§ (Hr. Raikes, Hr. Chancellor of the Exchequer, Mr. William Henry Smith.)
§ Order for Committee read.
§ Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."
§ MR. COURTNEY
wished to make some observations on the proposals made by the Chancellor of the Exchequer in his Budget speech with regard to Savings Banks. There was a deficiency of £3,250,000 upon the Savings Banks account, and the object which the right hon. Gentleman said he had in view was to stop that leak. His proposals, however, when examined, would not really stop the present leak, but would have the effect of starting a new one. The Commissioners for the Reduction of the National Debt received large sums from the trustees of the old Savings Banks established about 60 years ago, and those sums were invested in the public funds. The Commissioners allowed the trustees 3¼ per cent interest, and upon those transactions the deficiency he had referred to had arisen. The Commissioners also received the monies deposited in the Post Office Savings Banks, allowing 2½ per cent interest upon them; those deposits they likewise invested in the public funds; and upon them they had obtained a certain surplus. On account of the Friendly Societies' Funds there was also a serious deficiency. The Chancellor of the Exchequer proposed to place to the credit of revenue the amount of the surplus obtained from the Post Office Savings Banks. Now, suppose, by way of illustration, that 308 £94 was received from a depositor and invested in the purchase of £100 of Consols, the Commissioners would receive 3 per cent interest for the investment, and they would pay the depositor 47s., leaving an apparent annual profit of 13s., which they would be bound to pay into the Exchequer. But if the depositor wished to draw out his money when Consols fell below 94, say to 89 or 90, and the Commissioners had then to sell out, they would be landed in a deficiency. How did the deficiency of £3,250,000 arise? Not because the National Debt Commissioners paid more interest than they received, but because they bought stock in times of prosperity and sold it in times of depression. The gross amount of interest or dividend received by the National Debt Commissioners in respect of ordinary Savings Banks since the year 1817 was £62,112,000, while the total amount of interest paid and credited to Savings Banks by them during the same period amounted only to £54,339,000. So far as interest was concerned, therefore, they had been gainers by nearly 18,000,000. Their losses really occurred in the depreciation of Stock; and, as the Chancellor of the Exchequer made no provision for that, he would inevitably land himself in a deficiency. He contended that one-fifth of the interest received ought to be allowed as a depreciation fund. The plan he would recommend was this. There was a deficiency of £3,250,000. That was part of the National Debt; therefore, they might as well, first as well as last, hand over to the Commissioners another book-debt, to add to the National Debt, in order to make things square. That would involve no change in the finance accounts of the year; and having thus balanced the accounts, the only rational way of proceeding was to reduce the interest in order to keep the account solvent. He thought 2¾ instead of 3¼ per cent, as at the present, would be the proper rate to pay. That was the honest course, and he did not think that would be at all an unpopular proceeding.
§ THE CHANCELLOR OF THE EXCHEQUER
observed that this subject had only a year or two ago excited considerable discussion, and therefore it was not necessary for him to go into it at any great length. He quite agreed with the hon. Gentleman that the proposal in the 309 Bill did not completely deal with the whole question of the Savings Banks accounts. They had not attempted to touch the question of the accumulated deficiency. That was rather a complicated question, with which it would be necessary one of these days to deal. They had also avoided raising the question of an alteration in the rate of interest allowed. If they were to go into the question of the rate allowed for Savings Banks' deposits, they ought to look into the whole arrangements, and consider whether any alteration should be made in the limits of deposits allowed, which was an interesting but hardly a pressing subject. There was, however, this matter of the deficiency, which year by year was continually increasing, and which it was undesirable to allow to increase. But, then, there was one kind of increase which was real, and another which was a matter of account. Suppose the Funds one day this year were 94, you made the assets of the Commissioners so much. Next year the Funds might be 96, and then the assets would be a great deal more. That was a sort of variation which was a matter of account. It should be always borne in mind that the whole national income was security for the deposits, and there was no danger to the depositors. But then there was this continually going on, there was a larger amount credited to Savings Bank depositors year by year than was earned on the amount deposited to their account. For instance, as he had shown in his Budget Statement, the income which accrued to the Savings Banks for the year ending November, 1876, amounted to £1,307,000, whereas the interest credited to the trustees was £1,380,000, showing a deficiency of £73,000. In the same way, on the Friendly Societies' account there was a deficiency of, he thought, £49,000. The rate of interest was fixed by Act of Parliament, and it was really desirable that Parliament should know that it was giving year by year, in the shape of interest, more than it was earning, and then the country would see what the cost of this system was. The deficiency was, no doubt, at present a part of the National Debt. With regard to the Amendment of the noble Lord (Lord Frederick Cavendish), to the effect that the Government should make some allowance for the depreciation in the 310 value of the securities, he was prepared to accept it.
§ MR. DODSON
thought that a good deal might be said in favour of the proposition of the right hon. Gentleman the Chancellor of the Exchequer with regard to the Savings Banks funds. It would, to use the words of the right hon. Gentleman, "stop the leak," and prevent the deficiency from growing larger. The proposition of the Chancellor of the Exchequer would, at any rate, bring under the eyes of the public the annual loss, and pave the way for the proposal to reduce the rate of interest to the sum which was properly earned. He was glad that the right hon. Gentleman intended to accept the Amendment about to be proposed by the noble Lord the Member for the West Riding.
§ MR. MUNDELLA
suggested that the morning after the Budget Statement Members should be supplied with a printed balance-sheet, showing the estimates of receipt and expenditure of the current year, in order that they might be able to discuss the Budget proposals with advantage.
§ MR. W. H. SMITH
said, that the suggestion had already been considered, and arrangements would be made for the future to supply the House with the information suggested by the lion. Gentleman.
Bill considered in Committee.
§ (In the Committee.)
§ Clauses 1 to 6, inclusive, agreed to.
§ Clause 7 (Provisions of Income Tax Acts to apply to duties hereby granted).
§ MR. HIBBERT
moved, as an Amendment, in page 2, line 35, at end to add the words—Provided, That in estimating the balance of the profits and gains of any trade, manufacture, adventure, or concern in the nature of trade chargeable under Schedule (D) of the said Act, or for the purpose of assessing the duty thereon, in addition to the deduction allowed from such profits or gains for the supply of repairs or alterations of any implements, utensils, or articles employed for the purpose of such trade, manufacture, adventure, or concern, a reasonable sum shall be allowed to be deducted from such profits or gains to set against the depreciation arising from the wear and tear of such implements, utensils, or articles.He appealed to the right hon. Gentleman the Chancellor of the Exchequer to consider the injustice done to manufacturers under the existing law, by not 311 allowing them to take into account the depreciation of machinery when they made their returns of profits.
§ MR. ORR EWING
said, he cordially supported the Amendment. When the income tax was introduced by Sir Robert Peel, he was sure it was his intention that the manufacturer or mine-owner, or any person who carried on large works, should only pay upon the balance which he could divide amongst his partners; and he was also sure that if the return was made honestly the Government would not lose by agreeing to the Amendment. An honest man must keep books, and therefore must know the amount deducted for depreciation. What was done in Scotland? He did not know what was done in England, but in Scotland, if any person was doubted as having made an honest return, he was obliged to exhibit his books to the Inland Revenue authorities, who would make him add to his income tax the amount of depreciation which he honestly believed he ought to deduct before he divided his profits among his partners. He could not believe that so unjust a principle was intended ever to have been adopted. Under a Treasury Minute, issued many years ago, those who had property in ships were allowed to deduct depreciation of 10 or 15 per cent; but any person being a printer, spinner, weaver, or any other trade, was obliged to add it to the balance which he had to divide. He could not conceive a greater injustice to trade, and he did hope the Government would see their way to remedy the injustice. At the same time, he did not think these words would exactly carry out the views which he held upon the subject, but he could not see how the Government could contest the principle, and more especially when this right was granted to shipping, how they could refuse to grant it to other kinds of manufactures. There never was a time when there was a greater need for the Government to remedy this injustice to the manufacturers of Great Britain.
§ MR. ANDERSON
said, there was no Member of the House who had ever been connected with the manufacturing interest but had felt the injustice of the mode in which the income tax was levied. He had himself known many cases of great hardship, and it was only sur- 312 prising the country had submitted to it so long. He could only account for it on the supposition that the income tax had always been deemed a sort of temporary measure that we were to get rid of some day, and in that hope people had submitted to it. The case of the mine owner was even worse than that of the manufacturer, because everything a man took out of a mine he was absolutely taking out of capital, and, therefore, to make him pay on it as profits was most unfair, for it was making him pay, not on profit, but on capital. He hoped the Amendment would be adopted.
§ MR. WHITWELL
urged that the change proposed in the Amendment should be made as an act of justice, and not on account of the depression of trade.
§ THE CHANCELLOR OF THE EXCHEQUER
said, that an allowance was at present made which substantially came to the same thing as was now asked—namely, the deduction allowed for repairs and other fixed charges over a period of three years; but when the hon. Member asked them to go further, and allow for depreciation, he thought the proposal was an unreasonable one; for it would, in fact, be allowing the deduction twice over. There was no standard by which depreciation could be tested; but the Government were most anxious to deal with each case that was brought before the Exchequer, and deal fairly with it. As an instance of the difficulty to be dealt with, it had been shown that in one case £20,000 had been charged for depreciation on a plant that originally cost only £10,000. At the same time, the Inland Revenue Department were quite willing to deal liberally, and even generously, with those who came under the Schedule in the matter referred to.
§ MR. HIBBERT,
in reply, could not consider that his Amendment had so wide a scope.
Question put, "That those words be there added."
The Committee divided:—Ayes 56; Noes 91: Majority 35.—(Div. List, No. 115.)
Committee report Progress; to sit again upon Monday next.
§ House adjourned at Two o'clock.