Sitting of 13 October 1915

Preamble
The House met at a Quarter before Three of the clock, Mr. SPEAKER in the Chair.
PRIVATE BUSINESS.
Glasgow Water Order Confirmation Bill, Lords Amendments considered, and agreed to.
BANK OF ENGLAND NOTE ISSUE.
Copy ordered of Correspondence between the Treasury and the Bank of England as to the issue of Notes in excess of the limit fixed by Law at the time of the outbreak of War.—[Mr. Montagu.]
LOCAL GOVERNMENT BOARD.
Copy presented of Supplement to the Forty-fourth Annual Report of the Local Government Board for 1914–15, in continuation of the Report of the Medical Officer of the Board for 1914–15, containing a Report on Maternal Mortality in connection with Childbearing and its relation to Infantile Mortality [by Command]; to lie upon the Table.

MUNITIONS.
Copy presented of the Munitions (War Service Badges) Rules, 1915, dated 9th October, 1915 [by Act]; to lie upon the Table.
Copy presented of the Munitions (Ordering of Work) Regulations, 1915, dated 9th October, 1915 [by Act]; to lie upon the Table.

POST OFFICE (MONEY ORDERS, INLAND).
Copy presented of the Postal Order (Inland) Amendment (No. 2) Regulations, 1915. Dated 1st October, 1915 [by Act]; to lie upon the Table.
ORAL ANSWERS TO QUESTIONS.
  WAR.

    ADMIRALTY CONTRACTS (IRELAND).
    Mr. GINNELLasked the Secretary to the Admiralty the value of the Admiralty contracts placed in Great Britain and in Ireland, respectively; and the respective percentages of the whole during the first twelve months of the War?
    The PARLIAMENTARY SECRETARY to the ADMIRALTY (Dr. Macnamara): I fear I can only refer my hon. Friend to the answer given to him on 24th June last to the effect that to furnish the information desired would entail more labour than could be spared at the present time. I may, perhaps, remind my hon. Friend of the answer which I gave to the hon. Member for St. Stephen's Green on the 4th May, a copy of which I sent him on a previous occasion. That indicates the varied nature of the supplies which we obtain from Irish firms.

    SOLDIERS AND SAILORS (PENSIONS AND GRANTS).
    Mr. FALLEasked the Secretary to the Admiralty if he is aware that men of the dockyards who enlisted from a dockyard with the permission of the head of their Department were given civil pay to an amount sufficient to make up, with their allotment and separation allowance, the amount of their former wage; if he is aware that this right, privilege, or favour under which these men enlisted has been recently taken away from all men who entered the dockyard after the Declaration of War, even from those who entered with in one week of the Declaration of War; and if he will give his attention to this question and see that the men who so entered the dockyards and the Service should be again given the civil pay which was promised them?
    Dr. MACNAMARA: The privilege of the retention of civil pay allowed to Government employés actually in Government employment at the commencement of the War has been, in a number of cases, extended, under a misapprehension to

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    men who entered the Service since the outbreak of War, and subsequently joined the Forces. It is this class of cases which my hon. Friend has in mind. I can quite appreciate that there must be some dissatisfaction in such cases where the adjustment of the action taken locally under a misapprehension involves the withdrawal of privileges which the men referred to have received. The question is being considered, though I can give no undertaking.
    Mr. FALLE: Is the right hon. Gentleman aware that these men, some of whom joined the day after the Declaration of War, were under the impression that they would receive civil pay, and if they are not to have it will they be allowed to return to the dockyard?
    Dr. MACNAMARA: There appears to have been a good deal of misapprehension locally, and as I have said the question is being reconsidered; I will also consider whether the men will, if they cannot get their civil pay, be allowed to return to the dockyard.

    RECRUITING (IRELAND).
    Mr. GINNELLasked the Under-Secretary for War when and in what service John O'Donnell, of Larkfield, Manorhamilton, received his captaincy; how much public money has been paid and entrusted to him for his own use and for other recruiting purposes since the War began; whether it is with the sanction of the War Office he attends fairs and markets, threatening the physical destruction of the Nationalist society to which the young men belong, and abusing, cursing, striking, and hurling obscene language at the young men; whether he is aware that a young fellow named Kerigan, who retorted when so provoked, has been fined £1 under the Defence of the Realm Act; whether the magistrates ascertained the amount of liquor O'Donnell had taken on the day of that altercation; if these are not the usual methods of recruiting whether the results justify them; and, if the War Office disapproves of them, whether O'Donnell's services will be continued in county Leitrim or on the field of battle?
    The UNDER-SECRETARY of STATE for WAR (Mr. Tennant): The commission of Mr. John O'Donel dates from the 24th
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    June, 1915, and is that of a second-lieutenant and not of a captain. In reply to the second part of the question, I cannot say how much public money has been entrusted to Second-Lieutenant O'Donel, but I feel confident that it was no more than was adequate for the performance of the recruiting duties assigned to him. In reply to the third part of the question, I understand that Second-Lieutenant O'Donel attends some fairs and markets for recruiting purposes, but no complaints of behaviour such as that described in the question have been received. James Kerrigan was prosecuted and fined £1 under the Defence of the Realm Regulation Act for obstructing Second-Lieutenant O'Donel in the discharge of his duty as a recruiting officer. As regards the fifth part of the question, I have ascertained that the magistrates asked no question, as is suggested, regarding the amount of liquor Second-Lieutenant O'Donel had taken on the date in question, and I have independent testimony that Second-Lieu-tenant O'Donel was quite sober on the occasion. As regards the last two portions of the question, I am assured that Second-Lieutenant O'Donel has a friendly manner with the people generally in the district, and that he has been most successful as a recruiting officer. It is not proposed to discontinue the use of his services.
    Mr. GINNELL: On whose evidence was Kerrigan convicted? Was it that of O'Donel?
    Mr. TENNANT: I think I ought to have notice of that question.

    ARMY CONTRACTS (IRELAND).
    Mr. GINNELLasked the Financial Secretary to the War Office the value of the Army contracts placed in Great Britain and in Ireland, respectively, and the respective percentages of the whole during the first twelve months of the War?
    The FINANCIAL SECRETARY to the WAR OFFICE (Mr. Forster): The total value of contracts placed by the War Office with Irish firms from the beginning of the War to the 30th September last is about £2,600,000, but this figure takes no account of contracts placed locally—e.g., for provisions and forage—or of special local purchases, for which no estimates are available. I regret that I cannot give corresponding figures for Great Britain.

    WAR LOAN (BANK OF ENGLAND> CHARGES).
    Mr. CURRIEasked the Chancellor of the Exchequer whether he will consider the practicability of arranging that in future issues of War Loans such special arrangements as now involve certain investors in the payment of a charge to the Bank of England to cover its trouble will be incorporated in the original prospectus terms, so as to be available to subscribers free of cost?
    The CHANCELLOR of the EXCHEQUER (Mr. McKenna): I cannot undertake to give any pledge with regard to the terms on which any future War Loan may be issued.

    BELGIAN HOPS.
    Mr. LAURENCE HARDYasked the Chancellor of the Exchequer whether he is aware that during recent months the importation of hops from Belgium has been rapidly increasing, namely, from nothing in November to over 8,000 cwts. in August last; whether, since the area under hops in that part of Belgium, unoccupied by the enemy, is very small, the larger part of the hops imported must be of enemy origin; and whether he will consider if it is desirable that, as in the case of sugar, the import of which was prohibited for fear of enemy sugar being brought in, so in the case of hops a similar prohibition should be put in force?
    The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Captain Pretyman): My right hon. Friend has asked me to reply to this question. The hops imported from Belgium are mainly from the Poperinghe district, which lies behind the Allied lines, and all but 320 cwts. of the whole quantity imported have reached this country viâ Dunkirk. It would appear that the recent increase in importation to which the hon. Member refers has been due to the fact that only an unusually small quantity could be shipped last autumn. The total quantity of hops imported from Belgium during the twelve months ending on 31st August last was 27,401 cwts., as against 22,918 cwts. in the twelve preceding months.
    Mr. HARDY: Is the hon. Gentleman aware that the total production of that portion of Belgium in the hands of the Allies is about 1,500?
    Captain PRETYMAN: I believe what I have stated is the fact.

    MAIZE STOCKS, UNION OF SOUTH AFRICA.
    Mr. KINGasked the Parliamentary Secretary to the Board of Agriculture whether he is aware of the stocks of maize in hand in the Union of South Africa; and whether any steps are being taken to make these stocks available for Home purposes?
    The PARLIAMENTARY SECRETARY to the BOARD of AGRICULTURE (Mr. Acland): The Board are aware that a considerable quantity of maize is available in South Africa for export, and arrangements are being made, as far as is practicable, for its shipment to this country.
    Mr. KING: Does that mean that special rates are being arranged so that a special ship or shipping will be sent to South Africa?
    Mr. ACLAND: I will inform the hon. Member privately, in detail, of what we propose to do.

    ENLISTMENT OF FIREMEN (BRADFORD).
    Sir G. SCOTT ROBERTSON: I desire to ask the Under-Secretary of State for War a question of which I have given him private notice, namely: Whether he is aware that in Bradford the Fire Brigade men of military age are being solicited by recruiting parties to join the Army, while, on the other hand, the authorities, viewing with alarm the prospect of having to replace experienced firemen by untrained men of non-miltiary age in such a densely populated city as Bradford, more especially in view of the possibility of damage by visits of hostile aircraft have had to take active steps to prevent the firemen from enlisting; and whether, in these circumstances, he will direct recruiting sergeants not to attempt to enlist the firemen; further, whether he will consider the desirability of allowing these patriotic firemen to wear an official badge which will show everybody that they only desist from entering the Army at once because of the call of more pressing and immediate duty in watching over Bradford and protecting the city against fire?
    Mr. TENNANT: I do not know that I can agree with my hon. Friend's description as to which is the more pressing duty. I have received notice of my hon. Friend's question and am having inquiry made, but up to now I cannot, of course, give an answer because I have not the information.
    Sir G. SCOTT ROBERTSON: Does the right hon. Gentleman appreciate the danger of denuding our great cities of trained firemen and supplying their places with boys or oldish men without any experience whatever of Fire Brigade work, especially in these days when Zeppelin raids may be expected?
    Mr. TENNANT: I appreciate all that.
    Sir G. SCOTT ROBERTSON: If he appreciates that, and if the facts are as stated, will he consider the advisability of issuing a badge to the retained firemen?
    Mr. TENNANT: I will consider that.

    DEFENCE OF THE REALM ACTS (CASES IN IRELAND).
    Mr. GINNELLasked the Chief Secretary for Ireland how many banishment orders have been issued in Ireland under the Defence of the Realm Acts, and how many are now in force?
    The CHIEF SECRETARY for IRELAND (Mr. Birrell): Twenty-one persons have been served with orders under Article 14 of the Defence of the Realm Regulations prohibiting them from residing in or entering Ireland or certain specified areas therein. In six cases the orders are no longer in force, and in two others the persons have been notified that the orders are conditionally suspended.
    Mr. GINNELLasked the Chief Secretary for Ireland for what reason Messrs. Pim, MacCullagh, Blythe, and Mellows were brought before a resident magistrate to be sentenced to imprisonment by direction of the military authorities, instead of being dealt with by those authorities themselves; if any offence was committed or apprehended, will he say what it was in each case; why it was with held from the Court; why the Crown witness in each case expressly declined to answer defendant's counsel as to any offence, or evidence of offence, or reason for punishment; under what part of any Statute the magistrate, without trial, passed sentence of imprisonment for some-
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    thing not stated and of which no evidence was given; where is the statutory authority for imposing an additional month's imprisonment on Mr. MacCullagh for not keeping an undertaking which he never gave and which was illegally required; and, seeing that the procedure in these cases suggests no limit of application and may therefore amount to permanent imprisonment for an indefinite number without offence, charge, or trial, can he say how many of their political opponents the Government intend to proceed against in this manner?
    Mr. BIRRELL: The cases of the persons referred to in the question were dealt with by a Court of Summary Jurisdiction after it had been determined by the competent military authority, under Article 56 (3) of the Defence of the Realm Regulations, that they were of such a character that they could be adequately dealt with by such a Court. The offence with which the prisoners were charged was that they failed to comply with an order made against them by the competent military authority in pursuance of powers vested in him by Article 14 of the Regulations. The nature of the charge was clearly stated, and the fourth and fifth parts of the question, accordingly, do not arise. The answer to the sixth part will be found in Section 1 (5) of the Defence of the Realm Consolidation Act, 1914, which provides for a maximum term of six months imprisonment in the case of offences tried by a Summary Court. With regard to the last part, I must refer the hon. Member to the answer I gave him on the 26th July last.
    Mr. GINNELL: I should like to know whether the competent military authority in Ireland or the right hon. Gentleman himself believes that these four gentlemen are more dangerous to the realm than Lord Northcliffe?
    Mr. BIRRELL: I am rather satisfied with a less degree of danger.
    Mr. GINNELL: Why not proceed against him then?

    INCREASED RENTS (MUNITION AREAS).
    Mr. PRATTasked the Minister of Munitions if his attention has been called to the action of certain property-owners in.

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    Glasgow and on Clydeside in making extortionate increases in the rents of working-class houses; whether he is aware that considerable industrial unrest is threatened in consequence; and whether he has any powers under the Munitions Act to deal with this matter?
    The MINISTER of MUNITIONS (Mr. Lloyd George): I have received many representations on this subject, and I am informed that the unpatriotic course adopted by certain house-landlords in taking advantage of the national need to extort increased rents in munition areas is aggravating the labour unrest in certain districts. I have, therefore, directed my officers in these localities to make immediate inquiry into the matter and report to me.
    I am not sure that the Munitions Act is applicable to the case, but should the allegations of an unjustified increase of rentals of munition workers owing to war conditions prove to be substantiated, the Government will not hesitate, if necessary, to ask Parliament for any powers required to deal with the situation.

    Old Age Pensions (Ireland).
    Mr. GINNELLasked the Chief Secretary to the Lord Lieutenant of Ireland whether the old age pension inspector found that James and Anne Reilly, of Fermore, Streete, Westmeath, are both over 70 years of age, the man being for years crippled and unable to work the farm nominally his, but worked and stocked by his son; whether the assignment of the farm to the son was anything more than legal completion, in view of the son's marriage, of a fact long previously accomplished; whether it is the usual practice in such circumstances to value the son's stock and ascribe them to the parents in order to prevent old age pensions; whether the Coole pension committee, cognisant of all the facts, have repeatedly voted old age pensions to those two old persons; and, the ownership of means being the only question at issue, whether, on the local committee repeating its vote, the Local Government Board will have that question decided by the County Court judge or an impartial valuer before ruling on the pensions?
    Mr. BIRRELL: I would refer the hon. Member to the reply given to his question on this subject on the 22nd July last. As
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    regards the concluding portion of the question, the Local Government Board are the authority constituted by Parliament as the final court of appeal in old age pension cases, and they have no power to delegate their duties to any other body.
    Mr. GINNELL: Has not the right hon. Gentleman ascertained in the course of the inquiries he has made that the son of these people has worked the farm for many years, and that they are incapable of working it? Are they not entitled to the pension?
    Mr. BIRRELL: It was a case where the owner of the farm transferred it to his children. Had he retained it he would not have been entitled to the pension.

    Untenanted Land (Ireland).
    Mr. GINNELLasked the Chief Secretary for Ireland if, to show how the Estates Commissioners have contributed to the increase of food production in Ireland, he will state the number of new holdings formed from untenanted grass land that they have vested in purchasers during the twelve months ending 30th September last and the average number of the same class of holdings vested by the Commissioners yearly during the preceding ten years?
    Mr. BIRRELL: I am informed by the Estates Commissioners that the number of parcels of untenanted land vested by them as separate holdings during the twelve months ended 30th September last was 451, the average number of the same class of holdings vested yearly during the ten years ended 31st March last being 374.

    Royal Irish Constabulary.
    Mr. GINNELLasked the Chief Secretary for Ireland whether his attention has been directed to the recent disclosure in a Petty Sessions Court in Ireland that Sergeant Sugrue, Royal Irish Constabulary, had offered to Mr. Hyland a bribe of £100, with other inducements, if he would sware falsely that certain young Nationalists in the district had placed a bomb to blow up Glenaheiry Lodge; from what source that money was obtainable, and what was to have been Sugrue's own reward; whether he has since been and now is in the police force; whether it was on his evidence Lord Ashdown obtained £448 5s. l1d. from the ratepayers of county Waterford for the alleged malicious injury; and, want of sufficient information having been the reason for refusing a

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    sworn inquiry, whether such an inquiry will be granted now that this information is available?
    Mr. BIRRELL: I am aware that in the course of a case recently heard at the Petty Sessions Court at Clonmel the solicitor appearing for one of the defendants, in order to shake the credibility of the plaintiff, read out a document which he stated was an affidavit signed by the plaintiff in 1911. This document contained the statement referred to in the first part of the question. Sergeant Sugrue, who is still a member of the Royal Irish Constabulary, denies upon oath that he made any offer—monetary or otherwise—to Mr. Hyland, and he had no authority to do so. The Inspector-General has no reason to doubt the sergeant's denial, and it is not proposed to hold any inquiry into the matter. The answer to the fourth part of the question is in the negative.

ORDERS OF THE DAY.

  BUSINESS OF THE HOUSE.
  Mr. PRINGLE: I desire to ask the Minister of Munitions whether his attention has been called to the fact that there are a hundred and sixty-four questions on the Paper for to-morrow, and that that number will be increased by the questions postponed from to-day, and whether, in these circumstances, he will not move the suspension of Standing Order 19 for to-morrow's Sitting?
  The MINISTER of MUNITIONS (Mr. Lloyd George): I understand that if it were desirable to create a precedent to-morrow would be the most unsuitable occasion, because my right hon. Friend the Secretary of State for Foreign Affairs has a most important statement to make.
  Sir A. MARKHAM: Are we to understand that the Foreign Secretary cannot keep his reply back for a quarter of an hour? Does it make any material difference whether he makes that statement at 4 o'clock or 3.45? Having regard to the fact that the Prime Minister has asked that three questions put down for to-day should be postponed till to-morrow, that means that if the right hon. Gentleman answers those questions, the questions of three other Members will be shut out. I would ask the right hon. Gentleman particularly if he is going to be bound by precedent?
  Mr. LLOYD GEORGE: There are many occasions upon which questions have exceeded the limits allowed by the Standing Orders. I think that before we depart from a system which, on the whole, has been found to meet the general convenience of the House, it would, at any rate, be desirable to choose a more suitable and convenient occasion than the one when the Foreign Secretary is to make a statement which, I am certain, the whole House is eagerly awaiting.
  Mr. KING: Is the right hon. Gentleman aware that the statement made by Monsieur Viviani yesterday in Paris really deprives the Foreign Secretary's statement of a great deal of its originality and interest? [HON. MEMBERS: "NO, no!"]
  Sir H. DALZIEL: I desire to ask the right hon. Gentleman in what form it is intended that the Foreign Secretary should make his statement to-morrow? Is he aware that there is a general desire that it
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  should be made in some form that would allow Members, should they so desire after the statement, to offer some comments upon it, having regard to the fact that both the French Chamber and the other House have an opportunity of discussing the statement, which the House of Commons does not possess? I, therefore, ask him whether he would represent to the Prime Minister, if he is unable to give a reply now, that the wish of certain Members of the House is that the statement may be made in a form which would allow of discussion?
  Mr. CHAPLIN: Before toe right hon. Gentleman answers that question, may I put to him another, that is, whether he is aware that there is undoubtedly a feeling in some parts of the House that it would be well to hear the statement before it is decided what course the Debate should take upon it afterwards?
  Mr. LLOYD GEORGE: I shall represent all these views to my right hon. Friend. I understand there is a question on the Paper for to-morrow on that very suggestion.
  Sir A. MARKHAM: That will be too late.
  Mr. FELL: On a point of Order, Sir. Would it not be possible to make a more satisfactory arrangement for putting down questions over the week-end when we are sitting on Tuesday, Wednesday, and Thursday? I understand that notice was given to-day of a large number of these questions which are down for to-morrow. It is very inconvenient to have eighteen questions to-day and 150 to-morrow.
  Mr. SPEAKER: That would require the repeal of the Standing Order. The Standing Order says that forty-eight hours' notice is to be given of questions. At a time when Ministers are very much pressed it is very desirable that they should have plenty of time to prepare their answers. A question put down for to-day to be answered to-morrow does not give sufficient time.
  Mr. FELL: I was not quite so explicit. These questions were sent in to the clerks at the Table last Friday.
  Mr. SPEAKER: The hon. Member forgets that the House was adjourned during the whole of last week. The special rules with regard to handing in questions apply where the House rises from the Thursday, night to the Tuesday morning. In this case arrangements are made for the reception and circulation of questions. When

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  the House adjourns for a week or ten days there is no one in attendance.
  Mr. ROWLANDS: May I ask whether when hon. Members hand in more than eight questions for one day they can be prevented from being put on the Paper? I think to-morrow some hon. Members have more than eight questions down.
  Mr. SPEAKER: I have not looked through the list yet, but if there are any in excess of eight they will be struck out, and they will have to go over until next week.
  Sir A. MARKHAM: Is it in accordance with the rules of the House for an hon. Member to hand in a question which deals Member to hand in a question which deals communication sent by a Minister to the Press? I desire, also to ask the Minister of Munitions whether he will convey to the Prime Minister that Ministers have recently adopted the practice of sending communications to the Press instead of making them to the House, and is he aware that under the rules laid down by Mr. Speaker a. Member cannot ask a question which gives any reply made by a newspaper to a communication by a Minister, and that therefore right hon. Gentlemen should make their statements in Parliament, so that Members should have an opportunity of debating the question.
  Mr. SPEAKER: I do not quite know how much of that question is meant for me. The rule is that we do not allow quotations from newspapers. This is not the place for a reply to newspaper statements. The place to reply to statements in a newspaper is in the newspaper. That is the general principle, which seems to be sound.
  Sir A. MARKHAM: Where a Minister sends to a newspaper matters relating to policy in the administration of his office it is not, I take it, under your ruling possible to ask a question at the Table relating to the answer that the newspaper made?
  Mr. SPEAKER: It is perfectly possible. The only thing that is not possible is to make quotations from the newspaper using inverted commas, and showing that they are quotations. There is no objection to asking a Minister on what ground certain statements are made, or to suggesting criticism of the letter or communication which he has sent.
  Sir A. MARKHAM: My question was refused yesterday.
  Mr. SPEAKER: I should like to see the terms of the question. I think I could very soon alter the drafting so as to bring it into order.

  MESSAGE FROM THE LORDS.
  That they have agreed to—
  American Loan Bill, without Amendment.

BILLS PRESENTED.
  DEFENCE OF THE REALM (EVIDENCE) BILL.
  "To make admissible as evidence in trials under the Defence of the Realm Acts evidence given at preliminary investigations by witnesses who are unable to attend at the trial by reason of death, illness, or active service." Presented by Mr. TENNANT; to be read a second time To-morrow, and to be printed. [Bill 149].
  ULSTER CANAL BILL.
  "To authorise the temporary closing of the Ulster Canal." Presented by Mr. BIRRELL; to be read a second time To-morrow, and to be printed. [Bill 150.]

  CLUBS (TEMPORARY PROVISIONS) BILL.
  The SECRETARY of STATE for the HOME DEPARTMENT (Sir J. Simon): I beg to move, "That leave be given to introduce a Bill to amend the law with respect to clubs during the continuance of the present War."
  Public attention has recently been prominently drawn to the lengths to which certain establishments calling themselves clubs have gone in availing themselves of the protection which the present law gives to all clubs. A great body of evidence has been collected by different authorities. The present condition of things is complained of both by the military and by the police. In, I think, more than one case police magistrates have called special attention to it, and the Chairman of the London Quarter Sessions particularly alluded to it. There is no intention to alter the law relating to clubs for any permanent purpose. The proposal is simply to make a temporary change for the period of the War. The condition of

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  things which it is necessary to regulate may be briefly described in this way. A great number of establishments are springing up, in some cases registered as clubs, and in some cases posing as clubs without being registered, which do not really deserve the name of clubs at all, for those who resort to them are, for the most part, not permanent members of the institution at all. They are open at all hours of the night and all the early morning, and they are the resort on the one hand of every kind of swindler and harpy, and on the other hand they are resorted to by a number of young men, some of them serving in His Majesty's Forces, who, either from folly or inexperience, fail to recognise the real character of those with whom they are dealing there. I propose in this Bill that we should deal with the matter by making two main provisions. In the first place it appears to the Government that in time of war it is not unreasonable to require, in such areas as are scheduled for the purpose, that clubs shall close at a certain hour of the night. There is no intention that any club should be asked to close at an hour when a restaurant is open, and there is, of course, no intention of interfering with ordinary club life, or attempting to regulate by Statute the private conduct of anyone. But if restaurants are allowed, in London for example, to remain open until half-past twelve it is most desirable, and in the view both of the military and the police authorities it is necessary, to be able in such an area as London, and in areas which will be scheduled by Order, to require that clubs shall close at an hour specified in the Order, the hour not being earlier than the hour at which the restaurants themselves are required to close. I have caused to be made careful inquiries in connection with clubs of different kinds, of well-known reputation and respectability, but I am quite confident, from the replies I have received, that regulation on that head would not be generally resisted by those who in time of war are using clubs of the proper sort. But that is not enough. The real difficulty which faces both the military and the police is that under the general law that applies to clubs there is in no circumstances whatever the power of entry for the purpose of inspection, or, at any rate, as a rule, there is no power of entry for the purpose of inspection, unless a warrant from the magistrate has been first obtained. That may be a perfectly
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  good rule in times of peace, and nothing that I propose is intended in any way to call it in question; but in endeavouring to stamp out the public mischief which is being done by these disreputable night clubs it is absurd to say that nobody can enter them until first he has proved his case before the magistrate. We, therefore, propose to provide that for the purpose of enforcing the law there shall be the power of entry, not exercised by an ordinary constable, but exercised under the supervision of the responsible authorities by a superior official of police, or in the case of clubs that are resorted to by those who serve His Majesty's Forces a similar right is to be exercised by persons authorised by the military authorities. It is not possible to make such regulations and confine them to the particular disreputable institutions which it is, I think, the general intention of the House to regulate. Obviously you cannot define that particular class of club in an Act of Parliament. Therefore, the proposal will be general in form, but there is no intention to use these powers of inspection except for the purpose of enforcing the Act, and except in cases where there is reasonable ground for saying that in the public interest this entry should be permitted.
  The penalties are in two forms. In the first place, if the club was shown to be illegal within the meaning of this Bill, either because it kept open during prohibited hours or because it otherwise was breaking the law, either by selling liquor after hours or by allowing itself to be used as a gambling house, or as a resort such as a house of ill-fame, then the club itself could be struck off the register and prohibited from being a club for the rest of the War. In the second place, those who are shown to be responsible for that state of things, the manager or others responsible, will expose themselves not only to a fine but to imprisonment. There is one other provision to which I must draw the attention of the House. As things stand, the effect of striking the club off the register is very temporary and, indeed, trifling, for those who have established it, in order that they may cheat and deceive innocent people who go there, when they find the club has been struck off the register can go next day, pay five shillings, and start a new club in the same street—it may be next door.
  Colonel LOCKWOOD: Cannot that be refused?
  Sir J. SIMON: Not now, because it is as automatic as buying a postage stamp. We propose as far as new clubs are concerned, clubs not existing at present, but sought to be set up henceforward during the War, that before the registration of a new club is allowed an interval shall elapse during which police inquiries may be made, and the authority may refuse to register if the police show that the applicant is a person who, from his antecedents and record, ought not to be allowed to register the club. By these means the Government hope and believe that we shall be able to deal with a state of affairs which is not only a gross scandal, but is, in the present circumstances, a public danger. Without delaying the House further I can assure hon. Members that the evidence which has been put before me, and which the military authorities in London have also got, is such as to satisfy any reasonable person that in making these proposals we are not seeking to restrict by law the amusements and private life of anybody, but we are merely trying to protect this country from a danger at the very heart of the Empire.
  Colonel LOCKWOOD: Is it the intention to include the great central clubs, like the National Liberal Club and the Carlton, in the early closing time?
  Sir J. SIMON: I think the provision, whatever it may be, must be applied generally, but we propose that the authority may, in a special case, give an extension of hours. You may have a case where a club on a particular occasion has a perfectly good reason for wishing to remain open late, and there will be no difficulty in the Commissioner of Police granting leave. You may have a case where a club, owing to the occupations of its members, or for other special reasons, may well desire the general privilege of remaining open late—an obvious example would be the Press Club—and the Bill, as I introduce it, contains provision which would allow this exception. I do not, however, wish my right hon. Friend (Colonel Lockwood) at the moment to suppose that either of the clubs to which he refers—I do not know which is the one in which he is most interested—the National Liberal Club or the Carlton Club, will necessarily have a special exemption.
  Bill ordered to be brought in by Sir John Simon, Mr. Long, the Solicitor-General, and Mr. Brace. Presented accordingly, read the first time; to be read a second time To-morrow, and to be printed. [Bill 151.]

FINANCE (No. 3) BILL.
Order for Second Reading read.
Motion made, and Question proposed, "That the Bill be now read a second time."
Mr. LOUGH: I trust the Government will not take it amiss if one or two provisions of this Bill, which is a very important Finance Bill, should receive discussion in this House. There is a disposition in some quarters to suggest that almost any discussion is obstruction of the Government. I would like to assure the Chancellor of the Exchequer and the Government that I believe, as far as the great majority of the House is concerned, and certainly as far as I am concerned, there is every disposition to give every facility possible to the Government, and, above all, to help what I understand to be the main object of the Finance Bill, and that is the raising of the necessary money for the successful conduct of the War. This Bill, however, raises one or two very new principles, and I hope the Government will not take it amiss if those of us who have given some study to these particular principles should take the opportunity of bringing them before the House. We are deeply convinced that we are not in any way prejudicing the conduct of the War in doing this. On the contrary, we think it quite possible that the interests of the country may receive a very injurious check if this House does not do its part in examining new proposals, such as those now before us. I wish my right hon. Friend the Chancellor of the Exchequer were in his place. It is rather hard that we should have to discuss the Finance Bill in the absence of the Chancellor of the Exchequer, but perhaps my right hon. Friend (Mr. Montagu) will bring what I have to say to his notice. I hope the further stages will not be rushed as fast as those with which we have dealt. I personally got a promise from the Prime Minister that if we had not had fair time to consider the Bill, the Second Reading would not be taken so early. Instead of that the Bill was only distributed yesterday, and now we are asked to take the Second Reading of this, the greatest financial measure which Parliament ever has had before it.
With the general object of the Bill—that is, the raising of large sums of money for the conduct of the War—I am in hearty

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accord. I have only one criticism in regard to that matter, and that is that you did not bring in the heavy taxation earlier, and did not raise large amounts at a much earlier stage. Certainly, so far as those taxes which I consider will be helpful and productive are concerned, they shall receive nothing but help from me. But it seems to some of us that the Bill affords two or three examples of cases in which large sums might have been raised, but this was not done and a great opportunity was missed. I am not going to dwell on this. I merely mention it. One article—rubber—has been mentioned; Rubber has been exempted from taxation in dealing with the Motor Tax, I think that it is an article which might very well have been taxed. The import of rubber is increasing very rapidly. The estimated import this year will be 90,000,000 tons. The price of rubber has fallen. It is less now than it was before the War. The article is cheap and abundant in this country, and a tax of 1s. a ton would produce £4,500,000 a year. Yet rubber has not been touched, but is allowed to come in free while other parts of motor cars are to be taxed. Cocoa has been mentioned as well as coffee. In the case of these two, which are the luxuries of the rich, the additional tax imposed is only ½d. on cocoa and ¾d. on coffee, whereas if these articles were put on a lever with tea a revenue of £3,000,000 or £4,000,000 would be raised. Why should tea, the drink of the poor, have an additional 7d. a lb. imposed, while coffee, the luxury of the rich, is only put up ¾d. and cocoa only ½d.?
I will not elaborate the point, which appears to receive a certain amount of support in some parts of the House. I think that this matter should receive more attention than it has received from my right hon. Friend. He might have something to say as to cutting down some of these taxes. I do not want the point to be made that I am taking away millions of pounds of revenue. I am willing to give the Chancellor £10,000,000 more, only I wish to put this clearly, that he is affecting very great interests in this country which may be damaged if he takes a wrong course with regard to taxation. I will only deal with two points in connection with this Bill. The House will see from the preliminary remarks which I have made that I am almost precluded from dealing generally with the Bill. I am not going to say a word in reference to the important section dealing with Income Tax. Perhaps
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more might have been raised by that splendid system of taxation that is splendid so long as it is imposed justly. The point to which I wish to call attention, is what is the most remarkable part of the Bill for my right hon. Friend to have touched. My right hon. Friend, as everyone knows, was at one part of his interesting career secretary of the Free Trade Union, and those who are members of that union;—this House contains many of them—feel that the very principles of Free; Trade have been interfered with by the fact that, in a somewhat paltry way, a tariff has been introduced into the Budget. My hon. Friend behind (Sir G. Younger) says that it is a very good thing. That shows what interesting discussions we may have on this point. But my suggestion is that the House, may well be surprised that the right hon. Gentleman in. charge of the Bill should have introduced a tariff in the middle of it, and it is all the more extraordinary that this has been, done when we consider the nature of the tariff.
I remember when we used to make studies of tariffs in this country that one which attracted a great deal of attention was the McKinley tariff, which we often maintained did a great deal of harm to America, though it was mainly aimed at, this country. I think that in future the McKenna tariff will become as famous as the McKinley tariff, and will prove to be as futile, if not as dangerous, to the interests of the country on whose behalf it has been introduced. I will be very brief in dealing with this matter because of the stage to which it has got. We have now got a tariff in this House. None of us should have objected to these taxes if the Customs Duty imposed had been accompanied by an Excise Duty. We only ask for the corresponding Excise Duty, but we do not find that, and therefore the taxes form a departure from the principles that have been laid down by Chancellors of the Exchequer belonging to both parties in this House for many years past. This part of the Bill, I am glad to say, has been brought down to very small dimensions. There were only six taxes originally. Two have disappeared entirely, and the largest and most productive has been reduced to half. When you have gone so far as that in the good path, we may very well appeal to the Chancellor of the Exchequer to go the whole way and strike Clause 12 out of the Bill, as it is a Clause which will bring in no revenue worth, mentioning and will raise many troublesome

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and mischievous questions in reference to great and important interests in this country.
As regards these few remaining taxes, one of them is a tax on musical instruments. We were told that the object of these taxes was to prevent these luxuries coming into the country. In this particular case the whole import has been practically destroyed owing to the War. For instance, the import of pianos, which a year or two ago amounted to £1,000,000 a year, is now only £50,000. The Government made a mistake in picking out a market in which, owing to natural causes, the imports already have been almost completely destroyed, and they might very well leave it to these same natural causes to finish up these imports, and be quite sure that none of our money was going to be spent on pianos. The other tax to which I desire to allude for a moment is the tax on films. We have not had a single word from the Government as to why this particular import of films has been picked out. The film import is one of the most curious in the whole of the complicated list of our imports. The Chancellor of the Exchequer, when he passed these duties, did not, as I think he should have done—as each one of them represents a large interest—go to each of these interests, and give a reason for his proposal. He said, "Look in the Budget and there you will see the reason." I have looked to see what our import of films may be. I find that there is apparently a considerable import of nearly £1,000,000, but I could not find any previous figures and I could not understand that £1,000,000. I had not time to examine the matter at an earlier stage of the Bill, but I have tried to get a little information about it since then, and I find now that the whole figures are perfectly fictitious. There is no import. Nobody pays £1,000,000 for films imported into this country. It is only a fictitious value put on these articles by the people who send them here.
If you ask why this fictitious value is put on, the reason is that it is purely speculative. You, Sir, may be perfectly familiar with the custom that exists in dog shows. The rule is often made in a dog show that all dogs sent in must be sold, and so I believe theoretically, though it may not be expressed, that the idea in the United States is that all films sent here must be sold. If the owner does not want to sell his dog which he has sent to the show, he puts a thousand pounds as the price of it.
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That does not mean that the little dog is worth a thousand pounds; it only means that it should not be sold. That is the explanation of the films import. An hon. Friend behind me asks what is the point. The point is that it is a speculation. One film may turn out to be extremely valuable, but when the importers send their films they do not know which it may be. For instance, what can be more extraordinary than the film of Charlie Chaplin, which has turned out to be worth an empire's ransom? From what I saw of it, I was not very much interested in it.
In order to keep a finger on the films that are sent to this country, fictitious values are put upon them. I understand that in this country the payment for films is almost entirely by royalty, so that the import will not be touched by this proposal, quite apart from the fictitious value which I have mentioned. My right hon. Friend has told us that this tax is to stop the import of luxuries, but I think I have satisfied the House that there will not be much from an import tax of this class. I suggest to the House that the real object of this tax has its origin in an agitation which has been carried on persistently in certain organs of the Press of this country. The tax itself was defended in the "Evening News," a powerful syndicate paper, from the 11th to the 17th August. There was a tremendous agitation about putting a duty on films, and the only ground put forward was that it would be a protective duty, and that it was desirable to protect the British industry. There was no suggestion of luxury. In the first article, which appeared on the 11th August, there was a suggestion that all these films were made in Germany, "the Hun on pictures." On the 12th August this was further developed. The Government was urged not to pile up imports, and the article said:—
"It is time the Government took command by imposing such a duty as will prevent them underselling British."
On the 16th August, in the same paper, we find it stated:—
"As the Government must in future raise revenue by some sort of protection, a duty of 1d. per foot on positive films and 2s. 6d. per foot on negative would enable the British manufacturer to compete."
Next day there appeared a long article stating that:—
"Money spent on foreign that could be spent on English goods is sinful waste."
One of the directors of the company which owns these newspapers also owns a film manufactory, and this paper in which the agitation was carried on, the "Evening

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News," is one of the papers owned by a company, I think, called the "Amalgamated Press."
Sir H. DALZIEL: It is not the same company. It is the "Associated Newspapers."
Sir TUDOR WALTERS: They are the same people under a different name.
Mr. LOUGH: I am told that one of the directors of that company, Mr. Tod Anderson, has 3,900 shares in a film company called the "Regal Films, Limited." It has been suggested that my facts are not quite right, but I am informed that one of the directors of the company that owns these newspapers is also a director of a film manufacturing company. I do not suggest that there is anything wrong in a man who is a director of a newspaper company being also a director of a film manufacturing company, but if this agitation is started in a newspaper to protect a British industry against foreign competition, and if a director of the company that owns that newspaper is interested in film manufacture, the House, I think, should look askance at such an agitation before departing from the principles of Free Trade, and before it starts a protective tax, especially of this kind, which has no positive value. I only wish to say, with regard to Clause 12 of the Bill, that I believe it will do a great deal of harm to the trade interests of the country. All the principles of which my right hon. Friend is understood to be a great champion are violated in this Clause, and I make a final appeal to him not to trouble the Committee with it, but to drop it out of the Bill.
The other question to which I wish to call attention is that of excess profits. This is a most interesting departure, and I wish the House to consider it for a moment or two. All we heard of this matter, before the proposals of the Bill were made, was that a tax would be laid on war profits, and that those who made great and undue profits out of the War must pay up a large proportion of their profits. I want to call attention to the fact that the original basis has been entirely changed. There is no longer anything about war profits; it is a tax on excess profits. That is a very strange thing, and there seems to be no reason for it at all. Let me say at once—I want to be quite candid with the House—that I never quite sympathised with the theory of profits that seems to exist in
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some minds. Profits in business seem to me the same thing as victories in war, and if we are to go into the question of excess, profits, they ought to be defined. No definition has been given, no attempt has been made to look into this question, nor to give an explanation with regard to it. I suggest to the House that in these days in which we are living excess profits are not being made in this country. There are, no doubt, some businesses in which excess profits have been made, but you must not legislate for exceptional cases, but should take a broad view of the trade of the country. That trade has been carried on under extreme difficulties, and the companies which show any improvement in their balance sheets are few and much fewer than the large number that show a falling off. I would like to utter this warning, that where companies do show some improvement there is a plain and obvious reason, especially for the period taken, why that profit is not likely to continue. I said to my banker the other day, and one has to keep on good terms with one's banker nowadays, "How is business?" and he replied, "If you will tell us what is the value of our securities then we will tell you how business is." Any person in business who knows these trading organisations knows what losses they may have to face during the critical days in front of us. I say in face of that grave circumstance, which nobody can deny, it is a serious thing to plunge into this question of measuring too closely with a 12-inch rule the exact profits that may have been made during a few months since the commencement of the War.
Therefore, I make the suggestion that if you look broadly at the trade of the country there cannot be room for this tax. The trading community is made up of many interests. For instance, the shareholder who is interested in a prosperous company is also probably interested in many companies that are not doing so well. When my right hon. Friend hits a company he gets back to the individual, and I think he will find that there are very few individuals whose excess profits in these days balance the tremendous losses they are sustaining in other quarters. For these reasons I think that the principle which underlies this tax should receive a great deal of attention from the House before it is adopted. I put this point also, that so far as excess profits are made out of the War, they have been taxed already. We have got a great tax in this.

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country sanctioned by generations of usage and by volumes—mountains, I might say—of thought and work, and that is the Income Tax which is at once the wonder and admiration of every other country in the world. That is a tax on profits. My right hon. Friend has explained that he is now levying an Income Tax amounting to as much as 34 per cent, in the case of incomes of £100,000. If that is not enough, double it. The hon. Member for Black-friars (Mr. Barnes) said he wanted excess profits taxed 80 per cent. Why not raise the Income Tax and make it 80 per cent.? It is a tax we know and understand, and will be equal in its operations. But do not take a weapon which may strike blows which we know nothing about and which may damage interests of the greatest importance to this country. I have got another suggestion to make and which has been adopted already by the Government in one direction. The Government have already control of a great many businesses totalling now we are told up to 1,000. Beyond a certain line they take all the profits and nobody has objected. I suggest that that principle of taking over the business would be a far safer rule to adopt than the method which you propose. That system of taking control has worked exceedingly well. I have not heard of a single person objecting.
The Government has also done something else which, although personally I disapprove of it, yet is an alternative. They have taken over the whole supply of sugar. I do not know whether they have prohibited excess profits. They bought a great deal of wheat and commandeered ships. All those things are safe experiments and have done no harm. I have an objection to the sugar management by the gentleman in control of it, but I may be wrong about it. I am not self-opinionated, I only go the length of throwing out a point or two. I say that by means of Income Tax and control of business you would be adopting a far safer method than the one proposed. It will be said, perhaps, that I am always objecting and criticising, and why cannot I accept the thing which the Government puts forward. The Government has no better friend in the House than I am. I am only too anxious to support it and to swallow any dose or take anything which it gives. The only thing which prevents me doing so is that at times I think the matter which is put forward by the Government may bring them into difficulties, and then out of friendship I some-
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times object. That is why I object to this principle here. The idea has been founded and the basis has been that there are some scoundrels—and I have heard them described as felons in this House, and bloodsuckers—who are making great profits out, of the War. My right hon. Friend the Chancellor of the Exchequer surely does, not deny that that has been said.
The CHANCELLOR of the EXCHEQUER (Mr. McKenna): What I deny is that the Bill was founded on any such idea, or that those responsible for the Bill have ever made any statements in the least like that.
4.0 P.M.
Mr. LOUGH: I admit that the whole basis of the tax has been changed. The basis was such a basis as I have suggested in that remark. The right hon. Gentleman did not deny it was said in this House, and I can name the hon. Members who said it. Those charges are constantly being, made by a section of the Press which lives, on the idea that British trade is honeycombed with scoundrels and scoundrelism and that those people are very active at present. It is quite easy to test the matter and I think that before any action of this House is based on such an idea some facts ought to be put forward. What is the truth about the matter? All the particulars of 98 per cent, of the commerce of this country are at the disposal of any man who likes to look at the returns of public companies as disclosed in their balance-sheets. It would have been quite easy to have ordered a return to be made giving the yield on the capital invested in those companies. It may be said that there may be some of these people in the 2 per cent, not included in the returns, but you can get at them by the Income Tax. I suggest that in dealing with such mighty interests this House ought to be very careful indeed lest it should take some step in the dark. I heard a speech on this matter from the hon. Member for Blackfriars at an earlier stage in these proceedings, and which interested me very much. He said that the Labour party had considered this tax and had come to the conclusion that it was not high enough, but that a tax of 80 per cent. should be imposed instead of the mere tax of 60 per cent. which the Chancellor of the Exchequer has suggested. I thought, "What a noble speech this is. Here is an offer from the Labour party as a whole of 80 per cent. of all excess profits made since the War started. That means that if a

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workman has made £1 a week extra he will give back 16s.; if he has made 10s. he will give back 8s.; if he has made 5s. he will give back 5s." I thought what a noble proposal that was; but when I came to the end of the speech I found that my hon. Friend did not intend to apply it to working men at all. He exempted the Labour party. He reminded me of the words of Scripture about binding burdens for other people's shoulders and not lifting a little finger to help bear them.
I then looked above the Gangway to the Government. I have some experience of business, and I do not know of any group of men in business who have directly made more profit out of the War than the Cabinet. One-half of their number have tremendously increased their receipts. They have gone up from £400 to £2,000 or £5,000. They have made a vast war profit. If this principle is to be followed—I am against the principle all through—the Government are a group of men who have increased their receipts more than any other group that can be named. I thought, "The Chancellor of the Exchequer is a fine fellow; he is proposing something that will tax the Government." But when I look at the Bill I find that the Government propose to exempt themselves altogether. There again they are binding heavy burdens for other people to carry. I asked a fortnight ago whether the medical profession and the legal profession in both its branches would come under the Bill. Of course they will not. My right hon. Friend is a lawyer himself. Nearly all the Liberal members of the Government are lawyers, and they are all exempted. Complaints have been made about the price of food. When we traced those complaints to their origin we found that the price of wheat and of cattle had doubled in this country. Wheat was nearly 70s. One would have thought that all those people who were producers of wheat in large quantities might have to pay. But we have had a great landed interest added to the Government within the last few months. Is it owing to the presence of that landed interest in the Government that agriculture is altogether exempt?
Sir G. YOUNGER: What about the Income Tax?
Mr. LOUGH: We all have to pay Income Tax. But my hon. Friend has given me a point—that agriculture is touched by the Income Tax. Why not apply the same
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principle to business people? What is sauce for the goose is sauce for the gander. Treat all alike. I say that when this House faces the large problems that are raised by this tax, it will be found impossible to deal with them on the unequal basis which the Government propose to apply. I will not ask hon. Gentlemen below the Gangway what they think of the illustrations I have given, but I will ask them what they think of the exemptions. What does the Labour party think of the exemption of agriculture? While speaking of agriculture, I may mention another point. The thing bristles with difficulties. Husbandry in England is exempt. Why not husbandry in the Colonies? Why should we treat in this unequal fashion India or Ceylon, or any other of the Colonies? It may be suggested that it is because there are people in the Government who are largely interested. I do not want to take that view; but we ought to be most careful lest others, who do not know the lofty motives of the Government in matters of this kind, might think it unfair that such a heavy tax should be proposed for business men and a certain section of the community, while these others are left out. The agricultural producer is left out, but the broker who sells his wheat and cattle is brought under the tax. Why should not the producer, who gets most of the profit, be taxed, instead of the unhappy agent, who gets only a small brokerage?
I suggest that the tax in its present form is limited and unequal. I do not want to speak too strongly at this stage, because it may be modified; but if the Government are going on with the tax, it must be equal in its operations, and made like the Income Tax, so that it will press fairly on every individual. You must take the same proportion from everybody who has got it to pay, and not pick out one man here and another man there. For the purposes of the tax an arbitrary period is to be taken—the three years before the 31st March, 1914. The average profits of a concern for those three years are taken, and if in the next twelve months, or any period during the War, the profits increase beyond that amount, one-half of the excess profits is to be taken by the State. With several other Members I responded to my right hon. Friend's appeal that we should discuss this matter with him, and I think the Bill is in a better form than the Resolution. But it is only a little better, and it will require a great deal of examination

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before it is accepted. I thank my right hon. Friend for the distance he has gone to meet us, and I am sure he will have patience with us to the end. This arbitrary period may work the greatest injustice to trading companies. Business is not carried on by those bloated individuals to whom I referred earlier in my speech. Trading companies generally are collections of poor people.
Sir A. MARKHAM: Oh!
Mr. LOUGH: I do not know why some of my millionaire friends opposite jeer at that statement. A thousand people with a hundred pounds each put their money together, and so you get a hundred thousand pounds capital. These people have to live on what they get out of the company. There is no difference in principle between a trade union and a limited company. The shareholders in a limited company may not be able to earn nearly so much as the class represented by hon. Members below the Gangway. Therefore, if you do any gross injustice to these people, you are injuring those who are least able to put up with it. You are confiscating property on which the lives of people depend. It has been suggested that these bloated people in the trading concerns of the country are not doing their duty in the War. I repudiate the suggestion altogether. As far as I know everyone of the great trading concerns has its Boll of Honour. A large percentage of their men, sometimes all the available men of military age, have already gone to the front, and many of them have paid the penalty, just as some Members of this House have done. All the limited companies that I know and the banks have agreed to keep their situations open for these men, and they are making up their wages to the amount which they received in business. Speaking of it as a whole, the business community has not been unprincipled and greedy; it has been a happy hunting ground for the recruiting sergeant, and it has done everything it could to fight the War and bring it to a successful conclusion.
Sir A. MARKHAM: May I remind my right hon. Friend that the Treasury have agreed not to charge Income Tax on the wages paid to the dependants of men who have gone to the front? Consequently no shareholder is a penny worse off than before the War.
Mr. LOUGH: All these points will be dealt with later. My hon. Friend need not feel sore at what I have stated. Profits—that is, the dividends which you are taxing—are the wages of one class, and wages are the dividends of another class. You do just as much harm if you do any injustice to the great class of whom I am speaking, as you would if you did an injury to the poorest of the people. This arbitrary period may do a great injustice to trading companies. Take the case of a limited company which has been established twenty, or thirty, or forty years, but which for some reason during the past seven years has fallen on bad times. Supposing it had been accustomed to make £100,000 profit, but that in the three years, 1911–12–13, it divided no profits. There are many such companies. The datum line will be nothing. If hon. Members will look at the Schedule, they will see that half the concession that was made to meet such cases is taken away. Such a company, if it has now got back nearly to its former level, will be extremely hardly hit under the Bill. Surely it ought to be allowed to give something to the people who have got nothing for years past, before the State comes in and takes one half the increase.
Every year in a great community like ours new companies are started. The great business of English commerce could not be carried on if a large number of new companies did not come in every year. New companies will be able to show no profits in the earlier period at all. Although an attempt is made to meet them, it is made in a very niggardly and grudging way. No attempt is made to give them anything for the period that is past in which they got nothing, but in come the Government and take a large share of their present profit. What will be the effect? Wherever there are rich people in a company, the rich people will have the benefit—the preference shareholders. The rich always hold the best securities and the poor have the ordinary shares. Unless they alter the existing company law the Government will take away the dividends from the ordinary shareholders. Many of these shareholders are at the front, and they will see this House depriving them of their means of subsistence, while they are offering their lives on behalf of the country. Take the case of a company that was doing well and shows no improvement in the selected period. That company pays

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nothing, while the other company which may have had just as good a record for thirty years will have to pay over an immense proportion of its profits. Surely that is an illustration which we ought to avoid of the text, "To him that hath, shall be given; and from him that hath not, shall be taken away even that which he hath." I feel I must apologise to the House for having mentioned these cases. But I do say that the House wants to think on this matter, and it wants to get its notions cleared up. The matter should be examined—and it is quite easy to examine the returns up to date of these businesses. The Government ought to have commenced—it may not be too late yet for the Government to commence—to examine these returns, and to show the profits that they want to take. I would ask them to remember the alternative I have offered: increase your Income Tax or anything that falls equally on everybody. Increase it as much as you like, but do not bring out a tax which would have effects of which you have no knowledge, and which may possibly do grievous injury to that great business community which I venture to say here has done its duty in this War, and has stood by the Government in every national emergency.
Mr. SNOWDEN: With a great deal of what the right hon. Gentleman who has just sat down has said in his speech I am in the most complete agreement. I have a very large measure of sympathy with many of the details of criticism which he has offered in regard to the proposal as to the taxation of excess profits, but not in his general opposition to that proposal. I think it will be generally agreed that the scheme which has been submitted by the Government in this Finance Bill is one which is capable of very drastic amendment indeed. I hope that many of the points which the right hon. Gentleman has put before the House will receive due consideration on the Committee stage of the Bill. There were three points that the right hon. Gentleman put before the House. First of all, he mentioned the proposed increase of taxation on tea; secondly, he made a very vigorous onslaught on the Protectionist proposals of the Government; lastly, he dealt with the matter of excess profits. I quite agree with him—and I know that I am expressing the views of all the members of the party with which I am connected—in his opposi-
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tion to the proposed increase of the duty upon tea. If there was no other course than to increase the duty upon coffee in order to avoid an increase of the duty upon tea I might be prepared to agree with the right hon. Member in that proposal. But I do not think it is necessary, even in the present critical condition of the finances of this country, to add to the already very heavy burden which has fallen upon the poorest portion of the population.
I want, however, to deal with this Finance Bill upon more general lines. When the Chancellor of the Exchequer sat down after his Budget speech two or three weeks ago he was congratulated from every quarter of the House upon the lucidity of his statement, and upon the admirable manner in which he had, for the time being, met the financial necessities of the War. I think that those congratulations and that consensus of approval were due rather to a feeling of relief that the burdens to be imposed were not so heavy as had been anticipated. I have noticed, both in speeches in this House and in newspaper criticisms in the country, a change of view since the date of the introduction of the Budget. The criticism has been mainly directed to two points. The first was that the Chancellor of the Exchequer proposed to raise far too little during the current financial year by taxation, and that he was relying to far too great an extent upon borrowing. The second line of attack has been—and the right hon. Gentleman who has just sat down has given illustrations in his speech on this point—that some of the proposals seem to have been introduced without any necessity—which, if it had existed, would have caused them to be accepted—and have caused a great deal of irritation and opposition in the country. Since the Budget speech, however, certain proposals and changes have been made in the financial scheme. Certain Protectionist taxes have been dropped, and I share the hope expressed by the right hon. Gentleman opposite that what still remains in the Bill of these will very speedily follow those which have disappeared.
I do not profess to be able to understand the intricacies of the proposed taxation upon War profits. We shall, in my opinion, need a great deal of explanation from the Chancellor of the Exchequer in regard to the details of this proposal. It does, however, seem to me quite clear that the proposals which are now embodied in the Finance Bill have whittled down very con-

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siderably the estimate which the Chancellor of the Exchequer gave in his Budget speech, and which seemed to me to be a very low estimate. Leaving all exceptions or modifications out of consideration for the moment, and taking the estimate of £30,000,000 as being one-half of the excess profits made during the period of the War, I think it will strike everybody—there will be little dissent I imagine—that it is ridiculous to say that the profits during the last twelve months have not exceeded by more than £60,000,000 the average profits of two or three years ago! I will return to this subject later. The first general criticism I want to offer is this: The Chancellor of the Exchequer is raising far too little by taxation this year, and, as I said a moment ago, is relying to far too great an extent upon borrowing. I was quite disappointed that the Chancellor of the Exchequer did not impose more taxation in his Budget: there had been pressure brought to bear upon him from very influential quarters to do so. Even the "Times" newspaper had for some weeks before the introduction of the Budget been urging that there should be heavier taxation. I believe that similar views had been impressed upon the Chancellor of the Exchequer by financial interests in the City. What is it that the right hon. Gentleman actually proposes?
During the current financial year, the right hon. Gentleman proposes, there shall be raised no more than £30,000,000 by extra taxation. It is perfectly true that the taxes which are now proposed will not fully mature until next financial year. Next year it is expected that £100,000,000 will be raised by them, but the total increased contribution to the Revenue by means of taxation during the current financial year is only £30,000,000—which is not more than sufficient to pay for the War for a single week. Even next year, after the taxes have fully matured, and the estimated yield of £100,000,000 has been secured, the sum will be barely sufficient to pay the interest upon the accumulated War Loan. I want definitely to know—and I hope the representative of the Treasury will make a note of this—if this is going to be the policy of the Government? Is it the intention of the Government during the period of the War to raise by taxation only sufficient to pay the interest upon the debt; because if that is going to be the policy of the Government I look with dismay at the financial situation of the country after the War. It will make economic reconstruction, when
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peace returns, an almost impossible thing to accomplish. We have been led to believe—at any rate I have been led to believe—by the Budget speech of the Chancellor of the Exchequer last April that the policy of the Government was going to be something different to that. I remember on that occasion he dwelt upon the savings of the country, and seemed to suggest that those savings, amounting to three or four hundred millions a year, were going to be appropriated for the purpose of paying for the War. Again, he referred to the methods by which former wars had been financed. He told us how Pitt had financed the Napoleonic Wars by raising half the cost by loan and the other half by taxation. Taxation during that time reached a sum which was equal to two-sevenths of the then national income. I would further point out this in connection with the financial policy of that time: it is perfectly true that if you take the whole of that war period that half of the cost was raised by taxation and the other half by loan; but in the earlier years of the war it was financed almost wholly by loans and it was only when the folly of such a financial policy became apparent that Pitt changed his policy, and the later years of these wars were financed almost entirely by taxation.
During the Crimean war the policy of Pitt was also followed. Half of the cost was raised by loan and half by taxation. It may be said in reply to this that the expenses involved in the carrying on of these wars were a mere bagatelle compared with the present expenditure. That is true; but the reply is that the financial capacity as well as the taxable capacity of the country are enormously greater today than they were at that time. I make bold to repeat the statement which I have I think made before in this House, that if we were to-day to take one-fourth or two-sevenths of the national income of this country by some just system of graduation we could afford to bear it much better-than were the people of this country able to bear their proportion of taxation a hundred years ago. What is going to be the effect of this War Loan policy? I can imagine only one class of people by whom a policy of this kind will be welcomed. I have often stood here as the champion of what are regarded as the interests of a, class. I am not doing that this afternoon. This is not a matter which interests one class of the community above another. The matter is one of national interest. I

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can imagine only one class of the community benefiting by such a policy as this, and they will do so at the expense of the nation at large: that is the class which has money to lend. It will be disastrous to the business men. It will be disastrous for the municipal enterprises of the country. May I give an illustration?
The credit of this country has, during the last fifteen months, fallen from a little over 3 per cent. to—what shall I say, taking the basis of the last Loan, the American Loan—to something like 7 per cent. [HON. MEMBERS: "No, no!"] Of course, I am perfectly familiar with the excuse that the Chancellor of the Exchequer gave yesterday, but I do not for a, moment accept it. Take the rate of our last War Loan, 4½ per cent. Before the War British credit stood at a little over 3 per cent., say 3¼. A person who had £10,000 to invest in Government Stock could have obtained a return of £325 a year. A person who invests £10,000 in Government Stock now, gets £450 a year. Now before the War he paid an Income Tax of 1s. 3d. in the £. Now he pays 3s. 6d., and a little sum in arithmetic will show that, after paying the increased Income Tax, he still is £67 a year better off than he was before. That is the only class of the community which is likely to gain by this policy of borrowing. Who is going to suffer? The trade of the country is going to suffer. If the Government cannot borrow at less than 4½ per cent, or 5 per cent.—probably the next War Loan will not be raised under 5 per cent.—municipal credit is going to pay 1 per cent. higher or lower, just as you care to put it. Municipalities cannot borrow under 5½ per cent, and what will a sound industrial concern have to pay for new capital? Before the War a first-class, well-known industrial concern could not raise its preference share capital under about 6 per cent. If it were permitted to raise it to-day, it would not be able to obtain the capital under 7 or possibly 8 per cent. What is going to be the effect of this upon business—upon the reconstruction of our commercial system after the War? What is the effect now upon prices, and what is going to be the effect upon wages later?
Reverting for a moment to the effect upon our municipal enterprise, I know of a municipality in England which has already had notices sent in for the withdrawal of capital which, if that has to be replaced at 4½ per cent., will mean a 5d.
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rate upon the public. And the full effect of that has hardly yet begun to be seen. I heard yesterday, at Question Time, an outburst against the raising of house rents. I have no sympathy at all with the landlord who proposes to raise house rents without just cause, and I believe that in a great many of these instances no just cause can be discovered. But what about building in the future? It has been possible in the past to get a mortgage on cottage property at, say, 4 per cent. It could not be obtained now under 5 or 5½ per cent. I know of a great financial corporation in this country which recently placed £500,000 on mortgage at 5¼ per cent. What is going to be the effect of this upon the rents of the working people? I venture to think there is not a builder of working-class property in England to-day who would speculate a single penny in the building of cottage property unless he were assured of a rent of at least 1s. 6d. to 2s. a week more than before the War. I should like to call attention to a matter that has been brought to my notice. I have always understood that it was a legal obligation upon the mortgagee to pay the Income Tax upon the mortgage interest. [HON. MEMBERS: "It is!"] I had brought to my notice the other day a case which was quite new to me, and which, I think, is a case of very considerable importance. It was the case of a working man, with a mortgage of £200 upon his house, the rate of interest being 4 per cent. He had, of course, been called upon to pay Income Tax. He himself was not liable to Income Tax. He had made no claim for the repayment of this Income Tax for three years. At my suggestion he made an application to the mortgagee's solicitors, and his attention was then directed to the mortgage deed, which I saw, in which it was stated that the rate of interest must be 4 per cent., but that all Income Tax must be paid by the mortgagor.
An HON. MEMBER: It is illegal!
Mr. SNOWDEN: There is no doubt about it, because I saw the mortgage deed myself. The solicitor said that it had been the practice of his firm for a considerable number of years. I want now to turn to the taxation proposals which are embodied in this Finance Bill, and I have already expressed my opposition, and the opposition of my colleagues, to the proposed increase in the duties upon food. From a great many points of view, and for a good many reasons, I think these taxes cannot be defended, and especially

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are they indefensible at a time like this, when the cost of living has risen so considerably, and is continuing to rise. The cost of living has risen since the War by between 35 and 40 per cent. I believe, so far as the absolute necessaries of life are concerned, the figure is higher. What does that represent? I suppose the wages bill of the working people is higher this year than probably ever before. Suppose we put it at £1,000,000,000. They spend the whole of that amount. It does not means that their spending power has been increased by 40 per cent. It means that they have had to reduce the quantity of commodities, and the services they would otherwise have been able to obtain by that 35 per cent, or 40 per cent., and 40 per cent, on £1,000,000,000 is £400,000,000. When we talk of putting additional taxation on the working people I hope we shall never forget that terrible impost they are called upon to pay. I quite admit—it would be idle to deny, and I do not wish to deny—that large numbers of working people are earning higher wages now than ever before in their experience, but that is by no means universal, and we have plenty of evidence that many trades which have been extremely busy during the early months of the War are now beginning to fall off. I know one place in Lancashire where two weeks ago forty mills were stopped during that week for the want of work. I was in Yorkshire last week in the khaki district, and was told that the khaki trade there was very slack indeed. We have to bear these things in mind when we talk about imposing additional taxation on working people,, and we have to remember, too, that if this policy of the Government of raising the cost of the War by loan, and raising only sufficient taxation to pay the interest on the loan, is going to be continued, then all these taxes must necessarily be continued after the War, and, therefore, these imposts upon the working people will continue to be laid upon them when their capacity to bear them is smaller than it is now.
I turn to the Income Tax proposals. May I say with how much enthusiasm I welcomed the concluding words of the speech of the right hon. Gentleman opposite in which he advocated, with very great power, a very considerable increase in Income Tax? I, of course, have always been an advocate of Income Tax. I believe it is the justest and fairest way of raising our taxation. I would, if I had my way, abolish every other form of taxa-
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tion, and raise the whole of the necessary national revenue by means of Income Tax, with two reservations—Estate Duties and taxes upon alcoholic liquors. [An HON. MEMBER: "Tobacco."] Well, perhaps tobacco. I might have something to say about tobacco. I think the Income Tax proposals in the Budget have been very badly conceived. They are full of anomalies, and they are going to impose a great amount of irritation without securing a compensating amount of revenue. They are most unjust and most unfair to the lower range of incomes. The Chancellor of the Exchequer gave us to understand in his Budget speech that he was proposing a uniform addition of 40 per cent. He is doing no such thing. There is only one class of Income Tax payers who will pay 40 per cent., that is between £5,000 and £8,000 a year. The man with an income of £100,000 is not paying an increase of 40 per cent., but only 35 per cent., and there are those with very large incomes who are not paying an addition of more than 27 per cent. But when we come to the lower range of incomes—those below £200 a year—we find the gravest anomalies. I could quote to the House cases where the increased percentage is not 40, but 100, 200, 600, and shall I give one case where the increase is 2,600 per cent.? Take the case of a man with an income of £182 a year. He has got one child. Previously he got the abatement of £160, and therefore paid Income Tax upon £2, which, at 1s. 6d., made 3s. Now he gets—and I am glad to welcome this in the Bill—an abatement for one child of £25. That brings the amount down, to £157, and he has to pay Income Tax upon £37 at 2s. 1d. in the £. The result is that he pays twenty-six times more than he paid before, so far as my arithmetic is able to solve the problem. How can that be fair? How is the Treasury going to impose such an additional impost in the case of people with small incomes, while they are letting off people so lightly in comparison in the higher range of incomes?
May I make a suggestion? I do not know if there is anything in it, but if it be practical I think it would remove many of the existing anomalies. It is that, taking the case of incomes below £200 a year, instead of having this system of an Income Tax of so much in the pound, with all these abatements and allowances, you should have a Poll Tax—a fixed Income Tax—of, say, 10s. per man with an income between £120—the figure fixed by the

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Chancellor of the Exchequer—and £150—I am not binding myself to the figures; it is only a rough suggestion—and then, say, £1 between £150 and £180, and 30s. between £180 and £200 a year. I am quite sure that would work out more justly than the scheme proposed under this Finance Bill.
I want to turn now to another means of raising the revenue. I have already intimated I do not think that under this Bill the rich are paying their fair proportion of the cost of this War. I am very glad to be able to join in what is the universal testimony and tribute of the country to the sacrifice of life which both the middle and aristocratic classes have made, but in the matter of wealth they are not paying their fair share to the cost of the War. What are they paying? The capital wealth of this country used to be estimated at about £15,000,000,000, and I believe those figures were based upon an estimate made by Sir Robert Giffen some years ago. Recent investigations, however, have led to a considerable reduction of that figure, and the opinion of many people who are considered qualified to speak on this question is that it does not amount to more than £10,000,000,000. Suppose we take that figure. Taking the capital wealth of the country at £10,000,000,000, the rich who own that wealth are not contributing to the cost of this War more than half of one per cent. out of their total capital wealth, and they have most to lose by this War. Less than a thousand persons own more than one-half of the land of this country, and less than ten thousand own more than two-thirds of the land of this country. In former times it used to be the established fiscal system that land had to bear the burden of the poor. The question is how can we compel the property classes of the country to contribute a larger proportion to the cost of this War? In purely normal times I would not have made this suggestion. Under normal conditions I do not think a tax on capital is a desirable thing, but we are living in abnormal times, and whatever objections there may be to a tax on capital, they are infinitesimal compared with the ruinous policy which the Government is now pursuing of raising the cost of the War by loan. Therefore I would suggest for the serious consideration of the Government the taxation of capital. This, of course, ought to be graded. As a rough scale I would suggest that capital value below £1,000 should be exempt altogether,
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and then begin at 1 per cent. and grade the tax as the Super-tax is graded. If the tax on £10,000 be 5 per cent., it is not paid upon the full £10,000, but, say, 1 per cent. on the second thousand, 2 per cent. on the third and the fourth, and so on. I calculate that a tax of that kind rising to 10 per cent. upon amounts of £1,000,000 would bring in £500,000,000. There would not be much difficulty in doing that. I know the objections that will be raised to this suggestion. I know the objection in regard to capital which is invested in business; but that difficulty could be met by permitting the taxpayer to have two or three years in which to pay the tax. I submit these considerations to the Government.
I wish now to say a word or two upon a matter which was so ably dealt with by the right hon. Gentleman who preceded me, namely, the proposal to depart from our policy of Free Trade. It is no use the Government saying this is not so, because they know as well as everybody else that these Protective taxes have not been imposed for the purpose of securing revenue. A tax like that which I have suggested on capital would be infinitely better than a tax on motor cars, and an increase in the higher ranges of the Income Tax would secure the same effect. I see very little evidence of any lessening of luxurious expenditure in this country. Two days ago I read in the newspapers that a small portrait had just been sold for £35,000. Why was it possible to get £35,000 for a painting? Because there are people who have too much wealth. In a shop window in Bond Street a week ago ladies' handkerchiefs were exposed for sale at £20 per half-dozen, and we see similar evidences of luxurious expenditure all over London. The Government could do something to stop all that, but they are not going to stop it so long as they permit a man with an income of £100,000 to retain £63,000 of that income, because no man can spend £63,000 a year in a way which is beneficial to the interests of the country at a time like this. Dealing with this point in his Budget speech, the Chancellor of the Exchequer said that the rich had obligations. Of course they have, but the poor have obligations, and the country would suffer far less by the rich people being compelled to break their obligations than by the poor people being compelled to break theirs.
The Government do not intend these Protectionist taxes either to keep down luxury or for the purpose of raising

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revenue, but it is simply the thin edge of the wedge of Tariff Reform. It is the first step on the slippery slope that is going to lead us down to the Hell of Protection. Protection was started in this way in the United States of America during the American Civil War in order to raise revenue, and this kind of thing went on until America became the most Protectionist country in the world. I need not go in to all the Free Trade arguments at this time, but we know that by a system of this sort you are now setting up a protected industry in this country, and we know what that means. We all know that motor cars are to be taxed because of a certain motor car which is imported into this country from America with which at the present time English motor-car manufacturers are not able to compete, and consequently British manufacturers require protection against that import until the time comes when they will be able once more to compete with it. This is the price we are paying for a Coalition Government. I am quite in sympathy with many of the detailed criticisms which the right hon. Gentleman the Member for West Islington (Mr. T. Lough) offered, but I wish to contest his argument that the people who have been making very large profits out of the War ought to be permitted to retain those sums in their pockets.
Mr. LOUGH: I said that it should be done equally.
Mr. SNOWDEN: Then my right hon. Friend does not contest the general principle, and it is simply a question of the best way to obtain what we all want to secure. The right hon. Gentleman can rely upon my support in Committee in any attempt he may make to remove some of the quite apparent injustices in the scheme of finance which is embodied in this Bill. In regard to the proposed change in the method of assessing farmers under Schedule B, that is a method which I have often denounced under our former system. I am not at all satisfied with what has been done. Does the Treasury think that farmers are going to contribute like other classes of the community under the scheme now proposed? They are not. I know of one particular case, and it must be typical of hundreds of others, where a farmer has never paid a single penny of Income Tax, although his average profits for many years have been over £1,500 a year. In the past men who are really not farmers at all have
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been able to take advantage of Schedule B. They hire a field for pasturing cattle and then they claim to be assessed under Schedule B. The Finance Bill proposes no change in that respect. Why should farmers not be assessed like other people? I know it is said that they are too ignorant to keep books, and that seems the only excuse I have heard. Farmers who pay £400 or £500 a year in rent must keep accounts, and they certainly are not less capable of rendering a return than a small tradesman or shopkeeper. Therefore, while I welcome the little concession which the Government have made in this matter, I regret very much that they have not abolished Schedule B altogether, and put farmers upon precisely the same footing as every other person who is liable to Income Tax.
5.0 P.M.
I would like to say how heartily I approve of the reference made by the right hon. Gentleman the Member for West Islington to the exemption of Cabinet Ministers, which is distinctly proposed in this Bill in regard to War profits. However, I want to give them this word of warning. They were already suspected in the country. They began to be suspected when they rushed through this House a special Act of Parliament in order to save themselves the expense of re-election. This is going to make them more suspected. I would refer them to an article in a paper which I do not very often read, to which I was attracted by a sensational placard, called "The World," and on inquiry I am told that "The World" is the organ of fashionable society and the aristocracy. In this week's issue of "The World" there is an article headed "Revolution or Defeat," and one of, the statements in that article is that within the next few weeks certain members of the Treasury Bench are going to be hanged from street lamp-posts. I should be very sorry indeed if such a fate as that did befall any one of them, but I ask them to be careful and do nothing that can encourage such a spirit as that abroad. There is another class which is going to escape and which certainly ought to be brought in. There are a number of men who cannot be accurately described by anything less harsh than charlatans who are making enormous sums of money out of this War. They are men with a certain reputation as writers who are now posing as great authorities on foreign policy and military strategy. According to popular report, one of these men is paid £100 a week for one article. There are a good many of them,

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and they are to escape altogether under the proposals of this Finance Bill. If there is anything which can be properly described as war profits, surely it is the remuneration of these men. I want to submit these comments and these criticisms and suggestions to the Treasury. We have been very often told that this may be a war of resources, and, if that be true, it is most important that we should do nothing which is likely to lessen our economic power to continue the War. My last word to the Government is that they should very seriously consider this matter of raising so small a part of the cost of the War by taxation and of relying to such a great extent upon Loans.
Mr. DILLON: Under other circumstances than those which now obtain a very strong case could be made out against the incidence of some of the taxes contained in the present Finance Bill upon Ireland. It might be argued, and argued with great force, that the indirect taxes in this Bill are an unjust and an unequal burden upon Ireland. I allude, of course, to the taxes upon tea, tobacco, and sugar. These questions have frequently been debated upon previous occasions in the House; but I do not take part in this Debate for the purpose of raising any special or separate claim on behalf of Ireland. Ireland has contributed a full and, I would say, a generous share of her blood to this War, and she is quite prepared to contribute a fair share in proportion to her means to the cost of the War. I am content, from the point of view of Ireland, to leave over to the Committee stage certain matters of detail which will have to be raised, and which I am quite certain the Chancellor of the Exchequer is prepared to consider in a fair and reasonable spirit. The one or two points upon which I propose very briefly to address the House have a general application, and are not specialised Irish matters at all.
First of all, I want to say a word on the question of the tax upon excess profits, which was so ably dealt with by the right hon. Gentleman who sits upon the Front Opposition Bench (Mr. Lough). That tax in principle received universal support when it was first proposed, but I, like the right hon. Gentleman, knew at the time, and I am convinced much more after listening to his speech, that it would raise all kinds of difficulties. I am quite content to leave the discussion of that tax and the
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difficulties which it will raise to the Committee stage, but I would just mention for the consideration of the Chancellor of the Exchequer two illustrations to show the enormous complexity of the difficulties with which he will be faced. I take, first of all, the case of the City of Dublin. It so happens that practically the whole of the business of the City of Dublin—all kinds of business—was paralysed and almost destroyed as regards profits during the year 1913 by one of the most terrible strikes that have taken place in the recent history of these countries. It took a considerable time for the manufacturers and traders in the City of Dublin to recover from the crushing effects of that strike, and I venture to say, as regards all the great businesses of Dublin, it is only in the year to which this Excess Profits Tax would apply—that is, since this time last year—that they have reached anything like a normal figure. Just observe what the effect of this tax would be upon the City of Dublin. Men, including the whole business community without exception, who have been staggering under the effects of the terrible strike of 1913, and who have just recovered themselves, would be penalised to the extent of 50 per cent. of their profits because they were ruined in 1913. [HON. MEMBERS: "No!"] I was going to say it is only perhaps this last year—as regards the great majority of the Dublin trade at all events—that they have reached the normal figure.
These are really more Committee points; but I would give one other point, because it has attracted a great deal of attention. Take the case of a great milling company, one of the largest, I think, in this country, who announced an extraordinary profit last year. I am assured by men in the milling trade that a vast part of the profit made by men who closed their accounts two or three months within the War breaking out has been lost during the last six months. That particular company—Spillers and Bakers, of Cardiff—were denounced as blood-suckers and enemies of the public because they had made these great profits. As a matter of fact, anybody who understands business knows that they were really in no sense more wicked than any other traders in this country. All such great concerns as Spillers and Bakers have to have in their stores for contracts a very large quantity of raw material, and when the sudden rise in price came they, like all other traders situated in the same circumstances, made very large profits, but when

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the recent fall in wheat came, the sharp fall of the last six months, they no doubt—at least, so I am assured by persons in the milling trade—like a great many others, suffered very heavy losses. I only mention that as a sample of another class of case—I am sure that there is an infinite variety of them—in which it will be found exceedingly difficult to adjust this profit tax so as to do even justice, and that is all that my right hon. Friend and other Members who criticise it desire to see.
I now pass to the real point which chiefly induced me to take any part in the Debate at all. It was touched upon by the hon. Member for Blackburn (Mr. Snowden) amongst the other points he raised. He drew attention to that which I consider to be the great blot in this Finance Bill, and that is the inevitable and, I think, wholly indefensible injustice of the new Income Tax provisions. We have heard continually throughout the whole of the discussion on the finance of the War, and also on the question of Conscription and Voluntary Enlistment, the formula that there should be equality of sacrifice, and I think it is a formula to which we ought to endeavour as closely as possible to adhere. Can anybody who has examined and worked out the figures of the new Income Tax proposals of this Bill contend for a single moment that there is equality of sacrifice? I do not think any Government ever introduced a Bill so indefensible as are these new Income Tax provisions. I am speaking now, of course, of the proposal to lower the limit for exemption, and still more of the proposal to lower the limit for abatement, contained in Clause 20 of the Bill. How does that work out? It is almost incredible how the figures work out. Those who are now assessed for Income Tax at from £10,000 to £8,000 per annum are to be called upon to pay only about 27 per cent. increase. Those who are assessed at a figure of £3,000 and under will be called upon to pay 40 per cent. increase, and that is the normal. When we come down to the class represented by people who have incomes from £160 up to £300, we find that their Income Tax is in some cases first doubled and then 40 per cent. added to the double tax, and in other cases raised 400, 500 and 600 per cent.
I heard an hon. Member make an observation during the speech of the hon. Member for Blackburn. He asked the question, "What is the figure rise, not the percentage, but the actual figure?" I must
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say I think that was a wholly irrelevant interruption and had no force in it whatever. One pound a year to a man who is struggling to support a family on £200 a year is much more than £100 to a man with £8,000 a year, far and away more. Therefore, in estimating the justice or injustice of the addition to the Income Tax, you must have regard, not at all to the actual figure of the increase, but to the proportion. I think that is absolutely plain. If you depart from that principle, it might be argued that the proper, just, and reasonable way to increase the tax would be to add £10 all round, or £5 as the case might be, making it an equal addition both to the man who has £200 a year and to the man who has £8,000 a year. I hope that the Chancellor of the Exchequer will endeavour to explain to us when he comes to speak on what principle he attempts to justify a 27 per cent. increase on the man who has £8,000, a 40 per cent. increase on the man who has £3,000 a year, and the doubling of the tax on the man who has £300 a year. It is an amazing proposal.
In all the previous reforms that have been carried out in the Income Tax one principle has guided Parliament and the Government, and has guided it more and more in recent years, because one of the greatest achievements of the late Liberal Government was their reform of the Income Tax. They introduced the graduation, they introduced the Super-tax, they introduced that most admirable principle the differentiation between the Income Tax on earned incomes and on investment incomes, and they also introduced the remission on behalf of children, all of them excellent reforms. What has been the principle that has guided Governments for the last fifty years? The principle has been that you should grade the Income Tax in proportion to the extent of the income. Here we have introduced under the cover of the War, and under the pretence apparently of calling upon all classes to make equal sacrifice, an Income Tax Bill which reverses the entire policy of fifty years and proposes to grade the Income Tax inversely to the income, because that is the basic principle of the Bill. The smaller your income the larger your increase. How can anybody stand up in the House of Commons and defend that? I feel very strongly on this question for several reasons, but there is one reason which I feel impelled to impress on the House. It is that I am speaking on this matter on behalf of a class who,

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in my opinion, have suffered more from this War, and have a harder struggle to make ends meet than any other class, and who are, on the whole, not very well organised and not so well provided with champions in this House as are other interests. Who are they that have been hit by this extraordinary, and, as I contend, most unjust innovation in the Income Tax? They are clerks, teachers, poor clergy, and small traders and shopkeepers, and these are the class of men who suffer under this provision.
Take a good standard case, the case of a man in receipt of an income of £200 a year. That is, I should say, a good average example of the classes to which I have alluded, classes which, although they are not very powerfully represented in this House, are yet very important and very numerous. They have a very hard struggle for existence, and I really think I am justified in stating that they are the classes who have suffered most from the War, because, as a rule, they have not obtained those increases of income which many other classes, particularly the working classes and manual workers, skilled and unskilled, have secured since the War broke out. Take the case of the man earning £200 a year. I am, of course, taking cases where there are no children. At the old rate of Income Tax that man paid £3 a year: at the new rate he will pay £8 6s. 8d.—that is to say, his Income Tax is doubled, and 40 per cent, is added on to it. How can the Government defend or excuse that? If it were of any use, I could give a number of other cases, but I think I may rest my case on that as a fair specimen of the class on behalf of whom I am speaking. I have here an extract from a letter which appeared in the Press the other day, and which was signed by "A Teacher." The writer said:—
"If the Chancellor of the Exchequer will tax the man with a large income as he is taxing us, he might roll in money and pay his way. But no! The rich must he spared, whoever suffers. What sacrifice does the £5,000 a year man make when he pays £975. None at all. It is no sacrifice to give up superfluities. The sacrifice begins when the ordinary comforts of life have to be surrendered, the children's holidays stopped, part of their education perhaps, and when coal and even clothing and food have to be curtailed."
That is an honest description of what takes place. They have no way of making ends meet, except by reducing the food and the coal bills and the bills for other absolute necessaries of life. All this man says is perfectly true. Nobody likes to pay a high Income Tax, and I am sure that the
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£5,000 a year man pays with a very wry face. But he does not shorten his coal bill or reduce his food. He does not give up taking the children away in the summer time, although he might better do that than the poor man. I have here another letter, written by a lady. She says:—
"I do not think it is being realised that while the percentage of increase in the Income Tax on this Budget to a man earning £8,000 a year is 27 per cent., to a man earning £300 a year it is 80 per cent.; and whereas the man earning £300 paid in 11113 £5 5s. and in 1914 £10 10s., he will now pay £18 18s.; while a man earning £8,000 who paid last year £1,479 will now pay £1,879."
My conviction is that there is growing up amongst these classes of people the bitterest possible sense of injustice as to the effect of these alterations in the Income Tax. I have made it perfectly clear, without entering into more figures, that if you contemplate this matter solely from the point of view of the effect the Income Tax changes may have on these two different classes, and also from the point of view of justice, then the case against the changes is overwhelming. But when you take into account the indirect taxes and make allowances for them, the case becomes tenfold stronger, because not only is it true that the Income Tax changes alone are a terrible injustice to this section of the community, but these are the men and women who are hit, and cruelly hit, by indirect taxation. We have seen daily the rise in the necessaries of life owing to the increase of indirect taxation. We have all seen in the papers carefully worked out budgets by people who have to face the terrible problem of keeping a family on a weekly outlay of £2. It has been shown that in order to provide the same class and quantity of food for the family £3, or close upon it, is now required instead of £2. That is a result which I have seen worked out by various women. It costs, I think, £2 18s. 6d. to get the same quantity of food and coal as could be got for £2 before the War.
This Budget adds considerably to that bill by indirect taxation, and having still further enormously increased the difficulties of that unfortunate lady who has to spread out her weekly allowance to provide the actual necessaries of life, you bring down upon these unfortunate people this additional burden of Income Tax. It is all very well for a man with £5,000 a year to make little difficulty about paying a few more guineas a year in Income Tax, but anybody knows the position of a person struggling to live on £200 a year, and it very often happens that a man trying to

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do that has a much harder struggle than the artisan, who has not to keep up the same position and appearance as the shop assistant, or the poor clergyman, or the small trader. To tell me to present such a man with a bill of three or four guineas at the end of the year is a very small matter, is to tell me something with which I cannot agree. It may be a small matter to some Members of the House, but it is a great, a terrific hardship to the man on whose behalf I am speaking. It means all the difference to him. It may actually involve such a hardship as deprivation of food.
What I want to bring home to the House is that this is a real case of hardship. It is creating a great deal of the bitterest feeling, which will tend to increase in the country, a feeling which is inflamed very much by some of those orators who are advocating compulsory service, and which may become very dangerous. For my part I would do nothing to encourage such a feeling or to promote it. But it is growing in strength, and there is being put forward the formula more constantly, that if you want compulsorily to take the blood of the people, you must take their money first. You hear that on all sides, and you will hear a good deal more of it in the future. It will be asked in ever increasing volume, how can you invite the people to expend their blood and submit to compulsory service if you leave the rich man his money? That feeling is growing; it will spread, and if we are going to have another outburst of the conscription campaign in this House to-morrow, you will find this will be the cry that will come back from the working classes of this country, "Let us first see the rich deprived of their money, and then we will consider the question of giving our lives." This policy contained in these Income Tax proposals, which spare the rich and unjustly tax the poor, will undoubtedly inflame that feeling and embitter many thousands of men and women in this country, and therefore I do strongly appeal to the Chancellor of the Exchequer to take this matter into his consideration between now and Committee stage, and see whether he cannot, instead of adopting the suggestion of the hon. Member for Blackburn with which I cannot agree—a suggestion for the introduction of a poll tax, a tax which wherever it has been produced in the history of the world has always ended in friction and disaster, and which has never been either productive or satisfac-
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tory—whether the right hon. Gentleman will not meet this case by the simple remedy of reverting to the old principle and adding whatever Income Tax is needed, but dropping out these Income Tax proposals, this new principle which, I repeat, will lead to most dangerous and bitter feeling throughout the country.
Sir G. YOUNGER: I do not rise to follow the hon. Member who last spoke on the lines of his very interesting speech, but I would express my regret that, at the end of it, he introduced a subject which perhaps was not quite germane to this Debate, and which too might better have been left out. I rise to make no general statement on the proposals of the Chancellor of the Exchequer, but I want to raise one or two points in connection with Income Tax. The first is contained in Clause 27, which deals with bankers' profits. The proposal is that, in future, the interest paid on deposits shall be added to the profits of the banker, and the banker shall be entitled to deduct Income Tax on those payments. I think there is the very gravest objection to this proposal, and I am extremely sorry it should have been made. The excuse of the Chancellor of the Exchequer for making it is that, owing to the manner in which bankers are supporting the Government and the country in finding money for the War Loan, and in making enormous subscriptions, a question has arisen with regard to the difficulties in which they will be placed in respect of interest on investments which are charged with Income Tax at the source, and which, would largely exceed the amount of annual profit made by the bank on which Income Tax is alone payable. Some adjustment is deemed to be required. It is provided for by Section 2 of this Clause, and is perfectly satisfactory, but it is entirely confined to the current financial year. My claim is that that special form of adjustment ought to be continued and made a permanent form of adjustment. It is not by any means fair that, because of the situation which has been created by the generosity and support of the bankers, they should be placed in a position which they have never before occupied, that of being tax-gatherers for the Government.

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

(1) The American Loan Act, 1915.

(2) The Clackmannan County Water Order Confirmation Act, 1915.]

FINANCE (No. 3) BILL.
Question again proposed, "That the Bill be now read a second time."
Sir G. YOUNGER(resuming): When we were interrupted I was about to argue that the proposal in Sub-section (2) of Clause 27 ought to be made a permanent proposal for the adjustment of this particular position which has arisen, and ought not to be confined to the current year. It is very obvious that that adjustment is a necessity. I have in mind the figures of a bank which, under the conditions existing earlier in 1914, if not later in 1914, would have paid Income Tax on something like £70,000 a year, that being the difference between the amount of the income taxed at the source and the annual profits of the bank. Allowing for the ordinary doctrine of average and taking into account new investments in War Loan, which are very large, instead of there being a sum of £70,000 upon which Income Tax would have been payable they would gradually come to an amount of £147,000, upon which excess tax could be claimed. As a matter of fact, the tax would have been charged to the extent of £140,000 a year more than they had actually made, so that it is obvious to the House that some adjustment is necessary in fairness, and that adjustment, according to this Clause, the Government is proposing for the current financial year. But the Chancellor of the Exchequer takes advantage of this position, I think very improperly and very unfairly, not with a view to regularising the position in the future by the introduction of a simple adjustment which everyone could understand and which is perfectly simple and straightforward, but by roping into future profits the whole of the interest paid on deposit receipts to depositors. He entitled the bank to deduct the tax it pays upon that interest from the various deposits on which that interest has accrued. The sum therefore being roped into the annual profit for Income Tax purposes would leave the bank in the same position as the adjustment under the Income Tax Clause does now.
This course gives the Chancellor of the Exchequer an opportunity, of which he has
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taken advantage, of placing the bank in the position of being tax collector for him, and, in consequence, penalising it very severely. I will tell you why I say so. The great strength of the banks, certainly in Scotland, arises from the fact that they have an enormous number of small depositors. I saw the other day, in going through the accounts of a particular branch of a particular bank in Scotland where the deposits amounted to something like £200,000, that the average depositor only had about £140 or £150 in the bank. That was the strength of that particular branch. You could never have a run upon the branch to any serious extent because of the smallness of the deposits and the fact that the eggs were in so many baskets, and because, fortunately, people do not all lose their heads at the same time. These are the very people who probably are not liable to Income Tax at all. Yet, on a temporary deposit, or a small deposit of £100, the Bank has to charge either 2s. 6d. or 3s. 6d. per £, whatever it may be—that will be another difficulty, the adjustment of the rate—and this unfortunate person has to go through the whole of the machinery, with which everyone is acquainted, and apply to headquarters to get back the money. Of course, again the Treasury, as they always do, expect to make money from that very fact. They know that people do not understand their rights in the matter, and cannot or will not exercise them, and they make ever so much money every year. Claims for repayment are very often never made which ought to be made and which are perfectly justified. At present, in the condition of this country, and in return for what the banks have done for the Government, it is their business to encourage deposits and not to discourage them. People will put their money into a stocking rather than into a bank when Income Tax will have to be paid, knowing that their income is very much below the limit, and that they are not bound to pay. I ask the right hon. Gentleman, who I am sure is very well acquainted with all this, and has, no doubt, had it brought to his attention before, what will happen in the case of foreign money deposited in English and Scottish banks?
Mr. J. M. HENDERSON: It will not be taxed.
Sir G. YOUNGER: If it is not going to be taxed I have nothing to say on the subject. I did not notice that that was

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in the Bill; but we have had so little time, and it is so complicated and so difficult, that one must be excused if one has omitted a point. I did not notice it.
Mr. HENDERSON: It was given in an answer by the Chancellor of the Exchequer yesterday—that he did not intend to tax foreign deposits.
Sir G. YOUNGER: I am glad to hear that. I am sure it is not stated in the Bill. I was not so very far wrong after all. Again I ask why are banks alone dealt with in this way? What about discount companies? They receive enormous sums of money on deposit. Are they not to be obliged to charge Income Tax on the deposits? What about societies which receive large sums on deposit? Are they not to be bound also to do the same thing? Is the bank the only institution to be penalised, and why is it selected? There is no definition Clause that a bank is to include everything else. These people will, no doubt, say they are not bankers. The right hon. Gentleman had better bear in mind that he is treading on very dangerous ground, that there is a very strong case against this proposal, that there is a determined feeling to resist it, and that he is prejudicing his position very much with regard to future Loans and complicating the situation for himself by pressing any scheme of this kind. What the right hon. Gentleman might well ask and what, I suppose, banks will be perfectly willing to give, would be a return of the interest they pay on their deposits. They would much rather do that than have this system forced on them, with all the attendant difficulties and dangers which are likely to arise from it, and all the inconvenience and trouble and work which will be caused and the fact that instead of making a deposit in a bank, as it is at present, rather a popular form of investment, it will make it one of the most unpopular forms of investment possible to be conceived and will seriously deplete deposits in banks. Certainly in Scotland and England they are used mostly for the promotion of business interests and the assistance of the business community. If I was suggesting an Amendment it would be to cut out Sub-section (1) altogether and let him content himself with the scheme of adjustment set out in Subsection (2), which is quite satisfactory.
I should like to ask, in connection with Income Tax, whether Clause 28, about the place of assessment, in any way cuts out the right of people to be assessed by
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Special Commissioners? I do not suppose it does, but it is one of those peculiarly worded Clauses which no ordinary people can understand. As for the deductions in Scotland under Schedule A, that is of course an old grievance. Probably it ought to be regularised and legalised now, as lawyers have proceeded very much on the terms of the Section as it now appears. I have only a word or two to say about the Excess Profits Tax. I do not agree with the position taken up by the right hon. Gentleman (Mr. Lough). I think he took rather an extreme view of the situation, but I do not think it is possible to-day to discuss with any real intelligence, or real understanding of their meaning, the Clauses which impose the tax and the Schedule which deals with the machinery. They are of the most complicated character, and I think the right hon. Gentleman has made a mistake in attempting in the Bill to set out this elaborate machinery. There ought to be an elastic system of dealing with this tax, and not a hidebound, watertight system—the sort of thing we had in the Budget of 1909–10, from which everyone has suffered ever since. This is the same kind of thing again—elaborate Clauses, full of words signifying a good deal, I suppose, but signifying something different to everyone who reads them and very difficult to understand and follow. If a really sound, general principle were laid down in the Bill and an intelligent and capable tribunal appointed to deal with these matters, I am certain the right hon. Gentleman would get a much fairer and far more satisfactory result than he will ever get by a set of machinery Clauses like this, which are capable of every kind of conceivable construction.
It is impossible to provide by any set of Clauses for every special case. Cases are of the most extraordinary kind. I had a case brought under my notice the other day which your Clauses do not deal with at all, a case, for example, in which the Government are receiving an enormous amount of a particular article at a very low price. All the private contracts of this particular firm have been cancelled. They confine themselves entirely to supplying the Government, and in doing so they have placed a rival company, not in this country, in the position of taking the whole of the trade at nearly twice the price. What is the result? This other company—it is an American company—is going to put aside some millions of money as the result of this policy on the part of the British company,

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and a very patriotic and sound policy it was to help the Government through—they are going to put aside enormous sums of money as a fighting fund, and the chances are that at the end of the War they will crush the British company out of existence. Are these people to have the whole of the extra profit they are making on their moderate price taken away from them? I can see a case of grave injustice if the full Excess Profits Tax is imposed. Something should be allowed as a deduction against the attack which will be made upon them at the end of the War by their rivals. This is a peculiar case, but there must be thousands like it, and to endeavour to provide for them, as the right hon. Gentleman has done on every occasion, by these machinery Clauses is, I think, a very great mistake and one which I should like to see altered.
Another peculiarity has been brought to my notice in connection with this tax, and that is the difference between a controlled firm and one which is not controlled. The "Times" newspaper to-day says that the best way to evade the tax, or at all events to modify it, is to become a controlled firm. That is not my view at all. It is the other way on. I have here the case of a controlled firm and a non-controlled firm. The figures are supposititious. The turnover of each firm before the War was £100,000 a year. That is increased in each case, in war time, to £500,000 a year. The pre-war annual net profit in each case was £15,000. During the War period the profits have become £75,000 in each case. The munitions firm, under the draft preliminary rules, has to pay out of that profit £20,000 to the Exchequer, while the other has not to pay anything. The controlled firm has to pay, allowing for the War Tax of £20,000 on excess profits, £30,000 instead of £20,000, but the net result is that the controlled firm remains with £35,000, and the non-controlled firm with £45,000. That is not fair, and it wants looking into. That is another of the anomalies which arise in -connection with this tax, and which I mention because the right hon. Gentleman ought to have his attention drawn to it. It is well that a matter of that kind should not be misunderstood at the outset, as it has been by the writer in the "Times."
There is one point in which I have a special interest myself on which I should like to say a word. That is the proposal in
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Clause 17 to repeal Section 2 of the Finance Act, 1912, which passes on a portion of the monopoly value Licence Duty, in the case of people sharing the monopoly value of a public house, on to other shoulders than those which have borne the old Licence Duties. There have undoubtedly been cases of very grave injustice under this Section, which had the joint parentage of the hon. Member (Mr. J. M. Henderson) and myself. It was intended primarily, as far as we were concerned, to deal with the case in Scotland, where there are not such things as tied houses, and we were trying to protect the free publican against the rapacious landlord, who has seized already the greater part of the monopoly value. As the Government were taking back that monopoly value and restoring it to the State by a process which I need not characterise now—I have often done it before—we felt that it was extremely unfair that a man should have to pay monopoly value twice, and that as the monopoly value was being restored each person interested in it should pay a proportionate share of the new duties. That is the principle of the Finance Act all through. It was applied to other cases by Section 44, and it was entirely an omission on the part of the Chancellor of the Exchequer to apply it to cases of this sort. That Clause was put on the Paper during the Committee stage of the 1909 Bill. It was ruled out on a point of Order on the Report stage, but it appeared on the Paper on every Bill after that; so it is unfair to say, as many people do, that it was smuggled through this House at two o'clock in the morning. Everything was smuggled through then at two, three, five, six, nine, or ten o'clock in the morning. We were living in abnormal times, and we did everything at abnormal hours, and this Clause probably was passed at about two o'clock in the morning. I should think that was the normal time to pass it. But it was not the fault of the hon. Member and myself that it was opening in England a loophole and a chance of claiming which we had no intention of giving, and which has since been used to create harsh and unfair anomalies which I am only too ready to see put right. To repeal the Section simpliciter is going too far. It is cutting out entirely the principle upon which the Bill proceeded, and if, as is still possible under the Clause, notwithstanding the decision which has been given later by the judges—if it is still possible that harsh cases might occur, I think these

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ought to be dealt with and the Clause ought to be amended in such a way as to put a stop to them, and I shall hope that a Clause will be put on the Paper which the right hon. Gentleman will no doubt consider and which will effect that purpose, keeping the principle of the Bill to some extent—it would only be a limited extent. Those who knew the English law better than I did should have seen what that particular Section meant. It was quite unintentional on my part that it should have occurred, and we should be very glad to see any possibility of the continuance of these harsh cases removed either by Amendment, or, if that fails, by repeal. When the time comes I shall have something more to say on the matter.
6.0 P.M.
The FINANCIAL SECRETARY to the TREASURY (Mr. Montagu): The hon. Baronet who has just spoken, if he will excuse me saying so, has made a speech which is typical of the sort of speeches that we have got to expect on the Second Beading of this Budget. He brought to our notice three points, all of which I think were Committee points. The first one was the point about the bankers. On that matter I want to assure him that there is no intention of doing anything which meets with the considered opposition of the bankers in this respect. We imagined that this Clause would not meet with any serious objection from them, having regard to the position which the bankers took up at the time of their investment in the War Loan; but at the Committee stage I hope we shall come to an agreement about that and that there will be no difficulty about it. In regard to Section 2 of the Act of 1912, the hon. Baronet and my hon. Friend (Mr. J. M. Henderson) are in a difficult position. The glory of their names is for over associated with this great thing, but they both recognise that there is something wrong with their child. The hon. Baronet wants it to undergo a very serious operation, while the hon. Member wants to kill the beastly thing altogether, and I am afraid, after the most prolonged negotiations, that it looks as if his remedy will certainly be easier if not the most acceptable. However, that can be deferred to the Committee stage. I think that nearly all the points of the discussion thus afternoon, with a few general exceptions, which I shall come to later on, are Committee points. The reason for that is not far to seek.
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The principle of the Chancellor of the Exchequer's financial proposals have, I think, in the main, been accepted by everybody. This Budget has been framed to meet and to fight Prussian militarism. If it were not it would have been hailed from one end of the country to the other as the most disastrous piece of financial frightfulness that has been proposed in this or any other country. On the first part of the Bill, which deals with Customs Duties, I have very little to say. As to the question of indirect taxation, the scheme of the Budget has succeeded in keeping the proportion between direct and indirect taxation what it was before the introduction. There are three provisions in the first part of the Bill to which I would like to draw attention. There is a Clause, which was not mentioned in the Chancellor of the Exchequer's Budget speech, which repeals the taxes on certain articles in which spirit is used for manufacture, all of them used as medicines, or associated with the process of doctoring and surgery. This concession will cost something like £4,000 a year, but I know of no more appropriate time to make that concession than the present time. The second thing is the provision for preventing forestalments during the War, and for legalising the action which my right hon. Friend took in anticipation of the House's approval before the introduction of this Budget. Whatever may be said about the practice of forestalling suspected taxes in times of peace, a procedure which enables the trader to get enhanced profit out of the consumer at the cost of the revenue, cannot be tolerated in time of war. In regard to the much discussed Import Duties, it is no use my talking to the right hon. Gentleman opposite (Sir A. Mond) about them. Nothing could have been more eloquent than, and nothing could have been added to, what the Chancellor of the Exchequer said on this subject, but it leaves all these Gentlemen who oppose these particular taxes quite unconverted. I have only to repeat that they are intended as purely temporary measures, and that they have been selected on no principle whatsoever, except the principle that they will yield, in our opinion, compared with other articles which might have been selected, a substantial source of revenue, that the curtailment of the use of these articles will cause nobody any harm, that they are easy for an overburdened Customs Department to collect, and that they will give some indication of the length to

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which the Government will go to curtail needless expenditure. I yield to no one in this House in my devotion to the principles of Free Trade. I base those principles upon what I consider to be practical considerations; I think they are largely dependent upon the canons of elementary arithmetic. I would be a Tariff Reformer if I could convince myself that two and two make five, but they make four; it is a Cobdenite habit which they have. Every fiscal theory depends upon the circumstances of the time and place in which you find yourself. It would be monstrous, and it would be an act of the grossest injustice, to test the theory of Free Trade by the present conditions or the theory of Tariff Reform by the present conditions. When you have a time when most of the civilised part of Europe, or the uncivilised part of Europe, I had perhaps better describe it, is closed to trade, when you have deliberate and successful attempts on the part of the Government to take your manufacturers away from their own trade and employ them upon something else, when you have, in many instances, to obtain licences by cumbrous processes to export profitable goods, when your imports are controlled not by what you can afford to buy so much as by what you must have, when you cannot increase your exports to meet your import bill, because you do not want to, I say in these cases, with all due respect to my right hon. Friend, that it is a disservice to the cause of Free Trade to invoke it to fiscal practice at the present time.
The Member for Blackburn (Mr. Snowden) asked whether our principle was to obtain no more from taxation than that which is necessary to pay the interest upon the debt we are incurring. That is certainly not our intention, neither is it the result of what we have done so far. The interest on the new debt will be £78,500,000 on the 31st March next, and the new taxes proposed by the Minister of Munitions will yield £65,000.000.
Mr. T. M. HEALY: Does that include interest on the American Loan?
Mr. MONTAGU: A full year's interest on the total new debt that we shall have incurred by the 31st March next will be £78,500,000. The yield of the taxes proposed by the Minister of Munitions next year is £65,000,000, and it is provisionally estimated that the yield of the new taxes proposed by the Chancellor of
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the Exchequer will be £101,000,000. In round figures, £166,000,000 is the total yield as against £78,500,000 for the interest on the new debt. Those are the total increases that have been proposed since the War. The main new principles of the Income Tax which are embodied in this Budget are the assessment of certain incomes by half-yearly and quarterly instalments. This provision is concerned with individuals and firms who derive income from husbandry, from trade and business, from professions, and from employment. This provision has not been understood either in public discussion in this House or outside. In 1916–17, a normal year, and in subsequent years, half-yearly instalments of Income Tax due will be collected on or before 1st January, 1917, and on or before 1st July, 1917, with corresponding dates for subsequent years, in the case of farmers, traders, business, and professional men. Quarterly instalments, corresponding to quarterly assessments, will be collectable in the case of employed persons. In the present year there will be no quarterly instalments. On or before 1st January, 1916, the taxes payable under the first Finance Act of this year will be due, and on or before the 1st July, 1916, the tax payable under this Budget will be collectable. This arrangement will extend to everyone to whom the instalment system, half-yearly or quarterly, is in future to apply.
Mr. RAWLINSON: I do not quite follow the right hon. Gentleman. When is the first quarterly payment to be made?
Mr. MONTAGU: It will be made after the first quarter of the next financial year.
Mr. RAWLINSON: The 1st July next year.
Mr. MONTAGU: If the taxpayer who is subject to the quarterly instalment takes advantage of this provision, he will have on or before the 1st July next year to pay the deferred tax from this year, and subsequently the first quarterly instalment for next year. The House will have seen, though no comment has been made upon it, that we have swept away the limit of time during which Income Tax payers can claim relief on earned incomes, a limit which has led to serious cases of hardship. I want to say a few words about the very eloquent speeches which have been made by the hon. Member for East Mayo (Mr. Dillon) and the hon. Member for Blackburn (Mr. Snowden). The hon. Member for Blackburn

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says that he is one of those who would like the Income Tax universal, and to have no other tax at all, except possibly, I think he said, Death Duties and the tax upon alcoholic liquors and tobacco. If he ever gets his way he will have to extend the Income Tax lower and lower, until it embraces everybody, and when he does that he will find out, to his horror, that he has increased the taxation by thousands per cent, more at the lower end of the scale than at the other end of the scale. If the House agrees to the contentions of the hon Member for East Mayo and the hon. Member for Blackburn, it means that they will close the door for ever to an extension of the Income Tax downwards below £160. If you extend the Income Tax downward, if you impose the Income Tax on lower incomes, you must have a corresponding alteration of the abatement, and you could produce to the House then, alarming, remarkable, and very disconcerting theories of percentages which are wholly inseparable from a change of this kind, a change which, I hope, in times of peace, when the whole Income Tax comes to be reviewed, will be found to be pregnant, not only with further great changes, but the possible avoidance of a large part of indirect taxation. I will also point out to the hon. Member for East Mayo that the new concession with regard to children, which is going to cost the revenue £420,000 a year, is deliberately designed to help the most deserving of those who are called upon to pay the new and heavier Income Tax.
I now come to the excess profits. My right hon. Friend the Member for Islington, whose speech delighted the House, whose arguments were none the less amusing because they were unconvincing, and whose analogies were none the less humorous because they were wholly inaccurate, misunderstood completely the purpose, scope and principle of this tax. There is no suggestion, and, so far as the Government is concerned, there has been no suggestion, that there are any what we call bloated felons in this country. This is not a penal tax and is not intended to be. The principle is simply this, that war is, unfortunately, for most of our fellow countrymen, a period of hardship, privation and reduced income; and at the same time those people have got to be called upon to pay their share of the cost of the War. Going about among them one finds that there are businesses or trades, or people enjoying businesses or trades, who luckily differ from the majority of their
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fellow countrymen by enjoying profits larger than those which were enjoyed in time of peace. That is the whole case. They are wealthier and therefore they can afford to pay more than those who are poorer to the burden which we have to face. It is a question of the enjoyment of profits during a time of misfortunes.
My right hon. Friend talks about doing the same thing by the Income Tax which will apply equally all round. That is just what is wrong with the Income Tax, that it does apply equally all round. We want something which will apply only to those who are in the position of having what I may describe as income which they have not learned to live up to. The man who is suffering from a decrease in profits or income, or the man who has a stationary income, finds a great increase of taxation, owing to the responsibilities which he has assumed or the habits which he has acquired, a very serious blow to suffer all at once. Many hon. Members think that my right hon. Friend has not been severe enough in his taxation. I think that he may claim to be very steadily, and with very set purpose, training the inhabitants of this country to look forward to far larger imposts in the near future; but when you get to a man whose income has suddenly grown very substantially over the income which he had last year, then he is the appropriate person to go to and ask for a still larger and very substantial sum for the assistance of his country in time of war. That is the whole principle of the War Profits Tax. During the last ten days my right hon. Friend and I have seen everybody who wanted to come to the Treasury, for whom we could find time, to adjust the difficulties of the application of this principle, and I think we may claim to have met most of the objections in the drafting of the Bill. My hon. Friend the Member for Mayo gave two examples of difficulties in applying this principle. One was a trader in Dublin, who suffered in 1913, and the others were people who had made profits but were now going to suffer a loss. I can assure him that when he has had time to study the Bill he will find that both those cases have been met. We have substituted for the three years' average datum line a two years' average. The trader can select any two of the three, and with regard to future loss this is not so much a tax as a levy on excess profits over the whole War period. If he makes profits over the datum line in the first year

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of account he will be allowed to obtain repayment of his tax if he has made a loss on the datum line in the second.
My right hon. Friend the Member for Islington said in one of his most eloquent passages, "We cannot legislate without hardships." I agree that cases of individual hardship will be unavoidable under this Act of Parliament. I do not think that it would be a good thing to put every case of hardship to the new tribunal. I want to ask the House, in the discussion of the Committee stage, when the Government will be found ready to listen with consideration to every suggestion from the House, the whole of which perhaps without exception wants the new taxes to work, to take the view that to give to the new tribunal, wherever it may be avoided, the decision of individual cases would be a grave mistake. We have tried in the Bill to keep as far as possible the new tribunal, at any rate as a Court of First Instance, for cases of whole trades or whole classes, and if you allow individual cases to come to this tribunal, it seems to me that the collection of this tax would be very largely hampered. I would remind hon. Members that when we impose indirect taxes we do not consider one hard case or another hard case. We put them on with a thump. We do not consider how one drinker of tea will find it easier to meet the tax than another drinker of tea, but we are so very careful to inflict no hardship when we come to these taxes which are supposed to fall more heavily on the rich than on the poor; and I would suggest, if we can agree that in the vast majority of these cases no avoidable hardship or infringement of the principle of the taxes is contained in the Bill that we should not seek too much to consider the particular interests of a particular person in one of our constituencies, who finds that in his particular case the Bill would work badly.
Before I sit down, I would like to say a word about the real nature of the situation which this Finance Bill is intended to meet. It is an instalment of the provisions which we are making to meet the cost of the burden that we have incurred. I do not think that people in this country, and some of our critics in newspapers, some of the pessimists among others, realise what that burden is. We have first of all kept, and we have to keep, an impregnable and inviolable Navy. We have, in the second place, paid for, and we con-
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tinue to pay for, an Army which has increased from a few thousands to an Army which runs into millions. Third, we are finding by loan to our Great Dominions part of the expenditure of the contingents that they are bringing into the line of battle. Fourth, as regards India, we are paying the whole of the burden of the Indian contingents, except the normal peace expenditure. Fifth, we have advanced to our Allies such sums as it is estimated in some quarters would keep and maintain in the field three millions of their soldiers.
Mr. T. M. HEALY: For how long?
Mr. MONTAGU: The sum that we have been lending to them roughly would last for a year, but I cannot say how long, because one does not know what future demands will be made or how demands will grow or diminish. The only reason I draw the attention of the House to these facts is that we have a right to be proud of the share that we in this country are contributing to the great War; that we ought to be proud of the way in which the proposals for meeting the expenditure on the War have been received by all parties; and that anyone who belittles the share which, this country is taking in the War, with those facts staring him in the face, seems to me to be flying in the face of the truth. But, I would add, those who think that we have not yet brought ourselves adequately to the task of meeting these obligations and of insuring an adequate proportion of the resources of individuals shall be placed at the disposal of the Government have more ground for complaint. For the current financial year the expenditure is estimated at £1,590,000,000, and the revenue at £305,000,000, leaving a deficit of £1,285,000,000. Next year, if the present rate of expenditure is maintained, the estimated expenditure will be £1,825,000,000, and the revenue, on the present basis, is expected to realise £387,000,000, leaving a deficit of £1,438,000,000. It will be seen, therefore, that our burden involves a total expenditure by the Government amounting to no less than two-thirds of the entire estimated national income; and yet, despite this, there is said to be in the country a feeling of relief that the Chancellor of the Exchequer has asked for so little taxation.
I think it absolutely necessary to repeat that the expenditure on this War will have to be borne by the nation almost entirely out of its own pockets and in the form of

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tax or of loan. And it follows, therefore, allowing for any Loans that can be raised abroad, that in order to cover the difference every citizen ought to be prepared to put at least one-half of his current income at the disposal of the State, either in the form of tax or of loan. There seems to be an opinion abroad that the huge deficits can be found out of the enormous accumulated wealth of the country, which is sometimes put at £15,000,000,000, and which my hon. Friend the Member for Blackburn put at £10,000,000,000. He thinks that it would be quite simple to impose a tax on that which would raise a revenue of £500,000,000. But you cannot tax capital that you cannot realise. The accumulated wealth is in the form of houses, factories, railways, canals, landed estates, furniture, and, to some extent, securities, none of which can be converted into the goods and services that are required for active warfare excepting in so far as you can sell them or pledge them to foreign purchasers or lenders. It is no use lending them or selling them to one another. We have lately raised in America a loan of £100,000,000 sterling. We may find other buyers of our securities, other people who will lend us money; but this is not going to make a very large hole in the figures which I have mentioned.
There are some people who believe further that nothing is easier than for rich men to borrow their money from their bankers and then to lend it to the Government. This device again can have no effect unless the people who carry it out take measures to save and repay the loan from the bankers, at least as rapidly as the Government spends the money. If they do not do that the only effect is that they and the bankers between them have produced a certain amount of credit which can be drawn upon in the form of cheques which they have added to the available supply of currency without any addition to the available supply of goods and services. The only result of this must be increased competition between the Government and the spending public for a limited supply of goods and services. Then follows as a consequence a rise in prices. That stimulates the import of goods from abroad, and of course the foreign exchange is depreciated still further. So what is wanted in this War is not artificially created money, but actually produced goods and services which the Government must have for the War, and for which there can be no substitute. As our pro-
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duction of goods and services has been reduced by the flower of our men going to the War, and by the turning of others on to making munitions, the situation can only be met if the rest of the community forgo the use of goods and services to which it has been accustomed, so that the labour and energy used in producing them may be transferred to the production of goods and services required for the War. If we are to continue to finance the country for ourselves and our Allies—and nobody doubts that this must be done, and therefore it is what we are determined to do—it can only be by the civil population of this country, of all classes, severely stinting itself and rearranging its whole life on quite a different basis with regard to the consumption of goods and services.
There is no direction, it seems to me, in which the public can stint itself without exercising a beneficial effect on the national finance. If it goes without goods which are got from abroad it lessens the amount we have to borrow and consequently enables the Government to borrow more cheaply. It also relieves pressure upon our merchant navy, and it tends to check the great rise in freights which has been so important a cause in the rise of the prices of commodities which are imported. If it stints itself by refraining from buying goods made at home it sets free labour and energy to produce things required by the Government, or which, if sold abroad, improve the state of our commercial balance. If the country refuses to stint itself, in the long run it will be compelled to do so by the consequent rise in prices, which will reduce its buying power and bring about compulsory reduction of expenditure. I think the sense of relief which has been caused by the moderateness of this Budget arises from an undue appreciation of the state of affairs. It simply means that, if there is money left in the pockets of the people that money will have to be got later by loan or taxation. The man who spends on articles which he can do without now, and does not stint himself to the standard of the figures which I have quoted as showing what is necessary, who does not set himself to mould his life so that he will be in a position to afford one-half his income for the country—the man who does-not set that ideal before him is, in my opinion, not doing his duty in this War.
I do not think there has been any true appreciation of that as yet. There is little decrease in the consumption of luxuries.

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Those who dispense luxuries over the counter are doing a roaring trade. The consumption of some luxuries has increased. The consumption of alcohol has increased. I am told that the makers of expensive pianos are enjoying a considerably increased demand. I would observe, further, that there is a tendency to say that whenever you increase taxation you ought, therefore, to increase profits or remuneration, wages, or whatever it may be. If that is the result of the increased taxation you have achieved very little good by it; the money is sent round again, and consumption is not in any way affected. I can only assure this House that we have pledged, and we want to see pledged, the resources of this country to the utmost in this fight. I think it is for the people to see that their resources are ready, and are not dissipated upon private expenditure. The Chancellor of the Exchequer, I can assure the House, intends to develop, with all possible rapidity, the compulsory tax system of the country, but this by itself cannot be adequate to meet the case. Voluntary saving and voluntary readjustment of the standard of life by all patriotic citizens, are now required of them more urgently than anything else, if the ultimate victory which we confidently expect and look forward to is to be made assured and certain.
Sir ALFRED MOND: My right hon. Friend is to be congratulated on the extremely able speech which he has made, more especially, I think, because of the scientific way he has laid down the principle of taxation in order to guide our conduct. My right hon. Friend discussed some ideas of his absent colleagues on the Front Bench, in regard to the exercise of economy by the people, but how can he ask private citizens in this country to economise when on all hands throughout the country you see the monumental Government waste that is going on? What is the use of asking people to abandon or to diminish the quantity of goods they buy when they find this waste going on throughout the country? The Government must begin, and I hope they have begun, by examining into the enormous expenditure which is going on before they can legitimately expect the citizens of the country to alter their course of expenditure. As the right hon. Gentleman truly said, there has been an increase of prices, but that if, as soon as that increase takes
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place, you increase wages as well, yon will not effect any economy in consumption. Of course you will not. But that is-exactly what everybody has been doing, and nobody more so than the Government. The Government themselves have raised the scale of wages in this country in many cases, and quite unnecessarily have placed them higher than anybody else has done. They have taken men earning 16s. a week in agricultural districts and have paid them £3 or £4 a week. I can give cases where men employed by the Government in putting up huts have been paid £1 a day. Undoubtedly we have, in some way or other, to cut down expenses, but the Government will get no result unless it has the courage to institute some kind of organised system to attain that object.
The right hon. Gentleman referred to our objection—which we shall continue to raise—to the perfectly ridiculous tariff which this Bill discloses. We are not mere theorists, we are not concerned with theory, but we are concerned with the fact that, whether there is war or not, two and two make four and cannot suddenly make five. Two and two make four, and will still make four whether there is war or not. On what basis have these duties, been advanced? First, there is this War; secondly, the diminution of imports; and, thirdly, the wish to stop the people buying these imported articles. Let me first, deal with the question of the War. My right hon. Friend knows as well as I do that there is no tariff system in the world that has not been born during a war, and in regard to which the same argument was used as that offered by the Chancellor of the Exchequer. If you study the history of tariffs it proves that they originate during periods of war. American production began during the great Civl War. At that time America acted on Free Trade principles, which were abandoned on the ground that there was war. Import taxes were imposed. Those taxes remained after the War, and the tariff exists to this day. I am as certain as I am standing at this box that if you pass these taxes they will never come off. I cannot understand people who beat themselves on the breast in proclaiming their Free Trade faith and ask us to vote for these duties.
Let me take the second argument. Has the right hon. Gentlemen examined in detail what amount of money is to come from these various articles, which come from no country in which the exchange is adverse

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to us, except the 2½ per cent. in America? Does the right hon. Gentleman think it a good or bad thing that imports from France and Italy should be taxed? And there are no places in which the exchange is so much in our favour as in those two countries. Take the articles from the point of view of the American exchange. We have imported from America watches to the amount of £16,000. Where do the rest come from? Five hundred thousand pounds worth come from Switzerland. Can the right hon. Gentleman explain to me how he is going to affect American exchange by stopping the exportation of watcher from America? I cannot for the life of me understand how we are going to effect American exchange by stopping the importation of watches. Take the case of musical instruments. Nearly half of those musical instruments are from our Allies. How are you going to benefit the American exchange by stopping the import of musical instruments and parts from France? Do you think that you will encourage our Allies or be doing them a good turn by suddenly putting a tariff on some of their exports? I am astonished at the madness of imposing duties on a number of articles which come from our Allies, or from neutral countries, with which we are still on good terms, at such a moment as this. As regards the whole question of exchange, and considering that, half of the charges have been abandoned, and what are left are so fragmentary, I defy the right hon. Gentleman sincerely to get up and say that it will make a difference of 1 per cent. or ½ per cent. on the American exchange whether those duties go through in the form in which they now are or not. The right hon. Gentleman does not pretend to do that, and we have never had a defence of these duties. We were told that we must not discuss the principles, but only the details. The principles are not defended, and they cannot be defended by anybody. These duties were conceived in a mistaken idea and in entire ignorance of the results, and, like all tariffs, they are going to achieve exactly the opposite of what was intended.
Take one or two striking points. We were told that these duties would not have a protective effect, because no motor cars are being manufactured in England. I have got here a list of a number of factories in this country which are advertising motor cars for sale. Did the right hon. Gentleman or the Treasury know when they imposed these duties that
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those motor cars were being sold in this country? I am informed that the right hon. Gentleman received a deputation the other day, and was extremely surprised when he was made aware of this fact. How can he deny, when there is a large number of people manufacturing motor cars, that the putting on of a heavy duty is going to have a protective effect? Of course it is. If he admits that I am quite satisfied, and if he says he has introduced a protective tariff because of the War I am satisfied, but why does not the Government own up to what they have done? The right hon. Gentleman says you must not buy luxuries. I can go and buy a £1,000 motor car, but if I want to substitute for it a much cheaper car, because of what the Government say, then I am to be taxed for doing so. If you wish to buy a Ford you have to pay for doing so, while you can continue to buy the big car. I agree with the right hon. Gentleman that this is not a moment for people to buy motor cars, and I would suggest that he should make all motor cars expensive, whether they are foreign or otherwise. I would agree if he prohibited the importation and production of luxury cars. Why not let him put a 10 per cent, duty on all cars being built, and second-hand cars as well, and collect that duty with the Motor Tax collected by the local authorities? By doing so he would get two millions of money. There would not be any objection to it, and it could be applied to commercial vehicles as well, and it would not infringe any of those principles which will come back on them. Has he had time to read a single motor trade paper? If so, has he seen that the whole of the motor trade look on this duty as permanent?
Is it the fact that a deputation of a certain number of English motor-car manufacturers waited on the officials at the Treasury in order to press for a protective tariff, and what answer was given to them? Is this the result of the visit of that deputation? Are we not already experiencing all that evil of evils, of Lobbying, of this setting up of private vested interests, and all those personal matters to which those of us who are not merely looking at this question from the economic or theoretical point of view, have always attached the greatest importance? Since these duties have been introduced I have been more worried and bothered, and so have other Members, by going into details of half a dozen trades, either on one side or the

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other, than during many previous years in the House. That is the beginning of what we have tried to prevent for so long. How can it be said that these taxes are easy to collect. The right hon. Gentleman knows, that the Customs are having the greatest difficulty in knowing how to begin to collect them. He knows, too, that they have no bonded warehouses for motor cars, and do not know where to find them. He knows also that he is going to have a very largely increased staff and very great expense in collecting these taxes. That is common talk; everybody knows it. I venture to say that the collection of these taxes will cost a very great percentage of what they will bring. I have always thought so. Surely because a war is on everything that the right hon. Gentleman has said about the difficulties of a tariff and its evils does not suddenly disappear. He has said in peace time, and I suppose so have other Ministers, that the cost of collection and administration of a tariff is a difficult and expensive matter. Surely it remains so.
I would like to draw his attention to a point which has not hitherto been dealt with. Last year we passed the Provisional Collection of Taxes Act, which was introduced for the purpose of enabling the Government to collect the old Customs Taxes on the Resolution being passed by this House, and before the Finance Bill was on the Statute Book. When that Bill was before the House the hon. Member for Falkirk Burghs (Mr. J. M. Macdonald) moved an Amendment that the Act was not to apply to new taxes. That Amendment was accepted by the present Chancellor of the Exchequer on behalf of the Minister of Munitions. The Chancellor of the Exchequer on that occasion specifically stated that the Provisional Collection of Taxes Act ought not to apply to new taxes, and although the right hon. Gentleman the Member for West Birmingham (Mr. Chamberlain) pressed on all occasions not to have the Amendment accepted, it was accepted, and is to-day in that Act, and yet in violation of all that took place last year—the right hon. Gentleman shakes his head—but I think there is no doubt about it.
Mr. MONTAGU: I do not dispute for one moment what the right hon. Gentleman has said about the Provisional Collection of Taxes Act. All I dispute is that it has been violated.
Sir A. MOND: I was coming to that. None of these taxes—the new Import Duties—can be legally collected till the Finance Bill is on the Statute Book. If they can, then I cannot see either the meaning of the Debate to which I have referred or the meaning of the statement of the Chancellor of the Exchequer during that Debate, or his interpretation of the Act. Does the right hon. Gentleman contend that under the Act they are entitled on the passing of a Resolution immediately to put the duties in force?
Mr. MONTAGU: What I contend is this. Until the Provisional Collection of Taxes Act was passed it was held in the Courts of Law that we had no legal power to collect taxes on Resolutions; but we had collected taxes on Resolutions, because it was for the convenience of the taxpayer to do so in anticipation of the Act which he knew would be passed. To those taxes to which the Provisional Collection of Taxes Act does not apply, we go back to the practice which existed before the Act—
Mr. HIGHAM: That is held to be illegal.
Mr. MONTAGU: Namely, for the convenience of the taxpayer, so that he can pay, rather than wait until the Act passes, when he would have to pay from the date of the Resolution.
7.0 P.M.
Sir A. MOND: That is the most amazing explanation I have ever heard in my life. Why did we pass the Act at all? It was because the law declared it to be illegal for the Government to collect on Resolution, and on the very next occasion the Government commits the same illegality for the conveience, forsooth, of the taxpayer. Just see how absurd that is. You have been collecting taxes on two duties, which you have already abandoned, and if you abandon any more of these duties during the passage of this Finance Bill, as I am perfectly certain you will have to do, how can you say it will be for the convenience of the importer to pay these taxes? I do not think that is very candid. I would refer the right hon. Gentleman to the speech of the Chancellor of the Exchequer, in which he specifically gave reasons why this should not be done, and I am sorry he is not here himself. [Mr. McKenna entered the House.] I am very glad the right hon. Gentleman has come in. I have been criticising the action of the Treasury in collecting these new Import Duties on Resolution, and I would remind the right hon. Gentleman of the speech

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which he made when the Provisional Collection of Taxes Act was before the House, and in which he gave eloquent reasons why, under no conditions, should such taxes be collected on Resolution. He knows perfectly well why that provision was introduced, and accepted, although it was opposed by the right hon. Gentleman the Member for West Birmingham. It was introduced for the purpose of preventing a tariff being rushed on this country without discussion. It was to prevent what is being done to-day. I am amazed that nobody has brought that speech to the right hon. Gentleman's recollection. I do not know whether he remembers it; he cannot have, or I am perfectly certain he would not have sanctioned such an absolute breach of Parliamentary undertaking and law as he has sanctioned in this case. I am very sorry it has been done. I am very sorry the Government should go out of their way to commit an illegal proceeding, and a proceeding which they assured the House of Commons at the time they would not commit. I cannot convince the right hon. Gentleman the Chancellor of the Exchequer, and I cannot convince the Financial Secretary, that the imposition of a protective duty is obnoxious to those who supported them formerly. I should have thought that an analysis by the Chief Whip of the Division List would have shown them how those duties are resented. They have not convinced us that these duties will do what they want. If they desire to stop the purchase of luxuries, let them prohibit them at home and from abroad. Let them deal with them in a big and statesmanlike way. If they want the people not to buy motor cars, let them make the motor cars more expensive, and not go on in the way they are going on now. The Chancellor of the Exchequer agreed the other day to admit commercial motor cars free of duty, but now in the Finance Bill the regulations practically make the whole of the concessions an absurdity. He wants to make the importers of chassis say whether they are for commercial cars or not. How can anybody tell to what purpose an imported chassis will be applied? It might be six months after the chassis arrives before anybody could say whether it was to be used for a pleasure car, or an ambulance, or for commercial purposes. The importer cannot tell, and the wholesale agent does not know what it is to be used for, and he could not trace it to the ultimate retailer,
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who might possibly sell it to the Chancellor of the Exchequer himself. The right hon. Gentleman's provisions will not work. When we attack these duties it is not merely because we are theoretical, but because they break down when they are analysed. The right hon. Gentleman knows as well as I do the enormous difficulties and complications which this kind of duty involves. He has not been Secretary to the Free Trade Union all these years without being perfectly familiar with the fact that all this type of duties, not because of any vice of economics, but simply from practical experience, are bad, difficult to administer, expensive and unjust, and they remain so to-day as they have always been. He is damaging in many directions export trade which we were just gaining. One of the largest manufacturers of pianos informed me the other day that the South American trade, which has always been in German hands, was now being captured by English traders, who used parts coming almost entirely from France. The right hon. Gentleman is introducing a duty which will cut off this promising export trade, all on account of a delusion that he is stopping luxuries or imports.
The more I have had to go into these matters the more I have found, and the more the right hon. Gentleman goes into them the more he will find, that what we have both always said is perfectly true—that as soon as you begin to interfere in commerce or in industry you can no longer foretell what you will do. When you want to stop imports into this country you find that you are interfering with re-export trade of all kinds of whose existence you knew nothing. One of the largest exporters of watches in this country imports Swiss parts of watches, which are put together in this country and re-exported as English watches. What will happen if this duty goes through? Those watches will go straight from Switzerland; they will not touch this country at all. No English capital, labour, or goodwill will be used or built up. That will be the logical and automatic effect of this duty. Why does not the right hon. Gentleman abandon these miserable taxes? Why does he not introduce taxation which will not have these results or offend against all the principles for which he and I have fought, and for which I intend to go on fighting as long as I can? There is so little left of them, and there is so much objection to every one of these taxes that remain, as he will discover when we get into Committee.

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The right hon. Gentleman must surely be learning from his own officials the administrative difficulties involved in collecting them. The reason he gave for not putting on an Excise Duty was that the Customs staff is overworked to-day. Yet lie is putting on them all these difficulties, and giving rise to all this trouble and confusion, not for a permanent tax, but for nine months. Is it worth while to cause all this trouble and confusion for nine months? It cannot be. The right hon. Gentleman cannot believe it. He must see that he has entered upon a disastrous experiment, one which he may have been led into by others not so firmly versed in the elements of the matter as he is himself. I would adjure him even at this eleventh hour to give up this fantastical experiment, which will do him no credit, do no good to anybody, redound to nobody's advantage, but merely land them in difficulties, and at this time of crisis bring still another crisis. It would be infinitely preferable for the right hon. Gentleman to have a scheme by which he would raise a larger revenue and increase the price of motor cars equally, whether manufactured here or not. That would not be objectionable from any point of view. I understand that such a scheme has been outlined to the Financial Secretary to the Treasury, who apparently received it with favour. I would commend it to the right hon. Gentleman also. I think it would be well worth his while to look into it. He will find it an extremely good substitute for, and a great improvement upon, what appears in the Finance Bill. I hope the right hon. Gentleman is not one of those who, having constructed a large and very fine building, as he has done, is going to spoil it by leaving these excrescences upon it. Let him chip them off. He will have enough difficulties on a much bigger section of the Finance Bill without laying up for himself all these difficulties as well.
The Financial Secretary made a very eloquent and able defence of the Excess Profits Tax, but in defending the principle he appeared to me to make a curious mistake. He said that the principle of the Excess Profits Tax was that you were going to find somebody who had made more money during the War than in peace time, and you were going to say, "We will take away part of those extra profits." The Excess Profits Tax does nothing of the kind. It does not deal with individuals. It deals with companies. A company does not make money; it distributes money.
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The individual shareholders of a company from whom you take excess profits may have a very much smaller income than he had at the beginning of the War. He may have his money in four concerns, of which one has made excess profits and three have made a dead loss. In such a case the individual will not be a person who has a larger income. What the Government ought to have done would to have been to have obtained a declaration of the individual's income, and if anybody's income during the War was higher than it had been before the War, to have taken half or the whole of it away—the whole of it if they liked. But that is not what the Government have done, therefore the defence of the Financial Secretary will not hold good. We may have necessity for dealing more in detail with Clause 12 and other Clauses of the Finance Bill. When that time comes we shall, no doubt, have a reasoned defence of the different parts of what the Financial Secretary called an unscientific tariff based on no principle, and we shall try to put a little principle into it; but we would be much obliged if that trouble were saved to us.
As far as many other parts of the Finance Bill are concerned, most of us feel that there has not been adequate time to consider them even cursory, and I must reserve anything I may have to say on them until a later date. That the right hon. Gentleman has made a very strenuous endeavour—and, I should think, a largely successful endeavour—to meet many of the difficulties of the Excess Profits Tax, I have no doubt. In many directions a great improvement has been made. Whether that tax will ever be perfect is more than he or anybody else can say. That the tax may be still further improved is possible. That it will, on the whole, in the special circumstances, be accepted by the House is, I think, a matter upon which there can be no doubt. It is impossible to meet every kind of hardship that arises, and I quite agree that the right hon. Gentleman does not try to do so. In a War like this it is quite impossible not to find difficult cases. On a previous occasion the right hon. Gentleman seemed to think that I was opposed to this tax. I have never been. I think, on the whole, it is a very reasonable tax, and one that we must accept. The money must be found somewhere, and with the improvements which have been made I think the tax will, on the whole, operate quite fairly. I wish I could say the same for his unfortunate

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experiment in regard to a tariff. I wish he would modify that to such an extent that we should never have to refer to it again in the discussions on the Finance Bill.
Mr. ANNAN BRYCE: Like the right hon. Gentleman the Member for Swansea (Sir A. Mond), I was left rather cold by the homily on economy addressed to us by the Financial Secretary. No one can cavil at the arguments which he adduced in support of economy by every citizen; but the Government, which surely ought to set an example to the country in the matter of economy, is the worst offender. The Treasury has set up a Committee of Retrenchment, but that Committee of Retrenchment deals with all the civil departments except the spending departments. It has made cheeseparing economies in various directions, reduced the salaries of different people, and done away with a number of officials; but all these are economies which ought to have been made in time of peace as well as in time of war. No attempt has been made to control the expenditure of the great spending departments. In fact, the Treasury has actually parted with all the control it ever had over those departments. It has been practically told that it is not to interfere with any requisitions of money by the Admiralty or the War Office.
What is the result? We see the preposterous extravagance which is going on in every kind of construction. The principle acted upon in the construction of the camps and the various other buildings with which the Government are covering the country is that a percentage shall be given upon the labour employed and the materials used. The result is that the contractors have no inducement to economy. It is to their advantage that the expenditure should go up, because the greater the cost, the larger the amount of money they get from any particular percentage. The hon. Baronet the Member for Swansea gave cases of labourers getting 16s. and £1 per day. I know similar cases in camp construction in the West of England where boys who were previously getting 9s. a week are now getting from 25s. to 42s. per week for carrying carpenters' bags. Workmen, too, who used to get 18s. to 20s. a week are now getting as much as £3 and £4 per week. Workmen I have heard of who are driving stakes to carry trestles. The trade union steps in and says to them that they are not to drive in more than two stakes a day. The men concerned
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drive in their two stakes and go home. They are not wanted to work. Contractors prefer that they should not, because it means that more wages are paid, with a larger percentage for the contractor. That kind of thing is going on all over the country. Not only so, but I maintain there is an immense amount of corruption going on in connection with various Government contracts. I know cases where manufacturers are getting from outside buyers articles that cost 15s. each and then selling that same article to the Government for £3 10s. The manufacturer concerned is not getting the difference between the 15s. and the £3 10s., but it is going in various quarters which had better be nameless.
This kind of thing is absolutely universal. Everyone concerned with contracts which are being made at present, and which have been made since the War, knows there is enormous extravagance and wicked corruption going on. The Secretary to the Treasury very admirably criticised the hon. Baronet the Member for the Ayr Burghs, pointing out that a good deal of his speech was based on Committee points. But I am sure that the hon. Baronet was entirely justified in what he said by the1 very important declaration he elicited from the Financial Secretary. Speaking on behalf of the Scottish bankers he called attention to the exceedingly bad effect it would have upon business in Scotland, and the prosperity of Scotland if Clause 27 in the Bill were kept in. That applies with quite equal force to English bankers. I have heard to-day of cases. I have heard of a case of one bank in England where 90 per cent, of the deposits produce only £5 per year each. That means a very large proportion of the depositors, practically the 90 per cent., are people of very small means. These people ordinarily are below the limits of abatement. What will be the effect if this taxation of the deposits in the hands of the bankers is maintained? The effect will be that the reclamation of Income Tax will have to be made by the individual depositor. At a meeting of bankers to-day it was calculated that there would be something like three millions of claims made for repayment. Why should the bankers have the trouble of doing what the Treasury ought to do? Does the Treasury really know what kind of work it will be making, either for itself or others, by this very indiscreet provision in the Bill? This provision, if kept in, will be most disastrous in every way to the prosperity of

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the country. The hon. Baronet said there were two classes of depositors: there were the foreign depositors of money and the native, or national, depositors. Since the War began the foreign deposits have increased immensely. Those deposits will all be withdrawn. The process of the withdrawal of these deposits has already begun. I heard to-day that £100,000 of Argentine money has already been withdrawn from London and sent to America. We cannot, as the right hon. Baronet the Member for Swansea says, tamper with these things and keep ourselves in the position of having done nothing. The mere effect of having put this Clause in the Bill has already unsettled the minds of foreign depositors, and also the minds of our native depositors. The process of hoarding has already begun. Depositors have already been withdrawing from their bankers. They are afraid of the Clause. I do not think the right hon. Gentleman's advisers realise how dangerous it is to interfere with the course of trade. The right hon. Gentleman himself knows it, because in his speech he showed most clearly what the dangers of such courses are; but his advisers do not know it. Perhaps he is not always able to control them. I was very glad of the declaration made by the Financial Secretary. It was very necessary that it should be made, and at the earliest possible moment. I was very glad to know that if the bankers object to this provision—and they do unanimously object to it—that the matter will be looked into. I was going to speak on the subject of the Excess Profits Tax, but as that is a subject which ruins mostly into Committee points, I shall defer what I have to say.
Mr. T. M. HEALY: The Secretary to the Treasury made one of the gravest speeches that I have heard in this House since the War began. I am quite sure that he said nothing but what the crisis we are now in warranted, and that he spoke deliberately, because he practically warned us, and warned the country, that every man in it must be prepared to give up 50 per cent, of his income to carry on this War. So long as we get value for our money I do not think there will be very much to find fault with, but we want value for our money, and value for our men. We want value for the blood and the treasure given. It was only for the purpose of saying this that I rose, but I wish to associate myself with what the hon. Mem-
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ber for Mayo said on the question of the Income Tax in its effect on small incomes in Ireland. This country should remember—and I think there is a disposition on the part of the Chancellor and others to bear it in mind—that this vast expenditure of £1,500,000,000 is largely a British expenditure, and that British work and British manufacturers are to that extent gainers by this War. We in Ireland do not gain by this War in any way, except in the most, comparatively speaking, infinitesimal manner. If I were to say that out of the £1,500,000,000, that £50,000,000 went to Ireland, I do certainly think it would not be inaccurate. Therefore, you have a population in this country equipped to meet the taxation, whereas in our country you have a population with whom the smallest incomes carries in taxation the bigger burdens. The Secretary to the Treasury said that this was a war of Budgets, a war of bills, and that it will all go up in bubbles at the end of the War. I do not believe a word of that. The effect of this War will be felt by every man now alive for the remainder of his life.
When it comes to promises concerning the Income Tax, I remember former promises. Mr. Gladstone promised that the Income Tax applied to Ireland for one or two years would be taken off at the end of that time. We had not had an Income Tax for over fifty years. England is bound by the Act of Union—not by the Act itself, but by a promise made—not to put Income Tax upon us. England had lent us a million of money, or perhaps two millions, for the famine of 1846. When Mr. Gladstone came in about 1853 he said he would wipe off the famine debt, and put an Income Tax upon us instead, and we have been paying Income Tax ever since. But that has been Income Tax on the Gladstonian basis of £160. What does the right hon. Gentleman do? It is a terrible thing to make this reduction, and to bring it down to men who have less than £3 per week, in view of the rise in prices. You are hitting these unfortunate professional men, clerks and others, with incomes of £2 and £3 per week. The Government are going to call upon them for £2, £3 and £5 out of their incomes, and all in connection with a war from which they gain no practical benefit, and these people in Ireland belong to the very classes who have given their sons and brothers to fight. You put upon them a burden which I think is really more than they can fairly be expected to bear. If I believed that this thing was a matter of a

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year or two, or even three years, I would be prepared to advise the people to grin and bear it, but when I hear promises made that this taxation will disappear in two or three years, I can only remember previous declarations of the kind, and say that I have no confidence in these promises. I would, therefore, make an appeal to the Government as against this taxation which will fall hardest upon the cities, because it is there the professional—that is to say the clerking classes—and small business people reside, and I would ask the Government to give us a fair share of the munitions work that is going on.
I want to pay the Government this credit, that they have sent over to Ireland a most competent staff. They have taken the right men, and I think they have taken the right measures. I believe one could not have better men than the Government have sent over, and I have the fullest confidence in them. What I have not confidence in is, that in the competition for orders which is going on in various places in this country, that Ireland will get its fair share of orders. Perhaps this is not strictly relevant, but if we are to have taxes placed upon us the Government ought to see that we should, at any rate, toe enabled to bear the burden in the way I suggest. There are two or three other small points I should like to raise. May I take it as a settled legal matter, under the Act of 1901, that there is no necessity, if this is put on, to deal with contracts in the matter of new taxes? Take motor cars. As I read the Act of 1901 I believe I am right in saying no further measure is requisite. I only want to be quite sure because it has caused uneasiness as to whether any provision as to contracts is required. For instance, supposing I made a contract in June to sell a motor car, and I sell it in December, is it quite certain that the Act of 1901 carries the tax to the consumer? My own opinion is that it does. I want to congratulate the right hon. Gentleman on the repeal of Section 2 of the Finance Act, 1912—a well-intentioned Section, but the effect of which has been most mischievous and oppressive, and I am delighted it is repealed. That repeal was promised last year, and with it was promised another repeal to the Finance Act of 1910 dealing with Ireland in regard to Stamp Duties. Then the Minister of Munitions put down a Clause to deal with the injustice to town tenants, and from that day to the present the right hon.
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Gentleman was kind enough to tell me, he could not find it. His draftsmen knew it. It was put on the Paper; it was a Government Clause, and was to repeal a grievance under the Act of 1910. The Clause appeared on the Paper, and, the Government having a large staff at their disposal and having promised a Clause like this, I think it ought to form the subject of a Government proposal.
There is one other matter. The Minister of Munitions told us that he would divide all future Finance Acts into two; he would have a Taxing Bill and a Revenue Bill. Now, the bearing of that remark on the present Income Tax proposal will be apparent. We are not opposing these Income Tax proposals, believe me, for the purposes of the War. We are making a present of them to the Government without practically sifting or examination, and I humbly submit that these new taxing proposals ought to be put into a separate Bill. Let us give the Government the main lines of the Bill as it is, but the un-sifted proposals should go into a Bill and be considered more at leisure than we can consider this Bill. That was the promise of the Minister of Munitions, who said eighteen months ago, "We have not time in taxation legislation to consider these nice, fine points and repeals, and a whole number of matters of that kind." The right hon. Gentleman said that, as a result, you get congestion in the House. "I will split my Bill into two," he said, "and put my operative taxes into one, and my more doubtful proposals into a second Bill for the mature and calm consideration of the House." In my opinion, that ought to be done with these Income Tax proposals. I think any man who has under £160, and certainly under £150, a year, ought to be exempt. It is not merely paying the money. This infernal system of returns goes to the heart of the people; and to put upon poor men, many of them illiterate, the continual harassing of these forms is adding a burden to life wholly unnecessary. I certainly would rather see an increase of another penny in the £ upon the higher incomes rather than that the tax should be created for those who have under £150 a year. Three pounds is not such a lot to live upon in times of war when you have got these increases in every commodity and in every necessity of life. I think we ought to have more consideration for these people. We are getting it out of them on tea, tobacco,

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sugar, coffee, cocoa, and what margin in their miserable lives are we leaving for the ordinary little, what I may call, luxuries, the ordinary little decencies, the ordinary small comforts of life which were hitherto supposed to appertain to this poor deserving class. I do say £150 is the lowest on which we should call on people to pay Income Tax. I have no sympathy whatever with a proposal to tax working people. Everything they consume is already taxed.
My last point is with regard to Sykes' hydrometer. I do not understand—I do no believe anyone does—but is it a fair thing to put into a War Budget a provision of this kind, which seems to me to be highly unusual: "(1) The revised and extended table, an original copy of which, marked Table I. (Spirits) has been signed by the Chairman of the Commissioners of Customs and Excise, and deposited in the office of the King's Remembrancer at the Royal Courts of Justice, shall be substituted, as the table to be used by Officers of Customs and Excise for the purpose of ascertaining the strength of spirits by means of Sykes' hydrometer, for the table of the Strengths of Spirits denoted by the said hydrometer which is required to be used for the purpose by the Spirits (Strength Ascertainment) Act, 1818." I am informed that they had some similar provision with regard to beer in the November Bill, and now it is being introduced as regards whisky. We know nothing about it. We are utterly ignorant on this matter, and here is a Bill, circulated yesterday, and we are supposed to know what effect this Clause will have. Have the distillers of the country had an opportunity of discussing it?
Mr. McKENNA: They will before the next stage of the Bill.
Mr. HEALY: That is not the way to do business. This House is not accustomed, I think, without some explanation—we have none—to have a Bill flung at us. We got it yesterday; we are to discuss it today. The Minister does not say anything in bringing in his Bill, and necessarily, in a Cabinet crisis, I suppose I may say, the right hon. Gentleman was not able to be here during a portion of the Debate. I do not know what the effect will be, but it must be something, I imagine, to put an additional charge on the distiller, or the Treasury would not bother about it. It must have some taxing effect, and I think
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some explanation of it is due and deserving; and, above all, I would like to point out that this table of spirits is to be laid before the Royal Courts of Justice in the Strand. They do not make whisky in the Strand; they make it in Scotland and Ireland. It is rather an odd way of bringing the matter to the attention of Scottish and Irish distillers to say that a supplemental hydrometer and table have been deposited in an office in the Royal Courts of Justice in the Strand. I, therefore, with great diffidence, ask the right hon. Gentleman to inform us what is the scope of this measure. I would like to say there is no justification for the hint that was thrown in one quarter of the House, that the House is not unanimous in supporting the Government in finding the money to carry on this War. There is no such suggestion. Any grumbling that there is is not as to the bulk of the taxes, but as to the incidence of the taxes. This House is unanimously behind the Government in the conduct and prosecution of this War, irrespective of any section or party or country. But we are entitled, while giving the Government our general support and our unanimous support as a whole for any money they may demand, to attack points where the incidence, in our opinion, presses harshly on the public in particular instances.
Sir JOSEPH WALTON: The Finance Bill now before the House is, in my judgment, conceived in a broad spirit, and for the most part on equitable lines, and it was introduced, if I may be allowed to say so, in a conciliatory spirit by the Chancellor of the Exchequer, who also gave evidence that he fully realises the seriousness of the financial problem which we have to solve. The whole nation is prepared willingly to bear heavy taxation and to have their financial resources utilised to whatever extent is needed to enable us to achieve a complete victory over our enemies. At the same time, it is urgently necessary that we should conserve our national resources, hold by the principle of equal incidence of taxation, and prevent wasteful and unnecessary expenditure, both public and private, in every possible way. With regard to the taxation proposals of the Budget, I listened with great interest and pleasure to the most admirable defence offered by the Financial Secretary to the Treasury on the Excess Profits Tax. My only complaint of the Chancellor's proposals in regard to excess profits is that he does

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not cast his net wide enough. What I desire to see is that the Bill shall be altered so that all taxpayers enjoying increased incomes during the War shall be equally made to pay the Excess Profits Tax. Now the definition contained in the Bill of those who are liable to the Excess Profits Tax and those who are excluded from it seems to me to be very vague and unsatisfactory, and does not by any means embrace many to whom such a tax ought to apply. Some of those who ought to have been included, but appear to be excluded, have already been referred to by hon. Members who have preceded me, but I venture to suggest to the Chancellor of the Exchequer that large farmers, earning as they are substantially increased profits from the conduct of husbandry, ought not to be excluded from liability to pay the Excess Profits Tax.
Then we come to the question of offices and employment. It seems extremely vague as to who is included and who is excluded, and it requires much clearer definition. We had a definition given tonight that offices included the members of His Majesty's Government. All that I can say is that if His Majesty's Government realise as strongly as I do the necessity for retrenchment, both in national and private expenditure, we should have an announcement from them that, during the period of the War, they thought it right to receive only half the usual salaries that they enjoy. And I venture to say that such an announcement on the part of His Majesty's Government would do more to promote in the whole nation the practice of that rigid economy which is so absolutely necessary than all the speeches in the world. But I go further than that, and I say that if, following the example of the Government, the Members of the House of Commons came to the conclusion that half-time ought to mean half pay, and that they as a body ought during the War to accept half the usual payment of £400 a year for the discharge of their half-time duties, that would obviate the somewhat objectionable feature that has arisen more than once recently in the ostentatious announcement that certain Members would not accept during the War the £400 a year. I think the general feeling of the House would be that that sort of declaration would be wisely avoided. There were questions on the Paper to-day in regard to payment of Members, and I do not know what reply will be made to those questions, but I suggest to the Chancellor of the Exchequer that it is impera-
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tive at the present time of national financial difficulty that the Government, and the House of Commons, first of all, ought to set an example to the nation. But I have digressed from the Excess Profits Tax. I desire that that should be applied to all taxpayers alike who enjoy increased income during the War from whatever source it comes. I am glad to recognise that the Chancellor of the Exchequer has given the question of the Excess Profits Tax his most careful consideration. I notice that he has made a new provision that the taxpayer assessed for excess profits shall be able to select any two of the pre-war years as the basis upon which the Excess Profits Tax shall be charged, and I believe that that will obviate injustice and hardship in many cases. A great deal has been made to-night of the difficulty of administering this levy or charge in a fair and definite fashion. I hold that the Chancellor of the Exchequer, in the ten days recess we have just had, has shown in the Finance Bill now under consideration that this matter has deceived his most earnest attention. I greet with pleasure the appointment of a board of referees with power to adjust assessments in order to prevent manifest injustices, and this should disarm a good deal of objection to the Bill.
Some people have said that this measure is framed in watertight compartments, but I do not read its provisions in that way. Properly interpreted I think those provisions allow a good deal of elasticity. I wish to ask the Chancellor of the Exchequer one question in regard to the capital on which 6 per cent. interest should be paid as the datum line in connection with this tax. It states in the Bill that any borrowed money or debts shall be deducted in computing the amount of capital. I ask what about debentures, which certainly form a real part of the capital of the majority of companies In what position do they stand under the Bill? I am glad to know that the right hon. Gentleman excludes goodwill as a component part of the capital of public companies, because in many cases that is simply what one might term "watered capital." Another point I wish to draw special attention to is the provision that interest derived from investments by public companies is to be excluded. It is true that many trading companies have investments in other companies, and a very substantial proportion of their annual profits is often derived from investments in other countries, and unless the Excess Profits Tax has been

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deducted at the source by these other companies, it ought certainly to be added to the companies' profits for the purpose of the Excess Profits Tax. I think that is a point which deserves consideration. Strange things happen to Members of Parliament. I happen to have been an exponent of what I believe to be the true principle that no taxpayer in the country ought to be allowed to enrich himself out of war conditions. I happen to be the chairman of a shipping company, and I received, with some amusement, the following letter:—
"Taxation of Shipping Profits.
We much regret to have to inform you that we consider the course you have persistently pursued in the House of Commons for some time past is detrimental to the interests of the shareholders, and altogether inconsistent with your position as the chairman of the company."
All that I can say, in response to a letter of that description, is that I was only too pleased to dissociate myself entirely from unpatriotic men not prepared to bear their proper share of taxation during a time of war. Another provision in connection with the Excess Profits Tax, which I see with satisfaction, is that the authorities have the power to vary the time when the tax is to be paid, so that no undue hardship may fall upon the payer. With regard to the wideness of the application of this tax I would ask the Chancellor of the Exchequer whether he does not consider why in Clause 25 many of the items, such as offices, employments, and any profession, the profits of which have been made mainly on the personal qualifications of the person should be excluded. Why should doctors be excluded? We know that thousands of medical men have been called upon and are giving their services in connection with the Army, but the medical men remaining at home are in many cases earning largely increased incomes, and why should they be excluded? We are told that all agencies are to be included, but it is not made clear whether merchants are included. It would obviate all difficulties in this respect if the suggestion I made previously was adopted, namely, that all taxpayers enjoying an increased income during the War ought to have a levy on them in connection with the Excess Profits Tax. I would certainly exclude soldiers and sailors, because I think they come in a different category altogether, and ought to be excluded. I was anxious as I read this Finance Bill, to try and understand the meaning of the Words "any profession." I consulted my
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dictionary, and I find a profession is defined as
"an open declaration of one's sentiments or belief: an occupation or calling such as implies a measure of learning;"
I ask the Chancellor of the Exchequer to simplify the whole matter by treating anybody who enjoys an increased income during the War exactly alike, and making them responsible for the payments of Excess Profits Tax. The Chancellor of the Exchequer has a great burden upon his shoulders, but, after all, he is the custodian of the public purse. I see that my right hon. Friend has many intricate figures in front of him as the custodian of the public purse, but it seems to me to be of equal importance that the Chancellor of the Exchequer should exert his utmost influence to increase the margin of our national income. The Financial Secretary was very powerful on this point, and, in the most drastic fashion we have yet heard from the Government Bench, he urged that we should increase the margin of our national income available for taxation or loans by every means in our power. I am sure that is desired by all of us, and it is equally the duty of the Chancellor of the Exchequer to devise means of imposing taxation on our resources in an equitable fashion. Perhaps the most serious weakness of our financial resources is to be found in the huge excess of imports over exports, amounting to not less than £500,000,000. To reduce this excess by the consumption of less imported food and goods and by an organised effort to increase our home production of food supplies are, to my mind, the most practical measures that could be employed at the present time to strengthen our financial position.
8.0 P.M.
I do not think the Chancellor of the Exchequer would call into question those two statements. The question of national public expenditure and private expenditure are equally important, and I am sorry to notice that the Financial Secretary proceeded only upon the question of private expenditure. The question of public expenditure is equally important, and we have no signs that the Government recognise fully their responsibility in giving a lead to the public in a matter of economy. No drastic retrenchment has taken place in our national peace services. It is true that the Grant to the Road Board has been discontinued, but even after that there is only a reduction in our national normal peace services of £300,000. I see that in

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France they are proposing to reduce the number of Ministers from fourteen to eight, and the number of Under-Secretaries from eight to five. I humbly suggest to the Government to consider whether some saving could not be effected in our national Government by a similar policy. With regard to economy, as the guardian of our national purse, I submit that the Chancellor of the Exchequer should press for economy in every Government Department. We are not getting value for our money in our national expenditure to-day. The waste of food in connection with camps is in many cases a perfect scandal. The price paid to Army contractors is in many cases excessive. The other day I visited one camp where they were able to buy potatoes locally of better quality at £2 per ton less than the Army contractor was charging them, and other provisions they required at a price similarly low. Of course, this comes more particularly within Army administration, but still the Chancellor of the Exchequer, as the guardian of the public purse, is able to exercise immense influence as regards stopping the waste that is going on. They found in this particular battalion that the Army rations for the majority of the men were much too large. All men have not got the same appetite, and yet they were serving out, and do serve out as a rule, exactly the game rations to all men. They tried the experiment of three-quarter rations, with the distinct understanding that if any man wanted more he had only to ask for it, and the result was a very appreciable saving in the feeding of the battalion. I am sorry to have so many questions to raise, but I know the right hon. Gentleman will forgive me, because his heart is in the whole project of our getting value for our money, and also in arranging matters on lines to enable us to surmount the financial difficulties with which we are confronted.
I would raise the question as to whether sufficient pressure has yet been exercised on local authorities to compel them to stop expenditure on buildings and other works which could by any possibility be postponed until after the War. There are, in my judgment, public Government buildings being erected some of which might possibly be stopped until after the War. By stopping these works a certain amount of labour could be set free and utilised otherwise in the best interests of the nation. We have got over-staffed public
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Departments. Thousands of new employés, particularly girl clerks, have been recently taken on. In one Department I met a girl clerk, an industrious girl clerk, who told me, and I hope the Chancellor of the Exchequer will take notice of this point, that in her room there were twenty girl clerks, and really six or eight could perfectly well do the work. She was repeatedly asked by others, who said she was so quick, to take on an additional piece of work, and one man asked her to do a job for him because he had an engagement to play draughts. I had another interesting experience the other day. There is another department or office marked "M.S.C. 2." When I asked what it was I was told that it was a department of the War Office. I made the inquiry because from the room in which I was dictating to a typewriter I saw a number of idle young ladies, from whom shrieks of laughter, whistling, and other noises came. They were whistling cut of the window to attract the notice of the men in neighbouring offices. I found that this went on the whole morning. Occasionally they had gentlemen visitors, who kept them in fits of laughter for an hour at a time. These may seem trivialities, but are they examples of the waste of money that is going on generally. We ought to have greater oversight over the largely increased staffs that are being employed in connection with the whole of our public Departments.
With regard to private expenditure, we had a most eloquent speech from the Financial Secretary to the Treasury. There is no doubt that an enormous amount of money in circulation is being spent without restraint in this country at the present moment, and being spent largely upon eating and drinking and upon amusements. Most of the staple foods are unusually dear and luxuries comparatively cheap. The demand for beef and mutton is in excess of the supply, and therefore the price of beef and mutton has risen. The question occurs to me whether reduced consumption should not be enforced in the national interest. Some are practising economy, but far more are spending more freely than they ever did in their lives before, because they have more to spend. The majority, especially of our working people who are earning largely increased wages, do not closely question the prices which they are charged. The remedy for excessive prices, of course, is largely in the hands of the consumers, because if they were to practise rigid economy, especially

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in the consumption of imported articles, it would be followed by a reduction in prices. The nation's private expenditure is alarmingly extravagant. We have only to remember that in September of this year compared with September of last year, in food, drink and tobacco alone the increase is £10,000,000. In butter, cheese, eggs and margarine it is £1,750,000, in tea £1,500,000, and in sugar £1,500,000. The Excise returns for the first half of this year compared with the first half of last year have gone up by no less than £11,000,000. We imported in September £9,500,000 worth of articles, wholly or mainly manufactured. All this gives evidence of the real ground that lay under the statement of my right hon. Friend the Financial Secretary when he urged economy in the matter of private expenditure. It is perfectly practicable, but the nation as a whole do not realise the necessity, and therefore the example ought to come from the Government in the first instance.
The cost of living has increased nearly 40 per cent, and we need more vigorous Government action to keep down the prices of the necessaries of life. They commenced with coal. I acquiesced with regard to coal. They fixed a limit to the price of coal. But why did they stop at coal? I am glad to note that they have now gone on to sugar, and that they have fixed a limit to the price of sugar, stating that otherwise the supply would be withdrawn from the retailers of sugar. Why not go on to the other necessaries of life, as well as coal and sugar? The difficulty is that in many cases the consumer is made to pay many times over the additional taxation imposed. Take the case of the popular tea rooms. There is ½d. per cup increase in the price of tea. A pound of tea makes eighty cups, and therefore the proprietors of the popular tea rooms receive 3s. 4d. additional revenue for every pound of tea consumed. That is passing on the increased tax in a multiplied form to the consumer. We therefore need greater supervision. The Board of Trade took steps to keep down the prices of the necessaries of life at the beginning of the War, but they wearied in well-doing. We need them stirred up again to greater activity in order that we may have the prices of the necessaries of life reduced to the utmost possible limit.
The financial difficulties with which we are confronted might be lessened if we could bring about that large increase in
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food production at home which is absolutely possible. We import three-fourths of our food supply. In France and Belgium agriculture to-day is carried on right up to the fighting line by old men, women, and children. Why should not this be done in this country? The biggest waste in agriculture is caused by weeds. Surely women and children could remove the weeds. It is proposed that there should be composed through county councils war agricultural committees and local committees. Why were not these appointed twelve months ago? We have a right as a nation to insist in the present emergency that the whole of the land of the country shall be made to produce the maximum crops of which it is capable, and the way to do that is to organise, to organise in that drastic fashion in which Germany has organised, with the result that she is almost a self-contained nation in the matter of food supplies. We must remember that if by increasing our food production at home we lessen the amount we have to buy from abroad it means so much additional revenue, and so much additional margin between our national income and expenditure that will be available for taxation and for loans.
Mr. BYRNE: I wish to say a few words with regard to the Tea Tax, and I would ask hon. Members of this House if they are aware how heavily this burden will fall on the poorer classes of the country. In Dublin tea is a principal necessary of life; sugar, bread and milk come afterwards, but tea is the commodity upon which the poorer classes, the majority of the underpaid working classes, live. Under the first Clause of this Bill a very serious impost is placed upon tea. You are also increasing the price of sugar, while, owing to the War and the rise in the cost of wheat, the price of bread has gone up. In the City of Dublin, too, this week there have been very serious threats of an increase in the price of milk, and I need not point out what effect that increase would have on the child life of the city.
The House has no remedy as far as milk and bread are concerned, but I would ask the Chancellor of the Exchequer seriously to consider the advisability of abandoning the proposed additional taxes on tea and sugar, and thus give the poor a better opportunity of living. The money he would thereby lose could be easily made up by increasing the taxes on the luxuries of the rich, and by raising the Income Tax on a

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graduated scale on incomes above a certain amount. I hope, however, he will not increase the burden on men with salaries of £200 a year. These men under this Budget are being asked to pay practically double the Income Tax they had to pay last year, and at the same time the cost of living has gone up by nearly 40 per cent. This means that the man's salary is practically reduced from £200 to £120, according to the estimate of the purchasing power of the sovereign at the present time. You double the man's Income Tax and at the same time you ask him to pay 40 per cent, more for the food upon which he lives. If the rich had to pay taxes in proportion the man with £5,000 a year would have to contribute to the Government at least £2,000, and that should be arranged if you are going to secure equality.
In Ireland we have a couple of tobacco manufacturing firms. You are about to increase the price of tobacco, and that will mean the wiping out in the near future of these two Irish firms, because at the present moment they are working against an enormous combine which will keep prices down until such time as every tobacco firm which is not with them is wiped out of existence.
Then the price of tobacco will go up.
The Secretary to the Treasury, in the course of his speech, stated that the profits on the sale of alcoholic liquor have gone up considerably. I take that to mean that in his mind he has a scheme in the near future to further tax the licensed trade. As an ex-member of that trade I can tell the right hon. Gentleman that his statement is not true. At any rate, I can speak for the City of Dublin, where the trade has been taxed almost out of existence. I for one would not be here to-day were it not for the action of this House in imposing on the trade taxation which it is unable to pay. I had to give up my licensed business only a month ago because I was unable to make sufficient profit to pay the outgoing. If I had been able to continue at the trade I would be in Dublin to-day instead of being here asking the Secretary to the Treasury to remember that the licensed trade of the United Kingdom has been the best revenue collector for the country, that any further attempt to tax it will mean the killing of the goose that laid the golden egg, and, further, that not alone licensed victuallers, but other trades, are dependent upon the profits made from the sale of alcoholic liquors. One of the speakers to-night referred to the possi-
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bility of compulsion being introduced within the next week. I would ask this House to remember what Ireland has done. It has been the nursery for the British Army. It has provided both soldiers and money, and, unless they wish to create serious trouble, the Government will under no circumstances attempt to introduce compulsion into Ireland.
Mr. BIGLAND: The two most serious speeches we have had with regard to this Budget have been those delivered by the Chancellor of the Exchequer and the Financial Secretary to the Treasury. The main point in this Budget, to my mind, is that we have had some new principles enunciated. As a student of many previous Budgets, I can say it is the first time probably that any of us have heard a declaration from the Chancellor of the Exchequer that the object of a tax is not revenue, or revenue principally. The old principle always was taxation for revenue only, but now we have a Chancellor of the Exchequer boldly standing up and saying that there are other principles involved, and that one of those principles is that we should induce economy among the people of this country. Another is that we should endeavour to rectify our financial balance with foreign countries by the imposition of a tax upon imports. This new principle opens, shall I say, a floodgate to what Chancellors of the Exchequer will have to do in the future
The Financial Secretary to the Treasury told us that what has been laid before the country in this Budget is simply the beginning of what will have to be laid before the taxpayers of this country in the next few years. I quite agree. During this Debate several suggestions have been made to the House of new principles that may be taken up by Chancellors of the Exchequer in the days that are near. The hon. Member for Blackburn (Mr. Snowden) made a suggestion by which he thought great relief would come to the taxpayer in other directions. If I may say it, this Budget in principle might go in one or two directions that it has not gone, which would meet with a great response in the country generally. I find nothing in this Budget of a fiscal nature which is in any sense a penal clause on our enemies. I believe the time has come when Chancellors of the Exchequer will find it necessary to put in their Budgets penal Clauses as against the enemy countries. In this Budget there would have been an admirable opportunity to do that in the sugar

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Clause. I would make this suggestion for inclusion in a future Budget, that the enemy countries being the great producers of sugar, if we gave to our Allies, Russia, France and Belgium, who are also great producers of sugar, a preference in the sugar schedule in the next Budget, it would be in principle doing what the nation as a nation has determined shall be done, namely, that in future in our fiscal arrangements our Chancellors of the Exchequer shall show that we have a very different feeling towards the Allied countries from that we have to the enemy countries. People say, "What is the use of putting on a preferential tax or a differential tax against Germany when we are not allowed to trade with the enemy?" This is the time to do it, for the reason that when peace is made and the hatchet is buried, you cannot very well then begin to differentiate in the same way as the nation would to-day.
There is another principle which is not shown in this Budget, and which the Chancellor of the Exchequer ought to have shown. He says we can have taxation not only for revenue, but to bring about other purposes that are desired by the country. I think he might have shown in this Budget some desire to treat our Possessions abroad, in the matter of the production of the things which we need, in a different way than he has done. Taking alone the principle that we must rectify our exchange, I say that a future Chancellor of the Exchequer will find it absolutely necessary to draw his supplies from those portions of the world where exchange would not have the detrimental effect it has at the present moment. If we confine purchases of many of the necessities of our own people to purchases from India, Australia and New Zealand, we should find, in the matter of exchange, that the difficulties arising now with the United States of America would not have arisen if our purchases had been made in those countries.
There is a further point upon which the last speaker laid great stress. He said that in future it must be the policy of the Chancellor of the Exchequer, by his fiscal arrangements, to strengthen the output of the productions of our own country. This Budget does nothing, beyond the taxation of three or four articles, to strengthen production in our home industries. The Minister of Munitions, in a notable speech he made in this House some time ago, said
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that in future it would be the policy of this country to be less dependent for the necessities of the life of the nation upon our purchases from abroad. I believe it must be one of the first duties of every Chancellor of the Exchequer in all Budgets and Finance Bills in the future to endeavour to bring in these other principles in addition to the principle that has previously been enunciated by all Chancellors of the Exchequer, namely, that they would only put on taxes for revenue purposes. We have to-day the acknowledgment that there are many other purposes which are possible, and that a great deal more money will be wanted. Suggestions have been made as to how a vastly increased revenue may be obtained. I should like to make a few suggestions as to how, in the future, Chancellors of the Exchequer and those who work for the unity of the British Empire will be able in their Finance Bills and Budgets to work on this principle. I say that money can be raised for revenue purposes and for the defence of the Empire, if a well thought out scheme can be devised of taking articles that the world must have, which are produced within the British Empire, and putting a tax upon those articles if they go to foreign countries, that we can increase the productivity of our own manufactures and that we can also, shall I say, injure our enemies or make them suffer under a penal Clause in our Budget at the same time. Take, for instance, such an article as jute. All the jute in the world is produced within the British Empire. An export duty of £4 a ton on jute exported to foreign countries would bring in a great revenue, and it would become part of the price. Perhaps hon. Members are not aware that 40 per cent, of the revenue of Chile is raised by an export duty on nitrate of soda.
Sir J. D. REES: Only the Government of India could impose an export duty on jute
Mr. BIGLAND: It would come within a well thought out plan for an Imperial defence fund. In the case of Chile they raise 42 per cent, of the national expenditure by an export duty on nitrate of soda. The reason why they are able to do it is that the rest of the world must have nitrate of soda, and the export duty becomes part of the price which the rest of the world is ready and willing to pay, just the same as the railway carriage from the mines down to the sea coast, or any other labour connected with the production of

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nitrate of soda, is part of the price. I claim that there are many articles in the British Empire which the world must have and which the world would gladly pay as part of the price of an export duty. Take an article such as nickel in Canada. When I was travelling in Winnipeg some time ago we were passing through a wild part of the country, and I asked a friend, "What mining industries have you here, as I see the derricks across the streets? He said, "This is where nickel is produced." I said, "I did not know that Canada produces much nickel," whereupon my friend said, "We now produce 75 per cent. of the entire consumption of the world." I said, "That is strange. I know that no warship can be built without nickel, and that many of the other necessities of our enemies must have nickel; therefore why not put an export duty upon nickel so long as it goes to an enemy country?" If we travel round the British Empire we shall find that many of the necessities of our enemies and of our competitors are grown within our borders, and we can strengthen the industries at home and also the exchange position, which is now so frightfully against us, in the years to come by the Chancellor of the Exchequer taking due thought upon these complicated questions.
The Financial Secretary to the Treasury made the strange statement that he was brought up to believe that two and two make four, and the right hon. Baronet (Sir A. Mond) said he believed that still existed. In my opinion in this sort of matter two and two do not make four. In Sub-section (5) of Clause 12 of this Bill the Chancellor of the Exchequer provides that when motor cars or parts of motor cars are imported into this country, when a manufacturer here uses those parts he should be able to claim a rebate on the quantity that he has already paid duty on, I understand, if he can prove that he really did pay the duty. But the Clause is rather ambiguous, and I think it deserves some further attention. This drawback is to be given. It says:—
"Provided that the Treasury may by Order declare that the drawback shall not be paid in respect of any accessories or component parts named in the Order on the ground that it is not possible to provide satisfactory means of identifying those accessories or parts."
If the Treasury is going to be too strict in this matter it is starting a principle which I think is a mistake. If we as a
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nation are going to enter into these points we must enter into them on the same terms and conditions as our competitors, and where I say two and two do not make four is in this case. Germany, before the War, had a duty of 9s. a quarter on wheat, and if two and two make four the price of the flour made from that wheat must be more than the price of the flour made by the miller in England from the same wheat. But we find it is not so. One of my friends who is in the milling trade spent three months trying to ascertain how it was that in the only neutral buying country in Europe—that is Holland—the German miller, who paid 9s. a quarter, was able to undersell him, whereas he paid no duty and bought the same wheat as the German miller did. He found that the German, by paying duty on 264 lbs. of wheat, was allowed a rebate of 221 lbs. on flour, which gave him a small bonus on the quantity that he exported. Herein this Bill we give rebates to our manufacturers, but if we are going to restrict them too carefully and are too prudishly careful that the Treasury is not getting any disadvantage whatever, we shall be putting our people at a disadvantage as compared with the foreign competitor. All Governments, as far as I know, that give rebates on the portion exported of any article on which duty has been paid do it in such a way that a slight advantage is given to the exporter. If this Clause is carried out as I understand it, a severe detriment will take place to the British producer of motor cars.
Let me put the case in another way. It has been the custom of the Treasury in England in the case of sugar, which is also in this Finance Bill, that if, we will say, Huntley and Palmer or any other importer of sugar sends biscuits or cakes abroad with 2 per cent, or 4 per cent, of sugar in he claims rebate on the full duty paid. But under this Bill he is now to be allowed to grow English sugar. I do not think, in the ordinary way of business, he should be forced to prove that that sugar was really foreign grown sugar on which he paid the duty. So long as he shows that there is sugar in that cake or biscuit that is exported, he should be allowed the rebate on that quantity. That gives him a very slight pull in his export trade; but it is by giving a slight pull in the export trade that previous Chancellors of the Exchequer in this country built up a huge industry in tobacco. If the Financial Secretary will ask Mr. Wills of Bristol how

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he got the markets of the world he will say, "You enabled me to charge ¼d. an ounce more to the British consumer and I took l–8d. an ounce less when I sold in Sydney and in all parts of the world, and by that means the Chancellor of the Exchequer of this country enabled me to build up a great export business," and the same thing will happen again. One of the great necessities that the Chancellor has laid before the country is the necessity of increasing his export business. This is one of the ways of increasing the export business of this country by which you are going to pay the indebtedness which we are now incurring. You may say the principle is all wrong. You may say it is a bad way. Why not give a direct bounty if you are going to encourage your export? It may be too long a question to answer, but I maintain that the principle so enunciated of giving these rebates where they become a small advantage on the export trade is a direct help and necessity to the increase of our export trade. On the whole there has been a good deal of praise given to this Finance Bill. I do not withhold praise from the Government. One of the previous speakers, in criticising Clause 12, said he did it out of friendship to the Government. I should like to say out of friendship to the Government that I praise Clause 12, and I admire the pluck of the Chancellor of the Exchequer that he has been able to face the criticism directed against the Clause and, no doubt, when we come to the Committee stage there will be other points to be raised, but, on the whole, the satisfactory portion of this Bill to me is that it has opened a way for new principles to be enunciated by the Chancellors of the Exchequer who shall sit on that bench in the future.
Mr. CLOUGH: Like the last speaker I am disposed to concentrate my contribution to this Debate on Clause 12, but precisely for the opposite reason. The hon. Member thinks it introduces new principles. I object to it because it revives the bad old principle of Protection, and that it applies Customs Duties upon imported manufactured articles without putting any Excise Duties upon similar manufactured articles at home. It is very easy and cheap for the Prime Minister and the Colonial Secretary to tell us that this Clause does not constitute Tariff Reform, simply for the reason that no one knows exactly what Tariff Reform is. The Prime
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Minister himself possibly does not know. Even the First Lord of the Admiralty, although he has in days gone by scattered Valentines and half-sheets of notepaper like a schoolboy playing the game of hare and hounds, has failed to provide a definition of Tariff Reform which is of any use for practical politics. All that we can learn from the teachers and philosophers and professors upon this mysterious subject is that it is a very well-meaning invention. We have been told by Hyde Park orators and by the Tory Press, in season and out of season, what Tariff Reform means. Tariff Reform means stimulating home industries. It means keeping capital at home. It means establishing Colonial preference, and it means binding together for ever the Colonies and Dependencies of our mighty Empire. We are told that Tariff Reform means no short time, work for all, higher wages, and sound weekly wages, without sentiment, for every working man. We have been assured that Tariff Reform means fewer taxes, sending up the price of Consols, and paying off the National Debt. I am not sure whether the last speaker would not have us infer that Tariff Reform means keeping the foreigner out and making the foreigner pay. Mr. Punch, of course, informed us that Tariff Reform means more gentlemen, happier dukes, gaiters for alligators, and full speed ahead. If Tariff Reform means all these things, we shall all agree with the Prime Minister that this Clause has not by any means run the full gamut of the Tariff Reform musical scale, because it by no means represents all those things. Perhaps we shall agree also that this is not Tariff Reform, because it does not enact a scientific tariff, whatever that may be. But this Clause does reform tariffs; it resurrects tariffs, it revives tariffs, and therefore it is Tariff Reform.
There is another sense in which it approximates to Tariff Reform, inasmuch as it contains no Excise Duties. We may be pretty sure of this, that Tariff Reform, whenever it is brought in, will contain no Excise Duties. I think we may gather that from the last speaker. The worst feature of this Clause is the omission of Excise Duties upon similar articles manufactured at home, and it will form a precedent for a future Tariff Reform Chancellor of the Exchequer when he comes into power. It will open the floodgates, as the last speaker would say, for a Tariff Reform Chancellor of the Exchequer, and enable him to carry out full-blown Tariff Reform.

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There is another characteristic in which this policy set forth in Clause 12 resembles Tariff Reform. Five years ago my right hon. Friend the Member for the Wansbeck Division (Mr. Fenwick) was addressing a meeting in Skipton Town Hall, and during the course of his speech he asked, "What does Tariff Reform mean?" A voice from the audience at once replied, "Paying more for your stuff!" To my mind, if a voice can do such a thing, that voice hit the nail on the head. If that is the true meaning of Tariff Reform, then these proposals in Clause 12 are Tariff Reform, because if ever they come into operation they certainly will mean paying more for this stuff—such as motor cars, cornets, flutes, harps, sackbuts, psalteries, dulcimers, and all kinds of musical instruments. I will not labour the point further as to whether these proposals are Tariff Reform or not, but I certainly say that they are not based on Free Trade principles. I challenge the Chancellor of the Exchequer or the Prime Minister, or both of them together, to convince the House that these proposals are based on Free Trade principles. Free Trade frees trade, but this Clause does not.
What is Free Trade? Unlike Tariff Reformers, we Free Traders are not afraid of attempting to give a definition of the principles of Free Trade. Though it may seem rather late to ask such a question, it is doubtful whether the burning, shining lights of the Tory Tariff Reformers know really what Free Trade is. Free Trade is trade free from restrictions, or, in other words, free interchange in commodities. Perhaps it would be more helpful and profitable to ask, seeing that we are considering a Finance Bill, what is the practice of a Free Trade Chancellor of the Exchequer? A Chancellor of the Exchequer who lives up to his Free Trade principles, in the first place, only raises sufficient revenue to meet his expenditure; in the second place, he raises that revenue so as to keep trade free from restrictions; in the third place, he levies taxes in such a way that the whole of their produce—less, of course, the cost of collection—finds its way into the National Treasury. A Free Trade Chancellor of the Exchequer prefers to put taxes upon imports which are neither grown nor manufactured at home, such as tea and sugar, and if he cannot raise sufficient revenue from those he puts Customs Duties on other imports, and he puts Excise Duties on the similar articles manufactured at home, so that he gets the tax, the whole
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tax, and nothing but the tax, and so that no home industry gets any preference or protection. Clause 12 will not stand the application of those three conditions; therefore it is not Free Trade. We go further. We are prepared to proclaim from the housetops that this Clause embodies Protection, and that all these taxes are protective taxes. What is a protective tax? Fortunately we have had a definition of a protective tax given to us in a nutshell by the Prime Minister when he was Chancellor of the Exchequer. At Luton, on 29th November, 1907, the then Chancellor of the Exchequer said:—
"A protective tax was a tax imposed not for revenue merely, but for ulterior purposes, and with this characteristic, that it took from the consumer not only the duty imposed upon the imported commodity, but also what never went into the Exchequer, namely, the enhanced price of the whole supply of the commodity."
That is our charge as Free Traders against every one of the taxes imposed by this Clause. They are protective taxes, the whole of whose produce does not find its way into the National Exchequer, and consumers will be mulcted in a most unconscionable fashion. The Chancellor of the Exchequer has had somewhat to say about his predecessors' Budgets. When he has said all that he has had to say he is bound to admit that they were Free Trade Budgets and that the whole of the produce of those taxes went into the National Exchequer. Why, Lloyd George's celebrated Budget of 1909 was a triumph of Free Trade finance. It neither crippled trade nor put further imposts upon the necessaries of life or commerce.
9.0 P.M.
The right hon. Gentleman cannot say so much for his own Budget. It places restrictions on trade; it artificially raises prices; consumers can no longer buy in the cheapest market as ruled by the ordinary conditions of supply and demand. The whole produce of the taxes is not secured to the Treasury, and an unnecessary burden is imposed both upon the taxpayers and the consumers. Whatever the right hon. Gentleman may say about his Budget, as long as it contains Clause 12 he must confess in his heart of hearts, if he is honest with himself, that it is not a Free Trade Budget. He may lay the flattering unction to his soul that he is himself a Free Trader, but if he perseveres in placing these imposts upon the Statute Book other and plainer people will write him down as a Tariff revivalist. I consider that it is our bounden duty to protest against this return to the vomit of Protection by availing ourselves of every opportunity provided by the Rules of this House; as

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Free Traders both in peace and in war, and as champions of those of our con stituents who happen to be consumers—and which of them are not consumers? They may not all be capitalists or producers, or earners, but they are, every one of them, consumers, from the richest to the poorest, from the strongest to the frailest, from the oldest to the youngest. One is tempted to say that every vote given for Clause 12 is a vote given for Protection. So far as we unqualified Free Traders are concerned we are resolved to touch not, taste not, handle not this unclean thing, and in taking that course we believe that we are striving for the greatest happiness of the greatest number.
Sir J. D. REES: As this Budget is a businesslike proposition, greatly to my satisfaction, without any sentiment or social reform, I will endeavour, after my degree, to imitate by at once coming to the points on which I wish to ask the Chancellor of the Exchequer. I trust that he will kindly not put me aside by saying that they are Committee points, because those who are interested in what I am putting forward want to know what they are to do, so that they may take action before the Committee stage comes on. I do not find it laid down anywhere in the Bill that Excess War Profits Tax is not to be paid twice in respect of the same money. I will put a case to the Chancellor of the Exchequer. It is a very common thing, as he knows, for one company to have a large holding in another. One company is liable for Excess War Profits and pays the taxes. It then pays its dividends to the other company. The other company, by reason of the receipt of those dividends, becomes itself liable to the tax on Excess War Profits. As far as I understand it, that process might be repeated more than once. The Chancellor of the Exchequer may be able, I dare say, to explain it.
Mr. McKENNA: They only pay once.
Sir J. D. REES: I readily accept that, but people are so very apt to pay Income Tax that is not due—oddly enough it is a common occurrence—that, unless there is something in the Act making it clear, I do not think that the accounting officers of each individual company will earmark the profits which have as a fact paid Excess Profits Tax, without bringing them into account with other receipts of a different character, so as to make it clear that in
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no case does the receipt of this money make the second company liable to Excess Profits Tax. I hope that the Chancellor of the Exchequer will make that quite clear in his answer. I should also like to know from him whether an individual manufacturer or trader can deduct from any excess profit made by him in the year a loss sustained by him in the same period in respect of another business in which he is engaged? In regard to Income Tax, as the Chancellor of the Exchequer knows, there is a provision to this effect. I see nothing to the same effect in respect of Excess War Profits, and I would commend that to the Chancellor of the Exchequer. My hon. Friend who last addressed the House on this side, urged that an export duty should be put on jute. Whether that is done or not, it is only the Government of India that could put on the duty. That point in regard to jute manufacturing companies equally applies to tea companies in India and Ceylon. As I understand, when tea and jute manufacturing companies are registered in India and Ceylon they are liable to the Income Tax here, and are not liable for the excess war profits. If it is the case that a tea company or a manufacturing jute company, by reason of being registered in India and Ceylon, is not taxed on war profits, then there will be an immediate object on the part of such companies to register in India and Ceylon instead of Liverpool and London.
I shall be glad to have some information on that point for the information of those concerned. As regards the method of assessment of excess profits, I confess that I am disappointed that more is not left to an independent business tribunal, and that so much is attempted to be laid down by hard and fast regulations inside the Bill. It would be the more satisfactory I think to those trading concerns the more the assessment was left to an independent tribunal, which presumably would consist chiefly, or to a great extent, of business men. The less it is endeavoured to lay down any sort of Draconian code the better it will be for them. I ask the Chancellor of the Exchequer's attention to that consideration. The Chancellor of the Exchequer has now given the company or trading concern which is to be taxed a choice out of two of three preceding years. Let me, for instance, take the case of a mine. Suppose that in the last accounting period the company makes a profit of £20,000. As I understand, taking the average, you subtract £10,000 from the £20,000

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if it makes £20,000 in the following year. If I am right in my calculation, it is certainly a terribly drastic tax, and I would point out that where one gold mine makes a profit hundreds do not. Very few gold mines pay; it is notorious that only the exceptional ones do pay, and in the case I put the company would really have to pay half of its profits of £20,000, which it has only made once in its life over the datum line.
Take the case of a company with plantation rubber coming into bearing this year. I have heard of the case of a wild rubber proposition which the company after many years were reluctantly compelled to stop. The shareholders are probably poor men. The company came to the conclusion that wild rubber was not a paying proposition, and they start a rubber plantation. It is some years before the trees come to bearing, and yet when they come to bearing for the first time they have to pay taxes on excess profits. Suppose the company make £20,000 in the first year of the accounting period, will they have to pay the Excess Profits Tax? If so, how is the excess calculated, and on what? It may be that the two or three years previous were blanks, and how is the excess profit then to be calculated; and how can it be made fair to a company in that position? What is to be the datum line. I shall be very grateful if the Chancellor of the Exchequer will explain that matter. Then there is one matter connected with the Super-tax in which I can see no justice at all. It is really like drawing the teeth of the Jews. You take the tax because you can get it. I think it is indefensible. In calculating the amount for Super-tax, Income Tax is added, which the man has never received. It is one of the most unjust things that could possibly enter into the mind of men or of Parliament. I would like the Chancellor of the Exchequer to consider that matter. I think it would be far better to abandon the Super-tax frankly and to have a graduated Income Tax all round.
The Chancellor of the Exchequer will, I hope, forgive me for using a single bad word, as I am afraid I did on the last occasion, though I repudiated, for my part, the construction put upon it. Will the right hon. Gentleman take this opportunity of explaining why cocoa is let off lightly as compared with tea? I understood the right hon. Gentleman the Member for Islington (Mr. Lough) to say that cocoa might yield £4,000,000 of taxation,
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but £10,000,000 might be got if cocoa and coffee were taxed the same as tea. I may be wrong, but I took the calculation out of the "Westminster Gazette," which I imagine the right hon. Gentleman really has as much faith in as I have myself. I do not assert that the amount will be £10,000,000, but I do assert that the taxation of cocoa and coffee is very light as compared with the taxation on tea, which has gone from 5d. to 8d. and from 8d. to 1s. I do not complain of the tax on tea, and those who are concerned in that trade—in producing, buying and distributing it—are many of them fighting for their country. But why should one or two substances not grown in British territory with British capital and British labour be taxed only a halfpenny or a penny while tea is so heavily taxed? The Chancellor of the Exchequer must have known that I was referring to the fact that the chocolate and cocoa interest is always powerful, and while I do not assert it, I think that is a ground which some have put forward in regard to this difference in taxation. I do not wish to be acrimonious in the least, and nobody more rejoices that the right hon. Gentleman is in charge of the finances of this country, but I do wish to give him this opportunity for a glorious repentance. I trust that he will take the opportunity of explaining why cocoa, which, in manufactured form, mostly comes from Germany, and coffee, are let off so lightly compared with tea. I really hope that something will be said which will give satisfaction to others besides myself. It is not fair that the right hon. Gentleman should keep the explanation up his sleeve.
In regard to the Tobacco Tax, of which subject he is an acknowledged expert and I am not, it has been suggested to me that a number of small men interested in this trade would feel the tax much more lightly if it were collected by stamps. In that case they would not be put to expense and trouble, they would not have to provide extra capital, and they would just pay on the stamps as they sold the tobacco in various ways, and it would be very much easier to them, I understand. The right hon. Gentleman will not altogether despise an opinion coming from Nottingham, which is a famous city in regard to tobacco. I am told that is the case, and I am also told, and this is a point on which the Chancellor has very special knowledge, that the Exchequer would benefit if they adopted this system by gaining the weight of the

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moisture which is put in by the manufacturers, but the right hon. Gentleman knows more about that than anybody else. I would ask him, has he entirely renounced the hat tax? And could he not consider the question of the import duty desired by the lace trade. This is a point which would be extremely difficult to raise later, and therefore I take this, the last opportunity of asking him again to consider it, and to deal tenderly with the deputation which he declined to receive. Perhaps he may, in a day or two, be able to reconsider it. There was one matter which I brought forward previously, and which has recently been mentioned by Sir Edward Clarke, and that is the question of putting a tax upon all the innumerable houses which have separate names. As a candidate for the London County Council, and the same thing must have happened to others like myself, it has been my experience to be marched down miles of street with dreary houses, all exactly alike, and each possessing some grandiloquent name. There really is money in this proposition, since there are so many who always attach so much importance to those little proprietary names. Surely, if vanity and luxury are fitting subjects for taxation, what could be more vain and luxurious than dating letters from "Sandringham" or "Chatsworth," instead of being content to do so from, say, 1, Grosvenor Square, or 1, Mile End Road, as the case may be. I can assure the Chancellor that there is a great deal more money in this than possibly he imagines, because, of course, he never has to canvass. I ventured to bring this matter forward on a previous occasion, and it has now received the very eminent support of Sir Edward Clarke.
Mr. J. M. HENDERSON:I do not desire to follow the hon. Member for Skipton (Mr. Clough) in his grave and solemn reproof of my right hon. Friend the Chancellor of the Exchequer on his falling off from his earlier promises, and on becoming a Protectionist. But I would say this upon Clause 12—I am against these taxes, just as much as I have always been, and I shall always be against them. Speaking about luxury, I should like to say that if there is anything more calculated than another to create luxury in motor cars it is this 33⅓ duty which you are imposing on cars produced in other countries. I admit it is a very grave luxury in this country. I stood the other day for half an hour on the high
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road at Wimbledon, and I counted passing in that half hour no less than eighty-one luxurious cars, most of them very fine, high-horse-power cars, and that is leaving out altogether all commercial cars and motor bicycles. I thought to myself that if you are going to stop luxury in that direction, stopping people buying small cars is not the right way. We are also told that the present motor car manufacturers in this country were all engaged on munition work. A great many of them are, but not all; and there are a good many cars advertised.
I was very much interested in hearing this exordium for economy from the Front Bench, and to see in one of the illustrated papers an advertisement of the Napier car; and on the top left-hand side was a portrait of my right hon. Friend the Minister of Munitions, and on the right-hand side of the Prime Minister, while in the lower left-hand corner was that of the First Lord of the Admiralty and on the other corresponding side of the Chancellor of the Duchy, all of whom are owners of those very fine cars. If you want to put an end to the luxury in motor cars, there is a very simple process. Do what the Germans have done in this respect; and what they have done is to seize control of the motor spirit, and only give it out for useful or necessary cars. So far as this is concerned, I have no more to say than that I oppose entirely that tax as well as all the other taxes in Clause 12, and which I consider protective. If you wanted money, and big money and a good deal of it, and had then put on a tax on something which would have yielded that money, I would have been prepared in the exigencies of the case to have given up for the moment my strong Free Trade principles; but that is not so. You come for a small and almost useless thing, and something which cannot, and never will, bring in anything like a million of money. The next point to which I would refer is with regard to the bankers. My right hon. Friend told them, "If through the amounts of your subscriptions you are confronted with new and unforseen difficulties you will always find a ready hearing at the Treasury, and every step will be taken to meet your difficulty." I understood from the Secretary to the Treasury to-night that he does not intend to do anything against the considered judgment of the bankers.
Mr. McKENNA: In relation to what particular Clause?
Mr. HENDERSON: In relation to this particular Clause taxing deposit interest. I draw my right hon. Friend's attention to this point, so that he may consider it before the Committee stage. Is he aware—and I know very few people are—that the Bank of England refuses to deduct Income Tax on any dividend under £5. They objected to the trouble, but under this Bill you are putting on the banks the duty not of deducting the tax from the dividend, but may be once or twice or three times a year from the interest which they have to pay on deposit. If the Bank of England refused to perform that duty for small sums, then it is not treating other banks quite fairly to ask them to do so. If my right hon. Friend will call upon the Bank of England to deduct the tax from these small sums, he will find himself in possession of at least another million of money, or at all events of a very large sum. When the Income Tax was sixpence or a shilling, it did not much matter. But just consider: the interest on a £100 bond is £4 10s., and the Income Tax at 3s. is 13s. 6d.—a pretty considerable amount. So that if they are compelled to deduct the tax on these small sums and hand it over to the Treasury, my right hon. Friend will find himself in possession of a considerable sum at the end of the year. If you call upon bankers to deduct Income Tax from the interest upon deposits from time to time, you are faced with the difficulty that a man may have a certain amount of money on deposit or at interest for one part of the year, and he may have a loan from the same bank for another part of the year. You deduct Income Tax from the interest which he is paid, but you do not allow him the Income Tax on the amount which he pays the bank. What will happen in that case is that the account will be made out at the end of the year, and the interest on one side will be placed against the interest on the other. That is one of the difficulties.
With regard to excess profits, I admit willingly that my right hon. Friend has gone a good way to meet some of the difficulties which will arise when the assessment comes to be made; but he has not yet gone quite so far as I think he will go. In the first place, there is the date of the standard account. It appears to me to lend itself to a grave injustice. The Bill refers to the accounting period which ended after the first day of September, 1914, and before the 1st day of July, 1915. A man has a balance sheet finishing on the
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31st August. He has made a good profit during the year, but it does not come under Excess Profits Tax. But if his balance sheet happens to be made up the month after, it does come under the tax. In one case you take eleven months of pre-war profits, while in the other you do not take a shilling. That cannot be right. I suggest that a date should be taken, say, the 1st of August before the War, and then for whatever period the balance sheet is taken the ratio of the whole return from the commencement of the War should be the line upon which the assessment is made.
In Clause 38 there is a provision with regard to firms which have been engaged on war materials and munitions. I think that that ought to be extended to people who have been engaged on war equipment as well. Munitions I take to mean shells and so on, but equipment includes saddlery, uniforms and all that sort of thing, which would be left out here, but which are just as necessary in war as munitions. That, however, is a Committee point. There are many things which require further elucidation. The language is rather involved, and particularly in the Fourth Schedule it is difficult to follow exactly the meaning. Certain Amendments may, however, be made in Committee. I was also struck by the fact that while my right hon. Friend makes provision for cases where no profits have been earned for some time before the War, he does not say over what period that provision should extend. If I understand the Bill correctly, it is to extend only for the year in respect of which profit has been made. That cannot be quite right. There, again, the arrangements in the Schedule as to capital and the computation of profits are very involved, and will require further elucidation in Committee before we are able to see exactly how all these things fit in. These are really Committee points, but I have mentioned them in order that my right hon. Friend may try to meet them. He has tried to meet many other points, and I hope he will be able to meet these points also, so that we may have a Bill which will satisfy most people. So far as concerns the general principle of the Bill, my right hon. Friend shall have my support. All I ask is that he should meet difficult cases in a generous spirit. I quite agree that certain rules should be laid down for the guidance of the Referees. There should be some principle on which they should act, but I think they should

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have a large and wide discretion, and that their powers should be a little more elastic than they appear to be in the Bill.
Sir ALEXANDER HENDERSON: The figures which have been given to the House by the Financial Secretary have made it perfectly clear that the taxes imposed by the Budget of the Minister of Munitions and those contained in the Bill now under discussion do little more than meet the increase in the ordinary charges, plus the interest payable on the enlarged debt. I am disposed to think that if the ordinary charges and the interest on the increased debt are met, the Chancellor of the Exchequer should be content. He cannot raise much further taxation without seriously crippling the ability of the taxpayers to subscribe to future new loans. It is, I imagine, more important to have a reserve amongst the community who have the power and are willing to subscribe new capital than to be able to boast that the Budget has provided for 5 per cent. or 10 per cent. of the War expenditure. With every word that has fallen from the Front Bench, and from other parts of the House, as to the desirability, and indeed the necessity, of the strictest economy I am in agreement. I believe certainly the upper and the middle classes are practising that economy at the present time. But when the Financial Secretary suggests that expenditure should be so reduced that one-half of every man income should be made available for Government requirements in the future I do not quite follow him. Here is the position.
Take a man with a gross income of £5,000. A few years since this was subject to an Income Tax of 9d. in the £, and no Super-tax. An individual, therefore, had an income of £4,812 10s., which he could spend as he wished. What is the case today? That £5,000 will, according to the Finance Bill which we are now considering, be subject to an Income Tax of 3s. 6d. in the £, and a Super-tax of 3s. 6d. in the £ between £3,000 and £5,000. The result will be that the net income of that individual will be reduced to £3,600. Is it half of this £3,600 that the Financial Secretary referred to as the sum that should be put on one side and devoted to the purpose of providing the Government with their necessities? The man with £4,812 a year would find it, and does find it, very difficult to reduce his expenditure down to the reduced amount of £3,600. If he has only to spend half of that, and his expen-
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diture, which was £4,812, is to be reduced to £1,800, I take the figure of £5,000 as an example to show how impossible is the suggestion. All a man's plans in life are more or less made up and fixed according to the income which he has had for many years, and to suggest that an expenditure of £4,800 can be reduced to £1,800 is a practical impossibility.
The whole object that I have in rising at the present moment is to suggest that a Budget which provides for the current interest on the current expenditure, plus the interest upon all loans, with a reasonable margin, should be sufficient for the present, leaving the question of repayment of the debt to a time when full, complete and particular consideration can be given as to its repayment. It is very likely very possible, I suppose, that the expenditure in connection with this War and the old debt may run the country into a debt of not less than £4,000,000,000—a stupendous sum! Still, it is one that has to be contemplated under the circumstances that exist. Provided, however, that this debt of £4,000,000,000 gives the country victory and a lasting peace, I do not know that that lasting peace will have been bought at too great a price. Let us see where we stand at the end of the time. Fund that debt of £4,000,000,000 on a 4 per cent. basis, with a sinking fund that will enable the whole to be discharged in fifty years. Fifty years may seem a long time, but we know that the Napoleonic Wars resulted in a practical peace for the whole of Europe—taking it as a whole—for one hundred years. It is not, therefore, unreasonable to suggest that the peace that may follow the present War will last for fifty years. If the debt should amount to £4,000,000,000, and if it should be refunded in the way I suggest at 4 per cent. with a sinking fund—I think ¾ per cent. is sufficient to pay it off in the course of fifty years—the nation would have a vast possible charge of £190,000,000 a year—a large sum, but not a sum that is at all beyond the capacity of the nation to pay. When you attempt, as you are doing here at present, to tax the individual, and at the same time to call upon him to respond to the invitation to subscribe to loans, you are placing upon his shoulder a burden that he is unable to bear. He can bear one. He can bear the other. He cannot bear both. Therefore, I think, it is a proper question to raise on the Second Reading of the Bill.
There are details of the Bill that one can deal with in Committee, but it does

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seem to me that the question I now put before the House is one that should be considered at this stage. We have to provide the needs to prosecute the greatest War that the world has ever known. If you take from a man who has a large or small income all that he can possibly afford to pay in the shape of taxation you leave him no reserve to respond to the appeal you will make at a later date to provide you with further money. If you will confine yourself to providing for the general upkeep of the nation, for the interest on the new money borrowed, I think you are doing all that is advisable for you to do, and you should be content with that. I offer these suggestions, not that at the moment they arise, but it has been made so clear both by the Chancellor of the Exchequer and by the Financial Secretary that this is really only a first instalment of the charge that may be much greater at an early date, that I would ask hon. Members to give careful consideration to the idea that, while we must on no account charge the interest to our capital account, we should be satisfied by means of taxation if we provide for the ordinary upkeep of the nation's requirements plus interest upon any money that may have to be borrowed to carry the War to a successful issue.
Sir A. MARKHAM: The hon. Gentleman who has just sat down is a financial authority not only in the City but in the country. His observations will no doubt receive the careful consideration of the Chancellor of the Exchequer. I do not think anyone can take exception to the way in which he has placed the question of finance before the House. But I have listened in amazement to this Debate as a whole, and more particularly to the observations of the right hon. Gentleman the Member for West Islington (Mr. Lough), who initiated the Debate. In the first place, the House and the country—the House itself first—ought to direct its mind to the one single fact—which the House has so often forgotten—that we are engaged at the present time in the greatest War in the history of the world. When I hear hon. Members objecting to the Excess Profits Tax it fills me with amazement. I am very sorry indeed to know that a good many Members sitting on this side of the House have raised objections to this tax. For my own part I cannot conceive any tax more fair or more just in its operation than the tax which the Chancellor has put
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forward for the consideration of the House and the country. It is based on the first principle, which seems to my mind justice, namely, that those who have made profits, either during the War or at a time when the Chancellor of the Exchequer requires money, should find, not the whole but a part of the money for carrying on the War on the present scale. When I hear Members talking about the merits of Free Trade or Protection, and when I hear the right hon. Gentleman the Member for Swansea declaiming against the so-called Protection duties, when I remember that the right hon. Gentleman's fortune is due entirely to protective duties in the form of patents, I wonder again that the House should for a moment at this period be discussing any question of Free Trade or Protection.
Let the House turn its attention to the method of obtaining the money in the best way for the purpose of carrying on the War, and I say, so far as I am concerned, and I say it quite honestly, I am prepared to live on £1 a week and break stones on the road rather than that we should not wage this War and bring it to a successful conclusion. Therefore, when we hear Members getting up and denouncing the Excess Profits Tax, when thousands of people in this country have lost all their income, I wonder whether hon. Members really recognise we are engaged in this life and death struggle. Everybody says that he is quite willing to pay taxation, but when it comes to the application of paying the taxes everybody starts to criticise. I have never met anyone outside or inside the House who does not say he is quite willing to make almost any sacrifice to meet taxation, but the moment you start to apply the tax people begin to quarrel with the method put forward—a method in this case I think as just as it possibly could be. The right hon. Gentleman the Member for West Islington appealed to the House on behalf of small shareholders in industrial limited companies, and he said that, if this tax were persisted in, it would mean ruination to a large number of shareholders who possess only very small means. That is absolutely untrue. The hon. Member for Liverpool (Mr. Rutherford) shakes his head, but you are not going to ask these shareholders to give up a single penny of what they had before. The Hon. Member laughs. This is not a tax which will take from those shareholders any more than what they had before except the proportion of Income Tax.
Mr. RUTHERFORD: You are quite wrong.
Sir A. MARKHAM: The hon. Member is, of course, basing himself on the point that it might happen during the three years the company have not made money, but he knows, or ought to know, that, in a case of that kind, the Bill provides that the shareholders may have 6 per cent. on the whole, and where the shareholder had nothing at all, if he now has 6 per cent., is he in times of war going to grumble that, having had no increment at all in the previous three years, he is going to be ruined?
Mr. McKENNA: Six per cent. plus half the profits.
Mr. RUTHERFORD: The hon. Member does not understand.
Sir A. MARKHAM: I shall have to pay the tax, and I dare say I understand the Bill as well as the hon. Member, and possibly better. It is the case of the small shareholders that has been put forward. In industrial companies the ordinary shareholder does not get a look in at all. People who float companies do not get the public to participate, except as debenture holders, in anything worth having. The hon. Members know that.
Mr. RUTHERFORD: Speak from your own experience.
Sir A. MARKHAM: I do, and I say that when the public have put any money in anything with which I have been connected they have come in on the same terms as myself and have never lost anything. But when the argument is put forward on behalf of small shareholders, when this Bill gives them 6 per cent. where they had nothing before, plus half the profits, it is ridiculous to argue that it is an injustice to them. You must get the money from someone. Immense profits have been made in shipping, coal, iron and steel. If you are not going to take it from these people, from whom are you going to take it? Should not the burden lie on the shoulders of those best able to bear it, particularly when in the times in which we live so many people have lost all their income? A great many people have made money in this War who never made money before, to any large extent, and they are particularly the people who are protesting against these taxes. I am sorry that this Bill does not tax husbandry. I do not see why, if excess profits are made in hus-
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bandry, those profits should not be taxed. There have been very large profits made on grazing and in certain branches of agriculture, and at a time of national danger, when every penny is necessary, I think the Chancellor of the Exchequer, instead of curtailing the scope of this Bill, ought to extend its operations. I agree with the Member for Islington that it ought to apply equally to the salaries of Ministers. I think the Government ought to set an example to the State. It is not for the subject to set an example to Ministers. The financial position is so serious in this country, when we are spending £5,000,000 a day, that the first duty of any Government ought to be to set the example to the people themselves, and not ask the subject to eat less meat and to practice economies, while the Government grant pensions to their own particular friends, and have not in this particular case applied the tax to themselves. In so far as the Government have applied the tax to those who have benefited financially owing to the War it meets with my hearty approval. In connection with this tax there will undoubtedly be cases of hardship. I could give the House several cases, notwithstanding the hon. Member for Liverpool (Mr. Rutherford), who thinks I know nothing about excess profits. I will give two cases within my business. I am associated with the iron and coal trade, and one concern with which I am connected, consisting of a new colliery, which has been for eight years working and sinking through enormous quantities of water, has eventually reached coal. Owing to the great waste the mine has been very unprofitable. From £600,000 to £700,000 has been expended in the one colliery. For the first time, altogether outside the question of the War, the mine has come into a state to earn a profit. The company will receive some £30,000, although it has made considerably more than that sum. That is a case of hardship, and it applies in all cases. Although in the case of this company we have not received any return on the capital that has been lying idle we are going to receive under this Bill 6 per cent.
Mr. RUTHERFORD: No.
Sir A. MARKHAM: There is the sum of £600,000 invested in this company, and how can the hon. Member contend that we are not going to be allowed to have 6 per cent. on our capital?
Mr. RUTHERFORD: All that is going to be done is to allow 6 per cent. from the datum line. I understand the concern referred to by the hon. Baronet has been going on for four years without any dividend, and now you are going to get 24 per cent. That would be 4 per cent. for six years, or 6 per cent. for four years. But you are not going to get that. You are only going to be allowed a datum line of 6 per cent. on everything over that up to 24, which is 18. You are going to pay half, that is 9 per cent. in taxes, and you are not being allowed any profits whatever for the previous years of your development. It is one thing allowing on the amount of the profits, and another thing allowing from the datum line.
Sir A. MARKHAM: That is what I said. We had no profits before this date. In an industry in the coal and iron trades, you necessarily have to wait so many years before you get any return on your money. My argument is that we are going to get 6 per cent. plus half the profits.
Mr. RUTHERFORD: No.
Sir A. MARKHAM: That is so, and the Chancellor of the Exchequer will tell the hon. Member that I am correct. Before we get anything at all we have to find the money, and I think it is absurd to take the income from those who are in the fortunate position of having this income whilst so many of our countrymen have lost all their incomes owing to this War. I hope the Chancellor of the Exchequer when he comes to the Committee stage is not going to depart from the principle of this Bill in any shape or form. There may be cases of hardship which I am sure he would meet, and it will probably be necessary to set up a business tribunal to assist the Treasury and give that tribunal that full power to meet cases of hardship which will inevitably arise under anysystem of taxation of this character. In the main principle, however, I think the Chancellor of the Exchequer is perfectly right, and I have always advocated myself, from the commencement of the War, that the whole excess profits due to the War should be taken by the State.
Mr. RUTHERFORD: Hear, hear!
10.00 P.M.
Sir A. MARKHAM: I am glad the hon. Member for the West Derby Division is in agreement with me on that point, and I
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hope he will bring his persuasive powers to bear on the Chancellor of the Exchequer to amend the Bill by recommitting it with a view to taking 100 per cent. of these profits. With regard to the question of Income Tax, I think the Chancellor of the Exchequer has made a mistake. I think he ought to have laid the burden on the employer of collecting the tax at the source from working men who will be called upon to pay this tax. My right hon. Friend must not forget that bankers are paid a very small commission for collecting Income Tax. If the right hon. Gentleman was to allow employers a commission for collecting this tax at the source he would get his money cheaply, whereas under the system which he is now adopting he will not get the amount of revenue which he ought to get. I hold very strongly that all working men ought to pay taxes during this War in accordance with their ability to pay. During this War there are many working men earning very high wages who can well afford to make a contribution towards the expense of the War; but if it is not going to be collected at the source the Chancellor of the Exchequer will not get the money. What objection is there to asking employers to collect the tax at the source? A great deal of nonsense has been talked as to the cost of dealing with the insurance stamp. My own experience goes to prove that for every 2,000 men employed it takes one clerk to do the insurance stamp work and deal with all the cards and collect the money. That can be done by one clerk at a wage of 35s. or £2 a week. In some cases a clerk will deal with 3,000 men. The burden of collecting the Income Tax would be considerably less than in the case of the insurance stamps, because there are no cards to deal with.
What objection is there to putting this tax directly on wages, so that every working man pays his proportion of those taxes which he will otherwise escape? This is not a question which the right hon. Gentleman can regard lightly, because it involves enormous sums of money. The principle is that everyone should contribute towards the expenses of the War, and even at this late hour I think the right hon. Gentleman ought to consider this proposal to allow the employer to collect the tax at the source. With regard to incomes up to £2,000, the number of abatements at the present time are so enormous that the Chancellor of the Exchequer will be left with very little revenue, and during the War I think those abatements ought to

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cease. With regard to the man with a large income, no consideration has been given. The Chancellor of the Exchequer takes from him about 7s. in the £. I urge my right hon. Friend to extend the Income Tax to the working classes and let the employers collect it, and I also trust that he will get rid of those abatements. If the right hon. Gentleman once starts to give exemptions in this Bill he will lose most of his revenue. I believe as the Bill stands at present the Chancellor is going to get, not £30,000,000, but £100,000,000. I believe he will get £50,000,000 from the shipping interests alone. I know that the right hon. Gentleman is groping in the dark as to what the actual profits are likely to be, but they will be enormous. Therefore I implore him, at a time when we are wanting money, to stick to his taxes.
Mr. SAMUEL SAMUEL: I have to complain, first, that we only received the Finance Bill yesterday, and consequently it has been almost impossible for busy men to digest all its Clauses. We are interested in the methods of taxation, but I do not think anybody will grumble at the present time because they are taxed to carry on the War. I think everything that could be said has been said so far as the duties are concerned, and I shall not therefore at the present time criticise the action of the Government, but I am thoroughly in sympathy with what they have done in that respect. I thoroughly agree with the hon. Member for St. George's, Hanover Square (Sir A. Henderson), that the financial position of the country must be considered when we have before us the stupendous expenses which are involved in this War. We are told, and probably rightly, that the War may go on for two or three years, and it is necessary, as the hon. Member pointed out, to husband our resources. We are the wealthiest country in the world, but as the Financial Secretary to the Treasury pointed out, our wealth is not realisable. We have been spending large sums abroad, and we are able in the ordinary course to pay those amounts by our export trade. We ought as prudent men of business to consider, not what we are going to do to-day, but how we are going to meet our obligations during the continuance of this War with a view to bringing it to a successful termination. It will be undoubtedly the economic conditions of the country which will finally decide whether we are to be victorious or not.
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Hon. Members below the Gangway have been pleased on many occasions to point out that we have thousands of millions of pounds, but that money to a certain extent does not belong to the nation. I am sure the Chancellor of the Exchequer will appreciate that the wealth of the nation is in the main the wealth of the individuals who make up the nation, those people who spend their lives in business, and who by their industry give employment to the millions of working people. It is absolutely necessary for those people to have the means to carry on their business, and I thoroughly agree with the hon. Member for St. George's, Hanover Square, that we ought to see what the total cost of the War is going to be, and during the period we are carrying on the War to finance the operations by means of borrowed money. Nobody, I am absolutely certain, when the time comes to review the whole of the expenditure, will begrudge paying his quota, whatever it may be, to liquidate the liabilities which we incur in saving the Empire from destruction. We are giving of our flesh and blood, and everybody is prepared to make any sacrifice. Nobody objects to taxation, but we have to look further ahead. If you absorb the whole of the ready money in the country, if you tax every concern to the uttermost, if you take away not only the surplus profits during the period of the War, but impose large taxes besides, then, when the time comes and we have to enter the markets of the world in competition with other countries, the industrial and commercial classes will be unable to meet that competition with any prospect of success. It is for that reason I would urge upon the Government to review carefully that to which they are committed, and look ahead. The Government will have to raise enormous sums in Loans. We know that so far they have been only able to raise £100,000,000 in the United States. I am not going to talk about what they have paid for it. They were thoroughly justified, and they would be justified in paying more, because we must relieve the position at home. When they come to raise further sums in this country, they will find that those people who were in a position to subscribe to the former Loans have been bled, or rather have been sucked dry like an orange of all their available resources, and the Government will be faced with the problem, a very difficult problem, of how they are going to manage to secure subscriptions. Everybody is willing and anxious to subscribe.

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Last year, when I saw the difficulties the commercial community had in securing advances against the finest securities, I suggested to the late Chancellor of the Exchequer that it would be necessary for the Government to institute some kind of agency to advance, say, from £100,000,000 to £200,000,000 upon security, because at that time we were lacking in currency. The same thing will happen again, and I should like the Chancellor of the Exchequer to consider it, and not to wait until the crisis arises. The Financial Secretary to the Treasury this afternoon pointed out to the hon. Member for Blackburn (Mr. Snowden) that the figure he gave of £15,000,000,000 of securities held in this country was unrealisable. It will be for the Government to produce the means to make those securities realisable to a certain extent to enable the holders of those securities to provide the money for carrying on the War. In all these things, and indeed in any business, it is bad policy to wait until the crisis arises, and I would ask the Chancellor of the Exchequer to look carefully into his requirements for the next twelve months and then to devise the means, and not wait until the time comes. We do not want the British Government to attempt the issue of a loan and to have a failure. We want whatever they do while this War lasts to be successful, and I therefore endorse in every way what has been said by the hon. Member for St. George's, Hanover Square, that this is a time when we should not momentarily put on extra burdens. If you would look at this, if you would decide to capitalise the War expenditure, it would be unnecessary to broaden the basis of taxation for Income Tax to the poorer people at the present juncture. I do not say I am against making them pay some small portion of taxation, because, in my opinion, it is right that everybody should contribute in the same manner as their neighbours. Then they will realise their responsibility when going to vote, and will realise the responsibility inasmuch as they have to bear the same burdens as other people.
So far as the Income Tax is concerned I think it is a very legitimate tax, and no one will complain that it is too heavy under the circumstances. When it comes to the question of war profits taxation, I think that great injustice is being done in making that tax retrospective. I pointed out when the Resolution was before the House the great hardship which would fall
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on shareholders in companies who have already received their dividend for the year 1914, and have spent the money. It is a great hardship that they should be called upon to refund it. There are, as the Chancellor of the Exchequer no doubt knows, hundreds of thousands of small shareholders in these great limited liability companies. Many do not invest more than £50. They have received their dividends, it may be £2 or £5, and after a period of eight or nine months, without any warning, they are going to be asked to return whatever may be in excess of the profits of other years. As I understand it, any profit earned in 1914 over that in the year 1911, 1912 and 1913 will have to be refunded, and as an interim dividend may already have been paid in 1915 they will have to make the refund out of the payment for the rest of the year. The consequence will be the shareholders will hardly be able and certainly they will be unwilling to refund. The assessment will be made on the company, which will have to find in 1915 the money to refund the excess profits earned in 1914, and in many cases that may deprive the shareholders of any dividend for a certain part of 1915. I ask the Chancellor of the Exchequer to consider, in justice to these shareholders, whether he cannot see his way to give at least some relief in these cases. I do not indeed suppose there is a single commercial undertaking where they had not closed their accounts and books for 1914 many months ago. I hope the Chancellor of the Exchequer will consider that when he is dealing with the matter in Committee, because it is a serious injustice to many people.
There is another point in reference to Income Tax and the Excess Profits Tax which I wish to bring before the House, because I have had my attention called to it by many of my Constituents who are complaining bitterly, I think with considerable justice. They say that they are small people making £200, £300, or £400 a year, some of them even less, who are in competition with some great co-operative societies. I have the case here of a tradesman in the Upper Tooting Road, who writes to me saying that the Co-operative Society of Woolwich is building a very large store right opposite his place, and that seeing that the co-operative societies in the aggregate are making a net profit of something like £15,000,000 a year and pay absolutely nothing to the revenue, they are able to sell from 7 per cent. to 10

1407
per cent. below the prices at which tradespeople can sell. These co-operative societies were originally instituted by people working in a locality where they imagined they had to pay more for their provisions and necessaries than they ought to be charged; but now that these societies are launching out all over the country and dealing in every conceivable article, it is time that they should contribute the same as any other trading community in this country. We have no right in these times, when we are in search of money, to throw away a profit of something like £2,500,000 to £3,000,000 a year which would accrue to the revenue if Income Tax were deducted in the same way as it is from every other trader.
The Chancellor of the Exchequer will no doubt say that a great many of the shareholders are not liable to Income Tax. He does not consider that when he asks the joint stock banks to collect the Income Tax from their depositors. I can tell the Chancellor of the Exchequer that many of the joint stock banks have people who deposit £20 and £50 with them, and sometimes they do not go to the bank for a year or two years, and these men, in many cases, are not liable to Income Tax. If it is a question of the trouble of receiving returns from these people who are not liable I would suggest that when the Income Tax is deducted by the co-operative societies from their shareholders that they should give a coupon to those members who can prove that their income is below the amount which is liable to Income Tax. One hon. Member this afternoon pointed out the great injustice that was being done to the joint stock banks in making them the collectors of Income Tax from their depositors free of charge. The hon. Member for St. George's, Hanover Square, pointed out the same injustice. I would go further and say it will cause an immense complication in the accounts of the banks and will give rise to a great withdrawal of deposits from the joint stock banks. Our people are not accustomed to that method of conducting business, and if you wish in these times to introduce an innovation of that kind I am afraid it will cause a great deal of financial trouble if the taxpayers know that they are going to have their Income Tax deducted in that manner. I would ask the Chancellor of the Exchequer to consider how serious it might be at this juncture if there were a large withdrawal of deposits from the joint stock banks.
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There is one more item which some of my Constituents have asked me to put before the Chancellor of the Exchequer. They are small traders, who are not very often rich men, and they have with difficulty been able to put away enough money to buy a small house, and perhaps put on one side a few hundred pounds in investments, and they have asked me to ask the Chancellor whether he could see his way to apply the minimum rate of Income Tax upon houses of that description—houses of £25 and £30 a year—instead of charging, as I believe it is under the new Income Tax, a maximum rate of 3s. 6d. in the £. We have an enormous number of absolutely poor men amongst the small trading people of this country, and I am sure that the right hon. Gentleman's experience as a man of the world will teach him that these men are very often to be pitied for the struggle they have in maintaining their position and in making both ends meet, and I would plead on their behalf that something might be done to relieve them.
Mr. McKENNA: The hon. Member who has just sat down made one or two observations on the Excess Profits Tax which led me to think that he has not yet had an opportunity of studying the actual proposals of the present Bill. It is quite natural that he should have fallen into certain errors inasmuch as the Bill does not carry out exactly what was stated in the opening days of this discussion. As I stated to the House I should do, I took advantage of the week's Adjournment in order to see as many of the interests as I possibly could, and as a result of the interviews which I had the original proposal has been very seriously modified. I can reassure the hon. Member upon one or two points. It is not proposed to take an average of the three preceding years, but it is proposed to give the subject the choice of any two out of the three preceding years. Then, again, it would not be possible that a shareholder would be deprived of the whole of his profits for a very simple reason. In the first place, he cannot be charged a tax twice in the same year, and if in the second year the company in which he is concerned makes a loss he is entitled to set off the loss against the profit, and to recover the proper amount from the Treasury. Therefore the fears of the hon. Gentleman are, I think, groundless.
Mr. S. SAMUEL: I think the right hon. Gentleman misunderstood me. There is a profit in 1914 which has already been spent. There is a profit in 1915, and, therefore, the company or the shareholder will have to pay on the profit of the year that has been spent, and on the profit he is going to receive for 1915, out of his balance of 1915 profits.
Mr. McKENNA: I do not see that he would. He would pay out of the 1915 profits the 1914 tax, and he would pay out of the 1916 profits the 1915 tax. If in 1916 he is not fortunate enough to make a profit, but he makes a loss, then he is entitled to recover.
Mr. S. SAMUEL: Am I to understand that the excess profits of 1914 will not be levied on by the Government?
Mr. McKENNA: The hon. Member is far too acute to understand anything of the sort. As I have stated, the 1914 tax will be paid out of the 1915 profits; therefore I do not think the hon. Member can assume that the 1914 tax will not be paid. On the contrary, I think it will be paid. The excess charge levied on the 1914 profits will be paid out of the 1915 profits exactly as Super-tax is paid. There will be no possibility of a shareholder receiving nothing in the year 1915 as a consequence of the Excess Profits Tax. The hon. Gentleman followed a line of argument which was originally developed by the hon. Baronet the Member for St. George's, Hanover Square (Sir A. Henderson). I recognise the great authority with which the hon. Member for St. George's, Hanover Square, speaks, and I am sure my own position would have been made very much easier had I been able to adopt the policy which he suggests would be the right one. He thinks that we ought to limit our taxation during war to the requirements of our ordinary peace expenditure, together with the full charge for interest in respect of any amount of money which we may have to borrow for the purposes of the War. He would not go beyond that. He would not attempt to pay by taxation during war for any true war expenditure. I am mot sure that his view would be generally accepted. During the three or four months I have had the honour of holding my present office, nothing has struck me so forcibly as the strong representations that have been made both in this House and in another place that there ought to be heavy taxation imposed during the War in order to meet, as far as we can,
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and however little we can, the actual cost of the War.
I think the hon. Baronet must have misunderstood the Financial Secretary, when he quoted him as having said that our present taxation will do no more than pay interest an the Loan that we shall have incurred by the end of the present financial year. On the contrary, it will pay the interest, I think, probably on double the Loan. The amount of new taxation which we shall have to raise in a full year by the Budget of my predecessor, and by the present Budget, will amount to something not far short of £170,000,000, whereas the amount of charge for interest in respect of the whole of our borrowings by the 31st March next we do not anticipate will amount to more than £78,500,000. We shall, therefore, have a margin of £90,000,000 which we can set aside for one of several purposes. If the War is over, we can set it aside for meeting post-war expenditure of a temporary kind: permanent post-war expenditure in the nature of pensions and so on; a sinking fund, and, as I sincerely look forward to, a relief of the present rate of high taxation. If the War is continued it will be a fund out of which we shall be able to pay interest on such further loans as we may have to raise. But if the War does continue beyond the 31st of March next, I certainly would not venture to hold out to the House any hope that the new Budget will be free of new taxes. I think that if the War goes on we shall have to make ever new and new taxes, and if only for the purpose of checking consumption. Unfortunately I missed the speech of my right hon. Friend (Mr. Montagu). I regret it very much, but I understand on all hands that he made a most powerful statement as to the necessity of checking our customary consumption, and if no other means were available we must in last resort have recourse to taxation.
One of the results I hope of the present Budget will be that a great deal of the present consumption will be cut down, but those are views on which I am sure we shall have the support of the hon. Baronet. The hon. Member for Nottingham (Sir John Rees) asked me one or two questions to which he desired a reply now, though he admitted later on that they were more in the nature of Committee points. The answer to his first question is to be found in paragraph six of the Fourth Schedule. His question was whether a company, which is virtually the property of a second company and has made excess profits will

1411
have those excess profits charged a second time in the hands of the second company. If he looks at paragraph six of the Fourth Schedule, he will see his question answered:—
"In estimating the profits no account shall be taken of income received from investments except in the case of businesses such as those of investment, trust, or assurance companies, where the business to a great extent consists of the making of investments."
Consequently the investment will not be charged a second time. Then he asked me whether we propose in the case of a company which made no profits during any of the last three years to take half of the whole of the present profits. We do not. We propose to allow a minimum of 6 per cent. on the capital employed. If it is a business carried on by a partnership and not by a company we allow a minimum of 7 per cent., and in every case it is a question which may be brought before the Court of Referees to determine whether the trade is one in which a higher rate of interest than 6 per cent. or 7 per cent. should be allowed.
Mr. RUTHERFORD: Every case?
Mr. McKENNA: It applies to every trade. The rate of interest is to be determined for the trade concerned. For instance, I can quite conceive that the trade of rubber growing might very properly ask for a higher interest than 6 per cent., having regard to the fact that it takes five years before the trees bear. The rubber planters will go before the Court of Referees as a trade, and the rate having been once determined will apply to all companies in that trade, but it will not be a separate rate for each company.
Mr. RUTHERFORD: What about mines?
Mr. McKENNA: Mines will go before the Referees again as a trade, but in the case of mines, as in all industrial companies, there are special provisions for depreciation. I think the hon. Gentleman will agree with me that these are matters more for the Committee than for Second Reading. On the subject of lace I regret to say that, notwithstanding the very humorous speech of the hon. Member, I can hold out no hope to him at all. The tax having gone, lace inevitably goes with it. The hon. Member for Mansfield (Sir A. Markham) put a point to me, but let me first of all thank him for the support, in the circumstances of the case the very generous support, he has given. I speak
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with some knowledge when I say that he is quite right in telling the House that he knows as much about this matter as anyone. I am asked why I did not include husbandry. We have for the first time brought an immense number of farmers under the harrow of the Income Tax, and I think we ought to be as fair as we can when dealing with the same man twice. We hit him very hard, no doubt of it. Farmers when they paid only on one-third of their rent have escaped, and there were reasons for that, and reasons that hold good; but when we come to the conclusion that they ought to be assessed on their rental value, it brings a great many of them above the abatement limit for the first time, and at the moment of coming under the Income Tax law for the first time the rate is so very high that I thought it was a fair thing that they should not be included at the same time under the provisions for the Excess Profits Tax. More than one of my hon. Friends have referred to the fact that the Excess Profits Tax does not refer to offices. After all you have got to have a datum line, and the datum line in an office has been the same salary. One person holds it at one time and another person at another, but you must have something for a datum line. I believe a number of gentlemen have taken up official positions who, so far from having made a gain, have lost over it. Their profits might in other ways have all gone. I think, on the whole, that this tax is one which is really not appropriate to the individual earnings of a profession. You have no datum line on which to form your estimate. In the case of a trade or business the circumstances are entirely different. We all know that the element of price—I need not repeat what I have said on that point—enters so largely into the amount of profit that has been made that while we may fairly tax excess profits in one case we may have the greatest difficulty in other cases, and certainly we have got to have some kind of basis for reckoning our datum line.
Sir A. MARKHAM: The datum line, so far as the House of Commons is concerned, could be taken at £400 a year, and the House of Commons had better set the example.
Mr. McKENNA: Members of the House of Commons are not limited to £400 a year; some of them make a good many thousands a year in business outside. Supposing my hon. Friend had been good

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enough to accept office in the present Cabinet on the formation of the Coalition Government, would he suggest that the datum line for his salary of £5,000 a year ought to be £400? He would turn round and say, "Four hundred; why I make thousands!"
Sir A. MARKHAM: I say the tax applies to politicians; I am not a politician.
Mr. McKENNA: I think my hon. Friend is making a point which is only verbal. The office is a continuing office. The salary which is attached to it is the same salary which attached to it before. If my hon. Friend could show that a Minister in an office had received £2,000 per year before the War and was receiving £20,000 during the War, then he might come down and say, "Those are excess profits." But that is not the case, since the same salary attaches to the same office. My right hon. Friend the Member for Islington (Mr. Lough), who opened the Debate, made a very vigorous attack upon the whole of the taxes. His argument was this, and I wish he were here, as I should not like to misrepresent him: "It is quite true that individuals have done well in the War, but if you take the whole country through trade has not been good. There have been great losses and many people are suffering, and it is unjust to impose"—as I understood him—"a tax of this kind, a special particular tax, in these circumstances." He went on to say, "If you want more money increase the Income Tax, double it if you like, and put everybody on an equality." His argument appears to me, so far from being an argument against the tax, the strongest argument in support of it. This is a temporary tax, only a temporary tax, during the War. We are all living under exceptional circumstances. It is quite true that the great majority of people, if you go by numbers, are much worse off during this War than they were in peace, and much worse off than I trust they will be when once again we have peace. There are a few who are enjoying exceptional profits. I say this is not a moment to go in for asking everybody to contribute. I think it is a moment to ask those who are enjoying those special profits during the War to contribute out of those special profits to the relief of those who are not enjoying those special profits. If it brings in thirty millions, and I have heard some more hopeful estimate, I will only point out that thirty millions means
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something like, I should think, from ten-pence to a shilling of Income Tax. If we do not have one we must have the other. Is it fair that we should ask those who have got the excess profits to bear a special tax or impose an additional shilling upon earned and unearned, rich and poor alike? I think that this under the circumstances, which is a temporary tax for the purpose and during the conditions of the War, is the right and proper way to take from those who are specially enjoying profits a special share of the excess. My hon. Friend the Member for Aberdeen West (Mr. J. M. Henderson) referred to the Banker's Clause—that is to say the Clause which relates to the assessment of bankers to Income Tax. I stated before, and it was repeated by my right hon. Friend the Financial Secretary, that we are perfectly prepared to meet the bankers and to devise means which would be mutually satisfactory. I may say that that Clause was introduced, as I thought, with the concurrence of the bankers. Apparently it was not. I have since been in communication with them, and I hope to settle the matter in a way which will be satisfactory alike to them and to the Treasury. In dealing with a particular trade it is essential that the legislation should be of a kind which does not hit them injuriously, and I should be most anxious, while safeguarding the interests of the Treasury, to see that the particular methods we adopt are methods which will not injuriously affect the industry.
My hon. Friend the Member for Barnsley (Sir J. Walton) spoke of the extravagance of some of the Government Departments. So far as extravagance exists in any of the civil Departments, the Treasury is willing to accept full responsibility. The civil Departments present their Estimates to Parliament, and the Treasury is responsible for their expenditure in the sense that the Treasury examines what they do and controls their expenditure. But when you get to the great War Departments, on behalf of the Treasury I must repudiate any responsibility. The War Departments—the War Office, the Admiralty, and the Munitions Department—I suppose necessarily have to give orders and to undertake liabilities without consulting the Treasury; consequently we have no means of control. By a Treasury Minute they were absolved from the liability to consult the Treasury in advance. That Minute had to be given in the interest of the proper conduct of

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the War, and it must be given. It has been announced to the House, and the House has accepted it. Consequently, to take the occasion of the Second Reading of the Finance Bill as an opportunity of calling the Treasury to account for alleged extravagance on the part of the great War Departments is, in my judgment, a misreading of the facts of the case. We are not, and in the circumstances cannot be, responsible for the great military expenditure. All history shows that it is absolutely impossible to hold up a Department which is conducting the great business of a war while inquiries are made by another and an independent Department as to whether particular items of expenditure are needed. I am sure the War Departments are doing their utmost to avoid extravagance. I am sure there is nobody more anxious than the heads of those Departments to see that their money is well expended, if for no other reason than that they are each and all of them conscious of the fact that the responsibility for avoiding extravagance rests upon them, and not upon the Treasury. I am confident that the House may rely upon my colleagues at the head of those Departments being most anxious and most determined to do their utmost to avoid all items of extravagance. I should like, if I may, to repeat what I said on another occasion, that we hear in this House of every instance of extravagance that happens. [HON. MEMBERS: "No, no!"] Yes. [HON. MEMBERS: "Not one-half!"]
Sir A. MARKHAM: One in a thousand.
Mr. McKENNA: Oh, dear no! We all know the cases: the heads of the charges of alleged extravagance.
Sir A. MARKHAM: Not the individual cases.
Mr. McKENNA: Under the capital heads of the work done. But we do not hear of the mass of the work that is done in which there is never the slightest charge of extravagance. You hear nothing because the work goes on smoothly and evenly. I will venture to say that of the huge cost of the War, upwards of £4,000,000 and approaching £5,000,000 daily, the actual percentage of the whole that is wasted through extravagant expenditure is extremely small. The total figure may be large in itself compared with our expenditure, but I am perfectly certain that it is not a heavy amount.
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I confess that the speech of my hon. Friend the Member for Skipton (Mr. Clough) was, I think, hardly severe. His Free Trade principles are my Free Trade principles. I agree in principle with every word he said. I cannot understand how he can think that this Budget is either a Free Trade or a Protectionist Budget. It is neither one nor the other. There are things in it which we can call Free Trade and there are things in it which we can call Protectionist No Free Trader would introduce this Budget in ordinary times, and no Protectionist would do so. It is a War Budget. It is a Budget devised to meet the particular conditions of the War. My hon. Friend's Free Trade principles and mine are identical. But my Free Trade principles are not, to me, moral principles. I can well conceive conditions—and do conceive them now—that Free Trade, though still in my judgment the right policy in ordinary circumstances, may not be the right policy now for the special year of the war in which we are engaged. I can well conceive that it is right to do, temporarily, things in war that you would not do, permanently, in peace. I say this by the way because, if it is alleged that this is a Protectionist Budget all I can say is that the Protectionists ought to be ashamed of their protection. I cannot conceive of any Protectionist producing such a Budget as this as an example of what he thinks ought to be done in the way of Protection.
Mr. CLOUGH: I would like to point out that I confined my criticism to Clause 12 which, I maintain, is a Protectionist Clause.
Mr. McKENNA: All the other Clauses of the Budget are Free Trade Clauses.
Mr. CLOUGH:Mr. CLOUGH: Hear, hear.
Mr. McKENNA: Therefore we cannot describe it as a Free Trade or a Protectionist Budget. I hope we shall continue to describe it as simply a War Budget. The hon. and learned Member for Cork asked me one or two questions, chiefly as to the spirit tables. Seeing he is not here, I do not think they are of general interest to the House.
Mr. RUTHERFORD: Sykes' hydrometers.
11.0 P.M.
Mr. McKENNA: If the hon. and learned Gentleman were here, I should assure

1417
him we had no design to increase the tax, but simply to substitute a correct table for an incorrect table. There is no secret history attaching to that Clause. I can only say in conclusion that, while I propose in pursuing the Excess Profits Tax to follow the advice of the hon. Member for Mansfield, and not to allow the tax to be whittled away—and I do not think it is the wish of the House that it should be whittled away—I think I owe it to those representatives of the different trades who have been to see me the whole of last week that in every case, I think without exception, I was assured that, if the tax could be fitted to the case of the individual trade, there was no objection to it on principle, and I am sure the same attitude prevails generally in this House. While I must see to it that the tax remains areality, we shall certainly endeavour to meet all the objections which it can be shown in practice would render the tax unfair or harsh. We shall do our utmost. We have done so during the last fortnight, and we shall continue to do so. No one is more conscious that I am that in pressing a tax you are embarking on an uncharted and unknown sea, and unless you are very careful you may do more harm than good. We mean not to do harm, and we shall rely on the criticism of hon. Members to assist us in making the tax fair and reasonable; but in saying that I hope I shall not be met with the argument, when I have met first one and then another hon. Member, that "Now you have given so much you may as well give up the whole tax." My right hon. Friend opposite pressed me to make concessions in the Motor Tax and other taxes. I have met him in every one. "Now," he says to-day, "you have given up so much, why not give up the rest?" If that argument be used, of course it becomes impossible to maintain the open mind I think a Minister ought to keep, and those who are going to oppose the tax on principle should say so and should not plead for concessions. Those who are going to accept the tax and ask for concessions to render the tax more palatable I shall be ready to meet, but under the guise of rendering the tax palatable you must not forge an argument for overthrowing the whole tax.
Sir A. MOND Sir A. MOND made an observation which was inaudible in the Reporters' Gallery.
Mr. McKENNA: I rather understood when the right hon. Gentleman got busi-
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ness cars released from the tax, when he got tyres released from the tax, and everything he asked for in the way of rebate on export, I should not hear any more of the Motor Car Tax from him. But, with regard to the Excess Profits Tax, I would like it to be understood that we do intend to adhere to the tax and adhere to the revenue from it. But, subject to that, we shall do our utmost to meet the hard cases.
Mr. HENRY TERRELL: I hope the Chancellor of the Exchequer will not make any concessions in regard to the men who have enjoyed the comforts of their homes and greatly increased profits, and they will only be allowed to retain the profits they would have made but for the War. I rise to make an appeal to the Chancellor of the Exchequer and the House on behalf of the thousands of men who are to-day serving as officers and non-commissioned officers in His Majesty's Service. There are thousands of men who in civil life before the War were engaged in various businesses, occupations and professions earning considerable incomes, many of them married men with families to support who have given up their occupations and left their homes and families in order to serve their country. They accepted commissions in the Army, and in many cases they have enlisted and been appointed non-commissioned officers. They are men who have given up substantial incomes, and are receiving in pay an amount which is but a very small fraction of the income which they have given up. They have still got to support their families. They have not merely stated in words that they were prepared to give up everything, but they have indeed given up everything. They are the backbone of the New Army of which so much has been said. I know of many cases.
I could indicate within my own knowledge several cases of men who are in that position who by reason of this Budget find themselves in the greatest financial straits. When a man gives up his position and accepts the small pay which is given to a captain or a lieutenant, you may well understand that before accepting that position he must have reduced his expenditure very considerably, altered his mode of living, and calculated exactly how all this could be done on the very diminished income he would receive. Now things have changed, and these officers have not only that small pay to meet the expenditure he

1419
calculated upon, but of his every-day expenditure which is necessary is very much increased in amount. In other walks of life some relief can be got. The workman can demand higher wages. He can strike, and does strike, and he gets higher wages. The manufacturer increases the cost of his goods and the retailer again increases the cost of the goods not only to the extent of the tax, but beyond it, thus passing on to the consumer a part of his own burden. I have an instance of that only to-day. Tobacco which before the Budget cost 1s. 4d. for 2 ozs. is now charged 1s. 10d. Fourpence is the tax and twopence goes to the manufacturer, the retailer, and the workmen in order to relieve the increased cost of living.
The officer cannot pass on any of his burdens. He cannot pass on anything; he has to bear it all himself. That is bad enough, but on the top of this his cost of living is seriously increased, and on the top of that the little pay which is given to him is taxed, and heavily taxed. The tax, heavy in the first instance, is now to be increased. I know men who have given their all to the Service who, if this Budget is passed, and if they live long enough, will in the course of a few months be bankrupt. They cannot go on. They cannot live under the circumstances which will prevail when this Finance Bill comes into operation. This matter has been before the House before, and the Chancellor of the Exchequer has replied, "That is a very good argument for increased pay." Surely that is a fallacy. The Income Tax is a method of distributing the national burden amongst the people. You do not charge Income Tax upon very small incomes, because you do not think that the persons who earn them ought to bear any part of that burden. You increase the Income Tax by Supertax upon the very rich because you think the very rich ought to bear more than the poor men of that national burden. It is a method of distributing the national burden.
Surely the men who are giving up everything—thousands have given their lives already and thousands more will have to do so before the War is over—have borne their fair share of the national burden. They have borne more than their fair share, and yet you impose an additional burden upon them and upon a very meagre pay which you give to them. It seems to me unfair. It is certainly ungenerous, but it is worse than ungenerous; it is unfair to say to the men upon whom you rely, to-day to fight your battles, "You shall not only
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bear the burden you are bearing, but you shall finally bear an equal financial burden with the men who stay at home and not do anything for the country but try to make what profit they can out of the War." I do not know, but the Chancellor of the Exchequer may be able to tell the House, how much the taking off of the Income Tax on the pay would cost the Government. I do not speak for the Navy because I do not know the particular circumstances of the men serving in it, but I imagine it is the same as in the Army, and I cannot conceive that the amount would be large. It would be a comparatively small sum. Surely it would be better to put that sum on to the Excess Profits Tax and take it off the men who are serving the country. Put it on the men who are making money out of the War and relieve the men who are giving their services to the country in the War. In pursuing this course I know that in some cases you are imposing an intolerable burden upon men to whom you ought to act as generously as possible.
It is said that there are many men in the Service who do not require this relief because they have got independent incomes. This is quite true, and, if it could be done, I should prefer to discriminate between those men who require this relief and those men who do not. But you cannot discriminate. The same argument was raised in this House and discussed at great length on the question of the £400 a year which the Members voted themselves. It was said that a majority of the Members of the House did not want the £400 a year. The argument which then prevailed applies equally in this case. You cannot discriminate between different classes of men in the same profession or occupation. If it is necessary, in order to do justice to a very large percentage of the men in a particular class, that this relief should be given, it ought not to be refused because it might operate to give relief to men who really do not need it. All I ask is that the pay should not be subject to Income Tax, and I invite the House to do a scant measure of justice to the most deserving men in this country to-day.
There is another view to be taken of this matter, and it is that men who have come out on Service have in thousands of cases given up their business. They have to make a return for Income Tax on a three years' basis of the income which they earned in civil life, and in most cases they have to pay on the basis of an income which was derived in previous years but

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which has now ceased, or very largely so. Perhaps I may give an illustration which I have in my mind. It is the case of an architect who before the War was earning £1,000 a year. He gave the business up substantially, merely keeping on a clerk as he did not desire to lose the whole of his connection. Still, his income from the business has practically gone, yet he has to make a return on the three years' basis, and pays his Income Tax on it, getting no relief. He is now getting the pay of a lieutenant; he is married, and his income, instead of being £1,000 a year is reduced to £200. Yet you are going to tax him not only on that £200—you deduct the Income Tax on that before you pay it—but upon the basis of his income in the previous three years. To-night I only ask for relief for Income Tax upon the pay of the officers and non-commissioned officers. I hope the Chancellor of the Exchequer will see the justice, of the demand, and that he will also see the fallacy of his argument that I am asking for an increase of pay when I am doing nothing of the kind. I am asking that these men shall be relieved not from a burden which is imposed on every man who has to pay Income Tax, but from a share of the burden which ought not to fall on those who are already bearing more than their share of the national burden. If the Chancellor of the Exchequer can see his way to doing this, I hope he will accept the Amendment in Committee which I propose to move. I know of my own knowledge this is a matter of serious and vital importance, involving the means of living of a very large number of men who ought not to be put in financial straits by the action of the Government.
Sir RYLAND ADKINS: I was impressed by what was said by the hon. and learned Member for one of the divisions of Cork with regard to the provision in the Budget which altered the datum line of payment of the Income Tax. When that comes to be considered in Committee, I think it will require further and stronger arguments than the Government have yet given to induce us to support that under the present circumstances of the greater cost of living and of a prosperity which is very far indeed from being widely and still less universally diffused. The next point is this: Under the provisions of this Budget there is an increased tax on petrol, and it is provided, I think in Clause 41, that the proceeds of that tax, either as to the old tax or as to the new
1422
additions, shall no longer be used, as the old tax was, for the improvement of roads. I want to say to my right hon. Friend that there is real ground for asking him to reconsider this provision.
The roads of this country are now being used to an extent unparalleled in peace time. They are being affected and in some cases destroyed by heavy traffic, which arises entirely out of war conditions, and even when they are not so being dealt with, the ordinary traffic on roads is now, to an extent unequalled in peace time, a traffic connected with duties and matters that arise out of the conditions of war. Pleasure traffic has gone down, traffic in connection with the business arising out of the War has increased, and practically everyone who uses the road now is, in the vast majority of instances, using it for purposes connected with the War. When you get these two facts, that the user of the roads has become overwhelmingly for war purposes and that the result is that the cost of the upkeep of roads has greatly increased, then I respectfully say it is not long-sighted to take away the chief resource for improving the character of the roads and making them more qualified to bear this excessive traffic and this traffic which is so largely war traffic.
I am not asking for special benefits to ratepayers. I am merely saying that the money will not be properly spent if roads are allowed to go to rack and ruin throughout the country at this period, when they ought to be in a better and not in a worse conditions than they are in times of peace, and when the people who use them are munition makers, persons who are taking out wounded soldiers, persons going on recruiting and other errands, besides the actual use of them by military forces of all kinds. At the proper time I shall move an Amendment to that effect, and I ask my right hon. Friend to consider this. Although I do not profess to speak here with the formal authorisation of local authorities, I know what I am saying is borne out by the opinion of those who have most knowledge of road conditions and have the highest degree of responsibility for keeping the roads up to the mark during these trying times.
The only other thing I desire to say is that my right hon. Friend in his pleasant way has chaffed the right hon. Baronet (Sir A. Mond) in regard to his not being satisfied with the concessions on Clause 12. May I address this argument, which, to me, seems of real importance? I really

1423
care, perhaps, less than I ought for the exact definition of the Budget, whether you call it a Protectionist Budget or a Free Trade Budget or a War Budget. I am not absorbed in this ingenuity of nomenclature. I ask my right hon. Friend to bear this in mind. Clause 12, which now under the existing conditions will not bring any great financial results, is a Clause which is taking up a great deal of public attention, which is sowing the seeds of controversy and even dissension in many parts of the country, and which is diverting men's minds from the support of the War to the discussion of this old fiscal controversy, which we all want to put behind us during the period of the War. That is not done at our encouragement. It is not done with the wish or intention of any Member of the House, but it is there, and I have been deeply impressed, since the House adjourned twelve days ago, with the amount of controversy and irritation which this has aroused, with the way in which it diverts Member's minds from what they ought to be thinking about, namely, the prosecution of the War and nothing else. It wastes an enormous amount of national energy which comes from the diversion of public attention from the duties put upon it by the War to this old controversy.
One set of people claim a triumph for their principles, and another set of people say, if they are violent, that they have been betrayed; if they are pensive they say they are bitterly disappointed. Who wants people's party principles to triumph or be betrayed, or have any other emotional state attached to them now? If my right hon. Friend and the Government keep this Clause in the Bill nothing can prevent this diversion of interest among thousands of our fellow-countrymen and the consequent injury to that national unity, and to that direction of national means and efforts which we all want and which is of far more value than the very limited product of these new altered taxes which, altered though they be, still have this quality about them and still give rise to this most unfortunate result. I hope the Government will avoid this by seeing that they are really not worth the candle in any sense and by leaving the Budget, as it would be without them, in a position to command universal support at a time when financial proposals ought to command such support if they are to do for the country what they are intended to do.
Mr. RUTHERFORD: I do not rise to continue the general discussion, because in this most astoundingly awful Budget, if one may so express it, that has ever been presented to the House or dreamt of by any Member of it, it may be conceded that one day's debate on the Second Reading is surely not excessive, and I should be the very last to suggest to the Chancellor of the Exchequer that he should not put the Second Reading to-night. If he would give me an assurance that with regard to the novelties at all events which are in this Budget we should have free and ample time to discuss not merely the details but some of the principles involved in these very novel taxes, I must be content to sit down and not continue the discussion. We scarcely know from day to day what time the Government is going to give to these different matters, but I press the right hon. Gentleman to tell me whether we can rely upon an ample opportunity for discussion of these new taxes
Mr. McKENNA: If my hon. Friend invites me to interrupt him I can certainly assure him that there will be ample time. I would suggest that he would be taking the better course if all detailed criticism of the new taxes were left for the Committee stage, when both the principle and the detail of the taxes could be better discussed than in a discursive debate at the present time. There will certainly be ample time.
Mr. RUTHERFORD: I am very grateful to the Chancellor of the Exchequer for putting it that way. If the House is content to allow any Chancellor of the Exchequer to get the Second Reading of such a Budget as this in one day, I do not think the Chancellor would have very much to complain about in the way of obstruction. I can assure the Chancellor that, so far as I know, there will be no attempt to put down a number of amendments for the purpose of raising obstruction or wasting time; but the main principles, particularly of some of these new taxes, are, I think it will be admitted, points where reasonable, free, and extended discussion, if desired, might be given. I accept the Chancellor's assurance, and therefore I will speak very briefly on one or two points.
The principle of taxation has been referred to by the hon. Baronet, the Member for St. George's, Hanover Square (Sir A. Henderson) and other Members. I urge

1425
upon the Chancellor of the Exchequer that that principle ought to be the true principle to-day. When so many people have lost their incomes, when their investments are depreciated, and their businesses are being carried on under such difficulties, there ought to be no attempt to rush in and try to raise a substantial part of the capital money that is being spent on the War. The contention, as a matter of principle, is this, that if you get your ordinary expenditure from this taxation now, and you get sufficient to cover the interest on all your loans, with a reasonable margin, you ought to be satisfied with the taxation you are putting on in these exceptional times of distress, and not seek to do at the same time two things which are mutually destinctive, namely, seek to take away the available moneys that people may have, by way of taxation, and at the same time say, "You really must subscribe to this, that, and the other loan." It is impossible for people to do both. I support very strongly the principle which the hon. Members who spoke upon this subject were endeavouring to advance.
In regard to the general imposition of Income Tax, I was sorry not to see in the Bill that we have before us, any reference to or any indication that we are going to have a revision or a consolidation of the laws relating to Income Tax such as has been indicated and adumbrated several times in this House. When the Income Tax was a comparatively small amount we put up with all the inconvenience and difficulties of over eighty Acts of Parliament and the complicated rules and decisions which surround the levying of Income Tax; but now that you have got the tax up to such big figures, it is of extreme importance that the tax should be levied as free as possible from hardship and anomaly, and that the people who are really making substantial incomes ought to be paying on those substantial incomes, and that the people who are not getting any incomes at all should not have to pay tremendous Income Tax. I think it is time to more than urge the Chancellor of the Exchequer that some reasonable consolidation and cohesion should be introduced into the principles upon which the Income Tax is levied and assessed. I know of a case where a man is charged Super-tax who has not got a shilling income in the world, and has not had any for the last nine years, and yet he is being charged Super-tax, and is being threatened with all sorts of penalties for payment, and under the statutes and regulations he
1426
is liable to pay it. That seems an astonishing thing but it is nevertheless true.
The Excess Profits Tax is the great novelty in the Budget. So far as those are really war profits I have the greatest possible sympathy with the tax. Anybody who is making any money out of this War, if they are making it in consequence of the War, or in any way connected with the War, has no right to make money out of the country's emergency, and I would take the largest possible proportion of all profits that really properly came under that description. But when I look at the Bill and see the way it is now exposed, the idea is developed that it is not the War profits or profits that have been made out of the circumstances of the War alone that are going to be taxed, but all profits that happen to have been made during the period which commenced on 1st September last year. It seems to me that that is wrong. In a large number of cases that is going to be a deterrent to enterprise, and is going to drive business out of the country. It is going to drive the registration of undertakings out of England. It is going to do irreparable injury to London as the centre of the financial enterprise of the world, and I beg the Chancellor to pause before he insists upon carrying the principle of this tax so far as matters that have nothing to do with the War.
There is a vast number of cases in which profits have begun to be made, last year and this year, by concerns that have been making nothing for four, five, or six years before that date. There are concerns which had been making a loss in 1912, 1913 and 1914, which are now going to make some profits that are something like a return for their work during the last four or five years. It is no answer to these concerns to say: "You are going to have a datum line of six per cent." That does not give them back their money. I will give the Chancellor of the Exchequer an exceedingly simple illustration of what I mean. Suppose that a concern has been for four years developing its mine, or has been working its petroleum well, or has been planting its rubber—they are all in the same category of cases—and for the first time last year since the War it begins to realise a return for the labour and expenditure of the last four years. Suppose that that company's rubber has just come to fruition, or its petroleum has just been reached, or its gold found, and that that concern last year

1427
made 24 per cent. upon its capital. Distributed over the last four years that would be only 6 per cent. The hon. Baronet the Member for Mansfield, rather argued that in those circumstances that company should not have to pay this tax. He is wrong. In those circumstances that company would simply be allowed 6 per cent. It would have to pay 9 per cent. of its profits under this tax.
Mr. McKENNA: When we get into Committee I will explain it.
Mr. RUTHERFORD: I asserted that there would be a datum line of profits, and the difference between 6 per cent. and 24 is 18, and the half of that excess over £100 appears to me, under this Bill, to be bound to go to the Exchequer. There is another illustration of the injustice of this taxation. Supposing a man has money in half-a-dozen different undertakings, five of which this last year, in consequence of th War, have paid no dividend whatever—and that is the case with vast numbers of undertakings—while one has managed to make, in spite of the War, a little extra profit. It is obvious that, in ordinary circumstances, the man might be able to average his losses with the slightly increased profit. But this extra taxation is going to take a slice of it, so that he is prevented from getting something against his losses. The true principle of this Excess Profits Tax is that it ought to be treated the same as the Super-tax, and not as an Income Tax; it ought to be on the individual increases of profit, and not upon the profits of a company that represents a considerable number of shareholders. I feel very grateful to the Chancellor of the Exchequer for pointing out that we shall have a full and ample opportunity for discussing the principle and application of these taxes when we come to another stage of the Bill, and I think that we ought to be content. I have listened to the whole of the Debate, and I think the time that has been devoted to it is not been at all too long for the Second Reading of this Budget Bill, with its great and important demands.
Mr. T. C. TAYLOR: I agree with the last speaker that we have not devoted too much attention to the points raised by this Bill, and I think the speech of the hon. Member for Gloucester was a very important contribution to this Debate, and is an illustration of the fact that fresh matter may be introduced into these discussions.
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I am sorry that it is not convenient to adjourn the Debate; I should like to have had an adjournment, but I understand that the authorities prefer to prolong the proceedings to giving another day or even part of a day. It has been said that this War is exceptionally great, but it is also true that our resources are large compared with what they were at the time of previous wars. I agreed with most of the speech of the hon. Member for Blackburn (Mr. Snowden), but when he referred to capital getting a large interest, and would have to be taxed more, he rather overlooked the fact that the capital value of securities if capitalists had to sell at present, would fall by just as much as the rate of interest would be raised, except in the case of people with fresh money, just recently acquired, to invest. The existing capitalist really has not the advantage of a higher rate of interest on securities he already holds. I am one of those who believe that our finance should be conducted on sound lines, and that we should pay our way, and more than pay our interest. I do not believe we should be properly paying our way unless we pay now some of this enormous new expenditure we are incurring.
I am sure that must appeal to every sound business man who desires to pay his way, and in time of emergency wants to be paying a little off a new debt as well as the interest. I am very glad for another reason that the Chancellor is levying so much taxation. It is a very difficult task for any Chancellor by any means whatever to have to raise such an unprecedented sum, and yet I would rather have seen the sum still greater for this reason alone. It is to my thinking the only sound way of causing people to be economical. I could not help telling my friend the Chief Whip, who is chairman of a so-called war savings committee, that I myself could not go to meetings with any degree of enthusiasm to ask people, to come in crowds to hear exhortations to save their money. I believe the Gentleman sitting in the middle of the Front Bench (the Chancellor of the Exchequer) is the only man that can really make people save money they might otherwise extravagantly spend, and that is by taking the money from the people so that they cannot spend it then. I believe that is better than all those other sumptuary expedients as to which I should like to say a word subsequently. I do not think it is the business of a Government to distinguish or say what particular kind of expenditure we should

1429
indulge in, whether hats or watches, or plate glass or other things. I think it is better for the people themselves to make their own savings in their own way, and they can do it with more commonsense and greater advantage than the wisest Government could direct them to do.
So, on the general principle of taking money in taxation from people rather than telling them what kind of things they should not use, I heartily approve of the very large sum, and would have approved if it had been larger still, raised from those able to bear it, such as Income Tax payers. Might I make this little suggestion in order to relieve a certain class who have been spoken of as being particularly hardly hit by the new Income Tax, namely, those with about £200 per year. It seems to me it would be quite right to increase the allowance in respect of children from £20 to £30 or £40, and so actually exclude people of moderate means from paying Income Tax who have a large family of growing children. I believe that is absolutely sound, not only from the fiscal point of view, but from the highest national point of view, a healthy people to bring up healthy children, and to encourage the bringing up of children. I believe that is quite sound, and I would suggest to the Chancellor that he should go even still further in that sound direction. I notice that the Chancellor dealt very ably with the suggestion that those who had been earning excess profits should not be taxed so heavily, and that the case should be met by more Income Tax. The Chancellor pointed out that it would be very unfair to relieve the heavy payers at the expense of smaller ones. Might he not apply that principle to the case put by the hon. Member for Gloucester? Just as it is perfectly fair to tax excess profits, so in my judgment conversely it is perfectly fair to ask those who are going out to risk their lives for their country not to pay any Income Tax at all. Although I am not specially a military man, not being associated with the Army in any way whatever, except that I admire their deeds and try to get more soldiers, and so on, I think that one of the best things we could do would be to declare that during the War our officers should pay no Income Tax on their salaries at all. It would not mean a great deal of money, and I think it ought to be done. No doubt it would relieve some few rich men; but, after all, many of the officers now in the Army are poor men, and men who have been pro-
1430
moted from the ranks, with new expenses and so on, and I think they are a particularly deserving class.
I want to say one word on Clause 12. It is all very well for the Chancellor of the Exchequer to say that this is not a Free Trade or a Protectionist Budget, that it is a new kind of animal, neither fish, flesh, nor good red herring. All I ask is that in the name of common English fairness there shall not be this radical change of policy during the War. As has already been stated, it will create diversion and discussion of an objectionable type, such as none of us wish to see here or elsewhere if these taxes—two of which have gone, and I hope others will soon go—are persisted in. I am not here merely as representing a party. I am here representing Free Trade quite as much as any political party. I have already had representations from some of the leading business men in Lancashire who are much disturbed by what they look upon as the beginning of a new policy. It is the first step that counts in all these things. The first step is the most serious, and that is the reason why some of these men are alarmed. I respect their views. I have just as much respect for the views of the most ardent Tariff Reformer. I know that he is just as good a patriot and Englishman as I am myself.
But let us drop this discussion during the War. Do not let us bring in this bone of contention. It is the effect and not the intention of these protective duties that we have to look at. It is not the intention that will be discussed in this House two or three years hence, when these duties, if they are imposed, have to be reviewed, it is the effect that they will have had in the meantime. The Colonial Secretary, in his interesting Cabinet revelation the other day, told us that the President of the Board of Trade had a little ridiculed these duties. I think the Chancellor of the Exchequer has almost done the same to-day—as much as to say "Let us have them in order to show how futile and absurd they are." Absurd! Is that the way to treat the great trade interests of this country—to say "We will make an experiment upon them"; we will vivisect them; we will hold them up and see what will become of them"?
We will just try to make ridiculous the proposals of those who were our political opponents, by doing what?—by protecting or setting up certain interests in the next

1431
year or two, by causing certain people to lay out capital by going into the clock and watch or musical instrument trade—and to some extent the motor-car trade—by saying that we will never mind what happens to these people, if we can show how ridiculous and futile have been certain arguments. That is not a worthy argument; that is not, in my judgment, an argument that this House should entertain for a moment.
Mr. McKENNA: Who has used it?
Mr. TAYLOR: The Chancellor of the Exchequer was present, I think, when the Colonial Minister told us that the President of the Board of Trade had used some such argument as that. But the Chancellor has told us to-day that this might show how ridiculous Protection might be. If these things are ridiculous from a Protectionist point of view, surely they are objectionable from a Free Trade point of view? And this is done by the Chancellor for the sake of a million, or a portion of a million in a Budget of £386,000,000, or £387,000,000! Why should he infringe a principle that a great many of the supporters of the Government and many of the hon. Gentlemen, whom we used to call the Opposition, hold to be a dangerous principle, a principle which is injurious to the trade of the country? It is no good to say that the intention is this or that or the other if the actual effect is what has always been the effect in every country that has given industry this protection for a year or a few years. At the end of the time the industry comes to the Government and says: "We have invested our money and built up a trade and these things should be considered." If there was no other illustration you have that of the liquor industry, and we know what its fetters are. If we are going to have a large number of protected trades like that I do not know when the time will come that it will be possible to relieve the trade of this country from fetters forged in that way.
I submit that it is not a reasonable thing—that it is not a reasoned argument—to say to the House that because the effect of these duties will be this, that, or the other, which will alter or not alter a party argument of the past, we should try them. That is a very undignified and a very unreasonable way of putting the thing. I beg the Chancellor of the Exchequer to consider the effect of these
1432
proposals. He has studied them and knows the effect here as in other countries. He has not only introduced a bone of contention amongst some of the best and most loyal supporters of the Government, but the matter has, I am perfectly certain, already caused great alarm in Lancashire. I have the best reasons for knowing that. The matter is not one for members of the Government to joke about, and to think it is something very amusing. I can assure hon. Members that it is not the point of view of those whose livelihood at present depends upon their business. They do not look upon this with any favour. It is not fair, it is not in accordance with the way that the governments of the country have treated business in the past. What is the great difficulty in every country where protected industries existed—or do exist—and where you are trying to get rid of the fetters? The capital invested in the industries on the faith of Protection. We hear that the musical instrument makers—now that they have been offered an inducement—have put 33 per cent. on the price of their articles.
Mr. McKENNA: It is denied.
12.0 M.
Mr. TAYLOR: It is denied. Very well, I will venture into that very dangerous region of prophesy, and say that, if it is not true up to now, it will soon be true, because the duty on the imported article will soon enable the home manufacturers to get that price, and everyone knows the habit of business men is to get the best price they can, and as business men they would be foolish if they did not. But we shall have no such thing as freedom from pressure, and for attending to our proper business here if it is to be part of the duty of the Government of the day to fix the price of pianos, clocks, watches, and motor cars, sugar and coffee, and Heaven knows what. Cannot we leave the business men of the country, subject to the laws of this country concerning health and honesty, and all that sort of thing, to manage their own affairs?
An HON. MEMBER: Not in War-time.
Mr. TAYLOR: Yes, in War-time. I am not talking of munition industries, but of the butcher, the baker, and the candlestick maker—the ordinary industries. I maintain that it is one of the soundest principles of finance not to interfere with the business of this country more than it is necessary, because I defy

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the best Government in the world to manage that business for the most part as well as the men engaged in it. Subject to laws as to honesty and health, and that kind of thing, let the business men compete amongst themselves in the way that the public is best served, and then when the Chancellor of the Exchequer wants money, let him take the money from where it is. That is the soundest principle of taxation. Income Tax costs less to collect than any other taxes. Increase the Income Tax 1d. or 2d., or what you like; the revenue of the country will be got with less injustice, with less cost, and with less tendency towards corruption in the shape of Income Tax than in any other way. In Clause 12 there is a provision under which any person obliterating any distinctive mark on a part of a motor-car may be liable to a penalty of £500. A bit of casting which comes into the country has to be stamped for business purposes, and woe be to anybody who scratches that stamp off. It may get worn off in using the car; how does anyone know? If a man cannot prove that the mark was worn off he may have to pay £500. What an absurdity!
I warn the Chancellor of the Exchequer that this principle of taxing things ad valorem opens the way to all kinds of chicanery. It will make all kinds of difficulties for the department of the Customs and Excise, and will cost in the long run something in the way of honesty and virtue. It would encourage trickery in passing goods into this country. I have experience of it, and know the difficulty of an honest trader sending goods into the country where the rate of duty depends on market price. The Chancellor of the Exchequer will, I am sure, find it impossible to carry out this distinction in the first place between parts of cars and chassis for pleasure and for commercial use, and, again, he will find the greatest difficulty in having equitably carried out the principle of duties by valuation. Remember, 33 per cent. is a very heavy duty, and there will be a great inducement and temptation to everybody who imports parts of watches, clocks, cars or cinema films, to fraud, and I do beg the Chancellor of the Exchequer in the interests of peace and of fairness as between one policy and another, not to prejudice the matter, not to tip the beam one way, not to introduce this principle, new after nearly forty years, in our
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taxation for the sake of half a million or one million pounds which he hopes it will yield in a Budget of £387,000,000.
Mr. PENNEFATHER: Could the right hon. Gentleman see his way to adjourn this Debate and give us a few more hours some day next week. I know there are a number of hon. Members who have risen time after time and have not been able to get a hearing. I have been getting up myself since four o'clock and quite properly other hon. Members have been called before me. I feel that at this hour it is no time to enter at any length upon important matters. This Bill was only issued yesterday morning. I am on the Council of the Associated Chambers of Commerce, and they have to consider this Bill. It has to go to all the Chambers of Commerce to be considered by them and be returned to the Central Chamber with their comments upon it. As the result of those discussions many things may have to be brought forward which would not come strictly under the ruling of the Committee stage.
Mr. McKENNA: Yes.
Mr. PENNEFATHER: I hope the right hon. Gentleman will agree to give us an extra hour or two for further debate. I would remind the Government that the Press have not discussed any of these subjects and the whole public of England are in innocence of many of the most far-reaching matters in this Bill. I submit that in justice to our constituents and the great commercial institutions interested it is only right that there should be a further short and limited opportunity for discussion.
Mr. McKENNA: I would beg the hon. Gentleman to observe that the points which the Chambers of Commerce have in mind I think, without exception, relate to a particular tax, the Excess Profits Tax. I have met their representatives, and no other question was raised. I would suggest, in view of the promise I have given to the hon. Member's colleague, that this particular tax should be discussed in Committee, when hon. Members will be able to speak several times which they cannot do on the Second Reading. I do not think that the Chambers of Commerce wish to discuss the Second Reading at all.
Mr. PENNEFATHER: May I say that matters of principle may arise, and there are points, apart from the Excess Profits Tax—
Mr. MONTAGU: What matters of principle?
Mr. PENNEFATHER: This was only given to us yesterday, and has only been partly discussed to-day. I cannot possibly say what principles may arise. The great commercial bodies, the Press, and the public have not yet had an opportunity of discussing it. I do not want to push the right hon. Gentleman too far. If it is impossible, it is impossible; but if the Government could see their way to adjourn the Debate, I would ask them to consider it. I am not going to inflict a speech upon the House at this hour of the night—it would be almost an outrage to inflict upon it a long and perhaps a discursive speech—but I would appeal to the right hon. Gentleman whether he does not think that there is some reason in my suggestion. The Press, the commercial bodies, and the public have not had time to consider this and to confer with their representatives in this House. After all, we do to some extent represent the public. If the right hon. Gentleman says "No," then I would ask him to assure me, as he has assured the hon. Member for Liverpool (Mr. Rutherford) that when the time comes for the discussion of these various points in Committee we shall not be debarred from perhaps transgressing a little upon the strict ruling in such cases, and that it will be remembered that we have not had an adequate opportunity of discussing this Bill to-night after conference with representative bodies and with our constituents.
Mr. KEATING: I want to draw the attention of the Chancellor of the Exchequer to one or two points of a fresh character. First, will he kindly bear in mind the position of the unfortunate mem-
1436
bers of the community I represent who have not yet purchased their farms? They are really a very unfortunate class. Their number is not very large proportionately, but this Income Tax will affect them very much. I would suggest that the Chancellor of the Exchequer should give special consideration to their particular case. If he would kindly do that, he would be quite satisfied of the effect of the tax upon them. Next, I would ask him to bear in mind that there are in Ireland institutions of a religious character who issue publications out of which they get no conceivable profit of any kind. The increase in the cost of postage will have the effect of stopping these publications. If there could possibly be some means whereby religious institutions of this nature, who publish magazines for other motives than those of profit, can have some special consideration in the matter of postal rates I shall be satisfied. If the right hon. Gentleman will bear these matters in mind I shall be very much obliged to him.
Question put, and agreed to.
Bill read a second time, and committed to a Committee of the Whole House for tomorrow (Thursday).
The remaining Orders were read and postponed.
It being after half-past Eleven of the clock upon Wednesday evening, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at Sixteen minutes after Twelve a.m., Thursday, 14th October.

WAR.
  FINANCE (No. 3) BILL.
    INCOME TAX.
    INCOME TAX.
    EXCESS PEOFITS TAX.
    EXCESS PEOFITS TAX.
  WAR LOAN CLUBS.
  WAR LOAN CLUBS.
  PROFICIENCY PAY (EX-VOLUNTEERS).
  PROFICIENCY PAY (EX-VOLUNTEERS).
  COMMON LAND ENCLOSED.
  COMMON LAND ENCLOSED.
  INDIAN WHEAT SUPPLIES.
  INDIAN WHEAT SUPPLIES.
  BRITISH AND GERMAN PRISONERS OF WAR.
  BRITISH AND GERMAN PRISONERS OF WAR.
  Land Purchase (Ireland).
  Land Purchase (Ireland).
  Old Age Pensions (Ireland).
  Old Age Pensions (Ireland).
  Dairy Work (Ireland).
  Dairy Work (Ireland).
  Boyne Navigation Company.
  Boyne Navigation Company.
EARL OF JERSEY.
Petition of George Henry Robert, Earl of Jersey, and Viscount Grandison, in the Peerage of Ireland, claiming a right to vote at the elections of Representative Peers for Ireland; read, and referred to the Lord Chancellor to consider and report thereupon to the House.
LONDON COUNTY COUNCIL (TRAMWAYS AND IMPROVEMENTS) BILL.
Reported from the Select Committee, with Amendments.
LONDON COUNTY COUNCIL (GENERAL POWERS) BILL.
Reported from the Select Committee, with Amendments.

REPORTS.
Local Government Board (Forty-fourth Annual Report, 1914–1915)—Supplement in continuation of the report of the Medical Officer of the Board for 1914–1915, containing a report on Maternal Mortality in connection with Child-bearing and its relation to Infant Mortality:
Colonies (Annual)—No. 861. Gambia (Report for 1914):
Presented (by command) and ordered to lie on the Table.

BUSINESS OF THE HOUSE.
Standing Order No. XXXIX considered (according to Order), and suspended for this day's sitting.

AMERICAN LOAN BILL.
Brought from the Commons; read 1a, and to be Printed: Then (Standing Order No. XXXIX having been suspended) Bill read 2a, (The Lord Islington): Committee negatived: Bill read 3a, and passed. (No.162.)
House adjourned during pleasure.
House resumed.

ROYAL COMMISSION.
The following Bills received the Royal Assent—
American Loan.
Clackmannan County Water Order Confirmation.

VOLUNTEER BILL. [H.L.]
A Bill to enable the services of Volunteers to be accepted in certain cases by His Majesty for purposes in connection with the present War, and to make provision in relation thereto—Was presented by the Marquess of Lincolnshire; read 1a and to be printed. (No. 163.)
House adjourned at twenty minutes before Six o'clock, till Tomorrow, half-past Ten o'clock.