Budget Proposals — Income Tax.

Orders of the Day — Ways and Means. – in the House of Commons on 1 May 1919.

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Motion made, and Question proposed,


  1. (a) Income tax shall be charged for the year beginning the sixth day of April, nineteen hundred and nineteen, at the rate of six shillings in the pound, and the same supertax shall be charged for that year as was charged for the year beginning the sixth day of April, nineteen hundred and eighteen; and
  2. (b) the like provisions shall have effect with respect to the annual value of property as had effect with respect thereto during the year beginning the sixth day of April, nineteen hundred und eighteen; and
  3. (c) it is declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."—[Mr. Chamberlain.]

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

The Committee is very much indebted to the Chancellor of the Exchequer for the able, lucid, and candid way in which he dealt with a most difficult subject yesterday afternoon. He very truly reminded us, not in so many words, but in what he said, that Budgets are no mere matter of arithmetic. All Budgets, and especially these War Budgets, deeply affect not only the well-being of the State, but the well-being of every individual in the State, and I shall be very glad indeed if these discussions which have taken place and will take place bring to the minds of hon. Members, as well as the country as a whole, the salutary fact that the State is not a super-entity which finds the money, but that it is the taxpayer who finds the money for all the projects which the State undertakes. There is a far too general idea abroad at the present time—due very largely, no doubt, to the way in which Government Departments have taken up very large portions of what used to be our normal business life—that the State can do these things. It is the individual, through the State, who can alone do these things satisfactorily, and always and every time it is the individual who has to find the money for the Government Departments. The situation is sufficiently serious, and so serious is it that we were thankful for so minor a mercy as the statement which was made by the Chancellor yesterday that in the year the National Debt is only £300,000,000 less than was anticipated. But in that year there was nearly five and a half months, I will not say of peace, but at any rate of cessation of hostilities, and that shows most clearly with what a grave and serious position we are faced. Let me try and make clear, to myself at any rate, if not to the Committee, a matter which I found rather difficult in listening to the Chancellor of the Exchequer yesterday, and that was the two calculations that he makes. Those, of course, have only come into being, as far as the Treasury is concerned, since the War began. The two calculations which he makes are the one for the current year, 1919–20, and the calculation which he makes, in accordance with precedent, established, I think, by Mr. McKenna, and followed by his successor in office, the present Leader of the House (Mr. Bonar Law), of calculating a Budget or an Estimate for what is called a normal year. The first calculation which he has made for 1919–20 leaves him with a deficit of about £300,000,000, and that he quite properly proposes to meet by borrowing. In regard to that, no one can have any cavil, because we are in a year of war, and that is clearly and obviously the only way to meet it. But about this normal year, about which my right hon. Friend exhibited so much anxiety and uncertainty, it was really an imaginary year. What is the position in regard to that? He estimates his revenue for the normal year on the existing revenue basis, but the expenditure in that normal year he estimates on what we hope will be a peace basis. Just let us see how really illusory such an Estimate may very likely be.

I will take only one of his figures—the figure of £110,000,000 for the Army, the Navy, and the Air Force. On what basis is that calculated? I assume it is on the basis that the Army may be, say, 200,000 men. He does not know, and nobody knows. He is in the hands of the Gentlemen who were flanking him on his right and left yesterday, and the "Janus-like Gentleman" to whom he referred, the Secretary of State for War, he keeps a watchful eye on, and is wholly uncertain in what direction he may move. I have been trying to look up the word "Janus" since, and all I can find about him is that he was a gentleman who had two faces, and lived in a temple with only one door. This door was only opened in war time, and shut in peace. I very much fear that the present Secretary of State for War is a gentleman who wishes to keep his door open in both war and peace, as far as I can judge, from his speeches on the Bill he has introduced and the Estimates he has submitted; but whatever it may be, let me assume there will be an Army of 200,000 men. On the pre-war basis in all probability each man cost about £100, and it is a very moderate assumption to take that in a normal year each man will cost £200. That is £40,000,000 for the Army. I do not know how much for the Navy—double that, I should say, because, after all, whatever happens, the Navy is the sure shield for this country, and this country will always insist upon the Navy being maintained at a proper strength. That runs well beyond £100,000,000. Then there is the Air Force. I do not know what it cost in pre-war days, but surely it is going to run into many millions now. It is the one progressive arm of our defensive forces, and it must be an increasingly heavy charge. My right hon. Friend takes all these together and estimates them in that imaginary year—let us hope it will soon be translated into actuality—at £110,000,000. I just take that one figure to show how extraordinarily difficult it must be to make any sort of calculation, but my point about it really is this, that, taking his revenue on the present basis and his expenditure on the peace basis, he provides us with a deficit of only £114,000,000.

4.0 P.M.

I do not pretend to be a financier, but the fact that it is on this £114,000,000 that he bases or provides his new taxes. That shows in what a position the Committee finds itself. When the right hon. Gentleman was asked by one of my hon. Friends below the Gangway—I think it was the hon. Member for South Hackney (Mr. Bottomley) what year the normal year would be, he said, "I do not know; it cannot be next year, but let us hope it may be the year after." I am going to be bold, and to give an opinion to the Chancellor of the Exchequer. I say that the normal year that he ought to take should be 1920–21. Make it a normal year. If some such step as that be not taken, what is going to happen to our great spending Departments? What is the duty of the Treasury and of the Chancellor of the Exchequer? "The watch dog," he used to be called, of all the great Departments. I am afraid my right hon. Friend has grown hoarse with barking. I am certain he has made a great effort, but there are no signs of a bite in any one direction. On goes the expenditure. Turn where you like—Department after Department, still, after six months of cessation of hostilities, money has been poured out in all directions. [An Hon Member: "Six months?"] By 31st March next year, which I am asking him to treat as the normal year—by the time the normal years starts, on 30th March, next, he will have had sixteen months of cessation of hostilities, and, let us hope, four or five months of declared peace. I say to the Chancellor of the Exchequer that it is his duty, at all costs, to say to the spending Department, "The time has arrived for me to Budget for a normal year." It is the only way in which anything like a curb can be placed on the vast uncontrolled expenditure which is spreading devastation throughout the country. Business men are horrified at the prospect, and there is no use at all in merely making pleas for economy by the individual, although, of course, we ought all to respond to it. Let us realise the fact that we are living in a very human world, and unless the people see reduction of expenditure at the top, as long as they can get currency notes freely and get them paid out, they are going to spend them, and they are doing it.

Is there any cessation anywhere in any department of private life—our amusements, our expenditure on luxuries—which shows the faintest sign of a real grip of the fact that this country is in a parlous financial condition? Unless we have this grip at the top there is no hope of a real, broad, general consensus of experienced work on economy anywhere near the bottom, and unless we have economy practised by the people of the country and by the Government Departments, I do not know when the normal year for any Chancellor of the Exchequer is likely to arrive. After all, the index is this—the inflated currency. The Chancellor of the Exchequer yesterday gave us an indication of four periods—I never saw the handwriting more clearly on the financial wall. On 31st March last year the issue of the not currency was £228,000,000. On the day of the Armistice, 11th November, it was £291,000,000. On 31st March this year £328,000,000; on 30th April, £349,000,000.What is the cause of it? Clearly, over-consumption, under-production; vast expenditure, no real economies. As long as that goes on, your currency will continue to be inflated, with the results which occur in every country, and which, with all our financial greatness, we cannot hope to escape—continual rise in prices, continued rise in unemployment, industrial unrest. I do not wish to refer to what happened last year. It must be present in the minds of all of us. Let us avoid revolution.

I pass to say a word or two about what the Chancellor of the Exchequer has calculated as part of his assets. Very properly he alludes to our loans. Look at them for one monent. Russia—what prospect is there of getting money out of Russia in anything like reasonably conceivable time? France—it will be a very long time before we can get anything from poor France. Then there is Belgium, Serbia, and all the rest of them. What about the indemnities from Germany? I think the right hon. Gentleman exercised a wise discretion. It is a grave disappointment, after all the hopes that were raised and all the pledges that were given; but he exercises a wise discretion, like a business man, when he puts that to the Suspense Account.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

He places it to the Suspense Account. What chance is there this year of anything from Germany? Obviously, France and Belgium must have the first claim on any payment from Germany. No one for a moment murmurs at that, and will be only glad if they get it. Now let me say a word on the subject of the taxes, old and new, which the right hon. Gentleman proposes. There is the Excess Profits Tax. I rather wondered that in a War Budget he reduced a war tax, but so far as I am concerned there is no doubt that the Excess Profits Tax should come to an end as soon as it reasonably can. It is not the right way to raise money if it can be avoided. It did raise money successfully, but one of its greatest defects was that it penalised young businesses and played directly into the hands of the great monopolists. It strengthened their position. It really gave to new businesses a chance—a real start. What we want are new businesses. One of the greatest needs of the country is swift development of new ventures. Whether the reduction to 40 per cent. be justified is for the right hon. Gentleman to say, but on the general subject of the removal of the Excess Profits Tax, when it can be safely done, there can be no doubt that it is not the proper machinery for raising money in normal times.

With regard to what he said about land values, it is rather a sad day for those of us who fought this question to find it is now proposed that it should be relegated to the lumber room of a Select Committee. I welcome what the Chancellor of the Exchequer said yesterday on land valuation. It is of importance that there should be a trustworthy valuation of the land of the country available for public purposes whenever it is required. It is required now. I do not know how many Bills there are; I have lost count of them. Certainly three, perhaps four, great Bills, and the pivot of each of these Bills is the question of what price you are going to give for the land. I do hope something will be done now in regard to that.

My right hon. Friend dealt in more drastic fashion with the suggestion of a capital levy. As I listened to him I thought of what was said by Sir William Harcourt when he introduced his Death Duties. I should rather think that the phrases he has used and the vigorous denunciation with which he attacked a capital levy may have been the echo of Sir William Harcourt's Budget Speech. All I say about it is that it is not a matter to be dismissed with mere denunciation. If is a very serious proposal, and will have to be very seriously taken, because, rightly or wrongly—and so often the people are right when the Government think they are wrong, and great thinkers are sometimes wrong—whatever may be said in regard to this, there is not the slightest hesitation that in the minds of the people one thing is perfectly clear on taxation, and that is that war profits ought to be taxed. The theory is, of course, a perfectly sound one. It is that no one ought to have made money out of the War. We all admit that. But there will be grave public dissatisfaction if some method be not found of getting back to the public Treasury those vast sums which have gone to individuals as the price of the lives and the health of hundreds of thousands of our best citizens.

In conclusion, I wish to say a word or two upon the subject of Imperial Preference. Merits apart, there was not a single Member of this House who did not join in the feeling of pride and satisfaction which my right hon. Friend expressed that he had the opportunity of getting legislative sanction, as he hopes, to the beginning of a scheme of which his great father was the author, and who has now passed into the Valhalla of the British race. Just a word or two on this question. It is a beginning, and let all Free Traders in the House belonging to all parties—there are a good many still left, a good many who have not bowed the knee; they may come out, and let us know where they stand later on—but do not let us be other than quite clear on the point, because my right hon. Friend was, as he always is, quite candid about it. He said that, Though the beginning may be small, the measure of what I am inviting the Committee to do is not the amount of British Imperial trade which secures preference at this moment, but the opportunities for the development of that trade, which I invite the Committee to open out…From the small beginnings of to-day I hope that many Members of this House will live to see a really wide structure of inter-Imperial trade develop."—(OFFICIAL REPORT, 30th April, 1919, col. 195. Undoubtedly—and let us also be quite clear about that—that means, and must mean, as Mr. Joseph Chamberlain said, that you cannot have this Imperial Preference without a tax on food.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I am loth to interrupt my right hon. Friend. Personally, I have never repented of my support, of a tax on food in pre-war times, and have never given anybody any reason to be doubtful of my opinion upon the subject. But it is no proposal of His Majesty's present Government to place new duties upon food, and what I had in mind when I used the words my right hon. Friend has quoted was that Imperial trade, now actually done in the articles made the subject of preference will, I believe, under that preference, enormously extend within the lifetime of many Members. If it go further still, I am glad, but all I had in my mind in that statement was the effect of the actual preference proposed in the present Budget.

Photo of Mr Donald Maclean Mr Donald Maclean , Peebles and Southern

On the point of this being a really great structure of inter-Imperial trade, with the limitation to which my right hon. Friend has now referred, I think it is absolutely futile. However, it is the beginning, and you cannot have anything approaching a great trade with our Dominions without giving a preference on corn, on meat, and on wool, and Mr. Joseph Chamberlain's well-known declaration is in the mind of everybody. My right hon. Friend says he hopes it will go further. Of course he does, and I imagine every convinced tariff reformer in the House thought so then and thinks so now. I only say this to those who have been hitherto free traders. It is the beginnings that count, and this is the first step towards the complete system of preferential dealings with our Colonies which Mr. Joseph Chamberlain said must entail a tax on food. If you set up the machine to work up the little things, the machine will go on to great things. Just let me turn, by way of illustration, to what I think is a very small indication compared with the great scale to which my right hon. Friend hopes it will attain. I only take one illustration, because there must be other opportunities of dealing with these things in detail. Take the question of tea. Ninety per cent., as my right hon. Friend told us yesterday, comes from our Empire, and we are only therefore dealing with the finer class of tea which comes from China and Java. Twopence is going to be taken off. Does anyone suppose that that is going to affect the consumer in this country? At the very most he may get a penny, and for that trifling result you give preference to India, which is not pressing for this, so far as I know; indeed, I understand—I may be wrong—that there has been no great pressure from the merchants in this country. There are three large well-known associations in this country, I think—in London, at any rate—of tea growers. I understand they discussed this matter, and not one of them gave a majority in favour of it. The whole thing is very small as far as India is concerned. It is a trifle, and what comes off will not go into the pockets of the natives but of the traders who have offices in this country. That is where the penny will go, and we shall be lucky if we get a penny off our tea.

But what is going to be the result with regard to China? Has that been thought of? We have relations with China which have been for many years of the most amicable trading nature, and we have, of course, the benefit of the Most-Favoured-Nation Clause, as well as with Java, There is no greater potential market in the East than China. China has stood by us in this War. One of the very first things we may do by this trifling thing is at once to cause irritation in China. It is from these little things that all the trouble so often comes. Why disturb our friendly relations with. China, and perhaps affect our exports to China in the future? Lancashire is deeply concerned in this matter, and I hope we shall hear something from Lancashire Members with regard to it. What about manufactured goods? Canada, Africa, and Australia are not affected by one of the things. Cinema films, clocks, watches, musical boxes, motor cars—what have our great Dominions to do with these things? They are not manufacturing them on anything but the smallest scale at present. When these taxes were first introduced, what was the reason given for them? I do not know whether it was the Leader of the House or Mr. McKenna, but I think it was Mr. McKenna, who gave the real reason, which was nothing to do with Protection or tariffs, but to save the tonnage. My right hon. Friend has now tacked them on to his Imperial train, and away this wagon-load goes. It is to go on to the great scheme of the meat, the wool, and the corn. The great Dominions have always said perfectly clearly, "In any preference you give to us, take care you do not harm your own people at home." That is the attitude they have taken. It is, and must be, the foundation-stone of the great structure which it is hoped to build, and which will smash Free Trade and establish Tariff Reform.

We are at the parting of the ways. We must take our side on questions of principle. As far as I am concerned, and those with whom I have the honour to associate, we shall, with very great regret, have to fight this proposal. We do not like fighting this question now, when we are in the shadow of war, but I am sure my right hon. Friend will understand us when I say that we take our stand on these matters on the question of principle, and we are bound to omit no legitimate means of thoroughly examining the proposals. I do not want to offer any carping criticism. I only wish to say this in conclusion, on the whole question of our finance, and the sacrifices we must make, individually, socially, and in our corporate capacity: What men have died for, we, at any rate, can save money for, and economise for, because, unless we grapple with this question, and put this country of ours on a sound financial position, much of which they have died for will be lost. A "place fit for heroes to live" in cannot be constructed without sound finance, and sound finance means the sacrifice of the individual for the good of the State. Let us all do our duty.

Photo of Lieut-Colonel Leo Amery Lieut-Colonel Leo Amery , Birmingham Sparkbrook

The right hon. Gentleman dealt with what the Chancellor of the Exchequer himself treated as the most important part of his Budget in a manner to which, I think, nobody will take exception. Naturally, I join in the tribute which all Members of this House pay to the memory of that great statesman, Mr. Chamberlain, the originator, or, may I say, the reviver, of that idea of treating the Empire in matters of trade and in all matters as something different from a mere collocation of separate States. But I would remind my right hon. Friend that this policy now introduced by His Majesty's Government is not purely the policy of Mr. Joseph Chamberlain or of one party in the State, but is a policy brought forward at Imperial Conference after Imperial Conference ever since 1895, a policy to which the present Prime Minister made a most sympathetic response as far back as 1907; a policy which since then has been endorsed by more than one important Royal Commission, including Free Traders, as well as men who are Protectionists and Tariff Reformers; a policy which, finally, at an Imperial Conference two years ago was endorsed, not only by the Governments of all the Dominions, but by a British Government containing members of the Liberal party, as well as a Liberal Prime Minister, and containing among its members Mr. Henderson, who was at that time Leader of the Labour party.

I should like to take exception to one thing which my right hon. Friend said, namely, that this is an issue of principle between Free Trade and Protection and tariffs. It is a political issue, not an economic one. What the Government of this country has agreed to is not a system of Protection including preference. It has simply agreed to this, that whatever the tariff system of this country may be, that in so far as there are duties, whether they are Protectionist Duties, Revenue Duties, or whatever kind of duties they may be, they shall not be charged upon the produce of the Empire at as high a rate as upon the produce of foreign countries. What is really at the bottom of this question is this: Is the unit at the back of our minds when we talk of politics or of economics, merely Great Britain or the United Kingdom, or are we thinking of the great community that makes up the British Empire? If the Empire is always at the back of our minds as the real unit, as something which has a real political meaning, and which shapes our actions, it will then, I think, whether we be Free Traders or Protectionists, be found to affect our whole attitude in considering questions of this kind.

Let me put it thus: Preference is a policy for the free-trader just as much as it is for the protectionist. The whole-hearted free-trader, who is a believer in the British Empire, would naturally like to see the whole British Empire free trade—free trade in its internal relations and free trade towards the world outside. That is an ideal. We are practical men. I should have imagined that as a genuine free-trader? He wants Free Trade in cer-forgive me if I try to put myself into his point of view for the time being and assume that I am in the position of being a convinced free-trader, and also a believer in the Empire as a whole—I should consider it a most important thing that we should have the greatest possible measure of free trade within the British Empire. I would not be satisfied that one part of the British Empire alone should have a complete Free Trade policy, and that every other part of the British Empire should be living in a world of its own, having its own protectionist regime not only against the outside world but against every other part of the British Empire. I should therefore be willing, so far as might be, and without burdening this country with a system it did not want, wherever I saw the opportunity of doing something which promoted the extension of the policy of Imperial Preference, not only between this country and the Dominions, but between each Dominion and every other Dominion, to endorse and promote that policy.

I would remind my right hon. Friend that this policy is one which has slowly grown up within the Empire over a long period of years. By accepting the principle of Preference for its own sake, not for the sake of protection, we are here and now consecrating that policy for the Empire as a whole. We are putting the coping-stone on it. We may hope, as a result of these small measures, that we shall get an increase, not necessarily of Protection in this country, but of Inter-Imperial Free Trade between the Dominions and this country and between one Dominion and another. That, therefore, is the object at which we are aiming. If I were in the position of an Imperial free-trader, my quarrel with this particular form of preference would be that it did not go far enough. After all, there are free-traders in other parts of the Empire. There is a very strong body of free-traders in the great Dominion of Canada. What is the line of the Canadian free-trader? He wants free trade in certain categories of goods, and as regards other categories he demands for the Empire a 50 per cent. preference instead of the 33 per cent. preference.

I was very interested in seeing how my right hon. Friend dealt with these articles on which there is to be a 33 per cent. preference. I think he dealt with them rather contemptuously. I do not myself think he was quite fair when he said that the duties on watches were put on merely to save tonnage. These duties were imposed by one free-trader, and it would have teen a continuation of the policy of Free Trade if another free-trader had asked for a wider preference upon them. Anyhow, I do not think that this is a direct issue between Free Trade and Protection. The trade issue will be raised on its own merits, not from the point of view of Empire, but from the point of view of the trade of this country. All I myself hope is that, whatever answer is given, if that answer in any way involves any measure of duties, that then our principles of Empire Preference will apply there also.

Do not let us make any mistake about one thing: my right hon. Friend opposite said not only that this was a question between Free Trade and Protection, but also that it was raising again the old issue of taxing the food of the people. Like my right hon. Friend (the Chancellor of the Exchequer) I am absolutely unrepentant upon that issue. I myself believe this is not relevant to this Budget, but I do believe that if that policy had been carried out in 1903 we should not have had such heavy food prices to pay at the earlier period of the War. I do not want to raise that because I do not want to raise old controversies. But I do want to say this: the late Mr. Joseph Chamberlain made the speech to which my right hon. Friend referred on Imperial Preference in 1903— sixteen years ago. At that time he considered that, as a practical measure, you would not get much out of Preference—though he would have been glad of the principle—without in some small measure taxing foreign imports of certain staple foods. The Dominions at that time were mainly producers of foodstuffs and raw material. In the sixteen years which have passed the world has moved. Canada has become a great industrial and a great manufacturing country, and Canada will be capable, under substantial Preference, in the next few years of offering quite as much effective competition to keep our manufacturers alive and up-to-date as any free trader may desire. These particular duties on motor cars, watches, and films were imposed for war-time reasons. Do not be too sure that even these duties may not be of appreciable value to Canada. The conditions of manufacture in Canada differ from those of the United States only by an invisible line 4,000 miles long on the map. The 33 per cent. off the duties may make all the difference whether the factory is on one side of the line or the other, whether under the Union Jack or the Stars and Stripes. So much for the practical benefit to Canada. I do not admit that Preference is meant as a gift to anybody. We are establishing it, within the limits of the duties we impose in our own interest, in order to emphasise a certain principle which we believe to be of incalculable future value. We are giving to no one. We are simply carrying out a principle to the extent to which it is convenient to this country.

Do, however, let me say that my right hon. Friend is entirely mistaken if he thinks that even this small measure of Preference is not of very great value to very many parts of the British Empire. It is quite true that the importation of many of these goods into this country from different parts of the Empire is very small. But the standard we have to take is not the standard of what is imported now; it is the standard of the total consumption of this country—nay, of the British Empire—in so far as there are regions in this Empire which can produce the goods in question.

Let me take sugar. A very small fraction—I think it is 7 per cent. or so—of our total consumption comes from the British Empire. But the British Empire to-day contains soil and territory enough to produce sugar for five United Kingdoms. The measure, therefore, of what is set in motion, not this year or next, but over a course of years, is not the 7 per cent. but the 93 per cent. In the case of tobacco, 2 per cent. comes here from the Empire. We have in mind the other 98 per cent. Three million pounds or more is the actual value landed here. It would mean an immense incentive to the small grower in the Union of South Africa, in Rhodesia, in Nyasaland where, I believe, there is something like 4,000,000 acres of good tobacco-growing land—in East Africa, some of the West Indies, and for all we know, possibly Nigeria, and, of course, India. The whole of that field is now placed as the goal before the producers of the British Empire.

Photo of Lieut-Colonel Leo Amery Lieut-Colonel Leo Amery , Birmingham Sparkbrook

I am satisfied if our people gain. Others have their own markets and their own development. I do not think we should ask ourselves the question, whether a very small reduction may be taken from the harvest of the American tobacco-grower when we can give so great an inducement to the growers in other portions of the British Empire. I admit these are small beginnings. I wonder how many Members of this Committee realise that South Africa sends us only 7,000 gallons of wine per year—a ridiculous amount. Yet South Africa is one of the finest wine-growing countries in the world. Remember that in the late "'fifties," when the population of this country was less than one-half of what it is to-day, South Africa sent us on an average 750,000 gallons of wine per year, and as much as a million gallons in one year—a hundred times more than now. There is the hope placed before their people. It is not a gift. They have to earn it by their own work, their own production, their own skill in producing a good wine. It is an encouragement and a hope. So it is to the wine-growers of Australia. In all these cases you cannot reckon by the money given. The money given is not the point. It is the hope, the credit. Men will look into enterprises which they would not have looked into before. They will take courage, and plan schemes of development over periods of years, schemes which they have neglected hitherto. Just as the foundation of capital is credit, Imperial Preference is simply a new form of Imperial credit. That is what it really means.

Let me put its indirect benefits. It is not merely what any particular Colony or Dominion gains in this country. It is what each gains from the development of the system as a whole. I should like to give my right hon. Friend one instance of the cumulative way in which Preference works. A certain number of years ago—ten or twelve—under the ægis of the Free Trade Government of this country, a system of mutual preference was set up between Canada and the West Indies. As a result the West Indies now get from Canada considerable quantities of flour and wheat, and a certain number of manufactured articles. Now we are going to give a measure of preference to West Indian sugar, tobacco, and coffee. That will increase the development of the West Indies as a market, and owing to the preference between Canada and the West Indies, Canada will benefit from that development, and so benefit indirectly from our preference to the West Indies. That was what my right hon. Friend indicated when he spoke of the future extension of this system. Imperial Preference does not necessarily mean Protection. What it does mean is the increase of trade and the increased sense of security throughout the Empire.

The right hon. Gentleman raised the question of tea which is undoubtedly already in a good position in the Imperial market. As far as the ordinary merchant here is concerned he is not particularly interested. Let me make this point clear. Where the overwhelming bulk of a product already comes from the Empire the reduction of the duty will inevitably mean the reduction of the price to the consumer. My right hon. Friend opposite said that we get the best grades of tea from China and Java. We get some of the best and also some of the very inferior grades. The best grades are expensive teas on which there is, generally speaking, a considerable margin of profit. What will happen as regards these? Unless the Javan and Chinese producers are going to lose their market they will bring down their profits in order to compete. As regards the very inferior grades the preference means that the consumer will get a better Empire tea at the price which he paid for these grades. The consumer in fact will gain both in, price and in quality. He will get the better Chinese and Javan teas cheaper than, before, and good Ceylon and Indian teas at the same price at which, he is now getting the very inferior article. My right hon. Friend said that if we do this we shall offend China, and the Dutch in Java, or some other Ally of ours. That can only be true if our assumption is that the other parts of the Empire are foreign countries and that preference means favouring one set of foreign countries over other foreign countries which have been our Allies. That is really the issue which underlies this proposal. Is the Empire merely a group of countries in the same relation to each other as to every foreign country, or has it got a real inner moral unity? Have other countries any more right to object to Free Trade within the Empire, or Preference which is a modified form of Inter-Imperial free trade, than we have a right to complain of Free Trade between Texas and Massachusetts or between one province of China and another? That is the real issue. It is not a question here of Free Trade and Protection. It is a question really whether we regard the Empire as a unit, whether we are willing to do anything in our power to help to promote mutual intercourse, understanding, and development between its component parts.

My right hon. Friend dwelt upon the parlous position in which we find ourselves to-day. But let us look at it from the point of view of our resources. Look at it as I have done from the point of view of a man who has been through most of those countries and who has gone day after day and week after week from place to place where there are infinite possibilities of development and where only capital and enterprise are wanting. If you look at it from that point of view our burden of debt is trifling. Anything that will help that great development and enable this country to participate and to share in that great development must be desirable and necessary. Surely from the point of view of fellowship and understanding and binding the Empire closer together, anything that can increase commerce must increase mutual understanding. Anything that makes it easier for an Englishman to visit the Dominions, or for a citizen of the Dominions to visit this country, must help.

Only those who have friends in the Dominions can understand the emotion which is in the mind of men from overseas when they see Westminster Abbey or St. Paul's. Anybody who has visited such a place as the Heights of Abraham, where Wolfe and Montcalm fell, can appreciate what Canada means. Are those sentiments lessened because the origin of the journey was connected with business between two parts of the Empire or because there were convenient steamers which made the journey possible and which would not have existed if there had not been mutual trade? Surely we do feel that, consistent with the interests of this country, the more we can develop true commerce and intercourse between parts of the Empire, the more we can help to strengthen those Dominions whose strength has been ours in the day of trouble, the better it will be. Surely that policy is well worth pursuing and developing entirely irrespective of those old party divisions on matters of trade and economics within this country which I think we all look at with a very different eye to-day on one side and the other. We are entering upon a new period in the history of this country and the Empire, full of industrial, social, and economic problems which we have got to deal with in a new spirit, forgetting our pre-war ideas. We can, at any rate, start with this sure foundation, with the knowledge that we can only solve our local problems in this country successfully if we treat them all the time from the point of view of the wider unit.

Photo of Mr George Terrell Mr George Terrell , Chippenham

I certainly thought that this question of Imperial Preference was one which was definitely settled at the General Election. I know it was one of the definite issues submitted by the vast majority of hon. Members who were returned to this House, and we all know that the great majority of the candidates who preached the opposite doctrine were not returned to this House. I should have thought under these circumstances that it was really a waste of time on the part of my right hon. Friend the Member for Peebles (Sir D. Maclean) to raise this Debate again here to-day. My real object in rising is to discuss for a very few moments the incidence of the Excess Profits Tax. I welcome the reduction which the Chancellor of the Exchequer announced yesterday, and I am certain it will be a very valuable aid to the recovery of industry and trade in this country. There is not the slightest doubt about it that although a tax of the nature of the Excess Profits Tax was necessary as a war measure yet in times when the country is turning over from war to peace it was a most mischievous tax which retarded all development, and has proved a great injury to the recovery of trade and the consequent employment of labour.

I am afraid from the speech made in the House yesterday by the right hon. Gentleman the Member for West Fife (Mr. Adamson), in which, as I understand him, he regretted the reduction or alteration of this tax that he and those associated with him have very little real knowledge as to how this tax operates. It operates in a curious manner, and in some respects the sooner we can get rid of it entirely the better it will be. I have had the opportunity of conferring this morning with a special committee of one of the associations which is representative of over 1,000 manufacturing firms in this country, and they welcome the reduction which has been made in this tax, and though they realise that it is necessary that this tax in some form or in a reduced form should continue for another year yet there is a very strong feeling that this year must be the last year of the tax in any shape or form, and that it must expire with the present financial year, and that after the short interval which will be required to level up the different accounting periods they feel that this tax should come to an end.

5.0 P.M.

It is not really difficult to understand why this tax is so harmful and acts so unfairly in the period of transition from war to peace. Take two firms in the same line of business who ordinarily are competitors, and one is an excess profits payer and the other is not in that fortunate position. The one who pays the excess profit is put in a position of enormous superiority over the other, because, in any expense which that firm embarks upon in advertising, developing, or extending its trade, a large part of that expense is contributed by the Government out of the sum which would otherwise be payable for Excess Profits Tax. That is a view of the tax which I am perfectly certain has not been understood by hon. and right hon. Gentlemen who sit on these benches here, because it must be realised that that form of advantage is most unfair, and must in the long run do a great deal to discourage development. As the Chancellor of the Exchequer stated yesterday, it operates very unfairly on new firms in competition with the old-established firms which are, perhaps, costly, and are paying large sums in the way of Excess Profits Tax. There are just one or two points which I wish to ask the Chancellor to consider. They are really points of injustice affecting a very large number of manufacturing firms. There is the question of the standard over which the tax is levied. As everyone understands, the standard is based on an average of certain pre-war years, and in the case of small businesses worked by partners it operates very unfairly. Wages have advanced 100 per cent., and in some cases 150 per cent., but the people engaged in these small businesses are only allowed to receive the standard which they earned in pre-war years. That is a case which requires a little sympathetic treatment from the Chancellor. I am sorry that he is not present, because I wanted to press upon him the importance of seeing whether at some later stage, either on the Report stage, or when we come to the Finance Bill itself, he cannot arrange to meet the case of the pre-war standard and in some cases to give relief. There is also the alternative percentage. Six per cent. may have been an adequate return upon capital when the War was on, but it is hardly an adequate return to-day, and it would be greatly welcomed if he could see his way to raise the alternative percentage. There is one other point which is the most important of all. There is a difficulty in finding ready money to pay this tax. A great many firms are in extreme difficulties. If it is a big firm which owes a very large sum of money to the State, it does not care a button, because the Government cannot afford to let it down. I heard some time ago of the case of a firm which owed £1,000,000 Excess Profits Tax. It had not enough money in the till with which to pay the wages. It was all right, because the Government could not afford to let it down.

I am here to-day to plead the case of small firms which are being harassed by the Government for the payment of their tax. They cannot pay the money, and they are being threatened with proceedings. It is a very unfortunate state of affairs, and I hope that the Chancellor of the Exchequer will see his way to give the Committee some definite assurance that relief will be given in those cases, and that either the money will be accepted by instalments, as the Income Tax is being accepted, or that where it is necessary the money will be allowed to remain on loan in the businesses. There is no reason why the Treasury should not finance firms. It is not every case, but there are certain, cases where stocks have doubled and trebled in value, and where immediate cash has gone. I should like, if it were possible, to frame an Amendment to the Financial Resolutions, but I do not quite see how one can introduce it as an Amendment to those Resolutions. At any rate, it is a matter of administration, and I ask my hon. Friend's attention to it, because unless some help is given I shall have to carry the matter forward a further stage. I beg him to report to the Chancellor that an earnest case has been made for sympathetic relief in regard to the dates for the payment of the tax, and also for some considerable portion of the tax in certain cases being allowed to remain on loan in the businesses. It is obvious, if you hamper these businesses in times like the present, that you will hamper employment. I know you cannot help it, but I suggest that it is good business to help these businesses which are giving employment. Do not throttle them. I have a letter from a firm stating that they have written to the Inland Revenue asking for time for payment, and they have got a negative answer. I beg my hon. Friend to take a note of this grievance, which is a very real one, and to see if in some way by administrative action—and I hope we shall have an assurance from him in the course of this Debate—he can give relief in all suitable cases of the kind that I have mentioned.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

In almost the first sentence of the speech of the Chancellor of the Exchequer yesterday he was good enough to invite the assistance of the House in the great task with which he is confronted, and I am bold enough to rise for the purpose of complying with that request. Following the example of the course which I was wont to adopt in previous Parliaments upon these occasions, I desire to assist him in two ways: First, by a little friendly criticism of the Budget proposals which are before us, and, secondly, by a few suggestions for the inclusion in it of things which are at present missing. Mere negative criticism, after all, is not very helpful to the Chancellor. We know very well that in working the machinery of the House the Resolutions which he has come down here to table, whatever happens, will be passed. We know that nothing will induce him in any serious respect to deviate from them, and, recognising that, whilst I should like with respect to endorse very strongly the arguments just put forward about the Excess Profits Tax, which ought either to be left as it is or to be got rid of altogether, I shall endeavour to indicate to the Chancellor sources of revenue which apparently once more escape the attention of the Government. It has always been a source of surprise to me that on these occasions of the annual discussion of the Budget practically the whole House falls into a state of mind which seems to indicate that its sole conception of its duty is to consider only the proposals put forward by the Chancellor and not to endeavour to help him in finding other sources of revenue. In a few moments time I am going to tell the Chancellor, with respect but with no humility, where there are a few thousand millions waiting for him if he will only take them, and which he can have without inflicting hardship or injustice on any section of the community. Before doing so let me say one or two words of quite friendly and well-meant criticism of the proposal in the Budget itself.

I take, first of all, that which is considered by some to be its principal feature. I refer to the experiment in Imperial Preference. I endorse entirely what was said by the hon. Gentleman (Lieutenant-Colonel Amery), who spoke from the Front Bench a few moments ago, that we are entitled to regard the British Empire as one great unit whose inter-fiscal relations are its own affair and have no concern whatever with the fiscal policies of other countries. It is an axiom and common sense that you cannot give preference to any section of the British Empire except at the expense of some foreign competing country. All the discussions on fiscal reform in years gone by followed that line of argument. In this case we are adopting the wrong plan of doing the right thing. Taking something off the Customs Duties on goods which come to us from our own Dominions means first of all the loss of a certain amount of revenue. If you leave those Customs Duties as they are and increase them as against foreign countries, then you get at least the same revenue plus what you may get by virtue of raising the duties upon the other goods. As it is, the Chancellor has told us that these concessions to our own Dominions will mean a loss on many millions or money. Who pays it? It is only shifting the burden upon the British taxpayer. We do not see any certainty of the consumer getting the benefit of this reduction. Is tea going down 2d. per lb.? Not a bit of it. It will only be 1d. at the outside, I agree with the right hon. Gentleman, one of the Leaders of the Opposition (Sir D. Maclean), that the other 1d. will go into the pocket of the middleman. It is mere camouflage towards foreign countries to say, "We are not increasnig duties against you; we are simply taking them off our own Dominions." It has exactly the same effect, except that it results in an immediate loss of revenue to the State. You really get back to this first principle, that you cannot give a preference to this Empire except at the expense of its foreign competitors, and whether you do it by reducing the Customs Duties for our own Dominions or increasing them on foreign goods, it makes no difference, for you at once get an enormous loss of revenue, and that is not what we want.

But I am more concerned with the remarkable position in which we stand in regard to land values. The right hon. Gentleman did not give the Committee any indication at all as to the purposes for which he proposes to get this new valuation. There was no hint that when the valuation has been obtained there is going to be taxation based upon it; neither was there any indication of what is to be anticipated in that normal year to which we are all looking forward. But we are to have once more a valuation of land in this country. My submission to the right hon. Gentleman is that no general valuation of land is any good at all as a permanent guide to or basis of taxation or revenue. Land values fluctuate, like every other commodity. I want to know why, after the expenditure of £4,000,000 of money under the 1909 Budget, the whole of the valuations thus made are to be thrown aside and to be treated as no good either for land settlement or for revenue purposes. Yet we remember when the present Prime Minister described them as the new Domesday Book. I wonder if the right hon. Gentleman the present Chancellor of the Exchequer remembers that phrase. Now this Domesday Book is to be kicked ignominiously out by the House and by the Treasury. I was looking at the discussion on the introduction of this land valuation, and I found that the present Secretary for War said that once we had got that valuation set up we should have laid the foundations of a new England. That was ten years ago almost to this very day. What is the good of setting up another huge machinery, with thousands of officials, for the purpose of securing another valuation? Pending its report, there is, I take it, to be no proposal of a revenue character affecting the land. I cannot understand why it is that this great reform of 1909 is treated with such contempt, seeing that during the War we were told in this House, on scores of occasions, that the men engaged in the valuation were occupied on work of such national importance that they could not be spared to go and fight for their country. I cannot help thinking there has been some kind of accommodation arrived at between the various sections of the Coalition Ministry—some political accommodation—and that all this talk about a future land valuation which come to nothing at all. In fact, we shall be, this time next year, exactly where we are to-day, except that there may be two or three thousand more gentlemen drawing large salaries and preparing forms which are to be subsequently destroyed.

I want to say a word or two about indemnities. I do not want to labour the point. We shall hear a good deal about it before long, but I cannot help reminding the right hon. Gentleman of the fact, of which no doubt he is well aware, that under the German policy, had Germany been successful in this War, she would have done what I submit with great respect he ought to do. She would at once have signed judgment against us for the whole cost of the War, and, having done so, she would have said, "We do not expect it at once; we will take long term bonds, and collect so much each year." I confess I am disappointed that the Prime Minister has not authorised the right hon. Gentleman, remembering what he told us a week or two ago, to come here and say that "while we do not bind ourselves to any particular amount we will, during the financial year, bring into the Treasury so much cash on account of the obligations of the German Government as a first instalment of the cost of the War." The right hon. Gentleman has put that cost at £5,000,000,000. Perhaps he knows. We at any rate do not. But we shall soon know, and when we do know we shall know what to say about it. The right hon. Gentleman also said something about the necessity for enforcing strict economy in both national and personal affairs. But he did not say one word about any inquiry into the extravagant over-staffing of public Departments. There was not a word about strict economies there. I want to help him again with a suggestion which I made in this House eight or nine years ago. It is that the Public Accounts Committee, or some similar body, should have power to do something more than sit and hold inquests upon money which has been spent. They should have power to visit at their own free will every Government Department and ask every man they see there with his hands in his pocket, or whistling at the window, what his particular job is. Hon. Members will remember the story of the Government official who, complaining of the laziness of the British working man, declared that he had been watching a bricklayer on a building opposite for the last two hours and noticed that in that time he had not done a stroke of work. I think we ought to have some economies at any rate in the Government Departments.

I also desire to refer to the Death Duties. There I respectfully adopt what the right hon. Gentleman said. The Death Duties are the most direct levy on capital you can have, apart from the Excess Profits Duty, and things of that kind. But look at the way in which the Death Duties are being administered to-day. By the manner in which they are being continually increased you are gradually swallowing up the capital of the country. These duties have exactly the same disadvantages as the Excess Profits Tax. You cannot always collect them. Look at the case of the Excess Profits Tax. There is a sum of £300,000,000 outstanding. I could cite cases where firms are being pressed for excess profits while at the very same time they are being almost driven out of their minds to find the wages for their workpeople. You are taking capital away by this means to satisfy the most wild ambitions of some hon. Members in this House, but I would ask those hon. Members to think seriously before tampering with capital. Capital, in its true sense, is not merely money; it is money plus brains, plus enterprise, plus energy and plus labour—all these things combined. If you keep your excess profits even at the 40 per cent. point you are penalising labour and you are continuing the vicious system of paying more than you ought to do on your contracts and then taking a certain proportion out for the State. If you go on with the Death Duties in the same way you are putting an obligation on enterprise and energy which must result in unemployment, which will increase to an amazing degree. I re-echo what was said by the right hon. Member for Peebles (Sir D. Maclean), that no man has a moral right to make a profit out of the War. Tar to the uttermost farthing all excess profits directly attributable to war work and war contracts, but differentiate those things from legitimate enterprises carried on, often by great struggles and at great risk. I do not think the right hon. Gentleman heard the very strong appeal made by one of the preceding speakers, but I do hope he will reconsider his views on this question. So much for the general provisions of the Budget. There is, however, one other point. I was well aware that whatever else we should find in the Budget we should assuredly see those poor old hard-worked subjects—whisky and beer—trotted out for a further burden to be put on their already bent backs. I do not know how the right hon. Gentleman justifies knocking 50 per cent. off the Excess Profits Duty on the ground that it was a purely war emergency measure and then increasing the duties already put as a War emergency measure on spirits and beer.

Photo of Mr Joseph Devlin Mr Joseph Devlin , Belfast Falls

Because it was against Ireland.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

That would be a novel departure on the part of any country. But I want to ask the permission of the Committee to look at this matter for a few moments. The right hon. Gentleman has said to the brewers that the great difficulty is at an end. Surely the natural sequence would have been to let them brew as much beer as they like. He says, "You must not increase the price to the consumer, but I will give you special permission to improve the quality." Does anybody think that the brewer is going to avail himself of that provision when he is to have no chance of charging the customer more than for those horrible Government swipes which are administered to honest working men, and which are almost bad enough to raise a. revolution in the country?

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

The hon. Member overlooks the fact that there is to be no change in the existing prices, but if the brewers brew a better beer they will be able to charge a higher price than for the present beer.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

I am sure it will be most gratifying to working men to know that they are to have the privilege of paying more for their beer.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

No; I am sure the hon. Gentleman does not wish to wilfully misrepresent me. The scale of prices is graduated according to the quality of the beer. If the brewer increases the average gravity and in consequence brews a better quality beer, for that better quality beer he will be able to charge what he can now charge for the same quality, no more and no less; but if they continue to brew what the hon. Member has called "swipes," they will not be able to charge more for it than they do now.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

Surely the answer to that is simple. The war emergency has gone. Grain is plentiful. If you want to tamper further with beer and spirits at all it will not be for revenue purposes, because, if it were for such purposes, then the same remark would apply to every other commodity. What I complain of is the picking out for special treatment of this particular trade, which is one of the usual resorts of the conventional Chancellor of the Exchequer who is afraid to go outside the beaten track. There is a touch of D'Abernon about this policy. As a war emergency measure, you put restrictions on drink. You created the Liquor Control Board, which, of course, will go now that the war emergency has gone and the munitions difficulty is over. You made Lord D'Abernon the head of that Board. You not only put restrictions on drink, but you put them on racing as well. I took some active part in getting the restrictions on racing removed. I observed that Lord D'Abernon was most enthusiastic over keeping the restrictions on drink, yet I found him one of my chief lieutenants in removing the restrictions on racing. I found that he owned the favourite for the Derby, which would not have been run but for our joint efforts. I hope the same principle will be applied. Let us get rid of these restrictions altogether.

May I now introduce to the notice of the Chancellor of the Exchequer a veritable Eldorado of wealth, which might enable him to dispense with nearly all his other taxes. To begin with, I raise an old familiar theme of my own in the question of the dormant bank balances and unclaimed securities. For many years I have pressed that source of revenue upon successive Chancellors of the Exchequer. The development of the thing has been comical. The first time I questioned a Chancellor of the Exchequer about it, he said that he had made inquiries, and that there was nothing in it—the money was not worth troubling about. I asked of whom he had made those inquiries, and, with unconscious humour, he said, "From the bankers themselves." They told him that they did not handle any stolen money or any unclaimed securities. At a later stage another Chancellor of the Exchequer said that to carry out this proposal would mean dislocating the whole banking industry, and that, therefore, it was dangerous and difficult. Despite these replies, upon three different occasions I introduced a Bill into this House compelling bankers to disclose on a given date all the dormant accounts—that is, accounts on which there have been no operations for six years—and all the securities to which no claim had been made. I could give instance after instance showing the enormous character of this question, and I hope to be able to do that if my Bill is successful in coming on to-morrow week. Under the Ten Minutes Rule I have obtained the Second Reading of that Bill by large majorities of nearly four to one in other Parliaments. I would ask the right hon. Gentleman not to be afraid of the banks. Under the present system it would appear as if the banker were the most sacrosanct man in the world. The moment he is announced everybody else has to clear out of the way. Every Chancellor of the Exchequer is led to believe by the permanent officials that unless he keeps the good will of the bankers he can do nothing. If the business of banking is so important, why does not the Government take over the Bank of England and do its own banking business, get all the money out of the public, and use it for the benefit of the State? Heaven knows that we have enough Inquiries and Commissions at present, but I ask the right hon. Gentleman to consider setting up at least one more, which will call the bankers before it—the old private bankers, like Coutts's, who from the days of the French Revolu- tion down to the days of this War have been ever accumulating wonderful sources of wealth, both in dormant accounts and securities; like Cox's, who through the deaths of officers and one thing and another are always reaping a rich harvest, and private banks of all kinds. I have gone into the matter fully, and I have innumerable instances in my possession, and I say quite seriously a man should not speak flippantly on a matter of this kind—that if the Chancellor of the Exchequer will appoint a strong Committee, with power to take evidence on oath from the bankers of the United Kingdom, he will be startled by the millions which are in the hands of these bankers to which they have no moral claim and whose proper custodian is the Public Trustee.

Another suggestion I would make is for a very simple tax which would realise an enormous revenue, and which would be collected automatically without hardship or unfairness—that is a tax on advertisements. In France they derive an enormous revenue from such a tax. There every advertisement, whether a man pays £10 or 6d. for it, bears the tax. It is paid if he puts a huge poster on a wall. I have had some experience of that. We do not mind if we have to put a shilling stamp on a poster. An advertisement tax nearly came off a few years ago, but the Chancellor of the Exchequer listened to the bill-posters and in the end their arguments prevailed. The advertisement tax in France produces an enormous revenue. Let it not be said any longer that they do these things better in France so far as this particular tax is concerned.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Is the tax to be on posters only, or on all advertisements?

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

Yes, on every advertisement in a newspaper. When the account is paid it could include a stamp, as is done in the case of the Entertainments Tax. In the case of posters there would be an adhesive stamp indicating that the duty had been paid. Again, take the question of a stamp on receipts. We have an extraordinary way of doing things in this House. We have doubled the stamp on a cheque. When an honest citizen is going to pay his debts we say he must pay extra for it, but when a person is receiving money we leave him entirely alone. The tax need not be a heavy one, say a 1d. up to £10, 1½d. up to £50 and 2d. up to £100. That would produce an enormous revenue, and nobody on earth would feel the pinch of it. Why not try it for twelve months? It is a source of revenue at which, for some reason or other, successive Chancellors of the Exchequer seem to shy. I again press it on the attention of my right hon. Friend. Another tax I have often suggested, which is a very simple one, is a tax on all share certificates. You tax debenture bonds and things of that kind. Why not put a small tax upon every share certificate? Every man who buys a share thinks he is going to make a fortune at the time he buys it, and will be quite ready to pay a sixpenny stamp, just as when a man buys a racehorse he thinks he has a Derby winner in his stable. At the present time a transfer of shares has to bear an ad valorem stamp. It sometimes happens that there are shares which people never intend to take up. The transaction is a mere gamble, and you escape the duty altogether. Let a stamp duty be put on every share transaction, not merely on the transfer, and then every man who gambles on the Stock Exchange will pay.

Again, I would suggest a tax on betting and horse-racing. You may say that it is a wicked, terrible thing to encourage gambling, but do you not encourage drinking when you go on reaping a revenue from the sale of drink? Do you not encourage card-playing when you put a tax on playing-cards? When it comes to betting, however, it is a terrible thing. There is no civilised Government in Europe except our own which does not reap a great revenue from that kind of thing. In France from such a tax they pay huge sums to hospitals, for the encouragement of thoroughbred stockbreeding, and for the relief of the poor—in fact, in France they call it the right of the poor. I would ask the right hon. Gentleman not to shy at the bookmaker or at the man who goes to races. After all, racing is the sport of Kings. I never go to a great race meeting—which I hope to do with the permission of the Leader of the House next Derby Day—and see a million of men there all enjoying the national sport, without regretting that no Chancellor of the Exchequer seizes the opportunity of saying, "Here are a few hundred thousand pounds which on this day I can collect without the slightest trouble."

I would urge these proposals on the right hon. Gentleman with great respect. Do not let us go on the old beaten track for ever. Let us look out for new sources of revenue. We shall have to find them. I do not see the normal day coming quite so quickly as the right hon. Gentleman. I see no indemnities—I feel it in my bones. I see the necessity for maintaining an Army of Occupation for a very long time. I see other demands coming from the hon. Gentlemen above the Gangway. I see further shackles on capital, and a demand for a much bigger Budget than the right hon. Gentleman has anticipated. Let us avail ourselves, while there is time, of other sources of revenue. Above all, let us, if we can, expand our fiscal system, without injuring ourselves at home which we need not do. Let us take the opportunity of the Imperial spirit which this War has produced, which is the best guarantee for the safety and peace of the world for generations to come. Let us avail ourselves of that spirit and so revise our whole fiscal system and policy—throwing away Adam Smith, Stuart Mill. Ricardo, and all the rest of them—looking the position in the face, so as to bring about some form of Imperial solidarity and oneness of aim which shall make us feel that the lessons of the War have not been lost. If the right hon. Gentleman is bold enough, as he appears to be, to initiate that in a wide and generous spirit, he will be worthy of the great name he bears.

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

I should like to congratulate the Chancellor of the Exchequer on the very clear and able statement he made to us yesterday. For twenty-seven years I have had the honour and pleasure, of listening to Budget statements, but I never listened to a clearer and more businesslike one than we had yesterday. It has always been recognised that the present occasion is one, not so much for detailed discussion of the Budget and the proposed taxes as for a review of the general financial position of the country. It is especially necessary and desirable at the present time to take a broad view and to consider the position as a whole; therefore I will say very few words upon the proposed taxes. With regard to the tax on beer, no one will expect me to be very much worried because it is being increased. I am a little surprised, however, that it is thought possible to get so large an additional tax without increasing the price. I hope that may prove to be so. With regard to the Excess Profits Tax, I have always felt that while the War was on some such tax was absolutely essential. Public feeling, practically the public conscience, demanded that special profits made out of the War should be made to contribute almost the whole amount, or as near as you could get to it, to the public revenue. Unfortunately, there are reactions from that. The worst is that the tax has led to an extraordinary waste of public money, to great extravagance, and to very great injury to the public in consequence of the extent to which it has raised prices. The sooner we can get rid of it the better.

With regard to land values I may speak with considerable freedom, because when the land values proposals were first made in the form in which they appeared I ventured to criticise them strongly, and made use of one expression which our Unionist Friends embodied in a poster, and used in support of their candidates at the General Election. But I do feel, and I have always held, that we ought to have a valuation of the land of the country, and also that no tax was more just than taking for the country the unearned increment in the value of land. If that had been done fifty or seventy-five or one hundred years ago look at what an enormous revenue we should have had. I was never much disturbed because that valuation was going to cost a considerable sum of money, and for the time being was not going to yield money. It was a tax, of course, which was intended to yield when land increased in value, which takes years and takes time, but you must have a fundamental basis to begin with. If the Chancellor of the Exchequer could get rid of the Undeveloped Land Duty and that phase of it, and restrict himself simply to a levy upon the increase in the value of the land, if that simple process could be adopted, it ought to be done, and I should be very sorry indeed if a great effort were not made to complete that valuation upon which so much money has been spent. With regard to Death Duties, they are certainly justifiable, but in the long run the increase in money will not be very great. The higher you put those duties the more you encourage and almost drive people to distribute their property before death. Those who have not already done so will not be able to escape if they die during the next three years, but the inevitable tendency is in that direction, and there will be more and more of it, and it will be very difficult to counteract.

As to Imperial Preference, I am an old Free Trader, and although the right hon. Gentleman the Chancellor referred to this part of his Budget with very pardonable pride and liked it best, I like it least. I do not like Imperial Preference, but I do not feel that strictly and theoretically it is necessarily an interference with Free Trade or Free Trade principles as some people allege. There is no departure from Free Trade principles in levying different rates of duties on different countries, because we have done that all the way along with Free Trade Ministries in power. We have had the Most-Favoured-Nation Clause, which means that we had different rates of duties. Interference with Free Trade principles is when it gives an advantage to firms or industries in this country, and we are going to do that with Scottish shale oil, benzol, and on spirits, by putting on an increased tax upon foreign spirits. But Imperial Preference itself is not necessarily a departure from Free Trade principles, but all the same I am not particularly fond of it. [Hon Members: "Why?"] Because we have already got instances which do tend to Protection. If we keep clear of that I do not mind, and if we keep clear of taxes on food I do not mind. One point with regard to Death Duties. I think the amount received from Death Duties ought to be devoted to the reduction of debt. Really it is a tax on capital, and a perfectly legitimate taking at a very suitable opportunity, of a considerable portion of an estate for the use of the nation. I think it will be wise, with the enormous debt we have, to devote that portion of the taxes to the reduction of the debt. I have grave doubts as to the ultimate reduction of that debt unless we do something of that kind. We may start out with a Sinking Fund and all the rest of it, but when one looks back at the amount of debt at the end of the great French War, and at what it was at the end of last century, one sees that we made uncommonly little headway in its reduction, and I am afraid it will be the same now, unless we set out to deal with it in a much more determined way than we have done in the past.

I desire to say a few words about the general financial position of the country. We are passing through a very critical time. The War was critical, but in other directions this time after the War is almost equally critical. We have had unparalleled expenditure. We have had ghastly extravagance and waste, and the result is we have got an enormous debt and must bear a heavy burden of taxation. Up to now, although there has been some relief, trade has been hamstrung and shackled by State control. We have had threats of strikes and industrial dislocation and enormous increases of wages and enormous increases in the cost of living. We have got great social unrest, and in the midst of all that we have to face the very difficult and delicate problem of the resumption of ordinary industry and the recovery of our trade abroad and social reconstruction and the repairing of the ravages of war, and we have to do that at this moment while our political leaders are engaged on most important world-wide problems in Paris. At times we have from some sections of the community propaganda of the wildest economic nonsense. Now there is the Budget to raise the money. The way in which money has been thrown away for the last five years was positively appalling, but, unfortunately, very little could be done to prevent it. We were struggling for our lives and for the liberty of the world, and, indeed, for the maintenance of civilisation. We were facing the greatest crisis in our history, and we had to create and equip and transport an enormous Army across the seas under the threat of overwhelming disaster. Under those circumstances close bargaining and carefully thought out business arrangements were certainly at the outset almost impossible. Men, equipment, and munitions had to be obtained and to be sent abroad with all speed, cost what it might to get them there, to save our nation, and to save the Empire. In those days waste and blunders were inevitable. It was so in every country in the world engaged in the War, and it has always been so in war. But after all there has not been accomplished in the world's history anything that will bear comparison with what this country of ours has achieved, and achieved in the most unselfish way. No doubt the waste has been awful, and here and there there has been appalling incompetence, but we have done the job, and when the nation was struggling for its life we could not give proper attention to cost.

But now the tension is relieved, and the closest scrutiny should be given to it. We must first of all have Treasury control restored. Full control by the Treasury is absolutely essential to national economy, and we must have control by the House of Commons restored. We have lost that sadly during this War, and beyond that we must have Cabinet control restored. We have had Departments acting on their own, and they have had a glorious time, but when they have a good time, it means endless expenditure. We have not had that Cabinet control of the Departments which is absolutely essential to efficient administration. We must have them all brought to heel. Unfortunately one result of the fearful expenditure we have had has been to create the impression that the resources of the nation are unlimited, and that there is a bottomless reservoir of wealth somewhere, while really the position is something like this: A man with a house and furniture sells the lot and sets to work to spend the money, and for a couple of months has a fine time, but nobody who knew the facts would come to the conclusion that he was well to do because he was spending freely. That is practically what we have been doing. We are going to work now as though we had a windfall instead of having to face disastrous expenditure. Some people seem to act as though we had discovered a great mountain of gold in the country, and that all you had got to do was to go with a pickaxe and shovel and bucket and fetch it away. We are to build this and construct the other thing and undertake something else, and pay higher wages, and work shorter hours, and levy higher taxes. Why it seems to me almost as though an epidemic of economic insanity had run through the country like the influenza.

6.0 P. M.

The Chancellor of the Exchequer made an appeal for economy. It was his duty to do so. The Financial Secretary to the Treasury told us, as Chancellors of the Exchequer have told this House while I have been in it again and again, that the responsibility for expenditure rests largely on the House of Commons. In the first place it is on the Chancellor of the Exchequer and the Government, but he is powerless unless the House of Commons will stand by him. Directly you have got past this Budget you will have demands from all quarters to spend money on this that and the other. There is not a bit of use our preaching economy until the Government and the House of Commons itself determine to practice it. The Estimates before the War for the War Office were £30,000,000, and they are now round about £450,000,000. I think we ought to know what is the view of the Government as to the future expenditure on the War Office and the Admiralty and the Air Service. I know the difficulty, but we ought to know what the view and aim of the Government is, for that of course would have a great influence upon the officials at the War Office. They ought to know what they are expected to do, and to cut their expenditure down, and they ought to be made to do so. Further, as soon as possible we ought to stop borrowing for current expenditure. Borrowing for current expenditure means inflation, and all the evils that follow from it. We must as speedily as possibly pay our way in current expenditure from year to year. The sooner we ascertain what we can pay, and still maintain our industrial and commercial output, the better, and when we have done so we ought ruthlessly to cut down expenditure accordingly. And for goodness sake shut up these Government offices; get rid of these staffs; clear the lot out! Unless a stringent line is taken they will batten upon the nation for the rest of their lives. It is awful. Clear them out by the shipload and have no bones about it. You will not get rid of them without. Do not argue with them. They have no end of information at their fingers' ends; they can put up a case, and where they are controlling trades, and some of them have benefited by it, they will back them up. Get rid of them. Make up your mind that you will do it.

The object of the Budget is to provide a national revenue. It is all very well to set out schemes, but the possibility of getting this revenue means, Shall we have the national income upon which to levy these taxes? That is the important thing. The soundness of the Budget depends upon the maintenance of the national taxable income. If that is reduced you cannot get the taxes. We have been living, making profits and paying wages under artificial and abnormal conditions, which cannot possibly continue. We have been living on borrowed money. We must get back to normal conditions of trade and industry, and when we do, shall we have a big income which will yield this enormous revenue? Up to now a very large proportion of the output of the country has been taken by the Government and paid for very largely out of borrowed money. A large proportion of the wages and profits which are so misleading people has come from the expenditure of that borrowed money. That is coming to an end. Then we have to replace that trade and to replace that employment, and to replace those profits, or we cannot pay the wages and the taxes. Will the trade, profits, and prices which will pay the heavy taxes and permit the increase of the wages continue? Large profits came early in the War from the enormous increase there was in the value of stocks. They rose enormously and made enormous profits. That is at an end. Another source was that all the manufacturing concerns of the nation were fully employed, many of them day and night up to the full—plant, machinery, and men, everyone in full employment. Of course you make larger profits when all are working at full swing and high pressure in that way. Can that be maintained out of the trade we shall have? It will not be unless we can receive and maintain and repeat orders from home and abroad. The possibility of getting and maintaining these orders will depend upon the price at which we can supply the goods in the markets of the world in competition with our various competitors in other countries. The competition of foreign countries in neutral markets will be very severe. We shall have, in my judgment, the United States and Japan competing in neutral markets to an extent they have never done before.

What will be the effect of higher wages and reduced output on our power to compete? The idea seems to be in some quarters that the higher wages are to come out of profits and costs of management. Recent profits were based on temporary and artificial conditions. The profits will be less. The Chancellor of the Exchequer tells us it is estimated that on the old scale of duty the Excess Profits Tax would have yielded about £100,000,000 this year, instead of £300,000,000. If the profits are to be reduced in that way, where are the taxes to come from? A great deal is said about railways and mines. According to what we hear, the increases which have been given in both those great industries have practically swallowed up the profits. Where is the tax going to come from? We have a substantial Income Tax from owners of mines and from owners of railway stock and shares, but if the profits disappear where is the taxation to come from? Will the men pay it out of the increased wages they are going to get? I remember very well in the old days when wages were lower, working men used to say, "If I had the income I would pay the tax." Will they? The income has gone up to the tax limit, and they are squealing about it like a cat with her tail in the crack of the door. They howl as soon as ever it gets to their level, and now they want the level lifted, so that they shall still be out. It must be remembered that profits have not only to provide taxes, but they have to provide for repairs, for maintenance, and for extensions of works and businesses which are necessary for the continuance of our industries. They have to provide for new undertakings. It was estimated in the past that something like £400,000,000 a year was devoted on the one hand to maintenance, repairs, and replacement of plant and buildings, and on the other to the building of houses and new premises, new factories, and extensions. At present prices it will require £700,000,000 or £800,000,000 a year, and that can only come out of profits. But in addition to that, we have five years of neglect to make up. For the past five years our premises, our manufacturing plant, our railways have not been maintained. The repairs and maintenance have not been done. That has got to be done if they are to be brought up to the necessary efficiency. That can only come out of the profits which are to be made, and the progress of invention and discovery shows that all undertakings require more capital than they used to do. Plant is more costly, machinery is more complicated and expensive, and it means that we shall want more capital; but where are you going to get the capital from for these new extensions if all the profits are to be swallowed up in other directions? You will not have it, and you will not have the tax revenue from these profits.

Capital is essential. Where has it come from? It has come from saving, from thrift, from abstention from expenditure on the one hand, and, on the other, which is really another phase of the same thing, it has come from the accumulated profits of great undertakings, from men of special business capacity and ability, men of great foresight and courage who have built up big businesses. These great businesses and great profits are not made at the expense of the working people. They are not made by men who pay lower wages than the rest, nor by men who pay less for what they purchase, or men who get higher prices for what they sell. Take men like Lord Leverhulme. Take a business like Harland and Wolff. Does Lord Leverhulme pay less wages than anyone else in a similar business? Does he treat men less well? Does he sell what he produces at higher prices? Not a bit of it. The fortune that he makes out of it is made by his business capacity, his organising skill, his courage, and his enterprise. It is our interest to encourage men like that. They are great national assets. And if we are to deprive them of their reward and of their inducement we shall either drive them from the country or they will not take the risks and they will not incur the responsibility of these great undertakings, and that would be a great disservice to the country and, greatest of all, to the working classes. It is customary for some of our friends to sneer at the laws of supply and demand. You may sneer at them as you like, but you cannot get rid of them, and if you ignore them you will not do it with impunity. We need capital and we need organising ability, and the way to make capital and organising ability cheap is to have a lot of it, and that means that you must save in order to provide the capital and educate our people in order to develop their faculties, and the way to lose capital and organising ability, or to drive them from the country, is to deprive them of a fair return and to overtax them. Both capital and ability can very easily be driven away.

I want to say a word about what the right hon. Gentleman (Mr. Adamson) said yesterday. He had something to say about profiteering. His proposal for taxation was that persons with an income of less than £250 a year should only be taxed on luxuries, and that above £250 a year there should be an Income Tax commencing at 1d. in the £ and gradually graduated. I wish some of our good friends would really make an attempt to get at facts before they propound schemes and theories. If the hon. Member will only try to shape out an Income Tax commencing at a penny in the £ on incomes of £250 and grade it up and see how much he is going to get out of it, he will speedily discover that that will not supply a very big gap in the National Revenue. With regard to his £250 a year limit, we are pretty near to it now. If anyone has a wife and three children under sixteen he pays no tax until his income is £220 a year. If he has a wife and five children, under sixteen he pays no Income Tax until his income is £270 a year. But a single man with, an income of £250 a year ought not to be entirely relieved of taxation. The hon. Member had a good deal to say about profiteering. What is profiteering? Is it getting as much as you can, because if it is, and that is what I assume it is, I should like to know who does not. The manufacturer does, the merchant does, and, my word, the workman does. When you begin to talk about profiteering then I say that those who live in glass Louses should not throw stones. Can you tell me of the working men of this country refusing to get as big a price as they could?

Photo of Mr George Spencer Mr George Spencer , Broxtowe

Refused to take it.

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

Well, that is novel. We want to clear our minds of cant. It is human nature to get all you can and it does not belong to one class. It is in all classes of life and it is no use humbugging ourselves about it.

Photo of Mr George Spencer Mr George Spencer , Broxtowe

May I tell the right hon. Gentleman that when the miners made application for a war wage the Government told them that if they asked double they would have to give it them. But the miners refrained from doing so, although if they had demanded much more they would have had it.

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

No, they could not have got it. If profiteering be a sin, and I am not suggesting that it is, the working classes have to bear a full share of it. They have not done badly out of the War.


Not as well as the profiteers?

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

Yes, and I am going to show that they have done better. Wages in this country have increased during the War, until they are now somewhere between 800 and 1,000 millions above what they were before the War. That is the position. The wages are pretty well doubled. I am not suggesting that they ought not to have been doubled. That is not my point. I am glad that they have been increased, and I hope they will be maintained. It is a great boon and blessing to the community to have the masses of our people better paid. The cost of everything has doubled, and we are worse off unless our income is doubled. The vast mass of the people are notoriously better off than they were before. Therefore their incomes must have increased more than the cost of living has increased. There is any amount of evidence of the prosperity of the working people of this country. Look in any direction, and you will find it. Look at the expenditure on liquor and tobacco.

Photo of Mr Alfred Davies Mr Alfred Davies , Clitheroe



Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

I am not talking about profiteering; I am talking about the expenditure—about those who have the money to pay with. Three hundred millions were spent last year, thrown away by all classes of the community, on liquor and tobacco—two hundred millions of it by the working classes. During the War 1,200 millions have been spent by this country on liquor and tobacco, and 800 millions of it by the working people. And then we have appeals for economy!

Photo of Mr Joseph Devlin Mr Joseph Devlin , Belfast Falls

Is the right hon. Gentleman aware that a Chairman of Committees is now allowing Members of Parliament to smoke?

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

Only another evidence of what seems to me folly. The income and expenditure of every class of the community has not increased in the same proportion. The incomes of the remainder of the population other than the working classes have not doubled during the War. Let us take the Income Tax assessment. The figures I have are not up to date, but they are the latest. What do they show? They show that the amount assessable to Income Tax in 1913–14, before the War, was £951,000,000. In 1916–17, the last year of which we have the figures, it was £1,373,000,000, an increase of £422,000,000. That included the incomes of those between £130 and £160 a year. The limit was £160 before the War, but that was reduced to £130, which brought in a large number of people, and they are included in this Return. The taxation of the farmers has been trebled and that is included in these figures. The figures also include those working people and people of that class who were not up to £160 before but are now above that amount. Therefore the £422,000,000 does not represent the increase to the old Income Tax payers. I doubt whether the increases which the old Income Tax payers have got is more than £200,000,000 or £250,000,000 and that is after deducting Excess Profits Duty. That means that the income of other classes than the working classes has only increased by about 25 per cent., while the working class income has pretty well doubled. The Super-tax figures confirm this. Before the War the Super-tax figures reported the incomes of those with £3,000 a year and upwards. Before the War the amount of Income assessed to Super-tax was £238,000,000. Last year it was estimated at £280,000,000, an increase of only £42,000,000 on £238,000,000.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

The taxable minimum has been brought down.

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

I am referring to the figures based on the reduced minimum, those over the £3,000 limit. Their total income has only gone up from £238,000,000 to £280,000,000. The working class income has doubled, but the people above the £8,000 a year income have not got this advantage.

Photo of Mr Alfred Davies Mr Alfred Davies , Clitheroe

I should think not.

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

These are the official figures. The bulk of the increased profit of this country has gone to the working people and to the middle classes, the manufacturers and the traders. Many other people have been badly hit. People with fixed incomes have got nothing whatever. They have had to face the increased cost of living without getting any advantage. Let me take the case of a judge, simply because the income of a judge is public property. A successful lawyer before the War accepted an appointment as a judge, in the expectation that he would have a salary of £5,000 a year. The Income Tax upon that salary before the War was 1s. or 1s. 2d. in the pound, leaving him with £4,750 or £4,700 a year. Where is he to-day? His Income Tax and his Super-tax on £5,000 a year amounts to £l,787 10s., leaving him with an income not of £4,750, but of £3,212. If the purchasing power of that be considered, and if it has only been reduced by one-third, he has got to-day an income equivalent to £2,150 a year, as compared with £4,700 before the War. A very heavy burden indeed! That is an illustration of the case of tens of thousands of people, not as to amount, but in the character of their income, throughout the country. They have suffered very heavily. There is another phase of this question. The latest figures we have in detail are for 1917–18. Of all the national revenue, 18 per cent. was from indirect taxation and 82 per cent. from direct taxation. Broadly speaking, but not entirely, the indirect taxation is the taxation that falls upon the masses of the people, while the direct taxation falls on them to a very small extent, The indirect taxation was only 18 per cent. of the whole. If you deduct from the indirect taxation the taxation of liquor and tobacco, which are luxuries at the best—at any rate, they are voluntary taxes. I do not pay either. I escape the lot, and other people could do the same—you will find that the balance paid by the working classes is more than counterbalanced by the subsidy on bread. In other words, the subsidy on bread more than counterbalances the whole of the indirect taxation of the masses other than that which is derived from liquor and tobacco. What does that mean? It means that the working-man who does not pay Income Tax does not pay any taxation at all, because the whole of his indirect taxation is balanced by the subsidy on bread. Then what is the use of the right hon. Member for West Fife talking about the heavy burden of indirect taxation on working people? At the present time they really do not pay any except on drink and tobacco, which they would be better without.

There is no country in the world that in peace-time has had its working people so little taxed as this country, and in war-time it is almost incredible that it should have been possible to do it. One result of the War has been a great redistribution of wealth. It is a redistribution that you could not in ordinary circumstances have brought about in a couple of generations. The holders of invested capital have suffered very heavily indeed, while the working people have gained enormously. That being so, I do suggest that it is a little hard and a little unjust that those who have lost so much should be denounced and attacked by those who have gained so much.

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

Some in other classes of the community than the working classes have made great profits, but they are few in number compared with the great multitude. Take the large companies and large undertakings. Some have paid very big Excess Profits Duty. The remaining profit has not gone to any one individual. It has been distributed amongst large bodies of shareholders, many of them small people, and it does not increase their incomes in anything like a proportion corresponding to the increase of wages. Out of that they have had to bear the very heavy cost of living. I quite agree that in special cases under our economic system the reward of success is too great and the penalty of failure is too severe. We must encourage enterprise, but our aim should be to give to all a fair share of the result of joint effort. No service to the country and no exceptional capacity and ability justifies families for generations and centuries living on the result of that service without working. Unless you allow great business geniuses to get the reward of their effort you will not have it, but there is no reason why their successors from the time of William the Conqueror up to now should be living without working. That, in my judgment, is one great justification for the Death Duties, gradually taking it back again and bringing it to the community. The great transfer of wealth to which I have referred and the increase of wages will be an enormous blessing to this country if it can be maintained, and the real problem to which, I venture to suggest to my working-class friends, they should devote themselves in the maintenance of the conditions which will allow these wages to be paid. It would be a great boon to the whole community if they can be. There is no use in killing the goose that lays the golden egg. They can only be paid out of four sources—from one, or some, or all of them—(1) by a lower return on capital, (2) by smaller profits, (3) higher prices, and (4) increased production. If you make the return on capital below the market value, it will go away. Then commercial and organising capacity will leave the country if you do not give to business ability the reward which it can obtain elsewhere. It will go, or, if it remains here, it will not take the risk and responsibility. Those are two sources. The third is high prices. High prices are equivalent to a reduction in wages, and high prices curtail trade and tend to cause unemployment.

Colonel THORNE:

Do they curtail trade in America?

Photo of Mr Thomas Whittaker Mr Thomas Whittaker , Spen Valley

The real solution of the problem is increased output. That does not mean increased hard work. Any- body who knows the cotton trade of Lancashire and compares the conditions eighty years ago and the output per person in the mills then with what it is to-day will find that the output has been enormously increased, that the wages of the people have been increased, and that everybody has been benefited as a result. So it is throughout the world. The ideal condition is the maximum reward for labour that is consistent with the return on capital that will keep it here and a sufficient reward for organising ability. A diminished output per man in any industry means a decline in trade and a loss in employment. I was talking with one of the leading men from the United States only the other day about this question of output, and the restriction of output, and the ghastly fallacy that you can create employment by restricting output. He said it took them thirty years in America to kill that fallacy. But they have killed it, and none of the workmen in America will have any of that nonsense in their minds that you are going to make a country more prosperous by producing less. They have got rid of that. That is the great secret of success of America, and it will make America, our dangerous competitor in future unless we adopt a similar policy.

I do not know whether hon. Members have read one of the most interesting Government publications that was ever issued, the final Report on the Census production. I am afraid it has not been read as it should be. There is more information on economic questions in that volume than in any other volume that was ever issued. That volume showed, among other things, that in 1907 the value of the net output of the various industries of this country, and the net output was shown, by taking the value of the raw materials that went into the works, and the value of the finished article that came out, so that you can see the value that was added by the work of the whole of the organisation. The net value of the output in the cotton trade was £79 per person employed. In the woollen trade it was £70; in the hosiery trade, £61; boot and shoe-making, £71; printing and bookbinding, £88; iron and steel works and mills and foundries, £115; leather tanning trade, £117; paper-making, £111. The amount increased according to the cost or value of the plant employed. What had to come out of that output of £70 or £80 per individual—wages, salaries, rent, rates, taxes, depreciation, maintenance, all the working expenses, return on capital and profit. It is perfectly clear on the basis of those figures that you cannot have the bigger payments we desire to make unless you have a large increase in the output.

Another great need of the moment is security and reasonable certainty about trade. I would like to ask the Secretary to the Treasury what is going to be the trade policy of the Government What is it that is hanging up trade in all directions at the present time—uncertainty. [An Hon. Member: "The Blockade!"] It is not the Blockade; it is uncertainty. People will not give their orders for this, that, and the other because they do not know what prices are going to be. They will not give their orders now even if they can get a price quoted, because they do not know but that they may be paying a price very much higher than they may have to pay in a few months' time. On the other hand it is with extreme difficulty that you can get manufacturers and others to quote definite prices owing to the uncertainty of the trade. Take the building trade: Who is going to propose building at the present time? Who will put up buildings for you at the present time? Until you can get down to something like bedrock you will never get the certainty which we desire. What is going to be the Government trade policy? Until we know that we are in very great uncertainty. We also want stability. Strikes and labour unrest paralyse trade and create unemployment. Our commercial, financial, and industrial structure is built up on credit, and credit is a very tender and sensitive plant, and political, civil, and industrial security is vital to it. I say to the Government, Get all the shackles off trade. Get rid of all this control and these offices. Set an example of economy yourselves. Get rid of all these war staffs. Hasten a return to normal conditions, so that traders may know where they are. Then we may get down on something like a firm basis; and if we do that, then for myself I feel that if we face the economic, industrial, and financial problems that are before us with courage, patience, and mutual consideration, we have little to fear.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

Whatever else is disputable with regard to the Budget it will be agreed in all quarters that the country is faced with a most serious financial problem. In my opinion much bolder measures are needed to grapple with the problem than those which have been proposed by the Chancellor of the Exchequer. I wish to urge in the first place that the increase of taxation proposed in the Budget is insufficient, and in the second place that it will be necessary to meet a large part of the War liabilities by means of taxation of capital—that is to say, by a levy on capital rather than by taxation of income. I will discuss these two problems in order First, I maintain that the increased taxation proposed in this Budget is insufficient. A review of the position will show that the permanent revenue to be obtained from the Budget falls short of the requirements of sound finance by £134,000,000 a year, and therefore a further £134,000,000 of taxation ought to be imposed. We have not, during the War, been raising sufficient permanent revenue to meet the normal peace expenditure of the country when the War was over. Certainly the principle upon which we ought to proceed now is to raise this year by taxation such an amount of permanent revenue as will meet the estimated peace expenditure of the country in a normal year. The Chancellor of the Exchequer in effect agreed to this principle yesterday and gave certain calculations accordingly, but I challenge his figures and conclusions and will give my reasons for doing so.

The expenditure of the current year is £1,434,000,000, but this he pointed out includes many exceptional items. When the transition period from war to peace is ended I estimate that the peace expenditure of the country in a normal year will not be less than £900,000,000—as compared with the Chancellor of the Exchequer's estimate of £766,000,000—and it may be considerably more than £900,000,000, especially as wages of Government employés are such an important element in national expenditure, and wages are much higher than in pre-war days, and they are never likely, I hope, to go back. However, I will take it at the sum of £900,000,000. I do not propose to go in great detail through all the calculations showing how the estimate I have given of £900,000,000 is arrived at, but in short this amount for normal peace expenditure is composed of four main items. First, £270,000,000 for Civil Service and Revenue Departments Estimates, as against £495,000,000 for those Estimates in this Budget. An examination of the figures will show that, taking out exceptional items with a very liberal hand, there seems no prospect of the sum of £495,000,000 estimated for this year being reduced below £270,000,000 for normal peace expenditure. To bring down the figures as low as £270,000,000 I have eliminated altogether the railway subsidy of £60,000,000, the bread subsidy of £50,000,000, as the right hon. Gentleman did yesterday, and many other items, some of which will, as a matter of fact, probably continue in some form for several years. When I further mention that four items alone in the Civil Service and Revenue Departments Estimates—namely, war pensions, old age pensions, education, and the Post Office—cost well over £170,000,000, and that the cost of all the other Government Departments has gone up enormously, I think it will be realised that the figure I have given of £270,000,000 is a moderate estimate.

Secondly, I estimate £150,000,000 for the Army, Navy, and Air Force Services, against a gross expenditure of £655,000,000 this year. Personally, I believe that the amount of £150,000,000 will prove to be less than the combined sum which is actually spent on these three Services in a normal year after peace, particularly in view of the higher pay for the men as compared with pre-war days—and this part of the expenditure I welcome. I think, then, that £150,000,000 will prove to be less than the sum which is spent. At the same time, I wish to say that, in my opinion, this amount should be much more than sufficient for expenditure on armaments. However, I am not dealing with what I myself want or what I consider necessary, but I am dealing on a moderate basis with what I think is likely to happen. If the figure should prove to be £110,000,000, as suggested by the Chancellor of the Exchequer yesterday, or prove to be less than that, I shall be delighted, as it will mean that more money will be available for social reform, and, as I shall say in a moment, this will be very much needed.

The third main item is £400,000,000 for interest on the National Debt, taking the Debt as £8,000,000,000; I think it will amount to at least £8,000,000,000 before borrowings have ceased, and, indeed, in view of the very heavy expenditure during the next two or three years, the Debt will probably considerably exceed £8,000,000,000 after taking to credit sales from stock of goods and other items referred to by the Chancellor of the Exchequer yesterday. This Debt of £8,000,000,000 will, it is true, include a large sum not far short of £2,000,000,000 for advances to the Allies and Dominions. It is to be hoped that as years go on the interest on these advances will cease to be a charge on the British taxpayers and that indeed much, if not all, of the capital will be repaid.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Will the hon. Member forgive me if I interrupt him to say that the Dominions have paid and are paying interest on that Debt. I regret that I did not make that clear yesterday, and I am glad the hon. Member has given me the opportunity of saying it to-day.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I am very much obliged to the Chancellor of the Exchequer. As a matter of fact I hoped that the Dominions were paying that, and in private discussion I said I thought they were paying it or would very soon do so. But all countries have suffered from the War, and, as the Chancellor of the Exchequer pointed out last year, it would be sanguine to expect payment even on interest alone on the whole amount from both Dominions and Allies until, at any rate, a considerable period has been allowed to elapse for recuperation after the War is over. In all the circumstances I think it is best to adopt the course suggested by a late Chancellor of the Exchequer, and that is to treat, at any rate for a time, all sums which may be received from the Allies and Dominions, either by way of interest or of capital, as a sinking fund for the debt. If this plan is followed it is not necessary in building up the future Peace Budget actually to allow for both sinking fund and interest, but for interest only on the debt of £8,000,000,000. The average rate of interest may be taken as 5 per cent., and 5 per cent. on £8,000,000,000 is £400,000,000.

The fourth item is £80,000,000, and is a margin for other expenditure of many kinds which will have to be met, and particularly for various measures of social reform. With almost criminal optimism the Chancellor of the Exchequer yesterday practically left out of account all these items in his estimate of future expenditure. In effect he has allowed little or nothing for the big programme of social reform which his Government promised the country. The social reform measures will include the charge against the National Exchequer for the housing scheme, which will be a very big item; further expenditure on education to which the country is committed under the Act of last year, and this also will be a big item; the cost of the Ministry of Health, including the Grants in aid of rates which will have to be made under the Ministry of Health; increase of Old Age Pensions, and the cost of other proposals of the Joint Industrial Conference; and the Government is practically committed to giving effect to these proposals. A big expenditure on these and many other measures of social reform will be urgently demanded and very much needed, and practically every Member of the House is committed to a very large expenditure on social reform. Money, too, will be required for the Ministry of Transport, the Ministry of Supply, many reconstruction schemes, and also, I am afraid, for certain subsidies and compensations for which the Coalition Government has unfortunately made itself liable. Personally, I do not consider that the sum of £80,000,000 will be nearly sufficient for all these purposes, including the large programme of social reform which must be carried out. However, let me say again, that I am not dealing with what I want, but with what I think is likely to be done, and unless there is a levy on capital I do not think that more than, and probably not so much as, £80,000,000 will be forthcoming for all these objects.

If we add together these four main items of expenditure which I have given, namely, £270,000,000 for the Civil Service Estimates, £150,000,000 for the Army, Navy, and Air Force, £400,000,000 for interest on the Debt, and £80,000,000 as a margin for other expenditure, we reach a total expenditure for a normal peac year of £900,000,000. These estimates, of course, may be disputed. My reply is that year by year I have put forward estimates which have been criticised from the Treasury Bench as too high, yet in each succeeding year my figures have proved to be much below the mark, and the Treasury Estimates have been simply ridiculous. For instance, last year the then Chancellor of the Exchequer put forward an Estimate for normal peace expenditure of only £650,000,000. This year the Chancellor of the Exchequer puts the figure at £766,000,000—that is an error of £116,000,000. This shows how utterly unreliable, not to say careless, these Treasury Estimates are I have a great respect for the officials of the Treasury. They are very good at estimating revenue, but they seem to be utterly incapable of estimating what future expenditure will be. They do not seem to have beyond the merest inkling as to what the commitments of the Government are, and what their pledges are. If they would get a list of Government pledges they would see that there does not seem to be the smallest chance of our normal peace expenditure being less than £900,000,000. I believe that I am myself underestimating again, and that the normal peace expenditure will considerably exceed £900,000,000; however, I will work on the figure of £900,000,000 Against this the Chancellor of the Exchequer estimates that the permanent revenue to be obtained on the basis of the present Budget will in a full year amount to £766,000,000. If, then, the permanent or normal peace revenue is £766,000,000, and the normal peace expenditure is £900,000,000, as I have estimated, there will be a deficiency of £134,000,000, and that is the basis of the proposition I set out to establish, that further taxation of £134,000,000 ought to be imposed. In the main this will have to come from increasing the Income Tax. If the whole £134,000,000 were obtained from the Income Tax, the general rate of the Income Tax would have to be raised to nearly 9s. in the £. In any event, it seems impossible for the country to avoid an Income Tax at a general rate of 8s. in the £ apart from Super-tax. And even so, the Chancellor of the Exchequer will have to find nearly £50,000,000 a year from other taxes. This will be a task of extraordinary difficulty, especially as indirect taxation cannot, in my view, justly be increased on balance at all.

The conclusion to which we are driven then is that we shall be faced with Income Tax at a general rate of 8s. in the £apart from Super-tax and with very heavy other taxes. To tinker with the problem, as the Chancellor of the Exchequer is doing in this Budget, is merely to postpone the evil day. All this is quite apart from the question of whether the revenue is being raised on the best and most equitable basis as between the various sections of the community. I hold strongly, and have urged again and again, that the tea and sugar duties are much too high. These duties are inequitable and economically unsound, both in time of war and in time of peace. They are pressing very heavily on those persons who are below the level of subsistence, and the number of these persons is very much larger than is commonly supposed. If this matter were put right— indeed, I want to see these duties abolished altogether—then it would be necessary to make good the deficiency from other sources, again mainly from the Income Tax. Therefore the level of the Income Tax would be higher even than the figure I have indicated.

I wish to register my protest against the Preference Duties introduced in this Budget. I am totally opposed to these duties. They are economically unsound, and there are other grave objections in principle to them. However, I will not discuss these matters now, because we are to-day concerned with the raising of revenue. I conclude this part of my remarks by repeating that a review of the financial position of the country shows that when the transition period from war to peace is ended we shall be faced with a National Debt of at least £8,000,000,000, and we shall be obliged to raise annually by taxation the sum of £900,000,000. This is a most serious prospect. I do not believe that it is possible to go on raising, year by year, on any basis which is equitable and economically sound, the enormous sum of £900,000,000 by taxation. Industry will be strangled, the people will be ground down by oppressive taxation, and the tax system will, in my opinion, break down in the course of a few years. I believe, therefore, that it will be necessary to reduce the annual expenditure of £900,000,000 by clearing off quickly a big portion of the War Debt, thus greatly easing the annual national burden by reducing the charge for interest on the War Debt.

7.0 P.M.

In my opinion, the Chancellor of the Exchequer will be compelled sooner or later to meet a large part of the war liabilities by means of taxation of capital—that is, by a levy on capital—rather than by taxation of income. I urge that £6,000,000,000 of the debt should be cleared off by a levy on capital. The effect of this operation would be to reduce the charge for interest on the debt by £300,000,000 a year, and there would also be a saving of about £45,000,000 a year on Sinking Fund account. Thus the national expenditure would, in effect, be reduced from £900,000,000 to £555,000,000, and after the levy there could be a large reduction in the amount of taxation to be raised, and the general rate of the Income Tax could be reduced from 8s. in the £ to less than 3s. in the £. Last year I ventured to lay before the House of Commons, as completely as I could in one speech, a scheme for a levy on capital. It would take too long now to give that scheme in great detail, but I wish to-day briefly to outline the machinery for the operation, and then to deal with some of the objections against the scheme and compare, in certain respects, a capital levy for dealing with the War Debt with the alternative of what I may call the high Income Tax scheme. My suggestion is that the National Debt should be reduced from £8,000,000,000 to £2,000,000,000 by a levy on capital. The Debt might remain at £2,000,000,000, which would not be an insupportable burden, especially with the hope that the vast sum, not far short of £2,000,000,000, advanced to the Allies and Dominions will be repaid, at any rate in part, sooner or later. The levy would be made and paid after the manner of the Death Duties, and I wish to make it perfectly clear that the levy would be on individuals; it would not be on limited companies. The reason for this is that the share capital of limited companies is, of course, all owned by individuals, and it is in practice much simpler to make a levy on the capital, including stocks and shares, owned by individuals, because the rate for the levy will be a graduated one and will vary according to the amount of the individual fortunes. Persons worth less than £1,000 will be exempt; those worth between £1,000 and £5,000 will be taxed lightly, and the scale will rise by degrees right up to the millionaire; big fortunes will be taxed very heavily. This scheme is not confiscation and it is not repudiation. It is merely an alternative method of meeting a liability which has to be met anyhow, and which ought to be met by the wealthier classes of the country. It is most important always to bear in mind that, practically speaking, the interest on the War debt is being paid, and can only be paid, out of taxation. The interest on the War debt, therefore, does not really represent real income to the country. The War Loans could not, of course, be spent productively and therefore there are, practically speaking, no revenue producing assets for the money which was subscribed to the War Loans. Much the major portion of the War debt is held by the Income Tax-paying classes, and the interest is mainly being paid through the Income Tax; and unless there is a capital levy this process will have to go on for the next thirty or forty years. That is to say, that for a long period of years, interest and also sinking fund will have, in effect, to be paid out of taxation. Surely, then, it would be better largely to liquidate the debt; that is to write it down, just as all sound commercial concerns would write down a similar asset, and one result of the operation would be a large reduction in the rate of Income Tax. There is no more confiscation about a tax on capital than a tax on income or a tax on sugar. Unless there is a levy on capital, nearly one half, and in the case of those liable for Super-tax, more than one half, of the income of the wealthier classes will be confiscated, if you choose to use language of that sort. The truth is that a levy on capital merely does quickly what other taxation will do slowly. In a word, a levy on capital means paying off war debt by a sinking fund in a very short period, rather than paying off war debt by a sinking fund out of other taxation over a very long period.

Before proceeding further, I would mention that the principle of a levy on capital has received the qualified approval of the Leader of the House. I will quote an extract from the official report of his reply to a deputation from the Trade Union Congress, which was issued on 26th December, 1917. He had been discussing the future position of the country and after pointing out that the taxation caused by the War debt would mean a burden upon industry, he used the words: That burden is one of the inevitable consequences of the War, and all we can do is to try to make it tell as little as possible on the life of the country.Suppose you take this view—and I am inclined to take it myself—that we ought to aim at making this burden one which will rest practically on the wealth that has been created, and is in existence at the time the War comes to end, not merely that it should not fall on the wage-earning classes or on the people with small means with which to meet it, but that it should, so far as is possible, beborne by the wealth that exists at the time, so that it would not be there as a handicap on the creation of new wealth after the War. I think that is what we have to aim at. And how is that to come?The question of whether or not there should be conscription of wealth, then, is entirely a matter of expediency, and I think it is a matter which concerns mainly, not the working classes, but the people who have money. In my opinion it is simply a question of whether it will pay them best and pay the country best, to have a general capital levy and reduce the National Debt as far as you can, or have it continued for fifty years as a constant burden of taxation. Perhaps I have not thought enough about this to justify me in saying it, but my own feeling is that it would be better, both for the wealthy classes and for the country, to have this levy of capital and reduce the burden of the National Debt. These words sum up, in a few sentences, the precise case I am trying to put before the Committee, and I would like to ask hon. Members to bear very carefuuly in mind this statement of the Leader of the House. The Chancellor of the Exchequer, when he condemned a capital levy yesterday, apparently did not know that his predecessor—the Leader of the House—had gone a very long distance in favouring the principle. However, I leave these two right hon. Gentlemen to settle their differences. Many objections have been and will be urged against a levy on capital. I am quite aware of that, and I am going to deal with the chief of them. But the critics of a capital levy are utterly misleading, not to say unfair, in their methods. They point to all the difficulties in the way of a levy and generally ignore altogether the much greater difficulties, in my opinion, of the very high Income Tax, and other taxation, which will be necessary. That was really the attitude of the Chancellor of the Exchequer yesterday: he will not face facts. But facts must be faced, and it is necessary to realise that there is no easy way of dealing with this great problem. Either course will be difficult. My case is that the balance of net advantage lies with a capital levy. As a matter of sound economics I think that is clearly so, because the great bulk of the war debt will be wiped off from existing capital instead of being a charge for many years to come on future earnings.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

Will the levy be in cash or in kind?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I am coming on to that, but this is a big subject. I am satisfied that the very high Income Tax will prove to be an inequitable and most precarious fiscal instalment. Many evasions of Income Tax take place now and cannot be stopped, and with the high rate of Income Tax which will be necessary evasions will undoubtedly increase.

I will now proceed to deal with some of the objections to a Capital Levy, and for a fuller argument I would venture to refer hon. Members to a speech which I delivered in the House, on the Budget Debate, last year. I have diffidence in doing this, but I am anxious to save time, and in that speech I dealt pretty fully with many of the problems connected with a capital levy, including that of valuation, the difficulties of which are much exaggerated. The Chancellor of the Exchequer dwelt yesterday on the insufficiency of the staff of the Inland Revenue for the purpose of valuation. There does not appear to be any difficulty in increasing the staff of other Government Departments, and, as a Capital Levy will be found to be the only means of really meeting the situation, the necessarystaff—and it will only be temporary—for the valuation must be provided. I would point out that the Chancellor of the Exchequer practically indicated yesterday that the land is to be valued, anyhow. Further, three or four years in all would be allowed for the payment of the levy, and therefore three or four years for the valuation. Also, by the plan I outlined last year, the whole process of valuation would be very much simplified. The first objection I will touch on to-day is the contention that a levy on capital would absorb and use up liquid capital just at the time when it is wanted most—that is, during the period of reconstruction following the War. The reply to this objection is a very short one: It is not true. It is most important to realise that a Capital Levy does not, on balance, absorb or use up liquid capital at all. I would respectfully ask the Chancellor of the Exchequer if he would pay attention to this point, because, if I may say so with respect, he has not quite followed this aspect of the Capital Levy.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I beg the hon. Member's pardon. I have been following the whole of his speech with interest, if he will allow me to say so. At the moment my colleague had asked me a question which I was obliged to answer.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I am very much obliged to the right hon. Gentleman for the attention which he has evidently been paying. I do not suggest that he was not following me, but just at this particular point I wanted to call attention to the fact that a levy on capital does not, on balance, absorb or use up liquid capital at all. After all, what is a capital levy for? It is for the purpose of paying off War Stock, and, in so far as the levy is paid in cash—and by cash, I mean, of course, not only gold and notes, but also cheques, and so forth—the Government does not keep the cash, but it will be used by the Government to pay off holders of War Stock. In a word, the total amount of cash taken by the Government from persons under a capital levy will be exactly equal to the total amount of cash paid by the Government to other persons—that is, to holders of War Stock. There- fore, on balance, the total amount of liquid capital available in the country will not be altered or diminished 1d. piece by the operation. I ought, however, to say that the amount of the levy which would be paid in cash would be very small. I will deal with this point in the next objection, and it is an objection which, in fact, the right hon. Gentleman made yesterday. Practically, what he says comes to this, that a Capital Levy could not be paid because of the difficulties of realisation; that securities, and so forth, would be thrown on the market all at once, when there were few buyers about, and that prices would collapse. In point of fact, by certain methods, which I will hastily outline, the whole of the levy could be met or paid with no realisation of securities or selling of property at all.

The first of these methods is by payment direct in war stock. War stock of every kind—5 per cent. War Loan, National War Bonds, Treasury Bills, and so forth—could be handed over to the Government in payment of the levy, and therefore no realisation would be involved. This, of course, does not mean that war stock holders would be in a worse position than anybody else. As a matter of fact, they would be in a better position. All persons—with certain small exceptions—worth more than £1,000, would have to pay the levy on a graduated scale. It would not be compulsory for war stock-holders to pay in war stock; but it would be a very convenient way of paying the levy, and would be largely chosen, because some advantage in price would be given to those who paid in war stock. The second method of paying the levy without realising securities or selling property is by the exchange system. Here, again, I would like to ask for the special attention of the Chancellor of the Exchequer, because I think it is quite clear, from what he said yesterday, that this part of the machinery for a levy on capital has not yet received his close attention. Under this exchange system the Treasury would issue a long list of good securities, which would be accepted in payment of the levy, at certain fixed quotations. This list would be on the plan of the lists which have been issued by the Treasury during the War, for the purpose of mobilising American and foreign securities. All the securities in the list could be handed over to the Government in payment of the levy. The Treasury, and the Government, however, would not need to realise the securities or put them on the market. The Treasury would proceed to exchange these securities with war stock-holders under voluntary and agreed arrangements, some slight advantage in price being given to war stockholders as an inducement to make the exchange. There would be no compulsion about these exchanges; they would be perfectly voluntary. But many companies and individuals would be only too glad to make them, especially in view of the fact that the rate of interest at present yielded by high-class securities is almost certain to go down as years go on, and, therefore, good, first-classe securities with fixed interest, which are irredeemable, are better, as a permanent holding, than war stock, for war stock is redeemable. By this exchange system, a very large amount of the debt of the country would be dealt with and cancelled.

The third method of meeting the levy wthout the necessity of realising securities or selling property is by credit facilities, or, alternatively, by payments out of income over a long period of years. Credit facilities would, in particular, be given to owners of land and real property, and to those persons who have money locked up in their business, as, for instance, in a factory, fixed plant, carrying stocks of goods, and so on. These credit facilities would, in the main, be given through the banks, under special regulations laid down by the Government; whereby the borrowers would be protected, and the banks would be guaranteed by the Government against loss—though, as a matter of fact, any loss there could be would only be infinitesimal. This problem of the man who has his money locked up in his business is the one which looms largest in the minds of business men in regard to a capital levy and causes them most doubt and anxiety. It is argued that many men who have their money locked up in their business would—rightly or wrongly, and no matter under what guarantee—object to putting themselves in the hands of a bank, or to giving any form of security to a bank. If may be replied that the arrangement proposed would be a special one, made with the banks by the Government, and it would ensure that there would be no harassing by the banks. Nevertheless, account has to be taken of prejudice. Some business men would object, on any terms, to getting credit to any material extent from a bank in order to meet the levy. In such cases, the alternative is clear. Such persons would be allowed to pay the levy out of income by instalments, over a long period of years. The whole problem of men who have their capital locked up in their businesses is really a much simpler one than is commonly supposed, and is also a much smaller one than is commonly supposed.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

What security does the hon. Gentleman propose to get for allowing particular taxpayers to defer their liability to pay?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

That was dealt with last year in my speech. A Commission would be set up to adjudicate on these points. We had military tribunals during the War for military purposes, and we could now have tribunals to adjudicate in certain cases as to the most proper way of paying this levy.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

That was not my question. It was not who should adjudicate as to whether a man should be allowed to pay one way or the other, but when you allow him to escape the immediate levy, and to convert it into an annual tax, what security would you take that the tax should be paid?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

The reply to that is very simple. It would be done under the law of the land. So long as the man continued to earn an income, he would be obliged to pay out of income.

Photo of Mr George Younger Mr George Younger , Ayr District of Burghs

What is to prevent him from going bankrupt?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

You cannot under any scheme provide for every case, but such eases would be very exceptional. Surely the hon. Gentleman does not suggest the whole scheme should be vitiated because a very small number of people in private business might go bankrupt. That could be provided for by regulations laid down in an Act of Parliament, and there would be just as much security as you would get under the Income Tax scheme. The levy, as I say, would have to be met by individuals—not by limited companies. Limited companies are not touched by it, and much the greatest proportion of the trade of the country is carried on by limited companies. The number of private firms whose partners have all their money locked up in their business is very small. Apart from other securities outside their business, nearly all these people have, or ought to have, in view of the profits which have been made during the past few years, some War Stock with which to pay the levy or part of the levy. I may also add the Death Duty statistics show that the amount of the capital of the country which is locked up in the liquid capital of private firms is, proportionately, very small. It is, in fact, only about 5 per cent. of the capital of the country. However, in the case of these firms, it is not, for a moment, proposed to compel persons to pay, or toraise capital in order to meet the levy, when such an operation would cripple them and would be injurious to commerce and industry. The whole matter resolves itself into this: That, if a man cannot pay, or arrange to pay, in capital, or in so far as he cannot do this, he would be allowed to pay out of income, in one way or another, over a long period of years. The number of persons, however, who could mate out a case for paying wholly out of income would be small. The fourth method of meeting the levy without the realisation of securities is by payments in cash. Not very much would be done in this way. One of the objections urged against the scheme—and I rather think the right hon. Gentleman had this in his mind yesterday—is that there is not enough cash to do it, but I have already mentioned that the total amount of cash required would be small. Indeed, at any rate in theory, the whole operation could be carried through without any cash at all. Some persons, however, would no doubt decide to pay a part of the levy direct in cash, out of savings effected during the period allowed for the payment of the levy, and this would be a considerable time. Again, some persons would pay a certain amount in cash from deposits which they already had at the banks or elsewhere. In these two ways, a small amount of the levy would be paid in cash. By these four methods which I have now described, the whole of the levy could, as a matter of fact, be met without the necessity of realising any securities or of selling any property at all.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

Assuming a man's assets consisted, say, of a few alleged racehorses, and shares in a newspaper company, which he could not sell, would be then hand over to the Government shares in the newspaper company or one of his alleged racehorses?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

That would depend on whether they were preference shares or debentures and whether it was a good newspaper.

Photo of Mr Horatio Bottomley Mr Horatio Bottomley , Hackney South

What I had in mind was a most excellent one.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

That would possibly be in the list, and, if not, my hon. Friend, whose capital was locked up in private firms, would be able to pay out of income over a number of years. I wish, next, to touch upon two objections, one sometimes brought, and the other very frequently brought, against a Capital Levy. The first is this: It is argued that the business community will be injured, because private firms will no longer have the same amount of war stock to take to the bank as security to obtain credit with, in view of the fact that the levy wall wipe out£6,000,000,000 of debt. I would point out that this objection does not apply in the case of limited companies because their total assets will not be diminished by the levy. The reply to the objection is a very complete one. It is this: That, the practice of using war stock as security with the banks for obtaining credit, continues or even increase the evils of inflation. Whatever this operation of obtaining credit by war stock may mean for the individual trader, it is, on balance, a bad thing for the country as a whole, because it means that credit is being increased without any corresponding increase of commodities. The effect, therefore, is to keep prices up, or even to drive prices up higher, and the result, as I have said, will be to continue the evils of inflation—and many of our present difficulties are due to inflation.

The second objection which the Chancellor of the Exchequer made yesterday, and it is very frequently made, is that a capital levy would discourage savings and penalise thrift. The extraordinary thing about this argument is that those who use it apparently do not realise that a high Income Tax over a long series of years discourages savings and penalises thrift, and to a much greater extent, in my opinion, than a capital levy. Savings are penalised under the Income Tax scheme because a man has to pay Income Tax on the interest of his savings, whether the savings are past or future. It surely discourages savings if a man has to pay 8s. out of each £—and in some cases, with Super-tax, it will be distinctly more than 8s. in the £—out of the interest on his savings to the Government. Moreover, it is virtually certain that, after the Royal Commission, which is inquiring into the Income Tax has reported, the differentiation which at present exists in the Income Tax on earned and unearned incomes will be increased, and that unearned incomes will have to pay a still heavier rate.

Photo of Mr Arthur Samuel Mr Arthur Samuel , Farnham

Does the hon. Member bear in mind that most of the income now called unearned income is earned savings?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I am using the current phrase as regards taxation. The Committee perfectly well know what I mean. Unearned income will have to pay a higher rate. Personally, I think it is really a sound principle, but if this is increased it will mean a further penalisation of savings. For my part, I can scarcely conceive of a greater discouragement to saving than that, for a long period of years, a man will have to hand over to the Government nearly half, and, in some cases, more than half of the interest on his savings. The effect of this will be that many persons will say, "It is not worth while saving. I may as well use the money when I have got it, and then there will be no Income Tax to pay on it. I may as well buy pictures and jewellery, and so forth. Then, at any rate, I shall have something to show for my money, and nearly half of it will not be taken by the Government, which is the effect of the Income Tax scheme." It seems clear, therefore, that the high Incom Tax scheme, far from encouraging saving, will lead to extravagance and to luxurious living, and to locking up capital unproductively. This is most important. I submit that, between a Capial Levy and a high Income Tax, and their effects on saving, the balance of argument lies in favour of a levy on capital, which is a special operation, carried out for the purpose of dealing with a quite abnormal problem.

It is objected further, however, that a capital levy would operate inequitably between those who haves saved and those who have not saved. But precisely the same objection applies to the high Income Tax. If a capital levy is unfair, so is a high Income Tax unfair. Why should a man who has saved be obliged to hand over nearly half, or, with Super-tax, more than half, of the interest on his savings to the Government, while the man who has not saved has had the use of his money all for himself? This whole point, how ever, is greatly exaggerated. Generally speaking, there is a relative proportion between a man's capital and his income. There are, no doubt, exceptions, but they are much fewer than is commonly supposed. However, in the case of a man who has had a large income over a series of years, and who is found to have only a small capital—that is, a man who, presumably, has saved little—a provision could be made for the levying a special Income Tax where there is a great disproportion between income and capital. This is a perfectly practicable proposition, because the Government has all the Income Tax returns for many years back, and where there is a great disproportion between income and capital, a special Income Tax could be levied; and in this way, again, the capital levy scheme would work out more equitably than the high Income Tax scheme. Therefore my reply to the right hon. Gentleman is that, under a capital levy scheme, you can get at these people, whereas under a high Income Tax scheme you do not get at them to anything like the same extent.

I wish next to restate the whole problem of the war debt in a somewhat different way, and to compare, in some other respects, the capital levy scheme with the high Income Tax scheme. The war debt, as I have said, is likely to amount to £8,000,000,000. Of this sum, much the major proportion has been subscribed from profits made out of current production during the War, and because of inflation and high prices the war debt is very much bigger than it ought to be. If prices and so forth had remained normal, the debt, instead of being £8,000,000,000, would have been £4,000,000,000 or £5,000,000,000. However, the sum is £8,000,000,000, and this has mostly been subscribed out of war profits, which have been inflated because of high prices, and the Government has to pay 5 per cent. interest on this huge inflated sum of £8,000,000,000, and 5 per cent. is nearly double the rate of interest which the Government used to pay before the War. The position, then, is that, on a debt which, because of inflation, is nearly double what it ought to be, the Government is paying nearly double its pre-war rate of interest. Nevertheless, the opponents of a capital levy say that the only way to deal with the problem is for the Government to go on paying this high rate of interest and gradually reduce the debt by means of a small sinking fund. That is to say, the country has to pay interest and has to pay off this huge inflated sum out of current production—because that is what it comes to—over a long series of years. I would like to ask hon. Members to consider carefully what this means.

It is virtually certain, as years go on, that prices will fall considerably from their present very high level. Therefore, all the time interest is being paid, and the debt is being slowly redeemed by means of a small sinking fund, the money paid to war-debt holders will come to have greater and greater purchasing power because of falling prices and may, indeed, in course of time, come to have double the present purchasing power. Nothing of this kind occurred with the borrowings made for the South African War. The rate of interest then was under 3 per cent., and there was practically no inflation and no material rise in prices. If the rate of interest during this War had been 3 per cent., and if there had been no material rise in prices, and the debt had, therefore, been, say, £5,000,000,000, instead of £8,000,000,000, then, under these circumstances, the charge against the national expenditure for interest on the debt would only have been £150,000,000, instead of £400,000,000. All these various considerations constitute, in my view, the strongest reasons for reducing the debt, and reducing it quickly. My argument is that, as we have borrowed these enormoussums at a time of inflated prices, we ought to liquidate the debt during the time when prices remain, more or less, inflated. If we wait until prices have fallen, perhaps, 50 per cent., when we come to redeem the debt we shall be repaying a sum which in real values will represent twice the sum we have borrowed.

If I may illustrate this point in a homely way, I would put it like this: During the War, a man has lent one pair of boots to the Government, but later on, when prices are lower and the purchasing power of money is greater, it may be necessary, in order to redeem the debt, to return the equivalent of two pairs of boots. I contend that it is better to deal with this matter when it is only necessary to repay one pair of boots. But such a speedy liquidation of the debt can only be accomplished by a capital levy, and I wish again to make it clear that in what is proposed there is no confiscation and no breach of faith. The Government has undertaken to pay 5 per cent. interest on the debt. Let me, however, once more emphasise that the only fund out of which the Government can pay the interest and redeem the debt is from taxation, and, therefore, I contend it is better to pay off a big portion of the debt quickly by a levy on capital. I want to make it plain, however, that, under a capital levy, no man will be compelled to surrender War Stock before the date when the stock is due. In what is proposed there is no compulsion and no breaking faith. Large amounts of war debt, as the Chancellor of the Exchequer pointed out yesterday, fall due during the next three years, and a capital levy will enable the Government to avoid the necessity of renewing these loans. Again, as regards the 5 per cent. War Loan, 1929–1947, and National War Bonds, due 1927–8–9, there will be no breaking faith. Holders will be given the option of having their stock, or a portion of their stock, paid off earlier on advantageous terms. There would be no compulsion. The whole operation would be entirely voluntary, but most of those concerned would be glad to take early repayment on good terms. Further, it is not proposed to pay off the whole debt, and, therefore, those persons who prefer not to take repayment would continue to hold that part of the debt which, in any event, will remain in existence.

Now let us consider the alternative method of dealing with the War debt by means of the high Income Tax scheme. It is said that the only course to be pursued is to pay the interest and repay the debt over a long period of years out of production and increased production. I wish those who constantly urge this proposal, as if it were the last word on the subject, would consider carefully what, exactly, is involved in it, and how it will work out in practice. We want increased production. It is a good thing. But the workers have been promised, and they must get much the major portion of the fruits of increased production in higher wages and shorter hours. Both these have been promised them in order to raise their standard of life. These are the inducements which are held out to them to increase production. Therefore, this fund is not really available for debt purposes. The workers are certainly not going to increase production to pay interest on and to redeem an inflated war debt which is nearly all held by the wealthy classes and war profiteers. Moreover, even if increased production were available for debt purposes—and if faith is to be kept with the workers I submit it is not—let hon. Members consider the effect of increased production in relation to the problem of the debt under the Income Tax scheme. The more production is increased, the more prices are likely to fall. As prices fall, the tendency is for profits to fall. But—and, Mr. Whitley, we are now really coming to the crux of the whole matter—the Income Tax has always to be paid in cash made out of current profits. If, in the course of years, prices go back to the pre-war level, it may be necessary to double production in order to make the same profits for Income Tax purposes as are made now by half the production. Perhaps that, is putting the proposition in the extreme way, but there is a good deal of truth in the argument, and it is bound to apply, if not completely, at any rate to a considerable extent. I ask this question: Are manufacturers and business men, despite increased production, going to be able during a period of falling prices—and that period may last for many years—to make the same amount of profits in money—that is, the same profits for Income Tax purposes—as they do now? In my view it is quite certain that they will not during the period of falling prices, and however much production is increased, be able to make the same amount of profit as they do now, more particularly as increased production is mortgaged for higher wages and shorter hours for the workers.

What follows from all this? It follows that, to secure for the Exchequer the same amount of revenue that can be got from the Income Tax now, it will be necessary, as prices and profits fall, to raise the rate of Income Tax again and again. In order to get the requisite revenue for the Exchequer the Income Tax will have to be raised, and raised as time goes on, considerably above 8s. in the £. In my opinion the whole scheme will break down. It cannot be done. The Income Tax and other taxes will have to be put up to a level which will strangle industry and which will have the most serious effect upon the whole condition of the country and of the working-classes. The Income Tax scheme may be tried. I gather from yesterday's speech that it will be tried. The Chancellor of the Exchequer may be able to make shift by means of it, even for a few years, but it will break down and the country will be driven to a levy on capital. But, as I have already shown, it will be much better to have a levy on capital now. It will. be much better to repay these enormous sums, borrowed at a time of inflated prices, while prices remain more or less inflated.

I have pointed out that, as a result of a capital levy, the general rate of the Income Tax could be reduced from 8s. in the £ to less than 3s. in the £. It is objected, however, that there is no guarantee, after the levy has been made, that the Income Tax will remain at the lower level. As a matter of fact there is no guarantee that it will remain at the higher level of 8s. in the £, and I have just contended—and I do not think it can be denied—that it is almost certain, if you seek to raise an enormous amount of revenue from Income Tax, that because of falling prices the Income Tax will, as time goes on, have to be raised considerably above 8s. in the £. This whole objection, however, that the Income Tax should not be reduced by a levy on capital lest it might be put up again to some extent, is really not valid, because apparently it means that no War Debt should be paid off at all and the Income Tax should always be kept at a high level. When an argument is fundamentally unsound, it is, perhaps, not necessary to spend much time in refuting it; but, looking more closely at the problem, I would point out that the major portion of the Income Tax is for the purpose of paying interest on War Debt. Once the debt is reduced by a levy on capital there it no need to put up the Income Tax from the lower level for the purpose of paying interest on the War Debt. There is no need to levy Income Tax for paying interest on debt which no longer exists. If, after the levy, the Income Tax is raised somewhat, it would in the main only be for the purpose of social reform.

As far as I am concerned, I am all for social reform, and I hold that it is a very good investment for the wealthy classes and for the country. It pays in the end, and it pays the wealthy classes in the end. The people are not going back to pre-war conditions. Nearly all Members of the House are pledged to a big expenditure on social reform, and, if they are to keep their pledges, it behoves them to take such steps as will make a big expenditure on social reform possible. If the Income Tax is to be 8s. in the £, or higher, not much will be done in the direction of social reform, because the Chancellor of the Exchequer will say that he cannot raise the Income Tax still higher, and the wealthy classes are likely to find themselves in a difficult, not to say dangerous, position. It is, indeed, true to say that the absence of a capital levy will prevent much social reform, and this is not desirable either in the interests of the wealthy classes or of the country as a whole.

Two or three words, in conclusion, on the point taken up by the right hon. Gentleman yesterday. That is the objection to a Capital Levy on what I may call psychological grounds. It is said that a Capital Levy may not discourage saving any more than Income Tax, but that people will think it will. Again, it is said that a levy may not take capital out of businesses, but people will think it will, and a levy will have an unsettling effect on trade, and will damage credit. In my view, far from damaging credit, a Capital Levy will help credit by showing the financial strength of the country, and by demonstrating that the huge incubus of the War debt can be supported and dealt with. A Capital Levy is not a sign of weakness, but of strength. It means that the position is being faced squarely and being dealt with boldly. Again, one result of the operation would be that, after the levy, taxation would be much lower than would otherwise be the case, and therefore a country which has a capital levy would be advantaged in competitive power in international trade. It is likely that some countries on the Continent will have a capital levy, and it would, therefore, be well for us not to be behindhand. This is a point of practical importance. If a Capital Levy would be so disastrous, how is it that a scheme has been prepared by the French Government? Arguments based on psychological considerations must always be of questionable soundness, but if these considerations are to be brought into the matter, there is, in my opinion, one overwhelming reply which outweighs all such objections, and that is, that unless there is a capital levy, the workers and returned soldiers will think—and, in my view, they will be right in thinking—that they are helping to pay this huge amount of interest on the debt, and they will ask again and again: "To whom is all this money being paid?" The answer can only be: "The money is mainly being paid to wealthy men, most of whom, being above military age, have not fought in the War, but many of whom have made huge profits out of the War." I do not think this is a position which can be maintained over a long series of years.

We are faced with grave industrial unrest. I cannot conceive of anything which is more calculated to tend in the direction of producing a better condition of things than that the wealthy classes should now, without delay, and without compulsion, shoulder this huge burden of the War Debt and get it out of the way. The psychological benefit of such a proceeding might be incalculable. There are many other considerations in favour of a capital levy which I cannot touch on in this speech, but I will take one of them in conclusion. It is this: Most of the capital of the country is owned by older men, and therefore most of the levy will be paid by men who have not fought in the War, and the levy would do something to make conditions approximate a little more nearly to that ideal of equality of sacrifice of which we have heard so much and seen so little. Unless a levy is made, the high Income Tax which will be necessary will be a bigger burden on younger men than on older men. Most younger men have already, quite apart from their immense hardships in the Army, lost two or three of the best business years of their life. Their careers have been gravely prejudiced, and they will start again at a great disadvantage in the work of building up businesses and saving capital. This is inevitable, but if, in addition, they have to bear their proportion of a high Income Tax, they will be still further handicapped in securing an income and making a position. A little reflection will show that a high Income Tax, generally speaking, and despite abatements, will be a heavier burden on younger men than on older men, whose position is established, and who have already got their capital. Clearly it has been easier for the older man to accumulate capital—for they have done it when the Income Tax has been low—and in order that the younger men may have anything like the same chance, the Income Tax should be made as low as possible for them also. This can only be accomplished by a capital levy. Older men keep passing away, and, as years go on, the simple truth is that, under the high Income Tax scheme, much of the cost of the War will fall on men who have done actual fighting. They will not only have fought for their country, but they will be called upon to pay a big part of the bill. This I hold to be most unjust. Finally, all schemes of taxation and finance should be practicable, equitable, and economically sound. I submit that the scheme which I have outlined is practicable, is equitable, and is economically sound, and, I would add, inevitable, for to meet a financial problem of unprecedented magnitude and gravity, a capital levy, combined, as it would be, with a large and immediate reduction in current taxation, possesses a balance of net advantages over any alternative plan that can be proposed.

Photo of Sir John Marriott Sir John Marriott , Oxford

I think there will be grave differences of opinion as to the validity of the argument which the hon. Member has just addressed to us. I do not, however, think there will be any difference of opinion as to the very great ability with which the hon. Gentleman has marshalled his arguments, and the great lucidity with which he has explained a very complicated scheme, and for that lucidity I am particularly grateful. I think, too, that he has been successful, at any rate in the earlier part of his speech, in avoiding any appeal to prejudice or passion, although I do not think he was quite so successful in that respect during the concluding portion of his speech. On the whole, however, the attacked this business proposition from a business point of view, and it is from that point of view that I desire, in a few words, to examine the, argument which he has laid before the Committee. Before I pass to this very thorny problem of a levy on capital may I be permitted to say a word in warm congratulation of the Chancellor of the Exchequer on the whole Budget which he has introduced? It seems to me that this Budget is conceived on bold and broad and simple lines, and that the Chancellor of Exchequer has steered his way with conspicuous success between the Scylla of commonplace and the Charybdis of sensationalism. If the right hon. Gentleman has sinned in regard to the Estate Duties or the Spirit Duty, at any rate, he has had the courage to sin boldly.

In my view, his Budget will take its place among the historic Budgets of England, chiefly for one reason, namely, for the embodiment, as I hope it will be, in the Statute Law of this country of the principle of Imperial Preference. I am not going to develop that point, but I do think that the Chancellor of the Exchequer is to be very warmly congratulated upon his decision to disentangle the question of Empire trade partnership from the question of fiscal and revenue reform. I think it is a very great pity that these two questions were originally associated. I believe that if this question had been treated and discussed apart it would have been better for the solution of the problem of Imperial union. I think it is also bare justice that the Imperial Parliament, in accepting this principle, as I hope it will, should acknowledge not with shame but with some measure of repentence that we are now only following the example patriotically given to us by the great Dominions of the Crown. It is now twenty-two years since the Dominion of Canada gave a lead to the Mother Country and to the other Dominions on this question of Imperial Preference. During the next ten years that lead was followed by South Africa, New-Zealand and Australia, and now here after twenty-two years, taught by the experience of a terrible war, we have tentatively and tardily accepted this principle. But still we have accepted it, or at least I hope we shall accept it, and I believe it will mark a new departure in the relations of the whole British Commonwealth.

I had intended addressing to the Com-a few remarks upon certain inequalities with regard to the Income Tax law administration, but I gather that on that question the right hon. Gentleman preserves an open mind and he has promised to appoint a Commission. There is, however, one question upon which he does riot preserve an open mind, and that is the question which was brought forward by the hon. Member for Penistone (Mr. Arnold) to-night. I am very thankful that the present Chancellor of the Exchequer does not preserve an open mind on that question. The hon. Member has contrasted the attitude of the present Chancellor of the Exchequer with that of his predecessor. I am not concerned with that, but I am thankful that we have a Chancellor of the Exchequer now who has not an open mind on this question.

Let me now turn to the very skilful and detailed argument which has been laid before the Committee by the hon. Member for Penistone. I tried to follow his argument with very great attention, and I think the Committee will agree that I am doing no injustice to the main portion of his argument if I say that the greater part of it rested upon the supposed advantage of this capital levy as opposed to a high Income Tax. The greater part of the case of the hon. Member opposite really rested on the supposed advantage of his scheme, as opposed to the maintenance of the imposition of a very high Income Tax. He suggested this as the only practical alternative to an Income Tax which he put tentatively at 8s. in the £.

I am perfectly prepared, for argument's sake, to accept one part of his Argument. I think the hon. Member suggested that a 25 per cent. levy on capital would work out to the advantage of the individual taxpayer as compared with an 8s. Income Tax. I have worked out very rapidly a simple calculation. Take an estate of £100,000 invested in War Loan at 5 per cent. If you take the Income Tax at 8s. in the £, that would mean that the possessor of that estate would enjoy a net income of £3,000 a year; I think my figures are correct. If, on the other hand, you deduct, as the hon. Member opposite wishes to deduct, a capital sum of 25 per cent., that I admit would, in conjunction with a 3s. Income Tax, leave £3,187 10s. for the possessor of that capital. I admit that there is a very small balance in that transaction in favour of the course recommended by the hon. Gentleman opposite, but allow me to point out that the whole of the argument of the hon. Member depends on the acceptance of four assumptions. Firstly, that his capital revenue would not exceed 25 per cent.; secondly, that it would never be repeated, that it is going to be a clean cut; thirdly, that if you adopt this expedient you will be able to reduce your Income Tax considerably, I think he said to 3s.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

From 8s. to less than 3s.

Photo of Sir John Marriott Sir John Marriott , Oxford

Yes; to less than 3s. in the £ and, fourthly, that that reduction will be a permanent one. I do not think anyone will deny that the hon. Member's argument rests on those assumptions. Now I ask who is there in a position to make this bargain with the taxpayer? Is the Treasury in that position? Is the present Government in the position to make this bargain, or is the present House of Commons in that position? No; nobody is in a position to make this bargain, and if there is one thing more than another certain it is that if this levy is to be successful—I am the last person to admit that it is possible that it will be successful, but I will admit it for the moment—it will be repeated again and again on a more ambitious scale.

One of the Reviews a day or two ago admitted frankly that many of the arguments against this levy would be cogent if not conclusive if we were obliged to regard it as recurrent, and it was argued that one of its chief advantages would be that its very effectiveness will make its recurrence unnecessary. I think the writer of that article must either be very remote from political affairs or not a very close observer of human nature. Is there anyone simple enough to suppose that if this levy proves efficient for the immediate purpose the hon. Member has in view, that it will not afterwards be demanded for the financing of a thousand fads. There can be no finality in it, and the hon. Member is trifling with the common sense of the House and the country if he suggests that the levy will be a final or complete process in itself. I do not think some of his immediate friends would even suggest that it would be final. Therefore the first and fundamental assumption on which the whole argument of the hon. Gentleman opposite rests seems to me untenable.

8.0 p.m.

I pass to his second point, namely, that his proposal will enable a large reduction to be made in the general rate of the Income Tax, to something under 3s. in the £. Towards the end of the speech the hon. Member developed an argument which to my mind was a very curious one, namely, that the older men who have not fought in the War are to pay a levy in order that the younger men who have fought may start or restart their industrial careers without the crushing burden of an 8s. Income Tax. Who is going to guarantee in perpetuity a reduced rate of Income Tax? Certainly the hon. Gentlemen opposite will not give such a guarantee. Not long ago I read in the "Manchester Guardian" an article by a distinguished member of the Socialist party. I think it was Mr. J. A. Hobson, who said: I have been accused of advocating a capital levy as an alternative to a high Income Tax. What did Mr. Hobson say? He said: I want them both, The hon. Member now proposes it as an alternative, but I am not quite sure, if he gets what he wants, that he will long propose it as an alternative. No one is in a position to give a guarantee, and, without an absolute guarantee on both these points, the whole of this portion of the argument of the hon. Member falls to the ground. So much for the relief of the wealthy taxpayer for whose interests the hon. Member opposite is extraordinarily solicitous. He is so concerned for the wealthy taxpayer! I have attempted to meet him on that particular ground. I pass to his next great argument, namely, that a high Income Tax is a fatal deterrent to the re-starting of our industrial concerns. On that point we want to be a little careful to discriminate between existing and established concerns and concerns which have yet to make a successful start. Well-established concerns are already taxpayers, and the argument which I have already developed applies to them. The wiping out of the State's indebtedness by means of a capital levy as proposed by the hon. Member looks at first sight as if it ought to be favourable to new or young businesses. He made great play with that argument. Let me examine it for a minute or two a little more closely. Would it; be the advantage which he supposes? I ask the Committee to consider this point. What is it which these young businesses, apart from brains and enterprise, will most need? It is capital—abundant and cheap capital. Where are they to get it? Does anyone imagine, if this simple and alluring expedient be adopted—I must not call it an act of repudiation, because I do not want to be in any way provocative—that anyone will take the trouble to save a sovereign, or even a shilling, again? The supply of new capital will be dried up at the source. No one will ever take the trouble to save a shilling again.

Colonel THORNE:

What are they going to do with it?

Colonel THORNE:

Then it will find work.

Photo of Sir John Marriott Sir John Marriott , Oxford

It is very much better that they should save it in the interests of industrial economy as a whole. It is not the people who spend, but the people who save, who keep the industries going. Let as look at this matter for a moment, as the hon. Member invited us to do, from the point of view of the Exchequer. Let us suppose that we are able to do what he wants and are able to conscript capital, or, if I may not use that term, make a capital levy of 25 per cent. Consider how such a levy will react upon that current revenue which the hon. Member wants to raise to £900,000,000 a year. By cutting off your capital sum you will, pro rata, diminish the yield of your Income Tax from so-called unearned income.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

That is perfectly true, and it is all taken into account in my calculation. I have allowed for it.

Photo of Sir John Marriott Sir John Marriott , Oxford

I am very much obliged to the hon. Member for the endorsement which he has given to one sentence in my argument.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

It is a matter of fact.

Photo of Sir John Marriott Sir John Marriott , Oxford

It is a matter of fact, and therefore I ventured to state it as a fact, but I am very much obliged to the hon. Member for his endorsement even of a fact. You will pro rata diminish your Income Tax yield. That is not all. Has the hon. Member also taken into account that you will pro rata diminish your yield from those Death Duties to which so many people are attracted? You cannot have it both ways. You cannot conscript the same capital both during the lifetime of its owner and also after his death. If you take it in the form of a levy on the capital of the living, you cannot take it in the form of a levy on the capital of the dead. You much choose between them. You cannot have it both ways. The Committee may think that I am venturing on rather a double-edged argument in this respect. I am sorry not to see in his place one of the leaders of the Opposition who spoke first this afternoon (Sir D. Maclean). He was very much attracted by the argument that after all there is no difference in principle between a levy on the capital of the living and a levy on the capital of the dead. He argued that if you can levy this tax upon the capital of the dead without any injurious effect upon the revenue you can levy it on the capital of the living. I am perfectly prepared to admit that is quite true if you accept two assumptions: First of all, that man is a purely rational animal, and, secondly, that everybody dies simultaneously.

Colonel THORNE:

If we were all dead there would be no taxation.

Photo of Sir John Marriott Sir John Marriott , Oxford

Probably the hon. Member would survive in any case. I cannot imagine that even a levy on capital would kill him. If everybody were to die simultaneously, it would be just as difficult to levy the Death Duties as to have a tax upon the capital of the living. Again, if man were an entirely rational animal, the Death Duties would have just the same effect upon the accumulation of wealth as I believe this levy on capital will have. Here I admit you are up against psychology, and the hon. Member who introduced the question was very anxious to avoid that particular study. The Committee will observe that I have thus far gone with the hon. Member so far as to admit the possibility and the practicability of the proposal which he has made. But now I want for a moment to come to rather closer grips with the question, and I will invite the Committee to consider what is this accumulated wealth on which this levy can be made There is one indicative word in many speeches and writings on this subject. People talk about a "hoard of wealth" or a "hoard of capital." That is a word of very sinister association It conjures up the vision of some rapacious mediæval baron sitting on his money-bags, or some modern money-lender, or some wretched miser hugging his ill-gotten gains. If all the accumulated wealth were in gold or metal, a levy upon capital would be comparatively a simple process, but we all know that it consists of gold in the least degree. It consists of all sorts of things: houses, land, factories, shops, works, warehouses, stocks of every kind, implements, machinery, stocks and shares, certificates, and so on. The whole of this has been put at £15,000,000,000 or £16,000,000,000. That is the ordinary estimate, but it is pure guess work, and the first thing that you would have to do would be to value the whole of the accumulated wealth of the country. We heard yesterday from the Chancellor of the Exchequer himself that they have not found it very easy even to value the land of the country alone. I venture to tell the Committee that the valuation of the land is child's play as compared with the valuation of the whole of the accumulated wealth of the country. The hon. Member did not touch upon this point. The valuation would form a serious impediment in the way of the proposal which he has made. But let us assume that you have valued, and that you proceed to take the 25 per cent. which the hon. Member wants. The moment you proceed to lay a finger on this wealth, a great deal of it will automatically evaporate in your hands. You may value it by guesswork at £16,000,000,000 to-day, but a very large proportion of it will dis- appear the moment that you attempt to lay your hands upon it. I know that the hon. Member opposite, who has given a very great deal of thought to this subject, has various ingenious devices, and he mentioned several of them this afternoon, for avoiding this depreciation. He told us that some of it would be taken in cash. He did not lay any great stress on that, and I congratulate him upon his moderation in that matter. I do not think that he will get much of it in cash.

Photo of Sir John Marriott Sir John Marriott , Oxford

I did not misrepresent the hon. Member. I said that he did not expect to get much of it in cash, but he did say that he expected to get some of it in cash. I venture to say that it will be very little. He then went on to say that he would expect to get, though he would not insist upon it, a great deal of it in War Bonds—the cancellation of war stock. If you are really relying on this particular method of getting it, then it is nothing less than the repudiation of your debt, naked and unashamed repudiation. It has fallen to my lot in the last few years to go on many platforms and ask for the savings of many classes of people. I assured them that whatever happened their savings would be absolutely sacred and free from any possibility of cancellation or repudiation. But if this levy is really seriously proposed I shall feel I have got a good deal of money by false pretences. Then we are to have great facilities by banks guaranteed against loss by the Government, and we are to have a handing over of securities which it will not be necessary for the Government to realise. But I want to put this point to the Committee. If the Government do not realise the securities how will the holding of them reduce the debt?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

The Government does not continue to hold the securities. It exchanges them with War Stock holders, and having got the War Stock it cancels it. Many persons would be very glad to make the exchange.

Photo of Sir John Marriott Sir John Marriott , Oxford

That is another form of realisation.

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

No, it avoids realisation.

Photo of Sir John Marriott Sir John Marriott , Oxford

On that point I venture respectfully to differ from the hon. Gentleman I say if the Government do not realise it would simply be another means of raising the Income Tax. It would by the amount of interest reduce, not the capital value of the debt but the interest on the debt. You can only reduce the capital value by realisation in some form or other, and that is another and more objectionable form of raising Income Tax. If you levy you will compel sooner or later realisation, and compulsory realisation means certain depreciation. Who will buy securities or anything else of a permanent character with this menace hanging over the whole institution of private property? Let me be scrupulously fair in this matter to the hon. Gentleman. Some forms of wealth are to be exempted from the levy. I notice in a scheme put forward in a pamphlet by the Workers' War Emergency National Committee it is proposed to exempt two forms of wealth—that which is in the Savings Bank and that which is invested in Co-operative Societies. But why this particular form of discrimination? Why are you going to exempt £100 in the Savings Bank and take the £100 in War Loans? Still more, is it really fair or just to penalise the man who saves compared with the man who spends. Take the cases of three professional men each earning £1,000. One earns £1,000 and saves and invests two hundred a year out of it; the second spends his income right up to the hilt; and the third spends £800 and insures his life with the rest. These are three, typical cases, and I want to put this question seriously to hon. Members opposite. Are you going to treat the life insurance policy as capital and make it subject to this levy?

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I do not think we can carry on this by questions across the floor of the House. I am prepared to deal with it, but it is a long order.

Photo of Sir John Marriott Sir John Marriott , Oxford

Still, it is important as bearing on the question of equity with which I am dealing. I will not press the hon. Member for an immediate reply, but many of his friends will have an opportunity later on—

Photo of Mr Sydney Arnold Mr Sydney Arnold , Penistone

I cannot deal with it in a sentence.

Photo of Sir John Marriott Sir John Marriott , Oxford

I put it to the hon. Member's friends as a point on which the Committee would like some enlightenment. It is a question of equity. If you are going to treat the life insurance policy as capital you will have to face a big outcry. If you are not, how are you going to justify the discrimination between the man who saves £200 and invests it and the man who uses it in insuring his life? And still more, why are you going to penalise the man who saves £200 as against the man who spends his income up to the hilt? Which is the better citizen? You are treating as the worst citizen the man who is really making a contribution to the commonwealth. Just one word more. I have already detained the House, not so long, perhaps, as the hon. Member who preceded me, but longer than I have any right to do. I will only add a word or two in conclusion. This is the point which I would most earnestly and most respectfully press, not only upon hon. Members opposite and upon the Chancellor of the Exchequer, but, if my voice can reach so far, on the country as a whole and on every individual taxpayer, man and woman, throughout the country. Of all questions of current finance, the most absolutely fundamental is this: Do you or do you not believe capital is essential to industry and production? I want everyone to answer that simple question for himself. I am sure that the hon. Member for Penistone will answer it in the affirmative. I am certain of it. Then if capital be essential to production, how are you going to get capital? Can any human being suggest any other method of obtaining capital than the, if you like, autiquated and old-fashioned method of offering some inducement, some reasonable inducement, to saving and to thrift? There are two processes involved in the accumulation of wealth—of wealth which is destined to become capital. First it must be produced. Hon. Members will not deny that, and that is the only proposition I am inviting their attention to at the moment. I repeat they will not deny that wealth must be produced. But will they admit that the producer must be, by some means or other, induced to abstain from the immediate consumption of the wealth which he has produced? These are two questions to which I would like an answer.

Is there any other way? Some hon. Members may say there is, and may mention taxation. But can you get capital by taxation? I admit that by taxation you can prevent the consumption of wealth after its production, but you cannot by taxation or any other method compel the production of wealth. You are already by your existing system of taxation—and this is a point common to myself and to the hon. Member for Penistone—very seriously discouraging and penalising the habit of accumulation in the country. The man who is absolutely and directly engaged in production may out of sheer enthusiasm for his job scrape and save every penny he can for the development of his business. But I beseech the Committee to remember that the big capitalist employer is very rapidly disappearing from this country. The capital for your big industries is supplied for the most part by your small investors, by persons who are not even remotely concerned in the business itself, and it is these small investors that you have to encourage to save and to postpone the gratification of their immediate appetites in the hope of the peaceful enjoyment of leisure later on. I hope we may soon see such a reform of the Income Tax laws as will afford that encouragement. Still more earnestly do I hope that the Government, the House, and the country will turn a deaf ear to the seductive arguments advanced by the hon. Member opposite. I believe those arguments to be seductive. I know they are seductive. They have been put forward this afternoon with conspicuous ability. But, though seductive. I believe them to be emphatically fallacious, and I trust that the House will, on the contrary, endorse the view I have endeavoured to submit. I know that my view is hopelessly old-fashioned compared with that of the hon. Member opposite. That does not trouble me in the least. It means that the argument has stood the test of time. I am certain that, if reason and not prejudice be allowed to prevail in this matter, it will continue to stand that test. I hope the House will not only repudiate the views of the hon. Member opposite, but will repudiate them with emphasis and, so faras it can, with finality, and for this reason: I believe that for the timidity of trade which we are all deploring to-day and for the tardiness of our industrial recovery there are all sorts of complex reasons, but the essential reason is lack of confidence. What we want, above all, is the restoration of that confidence. Especially do we want to offer every possible re-assurance to those who, even though their motives are purely self-regarding, are by thrift and the accumulation of capital performing a real service to the commonwealth.

Photo of Mr Alfred Short Mr Alfred Short , Wednesbury

I feel sure that the Committee will agree when I say that we have had very interesting and illuminating arguments advanced by the two last speakers from opposite points of view upon the very vital question of the imposition of a capital levy. I have no desire to traverse the same ground, but I may say that the Labour Party view tins proposal with favour because they are inclined to the opinion that it will provide a reasonable and justifiable method of securing thy return to the coffers of the State of a large measure of that enhanced wealth which has been secured as a direct result of the War and of the operations arising out of the War. I have no doubt that when propositions of a novel and original character have been placed before this House in the past there was the same conflict of opinion, the same doubts and suspicions, thrown upon their efficacy and the possibility of their bringing the due reward suggested by their supporters. But subsequent events have transpired which have proved the doubts and suspicions to be false, and we have frequently seen the adoption of these novel and original proposals which have become part and parcel of our system of taxation. I do not claim to be conversant with all the intricacies and complexities of finance, the ramifications of which in these days have passed beyond the confines of our country and have entered the arena of international finance. But finance, after all—a sound, sane system of finance—basedupon the ability to pay—a system which does not lower the standard of living and which does not undermine the standard of subsistence of the humbler classes of the community—is the basic foundation of our national prosperity. Without that solid foundation in finance I am afraid it will not be possible for this or any other Government, no matter what its complexion, to face with equanimity either our financial commitments on the one hand, or, on the other hand, those grave social problems which confront us and which have been brought to our observation during the lifetime of the present Parliament. Energy, good will, unity of purpose. co-operation—all these things are fine in themselves, but, after all, we must have a sound system of finance, and that sound system of finance should be based upon a sound system of taxation. If we are going to face these problems adequately and effectively, I cannot foresee any shrinkage in our financial commitments in the future.

Reference has been made to economy. It is not for me to say one word in depre- ciation of the value of economy in these days. I believe that economy on the part of the Government and on the part of the individual are essential in view of our commitments. But if it is suggested by this Government that economy should be practised to the extent of delaying these great measures of social reform, if these great social sores upon the body politic are not going to be quickly and effectively dealt with, if we are not going to remove those vast injustices and evils which have so long sullied our national life and degraded our people, I am confident that the people of this country and we on these benches, will not tolerate economy of that kind. The opinion has been expressed in some quarters that there are great reservoirs of wealth, unlimited in extent. I would only say that the War has brought to the notice of the people of this country extraordinary manifestations of wealth of which they had little knowledge.

Great reservoirs of apparently hidden wealth have been disclosed, and, in addition, we are satisfied that the War itself has led to a vast increase in the private fortunes of individuals. Whatever may have been the policy of Governments in the past, these things have proved conclusively to the people of the country, to the thinking portion, at any rate, of our community, the insincerity of Governments in the past so far as finance is concerned. Therefore, if economy is to be practised, it will have to be practised at the expense of the well-to-do, and not at the expense of the humbler classes in the community, for whom we particularly speak from these benches. I believe myself that the day is fast approaching when the idle rich who have lounged through life and who have been exempt from wealth production, and who have battened upon industry and in too many cases have scoffed at the sordid miseries of the wage earners, will have to go, for I believe that society will not tolerate what John Stuart Mill termed the social evil of a non-labouring class, whether that non-labouring class be at the bottom of society or at the top of society. Reference has been made by the right hon. Member for the Spen Valley Division (Sir T. Whittaker) to a criticism uttered by the Leader of the Labour party, and he suggested that wealth was the product of the energy, the foresight, and other conditions associated with captains of industry and employers of labour. He appeared to fail to recognise even the services of the labourer in this connection, and to demonstrate and to justify his arguments he quoted the name of an eminent captain of industry who, at any rate, does occupy a position of eminence in his attempt to do something for his workers other than bleed them. I would recall to the House and to the right hon. Gentleman, if he were in his place, that the great mass of the wealth which those people enjoy and which we have noticed during the War has largely come as the result of paying inadequate wages to the workers of this country and through not rewarding thorn adequately, effectively, and sufficiently for their labour.

In my own Constituency in 1913 the standard rate of wages for labourers was 18s. per week and for eight weeks those men, with their families dependent upon them, went out on strike to secure an increase of a few shillings per week in those wages. I also recall that in 1911 and onward over 100,000 railway men in this country received less than £1 a week. Had the exceptional profits and extraordinary wealth of private capitalists and employers of labour been used as it ought to have been, to provide better wages and better houses and better facilities in the amenities of life, it would have been more creditable to them, and this country would have been richer and better so far as its human population was concerned. The same right hon. Gentleman also referred to the fact that the wages of the workers had increased. But the wages during the War have not increased in proportion to the increased cost of living. He complained also that the well-to-do had not doubled their private fortunes during the period of the War. We have statistics and evidence which prove conclusively that if during the period of the War they have not doubled they have increased to an extraordinary extent their wealthy holding. I find from the latest Return of the Inland Revenue Department that there has been an increase in this country during the period of the War as compared with 1914 of persons who have an annual income of £100,000 and over. I find also that in 1914 there were 30,211 persons with an aggregate income of £244,169,134, and on 30th April, 1916, that number had decreased to 29,723, but the aggregate amount had increased to £247,257,124, and no matter where one turns one finds that there has been as the result of the War a great increase in the wealth of the wealthy classes of our community. I would also like to call the attention of the Committee to the fact that there are some 40,000 families numbering 150,000 persons enjoying incomes exceeding £2,500, and they draw in the aggregate £300,000,000, or one-tenth of the national production, and this class has been greatly enriched by the War. We have a second class in the community comprising some 3,000,000 persons, including their families, who enjoy incomes ranging from £130 to £2,500, and in the aggregate they draw £1,500,000,000. Then I find that the great mass of the community receive as their share of the total wealth of the country £1,250,000,000, somewhere about 15s. per week I should imagine. Even in this country at this time there are people ranging about £l per week. The Labour party does not suggest for a moment that the working men should not be taxed. We do not suggest that he should not pay his fair share of taxation. We stand for a direct tax upon income, with due regard to ability to pay and to the standard of life at the moment.

This it appears to me is a Budget in which privilege, monopoly, and wealth can find solace and comfort. It is a rich man's Budget. The captains of industry, who have done so well as the result of the War, find relief in the reduction of the Excess Profits Tax with a promise of its ultimate withdrawal. The well-to-do motorist finds joy and relief in the abolition of the Petrol Tax, the landowner and the land speculator in the condemnation of the Land Taxes and their remittance for consideration to a Select Committee. The Chancellor of the Exchequer repudiated the principle of the Excess Profits Tax, largely on the ground that lavish and wasteful expenditure by employers had taken place. This took place during the period of the War in which the Government had control of materials. Before anything could be done, if I am correctly informed, employers had received priority from some Government Department. Why was this lavish expenditure allowed? There is only one reason in my judgment, and I think in the judgment of those who have thought at all. It is that neither the employers for the Government were anxious that the real truth should be known regarding the actual profits made by these companies out of the War and the operations arising there from. The Chancellor of the Exchequer proposes to discontinue this tax, and, as far as I can see, indicates the setting up of no machinery which is going to prevent in the future a similar evasion and a similar failure on the part of the employers to recognise their obligations to the State. So far as the Labour party is concerned, we shall oppose the abolition of this tax, unless there can be provided an alternative and an equivalent tax to take its place.

The right hon. Gentleman (Sir T. Whittaker) stated that the workers of this country, now that they have to pay Income Tax, were crying aloud for relief. If that be so, there is justification for that attitude of mind. What is the value of £130 to-day? If one's income exceeds £130 one pays Income Tax on £10. What is the value of money to-day? It is less than half what it was in August, 1914. Consequently the imposition of Income Tax upon incomes of £130, coupled with the heavy incidence of indirect taxation upon tea, sugar, and the necessaries of the working-class home is too great, and has a tendency to lower the standard of life and the subsistence level of our people. Therefore, the Labour party, in harmony with the demands of the organised workers of this country, put forward a plea for the remodeling of the basis of the payment of Income Tax, and we think the amount should be raised from £130 to £250. Whatever may be said about this Budget, whatever may be its virtues and whatever may be its vices, the great outstanding feature is that the right hon. Gentleman has provided no means whereby those who have enriched themselves during the period of the War are going to disgorge their wealth. I believe he is evading not only a public duty but a very pressing demand which is made upon him by the people of this country. The Labour party will not be satisfied unless and until we can secure from the Chancellor of the Exchequer some indication that the Government proposes to recognise its responsibilities in this matter and to return to the people of this country that which is their rightful heritage, so far as the enhanced wealth of the country is concerned, arising directly from the prosecution of this War.

Photo of Mr Joseph Devlin Mr Joseph Devlin , Belfast Falls

I do not think the Committee will be impatient if an Irish representative intervenes in this Debate. It is rather a regrettable circumstance that on an occasion of this character, when there is to be placed upon the already overburdened shoulders of the Irish taxpayer an additional £10,000,000, we are practically unrepresented in this House. English Members may say that the fault does not lie with this House but with Ireland, but I think I need hardly enter into all the controversies which have taken place, not only during this Session but in previous Sessions, to prove that the responsibility for this somewhat extraordinary constitutional anomaly rests not upon Ireland but upon the Government of this country. We are in the strange, I might almost say the grotesque position that in this Empire, with its loud vaunted boast of freedom, Ireland only knows the principle of taxation without representation, because even when the old Irish representatives came here to Parliament our voices were practically silenced, and our votes wore rendered almost nugatory by the overwhelming vote against us, when we raised not only the financial but the political rights of our country. It seems to me rather a strange circumstance that the people of Ireland, continuously taunted by members of the Government and by their supporters in the country of having refused to play our part in the Great War, are now compelled to bear more than our share of the financial burdens of this War. I think there never was a grosser slander than to say that Ireland has not done her duty in this War. Her voluntary recruits rushing to the Colours when first the flag of liberty was raised on the plains of Europe, the superior courage of her soldiers, the splendid and impressive part they played in all the great battles, their record of courage, and of chivalry, will be justified and vindicated by history when the politicians who misrepresent and assail Ireland will be forgotten.

What do we find in this Budget? We find that the Chancellor of the Exchequer comes forward, and that practically the only commodities taxed are commodities which constitute practically the only really prosperous industries in three provinces in Ireland. The Whisky Duties and the Beer Duties will result in imposing upon Ireland an additional burden of £10,000,000. We are often told—I have listened to the taunt repeatedly not only from members of the Government but from Members in different parts of the House—that the only thing upon which Ireland can unite is in the attempt to rob the British Treasury. There seems to be a delusion existing in the minds of the people of this country that Ireland is a great financial drain upon this country and a burden upon the Empire. What is the fact? The total revenue collected in Ireland for 1918 was £26,865,000, while the total expenditure was £13,200,000. The revenue contributed exceeded the expenditure by £73,665,000, and now, with the new Spirit and Beer Duties, there is to be added to that excess of revenue over expenditure a sum of nearly £10,000,000, so that Ireland will pay as her contribution to the Empire, over and above the expenditure in Ireland, a sum of £23,000,000. In this country there has been vast expenditure, and colossal sums of money have been raised for the War, but this country has benefited by that expenditure. Ireland has practically got nothing in the way of the making of munitions. With the exception of whatever advantages gained to the agricultural community and the farming classes, the War was of no industrial or economic value to Ireland. The War must have been of great financial advantage to this country, according to the speech of the right hon. Member for Spen Valley (Sir T. Whit-taker). In the first portion of his speech he painted so magnificent a picture of the prosperity of this country owing to the War that I was inclined to interrupt him and to say, "If you are to draw a logical conclusion from your speech, the sooner we have another war the better for this country."

9.0 P.M.

He told about the boundless wealth of the working classes, though I confess I did not follow him there. The working classes have practically had their wages doubled, I understand, in this country, but, if they have, the essential commodities of life have been doubled in cost. There is not much advantage there. I think nobody will defend the conditions under which the workers lived in this country prior to the War. Does the right hon. Gentleman imagine, or does anybody imagine, that if there had never been a war at all that the wonting classes of England would have been satisfied with the prolongation of pre-war economic and industrial conditions for the toiling masses of this nation? Nothing of the sort. The right hon. Gentleman painted a picture of the magnificent prosperity and of the tremendous advantage the War has been to the working classes. I remember—I do not say it was the right hon. Gentleman, but many of his cult—that when the Old Age Pensions Bill was first introduced, and long before it became an Act of Parliament, which involved the raising of £25,000,000 to pay a weekly dole of 5s. to the wounded soldiers of the industrial war, for the purpose of bringing some light and brightness and comfort into the lives of the old men and women who had been the soldiers of industry for a period of fifty or sixty years, there was not a single Member of the type of the light hon. Gentleman, who did not almost howl with rage at the possibilities of the universal destruction that was bound to come to industry and capital if this sum of £25,000,000 was imposed as a burden upon the State. That old wheeze rang round this House, and round about this House, every time a single social reform was adumbrated by any Minister in those days, and yet the very men who told us that the structure of the British Empire would fall to pieces if this £25,000,000 was to be spent upon giving some measure of comfort to those who in their youth and in the fulness of their lives had built up the greatness, the power, and the industrial strength of this country, were the very men who, without any hesitation, voted £7,000,000 or £8,000,000 a day for the War, and did it light-heartedly. One lesson which we can deduce from the financial aspect of the War is this, that the nation which for five years has been able to bear the burden of a £7,000,000 a day war is anation which ought to be able to do something to improve the conditions of the people, give them better houses, better wages, better clothes, better conditions, shorter hours, and some compensation for the tribute they pay to the common reservoir of prosperity in this country.

We in Ireland are asked to bear an additional burden of £10,000,000 imposed upon us by an English Chancellor of the Ex-chequer, and by an English Parliament in which we have no direct voice or influence. [Laughter.] Well, at any rate, you have my voice. That is all I get out of the transaction. I am almost as unsuccessful in my Parliamentary sphere of operations as the hon. and gallant Gentleman (Brigadier-General Croft). So far as results are concerned we may constitute ourselves as the twin brothers of the triumph of Parliamentary failure. Where do we stand in this matter? In the first place, I deny the right of this Parliament to tax Ireland at all, and I rise to protest against this Parliament taxing Ireland. This Parliament has no moral right to tax Ireland. It is not an Irish Parliament. It is not responsible to the Irish people. Ireland has no power, and can exercise no influence upon finance, in this House. Therefore, this Parliament has no moral power whatever to tax Ireland. Secondly, I object to paying an additional tribute of £10,000,000 a year for a Government in, Ireland which at the present moment is a disgrace to Europe. What are we called upon to contribute £10,000,000 for? An Army of Occupation of 40,000 soldiers.

You may tell us that that is our own fault, that the 40,000 soldiers would not be there if they were not needed. Is that the answer which I am to get from the representatives of this nation which went out to fight for the rights of small nationalities and for the fundamental citizenship which is to allow every free people to determine its own destinies? You talk about fighting for freedom and you have an Army of Occupation of 40,000 soldiers in a country which is your neighbour and would be your friend and was your friend until, either by your ignorance or your malignity, or your lack of appreciation, or by any other cause that may be attributed to it, you have placed Ireland to-day in such a position that every time you shriek "liberty" your enemies shriek back at you, "hypocrite." That is the answer you get when you talk about freedom. Ten million pounds additional tax for a nation not only held by an Army of Occupation, but a country where you have suspended all constitutional law and abolished all forms of legal tribunal, where you take your political opponents—and they are my political opponents too—I am not speaking for them, I am speaking for freedom. As I advocated freedom when I was helping you in the War in order that you might fight against Prussian despotism, I am advocating freedom now even for Sinn Feiners, the right to be tried. I do not care a crack of my fingers who the men are or whether they are my opponents. The principle for which I am concerned is the principle of liberty. You have courts-martial to try men for political offences. Trial by jury is abolished. You have the destruction of a great constitutional party that stood here as the friends of England the men who, on every platform in this country for twenty years preached the holy apostolate of good will, friendship and co-operation for all great causes between the Irish and British democracies, and inculcated it in the minds and consciences of their own people. But there is hatred to-day, deep burning hatred between Ireland and this country, and what has been your contribution to it? You destroyed the great party that brought friendship and goodwill about and you have paid the price in this country and in Ireland in the hellish fires of mutual hate and mutual distrust. There is not anything wrong in Ireland that has not been of your own creation. The hon. and gallant Gentleman smiles.

Photo of Mr Henry Croft Mr Henry Croft , Bournemouth

I was not smiling at you.

Photo of Mr Joseph Devlin Mr Joseph Devlin , Belfast Falls

I know he was not smiling at me. I do not object even to the hon. and gallant Gentleman smiling at me, but the hon. and gallant Gentleman smiles because of my description of the situation. I do not know whether the Prime Minister still is his Leader. He neither says "Yes" nor "No." I would imagine that the recent by-election would have determined his mind on that point, but I know that the hon. and gallant Member means that I do use strong language in this House. [Hon. Members: "No."] I know that my hon. Friend the Parliamentary Secretary to the Treasury dissents from that, but the reason that he thinks my language is not strong is not because it is not strong but because it is not as strong as that of his leader the Prime Minister. I never used such violent language against the Prime Minister or the Chancellor of the Exchequer or the Chief Secretary for Ireland as the Prime Minister used against Lord Northcliffe, and Lord Northcliffe used to be the standard bearer and the great exponent of the various policies of the right hon. Gentleman and his friends. But the Prime Minister when he uses strong language sometimes means it. I never use strong language unless I do mean it. That is the difference, and the Prime Minister declared at that Table that the malignity—that was the word he used—of the War Office in its treatment of Ireland during the period when Ireland was as strongly pro-war as this country was was perfectly indefensible. The War Office is indefensible. Dublin Castle is indefensible. Anybody who has anything to do with the government of Ireland is indefensible. So indefensible that they generally appoint men to be chief secretaries in Ireland who cannot defend themselves and who get out of their difficulties by throwing themselves upon the mercy of the House.

Ireland outside political trouble is the most peaceful country in the world. [Laughter.] You will get that in the records of the Judges of Assizes, and I notice that these loud smiles which come from the Tory Benches originate from a quarter represented by men who all say that now that England has become Socialist and Bolshevik they want to go over to Ireland which will be a peaceful place in which they can earn their living. Ireland is an absolutely peaceful country except in so far as political troubles are concerned, and you are the authors of all the political troubles in Ireland. But what we in Ireland cannot understand is why the plains of France and Belgium should be drenched with blood in order that small nationalities might be recognised and their liberties conceded and the small nations of Europe, about which even the Tory party know about as much as I do, and that is practically nothing, should have their liberties asserted by this country at such a cost in blood and with such a financial record as was set out by the Chancellor of the Exchequer, when you have one small nationality, Ireland, which you alone control, and you would not give that small nationality without shedding any blood but only by shedding hatreds, prejudice, and bitterness—that is all you would shed—the liberty which you say you have been fighting for in Europe. These are the only things you would shed, and yet, for some reason which I cannot understand, you are determined to go on in this way, and while you are squealing about the tremendous financial burdens which this country will be compelled to bear, you are keeping an army of occupation in Ireland which you could take out of Ireland to-morrow if you adopted those principles of justice and liberty which are the foundation upon which all prosperity and contentment rest.

You may say probably that this is the only policy we know of. There can be only one justification for any policy in this or anything else, and that is that that policy will succeed in its purpose. Do you mean to tell me that you will end the Irish question by keeping the army of occupation there for one year, or two years, or five years, or twenty years? Do not you know that until the army of occupation disappears the forces will be let loose again, the passions of the people will burst again, the old feeling and bitterness will be there? And if you think that, and you keep the army of occupation there, is this thing to go on for all eternity? That is what I want to know, and yet never from a single British representative, from a member of the Government, from the Prime Minister, or from anyone, have we been told what their Irish policy is. I know now what their Irish policy is, and this House will understand what the policy is. It is to add in this Budget £10,000,000 to an already over taxed nation, a nation which a Royal Commission appointed by British financial experts declared twenty-five years ago had been paying £2,500,000 more than its taxable capacity since 1800. The taxation has gone on, and on, and on ever since, and what have we got for it? At the end of 100 years we have, as I have stated, the Constitutional party destroyed, chaos created in the country, Ireland a bye word whenever the name of England and liberty are associated together, and confusion and suspicion and hatred and contempt as the only assets you possess for all your expenditure in this transaction. Even now at this hour perhaps the Chancellor of the Exchequer will tell us. He is the Gentle-who finds the money. He calls the tune and asks us to pay the piper. Perhaps the Chancellor of the Exchequer will tell us. Yes, he will. It is seldom we get a Minister on that bench who can tell us anything, and perhaps he will now kindly illumine the Committee and give some information to myself, as the only voice, as the hon. and gallant Gentleman calls it, from Ireland in this House. Perhaps he will tell us, not what the Irish policy of the Government is, but what we are asked to pay this additional £10,000,000 for. This is a business transaction, I understand. I believe the Budget ought to be a business trams action, and I want to know from him, as the head of the business side of the British Empire, what is to be the compensation that Ireland is to get for the £13,000,000 over and above her expenditure which she is paying now, and the other £9,000,000 or £10,000,000 which she is called upon to pay in connection with this Budget? I know he is a Gentleman of vast resources. I know that he was placed in the position of Chancellor of the Exchequer because they wanted a resourceful man at this financially epoch-making stage of the proceedings, and therefore I trust he will enlighten us and tell the House whether he expects Ireland quietly to sit down satisfied that she is to go on allowing this Parliament, without representation, to put additional burdens upon her already overburdened shoulders, to add vast sums to the vast sums she has already paid over and above her expenditure, and what it is that we are to pay all this for. Is the army of occupation to continue there? Is trial by jury to disappear, and all forms of constitutional justice no longer to operate? Are the representatives from Ireland to have no voice in the affairs of their own country? You give us, no doubt, a formal right to come here, but that is all. We never had any power here. [Hon. Members: "Oh, oh!"] Even when we carried Home Rule through this House it passed through stormy periods and vicissitudes which no Bill ever had to pass through before. It had to pass three times, through three different Sessions; it had to go to the House of Lords; it survived all these Parliamentary difficulties; it faced three General Elections, and was ratified by the electorate three times; it got the Constitutional assent of the King; and it was never put in operation. It is a scrap of paper, soiled and besmeared with false promises and broken pledges, and yet you ask us to trust you! We will not trust you. The only thing we will allow you to do is to tax us.

Photo of Sir Wilfred Sugden Sir Wilfred Sugden , Royton

The curtain has been rung down on the first act of the greatest drama the world has ever seen, and now the second act is being played out yonder in Versailles, and we here to-night are participating in the opening scenes of Act III. I aver that the question of finance—not only the finances of this country and Empire, but the part which this country and Empire shall play in the great international finance—shall be the greatest and most dominating in the wellbeing not only of this country, but of the Empire of which we form a small and integral part, and that not only shall this play a great factor in our own Empire, but in the great history of the world that is to follow. I say that the Chancellor of the Exchequer faces a. grave and Homeric task, a task the like of which never has any man had to face from those benches. Therefore, if the few very simple suggestions that one is permitted to offer to him to-night are worthy of consideration, I ask him to consider them in the light and from the purpose that it is this factor of finance that shall rule and that shall spell the history of this nation and people and the nations of the world in the days that are to come. We know that the essence of taxation is that the burden shall rest equally on those shoulders which are best able to bear it, and I believe that the great crusading spirit which led and drew men from every strata and section of our Empire to go out across yonder, and fight for things that were true and noble and brave and strong, may be consolidated in what appears to me equally important, namely, the more prosaic regions of the upkeep of our great Empire. England and Great Britain is a land of homes, and when we think of how finance must play a predominant part in keeping up a proper standard in those homes, and in the future and in the nobler life to come, the question of finance must have a grave and serious influence not only on the Front Bench but on every quarter of the House. Therefore we must think of some of the factors bearing on it. I am amazed to know that there are no accredited figures and no Government or any other economic records in this country which will give us the exact cost and bearing of each of the different types of homes in our land. That is an awful thing. I listened very carefully to the Chancellor of the Exchequer when he so splendidly gave to us his Budget scheme, but I heard nothing which had a heaving on the alterations to the life of the different sections of the people of this country as regards the taxation which he brought before us. When we consider that 70 per cent. of the inhabitants of this land belong to the humble, unskilled or semi-skilled classes; and when we consider the few figures that are available, as for example, the very illuminating and accurate chart which Mr. Kitching has brought before those men who are studious and who care to consider economics and finance, I would ask the right hon. Gentleman to realise how very important it is that the taxation to be applied to these semi-skilled typed should be appropriate to the humble outlook of these homes.

But this is not the only section which is not properly taxed: there is the section which largely pays the indirect taxation. This portion of the community also has not been properly considered, and though the Chancellor of the Exchequer quite calmly and unperturbably announced that though he was now prepared to reduce the Excess Profits Tax to 40 per cent., he even admitted that it was not a proper tax. I would therefore propose to him the operation of a sliding scale in connection with the tax on incomes of this kind, so that it should be possible not only to induce a greater output and a further production, but that it should be possible for all to par- ticipate and for each to bear a larger share. I would bring to his notice the fact that the proper establishment of the Exchange on the Continent should also be effected. This should have a bearing, for when we recognise that the Exchange to-day is against us, and that the financial market which in the old days had its centre in London is now going to New York, it is a fearful and terrible consideration as to what way the great social reforms and the reconstructive schemes which are to be placed on the shoulders of the tax payees are to be borne. I would, therefore, suggest to him, when the signing of the Peace Treaty at Versailles is concluded, that he and his Department should conjoin with all sections of the Allies, not only in considering how and in what way the finances of this country shall bear, but how the finances of the Allies and our enemies shall be dealt with, so that our great expansion and the story of the great trial and sacrifice of the men of this country and of this Empire may be worthily seconded, and that in future this country may rise to great heights and sublime power, not only in those sections of life which go to make up the heroic on the fields of battle, but in the more prosaic fields of commerce and industry.

Photo of Mr Francis Jackson Mr Francis Jackson , Howdenshire

I would like to preface the few remarks I have to make by expressing profound admiration for the very sound and businesslike Budget which the right hon. Gentleman presented to the Committee yesterday. I can imagine no more difficult or no more exacting task than that of compiling and presenting the first Budget after the cessation of hostilities in the most momentous and ruinous War which the world has ever seen, or which I hope it ever will see. I believe a normal Budget, in normal times, is never likely to satisfy everybody, and it might have been expected that a Budget presented at a time like this could scarcely have satisfied anybody. But I think my right hon. Friend may perhaps feel satisfied that, at any rate, he has succeeded in one aspect, and that is that everybody is pleased that it was not worse. I did not rise for the purpose of dealing with any of the more important and greater aspects which are raised in this Budget. I wish to say a few words on an item of taxation which was referred to, in a passing manner, by the Chancellor of the Exchequer yesterday. It is not one of the most important, but it is one which affects hundreds of thousands of individuals in this country, and especially the younger generation, namely, the Entertainments Tax. I must say, at the outset, that I think it is agreed, or should be agreed by all of us, that the Entertainments Tax at this time must be looked upon as a necessary evil, and that it is really a reasonable tax. No one will, or can really object, when he goes to an entertainment, and finds an entertainment there, to paying a tax to go in and see that entertaiment. So far as I am personally concerned, and I expect hon. Members have felt it also, this little extra tax on the price we have to pay to see what is called an entertainment brings home to us very vividly, at times, how very much we pay for what is called an entertainment.

I would like to deal with this tax from the point of view of how it affects outdoor sports and pastimes. As it stands now, subscriptions which are paid to clubs and societies which charge for admission, can be taxed at the rate of 3s. in 21s. I think the Commissioners have a right to assess the tax at a less amount than that, provided that they are satisfied that the circumstances warrant it. I think I am right in saying that a subscription of, say, £l 1s., which is paid to any cricket, football or agricultural club, has an average of about 2s. taken in tax at the source. This tax is taken, quite regardless of the fact that it is possible, through one circumstance or another, that the individual who paid the subscription may not possibly have an opportunity of getting any entertainment for the 2s. which is taken. I am told, on what I believe to be reliable information, that about one-third of the subscribers to a county cricket club, on an average, do not attend the matches, but if a ticket is issued, and tickets must be issued if a subscription is paid, the tax is paid at the source. I submit that in those circumstances that the Government is really getting money to which they are not' entitled, because the individual has not had any entertainment for the tax which he has had to pay the Government.

Let me take another instance. I believe it occasionally happens, if I may take my own experience to apply, that hon. Members of this House receive requests for subscriptions to clubs and societies of one kind or another, and, no doubt, they frequently most generously respond. If they receive a ticket for any sum of money—let me take a very reasonable sum of a guinea subscription—2s. or 3s. can be docked for too entertainment, which they are supposed to be going to get, although I believe in most instances it is a very remote chance that they get any entertainment from that source. I have been informed during the last few days by the Revenue authorities, from whom, I should like to say, I have received the greatest assistance and the greatest courtesy when I have approached them, as I have done on this particular subject, and they have offered to do anything I suggest provided they do not lose any money by it—I have been informed by them during the last few days that that can be got round by sending this money, not as a subscription, but as a donation, no ticket of admission being issued. I do not think that is widely known. I think it ought to be widely known, and I am quite sure that my hon. Friends who do send those subscriptions, and do get the tickets, would be perfectly prepared to pay a donation. Perhaps this is a tip which they will take, and which they will be grateful for, or, at any rate, the clubs will be grateful for, in the future.

The worst, and the most serious part, about this tax in connection with our outdoor sports and pastimes, is that it seriously affects the small local clubs, and those are the ones to which I think it is really a matter of great and serious concern. They may have to pay just the same, although they only charge a small entrance fee of two pence or three pence. I am absolutely certain that it was never intended by the right hon. Gentleman who introduced the Entertainments Tax in 1916, and it is certainly not intended by my right hon. Friend the Chancellor of the Exchequer, that anything to do with this tax should hamper or harm or spoil the development of our national sports and pastimes; but we have got to realise the fact that, after four or five years stagnation, they have got tremendous difficulties to face in order really to revive. All their grounds have got out of order. Their implements are damaged. The cost of everything is double, and travelling expenses are 50 percent. up. Therefore, they have got great difficulties to contend with, and undoubtedly this tax, small as it may appear to be, is a serious burden to them, and they are feeling it very much indeed. I do submit this, and I hope my right hon. Friend will be good enough just to consider it: The tax on all subscriptions, as it is at the present moment, is really unfair in its application. I believe that the only fair method of dealing with this tax is that subscriptions should be free of it, and it should not be compulsory that the tax should be paid from the source when the subscription is paid. The only fair method, in my view, is that when anyone goes to an entertainment and finds it there, as may not always be the case with a cricket match, for it sometimes rains, and he gets no benefit from it; but when he gets there, and finds the entertainment going on and wants to see it, he should pay that tax, but he should be able to produce his subscription ticket, on which he has paid a guinea, and then pay the 3d. tax to go in.

I know and realise how difficult it is to differentiate in any way whatever between entertainments. But I would beg my right hon. Friend to consider that there are certain of our great national games which are not played in this country for profit. They never make a halfpenny profit. I do not think you will find a single county club, and I would go so far as to say a single cricket club, which ever distributes anything in the shape of profit. Therefore, there is a very great difference in the actual entertainment on which a universal equal tax is placed. It is because I have received most persistent requests from all over the country that I should bring this matter up on this particular occasion that I have done so. I hope my right hon. Friend will give it consideration, and, when the proper time comes, I hope he may find himself able to meet us. I will even suggest that, allowing a subscription to be free, and that it should not be taxed on a lump sum, he might also make an alternative, and say that for a guinea subscription, if assessed by the Commissioners to carry a 2s. tax, the subscriber should have the alternative of paying the 2s. down, or paying, when he goes to the entertainment, the 3d. tax.

Photo of Sir Charles Lyle Sir Charles Lyle , West Ham Stratford

This has been a day, on the whole, of long speeches, but I do not propose to detain the Committee for more than a very few moments, and I want to address myself to one particular part of the Budget, namely, that of Imperial Preference, and I have viewed with very great pleasure the introduction of Imperial Preference. I am one of those who wish to treat our brothers, the Canadians and the Australians and the New Zealanders, better than I wish to treat the Germans. Austrians, Turks, and such like. That is a policy which I myself have constantly tried to advocate in a small way, and therefore I wish to make it quite clear that the policy of Imperial Preference as a policy has my hearty support. But I also agree with one of the Chancellor's remarks at the beginning of the introduction of Imperial Preference, wherein he said that we cannot give preference at the expense of the home producer. I think probably what he also meant was that we cannot give preference at the expense of the home producer or, I take it, the home manufacturer. It would be a poor sort of preference which would give an advantage to the Colonies at the expense of the British producer or the British manufacturer If I may say so, I think that that is exactly what the right hon. Gentleman is doing—that is precisely what he proposes to do in regard to one article, namely, sugar. He proposes to give a preference to the Colonies of one-sixth of the tax on sugar. I want to explain to the Committee that, of course, sugar may come in in two forms—raw and refined. It makes all the difference in the world to us over here as to the form the sugar comes in. If the sugar comes in in the form of raw sugar, it makes no difference to the people for whom I am speaking at the present moment. These are people who are not much heard of because they are numerically a small body, but they are not altogether an insignificant body. I refer to the British sugar refiners.

It may not be generally known that the British sugar refiners between them deal with about one million tons of sugar per year, turned out from the sugar refiners of this country. If this sugar, which is to come from our Colonies, comes in on a preference of one-sixth, and it is refined sugar, I say—and I do not think anybody will differ from me—that that will absolutely kill the British sugar-refining industry. [An Hon. Member: "Why?"] I do not see how it can be argued in any other way. There is a duty of 25s. 8½d. on the refined article. The Colonial importer, on the contrary, pays 4s. 3½d. I fail to see how, by any process of argument, it can be held that the British refiner can compete with that difference against him. It is quite true that at the present time there is very little refined sugar coming from the West Indies, We hope that they will benefit most from this preference. We are glad to see the preference. We do not want to look at these things in any selfish spirit at the present time. But there is such a thing as fair-play, even to a small British industry, and there can only be one result from this. If the West Indies do what they say they are prepared to do, and increase their output until they are able alone to supply the demand of the United Kingdom, then I say that there is no British sugar refiner who can stand against that, and, after all, the industry has struggled against adversity in the past, and had only just before the War began to rear its head again. I would ask the Labour benches to note this fact, that the industry here turns out a million tons of sugar annually, and is employing a good deal or British labour. I would ask the Labour benches to note whom this preference is going to benefit in the case of the West Indies. Who? Coolie labour in the West Indies. If the British manufacturer is cut out by this preference and the British workman is thrown out of work it will be for the benefit of the coolie labour which has been imported into the West Indies.

Photo of Mr William Adamson Mr William Adamson , Fife Western

Are these coolie labourers British subjects?

Photo of Sir Charles Lyle Sir Charles Lyle , West Ham Stratford

They come from India, I believe, and we want to see the West Indies developed, and I suppose they were imported because they were short of labour there. I am merely stating the fact, however, and the right hon. Gentleman (Mr. Adamson) may or may not think it the right thing. Nevertheless, it is a fact that the people who benefit by this will be the coolie labourers in the West Indies.

Sir J. D. REES:

Very likely they will not be able to get them. What then?

Photo of Sir Charles Lyle Sir Charles Lyle , West Ham Stratford

I do not know what they will do then. Some other labour, perhaps some of us, will go out—


Is the hon. Gentle man aware—[HON. MEMBERS: "Order, order."]

Photo of Sir Charles Lyle Sir Charles Lyle , West Ham Stratford

I am really a newcomer to this House, and even though I have a case I am, I think, entitled to state it. I am trying to state it as moderately as I can, and I ask the indulgence of the House if I put it at all strongly. I wish, however, to make it perfectly clear to hon. Members that there is no one more in favour of Imperial Preference than I am, but I say it should not be given at the expense of the home producer or the home manufacturer. I do not use this in any way as a stick to beat the Government. I do not wish to beat them. I want to be a supporter of the Government. I am not like some of the hon. Members opposite in that any stick is good enough with which to beat the Government. But I simply bring the matter forward because I think it is worthy of close study from the Chancellor of the Exchequer. I wish to put it to him as a serious warning of what may happen. I say there is a serious danger at the present moment, because the West Indies are developing. We hope they will develop. But if they do develop their production, the only result will be the extinction of sugar refining in this country, unless at the same time a system of protective tariffs is introduced, and that is, in my opinion, the only correct system whereby the British manufacturer is protected, the Colonial gets his preferential rate, and the foreigner pays the full duty. That is the only fair and square way of doing it. It is when you try to do it in the way suggested, and produce these things piecemeal, that you begin to find the difficulties and dangers. I would merely, in finishing, ask the Chancellor of the Exchequer very seriously to reconsider this scheme of sugar preference in some way, so that he may give the preference on the raw sugar and not on the refined. Unemployment looms large on the horizon. It would appear that British labour is likely to be displaced by coolie labour. There is a further danger of raw sugar alone being dealt with in the West Indies. In Canada there are some splendidly-equipped sugar refineries. We wish them every success. But what may likely happen there is this: that this raw sugar will go from the West Indies, be imported into Canada, turned out there in the form of refined sugar, pass from the Canadian refineries, and come here with the preference I have named. By so doing we shall have the Canadian refineries cutting out the British refineries, intead of the West Indies cutting them out. I appeal to the right hon. Gentleman to give this matter very careful study and sympathetic consideration, because I fear, as the result of the policy proposed, that the only results can be those I have stated.

Photo of Mr John Gretton Mr John Gretton , Burton

May I preface my remarks by offering to the Chancellor of the Exchequer my most hearty congratulations on the great personal success he has made in the introduction of his Budget, and especially that part in which he in- troduced Imperial Preference in British taxation? Those of us who have been his colleagues in this House for many years felt the emotion which must have moved him on this great occasion which marks a change in the financial, and I hope the Empire, history of our race. The field in which the right hon. Gentleman has decided to operate is so restricted that I regret that his new policy has not been developed over a wider field. If my remarks appear in the nature of criticism, I am sure the right hon. Gentleman will acquit me of any personal motive. In the first place, I wish to state that I regret he has found it incumbent upon himself to increase the Estate Duties and the Death Duties, which already press most heavily upon a numerous section of the community.

10.0 P.M.

I wish to speak particularly to-night on a subject upon which the House has often patiently heard me before. There has been an enormous increase in the taxes on beer and spirits, and obviously those taxes cannot be collected unless the sums of money which are to flow into the Exchequer are previously collected from the British public. It is a delusion to think that manufacturers can out of any of their own resources find those taxes unless they are previously paid by those who buy their productions. The real effect of these taxes is not understood, and I am not sure that the right hon. Gentleman has had his own way entirely in the course he has taken in this Budget. What has occurred is this: All classes of the British public want more beer and they want better beer. Under the announcement which has been made they will get an increased quantity of beer, but it is a delusion to think that there will be any substantial improvement in the quality of the beer with the very small increase in the gravity which is now suggested, and that is really playing with the question. The average gravity, 10.55, on which the tax is levied was fixed on the average gravity of the beer in the United Kingdom. Owing to the conditions of the War and the scarcity of material, the Government thought it advisable to fix an average gravity during the' War of 10.32, which is exceedingly low. There was practically no beer saleable before the War at that gravity, and yet brewers had to reduce their beer to that gravity, and the British public have accepted it with a good deal of grumbling as a necessary war measure. They are now expecting something very much better. On this question I am able to speak with a sense of responsibility as one who has had thirty years' experience of the brewing trade, and I say that I am sure the British public will be very much disappointed with this new proposal. The public are going to get more beer, but it will still be weak, washy beer. The lowest quality of beer which we were accustomed to sell in Burton before the War was 10.54 or 10.55, and that was sold retail in very many cases at 2½d. a pint, and never higher than 3d. Now the lowest price for beer of that quality is 8d. per pint, and the right hon. Gentleman has put this new taxation on in order to get the last drain out of the producer, who is now to be driven up against the highest limit of this scale. No doubt a little more beer of a higher gravity and better quality can be brewed, but the public will have to pay more for that beer. If they want a 6d. beer they will not get it at 5d. or 4d.,as they hope to do, and they will have to pay 6d. for it.

I will put the case in another way. If the right hon. Gentleman had decided that in the public interest he would arrange this taxation from other sources he could have adopted a method which would have been a national improvement on this particular process. If it had been decided that the taxes should not be increased but an increased quantity could have been brewed brewers could have charged a penny a pint lower for every quality of beer in the scale, but now every person who wants that better beer has still got to pay the higher price. I do not want to labour the subject because it is very tedious, and it is not easy to understand. What we all do understand is that the British public have got tired of the washy beer during the War, and I am sure they will be much disappointed when they find that the beer is very little better and they will have to pay a higher price for better beer.

It has been complained in this country that we do not brew as good beer as they do in Ireland, but the Irish brewers have been able to produce beer at 10.45 all the time during the War, which is nearer the standard gravity on which the tax is levied. The people in this country will have still to drink their beer at an average gravity of 10.40, while the breweries in Ireland are allowed to produce a beer of an average gravity of 10.47, and they send a great deal of it into this country in com- petition with English-brewed beer. When hon. Members complain of the increased taxation in Ireland, they forget to explain that a large quantity of the beer and stout produced in Ireland is sent into this country, in which case the British drinker pays the tax. This particular method of fixing the gravity and the prices with very high taxation is sweating the beer drinker for the benefit of the Exchequer.

I am wondering how long the people in this country are going to stand this form of control. It seems to me that the beer drinker is entitled to choose the kind of beer that for wants to drink, just in the same way as the man who has a cellar or who goes into a restaurant is able to choose the bottle of wine which he drinks with his dinner, but apparently that is not the policy of the Government at the present time. We are getting to the end of the period of enforced restriction owing to the lack of material. There is a shortage of material arising out of the conditions the War which will last until the next harvest, but that shortage will disappear, and there is no reason whatever why there should not be unrestricted brewing after the next harvest, say, in October or November. Apparently, these restrictions as to gravity, and as to scales of prices, however, are to endure for another twelve months. It was explained to us by the right hon. Gentleman that the Government are considering the form of control which is to be adopted, so evidently it is in the mind of the Government to continue something of this kind indefinitely. Are the people of this country going to put up with it? They ought to know what is going on and to have an opportunity of forming a judgment as to whether they are going to have all these restrictions taken away, and the gravity or strength or quality of the beer improved, so that they can secure the beer which they want.

I am bound to speak not only on the general question, but also on the particular question as it affects the: industry which I represent. These restrictions on the gravity and quality press most hardly upon the beers which are brewed in Burton and upon the standard beers of the London, Irish, and Scottish breweries. Under these restrictions, they cannot produce that article with which their reputation has been made, upon which their goodwill rests, and upon which the success of their business ultimately depends. We never said anything about these interests during the War, but now that the War has come to an end we say that our trade should not be harassed in this way, and that if the public want our productions they should be able to buy them. We do not complain of taxation any more than other brewers, but we do complain of taxation under conditions which hit us more hardly than any other brewers in the United Kingdom, and which hit the public because we are prevented from supplying the public with that which they want and with that they bought freely in the past. I take the case of the London breweries. London stout has been an article of great reputation and has been sold freely throughout the world. Under these restrictions, the London breweries are not able to produce that stout. I am assured by those who know this trade well, and my own knowledge confirms it, that this increase of gravity is merely playing with the question, and that these articles, upon which the reputation of these breweries has been made, upon which their goodwill depends, and upon which their business has been built up, are being seriously menaced.

Before I sit down I want to call attention to the comparative position of beer and spirits. There has been no doubt a great stimulus to the consumption of spirits in this country. The supply of beer has been raised to about 55 per cent. of the pre-war supply, and the supply of spirits-is about the same, 67 per cent., so that the amount of spirits which is allowed to be sold in comparison with the amount of beer is very considerably higher. That is not all. The taxation on beer has been raised upwards of 800 per cent., while the taxation on spirits has only been raised 238 per cent., or in round figures 240 per cent. The Government restrictions which were necessary up to a point, but which; were probably carried considerably further than was necessary have so deteriorated the quality of the beer which it has been possible to produce that there has been created a craving for spirits among many people who were not accustomed to drink spirits before. The relative taxation amounts to a subsidy on spirit drinking. In this matter I am a rival trader, being a producer of beer, but I think I may fairly say—in fact, it is my duty to say publicly—that the case has been raised whether as a matter of public policy it is desirable to encourage the drinking of spirits at the expense of the drinking of beer. I leave it to the House and the public outside to judge. I do not want to labour the point. I merely wish to say that the right hon. Gentleman has hit the brewer who is not a large owner of public-houses very hard by his taxation. He has announced the decision of the Government to continue the system of control and of restrictions on the quality of beer for another twelve months. He has also indicated that the Government are considering whether that should be prolonged indefinitely. He has imposed taxation on the brewing trade up to the hilt. It is obvious that that taxation must be collected from the public before the brewers can pay it into the Exchequer. The question is whether the public will agree to any more of it. They grumble at it a great deal. Will they pay a higher price for their beer? It is a matter of public policy. There are other questions to be dealt with which will have to be considered, but the question which the public will decide is whether the extravagant and extortionate prices exacted by war conditions are to be perpetuated.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I rise only to express the hope that hon. Gentlemen who have spoken will not think me discourteous if I make no reply—indeed, I do not expect they desire anything like a reply to the very interesting and discursive discussion we have had. I have been invited to discuss the Government policy on various questions—the policy of drink control and the regulation of the liquor traffic in this country. I have been invited to discuss many other questions more immediately relevant to the Budget. But I cannot, at this hour, deal with the speeches made by right hon. and hon. Gentlemen which were, after all, a reply to, and criticism of, my own observations and proposals. I hope, therefore, they will excuse me if, after speaking for so long a time yesterday, I do not attempt to-night any further rejoinder. What we are attempting to do to-day is to set the lists and define the issues which must be thrashed out in the course of the passage of the Finance Bill through the House of Commons. That applies, of course, to the challenge of the right hon. Gentleman who spoke first (Sir D. Maclean) on the question of Colonial Preference. The right hon. Gentleman's contention is that it is a legitimate cause of offence to foreign Powers and an illegitimate act on the part of any portion of the British Empire to have a more favourable Customs tariff within the Empire than against the stranger. There is no other country in the world that would tolerate that doctrine, and if this Budget kills it, as I hope it will, in the British Empire, then the Budget will be justified. I listened with interest to the very interesting speech of the hon. Member for Penistone (Mr. Arnold) on a subject which he has made his own. I have a great deal to say about that speech. He has had a great deal to say about mine, and I hope he will not think me discourteous if I do not attempt to argue the question now. It is a big subject not to be dismissed in observations occupying a few minutes.

I would rather, if I may, at this stage deal with one or two quite small matters which have been raised in the course of the discussion and on which I think it would be useful for me to say a word. Perhaps I may make my acknowledgments to the Committee at large for the many kind observations they have made to me. May I congratulate myself that, though hon. Members have naturally found a good deal to criticise, none of them have found it necessary to ask me to explain what I meant? I must say that that is a subject of some satisfaction.

My hon. Friend who spoke last at one stage put his own case as if it were a typical case, and at another stage he quite frankly admitted that it was not. The Burton case is typical of a small part only of the brewing community. It is not part of the business of the Chancellor of the Exchequer as such to limit the consumption of beer or to fix the gravity at which beer may be brewed, except so far as that may be necessary as a measure for the collection of revenue. In so far as we do either of these things they are done not as a Budget measure on the advice of the Chancellor of the Exchequer, they are done as a Cabinet measure with quite different social considerations. I would beg my hon. Friend not to misunderstand me. I am not dissociating myself from my Cabinet responsibility, I aim only trying to distinguish between that which is really part of the Budget and that which is part of the general policy of His Majesty's Government and not a special feature of the Budget, though, of course, it affects that and it affects the Chancellor of the Exchequer's proposals. When the Cabinet fixes a limit to the amount of beer which may be brewed it fixes a limit to the taxes which the Chancellor of the Exchequer can impose. That affects him as well as the brewer. But when my hon. Friend says that in raising the average gravity from 1032 to 1040 we have done nothing to meet the public demand for beer, or to meet the grievance which he and others have expressed on behalf of the English brewers, I beg leave to part company with him. The extent to which that increase of average gravity improves the average beer depends upon how the brewers use the liberty that is left to them. The quality of the beer will, after all, within the wide limits set by the Government, be settled by what the brewers think is in their own interests, by what they think the public is most likely to demand from them, and what they therefore brew.

My hon. Friend the Member for Stratford (Mr. Lyle) spoke with special reference to sugar refinery in this country. I will just make one observation on that. I have, as he knows, carefully considered this question. I consulted also with the Board of Trade about it. He himself admits that there is no immediate danger. What he is asking me to consider is something which may happen, not now but at some future time. I grant that something may happen at some future time Which may require other measures, but I do not think they are required now, and we had better wait and see what does happen before we alter the decision which I ventured to propose to the Committee. My hon. and gallant Friend the Member for Howdenshire (Lieutenant-Colonel Jackson) spoke about cricket and the Entertainments Tax and the point he raised applies to other associations and institutions as well as cricket. The point was, that we take the tax on annual subscriptions which give the right of entrance and which may not be used. It is open to anybody, as he himself has discovered, if the subscriber is willing to take a receipt in exchange for his donation instead of the right of entry he escapes the tax, but I am quite ready to consider the suggestion which my hon. Friend made, that subscriptions should be taxed only in proportion to the use made of them, and if he could arrange with some of his friends to get together representatives of the societies or clubs concerned and would confer with the Revenue authorities we might, perhaps, arrive at some solution on that point. Anyhow, I recognise that there is a hardship and a cause of complaint, and I am anxious to remedy it.

I will mention one other subject. I listened with great interest and admira- tion to the speech of my right hon. Friend the Member for Spen Valley (Sir T. Whittaker). His speeches never fail to interest me, and there was a geniality about the criticism which he displayed which made his speech particularly attractive. He dwelt, as indeed did some other Members, on the need for economy. He put his finger on the weakest point, which is not the Government or the Chancellor of the Exchequer, but the House of Commons. The hon. Member for Penistone referred to the taxation and then spoke of expenditure of which he was in favour. I have yet to find the Member of this House who is in favour of and will support economy in that sphere of public activity in which he is most interested. Everybody is in favour of economy on other people's hobbies but never on their own. I am overwhelmed with suggestions from correspondents of how I could tax other people who use things which my correspondent does not like, as for instance, having animals which my correspondent finds annoy him. Suggestions come from married gentlemen for taxing bachelors and from bachelors for taxing spinsters, and from everybody to tax somebody else. I want to find the hon. Member who will help me and the Government by suggesting that the time has come for a halt in that particular subject he is always pressing and who will also suggest that the particular form or source from which he derives his income is capable of tax-bearing and ought to bear larger taxation. The hon. Member (Mr. Bottomley) offered himself as a shining example of this form of sacrifice. I would invite hon. Members, when they resume the discussion of the Budget, to suggest economies and taxes which affect themselves instead of proposing always to economise and to tax someone else.

Photo of Mr Godfrey Locker-Lampson Mr Godfrey Locker-Lampson , Wood Green

I beg to move, in. paragraph (b), after the word "eighteen," to insert the words, Provided that if either a husband or a wife who are living together claims to be separately assessed for purposes of Income Tax, neither of them shall be liable to pay a larger sum in respect of Income Tax than they would be liable to pay if they were each unmarried. It is unusual to propose an Amendment to a Budget Resolution, and I would not think of doing so if I did not feel that a very great principle was involved, the principle, I mean, that married women have a right to absolute control over their own property. In 1842, when Sir Robert Peel revived the Income Tax, there was a flat rate of Income Tax, and so it did not very much matter that the incomes should he treated as joint for the purposes of Income Tax. In that year also married women had no control over their property at all. They were treated as chattels for the purposes of property. They were not the owners of their property, and they had no control over it. Directly they became married, the whole of their property was transferred ipso facto to the husband. That naturally was regarded as an intolerable position, and in 1882 the Married Women's Property Act was passed, under which a woman was at last made absolute owner, and given absolute control over the property she possessed at the time of her marriage. Lest there should be any doubt in anyone's mind, I will read the few words that gave her tins power— Every woman who marries after the commencement of this Act shall be entitled to have and to hold as her separate property all the real and personal property which shall belong to her at the time of marriage or shall be required by or devolve upon her after marriage. Those words are perfectly clear. The present system of Income Tax undermines that great charter which was given to women in 1882. At present a wife's income is treated as part of her husband's income, and the property in the income to that extent is handed over to her husband. I have here the Consolidated Income Tax Act which came into force about a fortnight ago, and on page 201 there is this sentence: The profits of a married woman living with her husband shall be deemed to be the profits of the husband and shall be assessed and charged in his name and not in her name or in the name of her trustee. The hardship is all the greater because the tax is heavily and steeply graduated, and also the Income Tax has been enormously increased. The Chancellor of the Exchequer does not treat Death Duties on the same principle. When a man and woman are married and the woman dies, the Exchequer naturally wants to get some tax and it treats the property of the wife as separate in order to get the tax. When they are living together as husband and wife the Exchequer wants to get its tax and it treats the income as joint for the purpose of getting the taxes. When the right hon. Gentleman was kind enough to receive a deputation the other day one of his chief points was that there was no differentiation to-day under the present law between husband and wife. I am quite sure that he did not in the least mean to mislead the deputation, but if I may say so, with great respect that really is not correct. There is a differentiation between the husband and wife. If the wife wants to obtain repayment of Income Tax she has to make a special claim for repayment. She has to claim specially to be separately assessed. If the husband wants to reclaim Income Tax separately he has to make no claim, and if neither of them make any claim the whole repayment in respect of husband and wife is made to the husband. It is only in the wife's case that a special claim has to be made for repayment of Income Tax.

I submit that the present Income Tax law ought to be brought into conformity with the Married Woman's Property Act, 1882. That Act is the great charter for the married woman. It is just as much a charter for the married woman as Magna Charta was the charter for British liberties in the past, and I do not think the Income Tax authorities have any right to come in and filch away rights that were given to women under that Act. It is not only a case of treating married women as absolute owners of their prospects, but the present law is a penalty upon marriage as such, and it is not only a penalty upon the rich, but it is a penalty upon the poor. I will give three illustrations of what I mean. Take a man who has an income from wages of £90 a year, and a woman who has an income from house property of £90 a year. They pay no Income Tax before they are married, because they are below the Income Tax level. They may be living together unmarried and enjoying a joint income of £180 a year, and they pay no tax; but directly they marry, and they still have their joint income of £180 a year, or a little over £3 a week, they have to pay a tax of five guineas a year, or nearly a week and a half's income. Take another case. Take a man who has an income of £120 a year from wages, and a woman who has £80 a year from, say, cottage property. Before marriage neither of these people pay any Income Tax, although they may be living together and having all the advantages, unmarried, of a joint income of £200 a year. Directly they marry they pay a tax of £8 5s. on their income, which is under £4 a week. My final illustration is a man who has an earned income of £250 and a woman who has an income, say from dividends, of £100 a year. Before marriage the man pays on his income £14 2s. 6d. and the woman pays nothing. Directly they marry they have a joint income of £350 a year, or a little under £7 a week, and they have to pay a tax of £26 16s. 3d., or a penalty on marriage of £12 3s. 9d.

On the other hand, suppose two sisters live together, with a joint income on the Income Tax level, they do not pay any Income Tax. A father and son living together do not pay it. A man and woman living together, unmarried, do not pay it. An aunt and niece do not pay. The only time it is paid is when a man and woman choose to join themselves in a legal marriage. Then the State steps in and puts a penalty tax on that legal bond. My right hon. Friend will not think that I am trying to score a point against anybody on that bench if I refer to something which was said the other day in the Debate raised by my hon. Friend the Member for Brighton (Major Tryon). The representative of the Treasury used these words: I agree freely as an individual and as a married man that there is a great deal to be said for the case presented to-night. It has always been an intolerable anomaly to feel that so far as taxation was concerned it would be cheaper to live with a woman who was not your wife than with a woman who was. That is an intolerable anomaly. That is the opinion of every reasonable man throughout the country. The quotation is sufficient, without any further words of mine. It is an intolerable anomaly. The right hon. Gentleman, when he received the deputation the other day, and several times in this House, has said that he cannot do anything because the Royal Commission was sitting. I think that about three days ago he told us that the chairman hoped that the Commission would report in time for the various Income Tax reforms to be incorporated in the Budget for 1920. I took the trouble the other day to look up the periods for which Royal Commissions have sat. I chose four important instances, and they gave three results—the Royal Commission on the Church in Wales was appointed on the 1st of May, 1907, and reported on the 1st November, 1910—over three years later. The Royal Commission on University Education was appointed on 26th May, 1910, and reported on 27th March, 1913, after just under three years. The Royal Commission on Divorce took exactly three years, and the Royal Commission on the Poor Law took three years and two months.

Does my right hon. Friend really believe that this Royal Commission on the vast question of the Income Tax is going to be able to report in time for various reforms to be made in the Budget of 1920? All this time these married women are to be subject to what the representative of the Government himself said the other day was an intolerable anomaly. The game representative told us that it was very difficult to disentangle the question of the married women's Income Tax from other questions of Income Tax. It was not in the least difficult to disentangle the question of hours and wages in mines. The reason was because the miners are organised. The transport workers and railway workers are organised. The unfortunate married women are not well organised, and therefore my hon. Friend told us that it was impossible to disentangle this question. He told the deputation, too, that it would cost a great deal of money. The cost of this is the measure of the present injustice. If he says that it is going to be a very heavy cost, then the reply is that it is a very heavy burden upon married people. And, after all, he can afford to pay over £1,000,000 a week to people who ought to be working at the present moment, and if he can afford to do that he can afford to remove this penalty on marriage. He may tell us that if he takes the tax off it will benefit the rich, but I think I have shown that the present tax is a heavy burden on the comparatively poor, and if he wants to meet the cost he can quite easily do so by an equivalent tax on higher-rated incomes. He may also tell us that evasions are certain to take place, that the wife or the husband may hand over their property the one to the other, in order to escape the duty, but I do not believe that is any difficulty at all. They can even now hand over their property to their children, and I think the right hon. Gentleman will agree, and I am sure the Treasury officials will agree, that very few parents at the present time hand over their property to their children in order to escape Income Tax. If he would like a precedent, may I give him the precedent of the Death Duties, where, if property is handed over within three years of death, the tax is still paid, and he could very easily arrange that after marriage, if property is handed over within, say, three, eight, or ten years, the tax should be paid by the person owning the handed-over property. But, after all, these are mere questions of administration, difficulties that can easily be surmounted by a little goodwill on the part of the Chan- cellor of the Exchequer, and certainly absolutely paltry difficulties in comparison with the great principle that marriage ought to be encouraged, especially at the present moment, and that women ought to have absolute control over their own property. No one wants to make difficulties for my right hon. Friend or for the Treasury or to try and score personal points on this subject as against the Treasury, but I feel that a vital principle is at stake. I feel that very strongly indeed, and I feel that the rights of married women under a great charter are at the present moment being undermined by the Income Tax authorities.

Photo of Mr George Tryon Mr George Tryon , Brighton

I rise very briefly to support the Amendment of my hon. Friend. I should like to begin by thanking the Chancellor of the Exchequer for the very long, patient, and careful hearing which he gave to the deputation, including a number of women, which went to him on this important subject. We do not propose to lessen the amount of revenue available to the country, nor do we propose to increase it. We simply propose a readjustment of the Income Tax in a way which would be much more fair as between married people and single people.

In other words, it is perfectly clear that the single people will have to pay more Income Tax in order to make up the loss which is necessitated by doing justice to those who are married. It is not the case that it will be the rich who will benefit from this change. The greater number of those who will benefit will be people with quite small incomes, and many with incomes so small that they would not pay Income Tax at all were it not for the exceedingly unjust arrangement by which the income of the wife is added to that of the husband, thus bringing the total income within the limit, although the incomes separately are so small that they would not pay tax. There are thousands of cases like that. We do not propose to benefit the rich as against the poor, and a vast number of those who would benefit would be poor people. But, taking a case amongst the rich I will give an example to show the kind of thing that would happen amongst the higher incomes. You might have, living in three houses next each other, a bachelor, in one house, with £2,400 a year; a spinster, in the next house, with £2,400 a year, and in the third house, a husband and wife with £1,300 a year each, and whose united income comes to £2,600 a year. The Chancellor of the Exchequer says the husband and wife must have their incomes added together. In effect, he says, "Here is a very large income. These people have £2,600 a year; they must pay Super-tax, which the person with £2,400 a year gets off." Now it seems to me perfectly possible that within the range of these four incomes, amounting altogether to £7,400 a year, so to arrange that the bachelor and the spinster would pay more, and the married people would pay less, while the country would get exactly the same amount. This in stance shows that there would be no advantage in the rate against the poor, but that the whole difference would be between those who are married and those who are not married.

Let me take an example which has not been put before. We might have had at the last Election, and we certainly shall have in future Elections, the chance of a husband and wife both sitting in the House of Commons, and both drawing £400 a year. That the country considers these people to be two persons is shown by its paying both of them £400 a year, but then down comes the Chancellor of the Exchequer who adds their incomes together, and says, "Here is a large income of £800 a year on which you might pay a higher tax." After the exceedingly witty remarks of the Chancellor of the Exchequer as to the feelings of every body with regard to their own In come Tax, I may perhaps transfer my remarks to the Treasury Bench I hope our present Chancellor may long hold his office, but there may come a time when this man may sit there and his wife may also hold office and draw £5,000 a year. The Chancellor of the Exchequer of those days will presumably have £5,000 a year, and his wife, holding office, may draw another £5,000. The Chancellor will have to add those two incomes together, and then there will be an income of £10,000 a year, on which the Chancellor will have to pay. If the Income Tax runs to about 11s. in the £, he will at that rate he paying more than his own personal income.

I would also put this matter forward from the point of view of constitutional government. We have had an election at which this question was before this country. Every hon. Member will agree that there was great feeling throughout the country in favour of this change being made. I am not putting it forward as a result of the last election, for in my own. Constituency both I and the Liberal Member who previously represented it have been urging this change for the last ten years. It would be a great pleasure to me if the Chancellor of the Exchequer should, in addition to the magnificent change which he has made in reference to Imperial taxation, add to it a great act of justice in reference to home taxation.

11.0 p.m.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I hope that my hon. Friends will permit me, on this occasion, to deal as briefly with the subject as they have just done I am sure that this is not the real occasion on which to join serious issue on a large point of policy. It had much better be done on the Finance Bill. Under any circumstances, the matter would have to be discussed on the Finance Bill, and that is really the right place to discuss it In the simplicity of my heart, I readily accepted the suggestion of hon. Gentlemen that I should receive a deputation on this subject some weeks ago, and when they asked whether they might be accompanied by ladies I, of course, gave way to their wishes, but I did not gather that their principal object in seeking an interview with me a few weeks ago was to put me through a preliminary canter to find out what were the arguments they would have to answer. That, at any rate, was the sole use they made of the interview. My hon. Friend who moved this Motion wishes to establish a great principle. He wishes to establish the principle—that is his main and chief argument—that married women shall have the absolute right to control their own property. I place no obstacle in his way. I do not challenge the right of married women to control their own property, and if it be the general wish of married women that each of them should be assessed separately from their husband, we can so assess them. My own conviction is that the great bulk of married women would be pretty much annoyed to be bothered with the Inland Revenue papers. [Hon. Members: "No!"] That is my own impression. I put it no higher. The great bulk of married women will not wish to be troubled by the Inland Revenue, and are content—and more than content—to leave this matter to their husbands. But there is no difficulty about it. If they want to be asssessed separately, they can be. Whether they are separately assessed or not there is no challenge to their right of controlling their own property or the enjoyment of their own property That is not the question here at all. The question is, shall married people—men and women, and not women only—be rated according to their joint income or according to their separate income? It is not a question whether a married woman shall have control of her own property, or a question of whether she shall receive a separate notice from the Inland Revenue and make a separate return. The question is whether, when there are married people living together, the rate on, which the Income Tax is charged shall be the rate applicable to the joint income of the two, or the rate applicable to the incomes separately. That is my difficulty. It is not a sex question, or a question of married women's property rights or married women's liberty. It is neither. It is a question of whether married people, be they male or female, are treated fairly as compared with other taxpayers. That is a very large question. My hon. and gallant Friend the Member for Brighton (Major Tryon) says: "Tax the bachelors." Why the bachelors? One of the ladies of the deputation said: "Tax the unmarried people." I said that would mean spinsters as well as bachelors, and she hastily said she meant nothing. The lady said she was not authorised to make any suggestion. "But why should you not tax the bachelor?" it may be asked. Because he is not married! That is not the reason. If you do it for that, will you excuse him if he can show that he has offered himself? [HON. MEMBERS: "Hear, hear!]—and—I tremble to say it—had the good fortune to be refused? You must then go further. You must turn to the offending lady who has refused, and she may say that she has married someone else. Are you then to re-transfer the charge? And to whom? To the man who will not marry or to the lady who has refused him the opportunity? But I do not want to make fun of this. There is a serious argument.

Photo of Mr Godfrey Locker-Lampson Mr Godfrey Locker-Lampson , Wood Green

That is not in the Amendment; there is no proposal to tax bachelors.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I know there is not. There is no constructive proposal.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

It is my business, and the hon. Gentleman will permit me, to examine the alternative. Frankly, I personally do not agree that the number is very large that is affected by the operations of the present law. I do not think that there is a grievance on anything like the scale suggested, though I am quite ready to admit there may be one as between married people themselves. What would be the result of the operation of the proposal of my hon. Friend? £50,000,000 of revenue might go at once—and very quickly! Take it at £20,000,000. If I lose that I must find other means to raise it. Therefore, I come to examine the proposal of the hon. and gallant Gentleman the Member for Brighton. Tax the bachelors! The bachelor may say, "I do not marry, not because I do not want to, but because my doctor has told me that I should not." But, it is argued, you do not tax him because he does not marry, but because in proportion to his means he has fewer outgoings. That is the real point. But against this should be placed the fact that men do not marry, or do not marry till late in life, because they have relatives dependent upon them, and so they sacrifice their own happiness in life from a sense of duty. It is not an easy thing to transfer the burden from the married person, who may have much more than the bachelor or the spinster having regard to the claims the latter may have. My right hon. Friend, foreseeing these difficulties, says, "put it on everybody." Is it the desire of the House that I should modify this tax by adding 6d. to the Income Tax with the prospect that in the near future, with the rearrangement which could be made, the increase would be very much greater?

Photo of Mr Godfrey Locker-Lampson Mr Godfrey Locker-Lampson , Wood Green

Will the right hon. Gentleman deal with the suggestion that he should get the cost out of the higher incomes?

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

There is a standard Income Tax rate, but that does not mean that everybody pays it. I could not test the cases which the hon. Gentleman gave, but I should be surprised if he was accurate as to the tax paid if I rightly heard his figures; but I shall see them in the Official Report. At any rate, I could deal with the present tax arrangement, a combination of the two; but what is the concomitant? The law in respect of a wife is more favourable to a married couple than a separate assessment of husband and wife's income without any relation to the fact that they are married.

Let me say to the Committee—and it is the last thing I will say to-night, because we are not really fighting this matter to night—that in the small income cases which my hon. Friend takes there cannot be the higher relief up to the point at which you get the maximum by their separation. The larger will be the profit according to the wealth of the two parties. In the case of the great bulk of the small incomes there will be only their share of the additional charge which is to be made in consequence of the change.

Photo of Mr Godfrey Locker-Lampson Mr Godfrey Locker-Lampson , Wood Green

I am very disappointed with the answer of my right hon. Friend, and I am more disappointed at the way in which he has treated this question. I suppose there is a great temptation to make fun on a question of this sort, but I do not think the right hon. Gentleman will find that he has gained anything by that. I understand, however, that there is a technical difficulty about taking a Division, because if we do that it will be ruled more or less out of order on the Finance Bill, as a new Clause, and on those grounds I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Main Question again proposed.

Photo of Mr Ernest Meysey-Thompson Mr Ernest Meysey-Thompson , Birmingham Handsworth

There are two or three points which I am very anxious to bring before the Committee. I also wish to congratulate the Chancellor of the Exchequer with regard to the question of Colonial Preference. I think I can claim to have some right to speak on this subject. In the first place, I resided as a colonist for several years in New Zealand and Australia, and, in the second place, I had the honour to be one of the earliest supporters of the right hon. Gentleman's father when he brought in the question of Colonial Preference in the first instance. There are two or three criticisms which I feel bound to make with regard to the Budget, but as they have already been dealt with very ably by other hon. Members, I shall simply state them without repeating the arguments. In the first place, there is the question of the immediate or very speedy removal of the restrictions upon trade, and the reduction as soon as possible of all unproductive expenditure. I look upon Colonial Preference as one of the most extreme importance. We are faced with an enormous debt, contracted during this War, and it is the duty of the Chancellor of the Exchequer to find the best possible means of relieving the strain upon this nation. It was not a war only between England and the Central Powers, but between the British Empire and the Central Powers, and, when we are considering the means by which the money can be found to pay the great debt which we have contracted, we must look to the future help of the Colonies in assisting us to meet our liabilities. There is a policy of construction and a policy of consumption which have been brought before the House during the last two days. The policy of my hon. Friend on my right has not been one of construction but of consuming the wealth of the nation out of somebody else's pocket to defray the cost of the War. I often wonder whether Members of this House are aware—I know that a great many people in the country are not—of the enormous help which can be furnished by the Colonies if we help them to develop to their utmost capacity. Do many Members, I wonder, realise that the area of Australia is equal to that of the whole of the countries of Europe, excepting Russia—and a great part of Russia would be included—and that the population of that vast continent is only 5,000,000, and only amounts to two persons per square mile. The population of New Zealand, which is peculiarly suitable for settlement by the English people, only amounts to one million. The resources of Australia and New Zealand are enormous. We had the question raised to-day as to whether sugar, tea, coffee, and so on, could be supplied within the British Empire. Of course, they can. Queensland, New South Wales, Mauritius and many parts of our Empire can supply us with all our needs. The profits coming into the pockets of our own Colonial people will enable them and encourage them to increase their population, let us say in Australia from 5,000,000 to 50,000,000. I wish I could get Members to realise what an enormous sum could be raised by our Colonies for the liquidation of our War debt in a very few years from the present time if we treat them as we ought to do and give them a slight preference over other countries and thus enable them to develop their resources. This is one point I should like to bring forward. It is of very great importance to this country. I have had the privilege during the last few months of putting up at my own home convalescent Australian and New Zealand officers and occasionally Canadians and Americans. The one thing that strikes them more than any other is the enormous preponderance of the rural populations in England over the urban populations, as compared with the immense preponderance of urban populations over rural populations in America and Canada and in our Australian Colonies. I have had the advantage of travelling in Canada and living in Australia. Time after time I have heard arguments brought forward in favour of legislation to induce people to live in the country, instead of in the towns. In Australia four-fifths of the population live in the towns, and, in spite of all legislation there to induce them to go into the country, it has been unavailing. I have discussed it very fully with those resident in America, Canada, and Australia, and I have come to the conclusion—and they agree with me—that the reason why they get populations to live in the country in England is that life in the country here is so much more attractive than it is in other countries, where it is almost ugly. I am, therefore, quite certain that nothing could be a greater mistake than to increase the Death Duties. They are already too high. They ought rather to be reduced. You are going to drive all the landowners of any size out of the country into the towns You are going to reduce the attractions to live in the country—hunting, shooting, farming, and so on—and if the landowners go then the doctor, the solicitor, and the land agent will follow, and you will denude the country of its population and drive them into the towns, which is not an advantage either to the country or to the towns. I wish to make a very strong protest on this point. From my knowledge of the country and my personal experience, I appeal to the Chancellor of the Exchequer to consider whether instead of increasing Death Duties, the receipts from which will be infinitesimal, he cannot adopt the other course, especially as the evil results to the country will be so great. Having made that protest I wish to congratulate the Chancellor of the Exchequer on his Budget as a whole, I would, however, ask him to consider the points which have been put before him, to as speedily as possible get rid of the restrictions on trade, and to reduce unnecessary expenditure on Government Departments. Then there is the question of the Beer and Spirit Duties. There is a strong feeling on this subject in my own Constituency, which is not far from that of the right hon. Gentleman, and I can only say that if the duties are not reduced instead of being increased there will be very great dissatisfaction. I therefore hope the right hon. Gentleman will give this matter further consideration and see if he cannot give better beer at lower prices instead of increasing them—a proposal which is causing the greatest dissatisfaction throughout the country at the present moment.

Question put, and agreed to.

Resolution to be reported upon Wednesday next; Committee to sit again upon Monday next.