AUTHORITIES.
Lord ROBERT CECIL: I beg to move, "That leave be given to introduce a Bill to enable local authorities to share with their employés profits made by such local authorities."
I have to apologise to the House for using this method of procedure, but I do so because I could not help hoping that, in view of the nature of the Bill, everybody will agree it is a Bill which ought to be brought in. It is a measure of a very small character indeed. The object of it is to enable local authorities to distribute a share of the profits that they make in any commercial undertaking among their employés who are engaged in the undertaking. I have long been an advocate of the principle of co-partnership, but I do not propose to argue that at the present moment. I personally think it is the only way, or, at all events, a hopeful way, out of our industrial difficulties. The difficulty of it from the political point of view is that it is not open to very much legislative assistance. In this particular case there is really something which the House can do to help if they are prepared to do it. At the present moment it appears to be illegal—the decision, I am bound to say, is one which is surprising to me—for a local authority to distribute a share of the profits it makes in a commercial undertaking among its employés. The case arose in this way: There is no doubt that the tramway undertaking at Belfast is carried on by the municipality, and the manager was very anxious to try the experiment of distributing 10 per cent. of the expected profits among those employed on the tramway. The plan was a great success, as I understand, and it was very much appreciated by the men employed. But the Government auditor has decided that that is an illegal way of disposing of the profits of the undertaking. I have no doubt that that is a perfectly right decision, and, while I do not question it, I say it is surprising. Perhaps the House will allow me to road a few sentences from a letter, dated 23rd February, 1914, from the general manager of the Belfast tramways, showing how the grievance was felt by the employés:—
"It is with great regret that I have to inform you that the Local Government Board auditor disallowed the payment of the profit bonus to the tramways staff, and surcharged the three members of the council who signed the cheque over £900 apiece. The staff took the matter up vigorously, and obtained the opinion of very eminent counsel in the Irish Bar, who held that
292
the payment was perfectly legitimate. They even went so far as to offer to take upon their own shoulders the surcharge made upon the three members of the council Their earnestness, and the value they attached to it, greatly impressed the Vice-President of the Local Government Board in Ireland, and there is reason to believe that he did his very best to arrange for the continuance of the bonus. The Government legal luminaries, however, were too strong for him and for my people, and 'grief' is the only word which can be properly used to express their feelings at the final smashing up of my scheme for their welfare, and which they were good enough to consider did them honour. I do not hesitate to say in conclusion that there are not a dozen men among them who did not regret the losing of what made them feel in honourable association and partnership with the municipality in their work, rather than the pounds, shillings and pence it represented. I may go further and say that I believe it would be difficult to get 100 citizens out of the 400,000 in Belfast to say that they were not sorry that the tram men lost their bonus."
That is really the case. I came across it merely as a co-partnership matter, and I ventured to put a question to the Chief Secretary, who gave a sympathetic answer, and, indeed, he went so far as to suggest that I should assist him to propose legislation on the subject. It seemed to me that the best way was to produce this Bill, which, I think, is a very simple one, merely to provide that, notwithstanding anything in a public or private Act, this kind of procedure shall be lawful if municipalities choose to undertake it. It is hardly necessary to mention that the employés were so much interested in it that they voluntarily wrote to me and thanked me for bringing the matter to the attention of the House. I have not asked any Member from Ireland on either side to put his name on the back of the Bill. I wish to present it to the House, although it arose out of the Belfast difficulty, as a general proposition which should be carried into effect by all municipalities alike. It is in no sense a party measure, and hon. Members on the other side of the House have been good enough to assist me by putting their names on the back of the Bill. I hope that this is a Bill which will succeed in reaching the Statute Book.
Question put, and agreed to.
Bill ordered to be brought in by Lord Robert Cecil, Mr. James Hope, Mr. Peto, Mr. Theodore Taylor, and Mr. Aneurin Williams. Presented accordingly, and read the first time; to be read a second time upon Thursday, 14th May, and to be printed. [Bill No. 228.]

PRIVATE BILLS.
Electric Lighting Provisional Order (No. 8, Kingstown) Bill [Lords]
Reported with Amendments [Provisional Order confirmed]; Report to lie upon the Table, and to be printed.
Bill, as amended, to be considered Tomorrow.
Alliance and Dublin Consumers Gas (Electric Supply) Bill.
Reported, with Amendments [Title amended]; Report to lie upon the Table, and to be printed.
Mansfield Railway Bill [Lords],
Read the first time; and referred to the Examiners of Petitions for Private Bills.

MESSAGE FROM THE LORDS.
That they have agreed to,—
Chelsea Borough Council (Superannuation and Pensions) Bill, with an Amendment.
That they have passed a Bill, intituled, "An Act to confer further powers upon the Mansfield Railway Company with reference to the construction of works and the acquisition of lands; and for other purposes." [Mansfield Railway Bill [Lords.]

ORDERS OF THE DAY.
  WAYS AND MEANS.

    BUDGET RESOLUTIONS.—TEA DUTY.
    Considered in Committee.—[Progress, 4th May.]
    [Mr. WHITLEY in the Chair.]

    TEA.
    Motion made, and Question proposed, "That the Customs Duty charged on tea until the first day of July, nineteen hundred and fourteen, shall be charged as from that date until the first day of July, nineteen hundred and fifteen, that is to say:—
    Tea, the pound … … five pence; and it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."—[Mr. Lloyd George.]
    Mr. AUSTEN CHAMBERLAIN: I understand that we have your permission to make use of this Resolution to continue the general discussion of the Budget Statement of the Chancellor of the Exchequer which was made a couple of days ago. That statement occupied a great deal of time and covered an immense area of ground, yet it left gaps in our information which are only partially filled by the White
    294
    Paper which the right hon. Gentleman has circulated, and, indeed, it opened up vistas which it will take this House a long time to travel down. I shall not attempt to follow the Chancellor in detail in all the many subjects which he raised. If I was to do anything of the kind my speech would be as long as his, and I am not sure that in the present stage of the information I should leave the country much wiser than I found it. But there are some observations which even at this early stage, and with the imperfect information which we at present have, that I would like to make. The Chancellor dealt very briefly with the results of last year. He congratulated himself, as he was entitled to do, on the realisation of Estimates the accuracy of which had been disputed by his critics a year ago. I was one of those who thought that the basis on which he told us he had framed his Budget was over-sanguine. I picked out one particular item last year as being an underestimate—that was Stamps—and apparently in that regard I was more fortunate in my guess than the Chancellor of the Exchequer. But the Chancellor of the Exchequer has had his Estimates justified, and more than justified, by a year of quite extraordinary prosperity from the Treasury point of view. He has now to budget for another year, which he tells us he cannot expect to be as prosperous as last year, but which he regards as likely to be a good normal year. Upon that assumption, and, indeed, upon any assumption, I cannot help thinking that the right hon. Gentleman has underestimated his income, and I would add that I am really at a loss to comprehend the Estimates which he has submitted to the House, cither for the current year or future years, as being the result to be expected from the alteration in Income Tax which he makes in reference to income invested abroad. These art minor matters, on which I do not wish to say more now. I rather want to clear away one or two subjects of this kind before entering on a general examination.
    One other minor matter of the kind relates to the finance of the year. Towards the very close of last year we had submitted to us very large Naval Supplementary Estimates of, I think, £3,000,000; yet, if I understand what occurred rightly, the Admiralty underspent £1,500,000. If I am wrong I should like to be corrected. If I am right I should like some explanation of how it comes that so late in the year the Admiralty was so far out in its calculation. There is only one other point I

    295
    propose to mention in regard to the finances of last year. The Chancellor once again reported with pride to the House the total yield of the new taxes which he imposed by the Budget of 1909–10. They have yielded in the year which has closed a sum of rather over £27,000,000. But, looking back on all that has happened, is the Chancellor wholly satisfied with his financial experiments of that date, and does he think that they have borne out his calculations? I am not now referring to the error which he himself admitted when he said that, owing to the failure of his expectation that the Navy Estimates would be reduced, and owing to growing demands, the taxes, as a whole, were not sufficient to finance the country without resort to new taxation. I am speaking rather of particular taxes. A very large part, the greater part, of the battle of these years was waged around the Land Taxes. They had, as I ventured to say before, other than fiscal purposes, and perhaps their other purposes were more important in the eyes of the Chancellor of the Exchequer than their fiscal purposes. I think I said on a previous occasion that in that great Budget the Chancellor of the Exchequer proposed certain taxes to get revenue and certain taxes to get votes; and that the taxes which got votes did not get revenue, and the taxes which got revenue did not get votes.
    Let us look at the vote-catching taxes, and see how much they contributed to the £27,000,000 produced last year by the total changes made by the Budget of 1909–10. The total sum as we know from the Chancellor of the Exchequer's statement was £715,000, but included in that total sum is the amount yielded by the Mineral Rights Duty. That is not a Land Duty, nor is it comparable in any way with the other Land Duties. Indeed, it is based upon opposite principles; and the Committee will remember that the original Mineral Eights Duty was based upon the same principle as the Land Duty, as for instance the Undeveloped Land Duty in particular. It was proposed to tax minerals which were not got in order to induce people to get them. That we were never allowed to discuss, because before we came to the proposal the Chancellor of the Exchequer strangled his own bantling and substituted the new Mineral Tax for it. The new Mineral Tax is nothing more or less than a new imposition of Income Tax upon mineral rents. Therefore I put that on one side. That is really
    296
    a development of Income Tax which is not a new Land Duty. The total yield of the other Land Duties is £386,000. By the courtesy of the Chancellor I have the figures. The Increment Value Duty brought in £31,000. It has not helped the Chancellor of the Exchequer to pay for many things. Undeveloped Land Duty brought in £275,000. That is a tax which, from the first, as soon as it was got into operation, the Chancellor expected to produce its full yield. I do not know whether he has seen any reason to change his mind on that subject. I see none. As soon as it was brought into effective operation it was to produce its full yield. I presume that it is in active operation now, and therefore that it is not likely to produce more than the amount gathered last year; but it is likely to produce less, because in the amount collected last year there is a great part of the arrears of the previous years. Lastly, there is the Reversion Duty, which, again, is not to be expected to develop to any great extent, for there the basis of the tax was dated back, and not, as in the case of the Increment Duty, dated from the time of the Budget, and that precious tax produced £80,000. I am sorry the Prime Minister is not here, but I should like the Chancellor of the Exchequer to draw the Prime Minister's attention to a speech he delivered in answer to my right hon. Friend the Member for the City of London on the 16th August, 1909, and reported in the OFFICIAL DEBATES. Volume IX., column 318. The Prime Minister was discussing the value of the Undeveloped Land Duty—the site value of undeveloped land. He said:—
    "I now come to the final charge against this tax. The right hon. Gentleman, having made it before, repeated it this evening. He said that this was not a fiscal proposal in any real sense at all on the ground that the yield of the tax would be less, or certainly would not exceed, probably, this year, the actual cost of valuation. I do not assent to the right hon. Gentleman's proposition. I defend this tax and all the the taxes contained in this Finance Bill as fiscal instruments, and if anyone can demonstrate to me that they are not, I shall agree they ought to he excised from the Bill. I shall agree that they should be excised if anyone can show that they will not be useful, profitable, and fruit-bearing for fiscal purposes."
    I would like the Chancellor of the Exchequer to remind the Prime Minister of that speech, and ask him to compare the results with his anticipations. We shall have spent about £3,000,000 on this valuation. We have not begun to cover the cost of the valuation itself, let alone to pay for the "Dreadnoughts" which the right hon. Gentleman announced he was going to finance out of these taxes. But

    297
    —and this is an important point—the charge on the revenues of the country for this valuation is but a small portion of the charge to the country itself. The amount of expenditure in which individual taxpayers, whether liable to the taxation or not, have been involved under the intricacies and complications of the Budget, the amount of litigation to which it has given rise, and which is still pending, the uncertainty which still prevails as to the whole basis of their assessment and collection, do, I think, mark those taxes out as something wholly unlike any tax we have ever placed on the Statute Book; and if the Chancellor of the Exchequer thinks they mark them out to his greater credit as Minister of Finance, I can only say that the standards of what are successful taxes are very different from those which I should apply. I turn for a moment only to the consideration of the Budget as a whole. It marks a stage—as when you turn a century you mark a stage—in our financial procedure. Within a very brief space of time we have created, and are continuing to create, standards of national expenditure which would not merely have filled with horror Gentlemen who were in the House when many of us entered it, and continued with us for years afterwards, but would have been treated by them as absolutely inconceivable.
    I confess that this Budget, with its yield on present taxes of £200,000,000, with a deficit on present taxation of £10,000,000 this year, £16,000,000 next year, and perhaps more in the years to come—this Budget, which is to raise £210,000,000, fills me with serious misgiving, not so much as to the course we are travelling, but as to the rate at which we are travelling. I cannot see that anyone now asks the House of Commons or the country whether they can afford anything that they want. In private life we have to do it, whatever our incomes, unless they be beyond the dreams of avarice. There are things which we should like, and for which we think we should be better, but which we have to admit to ourselves that we cannot afford; and amongst the things, I do not say to most of us of prime necessity, but things in the rank of desirable, we have to choose those which we can afford and forego those which are in excess of our means. It used to be the business of the Treasury to watch over the national expenditure in the same sense, and, without necessarily disputing the desirability, on general or on particular grounds, of the expenditure asked for by different
    298
    Departments, to put together the totals of all those fresh demands, and then, as representing the taxpayers, to say, "We cannot afford to carry out the whole of this expenditure; we must choose amongst it according to our means, and part of what otherwise would be desirable must be postponed until those means have increased."
    The CHANCELLOR of the EXCHEQUER (Mr. Lloyd George): Hear, hear.
    4.0 P.M.
    Mr. CHAMBERLAIN: The Chancellor cheers. He knows that is very necessary. But, alas, under his dispensation, the Treasury appears wholly to have abandoned that view. It is no longer a Department of check and control; it is the greatest, the most extravagant of all the spending Departments. In the old days, under greater men than any of us now living, the Treasury left to other Departments the initiation, definition, and conduct of legislation involving great expenditure. The Chancellor of the Exchequer used to confine himself to a statement that for this or that purpose, for education, for health, or whatever it might be, he found it necessary to lay aside a certain sum, but the policy would be the policy of the Department immediately concerned. That Department would be left to justify it, and the Chancellor of the Exchequer only made himself responsible for granting to that Department, after it had presented its ease to him, such sum as he thought the country could afford. I do not see that that procedure is followed now. Nowadays the Chancellor of the Exchequer teaches us to look to him, and all his Friends in the House and outside of it encourage us to look to him, as the initiator of all social reform, and the result is that the financial check which ought to be brought to bear on those reforms is not brought to bear on them, and the Treasury becomes insistent on expenditure instead of exercising any control over expenditure. We are accordingly moving at a rate which, quite apart from one of the objects on which the money is spent are good or are bad, certainly means trouble whenever we come upon less prosperous years, and may, if those loss prosperous years be years of any serious difficulty or complication, mean something more than trouble, grave serious injury to the State, and loss of credit and loss of elasticity in its financial concerns, which may cause us deeply to regret that we can no longer

    299
    echo the boast of our predecessors, that one of our greatest resources for any international struggle that we should be involved upon is the reserve of credit which our financial system gives us. Under those circumstances, and because I see already I shall exceed the time I allotted myself, I do no more than repeat in a sentence my regret that the Chancellor should have meddled with the Sinking Fund. Far better, in my opinion, to have taken a million off the new Grants somewhere, or to have raised a million more by taxation, than at such a time, and under such circumstances, to tamper again with the Sinking Fund. We have had within the last day or two the usual Return about the National Debt which gives a statement of the dead-weight debt, and of the amount of debt provision made each year for its repayment. In the last year for which we were responsible, 1905–6, the debt provision was eight and three-quarter million. In the next three years, and I am giving very round figures, it was nine and a half millions, eleven millions, and ten millions, respectively.
    Since that time it has never been as high as the figure at which we left it when we were still suffering the after effect of a great war, and when we had no such prosperity to assist us as that of which the Chancellor of the Exchequer has year after year been able to boast. It is quite true, and the Chancellor of the Exchequer is always taking credit for it, that the actual reduction of debt has been higher than those figures, but that is due to the accident of the years through which we have passed being more prosperous than he has dared to hope, and that is due to the working of the Old Sinking Fund, and not to the working of the New Sinking Fund, which is the specific provision which the Government makes. This New Sinking Fund, the sum they deliberately set apart in their Estimates for reduction of deadweight debt—that is the measure of the importance they attach to the reduction of debt, and the measure of the sacrifice which they willingly incur for the purpose. And in all these prosperous years, except the first three, and for two of which the present Chancellor was not responsible, they have never made a similar effort to that which we made in the last year for which we were responsible under circumstances of great difficulty, when, without launching out on any new projects of expenditure, we were obliged to raise taxation to meet the ordinary liabilities of the
    300
    country. The Chancellor of the Exchequer, even after raiding the Sinking Fund, has to largely increase taxation. What he has done is, I think, very much what everyone expected him to do. I never supposed that under present circumstances, both in legislation and in finance, that the Chancellor of the Exchequer would think of removing one of the food duties at the present time.
    But if he had ever thought about it, I think it was made impossible by the speech which the Prime Minister delivered on either the Tea or the Sugar Duty last year, when he pointed out how much and how large a proportion of our new expenditure was incurred for the benefit of the poorest classes, and how the rest of our expenditure was for the benefit equally of all classes, and how large was the proportion of that national expenditure which now fell on the shoulders of the more well-to-do, and, he stated a principle with which I, for one, heartily concur, that under those circumstances and under the conditions of the distribution of voting power which we now have and must always have, it would not be merely unsound, but reckless—and I am using my own words and do not profess to quote his—and immoral to absolve those from whom so large a part of the expenditure is specifically undertaken, and who are interested in the whole, from the duty of contributing any part whatever to that expenditure. The Chancellor of the Exchequer raises the Income Tax. He raises the Super-tax, which is but another form of Income Tax, and he raises the Death Duties generally. I think I speak the mind of all my Friends when I say that towards meeting this huge new expenditure the rich must contribute a much larger share than the poor. I think I speak the mind of all my Friends when I say that it is our desire that the contribution which a man makes to the State should be in the main proportioned to his means and to his abilities to meet the burden cast upon him. But you must take into account also the distribution of that part of the expenditure which goes to benefit portions of the community. I admit that it is not possible for anyone to lay down an exact principle by which you shall decide accurately when the burdens on a particular class of income become intolerable and oppressive, and to say that people falling within certain Income Tax limits are taxed beyond their means and out of proportion to others. But I do think that we are travelling perilously near that point when in a Budget of this

    301
    kind, and with demands for such an enormous increase of revenue so largely for social purposes, we take our contributions wholly from the direct taxes which exact no contribution from the less well-to-do amongst us.
    It is not easy and I think it is not possible to lay down general principles of this sort, but we are accustomed to hear in this House doctrines of taxation from the hon. Member for Blackburn (Mr. Snowden) and others which are no more shared on the benches opposite than they are on the benches behind me; and I think Members on the benches opposite may usefully ask themselves what it is in principle which distinguishes the course we are treading under the present Government from the course which the hon. Member for Blackburn advocates, and may try to decide at what point they will draw the line in this special taxation of classes and separate themselves from the Socialistic view of the hon. Member for Blackburn, that what you have to look at is not what you take from a man, but what he has over when you have taken from him all that you want. The result of using the particular taxes chosen by the Chancellor of the Exchequer, and them only, is that they are now fixed at very high levels. That is a great disadvantage, not as regards specially all these taxes, but the new taxes, because when a tax is low the anomalies and imperfections are little felt, but when you raise it to a higher figure every injustice is enormously magnified. It is not a question of arithemetical proportion; it is an increase in geometrical proportion, if I may say so, of all the anomalies and imperfections of Income Tax, which were perhaps tolerable though not answerable in logic, and perhaps defensible in practice, when you had an Income Tax of 6d. or 8d., but really become a very serious burden when you come to 1s. 4d. They are not met by the subtle distinction between earned and unearned income. That is a distinction which I presume, and I do not doubt, has come to stay—once made it is not likely to be altered—but do not lot it be thought that as between individual taxpayers of the same wealth it is always a fair discrimination, and if you are to consider because you have discriminated between the two you may tax unearned income to any extent you please, I think you will be making worse hardships than any you may have remedied by the attempt to distinguish between the two.
    302
    Take the income unearned, and let it be remembered unearned income does not necessarily mean income which a man has not won by his own exertions. Every penny of it may have been earned, saved at the cost of some privation, and invested to provide for the old age of the man and his wife or to make provision for his family afterwards. Take the case of a man like that, or take the case of the widow of a man left with an income, it may be partly inherited, and it may be partly or wholly earned. Assume that they are just above the limit of abatement—that is to say, that they have £701 income amongst the man and his family or the widow and her family. Is not a tax of 1s. 4d. in the £ on a family income of anything from £700 to £1,000 a tremendous tax for times of peace, especially if you consider the cost of education in these days to people of that class of life? The State does not present them with free education for their children of the kind which they desire to have for them, and which we think that they ought to provide for them. I think that the Chancellor of the Exchequer, when he carries his tax so high, is inflicting great hardship on classes of that kind. In the same way I unfeignedly regret that he has altered again, and so quickly, the Death Duties, and I particularly regret that he has done so at the lower scale. I am inclined to think that, for the general welfare of the country and to preserve the best parts of its social system, it is a great misfortune that the Death Duties on moderate estates should be so large. What the effect over a period of years is going to be on the life of our country districts I will not undertake to forecast; but I am sure that, by the changes which the Government have made since they have been in power, they have done much to overthrow the old social system which, whatever its defects, has yet preserved relationships of kindliness, good feeling, friendship and helpfulness amongst different classes of the community in the rural districts, and that no social legislation that we have passed now or are likely to pass, whatever its merits, can replace, by its hard and fast systematic charity, the kindly help, the friendly good feeling, and the daily knowledge and assistance which the old system gave.
    Let me make one other observation about frequent alterations in the Death Duties. When Sir William Harcourt made his great change he treated the Death Duties, and properly so, as a graduated Income Tax, to be provided for by

    303
    insurance, which the owner of an estate would take up paying premiums year by year, so that at his death he might leave the estate as he found it. That becomes impossible, in the first place, if you make the charges too heavy, because the current revenue of the estate cannot afford the premium. It also becomes impossible if you frequently vary the basis of the charge. It is a very great hardship to a man who has made provision on a certain basis to find the Prime Minister, when Chancellor of the Exchequer, altering the basis; he covers himself again, and, as he is older, on more expensive terms. He then finds the present Chancellor of the Exchequer again disturbing the basis, and he makes further provision when he is older still. He now finds the Chancellor of the Exchequer once more upsetting the basis, forcing him to have recourse to fresh insurance if he is not to leave a decreased estate, and to insure against the new taxes at a yet higher rate, because he is older than when he insured before. I do not think then, although the Chancellor of the Exchequer's methods are simple, even brutally simple, that they are without great hardship. They are more dangerous to the morals of the House of Commons and the country, because, owing to the taxes which he has chosen, and the points in the scale at which they are affected, those who suffer hardship are only a small proportion of the population, and therefore exercise but a small influence on our legislation. That is so, and it must be so in these days. I venture to say that that imposes a solemn duty upon us to weigh well the effects of our actions, and to see that, in the effort to make things smooth for ourselves with our electors, we do not pile an unjust burden upon a few, because they are a few—upon those who have not great electoral influence, not because they have the means to bear the new burden with indifference, but just because they have not the votes to make themselves a commanding force when we go back to our constituencies.
    One word about the new taxes. The Chancellor of the Exchequer proposes to abolish the Settlement Estate Duty. I think that that raises an ethical question of some difficulty which the Committee ought seriously to consider. Let me say at once that I, for one, should take no exception to this change, if the Chancellor of the Exchequer proposed to apply it to all future settlements. I think his case is
    304
    a very strong one for saying—I will not say there is no reason, but that there is not sufficient reason given for the present law. I do not challenge the proposal, therefore, as regards future settlements; but what about past settlements? Many years ago perhaps you took money front the taxpayer as part of a contract with him. For years, having paid that money, he has assumed that, when the time came for the fulfilment of the contract, he would have the benefit of it. Now you say, "On the contrary, we are going to break the contract which we made. We deprive you of the benefit for which you have paid." And you think you can justify that to yourselves by simply refunding to him the money you have received. No man as between man and man would make a claim of that kind. No Court would substantiate such a claim. Are we to be less scrupulous in keeping our bargains as between the Stats and the individual? On so great a question of principle, I hardly like to recur to a minor matter in connection with the proposal, although I have it on my notes, and which I heard suggested by an hon. Friend behind me. I understand that the Chancellor of the Exchequer not only proposes to break the contract and to return the money that was paid, but that he proposes simply to return that money however long he has kept it, and had the enjoyment of it. The least you can do if you break a contract of this kind—which I hope you will not do without a great deal of further consideration—is to allow the taxpayer interest on the money he has paid, just as you charge him interest when you allow him time for payment.
    These are all general questions from which one could not well escape. But the real interest of the Budget is not what is in it, but what is to come out of it. We shall not know what the Budget really is or what is the meaning of it, I presume, until we have had four or five other Bills submitted to us. But the main purpose of the Budget, after filling the deficit in the existing national balance-sheet, is to deal with the question of local taxation. We are all of us agreed, and have been for a long time, that that is a question urgently needing to be dealt with. We are agreed that it is not merely a debt, but a debt long overdue, to the local authorities and the ratepayers. We are agreed also that it is a debt from personalty to reality.
    Mr. WEDGWOOD: No.
    Mr. CHAMBERLAIN: The hon. Member will forgive me if I do not verbally except him from every general statement that I make.
    Mr. WEDGWOODmade an observation which was inaudible in the Reporters' Gallery.
    Mr. CHAMBERLAIN: As between the Government and ourselves we are agreed that there was a debt from personalty to realty. In so far as his proposal conforms to these general admissions, the Chancellor of the Exchequer has our hearty concurrence and approval. But he used very ominous language about the payment of this long overdue debt. He said that any subsidy to the local authorities was to be dependent upon the passage during the present Session of the various other legislative projects which the Government had in contemplation—a Rating Bill, a Valuation Bill, an Education Bill, an Insurance Bill, a Housing Bill—I do not know whether the number is more or less than half a dozen. If you get the money as the Chancellor of the Exchequer proposes to get it, and if you admit as he admits that this is a debt long overdue, the money ought to go to the local authorities at once, and the House of Commons ought not to be put under duress to pass within the very limited time available half a dozen highly-complicated, very technical, and, if we may judge from the Chancellor of the Exchequer's previous performances, I venture to say very undigested measures. We know something of the perils of hasty legislation, and I submit that it is in the interests neither of the Treasury nor of this House nor of the country that we should be told that our constituents will be deprived of the money we are voting for them, unless we consent to swallow, regardless of time and of our power to examine them, all the legislative projects which the Chancellor of the Exchequer or his colleagues will produce to give effect to his proposals.
    I have spoken of the amount of agreement which we have enjoyed for a long time on the subject of rating. I am glad to think after the Chancellor of the Exchequer's speech that that agreement is now much larger than it has often appeared. The Chancellor of the Exchequer was anxious to explain that, although he had sometimes dissembled his love, he had really always been very fond of the Agricultural Rates Act; it was only the particular
    306
    method that he opposed. I thought that he opposed the principle on the ground that it was a dole to the landlord. I thought that the view of himself and of his party when in opposition had been that agricultural land was not entitled to the relief which it obtained. We now have it admitted, not merely that it has been entitled to that relief, but that it would not be fair to rate it on the same basis as other property, and that that kind of relief must be continued to it under any changes in the future. But the right hon. Gentleman proposes that as part of his new scheme there should be a new valuation for rating purposes. I do not think that he explained to the House why. At any rate, I am unable to find in his speech any sufficient reason for that proposal. The new valuation is not required for any of the Grants which the right hon. Gentleman adumbrated, except the Education Grant, and by a very slight modification of our present system and the Education Grants you could fairly distribute the new Education Grant without any such new valuation as proposed. In spite of that he requires a new valuation. He tells us that for a large part of it the work has already been done, and the results in the offices of the Land Valuation Department, that he has got for it already gathered together an admirable staff; and that his new need will be easily adjusted to the valuation already made by that staff. I venture, profoundly, to differ in regard to those statements. He proposes to supersede all present Local Assessment Committees. In a sentence he said that though they were superseded local influence would not necessarily be eliminated. We shall be interested to see what amount of local influence is left. The Assessment Committees are superseded ! They have done their work very well. [HON. MEMBERS: "No!"] As a whole they have done their work very well. If a taxpayer is aggrieved as against ether taxpayers he has his right of appeal and can exercise it. I say that whether you think of the local authorities or of the individual taxpayer, all of them would sooner trust the judgment and knowledge of the Local Assessment Committees than be placed under the thumb of a centralised Government Department which will not have the local knowledge, which will not be accessible as the Local Assessment Committees are, and which will be costly out of all proportion to the Local Assessment Committee as at present constituted.

    307
    I have had a calculation supplied to me to which I invite the attention of the Committee. The Valuation Department, I am told, at the present time costs six shillings per cent. per annum on the rateable value of the country. A London borough, which was selected by my informant for comparison, manages its valuation at the rate of two shillings per cent. once in five years, with practically no charges in the interval. That is to say, your centralised scheme costs six shillings per cent. per annum against, say, sixpence per cent. per annum for the decentralised scheme of the London borough. But what about the valuation which the Chancellor of the Exchequer proposes to have, and what about the staff? I do not want to speak harshly of the staff of any Government Department, but I do not think that in any competent quarter it will be held that the staff which the Chancellor of the Exchequer has gathered together is competent for the valuation of agricultural land for annual rating purposes. I am quite sure that the valuation which they have made is of no use for their new purpose. The Chancellor of the Exchequer appears to think that by some simple arithmetical rule of thumb calculation carried out by the Department in their offices, they can convert the capital values they have got into an annual value for rating purposes—the capital value of 30th April, 1009. What rule of thumb is there between that and the annual value in 1915? Then take all special properties, mines, quarries, and properties of that kind. What relation has the capital value to the annual rateable value? They are wholly distinct, and have got to be discovered by examination of each case on the spot. They cannot be decided by any general rules laid down in central offices. To discover the annual rateable value of agricultural land you must have a field-to-field valuation. No such valuation has been undertaken or attempted by the valuers who have been at work. Those same valuers have never had to make a valuation of any of the statutory companies, and all those statutory companies must be valued for the purposes of rating.
    In the first place, any attempt to centralise your valuation will be infinitely more costly than your existing system, and in the second place, that it will cause, and rightly cause, great dissatisfaction and mistrust in the localities, and will be resented alike by your municipal, county,
    308
    and other authorities and by the individual taxpayers concerned. I add that it is wholly unnecessary for the purpose of the distribution of the taxation which you propose to make amongst these local authorities, and it is only required, if I may for once guess at motives in order to find a justification for taxes which have brought in no revenue and a Valuation Department which has spent a good deal of money without being hitherto of any use. I must omit some of the points on which I proposed to speak, but I must, in passing, say that I think the Chancellor of the Exchequer owes the Committee a sentence, at least, of explanation, if not more, of his reasons for flinging on one side the Report of the Majority of the Committee on Local Taxation—and the side which he himself adopted! The Committee reported not merely against taking land values as the sole basis of rating, but against any scheme of which the rating of site values should be any part. Their reasons are set forth with great power and ability in the Report which they have published, and not only their reasons, but some of the difficult problems to which the rating of site values in that connection gives rise. The Chancellor of the Exchequer gives us no reason for disregarding their recommendations. He did not dispute a single one of their conclusions. He gave us no information as to how their difficulties are to be got over. I am not going to read to the House—if I had not taken so long over other parts of my speech I had intended to do so—their general objections to this proposal. But I want to read to the Committee a paragraph or the part of a paragraph of the Report—paragraph 262. Having come to the conclusion that on general grounds they are unable to recommend the substitution of a system of site value rating for the present rating system, the Committee go on:—
    "It is unnecessary for us to refer at length to more detailed questions connected with the proposal. The witnesses who gave evidence before us had not in any degree elaborated their scheme. For example, we were unable to ascertain exactly how the land value was to be calculated, not from whom the rates were in fact to be collected, not what was to be done with existing contracts. Nor was there any indication given of the way in which the ownership of the site value was to be divided between the different interests, which in many cases must be deemed to have a share in it."
    Those are all very important matters, but no word have we had from the Chancellor in regard to any one of them. The right hon. Gentleman cheers me. I gather he appreciates the fact that, whilst professing to give the House an indication of what he is going to do, he realises perfectly well

    309
    that the House must be and cannot help feeling completely in the dark as to the nature, the equity, and machinery of those proposals—after the only statement which he has so far vouchsafed. I do say that we ought to have all this information before us before we are called upon to vote money as part of a scheme which, when it is disclosed to the Committee, the Committee may be unwilling to accept, and which may be as unpopular on the other side of the House as on this side of the House—for what I know it may be more unpopular in some quarters of the House. That information we ought to have before we are asked to vote the money. We ought immediately to have information on such subjects, for instance, as the treatment of existing contracts, and on questions which can be described as questions not of machinery, but of principle. On these there is no excuse for any delay, and I ask the Government to give us that information at the earliest possible moment.
    We want also—and this is very important—much more information than we have already got, either in the Chancellor's speech or in the White Paper which he has laid, as to the effect of his schemes upon the local rates. I spent, as I have no doubt many other hon. Members did, many laborious hours yesterday trying to find out where the local authorities would be if the Chancellor's proposals were carried out exactly as he has made them. I have come to the conclusion that there is no Member of the House of Commons, and no local authority, that can by any possible calculation within their power say how they will stand if the proposals adumbrated by the Chancellor of the Exchequer are carried out without alteration. It is quite evident that the Chancellor of the Exchequer has a great number of calculations before him. It is quite evident the Committee had other calculations than those which they have published in the table, on page 30, I think, of their Report. But that table—and the Chancellor's speech—is enough to show that some authorities are going to lose. I think there is reason to suppose that a good many authorities may lose, and very grave reasons to doubt whether any purely rural areas are really going to get relief at all. Take the Chancellor's proposals in regard to roads alone. I am not at all certain, if you consider the purely rural areas—by which I mean those which are agricultural—excluding from the districts known technically as
    310
    rural district council areas the urban communities within them—there is good reason to doubt whether these purely agricultural parts will not be worse off under the proposals of the right hon. Gentleman than they are now. But we ought to have, as far as the Chancellor of the Exchequer can give it, for the whole of his Grants, a statement as to how they will affect all the types of authorities within the country. He takes out one here and there, and I have no doubt he takes care it will show up pretty well. If I may judge from what I am able to see of local opinion down in Birmingham, we are not quite as sanguine as to the relief to that city as the Chancellor of the Exchequer himself appears to have been, nor am I myself quite certain—I am now talking of urban areas—as to what relief the Chancellor of the Exchequer professes to give. He spoke of his Grant being equal to a relief of 9d. in the £. Ninepence is a rather ominous figure. The last time it was 9d. for 4d.—this time it is 9d. for nothing. If any ratepayer, rural or urban, thinks his rates are going to came down by 9d. in the £ of which the Chancellor of the Exchequer speaks, I think he is an extremely sanguine individual.
    The Chancellor of the Exchequer divides his Grants into Grants for new services, and Grants in relief of existing expenditure, but I think his division is very imperfect, for anyone who studies his speech will see that the authorities which count upon getting large relief for what they are now doing are counting without their host. The Chancellor of the Exchequer is putting new burdens on all round. I saw the Budget described in a paper which supports the right hon. Gentleman as "a speeding-up Budget," but you do not speed up for nothing. No doubt local authorities will get larger sums, but they will only get them on condition of spending more, and it will be observed that at every stage in these new relations between the central and the local authorities, the local authorities are to count for less, and the central Government Department is to count for more. A central Government Department never works for economy. Take the Education Department. Do you think if we had less centralisation we might not have had, for instance, in our rural district, a system of education long before this, much better suited to the rural districts and much more economical. We hear a great deal about necessitous school areas. I remember having had to consider the case of West Ham when I was

    311
    in office as Chancellor of the Exchequer, and I found the Education Department refusing to sanction a proposal by the West Ham education authorities as being incompatible with their rules or standard of accommodation for children, which prevailed in every great public school in the country, and which prevails in some of them now, and which, I should think, prevailed in all the old public schools of the country when I was at school. A central authority drives to expenditure, and this Budget is intended to lessen the discretion of the local authorities, and to put more power into the hands of the Government Inspectors and Presidents of Boards.
    The Budget marks in this respect, as in other respects, an absolute abandonment of the old Liberal tradition. I have not been in this House nearly as long as many Members, but when I came into the House, the extension of local authorities and local responsibility was the great panacea of all Liberals. I remember the hon. Member for Salford (Sir W. Byles) and my right hon. Friend the Member for West Birmingham (Mr. J. Chamberlain), already divided on the Irish question, co-operating in view of their common Radical instincts on the Parish Councils Bill on these lines. All the trend of modern Radical legislation is in the direction of taking away power from the municipalities and local bodies, and concentrating it in the hands of central bodies, and this Budget will be an enormous and most powerful instrument for taking local government out of the hands of local authorities and concentrating it in Government inspectors and presidents of boards. I think that is so. Well, Sir, this Budget—and I am coming to the end of my observations—is also an abandonment of the old Liberal policy in matters of finance. No Liberal candidate can in future go upon a platform and talk of retrenchment. I recall a speech of the Prime Minister and speeches of many of his colleagues made in the General Election of 1906, denouncing not the particular objects to which the Unionist party had devoted money, but their general extravagance. I remember the Prime Minister announcing seriatim that every tax he mentioned was too high. All pretence of retrenchment, all careful economy has been abandoned by the Liberal party. They, like most of us, enjoy spending. I remember a witty lady who observed she was never so happy as when she was saving a penny, except when
    312
    she was spending £5. The House does not care much about saving a penny, but it loves to expend millions, and the Chancellor of the Exchequer encourages it to do so. He has been fortunate.
    Sir, I concluded my speech upon the introduction of his Budget last year with a prophecy which has been fulfilled. He then had spoken of the yield of his new taxes and the power they had given him of financing the growing expenditure of the country. I told him that that would be the last year of which that would be true. I was right. He has admitted that even the new taxation he is raising now will not enable him to finance next year's expenditure. We cannot look forward to a continuation of the unexampled prosperity which we have had. What are we going to do when the bad years come? What provision have we made to meet that? We have spent every penny as it came in. We have raised nearly all our taxes to a high figure. The Prime Minister indicated that it might soon be necessary to graduate the Income Tax downward, I suppose to a class which do not now pay, while his only reserve for war was to raise the food taxes—I think not a very happy reserve for a great war. Opinions differ amongst us as to the part which food taxes should or might play in our system of taxation, but is there anyone who thinks that a great war, which was a naval war as well as a land war, would be the happy moment to choose for an increase of the food taxes—just that moment when our food supplies would be threatened, and the quantity of them might be reduced, and the cost of them would certainly be raised?
    We are raising all our taxes to what would have been thought a war figure in times of peace. We raise them to this figure in times of great prosperity. We spend every penny year by year which these taxes bring in. We have mortgaged the whole future increases that we could reasonably calculate to come from these taxes. We know that the social reforms that we have passed will grow in their cost without any legislative interference, if no amendments or changes were made, and we know that as they work and their imperfections become visible, their anomalies become more painful, and we know that other Chancellors of the Exchequer might have to patch his handiwork and find fresh money to make these schemes work. I beg the House to think of these things. We are living too fast, we are moving too rapidly, and unless Members

    313
    of the House in all parts will make some serious effort to check the weigh upon the ship, we shall run upon the rocks before we know where we are.
    The CHAIRMAN of WAYS and MEANS: I think it may be for the convenience of hon. Members if I say at this stage that I foresee a possible danger in the discussion in our Committee of Ways and Means. It arises no doubt largely from the speech of the right hon. Gentleman the Chancellor of the Exchequer on Monday last, and that danger is, that we should introduce into the Committee of Ways and Means matters which more pertain either to Committee of Supply or to stages on Bills which have been hinted at. I do not propose to take exception to anything the right hon. Gentleman has said, but only to remind the Committee that in Ways and Means we are considering the ways of raising money, and not how that money will be dealt with after it is raised; but of course, to the extent to which the Chancellor of the Exchequer opened these matters in his speech, I cannot prevent hon. Members following him, but they must not attempt to go further into details.
    5.0 P.M.
    The FINANCIAL SECRETARY to the TREASURY (Mr. Montagu): The right hon. Gentleman who has just spoken will not misunderstand the position if the right hon. Gentleman the Chancellor of the Exchequer does not rise to reply to him at once. He asked me to intervene in order that he may answer further questions that may be raised in the course of the Debate when he replies later on. The right hon. Gentleman began with a dismal description of the Treasury and the condition in which he finds it now as compared with older times. I have very little experience of that office, but I can assure the right hon. Gentleman that we are endeavouring to administer that office on the same lines, more or less, as he administered it himself, and the reason why this new expenditure is recommended is because we believe that the country can fully afford it, and it is in response to demands comparable to those which he referred to from the Board of Education and from the Local Government Board. I do not think the right hon. Gentleman paid in his speech sufficient attention to the fundamental fact of this Budget, that the majority of the new taxes are not intended to increase the burden of the community as a whole, but go to reduce existing burdens, and ought not, therefore, to be compared
    314
    with the whole for new expenditure. The right hon. Gentleman developed yesterday, and proceeded to develop to-day, an argument against the conduct of the Government in determining to reduce the charge for the repayment of debt and announcing that as part of their financial policy. He first said that we ought not to include in the reduction of debt achieved in the last eight years those amounts which had been paid on the Votes for Army and Navy works respectively. The right hon. Gentleman reminded us that that had been achieved by setting up Sinking Funds when the expenses were incurred by the right hon. Gentleman opposite and his Friends. I think we are entitled to include those amounts if we remind the Committee of the fact that whereas they provided the Sinking Fund and incurred new debts, we have put an end to that kind of expenditure since this Government assumed office. There is one other remarkable argument which is as great an achievement as anything I have heard in this House in the difficult task of comparing two things which were wholly and irremediably unlike.
    The right hon. Gentleman said that by reducing the debt by £100,000,000 you have saved the taxpayer, roughly, something like £3,000,000 in interest on that debt, but you have to set against that the £21,000,000 you have incurred in respect of old age pensions and insurance. As I understand it, the dead-weight debt derives its name from the fact that the taxpayer, who is called upon to pay the interest, derives no present measurable benefit from the debt at all, and yet he cannot honourably escape, and his successors cannot escape, from the task of providing that interest as long as the debt remains unpaid, and as long as it remains a debt of this country; whereas, on the other hand, the expenditure incurred under the Insurance Act and for old age pensions is money which the taxpayer is asked to pay in order to foot the Bill for services rendered from day to day and from year to year. It is, in fact. a method of repayment of future debt, for whereas we inherited a deadweight debt from which we had no advantage, others who come after us by this Budget, on account of the great social reforms initiated by it, will have the advantage of greater prosperity in the nation through being relieved of many of the charges which now fall upon the taxpayer and the ratepayer. To suggest that you should compare the

    315
    burden of the taxpayer, in respect of something which can only continue as long as it is useful, with something which burdens him for ever is, I venture to say, with all respect to the right hon. Gentleman, merely grotesque.
    If the Committee will forgive me for dealing in more detail in this question with the reduction of debt, I should like to point out that there are three main heads under which we ought to consider the adequacy of the provision we have made. (1) How does the burden of debt remaining for future generations compare with the burden shouldered by the taxpayers of to-day or yesterday? (2) How do the sacrifices made by the present generation for the purpose of reducing debt compare with those made by earlier generations? (3) How far, having regard to expediency and equity, does the provision for debt reduction satisfy the creditors of the State, that is, the holders of Consols? The debt to-day is lighter per head of the population than it has ever been since the Napoleonic wars. In 1887, the total burden per head was £20.11, in 1899, before the Boer war, it was £15.52, and to-day it is £15.37. So far, therefore, as this comparison goes, the taxpayers since the Boer war have succeeded, despite the new debt added by that war of £160,000,000, in bringing the debt per head down to a lower figure than that which faced the taxpayer before the Boer war broke out. Further, not only has the population increased, but the wealth of the country has increased as well, and whereas the dead-weight debt on the 31st of March. 1906, was 5.8 per cent. of the estimated capital wealth of the country, on the 31st March, this year, the dead-weight debt was 4.3 per cent. of the estimated capital wealth of the country. Despite the fact that a large proportion of the money spent was derived from the Old Sinking Fund, I do think we are entitled to take credit for the fact that within the last eight years the present generation has made unprecedented sacrifices for the reduction of the debt. If you take into account the amount left over from last year of something like £5,000,000 for the reduction of debt, we have reduced it by £104,000,000 sterling. If you reduce the charge which comes in course of payment for the interest on debt by something like £3,000,000 sterling, then it clearly follows that with a debt charge of £3,000,000 less you can go on devoting
    316
    the same amount of money as you did before to the reduction of debt. I ask the Committee to consider seriously, having regard to the sacrifices that we have made recently, and to the growth of the wealth of the country, whether it is right, when you are taking great sums of money from the taxpayers to improve the well-being of the community, to ask them to tax themselves with the unprecedented amount for the continued reduction of debt which has been going on for the last seven or eight years. I think it would have been right to-reduce the Sinking Fund, as is proposed to-day, even if there had been no suggestion of an increase of taxation. I would remind the right hon. Gentleman opposite of a Paper laid before this House on the 11th April, 1899, by Mr. Hanbury, in which he presents this view:—
    "The maximum amount of stock of which alone account can be taken in connection with the Striking Fund cannot exceed the amount in the hands of the public."
    The amount to be taken into account is the amount in the hands of the public. Out of the total dead-weight debt the Government held on the 31st March, 1913, £233,000,000 sterling, or 35 per cent., the corresponding percentages for 1899 and 1906 being 34 per cent. and 28 per cent., respectively.
    Mr. CHAMBERLAIN: What is the amount in the Post Office Savings Bank?
    Mr. MONTAGU: I have no figures on that point.
    Mr. CHAMBERLAIN: The more there is in the Post Office Savings Bank account, the more serious is the situation, as by taking it for the Post Office you transform the obligation from a liability for an annuity into a liability to pay the capital sum.
    Mr. MONTAGU: I am only showing that if you take the test which was laid down by Mr. Hanbury, even in regard to that there has been an improvement in the position in respect of the amount of stock held by the public. I should like to commend to the right hon. Gentleman a report which I have noticed in one of the morning papers, which is not usually particularly favourable to the Government, with regard to the effect on Consol holders of the announcement which the Chancellor of the Exchequer made the day before yesterday as to the reduction of £1,000,000 in the Sinking Fund. Here is the quotation:
    "Consols were depressed at first by the reduction of £1,000,000 of the New Sinking Fund. They fell to 74¾

    317
    for cash. Afterwards the market thought, after all, that £1,000,000 either way makes no great difference to the Consol market and Consols rose again to 7415/16"
    The fact of the matter is that when this money has been withdrawn from the Sinking Fund there still remains something like £6,500,000 for the reduction of debt, and having regard to the considerations that I have mentioned this is ample for that service. The next argument which the right hon. Gentleman addressed to the House was one concerning the new rates of Income Tax and the dangers which we were under of taking an undue proportion of taxation from those who were wealthy but who were few, because they did not loom largely in the constituencies. I do not think it is right to say that wealth is not adequately represented in this House. I wholly and entirely demur to the view that you can measure the influence of wealth upon politics by the actual number of votes recorded at the poll. Wealth has many other methods and weapons of political activity, and I do not think the wealthy are ever likely to suffer, because, politically, they are not adequately protected. I believe that the unequal distribution of wealth can only be defended if it can be proved that an adequate subscription is taken from those who have wealth—for the necessary requirements of the country. If one looks at the statistics of the growth of wealth and capital in this country on the one hand, and the growth of the size and amount of incomes that come under review for Income Tax purposes, there is not the slightest doubt, if this burden is spread properly and fairly over the community, that the community can easily afford to pay it. But this money is not taken from the wealthy alone, for it begins with the very lowest Income Tax payer. Roughly, on the basis of the rates in force last year, out of 1,250,000 Income Tax payers, 251,400 paid less than 1d. in the £; and on the proposed rates 214,000 will pay less than 1d. Going a little higher up the scale, 725,000, three-quarters of a million of taxpayers out of one and a quarter million, will pay less than 6d., as opposed to 747,000 if the old rate had continued.
    I do not think that enough attention, in considering Income Tax questions, is paid to the actual rate of Income Tax that is paid. People talk of a 1s. 2d. Income Tax and a 1s. 4d. Income Tax, when the actual rate is something far less, when the majority of people are paying less than half, and when therefore there is sufficient room for a further drain upon Income Tax
    318
    resources in times of national emergency. The House ought also to remember that the general run of Income Tax payer is just the very man who benefits mostly by a reduction in the rates, and therefore, when we are setting out to relieve a burden which a Royal Commission and a Departmental Committee together have agreed falls unjustly upon local taxes and ought to fall more substantially upon Imperial Taxes, the Income Tax payer is one of the first people to whom this House ought to apply. After all, there are many people in this country, and I believe in this House who would admit the rating of personalty—a local Income Tax. These new Income Taxes are local Income Taxes in that they are collected imperially and distributed locally for the relief of local burdens. I do think, and here I am expressing a personal opinion with all humility, that the idea that the Income-Tax should be kept low in order that in times of crises it should be the first place to which to resort for extra funds, is really not so axiomatic a proposition as people suggest. It is at the very moment of a national calamity and national emergency that you can go with the greatest certainty to the whole body of taxpayers, from the poorest to the richest, and call upon them to make a special contribution in aid of the necessities of their country.
    The right hon. Gentleman opposite said something about the taxes on capital, and the harm that had been done by the increases in the Death Duties for which this Government have been responsible. There is no evidence of the destruction of capital in the statistics which are available. The total Death Duties paid in the seven years 1906–7 to 1912–13 have amounted to £154,400,000. The capital value of this country in 1913, if we take Sir Robert Giffen's principles of calculation, is £15,000,000,000, and other recent writers have put it at £15,869,000,000. Therefore this sum of £154,000,000 is under 1 per cent. for the whole period, or about. 15 per cent. per annum, and when you consider the rate of interest that this money probably obtains it is absolutely certain that the capital of this country is growing far faster than the amount taken from it for taxation.
    Mr. HEWINS: May I ask the hon. Gentleman from where he got that figure of Sir Robert Giffen's?
    Mr. MONTAGU: I took a figure from the "Nineteenth Century Magazine" of March, 1912.
    Mr. HEWINS: It does not agree with the authoritative statement.
    Mr. MONTAGU: I do not think that the truth of my statement can possibly be refuted. The growth of the national wealth is infinitely faster than the growth of the taxation upon it. I would remind the House that when they are considering the taxation of wealth they ought to consider, too, the purposes for which the money is taken. When you distribute money taken from wealth to such persons as those who are in receipt of old age pensions and to persons who obtain thereby a wage to tide them over a time of sickness, you are helping to build up a capital which is of the utmost advantage, the greatest possible advantage, to the tradesmen and manufacturers of this country. The right hon. Gentleman has, I think, few other criticisms of the method of raising the revenue and of the Estimates of the year. He did say something about the Land Taxes. It was a renewed criticism of bygone Budgets. I do not think that he appreciates the fact, or if he appreciates it he did not say anything about it, that you ought not to set the whole cost of valuation against the yield of these particular taxes, for the valuation has been of inestimable value in increasing the yield from the Death Duties themselves. [HON. MEMBERS: "No."] Oh, yes, that is absolutely undeniable—[HON. MEMBERS: "Oh!"]—in obtaining a better valuation of the estates which are taxed under it. The right hon. Gentleman compared the cost of valuation under the Budget of 1909–10 with the cost of the quinquennial valuation in London, which is only concerned in keeping an old valuation up to date. He compared that with the cost of making a new valuation. Then he uttered a solemn warning about the dangers of central control in local government. He said in an earlier part of his speech that Members on all sides of the House were agreed that something in aid of the rates was long overdue, and that therefore, so far as that topic was concerned, there were features of welcome in this Budget. The reason it is always suggested that more assistance to rates should be given is that the services upon which this money is spent are described, I think, as national or semi-national purposes, such as main roads and criminal prosecutions. Does the right hon. Gentleman deny, if they are national or semi-national, and if the Imperial taxpayer is therefore called upon to foot a large part of the bill for
    320
    them, half the bill for them, that he ought to have a voice, and a substantial voice, in the control of those local authorities who expend his money upon them?
    The right hon. Gentleman began with a review of the Budget as a whole. I say that the Budget as a whole simply consists of this proposal—to take money, large sums of money, mainly to improve local or semi-national services administered by local authorities in order to relieve the local taxes. My right hon. Friend has done this partly because the injustice of taking local taxes for Imperial purposes is admitted on all sides, and partly and mainly because this House is dependent in its social reform activity upon the willing co-operation of those responsible for local government. Unless this House asks the taxpayers to take their share of the cost of legislation, which is responsible for the growing burdens on the ratepayers, it is impossible to get valuable and efficient service from those who carry out our Acts of Parliament. Our Budget is a way of relieving unjust taxation and improving local services. Local services are at the root of national health and prosperity. The figures of our revenue, the figures of our national wealth, are ample and abundant evidence that we can afford to devote the money necessary to alleviate and prevent the remediable distress which is a blot upon our national reputation, and I am perfectly certain that the people of this country are willing to join in the war against ill-health and avoidable poverty as a valuable investment for the taxpayers of this country, provided that this House assists them in placing the burdens, local and national and Imperial alike, upon the broadest and most vigorous shoulders.
    Sir ALEXANDER HENDERSON: It used to be more or less a principle that direct and indirect taxation should proceed on parallel lines. When the Chancellor of the Exchequer had to raise more money direct taxation upon property and indirect taxation upon commodities were raised together, and when the Chancellor of the Exchequer was going to give relief to the taxpayer both these sources of revenue would receive that relief. The right hon. Gentleman the present Chancellor of the Exchequer has not adopted this principle, and, although he has not decreased the indirect taxation, as some of his supporters anticipated, he has so largely increased direct taxation that the proportion of that direct taxation to total taxation is now upwards of 60 per cent.

    321
    No doubt he has done this with the best intentions, but I think that it will be comparatively easy to show that the methods he proposes to adopt will have a diametrically opposite effect. When duties are paid upon articles of necessity it is recognised by all classes that each individual is contributing his fair quota to the revenue in respect of his consumption, but when the necessity arises for raising fresh money and duties upon such articles of necessity are not increased, and the whole increase is placed upon the persons who pay direct taxes, the latter seek and obtain relief to some considerable extent from the burden that is thrust upon them by making higher charges for the money they supply for the handling of the commerce of the country. It has to be remembered that money is very fluid; it can be used one day for one industry in one country and the next day it can be taken from that industry and that country and used in another. Just as the merchant in commodities who sells his goods at a certain price, less a discount, reckons his profits upon the net sum that he receives, so the merchant in money or credit lends his resources at a rate of interest, calculating the taxes that he has to pay, and reckons his profits upon the net sum he receives. The higher the taxes, the higher necessarily are the charges. If the Chancellor of the Exchequer increases the Income and Super-taxes these charges are passed on by the money and credit merchants to the borrowers.
    Direct taxation may, for a short time, fall upon the shoulders of those who first receive the burden, but, except in the case of trust funds and annuities, the burden is, to a considerable extent, passed on. If the money or credit merchant, by whatever name you call him—banker, capitalist, broker, or what not—lends at home he charges a higher rate of interest on what he lends to the manufacturer, middleman or the tradesman. If he lends abroad, he also charges higher interest, which is recouped to the foreign borrower by the higher prices that foreign borrower charges for the commodities he sends to this country to defray his liabilities. Ultimately, a large portion of all the additional burdens falls on the consumer. The amount of money required to finance our Home and foreign commerce is enormous, and the power of the money or credit merchant in a commercial community like our own is very great. As I have said, he charges the manufacturer and the merchant more interest, and the manufacturer
    322
    and merchant charges the tradesman higher prices for the commodities that they supply or produce. The tradesman, who has to pay those higher prices, and also, in all probability, higher rent, increased taxation, increased rates, and frequently increased interest for the money he has to borrow to carry on his business, raises his prices to the consumer to meet the whole of those charges. The consumer, therefore, to-day does not find that 20s. goes as far as it did a little time since, and there is no doubt that, if the present Budget becomes law, 20s. will in the future produce still less.
    The Insurance Act recognises a new principle, because it makes the employer a tax collector. The exact amount that the employer can recover is defined in the Act. The Budget now proposed necessitates the Income Tax payer becoming a collector of revenue, but the amount of his recovery is not defined, and it is pretty certain that the consumer will not pay less than his full share. It is generally admitted that the smaller the quantity of anything purchased, the higher is the price paid, and hence it follows that the really poor bear more than their proportionate part of the higher prices current for the necessaries of life. The general impression among the working classes is, I believe, that the higher price that they have been obliged to pay of late for the necessaries of life is due to the increase in wholesale prices. This is not the case. A volume has recently been issued—a most interesting volume—by the Co-operative Wholesale Society, and this gives the wholesale prices of commodities over a number of years. One of the tables in that book shows the cost of an average weekly family order of 21½ lbs. The figure for 1905 is 67.56d. For 1912 the figure is 74.28d. The increase in wholesale prices between the two years is 6.72d. The Report of the Board of Trade inquiry gives the retail price of most of the commodities composing this family order. For 1905 the retail prices worked out at 72.25d., and for 1912 at 83.25d., an increase of 11d., showing very clearly that the additional burdens borne by merchant and tradesman were charged to the consumer. The difference between the wholesale price and the retail price in these two years is 4.28d. in respect of an expenditure of 83d., which is something over 5 per cent., so that the consumer not only has had to pay the additional price in respect of the increase in wholesale prices, but added to that has

    323
    been another 5 per cent., which is no doubt his part of the burden which is supposed to be borne by the direct taxpayer.
    This is proof that the consumer to-day is paying a full share of the taxation imposed to meet the expenditure upon social and other legislation arising out of the Budget of 1900, although he was not directly charged in connection therewith. The present proposals of the Chancellor of the Exchequer may be attractive to the class they are intended to influence, but it is to my mind unfair to let them think that they are going to benefit by a proportionate remission of indirect taxation, and that the corresponding burdens are to be shouldered on to another class. Reference has already been made, in the course of this afternoon, to the "ninepence for fourpence" argument. When the small consumer realises that he pays not only the fourpence, but an additional sum for everything that he consumes, he is not likely to be too grateful. My principal object in bringing these facts to the notice of the Committee is to prove that the system of collecting from a comparatively small class the large sum the Chancellor of the Exchequer requires is uneconomical, and in the long run entails upon the masses a heavier charge than would be the case if, in the first instance, the charges were more evenly distributed in the form of direct and indirect taxation. I have endeavoured to show that the burdens of direct taxation passed on to the consumer in the case of necessaries of life amount to upwards of 5 per cent. of the total expenditure, and in the case of luxuries I am sure a much higher figure might be quoted. It is difficult—indeed, it is almost impossible to compute the total expenditure of the country, but it must amount to a huge sum, and 5 per cent. thereon would give a figure that would prove that the present system of taxation is not economical from the consumer's point of view. The Budget we are now discussing penalises wealth, and therefore makes the acquisition of money a crime. It inflicts a hardship upon a class which is very ready to bear to the full its proper proportion of all reasonable burdens, but that class distinctly resents unfair treatment.
    Mr. CHIOZZA MONEY: The hon. Gentleman who has just sat down expressed an opinion that the Budgets of my right hon. Friend, following the Budget of 1909, have been responsible for the recent
    324
    rise in prices in this country, I think that rather an extraordinary expression of opinion. It seemed to suggest that the activities of my right hon. Friend have extended far beyond the shores of this country. But the recent rise in prices has been a world-wide phenomenon. It has affected commodities not only here but in all parts of the world, and the hon. Member's statement requires to be qualified, because prices have not risen quite so much, for example, in this country as they have in the United States and several other countries to which, I believe, even the activities of my right hon. Friend do not extend. We must, therefore, look a little further for the cause of these high prices. It would be out of place for me to name them here. This is not the time for a strictly economic discussion, but I may-say that the rise is, partly attributable to the increased gold production, and partly also to the variations—in the balance of supply and demand throughout the world. I really cannot help feeling that the hon. Gentleman, when speaking of the charges being placed on the consumer might have referred to the recent rise in railway rates which should be taken into account in that connection. It would be unfair for me to dwell upon that now, but I hope I may be permitted to congratulate him upon his recently renewed interest in Grimsby and upon his endeavour to give increased facilities to meet the wants of its trade.
    With these few observations I may be forgiven if I pass to the very interesting speech which we heard from the right hon. Gentleman the Member for East Worcestershire (Mr. Chamberlain). That speech ended, as it began, upon a pessimistic note, a note which was also struck by the hon. Gentleman who last spoke. The right hon. Gentleman spoke, if I remember correctly, in deprecation, not so much of the nature of our recent expenditure as of the rapidity with which that increase is proceeding. Upon that point I think it necessary to observe that this country has to keep its place in the world, and if we compare our expenditure with that of other nations, we are struck with the fact not that we are spending more money than they are, but that we are rather laggards in the race of expenditure. That is no excuse for the expenditure, which must be considered on its merits; but whether it be in connection with armaments or with those social reforms which I think we in this country have taken up much too late,

    325
    it is only too clear that instead of setting an example to the world, it is rather the world that is setting an example to us. I do not urge that as an excuse for a single pound of the expenditure, the consideration of which is before us. But, after all, the Budget we are considering is concerned with national as well as with local expenditure. What do we find when we turn to a country like Germany? In that connection we find this: that local bodies there, not elected on the democratic basis at all—and this is a very remarkable thing, which I commend to the attention of the hon. Baronet the Member for the City of London (Sir F. Banbury)—but elected, as the Prussian town councils are, on a basis which gives weight to wealth, so that the rich elect more representatives to the councils than the poor—the councils elected on that basis spend money more freely than our towns do, and charge the expenditure chiefly to the well-to-do by a local system of graduated Income Tax based on a State graduated Income Tax. The Income Tax in Prussia is graduated, and a town like Frankfort takes that graduated Income and levies upon that a graduated tax.
    Sir P. MAGNUS: It is graduated downwards.
    Mr. CHIOZZA MONEY: But not reaching below £45 a year, which, as the hon. Member will remember, compares with the higher incomes in this country, because wages and salaries in Germany are lower than they are in England. The hon. Member will admit, I am sure, that the revenues of a city like Frankfort have in the past been levied with a much greater regard to the distribution of wealth than in this country, and it is one of the chief commendations of the proposals of my right hon. Friend that they have regard to the distribution of wealth, and do make an attempt to draw upon the wealth of the country for local purposes. There are one or two other tests—
    Sir F. BANBURY: Would the hon. Member like to have the German Emperor over here?
    Mr. CHIOZZA MONEY: I hardly know what the German Emperor has to do with Prussian cities. I know they have a most admirable Home Rule system—not only a State Home Rule system, but a municipal Home Rule system which makes the cities independent of the State, and certainly independent of that regal personage.
    Sir F. BANBURY: We are now discussing national, and not municipal, finance.
    Mr. CHIOZZA MONEY: With great respect to the hon. Baronet, I say we are discussing both in this connection. I want to pass from that to one or two other tests which may be applied to the pessimistic observations of the right hon. Gentleman. The test of savings may be applied. Last year was the record year for British investments. That can be absolutely demonstrated, as it has been demonstrated by my friend Sir George Paish, so that, after all the so-called depredations of my right hon. Friend, the British investor last year was able to invest more money than ever before. Turn to another test, and take the test of luxurious expenditure. It is perfectly clear that last year the expenditure upon luxuries in this country reached a point which was never attained before, and, with the exception of the, United States, perhaps, in the history of the world. It is only too clear from these general tests of luxurious expenditure on the one hand, and of saving on the other, that the taxation of my right hon. Friend, so far from trenching upon what is called the war reserve of this country, or the reserve for emergencies, has really not touched the fringe of luxury. There is one other observation in that connection which may be made, and it is that it is idle to compare our expenditure at this time of day with the expenditure, let us say, of the 1880's, when statesmen of both parties and of both Houses viewed with the utmost alarm the near approach of our total national expenditure, including Post Office expenditure, to £100,000,000.
    Sir F. BANBURY: And very sensible, too!
    Mr. CHIOZZA MONEY: It is idle to make that comparison. If I am asked to, decide whether an individual or a nation, is spending too much, I refuse to go back ten or fifteen years and ask what we were spending then. I would rather apply this test: What is the income of the individual or the nation, and what are the merits of the proposed details of expenditure? There is one other relevant consideration,—that is the magnitude of the people to whom the expenditure applies. It is very easily forgotten that this is a nation of 46,000,000 of people at this moment. Therefore, if you only spend 1s. per head upon them, you have to raise over £2,000,000. It is easy to astonish a public audience, and eventoexcite alarm sometimes in the House

    327
    of Commons, by referring to £5,000,000 or £10,000,000 without reference to the magnitude of the nation to whom it is applied and to the wealth of the people. Unfortunately, through the lack of what I may call the application of the sense of proportion, we get all kinds of admirable proposals burked, not only by the hon. Baronet (Sir F. Banbury), but by many other Members of this House. I venture to submit to hon. Members who think in that way that, after all, national expenditure may well be in the nature of an investment. I ask the Committee to ponder whether if, in those old days to which I have referred, there had been a larger national expenditure upon public health, education, housing, and town-making, that not only the health of the people of this day would be greater than it is, but whether their wealth would not be greater than it is. It is beginning to be demonstrable in this country that, although what I call the social reform era only commenced at a recent date, we are already beginning to draw dividends from the investments we have made. For my own part I rejoice that, not only one party, but every party in this House, is competing in proposing measures for social amelioration which makes demands upon the public purse. Only to-day we had a measure proposed under the Ten Minutes' Rule which would increase public expenditure. This country would get a tremendous dividend from the small national expenditure which would be involved in a measure of that kind.
    I pass to some other important general considerations arising out of the speech of the right hon. Gentleman the Member for East Worcestershire. He contended that it was immoral for us not to tax the poor. [HON. MEMBERS: "No, no!"] I do not want to go one inch beyond what the right hon. Gentleman intended. He was referring to the illustration of the balance between direct and indirect taxation, and he contended that we ought not to take taxation off the many, and that we ought not to relieve them entirely from a contribution to the national expenditure. I think I have put his statement fairly. [An HON. MEMBER: "He was quoting the Prime Minister."] It matters not who was responsible for the argument or whether the right hon. Gentleman was only repeating the argument of another. I am only addressing myself to the merits of the argument. In reply to that I say that it is not a
    328
    new doctrine in this country or in this House that we should excuse the very poor from taxation. It was a doctrine set up in the plainest terms by John Stuart Mill more than a generation ago, and by some other economists before him. For instance, Bentham, the founder of modern Liberalism, held that there was a level of income below which the State ought not to levy taxation. Therefore, I cannot agree with the right hon. Gentleman that it is not the duty of my right hon. Friend if he has the money—and I think he has the money this year—for example, to repeal altogether the remnants of the Sugar Duty. His observation as to giving undue power to the many has already been dealt with by the Financial Secretary to the Treasury, and I would only like to add this: If we examine the distribution of wealth in this country, we find that, of all the wealth left in an average year in this country, two-thirds are left by only 4,000 people—that is to say, of about £300,000,000 which will pass in this year, £200,000,000 will be bequeathed by only 4,000 people. It is quite easy to deduce from that the extraordinary command of the entire resources of the nation by a comparatively few people. When the right hon. Gentleman spoke, as he did, of our giving undue power to the many, I could not help thinking of that extraordinary distribution of wealth, and of what goes with it. For what goes with it is that it is ownership which is the real government which obtains in this country, and that all that this House has done so far is somewhat timidly to interfere with the real government of the nation, which is exercised by the people who command the nation. That really means the government of the nation by a comparatively handful of people. I do not think any hon. Member of this House need fear that we are giving undue weight to the needs of the many. As to the redistribution of wealth through taxation, I have never claimed in this House or out of it that taxation was a means of equalising incomes, but in these latter days it is very remarkable how far we are getting on that road. For example, in the "Times" this morning, I read—and it is a very remarkable utterance to read in the "Times" of 1914—
    "We have no objection to the principle that the rich should pay for the poor. Moreover, we regard the method of differential taxation as an extremely powerful instrument for redressing those inequalities of fortune which no one can regard as desirable."
    That is a saying which goes very far, although I myself should like to make

    329
    many qualifications as to its application to the needs of this country. I would rather that we applied ourselves to the distribution of wealth by making it possible for people to gain incomes than I would, after the inequalities had arisen, simply play the part of Robin Hood by robbing the rich and giving to the poor. After I have said that, I submit it is a remarkable thing to read words like those in a leader in the "Times." With regard to national expenditure as it is, I should like to point out that there is a good deal of exaggeration with regard to the statement of the increase in our national expenditure. That exaggeration arises from the nature of our accounts. The Post Office of this country is a rapidly growing business. The outgoings of the business are included in the statement of national expenditure, so that as during the last ten years the outgoings of the Post Office have increased from £16,000,000 to £26,000,000, we have that loaded on to our national expenditure. It is, of course, not national expenditure, and, so far from being that, it has, during those ten years, brought in an increasing profit. Therefore, in 1915, the present financial year, instead of adding £26,000,000 we ought rather to subtract over £6,000,000. That is the real truth in regard to the Post Office outgoings.
    6.0 P.M.
    Making allowance for the Post Office outgoings, I find that, including the sum devoted to the local rates, which is only in one sense national expenditure, the increase has been £48,000,000 in ten years. That £48,000,000 is again reduced by this consideration: In 1904–5 the national expenditure, without the Post Office outgoings, was £136,000,000, and in the new financial year it is £183,000,000, without the Post Office outgoings. These figures take no account of the fact that in 1904–5 the party opposite, as the hon. Baronet (Sir F. Banbury) knows, borrowed for naval purposes, whereas in 1914–15 we are paying off part of that borrowing and part of the interest arising from the debt. That makes a further qualification. It will be found that I am right in saying that in ten years, making allowance for that fact, the true increase in national expenditure has been, as nearly as possible, £44,000,000, which is about £4,000,000 per annum. How does that compare with the growth of wealth? I find that, leaving out of account the new financial year, and merely taking the nine years, which makes the comparison tell
    330
    against the illustration I am using, the incomes of the Income Tax paying classes increased by £238,000,000, whereas the increase in national expenditure was £44,000,000. In fact, it is almost true to say—I think it will be true to say at the close of the present financial year—that the increase in the incomes of the Income Tax paying classes was as great as the whole of our expenditure plus the whole of our local expenditure in rates. That surely is a very remarkable fact indeed! What has accompanied this increase in expenditure? The old economists have been quoted with great effect by the right hon. Gentleman who opened this Debate. If their opinions with regard to the restriction on national expenditure had been true, what would have happened in the last ten years? If all their prophecies of woe and disaster arising from increased taxation of the people had proved to be true it would surely have brought us to the brink of disaster in May, 1914, In those days of restricted national expenditure we certainly had great booms. There was a trade boom in the 'seventies, there was one in the 'eighties, and one in the 'nineties. But what invariably succeeded them? The records of commercial history show that invariably we had slumps of the most severe character. We had one in the 'seventies and one in the 'eighties, when the Fair Trade movement originated, and we had one also in the 'nineties. [An HON. MEMBER: "We are having one now!"] We are not having one now—that is the point I am making. I think prophecy with regard to trade matters should be indulged in with caution. What has happened is that the opinion of every person qualified to give an opinion was that there would be a certain amount of depression experienced long before this, and that all of them have been surprised that the depression has not arrived. If one-half of what the old economists and statesmen said in the old days with regard to national expenditure had been true, this happy result of a calm ending to the greatest trade boom we have ever experienced could not possibly have happened. There is something to be said on the other side. May we not give some weight to the consideration that probably a great deal of the increased national expenditure upon which we have entered has served to steady trade and unemployment? Take, for example, one of the chief items in that £44,000,000—the £12,000,000 or £13,000,000 which we are spending upon old age pensions. Is

    331
    that national expenditure? Is the income of the nation diminished by a penny by that expenditure? Of course, the national income remains unaltered. All that we do is to call upon certain people, chiefly the Income Tax paying class, for a contribution, which in some cases can be shown to be a very moderate contribution. It is taken from them and transferred to about a million old men and women at the rate of 5s. per week. The only thing that happens is that a different kind of spending takes place. Someone may say, "Does it not lead to a decrease in the amount invested?" Last year saw more invested in this country than ever before. It is permissible to say that there might have been more if that £13,000,000 had not been raised.
    An HON. MEMBER: There would have been more.
    Mr. CHIOZZA MONEY: I am inclined to doubt that, because of the contemporaneous increase of luxurious expenditure. I, therefore, prefer to think that it was taken out of expenditure on luxuries, and transferred to expenditure on necessaries, and what is the result of that? Surely it is clear that what we do is to take something from trades which are notoriously fickle and changeable, with changes of fashion and taste, and to transfer them to trades which are concerned with necessaries, and therefore to steady those trades. I do not say it is a great deal, but it is something done to steady trade and employment. As to other evidences, it is notorious that whether we take the test of foreign trade or of bankers' clearances, or the great test of the Unemployment Returns of the Board of Trade, we find that last year we obtained record figures in every direction and the growth of those figures has been contemporaneous with the growth of national expenditure, and the decline of the unemployment figure, of course, followed similarly. I should be deeply sorry if any word I have uttered should make it appear that I am singing the praise of taxation as taxation. I desire to safeguard myself in that connection. I do not believe that this or any other country can go on increasing its taxation in an unlimited degree for an unlimited period. As it appears that I have been defending taxation, I want to safeguard myself against that supposition. Taxation is more necessary for a given amount of national income in this country than in many
    332
    other countries, because of the opinions of the economists and statesmen which have been referred to. The very Gentleman who had charge of the destinies of this country but who, just because they held these opinions, allowed our slums to grow up and allowed our people to fall into physical deterioration, were by the same token opposed to every sort and kind of national investment. The result is that at this moment, where the Prussian Finance Minister can rise in the Prussian Diet and propose a Budget which contains an enormous amount of national State revenue, our Chancellor of the Exchequer when he proposes his financial statement has merely the £6,000,000 of the Post Office to begin with, and the few millions which were brought in by that little Socialistic experiment of Lord Beaconsfield when he bought the Suez Canal.
    Sir F. BANBURY: That was better than land value taxation.
    Mr. CHIOZZA MONEY: I am glad to find that the hon. Baronet a supporter of State investment. I never looked upon him in that light before. May I ask the Committee to look at the statement of the results of the Prussian State railways, for the last year for which we have figures as given in the recent return for which I moved. Prussia bought some of her railways and others she built herself out of revenue. The total capital cost of the railways was £558,000,000. That sum has now been reduced, by repaying capital out of profits, by £194,000,000, so that the railways now only stand in the books of the Prussian State at £363,000,000. I find that in 1912 the nett profits were over £39,000,000, that the interest on the railway portion of the Prussian State debt was met, the sinking fund was met, £6,000,000 of new capital expenditure was undertaken out of the profits, and there was a special reserve fund contribution of £8,000,000 and, in all, that there was £11,000,000 in the hands of the Prussian Chancellor of the Exchequer in relief of the Prussian taxes. It was clearly demonstrated that Prussian fares and freights were much lower than in this country. [An HON. MEMBER: "What about wages?"] Wages are rising much more rapidly than on British railway companies. As the more railways the more Free Trade, I do not exactly see the logical connection with the point of view of the Tariff Reformer. I think it can be demonstrated that Germany possesses

    333
    more internal Free Trade than we do because of the existence of these State railways—indeed, Prussia gets a double revenue. There is this revenue of which I have spoken and there is a second revenue which consists of the fact that she gets her goods and her people moved more cheaply than we do. This example is one that we ought to bear in mind at this time, when we are once more raising the taxes of the British people.
    Sir P. MAGNUS: Is the hon. Member not aware of the fact that the railway service in Germany is very much worse than it is in this country?
    The DEPUTY-CHAIRMAN (Mr. Mac-lean): I think the hon. Member had better keep to the subject.
    Mr. CHIOZZA MONEY: I was trying to defend myself from the suggestion that I find taxation the only way out of our financial difficulties, and I want to suggest that it is the duty of those responsible for the finances of this country not merely to tax, but to have regard to the future revenues of this country, and therefore especially to have regard to such subjects as that. I cannot suggest that we could readily put ourselves in the fortunate position that Prussia is in in that regard because of the extraordinary capitalisation of our railways, but I think that something might be done, and that the sooner it is done the better. I think the Estimates, both of the new taxes and the old, are very conservatively estimated in the figures which have been given us, and under those circumstances I cannot conceive why my right hon. Friend thinks it necessary to raid the Sinking Fund. I think it will be surely found, when the end of the financial year is reached, that we shall have much more than the revenue we need if we dispense with the £1,000,000 taken from the Sinking Fund.
    Mr. LOUGH: It can go back.
    Mr. CHIOZZA MONEY: That is hardly the right way to do it. I am glad to think that the Sinking Fund will benefit very considerably at the end of the year, but at the same time I would rather see the New Sinking Fund not tampered with I should like to see a Chancellor of the Exchequer with courage enough to ask the people of this country to submit to a little extra taxation in order to get rid of the capital indebtedness of the country altogether. It would not take very long to
    334
    clear it up There is one other matter upon which I should like to make an observation. It is with regard to the graduated Income Tax. The Chancellor of the Exchequer has circulated a Paper which shows the effect of the graduation of the Income Tax and Super-tax. I think page 5 of that Paper furnishes a criticism of the proposals in detail. Here we have erected a graduated Income Tax. It is formed really by the joint working of two separate Income Taxes—the Income Tax proper and the new Income Tax which we call the Super-tax. It is only necessary to look at these graduated scales to see that they bristle with anomalies. I do not agree with all that was said with regard to the hardships attaching to persons with unearned incomes of, say, £800 a year or thereabouts, who have to pay an Income Tax of 1s. 4d. in the £, but I agree that there should be some graduation between £700 and £3,000. That is much too big a step in graduation in unearned incomes. Now that the right hon. Gentleman is going so far as to get personal declarations of income from, I imagine, something over nine persons in eleven in the country, surely he can go a little further and get declarations from the whole of the taxpayers, which would enable him to graduate these incomes!
    Hon. Members will also notice that there are some very big steps in the earned scale. Take the difference between £1,000 and £1,001. One pound more income means paying £6 more tax. The same thing occurs with an income of £2,001. The taxpayer who has an income of £2,001 pays £15 more tax. That has an unfortunate tendency in practice to lead to incomes keeping within the point at which that remarkable transformation takes place, and really, if they work it out fairly, I do not think hon. Members will feel surprise that that should be so. If we turn to the Death Duties scale, we see a plain graduated scale which any man can understand. Why cannot we have a similar scale with regard to the Income Tax? The reason is that we do not get personal declarations of income from all taxpayers, but surely the time has come when we could complete the system, and set up a perfectly plain scale which would not only do justice to the taxpayer, but show the taxpayer that justice is done to him.
    With regard to the somewhat complicated series of measures which we are promised to deal with local taxation, and

    335
    upon which the distribution of the Grants depends in some measure, I cannot myself see how the Government can expect this House to pass these measures in such time as to enable the valuers to get their work done, and to enable the Grants to be made as between owners of sites and owners of improvements. How is it to be done in so little time? That being the case, I venture to press upon my right hon. Friend that the Government will not drop the excellent proposals it has made, but will frame an interim scheme which would enable the Grants to be made. The position is this: We are beginning to enact these taxes. These taxes will be passed into law, and the revenue will be accruing. Surely the House is not going to enact increases of the Income Tax and the Death Duties, and put the money in the Treasury for that money to be hung up, if the House of Commons finds itself unable to pass certain measures, or if the valuers are unable to get their work done. Surely the simple way out is for the Government, whatever else it does, to frame an interim scheme for the fair distribution of that money. I am pleased the Government has seen its way to make a bigger call upon the wealth of this country, in order to provide for the needs of the local authorities. The condition of the towns is a great reproach to the country. Our towns are beginning to rank very badly among the towns of Europe with regard to their amenities and their appearance, and really, if the present rate of progress goes on with regard, I fear, to the housing of its people. I think it would not be unjust to say that in many cases the towns do not make the creditable appearance they ought to make in view of the wealth of the country, and I attribute that row, as I have done before, to the fact that we have not got a proper call upon the wealth of the country to provide for the needs of the State. I rejoice that the Government have taken the matter in hand, and I would earnestly hope that they will not postpone the needs of the ratepayers and the municipalities. I hope they will not postpone the distribution of these Grants because of any difficulties there may be in carrying the necessary legislation this year.
    Mr. MILLS: The very interesting speech to which we have had the pleasure of listening makes one realise what can be done with figures by people who really
    336
    have got a grasp of them. When I heard the hon. Gentleman explaining almost to my satisfaction that the expenditure of the country was not going up, and that the Income Tax was not a burden upon anybody, I wondered why the Government should propose any new taxation at all if the expenditure has gone up so little, and if their economies are so rich. But in spite of his very optimistic comparisons between this country and the German States, I personally cannot help agreeing with my right hon. Friend that the financial situation to-day caused by this Budget is a very serious one, not only because of the actual amount we are asked to vote in the Budget, but because of the general policy of the Government which proposes it. I wonder what are the feelings of any hon. Member opposite who fought the General Election of 1906. I remember some of the speeches made in that year. There were violent denunciations of a Budget of £130,000,000, and we heard talk of peace, retrenchment, and reform. The present Prime Minister, speaking of a Budget of £149,000,000, said:—
    "These figures appear to me to call for no Comment. They speak with an eloquence that needs no rhetorical embroidery. In my opinion, they make a return to more thrifty and economical administration, the first and paramount duty of the Government."
    The present First Lord of the Admiralty, speaking at a time when he honoured our side with his support, said:—
    "He should like to do his best to pursue the same-economic performances he had hitherto devoted himself to, and unless the incoming Government made a substantial reduction both in naval and military expenditure, he should do his best to be a plague to the right hon Gentleman. … Since his quarrel with the Government [the Conservative Government of the day] had become serious, he should like to say that it was solely and entirely on the question of finance."
    And yet the right hon. Gentleman cheerfully supports a Budget which is £50,000,000 greater than that Budget, and he is himself at the head of one of the greatest spending Departments of the State. After using in 1906 the words which I have quoted, the Prime Minister sits beside his colleague, the Chancellor of the Exchequer, who, in the peroration of his speech introducing a Budget for £210,000,000, said that the Government were taking a step forward which would conduce to the more enduring strength and honour of our native land. Indeed, things seem to have changed since those days. I do not think that the country, perhaps, or even the House of Commons, fully realise the enormous extent of the expenditure to which we are committed and the liabilities which we carry. Not

    337
    only have we got to face a Budget for over £200,000,000, but we have a local budget of a great deal more than £150,000,000. In addition to that, we have local debt, the amount of which I cannot find out, but at the end of 1911 it was £620,000,000, and as it had nearly doubled in the previous ten years, I suppose it may be safely assumed that it is larger now. In addition to that, we have the National Debt of nominally £650,000,000. In addition to this deadweight debt and actual liabilities, we have contingent liabilities for loans guaranteed, and so forth, of over £200,000,000. Besides that contingent liability, we have another either actual or present liability, in regard to which I have often asked the Chancellor of the Exchequer to give us the benefit of his skill, and that is the deficiency in the Post Office and Trustee Savings Banks. We know that the Departments have deposits of £180,000,000 in their hands, against which they hold Government stocks as security. We all know that during the reign of the present Government some of these securities have had a considerable slump, and therefore there must be a very large deficiency as between the amount for which the Department is liable and the market value of the securities. That is a small point to mention in discussing these enormous figures, but it certainly would make for more intelligible accounting if that deficiency was clearly shown and added to our debt. I may say, though this also is a minor point, that the deficiency would not have arisen in its present acute form if the Government had carried out the principle, which is carried out in any business concern, of not holding their own debt. When the Department went into the market to purchase Consols they ought to have cancelled them and charged the interest due to the depositors on the Consolidated Fund. In that way they would have had the system regularised, and not this large deficiency now.
    These figures are very large, and the alarming point—even more than their size—is that they show a substantial increase from year to year, except, of course, the dead-weight debt, and the decrease in the dead-weight debt is, after all, a great deal more apparent than real, because, while you have been reducing debt, you have been putting to the expenditure of the State certain capital charges. The Secretary to the Treasury dealt with this question and said it was most
    338
    immoral to say you are adding to the total liabilities of the nation because you are spending £21,000,000 a year, or whatever the figure is, for old age pensions, national insurance, and so on. I agree that, from the moral point of view, it is, a very desirable thing that the money should be spent, but I say that the comparison you have to draw between the annual burdens which we have to meet every year and the annual interest of the dead-weight debt is whether or not these capital charges which you have put on us can be remitted. The annual payments for old age pensions and national insurance cannot be remitted by any Government, and therefore they are not only annual expenditure, but they are capital charges, and in any financial review of our position these charges should be capitalised. If they were capitalised, they would be found to be infinitely greater than the amount the Government has produced. They are increasing largely.
    My right hon. Friend has already eloquently pointed out that we are in a rather defenceless position, because the Minister on whom we ought to rely as the guardian of our finance, and as a rigid economist always prepared to say "No" to the extravagances of his colleagues, instead of being the guardian, has become the principal robber, and is always at the head and front of any movement for further expenditure. For that reason, I think that his check on the Treasury should be removed, and that the check of the House of Commons should be enormously increased. I am bound to say that during the short time I have been in this House nothing has struck me more than the incessant attempt that is being made by the Government to evade financial control by the House of Commons. For instance, there was the Persian loan, where a large sum of money was filched from the Treasury Chest and lent to Persia without the House of Commons having voted the money, and without our having the slightest opportunity of saying whether we approved of the loan or not. A similar case was the Chancellor of the Exchequer's issue of Exchequer Bills the year before last. He did not want the money, but he put out the Exchequer Bill and made the nation pay the interest, and put the money on balance. I suppose that the Government will say that they did not think they could have time to come to the House of Commons and ask for what was wanted. We have extraordinarily little

    339
    time to discuss Supply in this House, and when we do discuss Supply, very often party politics are discussed on those days, and then millions of money are voted without discussion.
    Mr. PRINGLE: The Stationery Vote.
    Mr. MILLS: In this matter I do not think that one side is more to blame than the other. Most serious of all, I think, are the Supplementary Estimates. Supplementary Estimates have now become part of our financial machinery. This Budget, as an Estimate of what the nation is going to be asked to spend in the coming financial year, is of no value whatever, because we know that any Minister may come down to this House and demand further sums, which we shall be compelled to grant. I would like to know what is the financial policy of the Chancellor of the Exchequer which is underlying this Budget? The Chancellor of the Exchequer, in introducing this very important Budget, made a very long speech, though I could not understand what he meant or how the money was going to be spent, and he stated casually, at the end, that he was going to raise the money in a particular way. He introduced the biggest normal Budget that any Chancellor of the Exchequer has ever introduced. He was putting larger taxes on capital and larger Income Taxes, without any regard to our resources in time of war, than any previous Chancellor of the Exchequer has ever done, and yet we have no justification either of the increased taxation or of his raid upon the Sinking Fund, though the Secretary to the Treasury has dealt with that question at some length this afternoon. I do not expect that the Chancellor of the Exchequer would justify his increase of Death Duties, Income Tax and Super-tax on the score of justice. We all recognise that under the present system of government it is no good for a section of the community that can only carry 10,000 votes to come to the House of Commons and talk about justice. But I would like to know whether the Chancellor of the Exchequer thinks that his present policy of taxation will be adequate to finance the necessary expenditure which is foreshadowed in this Budget, especially when this trade boom has fallen off, and whether, if that policy is going to be pursued to cover completely all his expenditure, what does he consider will be its effect upon the commerce of the country?
    340
    It seems to me that the whole financial scheme of this Budget is unsound, and that it infringes some of the permanent principles upon which our financial system is based. The Chancellor of the Exchequer proposes, first, to take £1,000,000 from the New Sinking Fund. The Secretary to the Treasury has defended this proposition, which the Chancellor of the Exchequer never attempted to do in the Budget speech, and took great pride in the fact that Consols had only fallen one-eighth, and had immediately recovered. The hon. Gentleman knows just as well as some of us who are engaged in the City what was the reason—that it was partly the activity of the Government broker and partly a more serious cause. So bad has been the effect of the Government financial policy that the Consol market has lost all the resiliency which it used to have. Hon. Members know very well that in the better days of Consols any political crisis, any foreign crisis, and, even more, the almost total suspension of the New Sinking Fund, would have produced a very heavy drop in Consols, because it was the natural investment of the funds of the public, and people were always jobbing in and out, according to what the political situation looked like. But the Government have so effectually frightened the private investor from investing in Government securities that even this rather large raid upon the Sinking Fund had not really any effect in depressing the already grievously depressed Consol market. If the Chancellor of the Exchequer takes satisfaction in the fact that his Budget can still keep Consols up to 74, I do not think that anybody need grudge him that satisfaction. Another point. Next year, as the hon. Gentleman knows, there are £19,000,000 Exchequer Bonds falling due on the 1st April. I suppose that the Government are going to make arrangements for renewing these bonds, and I have no doubt that they have considered the effect upon the price of that renewal which the present juggling with the Sinking Fund will have, and, even more, the announcement that that raid is going to be increased and extended in the following year.
    How did the Chancellor of the Exchequer justify his partial suspension of the New Sinking Fund? He justified it by comparing the amount of debt which he has reduced with the debt reduction of former Chancellors of the Exchequer. The hon. Gentleman the Financial Secretary had some very hard words to say of people

    341
    who compare unlike with like. His strictures ought to be reserved for the Chancellor of the Exchequer, because his debt reduction is absolutely incomparable with the debt reduction effected, say, by Mr. Goschen. Not only was the stock which he had to redeem about 25 per cent. cheaper than it was in Mr. Goschen's day, while in Mr. Goschen's time the necessity for reduction was less; but, much more important than all these facts, the Chancellor of the Exchequer is making his debt reduction by capital taxation, and in the days when Mr. Goschen made his debt reduction there was practically no capital taxation of any sort. It seems to me that by taking this £1,000,000 from the Sinking Fund, and by the large increase which the right hon. Gentleman is making in the Death Duties, he is making the nation live upon its capital. That could only be justified by a great national crisis or by the fact that a great reduction in expenditure has been undertaken. Luckily, the former alternative is not with us, and we know very well that with the right hon. Gentleman in office we are not very likely to suffer from the latter.
    In spite of the figures which have been given to us, the returns of the estates liable for Estate Duty for various years recently give us a rather interesting indication of the effect of this policy. Up to the year 1909 these figures had very largely increased. After 1909 they remained practically stationary. Before 1909 you were taking 6.5 of these estates in Death Duties, but since then you have been taking 9.1 per cent., and now you are going to take about 11 per cent. Therefore it does not want figures to show what must be obvious to everybody—that if you are going to increase the capital taxation of this country at this rate, you must be gradually reducing the capital of the nation, and the time will come—I do not say now—when the increased tax which you are going to put on will produce a relatively small sum of money. That is to say you will, by your policy, have destroyed the whole of the principal source of your income. But after all that may seem unnecessarily pessimistic. I quite admit that it will not happen to-day or to-morrow. The question which I wish to ask the Government to consider, and which the House of Commons ought to consider, is—what will be the immediate effect of the present system of taxation? The House ought to consider seriously, whether you can increase the tax on productive
    342
    wealth up to the point to which you are increasing it to-day, and still maintain sufficient capital, not only to carry on but to increase and expand the various enterprises in the country. That seems to me to be the point of the matter.
    There is no use discussing whether the rich can, or cannot, afford it. That need not be considered. What you have got to consider is the good of the whole country, and if taxation has been brought to a point at which you reduce the capital upon which people live, not the rich but the whole people of the country, then you are doing a very grave disservice to the country as a whole. I think that I detected signs in the speech of the hon. Gentleman who has just sat down of an electioneering strain, about the luxuries of the rich being taken away and invested in helping the poor. Sentiment is all right in its place, but you must have finance when you are discussing the Budget, and I think that it would be a very dangerous thing if, in order to avoid the immediate difficulties and unpleasantness of coming to the country for fresh taxation, you are taking the easiest course now which may end in very serious difficulties for the country. One of the results, which I foresee from the present financial system, is that you are infallibly going to undermine our position as the banking centre of the world. If you are going to put an increased Income Tax on the securities which foreign people hold over here, it is quite obvious that they are not going to continue to hold those securities. You can ask any large financier about this. I was talking to one this morning. He used to be—I do not know whether he is now—a supporter of the policy of the right hon. Gentleman, and he confirmed this view.
    I think that all of us must agree that in driving foreign security holders from this country you are preventing London from being the exchange centre of the world, as it is quite obvious that people draw from us and we discount their bills because they have got the securities lodged with us—I admit also because we are on a gold basis which other nations are not; but I think that the hon. Gentleman will admit that the securities held here in connection with these credits are also a very large factor in producing this result. That is the effect upon commerce. I want to know what the Chancellor of the Exchequer thinks will be the effect upon trade of this system of taxation? One result must be that

    343
    foreigners are not going to invest their money in this country. Another result will be that, by taking these large sums of capital every year from the country, you are leaving less capital for the expanding industries which already exist, and by the same process you are crippling old businesses by taking away from them a huge part of their resources, especially at a time like this when, as everybody knows, you have got to employ a large amount of liquid capital to make a profit than ever was the case before.
    The real fact of the matter is that you cannot consume capital for expenditure and employ it for trade as well. You are doing that. You are consuming that by your methods of spending it as income, and you cannot expect to have increased trade at the same time. I think we must make up our minds, when we are discussing this Budget, as to whether we have not come to the point at which we can no longer tax surplus income, which is the fund from which the people of this country must be employed. These principles seem to me to be so obvious that they should be agreed upon by everybody, and they seem to me so obviously broken by this Budget that I am driven to the conclusion that its real object is not fiscal at all, but has other considerations in view. I see in this extraordinary system of taxation which the right hon. Gentleman has introduced, and his methods of presenting the Budget, that he is dealing with the policy of hon. Gentlemen below the Gangway opposite, and is trying a great legislative measure for the redistribution of the wealth of the country. I gathered from the speech of the hon. Gentleman the Member for Northamptonshire that it was one of the traits of the Budget which he welcomed, namely, that it would have the effect of making a better distribution of wealth all through the country. I do not argue whether it is right or whether it is wrong, but I do say that it must be wrong in a Budget, the object of which should be to raise the necessary money for the needs of the nation with as little disturbance as possible of the interests of those from whom the money is to be collected. If you give up that principle, if, under your Budget, you transfer the wealth of the country from the present holders to other holders, then the principle which underlies this Budget can be understood. I do not believe myself that you can succeed, at all events by budgeting, in making

    344
    the poor richer, but you may succeed in making the rich poorer. I think it is very dangerous for the Government to attempt to deal with such a proposition by framing a Budget which may, perhaps, get them electoral support—for that is the object, no doubt—but I, for my part, believe that you cannot do it except at the risk of gravely crippling the commerce and industry of the country as a whole.
    Mr. SYDNEY ARNOLD: The right hon. Gentleman, in opening the Debate this afternoon, referred in terms of misgiving to the increased expenditure of the country, but I cannot help thinking that something will be gained if a little more recognition is given to the fact that the money necessary to finance the nation to meet its needs has been raised without any real difficulty. It is highly satisfactory that the revenue of the past year has grown to such an extent that the account closed with a surplus of £750,000. In the eight financial years during which the Government have been in power they have shown an average net surplus at the rate of £2,811,000 per year. In Germany, on the other hand, during those eight years, the average net deficit, as nearly as it can be ascertained, has been not less than £2,000,000 a year, irrespective of the £50,000,000 on naval and other expenditure, which has been financed out of loans, In this country we have demonstrated that we can, with comparative ease, find the money necessary to finance the nation's greater responsibilities. Nevertheless, it is contended that our national expenditure is now too high, quite irrespective of the fact that the character of the expenditure has materially changed in recent years, and the country, in some respects, is getting a much greater direct return for the money than formerly. Apart from that important consideration, and it is an important consideration, what is the standard to be when it is said that national expenditure is too high? It must be remembered that no scientific or definite conclusion has been reached as to the proper limit of national expenditure. Probably the point is one that each nation can only determine by experience, and, if that is to be the test, I can certainly see no evidence, in view of the generally prosperous condition of the country, and the great growth of trade in recent years, that our national expenditure is excessive.
    Moreover, some guidance in this matter may be found in the rules and maxims laid down by eminent authorities on these

    345
    questions, and in a comparison with the expenditure of other countries. Sir Robert Giffen regarded a national expenditure, which amounts to 10 per cent. of the total income of the country, as not unreasonable. M. Leroy Beaulieu has said that under 5 per cent. is light, between 5 and 10 per cent. moderate, from 10 to 15 per cent. heavy, and 16 to 17 per cent. the extreme limit. Judged by those tests, this country stands in a favourable position to-day. My hon. Friend pointed out that the real expenditure of the country in the current year is not £209,203,000, because from that ought to be deducted the cost of the Post Office, the telegraph, and other services, except so far as profit is made, otherwise the charges for those services cannot be regarded as a tax on the people. In justice, it should be said that the true expenditure of the country for the current year—that is, expenditure out of what may be termed taxed revenue, is £183,000,000 in round figures—8.5 per cent. of the national income. Taking the latter as £2,150,000,000 the figure accepted by competent authorities, it is a distinctly low percentage compared with that of Germany and France. The expenditure of those two countries has been recently growing very rapidly, much more rapidly than ours. The figures work out like this: The proportion of tax revenue expenditure to the total income of each nation now amounts to 11 per cent. in the case of Germany and about 16 per cent in the case of France. The comparison is a very satisfactory one for the United Kingdom. However much or however little importance may be attached to those figures, I do submit that hon. Members opposite cannot justly criticise the present rate of expenditure.
    Hon. Members opposite have repeatedly spoken of the excessive expenditure, but they have not shown any substantial item that they themselves would reduce. On the contrary there are certain items that they want to increase; but consistency is not a prominent characteristic of the present Opposition, and therefore, it is not surprising to find that at one and the same time they complain that we are spending too much, and urge that we should spend more. They want to spend more on the Army and the Navy; they want money spent upon agriculture and upon the relief of local rates; they want money for housing, for the land, and other matters. All their proposals are extremely vague, but are bound to put additional burdens on the taxpayer. If we take the present
    346
    expenditure as substantially agreed and add these further items, the figures are likely to be in excess of the present sum, and the real question at issue between the Government and the Opposition is not so much the amount of expenditure in future as it is on what objects and in what manner the money is to be spent and though the national expenditure to-day shows a large increase over ten years ago, yet it is not correct to place the figures of to-day in comparison with those of ten years ago, The character of the outlay has materially changed. Ten years ago national expenditure was mainly, for the ordinary cost of Government, quite apart from what may be termed beneficial social services. Today our national expenditure includes not only the ordinary cost of Government, but in addition, a large sum for beneficial social services. Ten years ago, in 1904–5, as my hon. Friend pointed out, the national expenditure on taxed revenue, eliminating the cost of the Post Office, except so far as profit is concerned, and including the payments to local taxation account, was £136,000,000 in round figures, and it is now £183,000,000 an advance of £47,000,000, the major portion of which is for these new beneficial and social services.
    That is not all. Apart form the growth in the cost of the ordinary Civil Services and so forth, there is no less than £14,720,000 of the total increased expenditure in the last ten years, represents the additional cost of the Navy. It is true, as my hon. Friend said, that if the money spent out of loans on the Navy in 1904–5 were taken into consideration, the increase would be less. I deplore the fact that the Government have thought it necessary to spend no less than £51,550,000 on the Navy. I deplore and regret it all the more, in view of the great improvement in the international situation which has taken place in recent years. There are peaceful relations between us and foreign Powers, but that apparently counts for nothing at present. However, apart from that, I think it is a matter for much satisfaction that there is no less than £27,000,000 for this new class of beneficial social services. There is the sum of £21,000,000 for old age pensions; there is a State contribution under the Insurance Acts and for Labour Exchanges; there is £1,500,000 for road development, which provides a source of relief for unemployment; and £500,000 for an extended and improved educational service. All this is quite apart from the normal in the cost of education. Finally, we

    347
    have the sum of £4,000,000 to be devoted to social objects and to the relief of local rates this year.
    7.0 P.M.
    In order to arrive at the increase of national expenditure pure and simple on these new beneficial services, the £27,000,000 should be deducted from the present expenditure of £183,000,000, which gives the sum of £156,000,000 for the current year, taking the expenditure on the same lines as ten years ago. That shows an advance of £20,000,000 compared with ten years ago. But as the population of the country grows the normal expenditure also grows. Fortunately, the tax revenue accruing to the Exchequer also grows at the same time. The normal growth of the Exchequer's tax revenue since 1904–5 has averaged about £2,000,000 a year, making a total automatic expansion to date of £20,000,000. What does this mean? It means that even if the present Government had imposed no new taxes at all, the revenue of £136,000,000 ten years ago would automatically have become £156,000,000 this year, and consequently an expenditure of £156,000,000 imposes no greater proportion of burden on the country than the expenditure of £136,000,000 ten years ago. I have already shown that on the same lines as ten years ago, eliminating the cost of new social services, the expenditure amounts to only £156,000,000. It consequently follows that, apart from the money for social service, the capacity to meet additional responsibilities has kept pace with the increase that has been made by the present Government, or, in other words, that the proportion of total national income now being taken for the same class of expenditure as ten years ago has not increased. That is the position if the new items for beneficial and social service were to be cancelled, but the great majority of the Members of this House, and of the electors of the country, do not wish them to be cancelled. After a very long experience the country recognises that all other efforts have failed to deal adequately with those social problems, and that it is therefore time that the Government should step in. There is almost general agreement that this money ought to be spent, and if it were not spent by and through the agency of the Government, or the local authorities, some of it would be spent by the workers. Therefore, these sums should not be regarded as an increase of national expenditure in the ordinary sense of the term. A proportion, at
    348
    any rate, of the money spent on beneficial social service is in the nature of alternative expenditure, such as expenditure on old age pensions and on the Insurance Act. Before those had been arranged for by the Government the aged and the sick had to be kept by local authorities or by hospitals or philanthropic institutions and charitable agencies or by the poor themselves.
    The outlay for those services represents a more equitable distribution of the burden of social evils which are national in character, and for which, therefore, all classes should take responsibility, and in the amelioration of which all classes benefit The burden of these social evils is now more fairly shared, because in raising the necessary money the Government have, apart from the normal growth of revenue, increased direct taxation. That is, to my mind, an eminently sound policy. It is only, indeed, by an increase of direct taxation that the money could have been got, or can be got, unless an excessive burden were to be placed on the poorer classes by an increase of indirect taxes. For my part, I would like to see indirect taxation made lighter, and not heavier, and here may I say that I regret another year has passed without some remission of the taxes on sugar and tea. Whatever differences of opinion there may be with regard to that important matter, let me point out that the Opposition have no proposals before the country as an alternative to direct taxation. It is quite true they are committed to a truncated system of Tariff Duties, estimated by their Leader to produce £10,000,000 per year. Personally, I do not think that when the cost of collection and other things are taken into account the yield would approach £10,000,000, but even if that estimate is realised, the money would not be available for reducing direct taxation, because it is mortgaged for other purposes. It is mortgaged for an increase in expenditure on the Navy and the Army, assistance to agriculture, and so on, and after those commitments of the Opposition have been met, if anything remained which is extremely doubtful then such sum is pledged for remission of indirect taxation on tea and sugar, which the Opposition frequently criticise when they are in opposition, and which they say they hope to reduce.
    The important problem for the Committee to consider is this: Are the proposed direct taxes, the Income Tax and the tax on Death Duties, too high, and on

    349
    what grounds can it be shown that they are? In discussing that problem, I think we must start from this point. There is no established or scientific principle by which you can determine how high are the rates at which direct taxation can be wisely levied. In this matter, just as in ascertaining the limits of expenditure, we can only be guided by certain general rules and principles, and by the tests of actual experience. It is not sufficient to say that direct taxation is too high, because it is higher than it used to be. Regard must be had to what is being done with the additional revenue. It may well be that higher rates are justifiable if the money is being used for social and beneficial objects. It has been said, for instance, that an Income Tax of 8d. is high in times of peace, and there is something to be said for that for ordinary Government services; but it does not follow that it heavier rate is too much if the additional yield is being mainly used to finance beneficial social objects which operate to the advantage of the country as a whole. Moreover, as has been pointed out, although the present rate of Income Tax will be nominally 1s. 4d., the actual rate, taking into account the various abatements, for the majority of Income Tax payers is considerably less. Nevertheless, the right hon. Gentlemen opposite and others have objected to the proposed rates of Income Tax, because they hold that the tax should be mainly a reserve for war expenditure. As a matter of fact, the reserve of a country for war expenditure out of current revenue is not only Income Tax, but all the taxes in the tax system. That was demonstrated at the time of the South African war, when a sum of £76,000,000 was raised out of current revenue, and of that £39,000,000 came from Income Tax and £37,000,000 from other taxes. In adition to that, a further sum of £160,000,000 was obtained by loans. The cost of War, when it comes, is generally met by loans, and not from current revenue, and the real reserve is ability to borrow; and, in comparison with many other European Powers, and particularly with those countries which it is at all necessary to take into account in this connection, we are to-day, relatively in virtually as favourable a position to borrow as nine years ago.
    It must be remembered that the Government have already reduced the dead-weight of the National Debt per head of population from almost the highest figure which it touched down to the lowest figure of
    350
    modern times. They have reduced the dead-weight of the National Debt per head of population from about £17 5s., which it was in 1906, down to £14 2s. Under those circumstances, I do submit to the Committee that the Chancellor of the Exchequer is justified in taking £1,000,000 from the Sinking Fund. Otherwise, in my opinion, we should have been imposing too big a charge for debt reduction on the present generation, and relieving posterity of an undue share of its just burden. If the National Debt charge were to be maintained at the level of past years, and as a consequence the Sinking Fund steadily growing, then the whole of the National Debt would be paid off in about forty years on the estimate of an average price of 90 for Consols. I really do not think on the grounds I have so far discussed that a good case can be made out for the contention that the direct taxes have been too high, nor is it true that Income Tax and Death Duties have been reducing profits, or the stimulus to make profits, because profits continue to grow and are growing at a greater rate than formerly. Further, the savings of the country are very considerable and are growing. An hon. Member said that we would very soon be living on our capital by taxation. In 1903 Sir Robert Giffen estimated the total' savings, after all expenditure and taxation had been met, as £264,000,000 per year. Last year the Chancellor of the Exchequer named £350,000,000 as the amount of yearly savings, and since then it has been put at £400,000,000 by Sir George Paish.
    Therefore, the annual savings are much greater than they used to be, and I do not see how it is possible to contend successfully that, through the increased Death Duties, the Government is taxing capital in the sense that the national resources of capital are on balance being reduced. I say that that contention is wholly misleading and unsound. There is the capital of the individual, and there is the national capital. No doubt the Death Duties do take some capital from individuals, but it does not follow that the national resources of capital are thereby being entrenched upon. A country cannot be said to be encroaching upon its capital when capital is added to by savings, and in this country there is such an addition, amounting to £350,000,000 per year or more, and the major portion of these savings are made by the Income Tax paying classes. I really think it

    351
    would be idle to argue that the Government is proposing to tax capital unwisely in the future. Finally, and this is a most important consideration, the yield from the Death Duties and Income Tax is continually progressive, and the heavier rates have been justified in that respect. Ten years ago the yield from the Income Tax was. £31,250,000 as against the estimated yield in all this year of £56,550,000, or £48,550,000 apart from the new taxes. Ten years ago the yield from the Death Duties was £16,668,000, and the current year it is estimated in all to be £28,800,000, or £28,000,000 apart from the new taxes. I cannot myself find any established fiscal principle to confirm the view that these direct taxes have been too high. On the contrary, they have been, and I think they will be, economically sound and increasingly productive.
    May I remind the Committee that the cost of collecting direct taxes is, generally speaking, in proportion to their yield much less than the cost of collecting indirect taxes? That is certainly true of Income Tax and Death Duties, and it will also be true of the Land Taxes when the valuation is completed, and when all the Land Taxes are fully in operation, and I rejoice that rating of site values will soon be an accomplished fact. It has frequently been emphasised that the cost of making the land valuation is a capital cost. In similar circumstances most industrial concerns would have spread the amount over a number of years. The Government, perhaps in an excess of virtue which has received but small recognition, elected to find the whole of the money out of current revenue. Even so, it is highly satisfactory to know from the very full statement made last year on this matter by the Financial Secretary to the Treasury that the present capital cost of land valuation is already, taking everything into account, being substantially recouped. Let me take the case if hon. Members opposite were in power, and were inaugurating a system of Tariff Duties, there would be, in the first place, not only the ordinary cost of collection, but there would also probably be the cost of new Customs warehouses and so forth. In that event I certainly would not think it right to add this capital outlay to the ordinary cost of collection, which would be very large indeed, and give the combined total as the normal cost of collection, as I should know full well that the
    352
    proportion of the total amount due to the capital outlay would not soon recur. I suggest that hon. Members opposite should be equally fair in their criticism of the land valuation.
    Mr. JAMES MASON: My right hon. Friend the Member for East Worcestershire (Mr. Austen Chamberlain) laid great stress on the danger of destroying our power of raising special taxation in cases of national emergency. The Secretary to the Treasury, in replying to my right hon. Friend, pointed out that it was not necessary that direct taxation should be available for that purpose, because, in cases of national emergency, indirect taxation could be levied without undue hardship. I would point out to the hon. Member that indirect taxation would, in the case of a European war, for instance, fall with much greater hardship than in normal times. The hon. Member who has just spoken (Mr. Arnold) apparently throws aside that explanation, and maintains that emergency expenditure would not be met by indirect taxation, but must be paid entirely out of credit. If we are to rely in case of emergency, such as war, on getting through the temporary difficulty entirely on credit, surely it behoves us to take special care to do nothing in our financial system which may destroy the credit on which we are to rely. The fact faces us that we have before us a stupendous Budget—a Budget for the first time exceeding £200,000,000—and when we remember that the £100,000,000 line was passed only eighteen years ago, I think no one will deny that it is, at any rate, a position in which we should turn round and consider where we stand.
    I wish to ask the Committee to consider for a moment a rather different aspect of the case, namely, the effect of the proposed taxation, not only on the industries of the country, but on the industrial and working classes. The Civil Service Estimates, taken by themselves have increased during the last nine years from £47,000,000 to £87,000,000—that is to say, they have nearly doubled, and have increased by £40,000,000. About one-half of that increase is due to two big items, old age pensions and national insurance. So far as national insurance goes, I think it will not be denied that not only the portion of the £20,000,000 which comes directly from the State, but also that portion which comes out of the pockets of employers and employés, are direct charges and burdens

    353
    upon industry. It is worth while considering what is likely to be the result of the incidence of these charges on industry. Obviously, burdens of that kind, like all others, must result in an increased cost of production. It is equally true that in most cases this increased cost of production would be reflected in the form of higher prices, and inasmuch as it is reflected in increased prices, so much will it add to the general cost of living. But there is a further effect. Burdens which tend to raise prices must also have a tendency to lessen consumption, and, by reducing the output, to lessen the demand for labour, and consequently to lower wages. All burdens of this kind when they assume sufficient magnitude can be directly connected not only with the cost of living, but with the whole question of the demand for labour and the rate of wages in the country.
    In the same way this tendency must always be enhanced by the effect of very large additions to direct taxation. It is obvious that a large proportion of the direct taxes, such as Income Tax, if not taken for the purposes of taxation, would be capitalised; it would be invested, and go to increase the amount of capital in the country. Therefore, the larger the amount of money taken by the State for spending purposes the less the amount that remains to replace the capital which is gradually being exhausted or wasted, and which must be replaced if the position of the country is not to fall back. I should like to differentiate very strongly between the effect of Income Tax and the effect of Death Duties. I have always maintained that as a direct tax the graduated form of Income Tax is by far the most equal and just form of raising the money required. The same remark does not apply in the case of capital duties such as Death Duties, because it is obvious that although a considerable amount of the money levied in Income Tax would, if not so levied, be capitalised, it is also true that a certain portion of it would be not capitalised, but spent in the ordinary way. But when you come to capital taxes, such as Death Duties, it means that at a certain given moment you take large blocks of capital now being employed for the purposes of industry, not for the purpose of keeping it as capital in the hands of the State, not for the purpose of investing it as might be done, for instance, in nationalising railways, but which is in order to melt it down for the purposes of ordinary expenditure.
    354
    It must be remembered also that this destruction or melting down of capital is, in cases like the present, accompanied by the curtailment of the very possibility of replacement—that is to say, by the increase of the Income Tax.
    There are other special disadvantages in the Death Duties form of direct taxation which, I think, should be borne in mind. There is the effect which they must have in the case of businesses belonging to one or a few owners. In the case of a big industry belonging perhaps to two or three people, the death of one of the partners involves a very large burden upon the industry, which, in many cases, can only be provided for either by mortgaging the property, assuming it is not already fully mortgaged, or, what is very serious to the welfare of the industry, by curtailing the amount of free working capital left in the hands of the survivors. The hard ship of Death Duties in cases of that kind is acknowledged by the Chancellor of the Exchequer, when he grants certain concessions as regards rebate, not only in the case of land, but, I think, in the case of fixed plant or machinery of that kind. Therefore, my general contention is, I think, fairly admitted. The Chancellor of the Exchequer, in his speech the other day, told us that the national contribution to public health was only £200,000 a year. Surely the national cost under the Insurance Act, which is largely for the purposes of public health, and which amounted to something like £7,600,000—
    Mr. LLOYD GEORGE: I was talking about the rates.
    Mr. J. MASON: I take it, then, that that sum was purposely not intended to represent the total expenditure? I will not pursue that point, as apparently I did not understand what the right hon. Gentleman said. What is the position in which we stand? The additional amount to be raised by this Budget is £9,800,000. It is disappointing that fresh means should have to be found to raise this money, after the hopes that were held out to us that the Land Taxes would be so enormously productive. It is true, as the right hon. Gentleman told us, that the new taxes of the 1909–10 Budget produced something like £27,000,000 last year. The fact remains, nevertheless, that the Land Taxes, which were those upon which the right hon. Gentleman repeatedly relied to provide increased revenue in future years, have up to the present produced absolutely nothing. Up to date the result of the

    355
    Land Taxes has been a net loss of £1,470,000. It is proposed that we should have yet another valuation for rating purposes. As the old one is not yet completed, I suppose that this new valuation is to be commenced before the old one is finished. I do not gather clearly whether this new valuation is to be based entirely on the old one—that is to say, by deduction—or whether there is to be, to some extent, a really new valuation. In view of what happened in connection with the land valuation, it would have been very interesting to know how long this new valuation is likely to take, and what prospects there are of getting any result whatever out of such a valuation during the current year. I really think, without taking a too one-sided party view, that it is time this Committee took a very serious view of what is likely to be our position in the future. The point has been fully dealt with this afternoon that our expenditure is increasing by leaps and bounds. The Budget has already doubled in eighteen years. We really ought to consider what we are going to do to meet the requirements of the next few years, if the normal increase goes on at anything like the same rate. If in the next eighteen years we are to have an increase in our national expenditure in anything like the same proportion as in the last eighteen, then I fear to think, quite apart from a national emergency, which might arise in the case of a great European war, what a serious problem it will be for this country to find the taxation which will be necessary for our ordinary purposes.
    Let us look at it in this way. The right hon. Gentleman has in this case very drastically taxed every source of direct taxation. I think it will be generally admitted that the amount of increased direct taxation is in all the different cases—in five definite alterations—is of a drastic nature. The result of that drastic treatment has been that during this year we are to get a revenue of £8,800,000 from those taxes, and that during the first full year that will become a revenue of £13,500,000. By figures which the right hon. Gentleman gave to the House in his Budget speech I made out that the amount would be more—that it would be something like £17,000,000 in the full year. It is not so. I see in the White paper it is £13,500,000. What I want to draw attention to is that if the drastic treatment of this direct practice produces £13,500,000
    356
    in the full year, what is to be our position in the future in the event of our having to raise a very considerable sum for some emergency. If there were an emergency of the kind such as I have referred to, that this large increase of expenditure was necessary, it could not be met by recourse to these direct taxes: we should have to look to some different method. We must look forward with some anxiety as to how such an event might affect us.
    It is obvious that indirect taxation cannot and ought not to be relied upon in the case of national emergency, such as would come upon us in the event of a great European war, especially as such a war, being a naval war, would inevitably lead to an increase in prices. When we come to reflect what would be our position if we had to raise another £40,000,000 or £50,000,000 a year, I cannot help thinking that the figures I have quoted are worthy of very serious consideration. The fact that this drastic treatment of direct taxes is to produce only £13,500,000 in the full year makes one wonder whether, in the event of it being needed, where the £40,000,000 or £50,000,000 is to come from. When you come to the suggestion which was thrown out by the last speaker, that in the event of a national emergency we should rely not on the possibility of further taxation, but on the credit of the country, then I say that the whole system of national finance must be overhauled, and considered, not only in view of the needs of the moment, not only even in view of the possibility of increase in the revenue in the future, but also in view of the effect of all these matters upon the whole credit of this country, upon which we should have to rely in such an emergency.
    Mr. DAVID MASON: The hon. Member who has just sat down referred to the effect of increased taxation upon the cost of living. He will pardon me if I do not follow him further in his remarks in criticism of the expenditure, because he and hon. Members on his side of the House generally ask for reduction of expenditure, while they still persist in seeking to increase it in other directions. Before I pass on to speak on the speech of the right hon. Gentleman the Chancellor of the Exchequer, I should just like to make one remark upon the very able speech made by the hon. Member for the Holmfirth Division (Mr. Arnold). There is one point which I could not quite follow. He spoke of our real reserve being our

    357
    ability to borrow. He seemed rather to deprecate the fact of maintaining our taxable reserve. Our real reserve, he said, was our ability to borrow in. time of stress. I think that most hon. Members will agree that our ability to borrow does not entirely depend upon ourselves, because, of course, in borrowing you have to borrow in the money market of this country, which is affeeted by all the money markets, and there is the fact that we cannot control the money markets of the world. It is very important, therefore, that we should very carefully guard our taxable reserve. I certainly do think that there the hon. Gentleman marred what was otherwise a very able speech.
    When he opened his speech the right hon. Gentleman the Chancellor of the Exchequer spoke of the right hon. Gentleman the Member for East Worcestershire (Mr. A. Chamberlain) as one who criticised his sanguine Estimates of last year. He included with the right hon. Gentleman some other Members who had also ventured to doubt his Estimates being realised. I happen to be one of those hon. Members who doubted that the right hon. Gentleman would be able to arrive at this Budget with the results which he has been able to announce. I shall endeavour to reconcile my criticism with the facts which have since emerged. My criticism on that occasion was directed more against the excessive expenditure. I believe—and I think I shall be able to show—that this very swollen revenue is stimulated by the extravagant expenditure. The particular expenditure which I was attacking—on armaments—does unquestionably tend to swell the revenue over which the right hon. Gentleman is now rejoicing. The right hon. Gentleman will readily follow me when I say that if the Government embarks upon a very extravagant programme that that encourages the great armament firms to increase their capital; it encourages the great shipbuilders to increase their plant; and this unquestionably tends to swell the revenue. It means a great expenditure of money by these employers of labour, which goes to swell the Customs, and unquestionably goes to increase very materially the revenue which he is now enjoying. At the same time, I am bound to state that I rejoice that the right hon. Gentleman certainly has been able to get this revenue, and also that we have enjoyed a period of great prosperity. I would just like, in support of my statement, to draw
    358
    the right hon. Gentleman's attention to a somewhat parallel case—that this apparent prosperity, which is stimulated both here and on the Continent by this excessive expenditure, does not mean that we are necessarily in a very sound position. Looking at a very interesting book, entitled "Twenty Years of Financial Policy," by Sir Stafford Northcote, I see that in 1847, when the then Chancellor of the Exchequer was bringing in his Budget, that he then, as we now, was enjoying a period of great financial prosperity which then, as now, did not necessarily show that the state of trade was in its essence very sound. The then Chancellor went on to point out—the case is not quite a parallel one—
    "While the revenue is expanding, it is largely due to the excessive expenditure which is going on on railways."
    The railway boom was then on, just as we during these past years have had large investments of capital abroad, with much wastage of capital through wars and other causes. The book goes on:—
    "On the other hand be informs the House that the condition of the revenue was never more satisfactory: that the estimates of his predecessor had fallen far short of the result; that for the first time within the memory of any financier in the House, it had been found unnecessary to have recourse to Deficiency Bills. … Before attempting to explain this apparently inconsistent state of things, it may be well to look on a little and see what was the end. Sir Charles Wood was speaking in February. In April there was a commercial panic, and many failures took place."
    The Chancellor went on to show that when judging as to whether your position is sound or not, you ought to have some regard to the character of your expenditure. While one is not appalled at the size of this Budget, I think many of us are appalled at the character of it when we know that this expenditure is still persisted in, and when we find that little or no check is placed upon it. We know that large sums are raised from Income Tax and Death Duties, and are almost entirely spent upon this unreproductive expenditure, and I think we may really ask the right hon. Gentleman and the Government to pause before asking for further authority to tax our taxable reserves. The hon. Member for the Uxbridge Division in the earlier part of his speech drew attention to the promises made by the First Lord of the Admiralty and by the Prime Minister when the present Government came into power. Those promises have certainly not been carried out. We were then told that we were entering upon a period of retrenchment. As the hon. Member pointed out, speeches

    359
    were made on platforms that we might and ought to expect from a Liberal Government economy, whereas it is well known to all of us that the increase alone upon naval armaments since the present Government came into power has been something like £20,000,000. Apparently even the Chancellor of the Exchequer could hold out no great hope of this policy being altered. That to my mind, and that of many on this side of the House who are supporting the Government, is discouraging—this further trenching upon our taxable reserves. The first part of the Budget Speech of the right hon. Gentleman was certainly well met with enthusiastic support on this side with regard to the adjustment of Imperial and local taxation, but the financial statement was marred by little or nothing being said about economy, and by holding out no hope of bringing to an end this blot—which it unquestionably is—this blot of sterilising waste of expenditure. We are entitled to survey the whole Budget, and to judge whether it is advisable or wise of the Government to continue to tap those additional sources of financial supplies.
    The Government were put in funds in 1909 by the Budget, and certain schemes of social reform have been advanced. But they have in many cases been far more than offset by the devastating effect of this policy of additional waste in other directions. One may liken the policy of the remedies of old age pensions, the Insurance Act, and other admirable schemes, to the running sand in an hour glass. What they put in on the top is far more than offset by this continuous drain at the bottom, and this policy is not only pursued in this country, but stimulates the Powers of Europe to pursue a similar policy, and you have often expenditure of a wasteful character which accentuates the increased cost of living. The hon. Member for Northampton combated the statement of an hon. Member opposite that this Budget had nothing to do with the rise in the cost of living. I should like to point out to the hon. Member that while the hon. Member opposite did not entirely say it affected the cost of living, I think there is no doubt it does affect a rise in the cost of living. If you have large proportions of your expenditure used for this purpose and withdrawn from other purposes, reducing capital available through opening up new territories in other parts of the world, such as the supply of wheat land,
    360
    tending to bring down the prices of food, that undoubtedly would affect the cost of living. So the hon. Member was perfectly wrong in stating that the finance we are now experiencing does not in a very direct way effect our economical position.
    The Chancellor of the Exchequer, in his very interesting statement as to the re adjustment of Imperial and local taxation, did not state very definitely what is going to be the relation between the Imperial Treasury and the local bodies. Of course, it is quite true that he told us these matters would be more definitely shown in the Bills which were still to come, but I should like to point out to the right hon. Gentleman that if any large Grants which are made by the Imperial Treasury entail considerable interference with local bodies, I believe he will find that it will meet with resentment on the part of the local administration. I recognise that where the money is provided by the public there must, of course, be a certain amount of control. But I hope, whatever arrangements may be come to between the Imperial Treasury and the local bodies, it will be along the lines that if the money is abused they would enter and take control, rather than on the lines of direct interference with the existing administration. The local bodies, as far as one can learn, are very jealous of their administration, and of their powers of assessment and valuation, and I would respectfully point out that the Government should bear that in mind in any arrangement that they come to in the administration of these Grants. I should like to say a word in regard to the particular financial position which we ere now in with regard to the alteration in the Income Tax, and to ask whether the Government would not be. prepared to reconsider the addition of what will really amount to 1s. 4d. upon small unearned incomes. It seems to me that presses very heavily upon a section of the community who are feeling the increased cost of living and who therefore are going to have their taxes raised in addition to their other charges. It seems to me that as little advantage will be derived from that particular class in the way of revenue they might surely be cancelled and the amounts recovered from the higher grade and higher income.
    There is no doubt as we heard throughout the Debates in this House on the position of the employés of the Post Office, that the increased cost of living is pressing very heavily upon those in receipt of

    361
    small incomes, and any relief which can be given to those who are in receipt of small fixed incomes, and who find everything has increased in price will, I hope, meet with the sympathetic consideration of the right hon. Gentleman. I should like to make one or two remarks upon the question which I hope the Government have had pressed home to them to-day as to the particular character of their expenditure. I do not think enough could be said of the necessity for making some change in our policy in that direction. One feels as a Liberal when speaking to popular audiences that there is unquestionably a considerable amount of truth in the gibes that we have from hon. Members that we have not been faithful to our old traditions. In one speech of the right hon. Gentleman the First Lord of the Admiralty, he actually made the astounding statement when speaking to a popular audience:—
    "None of the increase for naval expenditure has come out of the pockets of the wage-earning classes."
    While it is true that in direct taxation the burden has fallen heaviest upon the wealthier classes the cost of living affected by this policy falls heaviest upon the poor, and Mr. Churchill further tells us:—
    "If you trace this expenditure to its ultimate destination from its original source, you find that the overwhelming proportion of it has been expended in the wages of those who construct the ships or who construct the material of which the ships are subsequently built."
    I think that is one of those half truths that deserve most severe censure, because whatever our view may be as to how much or how little should be expended on naval armaments, there is no question of doubt that this expenditure is a direct charge upon the poorest in the land by increasing the cost of living, and I hope, therefore, the right hon. Gentleman will not use his position to either directly or indirectly try and deceive the working classes that the burden does not fall upon them. Of course it falls upon them. Perhaps more than upon any other class in proportion. If this policy is persisted in it will lead to an increased amount of labour unrest which will accentuate the increase in the cost of living by reducing the purchasing power of weekly wages, and will tend to perpetuate this discontent and unrest which we from time to time have experienced. On the other hand, if we could have economy in that direction, if we could reduce that amount of expenditure by one single stroke, we would improve the real purchasing power of wages. It
    362
    is a very difficult thing to automatically increase wages all round. An hon. Member speaking the other day very ably pointed out that, of course, while we agree it was desirable to have a fair wage for a fair day's labour still if you were to automatically increase wages in all trades, necessarily there would not be much relief to the individual workman in the purchasing power of his wages.
    The CHAIRMAN: It seems to me the hon. Member is now arguing matters not relevant to Ways and Means.
    Mr. D. MASON: I will not pursue that further. I am just about concluding my remarks. I want to emphasise this point with regard to the character of our expenditure, and I say, therefore, in asking us to give the Government increased powers to trench upon our taxable reserves, we should have some regard to what the money is to be spent upon, and while I recognise that the Chancellor of the Exchequer is faced with this possible deficit and the necessity for meeting it, the burden ought certainly to press hardest upon those best able to bear it. Mere taxation is no advantage in itself, and the highest finance surely would be to come down here and offer us some relief from taxation.
    8.0 P.M.
    Mr. SAMUEL ROBERTS: There is one point upon which Members in all quarters of the House will congratulate the Chancellor of the Exchequer, and that is the splendid way in which the revenue has come in. I was one of those who thought at the time that the Chancellor was too bold and sanguine of what the result would be, but the trade of this country has kept up in a most marvellous way, and I was pleased to hear the testimony of the Chancellor of the Exchequer that he did not think from inquiries he had made that the present so-called depression was going to be a serious one. I hope that that is so, and that we may take it that the Estimates he has adopted for the present financial year may prove to be as satisfactory as last year. But, having said that, I am afraid that the rest of my remarks must be criticisms of the Budget and of the right hon. Gentleman. We have in the space of eight years an increase of £60,000,000 in the expenditure of this country, amounting to 40 per cent., and if we go back to the year before the Boer war, which, I think, is a fair year to take, as it goes back to the last Administration, and before the period when the Army expenditure began

    363
    to go up so much, we find that there is an increase of £93,500,000, or 80 per cent. I mention these figures because it is a very serous matter that there should be such a rise in these few years of the life of the nation, and that the expenditure should be growing this way. But there is a worse feature than that, and it is this: That the national expenditure is going up more in proportion to the national income. The Chancellor of the Exchequer has no doubt seen the very interesting book published by Mr. Mallet, who, of course, is an expert, and who has gone very carefully into this question of the relations between national expenditure and national income. He points out in his book that whereas during these twenty-five years the national income has increased by 69.25 per cent. during the time, expenditure has increased more than 100 per cent., and it is calculated that at the present time the proportion will be very much more. It is not a very satisfactory condition to find an expert like Mr. Mallet, after very careful inquiry, telling us that our national expenditure is going to be more in proportion to our national income. That expenditure has been exceeded in recent years by the present Government which came into office pledged to economy. It was one of the chief election cries of the present Government during the election of 1906 that the Tory Government were spending far more than they ought to have done. Sir Henry Campbell-Bannerman, speaking at the Albert Hall on the 21st December, 1905, said:—
    "We want relief from the pressure of excessive taxation."
    I should also like to recall what the present Prime Minister said in his first Budget speech:—
    "A return to more economical methods was their first and paramount duty."
    There was a little leaflet issued by the Liberal Publication Department in the year 1906, which stated that:—
    "The present extravagance must cease and the business of national retrenchment must be promptly and seriously taken in hand."
    Has it been taken in hand? Instead of that we have a national expenditure which has been going up by leaps and bounds ever since. I cannot acquit the present Chancellor of the Exchequer of taking a part in this business. The duty of the Chancellor of the Exchequer is primarily to be the guardian of the public purse, and
    364
    to be very jealous indeed of all expenditure. That was the most prominent feature in the financial character of the late Mr. Gladstone. In fact, he carried it almost to an extreme—
    "His whole financial theory being plainly coloured with a passion against the waste of money with which experience had taught him to identify almost any Government expenditure."
    That is what Sir Robert Griffen says in his very interesting book, "Essays in Finance," published in 1880. The same authority further points out:—
    "The ordinary understanding of a financier's duty—and usually the correct understanding—is that he is to find ways and means for expenditure, and maintain the credit of his Government. With the expenditure itself it is not supposed he has much to do, except that having to furnish the means, he is expected to criticise it closely and reduce the bill if he can."
    What I complain about is that the Treasury has become one of our great spending Departments, and that many of the things which the Treasury now control, like old age pensions and the national insurance scheme, ought really to be in the hands of the Local Government Department.
    Mr. LLOYD GEORGE: Hear, hear.
    Mr. S. ROBERTS: I am glad the right hon. Gentleman agrees with me, because the Treasury ought to be kept apart to deal with money matters as the guardian of the public purse, and to check expenditure. Under our present system the Treasury has become a great public spending Department.
    Mr. JONATHAN SAMUEL: Would the bon. Member reduce the expenditure on the Navy?
    Mr. S. ROBERTS: No, certainly not. I would not reduce that expenditure, because, in my opinion, our very first duty is to secure the safety of the country.
    Mr. W. THORNE: You cannot have your cake and eat it.
    Mr. S. ROBERTS: Our first duty is to have security, and if we have not security then we have nothing. Taking the expenditure on the Civil Services, the cost has more than doubled during the last eight years, as compared with the expenditure on the same Services during the last year of the Unionist Government. In 1905–6 the expenditure on the Civil Services was £28,177,000, and during the coming year the amount will be £57,065,000, or an increase of nearly £29,000,000, or over 100 per cent. Of course, it is perfectly true to say that the larger part

    365
    of this expenditure is made up by old age pensions, insurance, and the Labour Exchanges. Taking the expenditure upon the Army and Navy, the position is that as regards the Army it is practically the same, but as to the expenditure on the Navy, making allowance for the loans which were raised by the Unionist Government, the actual increase in naval expenditure is only about £7,000,000. I know the total expenditure on the Navy is £51,550,000, but we all look upon that as an insurance for our national safety, and it only amounts to 2.3 per cent. on the national income, which is estimated by Mr. Mallet in his book to be at the present time £2,200,000,000. I maintain that for the safety of the nation that expenditure is absolutely necessary owing to the unfortunate competition we have been put to by one of the other nations of Europe. The increase in the expenditure on the Civil Services does not stop with the items which I have mentioned, but it runs through all the various classes, such as Public Works, salaries and expenses of the Civil Service, law and justice, education, science and art. Altogether the comparison between 1906 and the present year of those items shows an increase of £7,850,000. To that you have to add the increase on the Customs and Excise and the Inland Revenue, which amount to £1,371,000. Those two items alone amount to £9,223,000, and this includes the unfortunate item of the expenses of land valuation, which for the coming year with the other Departments will amount to £843,000. As hon. Members know, the revenue from the Land Taxes does not come to half that amount.
    With regard to the Income Tax, it is a most useful engine for getting money, and if the Income Tax is to be increased, I agree that the plan of the Chancellor of the Exchequer is a fair one, because it graduates from the lowest to the highest. I would like to ask, however, what hon. Members think of the fact that in a time of peace like the present we are to have an ordinary Income Tax at the rate of 1s. 4d. in the £? That is a rate which has only been attained twice since Sir Robert Peel reintroduced the Income Tax in 1842, and that was only for two years during the Crimean war and during the Boer war. During those two years the ordinary rate was only 1s. 2d. in the £. There is, however, this difference, that before those two wars the Income Tax was very low. Before the Crimean war the rate was only
    366
    7d. in the £, and before the Boer war it was only 8d., but now it is to be double that rate. I would like to know what the Chancellor of the Exchequer is going to do in case we should want money during an emergency. [An HON. MEMBER: "Double it again!"] But can you do that with a tax of 1s. 4d. in the £? Will the people be willing to pay such a large part of the income in that way? Mr. Gladstone pointed out time after time what a most valuable engine the Income Tax was in time of emergency. But he denounced it as:—
    "being a demoralising tax and a dangerous tax, vexatious to trade and industry and could not be retained as a permanent and ordinary part of the finance of the country."
    Mr. Gladstone thought the ordinary rate of the Income Tax in time of peace ought to be 4d., and we all know that he wanted to take the tax off altogether. I wish to congratulate the Chancellor of the Exchequer on his proposed alterations with regard to the Death Duties on quick succession. That is an Amendment which I moved in this House in the early years of the present Government, although I moved it with a rather larger graduation. I extended it to ten years in tenths, and I included all property, but the right hon. Gentleman has not gone to that extent. I regret that the Chancellor of the Exchequer has suggested an alteration in the Settlement Duty. On the grounds of policy I think settlements ought to be encouraged. In cases of a young family, is it wise for the husband to leave money unsettled? For these reasons I think it is a bad policy for the Chancellor of the Exchequer to make any increase in that direction, because it will not bring in very much money. With regard to the allocation of the new taxes, I am afraid that I cannot look forward with much hope to the ratepayer himself getting much relief. Those who have served on public bodies know that the more the Exchequer contributions the more encouragement there is to expenditure. The Chancellor of the Exchequer himself told us that one of the conditions he was going to make in giving these Grants was that the local authorities are themselves to show a spirit of expenditure. Therefore, I am afraid that this proposal is going to encourage local authorities to spend money, and that therefore the ratepayers will not be able to obtain the relief which the Government hope to give them. The point I want to make is that the Government ought to cry a halt in national expenditure, and the

    367
    country ought to insist that this increase in expenditure, which is going on year by year, ought to stop, and also that the Income Tax and the Sinking Fund should both be kept up to a standard at which they will be a real safeguard in the case of a national emergency. We want a low Income Tax and a high Sinking Fund.
    Whereupon Motion made, and Question, "That the Chairman do report Progress; and ask leave to sit again."—[Mr. Pretyman]—put, and agreed to.
    Committee report Progress; to sit again to-morrow (Thursday).

  CAPTURE OF PRIVATE PROPERTY AT SEA.
  Mr. MORRELL: I beg to move, "That, in the opinion of this House, it is desirable that His Majesty's Government should negotiate with the other leading maritime Powers with a view to obtaining such a revision of the laws of naval warfare as would secure immunity to all Private Property except in the case of ships carrying materials for war or attempting to violate a blockade."
  I am raising a question that has very often in recent years engaged the attention of this House. It was raised in the year 1908 by the right hon. Gentleman the Member for the Walton Division of Liverpool (Mr. F. E. Smith), in an Amendment to the Address, and was seconded by a Member of the Government, whom I see in his place, the Parliamentary Secretary to the Board of Trade (Mr. J. M. Robertson). The right hon. Gentleman the Member for the Walton Division regretted that His Majesty's Government had not instructed their representatives at The Hague to agree to the principle for which I am contending. It was raised in the following year in a Motion moved by the hon. Member for Bradford (Mr. Jowett), and there was a very interesting Debate, in the course of which the present Attorney-General (Sir J. Simon) made a most powerful speech in support of this principle. It was raised in 1911 by my hon. Friend who is now the Under-Secretary of State for India (Mr. Charles Roberts), and again last year it was raised by the same hon. Gentleman on the Civil Service Estimates. We had a very interesting Debate and a very strong
  368
  expression of opinion from all parts of the House in favour of this proposal. But I do not think that this is an inopportune moment, in spite of all this, to ask the House once again to discuss this very important question. We are expecting very shortly a new Hague Conference, and, as Great Britain is a power which hitherto has been thought to stand in the way of a change, it is very important that we in this country should make up our minds what attitude the Government ought to take in this matter.
  I think we may claim that there has been, not only in this House, but throughout the country, and indeed in all countries, a very remarkable growth of public opinion upon this question. Everywhere we have chambers of commerce passing resolutions, asking that this right of capture should be abolished, and we have had conferences of shipping representatives passing resolutions in the same sense. There is to-morrow meeting in London a conference of shippers of eleven European nations, under a British president, which claims to represent 4,000,000 tons registered steam shipping. The conference is known as the Baltic and White Sea Conference. Their first business to-morrow will be to move, and I have no doubt to pass, a resolution expressing the apprehension they feel and the disastrous consequences to merchant shipping and sea-borne commerce that must follow upon the exercise in any future war of the existing right of belligerents to capture and confiscate innocent private property, and calling upon Governments of maritime nations to take into early consideration the question of abolishing such rights. These are very remarkable expressions of opinion, and I can quote a great many more in the same sense—in fact, I think I am right in saying that the National Liberal Federation only last year passed a resolution on this subject. We are met at the outset generally in these Debates by an abstract objection and an argument which looks plausible, but which, I think, on consideration, like many other plausible arguments, will be found to have no weight behind it. It was the argument used last year by the Noble Lord the Member for Portsmouth (Lord C. Beresford), and it runs something like this: We are told that we are really engaged upon the wrong tack, and that if we take any steps of this sort to mitigate the severities of war, we shall, instead of promoting the

  369
  object which we desire, be making war more frequent, because we shall take away the motive which prevents people from going to war. They say, "You must make war as terrible as possible; then there will be less war and more peace amongst nations." That is an argument against the experience of history and against common sense.
  If you look at the history of civilisation, there is nothing more remarkable than that the steps which have been taken for many generations past to mitigate the severities and to narrow the scope of war have, on the whole, I think everyone will agree, when those steps have been possible and practicable, tended to keep good feeling between nations rather than to lead to more war. People take too low a view of human courage when they think that any nation is going to be kept from war by the mere fact that there will be a certain amount of loss under the present laws falling on comparatively innocent people. No, I do not believe that is the way in which to ensure peace. The only way in which to promote peace between nations is by getting a better understanding between nations, by doing what you can to remove distrust and to ensure confidence; and therefore an agreement of this sort such as we desire, if it could be carried, would in itself, do something in the cause of international peace. But I do not want to argue this upon merely general considerations. I agree that general considerations carry us a very little way in a question of this sort. What we have to consider, and what we are bound to consider, is what will be the immediate effect from the point of view of national interests of any change in the customs of war, if it can be carried. Looking at it from the most severely practical point of view, I claim that so far from this alteration in the international law, if it could be agreed upon, being a disadvantage to this nation, the balance in the long run would be found to be entirely in favour of the national interests which this Government is bound to protect.
  We are told by many Admiralty and Naval experts that although it is true, that this is an old weapon, and rather an ugly one, it is a weapon—this destruction of commerce—necessary for the safety of this country; that it is our only weapon of offence, and that therefore we cannot afford to surrender it, or at any rate we cannot afford to surrender it unless we get some equivalent concession
  370
  from some other nations. I shall attempt to show that is not the case; that so far from this being a necessary weapon, it is an obsolete weapon that will not have the effect that is claimed for it, that it is not suitable to the conditions of modern warfare, and, that so far as it is effective, it is a weapon that will recoil upon ourselves in the long run, just as much as it will do damage to the enemy. The fact is—and I do not think people who speak on this question consider it sufficiently—that since this weapon was used in the Napoleonic wars, the whole conditions of warfare, as this House knows very well, have been revolutionised by two things: firstly, by the Declaration of Paris, signed in 1856, under which we can no longer pursue an enemy's goods if they are carried in neutral ships; and, secondly, it has been revolutionised by the extraordinary increase in land transport, due to the introduction and extension of railways. It is quite true that in the Napoleonic wars this method of commerce destruction played a very important, though not a decisive, part. It is probably true that, except for it, the Battle of Trafalgar would never have been fought. It was the fact that the Spanish and French fleets, which were enclosed in the Harbour of Cadiz, could not get the supplies over-seas which they needed that compelled them to go out and fight the Battle of Trafalgar, and then they were destroyed and our sea supremacy was entirely established. But it has been very well said that if there had been railways at that time through Europe the Battle of Trafalgar would probably never have taken place. It was the fact that supplies could not be got overland that made this weapon of commerce destruction such a terrific one at that time.
  I will take a case which is much stronger. I want to assume the case of war against Germany, and that is much the strongest case from the point of view of those who are in favour of the present system. It is much the strongest case, because the German mercantile marine is perhaps the largest except our own. It is about a quarter of the size of our own; but it is a very large mercantile marine, and they depend upon it for their commerce and their food. I will assume that we have complete command of the sea, and have established a blockade of the German coast, and that the German fleet is contained in harbours and unable to come forth. Even then can we be assured that we have,

  371
  in this weapon of commerce destruction, a complete and effective method of bringing pressure to bear upon Germany so as to compel her to come to terms, as is asserted by those who support this system? We could not stop the railways taking supplies overland into Germany from other countries. We could not prevent neutral ships bringing supplies to Amsterdam and other ports, whence they could be conveyed for the use of the German nation. No one, I think, denies that under this method you can irritate an adversary, and can inflict on him a great deal of damage, but what I do not think we can say is that you will ever be able, under the present system, having regard to the Declaration of Paris, and having regard also to the railways, to bring a war to an end as claimed by those who support this system. After all, is it worth our while, against the feeling of the civilised world, to keep in use a weapon of this sort, unless we are quite sure it is going to be effective in the way which is suggested?
  Look at it from the point of view of danger to ourselves, and from the point of view of our own country. I assume also in this case—in the case of a naval war—we are supreme at sea. Even then I do not think anyone will deny that, considering the enormous size of our mercantile marine, considering the way in which this country depends for its food supply and raw material entirely on sea transport, for the railways do not help us—the dangers of this country are infinitely greater than the risks which would be run by other countries, if this system is maintained. It is quite true that privateering was abolished by the Declaration of Paris. It is also quite true that, if this system goes on, we shall have something like privateering revived in another form, and we shall see foreign Powers getting swift merchantmen well-armed for the special purpose of preying upon our commerce. It will not be denied that, at the outset of such a war, before our naval supremacy is entirely established, and even after, you may have enormous damage inflicted upon our commerce, and on our food supplies, by this method of commerce destruction, even although we still remain supreme at sea. In the Napoleonic wars he had a special system of convoys, and we had complete maritime supremacy, but even in these wars the losses to the commerce of this country were enormous. I think it is true to say that 11,000
  372
  vessels were lost, or more than the whole mercantile marine of France, in spite of our maritime supremacy, through commerce destruction. These are very remarkable figures, and it makes me wonder whether it is really worth while, putting it from the lowest point of view of national interests, to try and maintain this old and obsolete weapon. Lord Loreburn, whose book on this question is one of the most remarkable, and who has been in favour of the principle of the abolition of capture for ten years past, enters, in his book, into a very elaborate examination of what would happen in the case of war against various Powers with whom we might be engaged, and, after examining the cases one by one, he sums up as follows:—
  "What dues it come to? Assuming that we are supreme at sea, the results seem to be that no single State could by the instrument of enemy capture, inflict upon us, nor could we inflict upon them any decisive injury. … There are many people who think that the only nation in the world against whom this weapon of warfare can be used with crushing effect by a strong naval combination is the United Kingdom."
  We are at once faced by this question. Assuming that an international agreement can be made in favour of the abolition of this right, and in favour of the immunity of commerce during war, what assurance have we that such an agreement will be observed? Is it not, after all—and this is what our opponents will say—really a piece of paper, is it not a mere legal protection, and is it worth anything further? We are told, with some force, that if it were a question of international law affecting neutrals, then, no doubt, there would be some sanction for getting it observed. But in this case, where it is a question of agreement between belligerents, we are asked what security have we that in stress of war another Power will observe the agreement not to destroy our commerce? It seems to me a very important point to consider, but, in the first place, as regards that, one ought to remark that it is not true to say that this is a matter which does not affect neutrals. I agree that it primarily affects belligerents, but it does secondly and indirectly affect neutrals in a very important way. Under the present system there can be no doubt that where there are neutral goods upon a ship belonging to a belligerent they will be detained and damaged, and, it may be, irretrievably damaged by the system of commerce destruction through the ship being captured. Therefore, neutrals have, at any rate, some reason, although not a great reason, for

  373
  seeing that a law of this sort, if it is carried, is properly observed.
  Apart from that, I submit that experience shows that if an agreement of this sort were made with the opinion of the civilised world behind it, as it would be behind such an agreement if it were entered into, there would inevitably be a tremendous force compelling a nation, even in the stress of war, to pay more observance than they otherwise would to a rule of this sort. I do not deny that there might be breaches of the law. Of course, there would be, but in the long run it would be not merely the duty, but it would be the interest of a civilised nation when engaged in war to observe this rule of the immunity of commerce, if an international agreement were once entered into upon the subject. For a long time past now we have, fortunately, had immunity, more or less complete, for private property on land. Though I do not want to press the analogy too hard, the fact that during the Franco-Prussian war there was practically no plunder, and that even when Paris was captured there was no plunder of private property, does show that an agreement or custom of this sort, if it is once firmly established between civilised nations, does tend to be observed, and might, on the whole, be relied upon. Having regard to the fact that at present the Admiralty admit that they cannot protect our commerce, and that they are setting merchantmen vessels to arm themselves for their own protection, we should do better to rely upon international agreement or, at any rate, to rely to some extent on that, rather than to keep on this old and discredited system of warfare, merely because we believe that in some future war it might enable us to finish the war quicker than we should otherwise be able to do.
  Then there is the question of insurance. I do not want to press this point too hard, because I know it is a very difficult question. It does seem absurd, when we consider the amount of insurance which is done in this country, that we should be engaging our Fleet to destroy commerce of which the insurers of this country will afterwards have to pay the cost. I know the answer to that. I know that we are told that all the cost will fall by means of increased freights on the people who insure, but if you ask the insurers themselves about it—that is, the insurance companies—they will tell you that they would prefer that the commerce should not be
  374
  destroyed, rather than that they should have to charge these increased rates. At any rate, it is clear that the first loss will fall upon them, and that they will not be able to repudiate it. The chairman of Lloyd's, speaking at the International Maritime Conference, held at Copenhagen in May, 1913, said:—

  "The position which the English underwriters have assumed is that no contract for reinsurance will he repudiated by them on the ground that it covers enemy's goods, and that all such contracts will be faithfully carried out during a war as during the time of peace."
  We say that if goods are destroyed, English insurance companies, and insurance companies all over the world, will have to bear the cost. I now come to the question, which I submit is very important, as to how far this is going to affect what is called—
  "the abysmal folly of the present competition in armaments."
  The First Lord of the Admiralty, in announcing the other day that the Prize Law is to be abolished—a matter on which I desire to congratulate the Government—went on to say that if the present law were altered with regard to capture,
  "there is no reason to suppose that a torpedo-boat less would be built by any other foreign Power if such change were made by us."
  That certainly seems a remarkable and strange statement. I quite agree that immediately it might not affect the building programme of other Powers. As we know in this country, the momentum of armaments is extremely strong and vested interests are very powerful, and it is very difficult to get a reduction, however good the case may be. In attempting to bind together the two questions of the reduction of armament and this proposed alteration of the law as regards capture, and to make one dependent upon the other, as our representatives did at the last Hague Conference, they were really inviting failure, because you will not get a proud nation to agree, and it is difficult to expect a nation to agree to a reduction of armaments merely because we say we will give up an obsolete right which they do not admit from their point of view to be a very important concession at all. If you try to bind these questions together you are always liable to the idea, which is sedulously encouraged by the war party in other countries that you are laying some sort of trap to get other nations to reduce their necessary defences. In the long run I cannot imagine how anyone can suppose that an alteration such as we desire, if it can be accomplished,

  375
  would not inevitably have an effect in reducing the armaments of the world. The great argument of the Jingoes and armament mongers in every country would be removed. Their perorations would be gone. The fear of the commercial classes which compels them to agree to these heavy taxes on armaments as a means of insuring their property would be removed. The great motive for expenditure would in the long run be taken away.
  Certainly it is impossible to claim that this weapon is such a powerful weapon that the mere menace of commerce destruction will prevent other countries from going to war, and to tell us on the other side that when that menace is removed it will make not a bit of difference to the armaments that other nations are building up. I believe, on the contrary, there is nothing which those who desire peace in Germany and in other nations—those who are doing their best to reduce armaments—more anxiously look for than that we in this country should agree to some such change in international law. It would be the greatest motive, not merely for ensuring peace, but also a great motive for reducing the expenditure on war in every country in the world. Even if that were not so, I should still support this change on the grounds I have stated, because I believe it is in our own interests that the change should be made. But, I am confident that there is no better way in the long run of reducing our armaments and getting rid of the competition of armaments than by entering into an agreement upon this question.
  On all these grounds I ask the Government whether at last the time has not arrived to reconsider their attitude in regard to this question. I quite agree that hitherto they have not taken up a purely negative and a blank non possumus. They have been somewhat misrepresented. But it is true to say that the attitude of the British Government has been the greatest obstacle, amongst many others, against getting this policy adopted of the immunity of private property. I agree, too, that the question is, of course, a very difficult and complicated one, raising all sorts of considerations which it would take me far too long to examine now. There is, for instance, the question of contraband-how far ought we to require, as the condition of our agreeing to immunity, that there should be a better definition of contraband than obtains at present. I think
  376
  it is necessary and desirable that in any revision of naval law we should get a better definition of contraband than there is at present. If you cannot abolish contraband altogether, as was proposed at the last Hague Conference by our representatives, at any rate you ought to require that contraband should be confined entirely to the materials which are directly required for warlike purposes. Then there is the question of blockade. There again we may require some better definition than obtains at present. Whatever be the conditions which His Majesty's Government may think it necessary to impose before they will consider this question of immunity, it is desirable in itself that they should reconsider their attitude with regard to this, and I believe, so far as they are able to move in the direction indicated in this Resolution, so far as they are able to give to private property at sea something of the same protection as is now given by international law to private property on land, I believe they would have behind them wide and enlightened support from men of all parties in this country.
  Mr. GORDON HARVEY: I beg to second the Motion. I, like my hon. Friend, have heard in this House several Debates upon this most important question, and I have heard given from the Front Bench several different answers as reasons why the Government could not comply with the proposals made from time to time. None of these answers have been of a conclusive character, and I hope we may find—I do myself believe—that the attitude of the Foreign Office is not an implacable attitude upon this question. I hope we may receive to-night from the Foreign Secretary some encouragement that he will try to proceed with the request that we are making. None of us who advocate this change pretend that the change will be an easy one. The difficulties with regard to blockade and contraband will certainly require the most careful consideration; but I maintain that when we are told that this change would not be likely to lead to any reduction in the armaments of the world, I must express my profound disagreement with such a sentiment. I hope it would lead ultimately to a very large reduction indeed in the naval armaments of Europe. But the real question, of course, after all, is: Would this change, if made, imperil the interests of Great Britain? I ask, How could it possibly imperil those interests?

  377
  It is only repeating a mere platitude to say that our naval and shipping interests are enormous and supreme, and that our vessels are called upon to defend commerce scattered all over the world, and that we in this country depend upon the security of that commerce in time of war for our very existence; but it is most remarkable to find that the First Lord of the Admiralty, whose most extreme demands this House has never declined to meet, now comes forward and tells us, by his consent to the arming of merchant vessels, that this great Fleet of ours under present conditions is not able to defend the commerce of this country.
  If the change would not imperil our interests, at any rate it is one which is well worth trying. Whether it reduces the fleets of the world or not at once, it certainly would not add to that branch of armaments, and it might very greatly reduce the burden under which the nations of Europe are all groaning at present. Those who know anything about Germany and what has gone on there, know quite well that the appeals to the German people for grants of money for the setting up of a great fleet were primarily based on the necessity to defend their increasing overseas commerce, and it is obvious to me, at any rate, that if we could make private commerce less likely to be destroyed the very argument which is now being used to increase the fleets of Europe would be weakened, if not destroyed. It is well-known that the United States of America and the Triple Alliance of Europe are anxious to see this change made, and if it would not imperil our interests—and I believe it would not—in trying to meet these great nations in this way, we should arouse a better sentiment, I believe, between them and us, and after all, sentiment is a great force in foreign relationships, and tends to pacification. The Prime Minister issued an invitation a short time ago to the men of business in this country to come forward and join statesmen in counsel with regard to the burden of armaments. The business men of this country have been responding to that appeal. At any rate, in the north of England where my Constituency lies, the chambers of commerce have had meetings, and resolutions have been passed embodying such wisdom as business men possess, urging upon the Government to try to use this great concrete attempt, if I may call it so, towards the solution of the difficulty in connection with the burden of
  378
  armaments, and begging the Government to try to use this great argument to accomplish that end. I have no doubt in saying that with the great power and authority which the Foreign Office of this country possesses, the obstacles in the way, such as difficulties about blockades and contraband, are not insurmountable. At any rate, I should like to see the foreign offices going into counsel together, and our Government putting forward a proposal and trying to make a bargain by means of which this great end should be obtained.
  9.0 P.M.
  The UNDER-SECRETARY of STATE for FOREIGN AFFAIRS (Mr. Acland): I think the House will agree that both of my hon. Friends have made a very real contribution in their speeches on this subject. I feared that in what I have to say I might find myself in some measure sharply opposed to their views, but after their speeches I do not fear that any longer. I am intervening now, not to pronounce upon the Motion, for my right hon. Friend the Secretary of State will speak at the end of the Debate, but because I really think it would be for the convenience of the House that they should allow me to put certain points in order that these points might be in their minds as the Debate continues. Looking at the Motion on the Taper, it will be seen that my hon. Friend calls attention to the attitude of His Majesty's Government, and I would like for a moment to refer to that, so that we may be in possession of that up to date. Last year, when I had the honour of speaking on this matter, I quoted my right hon. Friend as saying that should there be any real indication on the part of the Powers generally, that this matter is likely to become a material point in effecting such a reduction of armaments as would really tend to diminish the apprehension of war, then His Majesty's Government had left the door open for the reconsideration of the question. My hon. Friend rightly said—and he did us full justice in the matter—that we have never been, and are not, out and out champions of the right of capture, and that we have mixed that question up with the question of the reduction of armaments. We have left it open to any Power who wished to consider it in that direction. I said last year that no Power had shown any willingness to respond to that invitation. The same is true now. The position is the same now as then, and I think I may go further and say that, so far as my knowledge goes, no Power has yet suggested to us that our

  379
  maintenance of the right of capture was an element with them necessitating the present or prospective size of their armaments. But there is this to be said in order that we may get up to date with regard to the position of the Government, that we have, I hope, to all intents and purposes, given up the practice of prize money. That is freely recognised by them as a very considerable advance for which I am glad and thankful.
  I will mainly try to show what a very big and difficult question this is, and how necessary it is that we should give it very minute consideration before we can decide upon any modification of policy. The difficulty of the question is borne witness to in many ways, and also by the fact that so many public men who have discussed it have found it necessary to change their minds in the course of their examination into it. It is, I think, agreed that it is not enough to say that immunity simply, as has been said outside this House, would give greater security to our commerce, and that, as we are a great commercial nation, therefore immunity must be in our interest, for we can all imagine a state of war which would be quite pleasant for all the commercial community, but while they were congratulating themselves on the charming nature of the war, and on how well they were getting on under it, they might suddenly find that we were beaten, and that all their congratulations had been very wrong. We must not risk that. It is not enough to say that immunity is in accord with the dictates of humanity and civilisation, and that it must, therefore, be adopted for this reason. One's object in war must, I suppose, always be to make your enemy desire peace, and if you can accomplish this by interfering with his commerce you may be in a position to avoid other means of which the result is, not interfering with the enemy's commerce, but with the lives of his subjects. It is surely better to take goods than to take life if you can have the same effect, but if by giving up powers against goods you drive us to develop further powers against the enemy's lives, the cause of humanity would not gain, but rather lose.
  The question of the humanity of capture is just worth pursuing for a moment. I say it is perfectly humane. When a merchantman is overtaken by a cruiser there
  380
  is no question of fighting. It must give up, and the crew and passengers must be looked after. They must be sent back, under the Declaration of London, to their own country as soon as possible, if they will simply make an undertaking that they will take no further part in the war. There is no suffering brought upon them by the capture of the ship in which they are sailing. On land the question is rather more complicated. The loss of the ship and goods falls primarily on the owners. They would, of course, have insured, and they would not be risking their ship and goods unless they had done so, and, therefore, the loss falls upon the insurers of the enemy ship and goods. It is certainly recouped by them in the rates of insurance premiums which they charge to the commercial community, and in that way it is spread over the commercial community of the enemy country, and so far as they can the commercial community recoup themselves for the loss by the" prices which they charge the general public for the goods in which they are dealing. Therefore, although capture generally involves suffering, it does not involve any undue suffering, and any suffering which there is is widespread. Capture involves really that pressure which is likely to induce a Government to bring the war to a definite issue. We cannot, and we do not claim, that in the right of capture we possess a weapon which will bring an enemy to his knees, but we do claim that it is a weapon which is perfectly consistent with all the dictates of humanity.
  Then my hon. Friend touched upon the question of insurance, which is a difficult matter, as he said. It is claimed that in proportion to, and owing to the inter-nationalisation of insurance our insurance would suffer, owing to the insurance or reinsurance of an enemy's ships. On the other hand, it is true, as he said, that legally policies of insurance of enemy's ships are void as against the capture by the nation of the insurers. On the other hand, it is true I believe that Lloyd's have declared that they would not use that technical and legal right to break those bargains. It is therefore a difficult question. I suppose what would really happen would be that Lloyd's would really quote such rates as would make the business profitable, in which case the loss would be spread over the commercial community in the enemy's country, who would have to pay those premiums; or that they would refuse to quote altogether, in which

  381
  case the enemy would have to keep their merchantmen in neutral ports, in which case the loss would be spread over that community; or they would have to insure at home, in which case, again, it would be the general public of the enemy country and not our subjects who would suffer. But with regard to humanity, I need do no more than quote on the subject Lord Lorebum, who said
  "no operation in war inflicts less suffering than the apture of private vessels,"
  and so I move to another point. The hon. Member who proposed the Motion compared very briefly the laws on land and those on sea with regard to private property. I say boldly that there is not that contrast between the two that has sometimes been suggested. The reason why the conscience of humanity favours as great an immunity as possible on the land, is that in a land war it interferes with people's homes. They are in the path of the invading army, not because of anything which they have deliberately done themselves, but because their homes happen to be there. It is their misfortune and not their fault. They are no parties to the war, but they cannot get away, and therefore as little harm as possible is done to them, particularly as, if the invasion is successful and leads to annexation, those individuals with whom you have interfered will become your fellow citizens. There is no difference on the sea, mutatis mutandis. The private property of those persons who are there in the ordinary carrying out of their duty is just as immune and just as much respected on sea as it is on land. All the private property of the officers and crew is absolutely immune. The only thing which is liable to capture is the ship itself and its cargo, which have been voluntarily and purposely risked for the sake of gain.
  That is, I am sure, a point, though it may be a small point, to be borne in mind. And with regard to things of a similar nature, means of transport and communication and conveyance, which are risked in the same way on land, the law, in its effect at any rate, is just the same as it is on sea. When a country obtains control of a trade route, whether it is a river or a railway, in a country which it invades, that trade route is every bit as much closed to peaceful commerce as any sea route is closed to peaceful commerce. If an enemy obtains command of all channels of communication in a country on land, those channels would be closed just as the sea
  382
  routes would be closed and no peaceful commerce could go forward. The enemy would seize all those means for communication, the railways, and so on, and use them for his own supplies, entirely paralysing and stopping your trade. Therefore, on the land, it is legitimate to appropriate all means of transport and communication, if it is legitimate to do so on the sea. For instance, if there were a wireless installation on the land in the district invaded by the enemy, that would be captured and not allowed to work. Yet my hon. Friend proposes, I admit with limitations, that wireless installations should continue working and giving information so far as they could to the enemy on a ship, though they would most certainly stop it on the land. But the difference, and the only difference, and it is a narrow difference, between the laws of war on land and on sea is this, that when on the land any means of communication, such as railway stock or motors or barges are captured, as they can be captured, they do not become a permanent part of the property of the capturing country, but must be restored at the end of the war, whereas on the sea ships may be captured out and out. That is the total extent, so far as I can see, of the difference.
  But we must remember this, that on the land such property is innocent in character. It is captured because it happens to be there, and not because it has been purposely risked in order to aid the enemy. It has infringed no sort of prohibition; while if a ship wants to escape it may do so perfectly well. There will always be days of grace for it to get into a neutral port, and a neutral port for it to stay in. The fact that the ship and cargo are voluntarily risked for the sake of gain, and for the sake of profit to the enemy, while on land what is met with happens to be on the ordinary routes of the invasion, really establishes a certain difference. It may be, of course, that we shall be able to find some sort of ultimate solution of this question by bringing the code of law on the sea exactly into correspondence with the code of law on land, and by saying that ships which are captured shall be restored at the end of the war, and not altogether forfeited. That was the Belgian proposal, if I remember aright, at the last Hague Conference. But that is only one out of many matters which need very careful consideration before you can pronounce definitely upon them. I would

  383
  now like to come to close grips with the subject, and would like to urge that the present right of capture is so closely connected with other rights of maritime war that you cannot safely give it up without a very careful examination of how its abandonment would affect these rights and our position in exercise of them.
  Take a question mentioned by my hon. Friend, such as contraband and blockade. There is, first of all, the obvious contention in logic, and there is then the contention in strategy. But so far as the logic in the matter is concerned, the object of the hon. Member is clear. It is that private property should be immune from capture. The Resolution proposes to recognise the capture of contraband and of ships violating a blockade. Yet contraband is private property on the sea only one degree more useful to the enemy than that which the hon. Member wishes to exempt from capture, and blockade is the right of stopping all goods and all ships, enemy and neutral, in a certain zone and in certain conditions, and where it is effective it is a much more serious interference with private property than its capture on the high seas. I feel sure that he will agree with me that it cannot be very satisfactory to him to contemplate that state of things, as his Resolution does, in which the enemy property and enemy ships should be liable to confiscation, if you can draw a zone of warships round the enemy coast, although perfectly immune on the high seas. Clearly, if private property is to be really immune, there ought to be no contraband and no blockade, for surely you can hardly justify immunity in the one case and right of capture in others. There is a more serious connection between these rules with regard to strategy. The questions run into one another and depend upon one another. The Great Powers have at present agreed rules in regard to this, and their Admiralties have no doubt laid their plans and dispositions accordingly under the impression that the right of capture would continue.
  I suggest that if it is not continued there must be a very full opportunity of re-examination of those other rights to see whether you have not inadvertently increased the strain of war and sacrificed certain rights of the country while your object may be just the opposite. I recognise that in both the speeches that I listened to that view was borne in mind,
  384
  and I think that was, if I may venture to say so, a great advance, and I welcome it as showing the necessities of the situation. May I ask attention to a few considerations which arise quite spontaneously in that regard. I am purely a layman in this matter, and I have had no interview with the Admiralty in regard to it. I have not tried to find out in any way what their plans or dispositions, in event of a naval war, might be. I simply-read the Declaration of London with such care as I could to see what the law actually is, and these matters that have occurred to me are perfectly commonplace and not in any way expert considerations of the question. Take the question of contraband. I began by saying that my hon. Friend's object, and the object of all of us, is that through the security of our trade we may be able to effect a reduction of armaments. It is extremely desirable that we should be able to do that. Everyone must admit that it would be the most signal and genuine relief if we could be sure that our trade would be immune, and that we should-not have to employ fleets partly, at any rate, for the purpose of protecting it. Our Merchant Fleet is very obviously a very great target, a very tender target, and if it were no longer an object of anxiety, and if the Navy could be liberated for other duties, it would be a very great advantage. I think it is our duty to maintain the right of contraband. I do not suggest for a moment that other nations would break the law, but there would undoubtedly be a temptation to do so if two of the Great Powers were fighting, and it was a matter of life and death. But I do not suggest that they would. What I do suggest is that, quite legitimately, and inside the laws of the country, if the enemy obtained freedom from any section of the Fleet they could stop our ships and bring them to their own ports under the pretext or suspicion of contraband, alleging that they had information that those ships contained contraband.
  Those ships might be carrying food which was vital to this country, but still they might be legitimately sent for adjudication before the Prize Courts of our enemy, and long before two years were over, during which, under the Second Hague Conference ships may be before the national Prize Courts previous to any appeal to the International Prize Court, we should have been forced into submission, unless we could secure a proper food

  385
  supply in neutral ships or in some other way. I would like hon. Members to address themselves to that argument, namely, that so long as the doctrine of contraband continues—and remember this country was the first to express a willingness and desire to give up contraband, but it is insisted upon by other countries, and not by us at all—the danger to our commerce and consequently the calls upon our Fleet would be practically as great as they are now. Then, with regard to blockades. That is another weapon about which I know nothing from the technical point of view. I do not know at all whether and how the Admiralty would exercise it in any war in which we might be engaged, but it is clear to the lay mind that two things are obvious—first of all, that we no longer possess the power of blockading neutral ports under the Declaration of London, and consequently we no longer possess power to blockade close up to the enemy ports so as to prevent access from neutral ports.
  Then again, the development of submarines, torpedo-craft, and aircraft, to my mind, at any rate, mean that you cannot blockade right up close to the enemy coast. What is the effect of these two things in conjunction? It is that you could not stop enemy merchantmen going through your blockade to a neutral port, or from going along the coast between the neutral port to the enemy port. By way of illustration, take the proximity of Lisbon and Cadiz, if there were a war with Portugal; or take the position of Genoa and Barcelona, on each side of Marseilles, if there were war with France; or, again, take the port of Amsterdam and the North Sea ports, if there were war with Germany, and to my mind, at any rate, the last instance is just as impossible as any other instance I could possibly take. What I want to point out is that the ships in any of those cases could come through our blockade lines and say that they were going to a neutral port, Cadiz or Genoa, Barcelona or Amsterdam, or whatever it might be, and we should have to let them through our blockade lines. They would go along in perfect security to their own ports, and they would get fitted out for whatever services might be most valuable at the time to the enemy. They would then come out again through our blockade, and at once go to a neutral port, a perfectly legitimate thing under the present rule, either taking coal or oil to a rendezvous to supply a hostile cruiser,
  386
  or send wireless messages as to the disposition and composition of our Fleet, and reporting any changes from day to day. Or they might get through our blockade line and convert themselves into cruisers on the high seas to hold up commerce under the plea of searching for contraband.
  It is surely inconceivable that we would let the enemy ships, whose sole object, considering their national patriotism and duty to the Government, would be to render services of that kind, pass through our blockade. Surely that is a very important point, seeing that our naval operations would be made infinitely more complex and difficult if anything of that kind were allowed. I can imagine that under those circumstances we should have to give up blockade altogether. What would be the prospect then? Probably for years we should have to keep the sea with our Fleets, while the enemy Fleets were in their harbours, until owing to strain or the mishap of war, we became temporarily the weaker party, when their Fleets would come out and ours might be beaten, in which event our shores would be open to invasion. My hon. Friend will be the first to agree with me that if that, or anything like that were to be the result of giving up the right of capture, it would be because he and his Friends had been playing straight into the hands of those who want us to set up an Army on Continental models. It is the last thing my hon. Friend wants, it is the last thing I want—it is the last thing this country wants. The burden of armaments is quite big enough in all conscience at the present time, and we do not want any tendency in this country towards the stregthening of our power of operating on land owing to diminution of our power on the sea. I will take only one more case, that of the right of conversion on the high seas. There again, I believe, we should be very willing to give it up, but other nations are unfortunately not willing to give it up. Their ships would sail back to their own ports from neutral ports—in many countries it is their duty to do so—to report themselves for this service to their own Government, and they would have guns put on board. Mr. Thomas Gibson Bowles said that the guns which are needed are not very much or very showy. He says that an antiquated gun that will throw a three-inch shell 250 yards is all you require. I can imagine what would happen, namely, that when there

  387
  was any of our commerce destroyed those guns would be on deck, but whenever a cruiser came over the horizon those guns would be taken off the deck, and we should not be able, in fact, to say that the ship was using them. That is not an agreeable prospect.
  I do not presume to claim that all these arguments that I have used are absolutely sound. I mean, as a layman, they are only things that have struck me incidentally. They are sound, I think, as far as they go, but they may not be the whole truth in the matter. They are only things I found, after browsing around among some of the most obvious points after reading the laws of war as they are at present settled; but I do submit that if an outsider can come across those points, which, at any rate, seem to be rather anxious ones so far as this country is concerned, it does show that we ought not to accept a Motion, even of this mild kind, without very careful examination. It is quite conceivable, I think, that we might have a code as to contraband, as to blockade, as to conversion, as to the use of wireless, as to the treatment of captured prizes, and other questions that may be effected, and which might make immunity from capture compatible with national safety. It is quite conceivable that we might arrange with some countries or with all countries to carry out that code after some revision of those matters, if by any terrible chance we happened to be at war with them. I believe that the Government would be entirely in favour of examining the question in that way. As I said at the beginning, we do not at all wish to champion the right of capture under all conditions, but I do say that it is not conceivable that we should arrange with other countries to let all national commerce of ships go free without very anxious reconsideration of these and other parts of our maritime war law before we come to that conclusion. I will use only one last argument: Do we not want war if it comes to be on the responsibility of the peoples rather than on the responsibility of governments? Are not the peoples of countries, unless captured by a Jingo Press, more likely to avoid quarrelling with one another than their governments are? Is not everything which increases the power of expression of the peoples will, and the control by the people of their governments in the interests of peace?
  388
  I am not quite sure what the answers to those questions are. Sometimes I am hopeful about the development of peoples. Sometimes one is compelled by the passions that even now take possession of people's minds when a Jingo spirit gets abroad to lose at any rate hope for the real control of peoples of governments, and hope for the development of national consciousness as to the wrong and sin of war, but that is at any rate my hope for the development of democracy. In retaining the right of capture, we retain nothing to which any humanitarian can object, but you do retain for what it is worth a steady, persistent influence over a very powerful section of people in other countries in the direction of making them desire to avoid war. Quite apart from the right of capture, there would be sound moral reasons against war, and many material reasons, but may it not be worth while to keep the motives for peace as strong as we can. I do not put the right of capture too high. I do not say by it alone we can bring an enemy to his knees. I do not say by retaining it you have any guarantee for peace, but I claim so long as you retain the right of forcing the enemy during war to lay up his mercantile marine in neutral harbours, you will find among the great organised commercial communities a strong inclination against war, and a certain tendency towards retaining effective control over the policy of their Government. Let us remember we are in the main a naval Power. Our powers of offence in any case are not great. I, for one, do not wish to increase them by enlarging our Armies. Let us, therefore, not lightly give up such powers as we have. Let us not without reason exchange a widespread motive for peace for something which may prove a false security in war.
  Sir EDWARD BEAUCHAMP: If the abolition of the right of capture gave us any reasonable certainty of being enabled to effect any material reduction in our expenditure on naval armaments without in any way lessening our own safety and security, I believe that there is no Member in any part of the House who would not be ready to accept the Resolution of my hon. Friend. I certainly have no desire to perpetuate the competition in armaments. While it lasts, millions are taken annually from productive work which, but for the necessity of those armaments under existing conditions, might be spent in other

  389
  things which would greatly add to the prosperity and, I think, the happiness not only of the people of this country, but, as well, the people of other nations with whom it is our earnest desire to live in peace and harmony. This subject has been under discussion on more than one occasion within the last few years. The right hon. and learned Gentleman the Member for the Walton Division of Liverpool (Mr. F. E. Smith) raised it in the form of an Amendment to the Address, and last year we had a very able and very interesting speech from the Under-Secretary of State for India. I think that one of the main grounds, though I do not say it is the only ground, for desiring immunity from capture of private property at sea is that the maintenance of this right is felt to be one of the great obstacles to obtaining general agreement amongst the Powers for the reduction of naval armaments. My hon. Friend the Member for Burnley did not lay much stress upon that point this evening, but the Seconder of the Resolution did. The point was raised especially in the Debate in 1908 by the right hon. and learned Member for the Walton Division, who was answered on that occasion by the Foreign Secretary in these terms:—
  "I do not for a moment believe that the attitude of the Government on the question of the immunity of private property from capture at sea had the remotest effect on the prospect of the reduction of armaments."
  One of my objections to this Resolution is, that it deals with one part only of the whole principle of naval warfare, which has gained some adherents from the misuse of the term "private property." It is not private property in the sense that it is the property of an individual. Whether it is the ship, or whether it is the cargo, it is not the individual owner of one or the other who suffers by the capture. If the owner is a prudent man, he is insured; and it is really the consumer who has to pay the higher price caused by, amongst other things, the premium of insurance. The interest in enemy's goods on board a particular ship is, as Sir R. Custance has pointed out recently, not confined to a single individual, but is spread among a great number of people, who subsist upon the profits derived from producing and handling these goods.
  Mr. MORRELL: Does the hon. Member deny that there is any private property in a ship which is captured?
  Sir E. BEAUCHAMP: I say that it is not private property in the ordinary sense of the term; the loss really falls upon the
  390
  whole nation as consumers. It may be that amongst the losers there will be English underwriters. This may be so; but although an underwriter may lose on a particular ship, he may very well, as was the case in the Napoleonic wars, make a fair profit on the volume of the transactions into which he had entered. This case has been argued partly on the plea of humanity. I would ask those who urge that plea, is it less humane to stop your enemy's trade by capturing his ships than by blockading his ports? These are both military operations designed for the same end, namely, to bring financial pressure to bear on your enemy, and so to reduce his power to carry on the contest. You are ready, I suppose, if you argue the question on the ground of humanity, to destroy your enemy's warships, with all the awful carnage, terrible to contemplate, which would be the effect of a naval battle, and yet you would hesitate to stop his trade. The views of Lord Loreburn on this question have been mentioned by the Under-Secretary of State. I would go further back than that, and quote the words of Edmund Burke, who, speaking in the House of Commons in 1793, said:—
  "In a state of warfare, it must be the wish of every good mind to disarm the enemy rather by despoiling than killing them, as well from motives of humanity as personal interest."
  If you do away with capture of so-called private property you must, if you are not to be landed in an entirely illogical position, do away with the right of commercial blockade also. How is it possible to maintain the right to blockade your enemy's ports, to prevent neutrals as well as his own ships from entering them, while foregoing the right to destroy or interfere with his sea-borne trade by the capture of his merchant shipping? This was clearly seen by my right hon. Friend the Foreign Secretary when sending his instructions to our delegates at The Hague. These were his words:—
  "It must be remembered that the principle, if carried to its logical conclusion, must entail the abolition of commercial blockade."
  Is my hon. Friend, the mover of the Resolution, prepared for this? If so, how would he propose to bring pressure to bear upon an enemy? The sole power which this country possesses is the power to interfere with the sea-borne trade of the enemy. It is said that by interfering with his sea-borne trade, you cannot deal the enemy a vital blow. I am quite prepared to admit that. But if you were able to shut up his merchant vessels in his ports,

  391
  to stop all his sea-carrying trade, I think you would be able to bring very effectual pressure to bear upon him, and I hope more speedily to end the war. To come back to my hon. Friend's proposal, if in time of peace you could come to an arrangement of the kind referred to, are you sure that it would be carried out in time of war? I doubt very much whether it would. I would again quote the Foreign Secretary in this connection. He stated that you cannot rely on a treaty which affects only belligerents being kept in time of war with the same certainty you can rely on rules, the enforcement of which interests equally neutrals and belligerents. An agreement made in time of peace would, I maintain, have no binding force upon belligerents. If its maintenance impaired the power of a belligerent to bring the war to a close, is it to be expected that it would be kept? I doubt it. Even if you are prepared to rely upon such an agreement, is it certain that it would enable you to reduce in any way your naval expenditure or to reduce your Navy? Certainly, if commercial blockade is continued, not one single ship less would be required. It is a fallacy to suppose that the size of our Navy is dependent upon the protection of property. It is dependent upon the force which we may have to meet. We have to meet our enemy, and the object of our Navy is to destroy, or otherwise to disarm him. We may do away with the right of capture, and by doing so cripple our own power. We should still have to fight the decisive action when, other things being equal, numbers alone will tell. I hope that if this Resolution goes to a Division it will not be accepted by the House.
  Mr. DICKINSON: The hon. Member who has just sat down has asked us what reason we have to think that this change in the law, which we advocate, will bring about, or tend to bring about, a reduction in armaments. I think it is perfectly clear that armaments, or naval armaments at any rate, during the last few years have been increased, and brought about, chiefly by reason of the fact that they are wanted, not merely for the defence of the shores of the country which has supplied them, but also for purposes of defence on distant oceans. We know quite well that the arguments used in Germany by those who support a great Fleet entirely rest upon the fact that their
  392
  Colonial Empire is increasing, that their mercantile marine is getting larger every year, and that that mercantile marine is endangered by the existing law of capture at sea. There can be no doubt that it is the formation of the German Navy, the formation of other navies, and the increase of others, which has brought about the necessity in this country of our increasing our Navy. I cannot help believing that if we wish to stop the growth of armaments we have got to go a good deal deeper into the question than merely making the suggestion of a naval holiday, or things of that kind, which only mean the arrest, for that time, of our shipbuilding programme. It is because I believe that this proposal is one of those questions which go to the root of the whole matter, and which, if discussed between the various nations, will enable our representatives and their representatives to probe the whole question of armaments, and also of our international relationships, that I support my hon. Friend in this proposal that we should ask the Government to, at any rate, initiate negotiations.
  There can be little doubt that it is this country that blocks the way. At The Hague Conference, when this subject was discussed, the representatives of twenty-two Governments voted for the American proposal to abolish the right of capture, while only eleven voted against. There were a good many abstensions, and for that reason it was impossible to carry the proposal. Notwithstanding the instructions that were given by our Government, a study of the proceedings at The Hague leads one to think that it is almost a certainty that if we had taken as active a line as was taken by the Americans in supporting this proposal, the result would have been very different. The nations that voted against—several of them, at any rate—voted largely because they were anxious to follow our advice and example. Their action, I think, would have been considerably altered if we had taken the initiative with any degree of enthusiasm. The position which this country occupies in its relationship to this question is one which I think is rather—I will not say reactionary—but rather behind the times. It is the more to be deplored because it is looked upon as an action which is guided simply by our looking after our own interests. I will not say with unanimity, but the general consensus that does exist with regard to this question in favour of the abolition of the right of capture

  393
  abroad is sometimes put down to a feeling on the part of foreign nations that they would like to weaken this country. I believe that to be an error. I believe really that in the general agreement on the part of writers, Continental writers at any rate upon the subject, and the general movement of nations, there is a bonâ fide act of assent and agreement throughout the civilised nations with regard to this aspect of war. I think that is also shown by the fact that we have so distinguished a man as Lord Loreburn who advocates this cause.
  The fact is that there is an opinion growing up and very largely held that we ought in gradually moving from conditions of barbarism to the higher conditions of civilisation, to abandon this particular method of warfare, being what it undoubtedly is, a relic—I will not say of barbarism, but, at any rate, of a former system of warfare which in many respects we have abandoned. For the last 200 or 300 years there has been a general movement towards the opinion that war ought to be conducted as much as possible against the armed forces of the nation, and not as against individual persons. I think that this movement is shown by the various alterations which from time to time has taken place in the international law that affects warfare. The Under-Secretary for Foreign Affairs said that the changes which have been brought about in the rules of land warfare have been due to a desire to protect the individual person from undue hardship. We must remember that these changes have also extended to the capture of property on land. By a resolution of The Hague Conference, which was really carrying on what was being adopted fairly universally before—it was laid down—
  "That it was particularly forbidden to seize an enemy's property unless imperatively demanded by the necessities of war."
  In regard to the appliances for transport and war material, whilst saying that they might be seized even if they belonged to private individuals, the resolution said that they must be restored at the conclusion of peace, and indemnity paid for them. Besides that, there are other questions in which the sanctity of private property has been recognised in land warfare, apart from any question of inhumanity or cruelty to individual persons. We know that money lent to a belligerent State cannot be confiscated, and of course private property of a foreigner in a belligerent
  394
  State cannot be taken. The question arises why should not the same principle be applied to private property when it is on the sea, which, after all, is a public highway, and is used by the various nations of the world?
  10.0 P.M.
  And at the last Hague Convention this principle was still further followed when it was laid down that no fishing boats or vessels engaged in purely local trade were liable to be seized, and all this tends to show this general movement of public opinion towards the abolition of the right that the belligerent has to appropriate the private property of private individuals who are not themselves actually taking part in the war. And if this principle can be justified on land, it can also be justified on sea. You may urge, and it has been urged this evening indeed, that we ought to have the right to seize property at sea, because it enables you to bring pressure to bear upon the enemy, or the individuals who lose by it. Precisely that same principle would hold good on land. Nevertheless it has been abandoned on land, and there is no reason why it should not be abandoned at sea. But in reality the main argument, I think, of those who oppose the abolition is one that the right of capture at sea is supposed to provide a weapon of great value to ourselves, and one that other States do not possess. This was put forward by the Under-Secretary just now who urged that it is a means whereby we can either shorten a war or possibly prevent a war, and if war can be shortened or prevented by this means, we ought to be the last to put an end to it. But is this so? Can it really be made good? I doubt it. The question divides itself into two sections. The first question is: What is the value of this right in the hands of our enemies as against us, and how will it affect us? and, secondly, what is its value in our hands against them? There can be no doubt that, given equal naval strength, if we by any chance found ourselves at war with a combination of Powers that could put on sea a Navy with equal powers to ours, we should suffer very much more from the existence of this right of capture than any other nation. My hon. Friend has shown that, and I need not elaborate it. It is most essential to us to keep our trade free, because we could not carry on war unless we could feed and maintain the employment of our people, and we could not feed them or keep them employed if the ships bringing goods to our shores should suffer in any way. On

  395
  the other hand, other Continental Powers have other means whereby they could get the necessaries of life, and therefore the interception of sea-borne supplies to a central European nation, although it might have some effect, would have really very little effect compared with the damage which it would cause to us. The fact is, if the right to capture provides a means of bringing pressure upon a nation as a whole by cutting off the food and the goods necessary to keep up employment, its abolition would be of inestimable value to ourselves, given conditions, in which we were actually fighting for our lives with some combination of nations of equal naval strength to our own. But, of course, it may be said that if you contemplate a condition under which trade can be cut off from this country you would have a situation in which this country would be on its knees; that if we failed to keep the command of the seas we would lose, whatever happened, and therefore the question should be discussed on the basis of our still holding the command of the sea. Now if we were able to sweep the seas of all our enemy's ships, will that stop war, or will it attain its end by putting an end to war? Why should it shorten war? On the assumption that our Navy is free to travel from one place to another then with modern appliances, wireless telegraphy and rapid steamers, there would be no difficulty in our Navy practically sweeping the whole of the mercantile marine of a European enemy off the seas in a very short time. The result of that would be a loss to traders, but nothing more would happen. The ships in ports would be detained, and others would be captured, but I cannot believe for a moment that any great European nation would be in the least inclined to give in simply because its mercantile navy, which does not constitute a very large proportion of its total wealth, was put out of action and made useless, because when that was done, the whole of the trade, or the greater part of the domestic trade, of that country would go on much as before.
  The trade of Germany and of France does not depend upon its sea-going trade as our does. Their industries would continue, although there would be a certain amount of loss, but not sufficient to make them give way. Take, for instance, Germany—I doubt whether a quarter of the
  396
  imports of the wealth brought into Germany comes in by sea and in German ships. Therefore it would be only a comparatively small proportion of the trade that would be affected; much too little, I should imagine, to cause this great revulsion which would bring a war to a rapid conclusion. The same considerations would, I think, apply to the argument that it would tend to prevent war. I can hardly conceive that a great nation like France or Germany or Austria, if they were brought face to face with the necessity of declaring war, would hesitate simply because by some chance it might lose its mercantile marine. It is an argument constantly used, and one which, if well founded, I admit, ought to be taken into consideration, but in both these arguments I believe we do not recognise what are the real facts of the case, especially under the conditions of modern warfare. On the contrary, I believe that the maintenance of this principle does really generate feelings, I will not say of war, but does generate a readiness to accept increased armaments among foreign nations.
  There is no doubt that the departure made by Germany not long ago in arming her merchantmen was due entirely to the dangers which arise from this right of capture. I have always understood that that was the reason why we, most unfortunately, as I think, have taken the same course. As my hon. Friend has already stated, this is really reviving privateering, and is entirely due to the existence of the risk that commerce runs. The fact is that our duty is to reassure people rather than to insist upon methods which make them more and more anxious to arm themselves in case of war. I believe if this proposal were made to the other Powers, and if we could obtain a public recognition of the fact that it was being seriously discussed by the great maritime Powers, it would have really successful results. I am not so hopeful about Governments, because I think they are rather slow in moving in this matter. I can assure the Foreign Secretary that he has more friends among the humbler classes in foreign countries, as well as our own, than he thinks, in regard to any efforts he may make. In Germany, France, and elsewhere there is an ever-increasing number of persons who are anxious to see something done in this direction, and who are beginning to deplore, and to a certain extent oppose, this constant increase in armaments. Nevertheless, when one converses with them

  397
  one is always met with the answer, "The Navy must be kept to protect our commerce against this particular danger."
  Quite apart from the Governments of the various Continental countries, I believe we shall find that there will be an increasing support on the side of anyone who would move in this matter and bring the various Governments to consider it seriously. I know we have been told that our Government has left the door open, and that they are only waiting for propositions from the other side. I am afraid this process of waiting is not likely to come to very much. All these matters depend upon the initiative of somebody. The right hon. Gentleman has not only a great influence with Governments all over the world, but he has also a reputation with the masses of the people all over Europe and America, and I believe if he could see his way to take some step in advance on this question he would find support that would carry him through and he would influence those who are anxious to come to an agreement in other parts. Of course, the actual methods of carrying out this proposal are difficult and various. It might be possible to come to an agreement without the absolute abolition of the right of capture in every case, but upon some lines assimilating maritime law to land law. There have been several proposals made at conferences of steps that would not be going the whole distance which is sometimes advocated, but if one could make some change which would tend towards the absolute abolition of this right it would be a step in the right direction, and I believe we should find it supported by many others in other parts of Europe.
  Mr. HOLT: I think this Motion is one upon which there is rather a mixed opinion. I know there are considerations in favour of it, but there are also some powerful considerations against it; and I should like to put one or two of them before the House. The first proposition I should like to advance is that, with recent developments of shipping, capture for the weaker Power will be much more difficult than in the past. Wireless telegraphy will probably let you know where a hostile cruiser is before the capture can be effected. It will therefore be much easier for the stronger Power to chase the weaker Power off the sea and prevent captures than was the case in the past. If I am right in that view—and if I am right, as I believe I am right, in assuming that we intend to be
  398
  the strongest Power at sea—then capture is a powerful weapon in our hands, and it must be a more valuable weapon to us than to any of our opponents. As a military manœuvre by itself it is a weapon favourable to us and not to our enemy. I think that is an important consideration to keep in our minds.
  Furthermore, the power of cruisers to keep at sea is less than during the Napoleonic wars, when a ship could keep at sea for six months. Now there is scarcely a cruiser which could keep at sea for a fortnight. This, again, is against the power of the weaker naval Power to effect capture. One of my hon. Friends said that there might be a blockade preventing maritime commerce reaching the ports of a Continental Power. That is quite true if you have plenty of neutral ports; but suppose you have this terrible European conflagration, there would probably be no neutral ports, and in that case the argument fails. There is the argument that you could get goods by land in the case of a central European Power when sea transport has failed, but that depends upon neutral ports, and once those ports disappear then the necessity for maritime transport becomes just as urgent as ever it was in the old days. I was surprised to hear the hon. Member for Burnley (Mr. Morrell) produce the argument about insurance, because no system of insurance can get rid of the risk from the shoulders of that class upon which it naturally falls. What actually happens is that the class liable to the risk pool their risk with the insurance companies, and the only result of insurance under these circumstances is that you make certain of paying more than the average. Those classes are made to pay more than the average disaster, and this goes to find the profits of the insurance companies and their expenses. What would be the result if disaster were certain? You would have to pay 100 per cent. If there were no possibility of disaster, nobody would be such a fool as to insure at all. Insurance does not affect the real incidence of the loss at all. All it does is to distribute the loss amongst that particular class, but it does not get the risk off the shoulders of that class.
  The Resolution before the House tells us that ships should be exempt from capture except in the case of ships carrying materials for war. That is a very important consideration. That refers to the whole doctrine of contraband. Now consider the position of the British Empire with regard

  399
  to contraband. Not only this country, but the Empire as a whole depends upon maritime commerce. It is the means the Empire has of intercommunicating with itself. It is our only means. Practically, a very substantial proportion of the traders in the inter-Imperial trade, trading from one part of the Empire to another, carry articles which might be called materials of war. Immediately after the Declaration of London a very large number of articles which are regularly carried became actually contraband. For instance, specie and a great many more articles which are conditional contraband are regularly carried, and must be regularly carried, by the vessels that form the different links between the different portions of our Empire. Apparently all those ships would be liable to seizure. They would probably be interned in the first instance, and released in the final and ultimate appeal in a few years' time. That will not do. It is essential to us, not that the ship should ultimately be returned to the owner at the end of the war, but that during the war our ships should be able to carry on their business, which is that of carrying goods to and from this country. It would be absolutely no satisfaction to us as a nation, no matter what the position might be to the ship-owning individual, to have the whole of our mercantile shipping returned to us at the end of the war with compound interest if we had been prevented from using them during the war. It is essential to us that we should continue to use our shipping during war, not for the purpose of ship-owners only, although that is an important consideration, but also for the advantage of the rest of the inhabitants of this country who cannot live unless they have the opportunity of using ships. I regard that as a matter of prime importance.
  My hon. Friend the Under-Secretary of State referred to the proposal which, I think, he said had been put forward by Belgium for interning ships during war, and returning them at the end of war. That is absolutely futile from a national point of view. The ship might just as well be sunk straight off. Therefore, if we are going to consider the abolition of the right of capture as an advantage to our commerce during war, it is absolutely essential that the whole law of Contraband of War should be swept away. I do not believe that an international law which is clear and cannot be
  400
  disputed, and which is undoubtedly agreed upon, will be broken. I think that parties in the excitement of war will sail as near the line as they dare, and that they will give every doubt in their own favour. Experience shows that the laws will be stretched by the belligerents as far as they decently can. They will, as far as they can plausibly make a case, stretch the law in their own favour, but I do not think that they will go further. When they have no excuse for detaining the ship they will allow it to go free, but if they can trump up an excuse, especially if they are hard pressed, I believe they will do so, very likely returning her with compound interest afterwards, though that will be no satisfaction to the nation, whatever it might be to the individual owner. Look at it from this point of view. If it is necessary to protect a large portion of our contraband, the steps the Admiralty would have to take to protect, say, 20 per cent. would be sufficient to protect the remaining 80 per cent. of your trade. You cannot protect a portion of your trade only, because the method you adopt is that of chasing hostile vessels off the sea, and, if you once establish maritime supremacy, you have complete protection of everything. You cannot obtain partial protection at less cost, expense, and trouble than is necessary to obtain total protection. From that point of view we must obtain the right of total immunity, if there is to be any immunity at all, but we must not lose sight of the fact, and I put this as an argument in favour of being willing to accept abolition of capture, coupled with the total abolition of contraband that in those days, when we are neutrals, and I think we are much more likely to be neutrals than belligerents, we shall undoubtedly derive considerable advantages if we can secure the total abolition of contraband.
  There are interferences with commerce in war which I think are much more cruel, and, in many respects, more serious. I refer to the letting loose of floating mines on the seas. I do not know what would result supposing those things which occurred in China during the war between Russia and Japan were to happen in Europe in a war between two first-class Powers, and if damage to neutrals near our shores was caused thereby. I do not believe the neutrals would remain neutral very much longer. We are told that if we agree to this Motion we shall secure a reduction of armaments, There is no one

  401
  in this House more anxious than I am to secure that, but I must confess the evidence upon which we are asked to believe that a reduction of armaments is going to follow on the abolition of the doctrine of capture seems very slender.
  An hon. Member told us that one of the main motives of building gigantic navies was to protect commerce in time of war, and, later on, he said he did not believe any great Power would avoid war merely on account of the danger of the capture of its commerce. But surely, if a nation spends millions upon millions in building a navy in order to protect its commerce, it will take very considerable thought before it runs the risk of going to war and thereby losing its commerce. The argument is one which cannot be used both ways, and I venture to think it would be a matter of powerful consideration with a nation before it entered upon war and in determining in what way and how long it should prosecute it. I believe that the proper attitude for this country to take is one of being willing to negotiate on the question of the right of capture at sea—willing to give up, if necessary, something which we believe to be of considerable value to ourselves, providing we get in exchange and in other directions concessions which would be of equal value to us. I do not believe we shall ever get as a mere consequence of giving up this right an agreement to reduce armaments, but I am quite willing to admit that if we can by negotiation or concession do anything to establish greater good will among the nations there is good hope there will be a reduction of armaments as a result thereof, and that is why I respectfully urge on the Government that they should be willing to negotiate, but not willing to agree unless they get valuable consideration.
  Mr. J. M. HENDERSON: It seems to me that we are discussing a subject as to the future of which we are very ignorant. We have had no naval war since the days of sailing ships. My own belief is that when a war breaks out—God forbid that it should!—between this and any other country, you will have no ships to capture. I know very well what has happened in regard to insurance companies. The Liverpool Association have settled that unless the Government will insure their ships they have given instructions—I have this from several heads of large shipping concerns—that on war breaking out their ships are to seek the nearest
  402
  neutral port and there remain until the war is over. In the old days of sailing vessels a commercial ship could venture across the sea, but in these days of wireless telegraphy, swift cruisers and swift torpedo boats of 30 knots, no merchantman has a chance of escaping. What would happen if we had a war, say, with Germany? All the German ships would keep in their own ports, and would not go out unless they were insured by the Government and convoyed by the German Navy. Let us assume that after two or three months we had acquired command of the sea. We could not carry the war any further.
  I remember a speech of my right hon. Friend a year or two ago in which he said that he relied upon this right as being the best means of enabling us to bring a war to an end. I assert that it would not, because there would be no merchantman to seize. Germany could get her supplies from any quarter, while we could not. If our ships were kept in the same way within their ports we should suffer a great deal more than they would. We have much more to suffer in every way. If the ships keep to the ports we are injured ten times more than Germany would be. I wish my right hon. Friend to consider this. I know, from communications with shipping men, that the moment any war is declared they will stop the vessels going to sea, unless they are accompanied by men of war of this country able to protect them, or, on the other hand, unless they are insured by the Government. Without that we may take it as certain that the ships will not be there to be captured by anybody, so that we are really fighting around something which upon trial we shall find has very little substance. With the present speed of communication, and particularly with wireless telegraphy, any ship that is stopped in any part of the world will be sent into a neutral port, and there will be no mercantile shipping, except some of our own, to seize. If a foreign country is not so dependent upon sea commerce as we are, and can stop their shipping going out to be seized by us, whereas we must send our shipping out to bring us food and raw material, it stands to reason that it is much more to our interest to free ourselves, if we can, from the right of capture, so that our vessels could go and come to and from this country, which is essential to us. It does not affect us to any extent

  403
  that we should be able to capture the vessels of foreign countries, because they would not go to sea to be captured. The question ought to be considered in the light of modern science, modern shipping and modern power of communication, and the probability which exists that in case of a war between two great foreign navies the ships of this country and any other country will remain in port until the war is over, so that the question of capture has very little substance in it, and might very well be given up.
  Mr. JOWETT: I wish to associate myself and my Friends with the Motion. I should like the Foreign Secretary to deal with the case put forward as to the far larger importance to this country of having property at sea immune from capture than it is to any other country. What was said by the Under-Secretary largely centred on other arguments of this kind, that we should lose some advantage if we gave up this right of the capture of private property, whereas it is the other point of view that really is important. We are more dependent than any other country on the face of the globe for imported food, and the mere fact of interference with the food supply would send prices up within a few weeks to such an extent that the poorer classes of the community would perish wholesale because they could not afford to buy them. I have listened to what has been said in previous Debates upon this question, but I have never heard, or seen, any statement that met that point, that in view of the peculiar position of this country and its dependence upon foreign food supplies, it is vitally necessary that we, above all nations of the earth, should claim that private property at sea should be immune from capture in time of war.
  The SECRETARY of STATE for FOREIGN AFFAIRS (Sir E. Grey): The question has been treated very much in Debate as if it were a departmental question belonging to the Foreign Office, but it is not really a departmental question, as far as the Foreign Office is concerned. The Foreign Office, no doubt, becomes the channel through which, on such occasions as The Hague Conference, instructions are conveyed to the delegates who are appointed, but it is not the Department in this matter which is specially qualified or concerned with advising the Government as to what the merits of the question are. I think probably the Admiralty and the
  404
  Board of Trade are more departmentally concerned with the merits of this question than the Foreign Office. My hon. Friend (Mr. Acland) happens to have given great attention to this subject—I think he somewhat modestly called it having a browse around—and has made an interesting speech, because he has given a good deal of study to it, and has found great interest in it. On a question of this kind, which is not purely Departmental, and in which the policy of the Government has to be pronounced, it is natural, of course, for either the Prime Minister or the Chancellor of the Exchequer to make a pronouncement. Both of them happen to be particularly engaged in other matters, and I have not succeeded in being able to induce any of my other colleagues to take charge of the question this evening, and that is really the reason I am doing so, and not because it is specially a matter for the Foreign Office. I also had the misfortune to make a speech upon it some years ago also from the Departmental point of view.
  I am not sure that my own personal views on the question are not modified to some extent since I made that speech. I was dealing then with an entirely different Motion which was presented to the House in a very different way, and I think the greater part of my speech, so far as I can remember—I have not referred to it recently—was directed to the question of blockade, and on the assumption that you could not separate the question of capture from the question of blockade. My hon. Friend who introduced the Motion to the House to-night has put it forward in a form which eliminates the question of blockade from the Motion. Blockade is one of the things which he makes an exception in the Motion, and he has therefore presented to the House a proposition which, I think, is a somewhat different thing from that which the House has ever had before. It deals with the question of the immunity from capture of private property at sea, while reserving the right of blockade. These two propositions are entirely different. That reservation changes the character, and certainly changes my attitude, as to immunity from capture of private property at sea. I would say this, and I am sure it is the view of the Government, that they could not consider or accept any Motion which would commit them to the abolition of the right of blockade. That they would certainly reserve,

  405
  but when it comes to the question raised by my hon. Friend which eliminates the question of blockade, I think we can discuss it in a much less uncompromising spirit. I would like to say that my hon. Friend brought out very clearly the importance of the question. He also brought out that it is not a one-sided question, and that there are great difficulties and limitations attached to it, and his whole speech was a thoughtful discussion of the subject and a real contribution, I believe, to making some progress, and it is in that spirit I should like to deal with it. My hon. Friend said he would deal with it from the severely practical point of view of national interests. The hon. Member for West Bradford (Mr. Jowett) also spoke from that point of view. He said that it is more to our interest than to the interest of any Continental nation, or any other nation in the world, that shipping and private property should be immune from capture at sea. I think I can understand the point of view of my hon. Friend, but I will restate it in these words. The interests exposed by British trade are so great and so vital that it is absolutely certain immunity for merchant ships would be an undoubted advantage to Great Britain.
  To understand the position you have to consider whether it can be secured. We must get an absolute and certain immunity for ourselves. If an agreement were loosely drawn and subscribed to by us which left us under the impression in time of peace that we had secured immunity, and then, when we were unfortunately engaged in war, left us to discover that we had not secured it, that would be the most unsatisfactory and dangerous position of all. That is why you want to approach this question very carefully, and any agreement on this question is in a different position from an agreement like the Declaration of London, and things of that kind, which, regulating relations and dealings in time of war, not between belligerents inter se, but between belligerents and neutrals, may serve to secure that those agreements will be kept, because a nation having become a belligerent is anxious not to provoke seizure, and that is in itself an automatic pressure upon the belligerent nation not to violate an agreement which it has come to in time of peace, and which affects its dealings with neutrals. But when you come to an agreement which is only between belligerents, which you have made in time of peace, but which in time of war
  406
  will be operative only between the nations at war, then there is much less sanction and pressure behind it, and a much greater inducement to one of those belligerent nations, I will not say openly to put the thing aside, but, as the Member for Hexham has said, to put his own interpretation upon it.
  What I apprehend would happen unless any Resolution about immunity of private property at sea were very carefully drafted would be something of this kind—to give one instance. War has broken out between two belligerent Powers, each with considerable navies, each having bound themselves in time of peace to respect immunity of private property and shipping in time of war. A merchant vessel belonging to one of them, equipped with wireless telegraphy, might possibly either from design, or it might even be by accident, come among the fleet of the enemy. The enemy seeing a merchant vessel, belonging to the belligerent nation with which it was at war, equipped with wireless telegraphy, would certainly either seize that ship or at least confiscate its wireless telegraphy. It would be impossible to have a condition of things in which, two nations, being at war, the vessels of each of those nations equipped with wireless telegraphy could be able to move freely among the fleet of the other nation, sending information back as to its position. Suppose that nation, to protect itself, seizes that ship or confiscates its wireless telegraphy what is to prevent the other nation from saying "Already the rule of immunity from capture at sea has been violated, and having been violated in the first instance by the other party we do not intend ourselves to observe it?" You must have some careful rule to guard against things of that kind. Again, with reference to contraband, suppose that in time of peace you have come to an agreement that there should be immunity of private property at sea, and that in time of war one belligerent nation issues a list of contraband and declares food to be contraband. The other belligerent nation at once loses all the advantages, all the main advantages on which it thought it could rely when it signed the agreement in time of peace. I think that those illustrations lead up to what will be my main point to show that we cannot point blank say that we are prepared to agree to immunity of private property from capture at sea. But we will advance this stage. I think we are

  407
  prepared, and, in fact, in 1907, we did give instructions to our delegates to say that if it were likely to lead to a reduction in expenditure on armaments, or if we had any evidence to that effect, we must be prepared to agree to something.
  Then I am afraid the position is not improved with regard to the reduction of expenditure upon armaments. It used to be assumed that other Continental nations were only waiting for some word from us on this question to reduce their naval expenditure. That used to be assumed in regard to Germany in particular. I think some years ago it was really the underlying assumption of those who supported this view that, if we would only speak the word, it would lead to the reduction of the German naval strength. In all the eight or nine years that we have been in office we have never had the least indication from any Continental nation that I remember—certainly not from Germany—that their naval expenditure was bound up in any way with the question of the immunity of private property from capture at sea. No other country has come to us and told us, "If you will agree to this, it will enable us to reduce our naval expenditure." If it had been the fact, undoubtedly we would have had some indication of it. My hon. Friend who moved the Motion said there would be an indirect effect from the change. I am not sure that I am very sanguine about that indirect effect. My own opinion 5s that practically nothing you can do, that no change in the law, or Resolution or Regulation of this kind, will really have a very material effect upon the chances of war or expenditure upon armaments, except one thing, and that is the growing belief between the great nations of the world that they have good intentions towards each other. If we could only arrive at that state of things—which is arrived at from time to time, without any alliance or binding obligation, between particular nations—and if the Press of the different countries, in dealing with international questions and foreign affairs, gave to every country at least the benefit of the doubt, I think we should see an enormous and rapid improvement on the question of armaments. Until we get some change of that kind I do not believe that the navy laws of foreign Powers can be affected or altered by this question, or by other definite arrangements which we may offer. With regard to the risk of war,
  408
  and the pressure which may be brought to bear upon a foreign country by interference with sea-borne commerce, the view taken on the Continent I believe to be quite different from that which we heard quoted from Lord Loreburn in this country, and it is at the present moment the apprehension of interference with sea-borne commerce which is regarded on the Continent as one of the great risks of going to war.
  We must not bring about a state of things under which, between ourselves and any great Continental nation, that great Continental nation makes up its mind that it is going to run no risk, or a risk of very limited liability, in case of war, while we ourselves remain open to risks of unlimited liability; because, as regards any Continental nation, we should be liable to risk in time of war with them, or we should be liable to risk if our Navy was not of sufficient strength, a risk to which the Continental nation would not be liable. However superior our Navy is to that of any great Continental country, there can be no question, whatever naval victories may be achieved, of the invasion or conquest on our part of that territory. That is out of the question, with the enormous Continental armies that are there, so that no Continental country runs that risk so far as we are concerned. As far as we are concerned, supposing our Navy was worn down, and if you so limit the operations of our Navy that it is unable to bring pressure to bear on the other country, and the other country is able to continue the war without being subjected to pressure you may have the war continued for such a length of time during which the whole burden of wear and tear and of protection of the sea is upon our Navy and not upon the Navy of the Continental Power, and you are going to make war a very one-sided affair once you produce a state of things in which the balance of risk in war is enormously against this country and enormously in favour of the great Continental country, and I doubt whether you have done anything either to diminish the chances of war or to diminish the expenditure on armaments. That is why I make the point of the right of blockade. If you eliminate the right of blockade when you come to the question of interference with merchant ships and private property on the high seas I agree to this extent with my hon. Friend, the mover of the Resolution, that I do not think that it is to our interest that we

  409
  should pose as being the champions of the maintenance of that right.
  My hon. Friend said that at the last Hague Conference we had been the great obstacle. I can only speak more or less my own personal opinion, because this is a very large subject, which the Government will have to consider much more carefully than it has yet had time to consider it before it gives its final instructions to our delegates to The Hague Conference, but my own opinion is that there is no reason why we should be found the chief obstacle at the next Hague Conference. There is no reason why we should not devote our efforts and our considerations in the interval that must take place before the next Hague Conference not to supplying our delegates with arguments for opposing the Resolution, which undoubtedly will be brought forward by the United States, or some other Power that brought it forward before; but to examining the conditions on which we can instruct our delegates to accept the Resolution. I would suggest that discussion in this country should be devoted, not to labouring the mere point to give immunity to merchant ships, and private property at sea is a desirable thing without examining it closely, but the discussion should occupy itself with examining the conditions on which it might be safe for this country to agree to such a Resolution. Some of the conditions obviously are, first of all, the question of blockade, on which we should want a recognised understanding with other countries. We had such in the Declaration of London. If the Declaration of London were ratified that would stand and be sufficient with regard to that particular point of blockade. Without some understanding with regard to blockade we could not agree to this particular Resolution. Then you would certainly have to have very strict conditions with regard to contraband, in order to guard against the illustration I gave of the want of regulation of contraband being used as a protest or excuse for setting immunity aside in time of war. That would want very careful consideration. I think my hon. Friend the Under-Secretary of State for Foreign Affairs said you ought to have an agreement that merchant vessels are not to be turned into armed ships. Otherwise what will happen will be this: You may be at war with a Continental country and you may have established a blockade of its ports. One
  410
  of those merchant vessels may go to a neutral port near its own coast, and you would be unable to stop it going. It could go there and wait until some opportunity of the blockade allowed it to slip through into one of the neutral ports of the Continental country and emerge again an armed vessel to do what mischief it could. Therefore, that is one of the points on which we should want an agreement. I quite agree with my hon. Friend the Member for Hexham (Mr. Holt) that if we agree to anything of this kind we must get a quid pro quo. I think he mentioned the question of floating mines. That, I agree, is a thing in regard to which we should certainly want an agreement.
  All these points want very careful examination. My hon. Friend who brought the Motion before the House in a forceful way appeared to recognise the difficulties. I have spoken my own personal opinion rather than the settled opinion of the Government, who have not had time to consider the whole matter; but I think I have met my hon. Friend to a considerable extent by advancing the position which we might be able to take up at The Hague Conference. I have indicated reasons why we must keep our hands free. Our object in doing so is not to offer a blank opposition to this question on the next international occasion, but to guard against committing ourselves to accepting it without having secured proper conditions. If that is so, I cannot on behalf of the Government accept a Motion committing us to initiate negotiations with foreign countries, as this Motion must be regarded as doing. We must first have time to work out the conditions on which we should be prepared to negotiate. I trust that in the course of the next year or so that will be done, and that when the subject next comes before the House the Government may be in a position to take the matter a little further, and to be more explicit as to the conditions upon which such a position might be taken up by this country. If it is understood that we must have conditions, I should be quite prepared to take up the attitude that we should not on the next occasion refuse to negotiate, but should come forward ourselves with the actual conditions which we regard as essential and fair in the matter with the possibility of a settlement.
  Mr. MORRELL: Would the right hon. Gentleman accept a slight Amendment of the Resolution to the effect that the Government would be willing to negotiate if invited to do so.
  Sir E. GREY: No, Sir. I think we must have our own time to examine the matter. It is difficult from the Motion before us to say exactly to what we should be committed.
  Sir F. BANBURY: It will be evident Lo every one that we have discussed a most important subject, and one which cannot be disposed of in a debate extending over two and three-quarter hours. The hon. Member for St. Paneras (Mr. Dickinson) suggested that if we consulted other Powers on this question we should be going a long way towards the reduction of armaments, and he brought forward as an illustration the fact that at the last Hague Conference we had, in his opinion, obstructed rather than endeavoured to advance his particular proposition. I think that the argument was a very unfortunate one, because at the last Hague Conference what took place was this: we entered into it in the belief that if we pointed out to the other Continental Powers that we were prepared to diminish armaments other Continental Powers would at once accede to our request and—
  It being Eleven of the clock the Debate stood adjourned.
  The remaining Orders were read and postponed.

  MENTAL DEFICIENCY ACT (PROVISIONAL REGULATIONS).
  Mr. WEDGWOOD: I beg to move, "That an humble Address be presented to His Majesty praying that the Provisional Regulations made by the Home Office under the Mental Deficiency Act, 1913, be annulled."
  The Mental Deficiency Act was brought in two years running. During the first year it contained a Clause requiring the local authority which had to administer the Act to make what amounted to a black list of all the defectives within their area. That requirement was very strongly objected to both in Committee upstairs and elsewhere. It was regarded as undesirable that a black list or record of defectives in the country should be made. The objection was so strong and so well-founded that when the Bill was reintroduced in 1913 that provision was excluded, and power was taken instead for the local
  412
  authority to make a list which I will describe to the House in the words of the Act, which were as follows:—
  "The local authority are hereby empowered that it shall be their duty to ascertain what persons within their area are defectives subject to be dealt with under this Act otherwise than under paragraph (a)."
  The House will recollect that this Act of Parliament was recommended by the Government to the House on the ground that it did not apply to all defectives, that it was not an Act of Parliament which hunted out defectives, but only dealt with those who come otherwise within the meshes of the law, and that the ordinary defectives would not be dealt with by the Act. Consequently, the local authority was only given power to take particulars as to those defective who come within the provisions of the Act. Those who are within the provisions of the Act have to be not merely defective persons, but defective persons found neglected. You cannot make that return before they are neglected, nor can you make a list of those found guilty of any criminal offence until they are found guilty. You can make a list of those undergoing imprisonment and the habitual drunkards, but not those who are found in receipt of Poor Law relief giving birth to illegitimate children until they are so found. Therefore the powers of the local authority were severely restricted by the State, and they were only to make a list of those who came within the provisions of the Act as being already within the meshes of the law. We knew in getting that provision excluded we were acting directly contrary to the wishes of the Eugenists who brought the Bill for ward, but it was claimed by the Home Secretary—
  Notice taken that forty Members were not present.
  Mr. WEDGWOOD(seated and covered): On a point of Order. May I ask you if I have not the opportunity of moving this Address now, whether I am deprived of my rights under the Mental Deficiency Act of moving this Address to the Throne? I desire to know from you whether these Regulations will become law if this opportunity of moving the Address is not given?
  Mr. SPEAKER: I should like to refer more particularly to the Statute.
  Mr. WEDGWOOD: May I read the passage?
  Mr. SPEAKER: The probability is that the Statute fixes a particular date.
  Mr. WEDGWOOD: It fixes thirty days on which the House has been sitting. Those thirty days expire to-morrow.
  Mr. SPEAKER: The hon. Member's only chance then would appear to be to-night.
  Mr. WEDGWOOD: In that case, as we can always be counted out, I presume that
  414
  this provision in the Act to give the House an opportunity of preventing the regulations becoming law is a farce.
  Mr. SPEAKER: I should not like to say that anything the House does is a farce. It depends upon how much interest is taken in the matter.
  House counted, and forty Members not being present—
  The House was adjourned at Seventeen minutes after Eleven o'clock, until to-morrow (Thursday).

NATIONAL INSURANCE ACT.
  CONTRIBUTIONS RETURNED.
  CONTRIBUTIONS RETURNED.
  Licensed Tobacco Manufacturers.
  Licensed Tobacco Manufacturers.
  Land Purchase (Ireland).
  Land Purchase (Ireland).
  Conyngham Estate, County Donegal (New Roads).
  Conyngham Estate, County Donegal (New Roads).
ROYAL NAVY.
  HOSPITAL STOPPAGES.
  HOSPITAL STOPPAGES.
  WAGES PAID, 1913–14.
  WAGES PAID, 1913–14.
  CONTRIBUTIONS UNDER NATIONAL INSURANCE ACT.
  CONTRIBUTIONS UNDER NATIONAL INSURANCE ACT.
BRITISH ARMY.
  ROYAL FLYING CORPS.
  ROYAL FLYING CORPS.
  OFFICERS (WAGES PAID 1913–14).
  OFFICERS (WAGES PAID 1913–14).
  Necessitous School Areas.
  Necessitous School Areas.
  Victoria and Albert Musuem.
  Victoria and Albert Musuem.
  School Board Elections (Scotland).
  School Board Elections (Scotland).
POST OFFICE.
  TELEPHONE CALL OFFICE, KILLYLEIGH, COUNTY DOWN.
  TELEPHONE CALL OFFICE, KILLYLEIGH, COUNTY DOWN.
  MOUNT PLEASANT REFRESHMENT BRANCH.
  MOUNT PLEASANT REFRESHMENT BRANCH.
  Importation of Plumage (Prohibition) Bill.
  Importation of Plumage (Prohibition) Bill.
  German Empire (Expenditure).
  German Empire (Expenditure).
  Mercantile Marine (Deaths of Asiatics).
  Mercantile Marine (Deaths of Asiatics).
  Friendly Societies (Rules).
  Friendly Societies (Rules).
  Debt Reduction.
  Debt Reduction.