Corporation Profits Tax.

Orders of the Day — Income Tax. – in the House of Commons at on 27 April 1920.

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"21. That there shall be charged on the profits or gains arising in any period of account which includes any time after the thirty-first day of December, nineteen hundred and nineteen, from any trade, manufacture, concern in the nature of trade or business carried on in any place whatsoever by a corporate body incorporated by or under the laws of the United Kingdom, or carried on in the United Kingdom by a corporate body incorporated otherwise than as aforesaid, and on any income (other than any such profits or gains as aforesaid) accruing from sources in any place whatsoever in any such period of account as aforesaid to a corporate body incorporated by or under the laws of the United Kingdom, or any such income accruing from sources in the United Kingdom in any such period of account as aforesaid to a corporate body incorporated otherwise than as aforesaid, a tax of five per cent. of the profits, gains or income.

First Resolution read a Second time.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

I beg to move in the table to leave out the words "Increased duty on tea—1–1st August, 1921."

We desire, in moving to omit the duty on tea, to make a general protest against the indirect taxation placed upon the people of this country, the majority of whom are actually working people. The duty amounts to 1s. in the 1b., with a rebate of 2d. in the lb. for Empire-grown tea. According to the statement of the Chancellor of the Exchequer last year, 90 per cent. of the tea consumed in this country is Empire-grown, so that, broadly speaking, the duty actually paid by the consumer is 10d. per lb. This is not an ad valorem duty; it is a fixed duty, and, whether the tea be the cheapest or the most expensive which can be purchased, the duty is 10d. in the lb., which means that the poorer classes are more heavily taxed by this indirect taxation than the wealthier classes in the community. The proportion of tax to the price is largest in the case of the cheapest tea. The duty on tea selling at 2s. 4d. or 2s. 8d. per lb. amounts to one-third of the purchase price, but as the price increases the duty decreases in proportion till it only amounts to one-sixth of the purchase price when the tea is sold at 5s. per lb. This duty shows probably in a better form than any other tax the iniquity of an indirect tax which places such a heavy burden upon the poorer classes in the country. That is one of the reasons why the Labour party desire the deletion or repudiation of this duty altogether. I can quote even the case of the Chancellor of the Exchequer himself, because just prior to the War he and those who with him now sit on that Bench moved a reduction in the tea duty of 3d. per lb. Since then the duty has increased, and it is now nominally 1s. in the lb. If it were good enough for the community to have a reduction in the price of tea when the right hon. Gentleman was in opposition, surely it cannot be bad for the community now, when he has control of the finances of the country, for him to agree to a remission of the duty, or even to do away with it altogether.

We on these benches do not desire indirect taxation. It is the most iniquitous form of taxation that can be imposed. People do not know what they are actually paying in taxes. When they purchase tea or tobacco or any other article that is taxed, they do not realise, in the great majority of instances they do not even know, that a very large proportion of the price is the tax upon the commodity. Consequently, believing as we do that the best form is direct taxation, so that the individual may know actually how much he or she is contributing to the maintenance of the nation, we wish this duty upon tea to be done away with altogether. We take this tea duty in order to voice a general protest against indirect taxation upon the food of the people. It is many years since I first took an interest in politics, and I can remember the elections 20 and 25 years ago that were waged upon what was known in the Newcastle programme of the Liberal party as the "Free Breakfast Table." A quarter of a century afterwards we find that the breakfast table is more heavily taxed than it was when the Newcastle programme was first placed before the country.

These taxes continue to increase. There is a shifting of the duties, but there is never an abolition of them altogether. Practically 33 per cent. of the taxes are indirect taxes. That is not a fair proportion. If we wish this country to realise to the full the financial position that it occupies, the best method is to assess the people directly and make them pay in proportion to their wealth. The gross receipts from the duty on tea amount to £16,074,000, and, after giving rebates, making repayments, and allowing for the cost of collection, the net receipts amount to £16,035,319. The working classes are paying the great bulk of this duty, and they pay it in a manner that inflicts a greater hardship upon them than upon any other section of the community. We have heard from the Chancellor of the Exchequer that the country requires all the money that he can get, and I understand that the position he will take up will be that the War has cost us thousands of millions of pounds, and, in view of the great burden upon the country necessitated by the repayment of the money borrowed and the payment of interest upon that money, it becomes necessary for him to search every possible avenue in order to meet the financial necessities of the country. There are other avenues which have not been explored, but which might be explored by the Chancellor of the Exchequer, if he would take his courage in his hand, to meet the deficit resulting from the deletion of the tea duty. One Government official has estimated that the additional war wealth in the hands of 1 per cent. of the population amounts to £4,000,000,000. There is no suggestion of taxing that wealth, but the poor people who have made nothing out of the War—[HON. MEMBERS: "Oh!"]—except sacrifices—[HON. MEMBERS: "High wages!"] High wages do not compensate for the increased prices that the trusts and combines of this country have placed upon the food supplies of the nation. The figures of the Board of Trade show that the cost of living to-day, as compared with 1914, is greater in proportion than the in crease in wages. We have not kept up our wages in comparison with the in-creased prices. Let us be fair and under stand what these increased wages purchase for the people to-day. They do not purchase the same quantity or quality of commodities that people were able to purchase with their wages in 1913, and on top of this decreased standard of living—[HON. MEMBERS: "Oh!"] Hon. Members sneer—

Photo of Mr William Joynson-Hicks Mr William Joynson-Hicks , Twickenham

Does the hon. Member really mean to suggest that the great bulk of the working-men to-day who are earning these large wages are no better off?

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

Will the hon. Member keep a little more to the point? His re-marks are very suitable to a Second Reading Debate, but we are now discussing one particular Resolution. Let us keep to it.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

I was replying to an interjection, and generally interjections are followed up by other interjections, and the Debate is thus widened. This particular tax will fall more heavily upon the workers of this country than upon any other section, and we submit it is a tax which ought to be removed.

Sir J. D. REES:

It is no part of my business to object to any decrease in the tea duty, but anyone listening to the hon. Member would not have thought that the Chancellor had left the tea duty where it was. He has not raised the tea duty, and is simply maintaining it at the rate that was in force. The hon. Gentleman seemed to be arguing on the assumption that the Chancellor had imposed an additional duty on tea.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

I did not suggest anything. I was simply pointing out that a tax which is bad and iniquitous in principle ought not to be continued.

Sir J. D. REES:

The hon. Gentleman says that all indirect taxation is iniquitous, but somebody else might say that all direct taxation is iniquitous. The real truth is that all taxation is iniquitous, but since a certain amount has to be endured it is a strange argument to lay before us that a tax is iniquitous because it is indirect. I rose principally to correct a statement made by the hon. Gentleman who said that tea was being sold in this country at twelve times the cost of production. He must have made that statement unwittingly. The fact is that the cost of producing tea has increased very much in recent years. The factors which lead to increases here are not wanting in India, even to the presence of agitators going about pressing the cultivator to object to his lot and claim higher wages.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

I made no statement with regard to the price of the production of tea. I merely mentioned the price at which tea was sold in shops over the counter. I made no statement which could be construed as referring to the cost of production.

Sir J. D. REES:

Did the hon. Gentleman not say that it was sold at twelve times the cost of production?

Sir J. D. REES:

Then probably I have done the hon. Member a service in correcting the statement.

Mr. THOMAS:

But he never made it.

Sir J. D. REES:

Since I misunderstood the hon. Gentleman to that extent, possibly somebody else did. Tea is being sold in very large quantities in the United Kingdom at less than it cost the producer to bring it to the market. The profit of growing and selling the tea this year is not likely to be so large. I do demur to the hon. Gentleman stating in this House what is so frequently and so unjustly and so unpatriotically said outside, that wherever prices are high and where that is due primarily to the extent of ninety-nine hundredths to the question of supply and demand, that such prices, including the price of tea, are due to the action of combines. That statement in regard to tea is absolutely contrary to the facts of the case.

Photo of Mr John Mills Mr John Mills , Dartford

I desire to support the Amendment because the party on this side regard all forms of indirect taxation as being vicious and altogether contrary to sound economics. We believe that all taxation should be equitable and based on sound economic lines, and we think this tea tax is neither. The tea tax operates so hardly that one could not exaggerate the viciousness of the proposal. It is not levied according to the ability to pay, but depends on the size of the family as to how much they contribute to this particular tax. This is a subject which has formed part of the arguments of both of the great political parties for very many years. The people who in the main consume tea are people who live a family life, and the greater the number of children the greater the amount of the tax. The Minister of Labour told us to-day that there were 220,000 ex-service men out of employment, and it may be taken for granted that a large number of those are married men. When we insist on retaining this tax because, forsooth, the cost of government has got to be borne by all sections of the community, I would remind the House that the men who draw unemployment pay, and whose stable food very often is bread and tea, pay by this tax directly for the cost of government. The same applies to an even more helpless section of the community, the old age pensioners, who have to contribute out of the miserable sum which was accorded to them, but not unanimously, by this House. I am only sorry we are not sufficiently numerous on these Benches to bring about the abolition of this tax.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I am much obliged to hon. Gentleman opposite for the method they have taken to raise the broad question of public policy which they desire to raise by the Amendment now under discussion. The hon. Gentleman who moved expressly stated that his object was to raise the question of indirect against direct taxation and to take on this Resolution the general sense and decision of the House on that broad principle instead of raising it on each tax. I am much obliged for the businesslike way in which they have raised the question and I quite agree it is one which is worth occupying a little time of the House and on which we must come to a definite decision. I agree with the hon. Gentleman that if you considered the tea tax by itself it would be grossly unfair if it were the only tax we had to consider, because in that parti- cular tax as in certain other indirect taxes people do not contribute in proportion to their ability to pay. If, therefore, indirect taxation was our only taxation or our main source of taxation I agree that such an objection might be fatal. At any rate it might be fatal to the limitations of indirect taxation to the present subjects of that taxation, but that really is too narrow a view to take because the errors and injustices of one tax are corrected by another in so far as human ingenuity is able to correct them. To treat indirect taxation, such as the tea tax or generally, as if it were the measure of the rich man-s contribution as compared with the poor man and to try by this single test to prove that is, I venture to say, to make an argument which cannot be sustained and which rests on far too narrow a basis. The correction of the inequality of the tea tax or other similar taxes is made in the Income Tax, the Super-tax and other charges falling on the direct taxpayer. What is the view of taxation of hon. Gentlemen opposite? The hon. Member who moved says he is opposed to all indirect taxation, not taxation on what you may call the necessaries or simple comforts of life, but to all indirect taxation even if it falls on luxuries or comparative luxuries, such as beer, spirits, champagne or wines. A great number of people can do without those articles, and I am sure the hon. Member will not put them in the same category as tea. We are not to tax one of those, and last year I was told from the Benches opposite that we must not tax entertainments and that that was an improper tax from the point of view of the Labour party. The hon. Member says I am to rely upon direct taxation alone. Will he carry that to its logical conclusion and extend the Income Tax downwards?

Mr. MACLEAN indicated assent.

Photo of Mr John Mills Mr John Mills , Dartford

Yes, to a minimum standard of decency.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I will deal with one hon. Member at a time, and I will deal first with the hon. Member who has been here longest. He is ready to do it, but his party is not ready to do it, and he cannot pretend for a moment that such a proposal as that would be sympathetically received by working-class opinion gener- ally. On the contrary, we all know that last year there was the strongest pressure on those Benches that I should raise the exemption limit for Income Tax. I waited for the Report of the Royal Commission on Income Tax, and on this occasion I propose to do it. I venture to say that when the hon. Gentleman opposite has to frame a Budget, he will find that the rich man, as the universal milch cow, is not as productive as he thinks. Unless the whole of the people contribute in proportion to their means, I do not see how the country can pay its way, and the endeavour of my Budget, not through the tea duty alone, but through that and the whole series of taxes taken together, is to apportion the burden fairly in relation to the ability of the different people to bear it. I could not possibly assent, and I do not suppose for a moment that the majority of the House would assent, to the principle that henceforth there is to be no indirect taxation and, least of all, to the proposition that those who at present contribute only or mainly by indirect taxation are prepared to assume their share of the burden through direct taxation.

Lieut.-Colonel JOHN WARD:

An absence of a few years from the House and returning again to a Budget discussion are most interesting. I suppose that if you are in attendance regularly at the House the change is not noticed. When I left the House prior to the War this subject used to be debated every Session. The Liberal Government and the Labour party, largely operating together, were on that side of the House, and the right hon. Gentleman the present Chancellor of the Exchequer and his friends, especially the hon. Baronet the Member for the City of London (Sir F. Banbury), used to sit in Opposition. Every Session when this tea duty came on this same Amendment was moved by the Opposition. It was always considered as a good election stunt. I have not looked through the speeches to see the line that the present Chancellor himself took in those discussions, but it strikes me it would be extremely interesting to see them

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

The hon. and gallant Gentleman has alluded to me. May I point out that, so far as I remember, there were only one or two of those occasions, and then I always voted against my party and with the Govern- ment in favour of maintaining or of increasing the tax on tea.

Lieut.-Colonel WARD:

That may be perfectly true, but the point I am arriving at is entirely a different one. Times out of number it has been suggested to me, by the officials of the Labour party, that this Amendment was only just a Tory election stunt, something that they wanted for a by-election or something of that kind, and that we were not going to be led astray on a miserable move of this description. As will be shown by the Divisions—this is the point I am coming to, and I think my hon. Friend the Member for Dartford (Mr. Mills) ought to know it—the Divisions will show that times out of number we Labour men in this House, knowing that this Amendment was a mere Opposition stunt, where one party wanted to be able to prove to the working classes in the constituencies that they were their only friends, voted accordingly. We played the game, and I am not sure that the right hon. Gentleman has not played it himself. I know his party have when they were in opposition and we were supporting the Government, and therefore I do not think, if I were the Chancellor, I would take this Amendment quite so seriously as he has done. He has argued it as though it was the first time the proposition had ever been suggested. For the whole ten or thirteen years I have been in this House it has come forward. When it suited our purpose, for ten of those years, we voted against reducing the Tea Duty, and now I suppose, as we are in another position, it is our business to vote for reducing it. That is how the question presents itself to me after an absence of five years. I used to be instructed regularly to vote in favour of maintaining this duty, not because we liked it. I think the hon. Baronet the Member for Nottingham (Sir J. Rees) really represented the feeling of the whole House on the subject when he said that all taxation is wrong and wicked, and that is our attitude, and the most we can ever discuss about it is the question who shall pay the taxation that is necessary? Naturally the next step is, "Well, we want to get the other fellow to pay as much as possible, and not ourselves." That is exactly what the Amendment before the House means, nothing more and nothing less.

I quite agree that indirect taxation affects the working classes greatly, and probably if we were to go into the matter and find a real and proper basis of direct taxation, even for the working classes, it would be much better than this indirect taxation, but that is not possible. If one were going to relieve from indirect taxation the working people, the poorest people, I should imagine that very likely, purely from a popular point of view, one would attack the increases of the Chancellor of the Exchequer on the price of beer. There is more money got out of the poorest people by the taxes on beer than there is by the taxes on tea. There is not the slightest doubt about that. The hon. Member for Dartford must know that that is the case—beer, and whiskey, and spirits, and things of that description—and if you were really going to relieve workmen of a very serious item of indirect taxation, I should imagine that, except for the sentiment attached to the temperance side of the question, and regarding it purely as an economic proposition, probably the indirect tax on tea would be about the last thing you would think of dealing with. There are so many other means by which the working man is forced forced to pay without knowing it that ought to be dealt with, and that is the reason why I am not myself, knowing the situation as it was six or seven years ago in this House and as it is at the present moment, very enthusiastic about the Amendment now before us. Indirect taxation apparently is necessary until there is some complete revision of our method of taxation. I would most certainly prefer, whatever the Chancellor of the Exchequer might say, if a Committee or some other body could be set up to decide what was a proper proportion of direct taxation that the man with two or three pounds a week should pay. The mere fact that he knew the sum that he had to pay, whether it was one shilling, or two shillings, or three shillings per week, the same as he does with his local rates, the mere economic and political and moral influence of paying taxes direct, even by the poorest man in the State, would be of such an enormous advantage in the education of the people that it would be a good thing if one could undertake it; but it does not want to be dealt with in the piecemeal way of a party move on the Budget. It wants to be dealt with in a much more drastic way than that, and that is why I cannot vote in favour of the Amendment.

Photo of Mr James Thomas Mr James Thomas , Derby

I understand my hon. and gallant Friend who has just sat down taking advantage of this opportunity of reminding all sections of the House that this formerly was the stock Amendment used by all parties. It is true, and if the right hon. Member for Paisley (Mr. Asquith) Were here now he would be compelled to admit that he had moved the same Amendment himself, and I believe that the Chancellor of the Exchequer also—

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

My impression is that throughout those Debates I supported the grant of a preference on tea, but I do not think I ever said one word that would lend colour to the suggestion that I was in favour of the total abolition of the tea duty, and still less of the total abolition of indirect taxation.

Photo of Mr James Thomas Mr James Thomas , Derby

All I can say is that if my right hon. Friend will look at the OFFICIAL REPORT, he will find that he moved a reduction of the duty.

Photo of Mr James Thomas Mr James Thomas , Derby

The fact that my right hon. Friend previously moved the reduction by threepence I used as an argument to show that both parties had done the same thing, but I want to take exception to the proposition laid down by my hon. and gallant Friend (Lieut.-Colonel J. Ward) that, viewed from the standpoint of the working classes either as a fair tax or as a popular tax, we ought to associate the tax on tea with that on beer. I, at least, entirely dissociate myself from any such proposition. I do not think any Member on these Benches would dare go down to any constituency or to any body of working men and attempt to defend the proposition that, viewed purely from the standpoint of a tax, we as a party or he as an individual could defend a tax on tea in preference to a tax on beer. I wish to urge this point. There are a large number of people in this country to whom tea is an absolute necessity, and beer, whatever may be the relative merits of the two beverages, cannot be placed in the same category. My right hon. Friend said, quite rightly, that we ought to say from these Benches what is our alternative, that it is not sufficient to say we are opposed to indirect taxation without following it up by suggesting what is our particular method of taxation. I am entirely opposed to indirect taxation, even on local municipal bodies. I always favoured, and I favour today, instead of the rates being paid by the landlords, that the rates should be paid by the tenants. Wherever that is done, there you have developed a higher and better type of citizen, because of the direct personal interest that the payment of the rates brings home to them. I think it is a profound mistake, regardless of party, not to realise that direct taxation, as a principle, is better than indirect taxation.

In the same way, my right hon. Friend says, "Would you agree to the Income tax limit being lowered if you were to succeed in taping the indirect taxation off?" I say emphatically, Yes, because, always assuming that we are agreed that a certain amount of taxation is necessary, and we are agreed that indirect taxes are bad, it naturally and logically follows that direct taxation must be the alternative. But when we come to figures, I am sure my right hon. Friend will agree that if a pound to-day is only worth in spending power 8s.,as it is, it is unfair to suggest that, whilst we are imposing taxation we should agree that the present Income Tax limit is fair. I put it quite frankly that the previous £150 limit is now equal to about £325, and we are entitled at least to go back to the pre-war standard. Therefore, I want to say quite frankly that this Motion is not moved in the sense of the old party Motion. That aspect of the question has not been debated in the least. But it is, as my hon. Friend says, the general principle of direct versus indirect taxation, because we feel as a party—and I am sure there are Members of other sections who feel the same—that, so far as the principle of direct as against indirect taxation is concerned, direct taxation is best, and we have chosen the tea duty to give expression to our views.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I do not think the speech of the hon. and gallant Member for Stoke-on-Trent (Lieut.-Colonel J. Ward) should pass without comment. I think he is wrong when he says the Labour party in the old days always voted with the Liberal Government in favour of these indirect taxes. I think the matter was debated twice, and on both occasions, if my memory serves me aright, they voted in favour of the reduction of the tax. Certainly I did. In any case, it is really a first-rate example to hon. Members who sit on these Benches of the advisability in Parliament of always voting on merits, and not in order to support a particular party. The principle involved in this is really a vital question not only to the Labour party but to the whole House of Commons and the country. If Members of this House have the courage to vote as they believe is right, irrespective of party advantage, the country will get on a long way better. I think the Chancellor of the Exchequer is wrong when he believes that the working-classes of this country are not prepared to have direct taxation in the shape of a lowering of the Income Tax level rather than the present indirect taxation.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

Not only was I pressed again and again to raise the Income Tax level last year, but I was threatened that the working classes—well paid workmen—would strike if I did not.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I have constantly had the question put to me at meetings whether I was in favour of raising the Income Tax exemption level, and I have always said I would prefer to have these indirect taxes taken off rather than raise the Income Tax level, and I am bound to say that at every one of these meetings the audience has agreed with me. It is more or less a question of putting these questions before an audience. Immediately they find indirect taxes fall on a large family with far greater weight than on the bachelor or the small family, they always agree they would sooner have a rebate on indirect taxes than on direct taxes. The Chancellor of the Exchequer knows perfectly well that in this country you have only got to tell the people frankly what is the case, and if it is a sound case they will agree. There is always, it seems to me, a little too much nervousness about pointing out to people the incidence of taxation and the necessity of making sacrifices, particularly during the War, and even after the War. But the real reason why I want these taxes reduced to-day is a reason which, I believe, will appeal to the Chancellor of the Exchequer and to most Members of this House. We have not only indirect taxation at the present time, but we have also an indirect bonus in the shape of a subvention towards cheapening the price of bread. We all know that that subvention is a thoroughly unsound system of bonusing the people of this country. It is an old Roman system—panem et circenses. Why not knock on the head that indirect subvention, and at the same time reduce your indirect taxation by an equivalent amount so that you would balance matters, and do away both with the bad indirect tax and the bad subvention at the same time? If we are to get on to sound financial lines in this country, we have got to do away with these subventions. To do away with them at the present moment means putting a large additional charge upon all the big families. Why not balance that by taking off these taxes now?

More than that, we have heard often enough, not from the right hon. Gentleman, but from the Prime Minister and others, that this Government is not responsible for the high cost of living at the present time. If you want to reduce the cost of living at the present time—and I should have thought it was pretty obvious that it was necessary the Government should do something in that direction—the perfectly plain and simple way is to do away with these taxes on tea, sugar, coffee, and dried fruits. If that were done, the cost of living would immediately fall, and it is really not quite straight to tell the people of this country that the Government are not responsible for the high cost of living, when they could immediately bring down that high cost of living. The Government have invented, in effect, a fresh form of indirect taxation, which the right hon. Gentleman has not mentioned, and which does not appear in the Budget. It is due to their depreciation of currency. Every time they increase paper credit or paper currency in this country they are, in effect, depreciating the paper currency throughout the country, and, as the value of the paper pound falls, so automatically the cost of living rises. That is a new form of indirect taxation. The Government are responsible also, in so far as they keep an adding to the National Debt.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

These observations are very suitable to the Second Reading of the Bill, but not to discussions on tea.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I thought we were taking, on the tea duty, the general question as to indirect taxes.

Photo of Mr James Lowther Mr James Lowther , Penrith and Cockermouth

The House has no power to do that at all. The rule is that we must discuss one Resolution at a time, and that now before the House is for a tax on tea.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I think I am only following the right hon. Gentleman opposite in dealing with indirect taxation generally, rather than the tea duty. However, I will try to confine myself to tea. The real reason why I am going into the lobby is, not in order to embarrass the Government to-day, but because we believe the cost of living has got to be brought down, that the Government is responsible for keeping up the cost of living, both by indirect taxes and the depreciation of the currency, and we on this side, at any rate, will vote on merits, in order to bring down the cost of living in this country and prevent the perpetual unrest going on at the present time.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

The hon. and gallant Gentleman said that if the tea duty were reduced the price of tea would fall. I should not like to say whether it would or would not, but we certainly cannot assume that it would fall. There was a heavy duty some years ago put on all coal that went into the City of London. There was a great outcry. This duty brought in a large revenue, which was spent on improvements in the city. It was done away with, and coal rose more, and has done so ever since. I do not think we could assume, as a matter of course, that because the duty was taken off the price of the article would fall, although if a duty is put on, I think we might say with absolute certainty that the price of the article would increase. I would say one word with regard to the speech of the hon. and gallant Member for Stoke. What really took place was that the Radical party said that when they came in office that they would reduce the duty on tea, and they always voted against us when we were in power and kept on the duty or raised the duty on tea. When they came into power they did not reduce the duty on tea at all, although they were pledged to do so, and a certain number of hon. Gentlemen sitting on my side of the House on one or two occasions, I think, said they would put them into the lobby to see if they would carry out their election pledges, but they did not. I did, and I remember I was complimented by the Prime Minister that on every occasion I did my best to persuade my party to do this. As the hon. and gallant Gentleman has mentioned my name I thought I would put him right on that matter. That is all that took place, and it seems that we are going to have a repetition of the same thing.

Photo of Mr Charles White Mr Charles White , Derbyshire Western

The hon. Member for Govan (Mr. N. Maclean) led us to understand that this duty on tea pressed on the poor to such an extent that it actually affected their standard of life, thereby giving the House to understand that, owing to the heavy duty on tea, the working classes were not able to drink as much tea as they did before. I think the Chancellor of the Exchequer said the other day that the consumption of tea in this country, not in pounds worth but in tons weight, had enormously increased during the last year or two. That shows that that extra tea was consumed by the bulk of the population. It was not consumed only by those fortunate people whom the hon. Member stated had amassed something like £400,000,000. They have not had an orgy of tea; they have not bathed in tea. Then, with regard to the question of the Income Tax, I think the Chancellor of the Exchequer would be well advised not to take that as an alternative for indirect taxes at any time, because not only have there been these protests and resolutions passed, threatening to strike unless the exemption rate limit was raised, but also there has been, especially in South Wales, I understand, a very large amount of refusal to pay Income Tax, and in many cases evasion of Income Tax, which involves much difficulty in collection. Indirect taxes are simple to collect, and probably in that way are cheaper to the taxpayer.

Question put, "That the words proposed to be left out stand part of the said Resolution."

The House divided: Ayes, 247; Noes, 59.

Division No. 93.]AYES.[5.2 p.m.
Adair, Rear-Admiral Thomas B. S.Glyn, Major RalphNicholson, William G. (Petersfield)
Agg-Gardner, Sir James TynteGoff, Sir R. ParkNield, Sir Herbert
Archdale, Edward MervynGould, James C.Norris, Colonel Sir Henry G.
Ashley, Colonel Wilfrid W.Goulding, Rt. Hon. Sir Edward A.Norton-Griffiths, Lieut.-Col. Sir John
Asquith, Rt. Hon. Herbert HenryGrant, James A.Ormsby-Gore, Captain Hon. W.
Atkey, A. R.Gray, Major Ernest (Accrington)Palmer, Major Godfrey Mark
Baldwin, StanleyGreen, Joseph F. (Leicester, W.)Palmer, Brigadier-General G. L.
Balfour, George (Hampstead)Greene, Lieut.-Col. W. (Hackney, N.)Parry, Lieut.-Colonel Thomas Henry
Banbury, Rt. Hon. Sir Frederick G.Greig, Colonel James WilliamPearce, Sir William
Barker, Major Robert H.Gritten, W. G. HowardPease, Rt. Hon. Herbert Pike
Barnett, Major R. W.Guest, Major O. (Leic, Loughboro')Peel, Lieut.-Col. R. F. (Woodbridge)
Barnston, Major HarryGuinness, Lieut.-Col. Hon. W. E.Philipps, Sir Owen C. (Chester, City)
Barrand, A. R.Gwynne, Rupert S.Pickering, Lieut.-Colonel Emil W.
Barrie, Hugh Thom (Lon'derry, N.)Hailwood, AugustinePilditch, Sir Philip
Barton, Sir William (Oldham)Harmsworth, Hon. E. C. (Kent)Pinkham, Lieut.-Colonel Charles
Beauchamp, Sir EdwardHarris, Sir Henry PercyPownall, Lieut.-Colonel Assheton
Beckett, Hon. GervaseHaslam, LewisPrescott, Major W. H.
Benn, Sir A. S. (Plymouth, Drake)Hennessy, Major J. R. G.Pulley, Charles Thornton
Benn, Com. Ian H. (Greenwich)Henry, Denis S. (Londonderry, S.)Purchase, H. G.
Bigland, AlfredHickman, Brig.-Gen. Thomas E.Raeburn, Sir William H.
Birchall, Major J. DearmanHilder, Lieut.-Colonel FrankRaw, Lieutenant-Colonel N.
Bird, Sir A. (Wolverhampton, West)Hinds, JohnRees, Sir J. D. (Nottingham, East)
Blane, T. A.Hoare, Lieut.-Colonel Sir S. J. G.Remer, J. R.
Borwick, Major G. O.Hohler, Gerald FitzroyRemnant, Colonel Sir James F.
Boscawen, Rt. Hon. Sir A. Griffith-Hood, JosephRichardson, Alexander (Gravesend)
Bowles, Colonel H. F.Hope, James F. (Sheffield, Central)Roberts, Sir S. (Sheffield, Ecclesall)
Bowyer, Captain G. E. W.Hope, Lt.-Col. Sir J. A. (Midlothian)Robinson, S. (Brecon and Radnor)
Breese, Major Charles E.Hope, J. D. (Berwick & Haddington)Robinson, Sir T. (Lancs., Stretford)
Briggs, HaroldHopkinson, A. (Lancaster, Mossley)Rodger, A. K.
Brown, Captain D. C.Hotchkin, Captain Stafford VereRoundell, Colonel R. F.
Bruton, Sir JamesHoward, Major S. G.Royds, Lieut. Colonel Edmund
Buchanan, Lieut.-Colonel A. L. H.Hunter, General Sir A. (Lancaster)Samuel, A. M. (Surrey, Farnham)
Buckley, Lieut.-Colonel A.Hunter-Weston, Lieut.-Gen. Sir A. G.Samuel, Rt. Hon. Sir H. (Norwood)
Burdon, Colonel RowlandHurd, Percy A.Sanders, Colonel Sir Robert A.
Burn, Col. C. R. (Devon, Torquay)Illingworth, Rt. Hon. A. H.Scott, A. M. (Glasgow, Bridgeton)
Butcher, Sir John GeorgeInskip, Thomas Walker H.Shaw, Hon. Alex. (Kilmarnock)
Campbell, J. D. G.Jackson, Lieut.-Colonel Hon. F. S.Shaw, William T. (Forfar)
Campion, Lieut.-Colonel W. R.James, Lieut.-colonel Hon. CuthbertShortt, Rt. Hon. E (N'castle-on-T.)
Carr, W. TheodoreJameson, J. GordonSimm, M. T.
Carr, W. TheodoreJephcott, A. R.Smith, Sir Allan M. (Croydon, South)
Carter, R. A. D. (Man., Withington)Jellett, William MorganSmithers, Sir Alfred W.
Cautley, Henry S.Jesson, C.Sprot, Colonel Sir Alexander
Cecil, Rt. Hon. Evelyn (Birm, Aston)Jodrell, Neville PaulStanley, Lieut.-Colonel Hon. G. F.
Cecil, Rt. Hon. Lord H. (Ox. Univ.)Jones, Sir Evan (Pembroke)Starkey, Captain John R.
Cecil, Rt. Hon. Lord R. (Hitchin)Jones, Henry Haydn (Merioneth)Steel, Major S. Strang
Chamberlain, Rt. Hn. J. A.(Blrm.,W.)Jones, J. T. (Carmarthen, Llanelly)Stephenson, Colonel H. K.
Child, Brigadier-General Sir HillJoynson-Hicks, Sir WilliamStewart, Gershom
Clay, Lieut.-Colonel H. H. SpenderKerr-Smiley, Major Peter KerrStrauss, Edward Anthony
Coats, Sir StuartKing, Commander Henry DouglasSturrock, J. Leng
Cohen, Major J. BrunelKinloch-Cooke, Sir ClementSugden, W. H.
Colfox, Major Wm. PhillipsKnights, Capt. H. N. (C'berwell, N.)Surtees, Brigadier-General H. C.
Conway, Sir W. MartinLaw, Alfred J. (Rochdale)Sutherland, Sir William
Coote, Colin Reith (Isle of Ely)Law, Rt. Hon. A. B. (Glasgow, C.)Sykes, Colonel Sir A. J. (Knutsford)
Coote, William (Tyrone, South)Lewis, Rt. Hon. J. H. (Univ., Wales)Talbot, G. A. (Hemel Hempstead)
Cory, Sir J. H. (Cardiff, South)Lindsay, William ArthurTaylor, J.
Courthope, Major George L.Lister, Sir R. AshtonTerrell, George (Wilts, Chippenham)
Cowan, D. M. (Scottish Universities)Lloyd, George ButlerTerrell, Captain R. (Oxford, Henley)
Cowan, Sir H. (Aberdeen and Kinc.)Lloyd-Greame, Major P.Thomson, F. C. (Aberdeen, South)
Craik, Rt. Hon. Sir HenryLocker-Lampson, G. (Wood Green)Tickler, Thomas George
Curzon, Commander ViscountLonsdale, James RolstonTownley, Maximilian G.
Davies, Thomas (Cirencester)Lorden, John WilliamWaddington, R.
Davles, Sir William H. (Bristol, S.)Loseby, Captain C. E.Wallace, J.
Davison, Sir W. H. (Kensington, S.)Lyle, C. E. LeonardWard, Col. J. (Stoke-upon-Trent)
Dawes, James ArthurLyle-Samuel, AlexanderWarren, Lieut.-Col. Sir Alfred H.
Doyle, N. GrattanM'Donald, Dr. Bouverie F. P.White, Lieut.-Col. G. D. (Southport)
Duncannon, ViscountMackinder, Sir H. J. (Camlachie)Whitla, Sir William
Du Pre, Colonel William BaringMcLaren, Hon. H. D. (Leicester)Williams, Lt.-Com. C. (Tavistock)
Edge, Captain WilliamMacleod, J. MackintoshWilliams, Col. Sir R. (Dorset, W.)
Elliot, Capt. Walter E. (Lanark)M'Micking, Major GilbertWilloughby, Lieut.-Col. Hon. Claud
Eyres-Monsell, Commander B. M.McNeill, Ronald (Kent, Canterbury)Wilson, Capt. A. S. (Holderness)
Fade, Major Sir Bertram G.Macquisten, F. A.Wilson, Lieut.-Col. M. J. (Richmond)
Fell, Sir ArthurMagnus, Sir PhilipWilson-Fox, Henry
Fildes, HenryMalone, Major P. B. (Tottenham, S.)Wood, Sir J. (Stalybridge and Hyde)
Fisher, Rt. Hon. Herbert A. L.Marriott, John Arthur RansomeWood, Major S. Hill- (High Peak)
Flannery, Sir James FortescueMatthews, DavidWoolcock, William James U.
Foreman, HenryMond, Rt. Hon. Sir Alfred M.Worthington-Evans, Rt. Hon. Sir L.
Forestier-Walker, L.Moreing, Captain Algernon H.Yeo, Sir Alfred William
Forrest, WalterMorrison-Bell, Major A. C.Young, Lieut.-Com. E. H. (Norwich)
Ford, P. J.Mount, William ArthurYoung, W. (Perth & Kinross, Perth)
Ganzonl, Captain Francis John C.Munro, Rt. Hon. RobertYounger, Sir George
Gardner, ErnestMurchison, C. K.
Geddes, Rt. Hon. Sir Eric C. (Cam.)Murray, Major William (Dumfries)TELLERS FOR THE AYES.—
Gibbs, Colonel George AbrahamNail, Major JosephLord E. Talbot and Mr. James
Gilmour, Lieut.-Colonel JohnNewman, Sir R. H. S. D. L. (Exeter)Parker.
NOES.
Bell, James (Lancaster, Ormsklrk)Harbison, Thomas James S.Roberts, Frederick O. (W. Bromwlch)
Bowerman, Rt. Hon. Charles W.Hartshorn, VernonRose, Frank H.
Brace, Rt. Hon. WilliamHayday, ArthurSexton, James
Briant, FrankHirst, G. H.Short, Alfred (Wednesbury)
Bromfield, WilliamHogge, James MylesSpencer, George A.
Cape, ThomasIrving, DanSpoor, B. G.
Carter, W. (Nottingham, Mansfield)Jones, J. J. (West Ham, Silvertown)Swan, J. E.
Davies, Alfred Thomas (Lincoln)Kenyon, BarnetThomas, Rt. Hon. James H. (Derby)
Davison, J. E. (Smethwick)Kiley, James D.Thomson, T. (Middlesbrough, West)
Devlin, JosephLawson, John J.Thorne, W. (West Ham, Plaistow)
Edwards, C. (Monmouth, Bedwellty)Lowther, Lt.-Col. Claude (Lancaster)Walsh, Stephen (Lancaster, Ince)
Edwards, Major J. (Aberavon)Lunn, WilliamWedgwood, Colonel J. C.
Edwards, John H. (Glam., Neath)MacVeagh, JeremiahWignall, James
Entwistle, Major C. F.Mills, John EdmundWilkie, Alexander
Finney, SamuelMorgan, Major D. WattsWilliams, Aneurin (Durham, Consett)
Galbraith, SamuelMurray, Dr. D. (Inverness and Ross)Wilson, W. Tyson (Westhoughton)
Glanville, Harold JamesMyers, ThomasWood, Major M. M. (Aberdeen, C.)
Graham, W. (Edinburgh, Central)Newbould, Alfred Ernest
Griffiths, T. (Monmouth, Pontypool)O'Connor, Thomas P.TELLERS FOR THE NOES.—
Grundy, T. W.Parkinson, John Allen (Wigan)Mr. Nell Maclean and Mr. Water
Hallas, EldredRedmond, Captain William Archerson.

Question, "That this House doth agree with the Committee in the said Resolution," put and agreed to.

Second, Third, and Fourth Resolutions agreed to.

Fifth Resolution read a Second time.

Motion made and Question proposed, "That this House doth agree with the Committee in the said Resolution."

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

I merely desire to say that, as the right hon. Gentleman is going to receive a deputation on this subject on Thursday, I do not propose to do more than enter a caveat against it.

Question put, and agreed to.

Sixth Resolution agreed to.

Seventh Resolution read a Second time.

Lieut. -Colonel GUINNESS:

I beg to move to leave out the words, "and that on and after the date aforesaid a further additional duty, equal to fifty per cent. of the value thereof, shall be charged on sparkling wines so imported."

I have no objection whatever to all-round duties on wine remaining as they are in the financial Resolution, or indeed to their being increased. It is not competent for any private Member to move an increase, but I think a good many of us feel that the Chancellor of the Exchequer has not gone as far as he might have done in increasing the general level of duties on wines. Many of us object to the increase of the duty on sparkling wine, specially in an ad valorem form. Firstly, there is the reason of revenue, because we believe that the right hon. Gentleman will find he has reached the point of diminishing returns; and, secondly, because we believe that for international reasons it is not advisable to put on this heavy duty, which would probably have the result of destroying an important industry in France which is already terribly affected by the War.

If the right hon. Gentleman wants to get more revenue from wine the obvious class of wine to which he should apply himself is the heavy wine. My reason for saying that is that in the speech the Chancellor made on the 21st of this month he showed that the increase in sparkling wines over the figure of 1913 was 28 per cent., whereas the increase in the importation of heavy wines was seven times as great, or 203 per cent. Surely that points to getting further revenue, not from these sparkling wines which may be said to have been in a stationary condition as regards imports, but from the heavy wine, such as port wine and the other wines, which do not necessarily come from France, and where the importation was seven times as much increase as in the case of sparkling wines. The duty of 50 per cent. on sparkling wines amounts to 1,000 per cent. increase on the present duty. The Chancellor of the Exchequer based his estimate on the return from this increase on the clearances of 1,300,000 gallons. That is 100,000 gallons more than the average of the ten years preceding the War, and only 190,000 gallons less than in the bumper year of 1919. I believe his estimate will be disappointed for these reasons.

The year 1919 was an exceptional year for the importation of champagne, because there had been no importations during the War, and the scarcity of stocks had necessarily to be made up after these four years of suspension. Then the importation of champagne is always spasmodic, depending on vintage years. There has been no opportunity of importing 1918 vintage, and it had to be brought in during 1919. That was the year of the Declaration of Peace, and the year in which tens of thousands of our troops were being demobilised, with the result that scores of thousands of people drank champagne last year who do not make a practice of indulging in that form of refreshment. I will give the figures which have been given to me by a wine merchant as to how this new duty will work out in the retail price. May I say, in the first place, that there is some doubt among the Customs authorities as to how this duty is going to be charged, and I hope the Chancellor of the Exchequer may be able to throw a little more light as to the basis of this ad valorem duty. I am informed that there is a difference of opinion between the Customs officials. At one wharf they say that it is to be charged on the price to the shipper, but at another wharf they say it will be charged on the much higher price paid by the public to the merchant. Let me just show how this will work out. If you take the price of a dozen of champagne to the shipper as 140s., with 21s. extra for the duty and carriage, you get up to 161s. to the merchant, paid by the merchant to the shipper after he has met his ordinary level tax. Charging the ad valorem duty on the price received by the merchant from the public if he has to make 40s. on a dozen of champagne, which is 10 per cent. on the sale price, he must sell at 400s. a dozen, or 34s. per bottle. If the smaller basis is adopted, the price to the shipper, the duty would fall to 75s., and the price paid to the merchant would be 280s., or 24s. a bottle. In the restaurants where champagne is consumed it often remains in the cellars for many years before it is drunk, and obviously a considerable increase must be charged over that 24s. or 34s. on the higher prices. A large amount of this champagne is not drunk in that way, but by people in hospitals or invalids who are prescribed it by the doctor. In those cases it is going to be a terrible hardship if the price of champagne is put up to this prohibitive level.

There is a very strong objection on many grounds to an ad valorem duty. It was tried thirty years ago on champagne, and it was dropped because it was found impracticable, and led to a vast amount of fraud. If the right hon. Gentleman wants to tax champagne more heavily, he will be well advised not to do it by an ad valorem duty, but by means of a, level duty all round. My last reason is, I think, the strongest of all, that is, the international reason that we do not want at this moment to do anything which seems unfriendly to our great ally, France. No less than 97 per cent. Of the sparkling wines imported into this country last year came from France. There is 44 per cent. of the champagne district out of cultivation owing to the devastation of the War, and I think it will be a cruel blow to this industry if, on the top of their present troubles, this duty is to be imposed, which will make it an offence against good taste for anyone in this country to spend money on champagne.

I cannot imagine anybody in the present gravity of our finances and the necessity for curtailing luxuries daring to be seen drinking champagne when the cost charged at restaurants goes up to £2 or even £3 per bottle. The French realise that quite well. They know this is an absolutely penal tax on champagne. They know that the champagne industry has lost the whole of the market, which used to be so productive in America and Russia, owing to prohibition, and they know that the only chance of re-establishing their vineyards and of rebuilding the town of Rheims is that champagne should be imported without hindrance into this country. I have recently been in the champagne country, and I have seen the devastation that has been done there. I have seen how the peasants are trying to replant their vineyards, hoping they will again be able to get that prosperity which from time immemorial has been brought to their district by the production of sparkling wine. I think it is a most cruel blow to this sorely-tried population if by means of a tax of this vindictive character this great French industry is to be condemned to complete destruction.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I beg to second the Amendment. The arguments I could advance now are practically those which I wish to advance later on, and there- fore I will content myself with simply seconding this Amendment.

Photo of Mr Thomas Myers Mr Thomas Myers , Spen Valley

I desire to oppose the Amendment which has just been moved by the hon. and gallant Gentleman opposite, and I wish to support the proposal which has been made by the Chancellor of the Exchequer. The right hon. Gentleman told the House in his Budget speech that the Wine Duties have not been touched since 1899, and that in the meantime a considerable demand had been made upon beer, spirits and the like. The hon. Member who has moved this Amendment has specifically dealt with sparkling wines, and he has more particularly specified champagne. The importation of champagne into this country in 1919 was roughly 300,000 gallons more than the importation in 1913. I know that some interests involved in the production of this article have recently held a meeting, and that the results of that meeting have become public property in the shape of a general expression against this tax being levied on champagne. The Anglo-French entente has been an expensive one to this country, but we can hardly expect it to break down over the price of a bottle of wine. The importation of Spanish, French and Portuguese wines into this country in 1913 was, roughly, 8,000,000 gallons. In 1919, it was over 23,000,000 gallons, in fact the importation had trebled in the interval. The hon. Member referred to the price of champagne being somewhere in the region of 34s. a bottle. It can hardly be a working-class beverage at that figure, and if we take the whole importation of French, Spanish and Portuguese wines, and include the whole of the 23,000,000 gallons, even then it does not come within the category of working-class consumption to any great extent. When we recognise that the imports of these wines average three gallons for every family in the country per year, I would remind the hon. Member that there must be a good number of working-class families who do not get their share, and whose share must be consumed by other people. A year or two ago, on the introduction of the Budget, we heard a good deal about the robbing of hen-roosts. I wish to extend my congratulations to the Chancellor of the Exchequer on having found one to rob. This is one of the departments of taxation where undoubtedly it is desirable to make the consumer pay.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I have already disclaimed, if that were necessary, any intention to inflict loss upon France, and I have stated that in my opinion no charge which I am now proposing will have that effect. I hope we may be allowed to examine this tax on its merits and not from the point of view of one side of the Channel or the other, but remembering that we have to face an extraordinarily difficult financial position, and are therefore driven to financial expedients not wholly palatable to the one country or the other. I do not venture to criticise the proposals which the French Government have made for the restriction of imports or the taxation of luxuries, even although those proposals may and do exercise an injurious effect on British trade, and I hope that the French will realise that we have our difficulties to face although they may not be as great as their own, and that we must, therefore, be allowed to consider the best methods by which we can meet them. My hon. and gallant Friend comes to rather a lugubrious conclusion on information supplied him by a wine merchant friend as to the effect of this tax. My hon. Friend has had considerable experience in the House, and he will, I think, admit, that the anticipations of traders at a moment when we are discussing new duties are apt to be unduly pessimistic, and that in the result it frequently happens that the portentious evils which they fear, either for themselves or for their customers, do not follow on the modest impost suggested by different Chancellors of the Exchequer. I rather regret that my hon. Friend did not wait, as the hon. Member who spoke from the Bench opposite on a previous Resolution was content to do, until I had received a deputation from the wine trade, which I have undertaken to do if they can make one representative. Considering the number of deputations which have to be received, that is a condition which I am obliged to make. I will, however, see them before we get into Committee of Supply. I will consider what they have to say, and if I find that, without injury to my scheme, some small modification would be more acceptable to them, I shall give favour- able consideration to any such suggestion, but I cannot commit myself beforehand, as I do not know what they desire.

My hon. Friend sought to know how and when the duty will be levied. It is proposed that the charge shall be levied when the wine is cleared from bond. If it is cleared from the ship's side the charge will be levied on the import value c.i.f.; if it is put in bond and kept there many years the charge will be on the value of the wine as cleared and when it is cleared, and when the ordinary duties are paid. My hon. Friend did not appear, like the right hon. Baronet (Sir F. Banbury), who seconded his Motion, as an opponent of an increased duty on wine. On the contrary, he was quite content that I should raise the general duties on wine still further, provided that I made no special tax other than the existing special tax upon sparkling wines. I chose sparkling wine because it stood in a class by itself, both as a luxury and in the matter of price, and I should very much like to pursue the calculations of my hon. Friend as to the price which it is necessary to charge to the consumer. Perhaps I shall have an opportunity of doing so, but I would like to know how that charge is made up. I cannot help thinking that at the present time there is a profit on champagne somewhere. There are so many stages at which it can be made. The average import value of sparkling wine—this includes champagne, of course—in 1919 was 52s. 5d. per gallon. In the first three months of this year it had risen to 55s. Still wines imported in bottle last year averaged 23s. 6d., but they have fallen in the first three months of this year to 21s. The average import value of port, I think, is 15s. But still wines in bottle, and the heavier ones imported in cask, are not comparable in price or as luxuries with sparkling wines. I quite agree that the amount of champagne drunk last year was quite abnormal, but I doubt if a gallon less would have been drunk if this tax had then been in force. Perhaps it is saying too much to suggest that not a gallon less would have been drunk, but, at any rate, I do not suppose there would have been any material difference if the tax had been in force. I do not think it is likely that this tax, in the circumstances of the day, constitutes an element which will affect materially the amount consumed, nor could I venture to count upon a much larger amount being consumed if I accepted the Amendment of my hon Friend and omitted the special duty on sparkling wines.

There is one other point to which my hon. Friend alluded, and upon which I must say a few words. As I understood him, he took special exception to the ad valorem duty. Now we have had some experience of ad valorem duties in recent years as we have been enforcing them on a variety of articles for the last four or five years, and it is not found to be such an impossible task to arrive at a fair valuation as my hon. Friend anticipates it will be in this case. Let me remind him that the present ad valorem duty bears no resemblance to the ad valorem duty which was abolished in 1888. This is a pure ad valorem duty. That was a two-rate duty accordingly as the wine was above or below a particular figure. Then there was every inducement to bring the price a 1d. or 2d. below that line, and I daresay there was a good deal of difficulty in showing whether that penny ought to be just above or just below the dividing line. But there is not the same inducement when the tax is ad valorem throughout and is not dependent on whether it falls on one side or the other of a single dividing line. I am hopeful that this tax will be collected without seriously restricting the drinking of champagne beyond the extent to which it would have fallen under any circumstances by reason of last year's level being, as I agree, abnormal. When my hon. Friend says that a patriotic man would be ashamed to be seen drinking wine so heavily taxed, I venture to think that that is a mistaken view of patriotism, especially when we are confronted with the position that the larger the share of taxation which is paid on a bottle of wine the greater is the display of patriotism. At any rate, when we are confronted with a position like the present, we must try and find some new sources of revenue, and I do not know that we could find a better one or one likely to cause less disturbance to the general trade of the country than this extra duty on wines and cigars. I chose the duty on sparkling wines because they are undoubtedly articles of luxury, and because the rates of taxation on the wines have not been altered for many years and bear no sort of proportion to the prices at which the articles are sold. I shall see the deputation mentioned by my hon. Friend, and shall, no doubt, learn something from them. At any rate, I shall listen attentively to all that they have to say. I must frankly say, however, that, as regards detail, I must, on this and other matters, keep an open mind, but I do not anticipate that I shall see any reason to recommend any material alteration, and perhaps it may be none at all, in the proposals which I have laid before the House.

Photo of Mr Ronald McNeill Mr Ronald McNeill , Canterbury

I agree that the right hon. Gentleman is quite right, at this time, to impose taxation wherever possible upon matters of pure luxury, and also that, if you are seeking luxuries which in themselves are worthy of being taxed, it would be difficult to find any article more worthy than expensive wines and cigars. One thing, however, that fell from my right hon. Gentleman surprised me extremely. I have always understood that consumption varied in proportion to the amount of taxation put upon the article, but I understood my right hon. Friend to say that, although he is putting admittedly extremely heavy fresh taxation upon a certain class of luxuries, he anticipates that it will have no substantial result in reducing their consumption. I am very sceptical about that. It is easy in this House to make light of the cost of an article like champagne, and I have no doubt that there will be a considerable number of people who will drink champagne no matter what is its price. Surely, however, the revenue to be derived from an article of this sort depends, not so much upon whether a comparatively small class of persons can continue to afford it as upon whether there may not be a large class of consumers who, under the new price, will be unable or unwilling to touch the article at all. I believe there is a large number of people who, perhaps on rare occasions, but still on occasions, go in for the luxury of champagne, but who, under the proposed taxation, will drop it altogether. Therefore I believe that my right hon. Friend will lose rather than gain revenue from the taxation he proposes.

I sympathise with the Mover of the Amendment on account of the last of the grounds on which he supported it, namely, the effect which this taxation must have on France. I cannot believe that my right hon. Friend is really proposing this taxation for financial reasons at all. I think his difficulty became apparent from the speech made by the hon. Member opposite (Mr. Myers), who, in speaking to the Amendment, said that champagne is not a working-class beverage. It is quite new to me that a good reason for taxing an article beyond what its consumption will bear is that it happens to be used by one class more than another That seems to be quite an irrelevant consideration, but I believe that is what is at the back of the mind of my right hon. Friend. I am quite sure that, as he explained to us, he desires to do nothing which would be detrimental to France, and I do not believe he wants to put on taxation which will crush consumption and defeat its own object. What really is in his mind, and I sympathise with him in his difficulty, is that great prejudice might be excited if he put taxation upon articles consumed by the working classes, and refrained from putting it on an article consumed by the wealthier classes. I think, however, that he ought to resist the temptation to put on a tax for that reason, unless there are better reasons as well. I am sure my hon. Friend is right in saying that this tax cannot fail to be a serious blow to our French Ally. It affects just that part of France which is suffering most, and just at a time when it is vital to France to get back her export trade with a view to reestablishing her exchange—at that very moment, when we ought to show her every possible sympathy, we put a tax or. one of her chief articles of export merely for a political reason at home.

I do not know much about the wine business of the world, but I understand that before the War there was a very considerable import into this country of less valuable sparkling wines from Germany. If you put an ad valorem tax upon sparkling wines you give a direct preference to these German wines, because they would be of lower value. You do that at a moment when the valuable French vineyards have been largely destroyed by the War, while the German vineyards have been left untouched. While I should not have a word to say otherwise against this particular taxation on its merits, I think that, under these circumstances, the present is an extremely unfortunate moment for it, and I hope that my right hon. Friend will reconsider the matter and see whether, avowedly as a concession to France and as a token of friendliness to her, he could not see his way to foregoing it. I am glad that my right hon. Friend is going to see a deputation and is keeping an open mind on the subject. That deputation, I understand, is coming exclusively from the trade of this country. I do not know whether it would be possible for him to receive a deputation representative of the growers in France; they are the people who are really going to be hit, and for whom we ought to show consideration at such a time as this.

Photo of Mr Henry Cautley Mr Henry Cautley , East Grinstead

My right hon. Friend has been discreetly silent upon two points. He has not told us what the ad valorem tax on champagne really is, and he has not told us what the tax per bottle will be.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I gave in my Budget statement the figures for the yield of the taxation on sparkling wines, and I said that, on last year's values, the average tax on a bottle would be 6s. As it is an ad valorem tax, it would depend on the value at the moment when the duty is payable.

Photo of Mr Henry Cautley Mr Henry Cautley , East Grinstead

I am aware of that, but my question was directed to champagne, and I am still at a loss to know how much the ad valorem tax is. With the doubling of the ordinary taxation I think everyone will agree, but what I want to understand is, what is the amount estimated to be derived from the ad valorem tax on champagne? If it is only going to amount to £500,000 or £700,000—and I think it cannot be more—it seems to me to be a very small matter over which to run the risk of annoying the French nation, and causing trouble in the relations between ourselves and the French people. I should also like to ask the right hon. Gentleman how much this tax will increase the price per bottle of champagne. We are told that the actual price of this wine is going to be at least 34s. per bottle, and the Chancellor of the Exchequer says he estimates that the consumption will not be decreased. I should like to ask him upon what he bases that opinion. I should have thought that the enormous price of 34s. would be almost prohibitive except for the wealthiest people, and I am convinced, so far as we have heard to-day, that this tax will not increase the revenue at all, and, on the other hand, will do us enormous harm in our relations with France.

Question, "That the words proposed to be left out stand part of the said Resolution," put, and agreed to.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

6.0 P.M.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I hope the House will omit this Resolution altogether, not only in regard to champagne, but in regard to all the wines which come from the countries of our Allies. We should do nothing which would in any way irritate or impede the recovery of France from the dreadful state into which she has been brought by the War. My right hon. Friend the Chancellor of the Exchequer, in introducing this Resolution on the 19th April, said: Nothing but consideration—pushed to its utmost limit—for the feelings of our Allies, especially Prance and Portugal, would have justified me in making so large an increase in the beer and spirit duties last year whilst leaving the wine duties untouched."—[OFFICIAL REPORT, 19th April, 1920, col. 87, vol. 128.] I have looked through his speech again, and that is the only reason I can find why my right hon. Friend proposed this alteration in the duty, unless it were the reason to which my hon. Friend the Member for Canterbury (Mr. McNeill) referred. I fail to see what the increase in the beer and spirit duties has to do with it. It was a little unfortunate that the hon. Member opposite (Mr. Myers) was in such a hurry to speak, because I think he has really informed the House what was at the bottom of this Resolution. As my hon. Friend the Member for Canterbury said, the working classes are going to have the price of their beer increased, and to a far larger extent than the duty on tea, and, that being so, you are going to inflict a grievance upon other people. That is always a short-sighted policy. Because someone says to me, "I am going to take 5s. out of your pocket," it is no satisfaction to me to take half-a-crown out of the pocket of my hon. Friend unless I can keep it for myself. My right hon Friend picked out the weak spot in my hon. and gallant Friend's speech and said it would be most patriotic to drink wine because you will be paying a higher tax. Still greater would the patriotism be if you did not during champagne but drank water, and advertised to the Labour party and other people who are extravagant that you were showing the true way to bring about an equilibrium in the finances of the country by practising economy, which is the only way in which you can bring about an equilibrium.

That being so, and there being no real sound reason advanced by the Chancellor of the Exchequer for putting on these duties, let us see what they bring in. The Chancellor of the Exchequer said he looks for an increase of £3,800,000 in the present year and I think £4,000,000 in a full year. Is it worth while, when we have a Budget of £1,400,000,000, to obtain a sum which is not greater than £4,000,000 if by doing so you will in any way inflict an injury upon our Allies? An hon. Member opposite said he did not think the friendship between this country and France would in any way be vitiated by the fact that you were putting a duty upon these wines. If you want to annoy anyone you touch his pocket. I have actually seen signs of a revolt amongst Members of this House during the last three or four days, a sign which I have not seen since this Parliament came in, and the only reason I can think of is that either their or their constituents' pockets are being touched. That is the sort of thing which will occur in France. I have had a little experience of the French. I do not want to say anything against a gallant race with whom we have fought during the last five years, but if there is one thing that the Frenchman is a little touchy upon it is his pocket. We shall touch him very much if we in any way check the opportunities he has of exporting his produce. My hon. Friend says in the wine district in France there has been very great devastation. There is no question about that. I cannot help thinking that if we put this enormously increased duty upon these particular articles the result will be that we must check consumption. During the last year or so there has been a very large number of people who by some means or another, I do not know how—it has not come my way—have made very considerable sums of money. All that comes quickly goes quickly, and they have been spending in a very extravagant manner and amongst other things they have been drinking a very considerable quantity of wine, especially champagne. It is quite possible, especially with the enormous burdens which are being put upon us in the form of taxation, that that will cease and we may find that the result of these duties will be that instead of receiving something like £3,800,000, very likely very little more will be received than has been received up till now.

Under these circumstances, I will only ask my right hon. Friend if he thinks it really worth while, for the sake of a saving of possibly £4,000,000 of revenue, to do something which, as certain as I am standing here, is bound to irritate our Allies. It is true that we do not interfere with the taxation of France, even though that taxation may possibly injure us. But are we in exactly the same position as France? We have not suffered as France has suffered. We have not had all our towns and cities and houses destroyed and our cultivation ruined in the same way that the French have. They are grateful to us for the assistance we have rendered them, but, at the same time, we must take into consideration the tremendous suffering the French have gone though, and we ought, if possible, to endeavour to extend to them some consideration. I hope when the deputation interviews my right hon. Friend he will reconsider the whole position. I hope he will remember that there are, I believe, a large number of people who have sympathy with France, and who think this is an imposition which, while it will not much advantage this country and will not much lighten the burden upon us, will do a great deal to destroy the friendly feeling which exists between this country and France, and will annoy our neighbour without conferring any corresponding benefit upon ourselves.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

My right hon. Friend challenges the whole policy of making any addition to the duties on wines. He appeared to suggest that it was an improper consideration for me to have in mind that if I was taxing beer and spirits, the cheaper drink of the humbler classes, it might be proper to add to the more expensive drinks in the main, though not exclusively, consumed by the better-to-do classes. I am not at all ashamed that my proposed addition to the wine duties is to be taken and judged in connection with the proposed addition to the duties on spirits and beer. If you make these enormous increases in the duties on spirits and beer and leave wine untouched, you do something to induce people who have been accustomed to drink beer and spirits to turn to wine. There is no moral objection to that and no social objection. But you are introducing a disturbing factor into normal trade relations, and it certainly seems to me a very curious argument that it is an improper thing for the Chancellor of the Exchequer, when he proposes to increase the tax on an article of common consumption, to propose as part of the same scheme an increase on the tax on articles similar in character but of a more expensive type. My right hon. Friend says, "Is it worth while? After all, what do you get from the increase in the wine duties?" I am rather surprised to hear that argument from him, because it assails me at every turn. Either the proposals bring in a great deal, in which case it is monstrous and excites opposition, or it brings in little revenue, and then it is such a trifling matter that it really is not worth while to stir up all this trouble and incommode so many people. But my right hon. Friend preaches the doctrine of small things. He wants small savings. I want the small taxes as well as the big ones. We have had the great sweeping taxes in wartime. I think it is time we looked around to these smaller sources of revenue as a contribution, not merely to our immediate expenditure this year, but as a permanent addition to our revenue for some years to come until we have greatly lightened the burden of our debt and can begin to think about lessening the total taxation, and therefore reducing taxes instead of increasing them.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I did not object to this tax on the ground that it was a small one, but because I thought it would embitter the relationship between our Allies and ourselves, and that being so, was it worth while to do that for a small sum? That is where the small sum came in.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

The £4,000,000 that I get from these increased wine duties is part of the total increased sum which I am raising from alcohol generally, and I ask my right hon. Friend to think of the duties on alcohol as a whole rather than to begin pulling them to pieces by picking out this article or that, first one and then the other. I can add nothing to what I have said already on the general subject of the effect of the proposal upon our Allies. No one who knows how gladly I acknowledge, in addition to the strong feeling we all have for our great Ally in the last War, the personal debt which I owe to France for the education which I received and the friendships I have made there, will think for a moment that I should be likely to add to her difficulties or inflict unnecessarily any injury to her trade. I do not believe, in the circumstances of to-day and with the taxes at no higher amount than I have proposed, they will have this disastrous effect which my right hon. Friend and others have assumed.

Question put, and agreed to.

Eighth Resolution read a Second time.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution"

Photo of Sir Joseph Hood Sir Joseph Hood , Wimbledon

I should like to ask the Chancellor of the Exchequer for reconsideration of this tax, in the hope that he will, at any rate, receive a deputation from those members of the trade who are particularly interested. I do not pretend to have a very extensive knowledge of this particular branch of the trade. About 10 years ago I occupied, for a limited time, the position of Chairman of the Havana Cigar and Tobacco Factories, Ltd., although I confess that I have never smoked one of their cigars. There always has been a difference between the rate levied upon leaf tobacco and upon the manufactured product. Prior to the War the rates levied upon leaf tobacco or raw tobacco was 3s. 8d. per lb., and the rate on imported cigars was 7s. The present rate is 8s. 2d. upon leaf tobacco and 15s. 7d. upon the imported cigar. There was a very good reason for the difference when it was first made, a difference of nearly 50 per cent., the reason being the loss in the manufacture of leaf tobacco in the process of the manufacture, and in addition there was also a measure of protection for the British manufacturers The Chancellor of the Exchequer by his new tax now proposes to add 50 per cent. ad valorem duty upon the imported cigar, leaving leaf tobacco untouched. Therefore, to that extent there is a very considerable measure of protection to the British cigar manufacturer. I believe that 80 or 90 per cent. of imported cigars come from the Island of Cuba, and the rest mostly from the British Dominions. Cuba, to whom, I believe, we were indebted during the War for very considerable supplies of sugar, will be the hardest hit, and the Dominions will also be hit, be- cause the cigars which they send to us will pay two-thirds of this additional duty that will be imposed ad valorem. Unfortunately, from the point of view of the importer, there are very large stocks of imported cigars in the country, due to the increase of price which was made at the beginning of the year.

The importers say that the Chancellor of the Exchequer will be disappointed in the proceeds which he expects to get from this increased duty. They also say that they will be unable to dispose of their very large stocks of cigars, and they ask that some consideration should be extended to them in that direction. Very reputable firms say that unless some measure of relief is extended to them in that direction that one half of them will have to go out of business and the other half will be subject to serious financial embarrassment. I hope the Chancellor of the Exchequer will see his way to receive the deputation from these Gentlemen so that they may lay their views before him. They say that the Chancellor of the Exchequer will not get what he thinks he will get from this new taxation, and that in view of the hardship which will be imposed upon them they ask that this duty should not be imposed for some months to come. They also point out a fact which possibly is not thoroughly known—namely, the enormous discrimination which will now be adopted in favour of the British cigar, to their disadvantage, because at the present time leaf tobacco only pays 8s. 2d. duty per lb., while the imported cigar will at least, in future, be taxed something like 30s. 7d.

Photo of Sir Percy Hurd Sir Percy Hurd , Frome

I would ask the Chancellor of the Exchequer to consider the excessive character of this increased duty, representing an addition of 15s. per lb. If the Leader of the House were present I would invite his support of my case, because when he was Chancellor of the Exchequer he once said that the enjoyment of an excellent dinner was largely dependent upon the quality of the cigar which followed the dinner. I cannot quite appeal on the same ground to Members of the Labour party.

HON. MEMBERS:

Why not?

Mr. J. JONES:

We like a good cigar as well as anybody. Who has a better right to a good dinner?

Photo of Sir Percy Hurd Sir Percy Hurd , Frome

We know that they prefer the cheapest Indian cheroot.

Lieut.-Colonel WARD:

I like a good cigar as well as anybody.

Photo of Sir Percy Hurd Sir Percy Hurd , Frome

I can, however, appeal to the Labour Members on the ground of principle. This is an indirect tax. We have heard just now of the fearful nature of indirect taxes. I hope, therefore, that on this Amendment we shall have the support of the Labour Members. I would especially call the attention of the Chancellor of the Exchequer to the hard case of the importer. I have a statement which a number of importers have made out at my request, which shows how very seriously they will be hit. They tell me that this tax will stop the sale of cigars now in bond. The Chancellor of the Exchequer knows the way the trade is run on very large stocks. It will be practically impossible to sell the large stocks at this enhanced price. Moreover, these large stocks are financed by advances from the banks, and the appreciated value of the stock will, in their opinion, very gravely embarrass them in their financial relations with the banks. They say in the statement that the position of many of them will become desperate, and may even lead to bankruptcy. I do not know whether the Chancellor of the Exchequer can see his way to enable them to continue clearing from bond at the old rate for six months. At any rate, I hope he will consent to receive the deputation so that their hard case may be considered.

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

I receive a great number of letters, not all of a complimentary character, and I receive a great number of deputations of often angry and generally perturbed individuals. I will receive a deputation from the cigar trade and will discuss this matter with them; but if I am going to do that, it would be better for me not to enter into a discussion of the details now. I will listen to what the deputation have to say and discuss the position with them, and will come back to the House on the Committee stage. I will only say that the anticipations that have been expressed have been exaggerated. Let me give a sample of what is involved. Take a medium-sized cigar, running 80 to the lb. The total tax on an Havana cigar of that kind will be 30s. 7d. per pound on the basis of the 1919 import value. That is about 4 ½d. each on the medium-sized cigar, 80 to the lb. Of that 30s. 7d., 15s. represent the ad valorem duty, so that of the 4½d. per cigar, the ad valorem duty means, approximately, 2d. I do not think my hon. Friends really believe that the Havana cigar trade is going to be stopped and the trade ruined because on a medium-sized cigar, running 80 to the lb., there is an additional charge of 2d.

Photo of Sir Joseph Hood Sir Joseph Hood , Wimbledon

Will the right hon. Gentleman allow me to give an illustration?

Photo of Mr Austen Chamberlain Mr Austen Chamberlain , Birmingham West

No illustration can fit every case where it is an ad valorem tax. We had better leave the discussion of details to take place between the deputation and myself. My hon. Friends will be perfectly entitled, if I do not satisfy the deputation or themselves, to raise the matter on the Committee stage of the Bill. They will not be prejudiced in the least by allowing the discussion to be postponed until then.

Question put, and agreed to.

Ninth Resolution read a Second time.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I do not wish to move the Amendment standing in my name.

Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

I want to draw attention to these duties, because they are extremely heavy, and also because there is the grossest form of discrimination between a mechanically propelled vehicle which is to be used for farming and one which is to be used for any other purpose. If used for farming it is to get off with 5s. duty or, if it is a tractor, with a charge of £6, £10, or £21 a year. Similar vehicles used for locomotion or for distribution to shops or co-operative stores are charged £25, £28, or £30, or, roughly speaking, rather more than twice as much from the same vehicle. Considering how well farmers have done out of the War and that the landlords of the country are all selling their land at at least 50 per cent. more than its pre-War value, I do not see why they should be treated so lightly and at the same time these crushing duties should be laid on other forms of enterprises. These taxes mean that the ordinary motor vehicle used for distributing goods will have in future to pay very high duties. Take the smallest vehicle of all, the ordinary mechanically propelled tricycle which propels a distribution van. It has got to pay £10 a year. That capitalised at 20 years' purchase means £200 added to the cost of the vehicle. The vehicle itself would not cost more than £200. Here you are doubling the cost of a means of transport which is not only coming more into use, but which is obviously of great advantage to the whole community. The more mechanically propelled vehicles we have the less is the transport congestion, the more quickly the goods are delivered and the less the labour involved in distributing them. The whole secret of the solution of the transport question is to get our goods distributed by mechanically propelled vehicles instead of by horse, car or by the slow cumbrous transport used at the present time.

These duties are imposed nominally upon the people who have got these distribution motors or lorries, but they would all be transferred to the consumer at the earliest possible moment. It is exactly like putting rates on machinery. They become an additional standing charge on the industry, and that tax is at once transferred to the consumer. But something extra goes on to the consumer as well. The first thing a business man does is to calculate his standing charges. Then he puts down the ordinary cost of production, including wages, and then he adds his profit on the total amount, and the consumer is not only going to pay these extra duties, but he is going to pay more, and when we are protesting against increasing the cost of living, the House should understand that by these duties we are putting an increase on the cost of retailing goods in this country, and even on the work of distributing them from the railway depots to the wholesale houses.

An admirable system has come in lately, particularly in our mining villages, of getting people out into the country for a holiday from the towns on big char-a-bancs, which have opened up the country to the people in the great towns in Lancashire and the Midlands, and which take them out 10 miles or so and allow them to see something of the country. These vehicles, if in London, are now going to pay an annual tax of £84 a year, and if in the country an annual tax of £70 a year. Obviously, the use of these vehicles for the purpose must die out when the charge is so enormous, and it will actually prevent that form of holiday being taken altogether. There are only about 26 weeks in the year during which these char-a-bancs can run, and this will mean a charge of £2 a week, which will prevent this use of these vehicles. It may be said that these vehicles use the roads, but they are pneumatic-tyred vehicles, and the consequent wear on the road is nothing like what is caused by motor 'buses and lorries. The disadvantage of these taxes is that they are going to discourage an efficient and rapid distribution of goods, and they are also going to put an end to one of the best forms of holiday-making which exists at the present time.

Photo of Mr Neil Maclean Mr Neil Maclean , Glasgow Govan

I asked a question several weeks ago of the Chancellor of the Exchequer regarding certain disabled soldiers who had to sit in invalid chairs and whose friends provided them with small motors which drive those chairs at a very slow rate, and thereby relieve these invalids from the physical strain of propelling the chairs with their hands. The revenue officials in several cases in my own constituency, and possibly in other constituencies, assess these chairs and come down on these disabled soldiers to make them pay the motor-cycle tax on these invalid chairs because of the small motor attached. The question I asked the Chancellor of the Exchequer was whether any relief from this tax would be granted to those people. The answer I received was to wait until the Report of the Committee considering the Income Tax had been presented to the House. That Report had now been delivered, and we are here considering the taxation of motor vehicles, including vehicles not exceeding 5 cwt. in weight unladen, adapted and used for invalids, 5s., but in another part it states, any vehicles other than the foregoing, not exceeding six horse-power or electrically propelled, £6. Unless there is some assurance given by the Minister of Transport or the Chancellor of the Exchequer that these vehicles to which I have been referring are not expected to come under this heading, the revenue officials would be quite within their rights under this Resolution in assessing such invalid chairs at the motor-cycle rate, and I would wish either of these right hon. Gentlemen to make a statement as to what the Chancellor of the Exchequer is prepared to do in order to secure to those indviduals, who are unable to walk and who feel themselves compelled to use this means of adding to their comfort, relief from paying a £5 or £6 a year tax, because their friends have looked after their comfort. It is one of those cases which should be sympathetically considered.

Photo of Mr William Joynson-Hicks Mr William Joynson-Hicks , Twickenham

I would like to welcome the support of my hon. and gallant Friend the Member for Newcastle-under-Lyme (Colonel Wedgwood). I dare not make a speech like that. At any rate, I experienced opposition from the Labour Benches on former occasions when I spoke against such taxation, and I only hope that if there is a Division when these matters are discussed on the Finance Bill my hon. and gallant Friend will carry his friends into the Lobby against a form of taxation which I have always said was bad for the country. No doubt the whole of these taxes will be discussed fully when the Finance Bill comes before the House and I will not go into them now, but I will ask two questions. The first is with regard to motor cycles. It is provided that motor cycles must be of less weight than 7 cwt. I am informed that they are already being made heavier than V cwt., and I would ask the right hon. Gentleman, when the Bill comes on, to amend this and to make it 8 cwt., so as to cover the cycles which have already been manufactured, and weigh somewhat more than the 7 cwt. The second question is in regard to the old familiar steam roller which up to the present has not been taxed. It is not a vehicle which injures the roads. It exists mainly for the purpose of improving the roads. I am not quite clear whether under the provisions of this Resolution steam rollers would not come under one of these forms of taxation, but I am quite sure that my right hon. Friend does not intend to tax steam rollers which do not damage but improve the roads, and I will ask him to make a statement which will relieve the minds of those in the steam-rolling trade, including the large number of workmen who are engaged in steam-rolling. It will mean a considerable difference to small proprietors if they have entered into contracts for steam-rolling and find that a large tax is placed on them. I hope that my right hon. Friend will give me that undertaking to remedy this before the Bill gets into Committee. There was a statement made contradicting me on the last occasion when I spoke, suggesting that the Committee which the right hon. Gentleman set up some little time ago to consider this form of taxation was set up with the view that the Petrol Tax has got to go, and that it was not open to them to consider whether the Petrol Tax should remain or some other form should be substituted. My right hon. Friend contradicted me on that, but I do want to call his attention to a statement, which he will probably see in the Press very soon and which lies before me, from one of the members of that Committee, in fact, the member who produced the greater part of the Report, to the effect that the Motor Taxation Committee was appointed from the panel of experts by the Minister of Transport, and was invited to consider some system of solving the problem: what is the most equitable way of raising no less than £7,000,000 per annum by taxation of motors, in view of the wish of the Chancellor to abolish the Petrol Tax. That looks very much like what I said in the Debate some weeks ago. The Chancellor said very nearly that in the Debate last year. He had made up his mind that the Petrol Tax had got to go, and something must be substituted for it. If that was really put before my right hon. Friend's Committee, the whole value of their Report in favour of different forms of taxation is gone, because any proposal to continue the Petrol Tax was not possible, because the Committee were told that it was the wish of the Chancellor of the Exchequer that the Petrol Tax must go and that they should find some substitute for that tax. I thought it right to put this before my right hon. Friend at this stage, in order that he might confirm it or otherwise.

Photo of Mr Samuel Finney Mr Samuel Finney , Stoke-on-Trent Burslem

I should like to have some assurance from the right hon. Gentleman with respect to vehicles used for the purpose of conveying injured workmen from collieries to hospitals. Accidents are taking place every day, more or less, at all the collieries of the country. I am very pleased to say that employers generally nowadays try to provide vehicles suitable for the purpose of conveying these injured workmen. I ask for special consideration in this matter. I want these vehicles either to be totally exempted from the tax or to be subjected only to a light tax.

Photo of Mr Augustine Hailwood Mr Augustine Hailwood , Manchester Ardwick

I would join with the hon. Member for Newcastle-under-Lyme in protest against the heavy taxation of the vehicles to which he refers. I should also like to ask how this new taxation is to be carried out. Are the vehicles to be assessed on the weight of the vehicle and in another case on horse power? Who is to decide? Is a Ford car to be assessed at 20-horse power, and to pay a tax of £20, or is it to be assessed on its weight? We were given to understand that this was to take the place of a tax on petrol, but the proposed taxation is much higher than the tax on petrol. A tax of £20 is equal to 1,600 gallons of petrol. It will be putting a heavy strain on the various industries. I fail to see how the multiplicity of taxes can help. It means only further staffs of clerks, the consumption of more paper, and much inconvenience, and in addition I take it that the taxes will have to be paid in advance, whereas petrol is paid for as it is obtained, week by week. If more taxation has to be raised, I hold that it will be better to concentrate on one or two taxes.

Photo of Major Sir William Prescott Major Sir William Prescott , Tottenham North

Reference has been made to the Departmental Committee which sat in regard to the taxation of motor vehicles, and to an instruction said to have been given to that Committee by the Chancellor of the Exchequer that the petrol tax must go and a motor tax be substituted. I find on reference to the report a paragraph which says that roads are to be repaired and improved, that users of the roads will have to make a large contribution. It was also stated that the Chancellor of the Exchequer considered the petrol tax was not a satisfactory means of finding the revenue required. I think the House will see that no such instruction was given to the Committee which considered the problem. Personally, speaking as a road engineer who has given the whole of his life to the construction and maintenance of roads, I think the House will do well to consider the very great problem that confronted that Committee. It was the raising of an annual net revenue of between £7,000,000 and £8,000,000 for the upkeep and maintenance of the roads of the country. The central authority, the Roads Department Branch of the Ministry of Transport, will contribute this money to the highway authorities for the upkeep and maintenance of their roads, and they expect to derive a substantial sum for carrying out works of reconstruction and effecting necessary road widenings. The House may remember that the Minister of Transport is now engaged on the great task, in conjunction with the Roads Advisory Committee, of which I have the honour to be a member, of classifying the roads of the country. The county councils and the highway authorities are now occupied with that work.

When that has been completed the highway authorities will get something like 50 per cent. towards the maintenance of first-class roads and 25 per cent. towards the maintenance of what are known as second-class roads. I do not think any Member, or even the hon. Baronet (Sir W. Joynson-Hicks), who is the principal spokesman of the Automobile Association in this House, has ever denied the necessity for spending this money on the great highways of the country. Road repairs and road improvements are very much in arrear. Nothing whatever has been done during the last five years. As a road engineer I Ray it is one of the worst possible forms of economy not to carry out these repairs at the earliest possible date. There are thousands of miles of the great highways in a thoroughly bad condition. It is a costly thing for road users not to have roads which are serviceable for mechanically -propelled vehicles. As to the cost of the maintenance of roads, though I have no actual figures to give to the House, I should say from my own experience that it is now something like 100 per cent. more than it was in pre-War days. Suppose we raise this £8,000,000 of money by this taxation, what does it mean? The equivalent of something like £3,500,000 before the War, which is a very much less sum than the old Road Board had to spend.

I want to refer to a circular letter that has been sent out by the Automobile Association and Motor Union, dated 14th April. It is signed by Mr. Stenson Cooke, the secretary. They say that the Petrol Tax should be retained as against any alternative proposal. Any alternative proposal, no matter what it is, no matter how good or desirable it may be, must be rejected. A more selfish attitude on the part of a body such as this could not be imagined. If roads are to be re-surfaced and the great highways to be reconstructed and the necessary road widenings carried out, the road users of the country must be prepared to make a largely increased contribution towards the upkeep. I go further and I say it is very necessary in their own interest that they should do so. I am afraid they have not paid sufficient attention to that aspect of the question. The better the roads, the less will be the cost in maintaining engines and gear and the less will be the wear and tear of tyres. I should like to refer also to the meeting that took place at the Automobile Association last January. The Automobile Association was represented at that meeting and the resolution passed was a unanimous resolution. The other persons who were parties to that resolution will certainly regard it as a breach of faith if at the present stage it is thought fit to depart from the resolution. I do not know whether hon. Members noticed a letter in "The Times" to-day signed by Mr. Shrapnel Smith, the chairman of the committee of the Mechanical Transport Association.

7.0 P.M.

We must have the money for these roads. To those who prefer the present system my reply is that we cannot get the money unless by a severe imposition on petrol. It will simply mean that the tax per gallon now charged to motor cars will have to be raised from 6d. to 1s. 2d. or 1s. 3d. per gallon, and for commercial cars from 7d. to 7½d. The only opposition to the tax, as far as I can gather, comes from the Automobile Association, that is, from the pleasure motorists. It is necessary only to consult the table on the back of the Report of the Departmental Committee, which has been issued by the Minister of Transport to every hon. Member, to see how very little the pleasure motorist can make complaint. I think I have said sufficient to clench this matter and to show that the main roads of this country are in a very bad state of repair and a great many of them require to be absolutely reconstructed, and also that this sum of seven or eight millions is required by the Central Authority to disburse to the various Highway Authorities in order that the roads may be put into a proper state of repair. This single tax system and the scale of duties laid down in the Report of the Departmental Committee is a just and equitable one from every point of view.

Photo of Mr Henry Cautley Mr Henry Cautley , East Grinstead

The hon. and gallant Gentleman who introduced this discussion suggested that there was unfair differentiation in this tax in favour of agriculture. I will try to enlighten him if he will try to be fair. These taxes are imposed solely for the purpose of improving the roads and the theory of the taxes is that the heavier tax should be put on the vehicle which uses the road most and the lightest tax on those vehicles which use the road least. To anybody, except the hon. and gallant Member, it would appear that those vehicles that do not use the roads should not pay the tax. Agricultural motor vehicles which do not use the roads are to pay 5s. duty. That arrangement is obviously fair in the case of such a vehicle and to the occupier of the agricultural land. Does the hon. and gallant Member maintain that the agricultural motor vehicle which is used on the roads for haulage for agricultural purposes is more lightly treated than the char-a-banc which carries a complement of thirty-two people and comes from the town and cuts up our country roads.

Photo of Colonel Josiah Wedgwood Colonel Josiah Wedgwood , Newcastle-under-Lyme

Do not farm carts cuts up the roads?

Photo of Mr Henry Cautley Mr Henry Cautley , East Grinstead

The char-a-banc with its enormous weight, and which carries such a number of people, does not pay a farthing for the upkeep of the roads, whereas practically the whole of the maintenance of the roads falls on the agricultural occupier and the residents in the districts, and more particularly the farmers who occupy the land and use such implements. Whatever differentiation is shown is hardly sufficient in favour of the farmer occupier to be really fair. The hon. Gentleman who spoke last pointed out that the roads were in very bad condition, and, although I object in principle to the taxation of the vehicle, this will do something to raise a sum of money towards putting the roads in proper repair, but it will do little or nothing to lessen the burden of local taxation, which falls on the local residents in rural districts, who are taxed out of all proportion for the maintenance of roads which are damaged by men who come out of the towns in all sorts of vehicles which do not pay a penny towards the cost of the roads.

Lieut.-Colonel PINKHAM:

I rise to support the Resolution, and I do so for the reason that the yield of the present tax is altogether insufficient for the necessities of the roads. I am told that one of the largest omnibus companies in London does not pay a single penny to the tax, as that company does not use petrol, but uses benzol. The yield of the tax to-day under the old system is only £4,500,000, and under the proposed new system will be £8,575,000. The whole of that sum will be distributed among the local authorities to put their roads in order. I do not think there is any man who will claim that our roads are now in the state in which they ought to be and in which we wish them to be. If they are to be put into anything like that order which will enable them to carry heavy motor traffic and fast luxury traffic, both of which cause considerable damage to the roads, then we ought to have this tax or a similar one to raise the money required. The condition of the roads today is altogether different from what it was a few years before the War. At that time six inches of concrete under asphalt or wood paving was all that was required, and all that any local engineer thought was sufficient, to carry the traffic, and so it was. To-day it is wholly insufficient. The heavy motor pounds the concrete, and when your wood paving is removed you find that the concrete is all gone to pieces, and instead of putting in six inches you have now to put in 12 or 15 inches of concrete, and often to reinforce that. Therefore I hope that this system will go through. Those who do not use petrol and use benzol have, I believe, in some cases an ingenious system of having one-third petrol and the other two-thirds something on which they have not to pay. If this tax goes through the local authorities will have some money at their disposal, and we shall be able to get the roads back into a condition which will not only carry heavy traffic, but which possibly will give some sense of comfort to the luxury user of the motor car.

Photo of Viscount  Curzon Viscount Curzon , Battersea South

I desire to intervene as one who motors a very great many miles in the course of the year. What the ordinary motorist wishes is not so much that the general sum that he has got to find in taxation for the improvement of the roads should be lessened as to see that the incidence of the taxation is changed from horse-power and put on use. In that way you would make the man who uses the road most pay most. I believe that this country is faced in the future, and I think the Minister of Transport will bear this out, with the probability of a very serious shortage of petrol. Even though the petrol is reduced, some people will go in large extravagant cars on unnecessary joy rides and consume a lot of petrol. If you simply put the tax on horse-power, and if at the same time the petrol supply is reduced, the motorist will not be able to use his car so often, but will still have to go on paying the same amount in taxation. An hon. and gallant Member said just now that the only opposition to this system of taxation came from pleasure motorists. I do not think that is quite correct. I think this system of taxation is rather in the interest of the pleasure motorist. Take the man who owns a Rolls-Royce car, the present value of which is somewhere about £3,000, and the man who owns a Ford car, the present value of which is about £400. The horse-power of the Ford car will be about 20, so that that man will have to pay £20 per year, while the owner of the expensive car will pay about £40. Speaking as a motorist pure and simple, I would personally like to see the petrol tax retained as well as a horsepower tax, but I do not want to see the whole taxation transferred to the horsepower of a car. The horse-power of a car is a very indefinite figure. It is stated in this scheme that the Minister of Transport will make regulations about the horsepower. I would like to know what sort of regulations they will be. Will they be those of the R.A.C., which take no account of the stroke? Is the right hon. Gentleman going to take no account of the measurement of the stroke in his calculations? In this scale of taxation vehicles not exceeding 5 cwt., and adapted to the use of invalids, are to pay 5s., while locomotive engines, agricultural tractors, and other agricultural machines are to pay 5s. Is it contended that the motor Bath car does as much damage to the roads as the steam tractor? Again, road locomotives, agricultural engines, and such like, not exceeding eight tons in weight, are to pay £25 per year, but a motor lorry, and the three-ton lorry is, I understand, becoming very common in transport, exceeding three tons but not exceeding four tons, is to pay £28. That does not seem to be quite fair. There are other anomalies in this taxation to which I hope I shall have other opportunities of referring. As motorists we do not object to the amount to be raised, but to the way in which it is to be levied.

Photo of Mr Noel Billing Mr Noel Billing , Hertford

I must say in my opinion, and in the opinion of many Members with whom I have discussed this question, the fact that the Chancellor should have chosen this time to impose taxation on transport is the greatest paradox of a Budget which is full of them. We wish to relieve congestion on the roads, yet on the one hand the right hon. Gentleman calls on the taxpayers to pay an immense sum of money to subsidise railways, and on the other hand the only thing which can relieve the railways he penalises by excessive taxation. I am not referring to motor cars so much as to motor vehicles, which are necessary for ordinary commercial work, in taxing which he is adding much to the chaos and confusion which already exists in the transport service of this country. It is the incidence of the tax that I object to. In the first place it is unsound to take the tax off petrol. The immediate result of the Chancellor's action was a boom in petrol shares. "Shell" shares to-day are in a great deal happier condition than they were before the Chancellor's statement. We shall undoubtedly have to pay just as much for our petrol in a few weeks' or in a few months' time, because the profiteers in petrol will say, "If they will stand the 3s. 8d. before the Budget, they have got 3d. off, and they will stand the 3s. 8d. now." If the right hon. gentleman is not prepared to protect us from the profiteers, at least he might not deliver us into their hands. I am sure the Chancellor of the Exchequer is utterly ignorant of motor cars, and that the advice he has received on them is erroneous, or otherwise he would not have suggested taxing motor cars by cylinder capacity. Cylinder capacity has little or nothing to do with the horse-power of an engine.

By increasing the stroke of a standard engine you can put it up 25 per cent. horsepower in a few hours, and by increasing the compression you can do the same thing. Two engines side by side, of the same bore and stroke, one with large induction valves and the other with small induction valves, will give two totally different horse-powers. The Minister of Transport is interested in motors, and I believe he drives a Rolls-Royce car. I will undertake to take over his car for him and increase his horse-power by 30 per cent. in a few days or weeks by changing his carburettor. Horse-power depends on the condition of the gases when they enter the cylinder. A perfect carburettor will cause one engine to give off 50 per cent. more horse-power than another, and yet, in spite of all this, the Chancellor of the Exchequer chooses the most elastic part of the whole thing to measure as his means of taxation. If the Chancellor of the Exchequer had decided to make men pay for wearing out footpaths, what would he have taxed? The food which gives us the strength to walk, or would he have measured our muscles and taxed us on our strength?

Photo of Mr Noel Billing Mr Noel Billing , Hertford

No, I think it would have been on our boots with which we rub the pavement, and that is where the incidence of the motor tax should fall—on the tyres. I cannot understand why the right hon. Gentleman is so anxious to protect the rubber and petrol trades. There is not a motorist who would not be prepared to pay a tax on tyres. If you tax tyres you tax that which comes into contact with the road, and if you tax petrol you are taxing a man unfairly in relation to the horse-power, but you are taxing him in relation to weight, because the heavier the motor car, the more petrol you take to drive it along, and therefore the greater taxation is being paid for the heavier car. It makes us feel that there is some reason why the rubber industry and the petrol industry are being thus protected. It is going to do an immense amount of harm, and I appeal to the Minister of Transport in the matter. As a motorist he will benefit by it, I suppose. Indeed, this is a rich man's tax, for the simple reason that any man, like the right hon. Gentleman the Minister of Transport, who drives a Rolls-Royce two hundred miles a week, is well home on this tax. He pays £40 a year; the petrol consumption of a Rolls-Royce is eleven miles to the gallon, and therefore he saves his petrol tax, threepence, on every eleven miles. Therefore the owner of a Rolls-Royce stands where he did before, but saves his petrol tax. Then the Chancellor of the Exchequer asks us to believe him when he says he is protecting the poor man. The whole of the incidence of the taxation in this Budget is in favour of the rich man. Personally I shall vote against this Resolution, and I trust that hon. Members will not think they will bring the Government down by registering their protest against this very unjust tax.

The greatest contribution to road repair funds in the past ten years has been from fines. Whenever any local council wanted some money, they used to get a couple of policemen and put them on a straight road and get in some £50 or £60 an hour through catching motorists exceeding the speed limit. I know it to my cost. I ask the right hon. Gentleman if that is the case—and I think he has experienced it himself—that at least he might abolish the twenty miles speed limit, which is a very foolish thing at the present day. To permit of a car to be built with 60 horse-power, and make a man pay tax on 60 horse-power, but not to allow him to use anything like that horse-power on the roads without fining him is another paradox. The whole question of motor cars should receive the careful attention of this House. In the next five years we are going to see a revolution take place in the whole of the road transport of our country, and to bring in this nasty little tax, which will put the small man off the road, is ridiculous. Those admirable vehicles known as "rubber-necks," which take people out for a little fresh air on Saturdays—again the poor people who cannot afford a motor-car and who go out occasionally in charabancs—are being taxed £84 a year, according to the seating capacity. Is the right hon. Gentleman aware that that represents about 25 per cent. greater than the capital cost of the vehicle? It represents a capital charge of about £1,600, and the cost of the vehicle is only about £1,200. He is taxing it about 30 per cent. more than its total cost per annum, and what business can be conducted on those lines? It is putting these people right out of business, and it is putting the small motor trader out of business too, because he prefers to pay his tax in some more indirect way than by these large lump sums. I do not know whether the right hon. Gentleman is going to make any concession to us at all, but I am almost certain he is not. I do ask him, however, to give our suggestions a little consideration. Will he tax tyres? If he does, he will get the whole motoring public in exact and just proportion to the amount they use the roads.

Photo of Sir Eric Geddes Sir Eric Geddes , Cambridge

Will the hon. Gentleman send me a workable scheme?

Photo of Mr Noel Billing Mr Noel Billing , Hertford

I thank the right hon. Gentleman for giving me that opportunity, and I will certainly do my very best to comply with it. That is the spirit, if I may say so, that one appreciates in Ministers of the Crown—a genuine desire to get suggestions. Under these circumstances, I have nothing further to say, but I will save up my strength and ingenuity and ability to produce for the Minister of Transport a workable taxing scheme for motors.

Photo of Sir Herbert Nield Sir Herbert Nield , Ealing

I think the last speaker is to be congratulated on the humour he has been able to show and the skill with which he can develop horse-power in order to defeat Regulations as to speed. He has confessed himself as having been a victim on many occasions to those Regulations, the breach of which involves a substantial fine. I think, as I entered the House to-day, I saw that curious looking vehicle which is awaiting his pleasure, and which is, no doubt, the vehicle in which he is able to break the law.

Photo of Mr Noel Billing Mr Noel Billing , Hertford

That vehicle is only taxed £27 under this tax, and develops 109 h.p.

Photo of Sir Herbert Nield Sir Herbert Nield , Ealing

By the look of it I should like to double the tax on it. I am not concerned about the niceties of generating horse-power, of adjusting carburettors, or any of those mysterious portions of these road monsters of which I know nothing, but I do know what it is to have to provide estimates to mend roads, and I know the condition in which the main roads of this country have got, and the main roads of my own county. Incidentally, I was glad when I came in to hear the Chairman of the Highways Committee in the county of Middlesex giving his experience, and I hope supporting the proposal of the Government in this matter. The White Paper points out the difficulties in getting a really just tax based upon petrol spirit, and I think that is unanswerable, and when you are told, as you are in the White Paper, that not only have you got the steam-driven vehicles, those enormous monsters that carry trailers and heavy weights over the roads and bridges, but you have also a number of spirits which can be made in this country with the aid of a skilful chemist in such proportions as to escape the spirit duty, it is clear that you have unfair competition on the roads, because they are worn out by vehicles which do not come under the duty, and it is necessary that there should be equality as far as possible in the tax which is imposed. You cannot go back to the old tax and put it upon horse-drawn vehicles as well as motor-propelled vehicles. I see no other proposals by which money can be raised and the roads repaired than by taxing the horse-power of motors.

My hon. Friend said it is extremely hard that people should be taxed upon a horse-power which ho has the fortune or misfortune to possess. I can quite understand ardent motorists like my hon. Friend having a tremendous temptation when they have got the power almost to fly upon the road if they only move a little lever. But it seems to me that a man who drives a Rolls-Royce car of 60 horse-power is more likely, when he gets into a quiet spot, to let it go, thereby injuring the road very materially by the high speed he makes. I can see no other way than the Government's proposal to put the tax upon the horse-power. It may be necessary to keep a petrol tax on, too, in order to ensure justice between the various users of the road, but, as one who has had to do with county government for many years, now that motor cars have become so universal, and there are so many motor tractors on the main roads radiating from London, I say the cost is so excessive that without some equitable system of taxation, such as is proposed in this Budget, the burdens on those counties are out of all proportion to what they ought to be.

Photo of Sir Eric Geddes Sir Eric Geddes , Cambridge

I will deal first with all the points which have been raised, to which I have been asked to give answers.