§ Order for Third Reading read.
§ Motion made, and Question proposed, "That the Bill be now read the third time."—(The Chancellor of the Exchequer.)
§ SIR J. LUBBOCK (London University)
I rise, Sir, to move the rejection of the Bill. We have been told that political economy has been banished to Jupiter and Saturn, and I fear there is much truth in the statement. At any rate, in moving the rejection of this Bill, I shall endeavour to do so without any heat or party feeling, and rather as if I were an economist in Jupiter or Saturn looking down on this earth. Indeed, I can easily do so, for I have no expectation of succeeding to an estate, nor will the equalisation of the Death Duties affect me, as my interests are in the main not in real, but in personal property. In the first place, I will deal with the principle of graduation. The Chancellor of the Exchequer says that it was advocated by Adam Smith and John Stuart Mill. On the contrary, however, I am able to show that both those eminent authorities have condemned the proposals of the Government. In fact, I do not hesitate to say that graduation as proposed in this Bill has been condemned by the general consent of political economists and the sentiments of the civilised world. The Chancellor of the Exchequer indeed attempted to justify himself by the statement that wills are of modern origin, that previously the property went to the State, and that a similar course to that now proposed was 181 adopted in feudal times. I do not know that any precedent from barbarous races and feudal times would be very satisfactory, but, as a matter of fact, before the origin of wills property devolved not on the State, but on the family. The argument based on the precedent of feudal times is, I admit, in point, but I should have thought it was rather a warning against, than a reason for, the proposal. Now, Sir, what are the objections to graduation as proposed in this Bill? It is unjust; it tends to discourage thrift; it has no natural limits, and, being a tax on capital, it will ultimately fall on the poor. Firstly, then, as regards justice. M. Thiers truly says that for the State to make a graduated charge is as if a tradesman or hotel keeper had different prices for the same article. We know what we should think of such a person; but in future he will at any rate be able to quote the authority of the Chancellor of the Exchequer for doing so. The Chancellor of the Exchequer tells us that if a man leaves £100,000, £4 per cent. or £4,000 belongs to the State. We have only the authority of the right hon. Gentleman for the statement, but if 4 per cent. belongs to the State, why does he in some cases take 1 or 2 per cent. only, and in others 6, 7, or 8 per cent.? The country is asked to believe that this is because he wishes to tax the rich. But in that case the duty ought to be levied on the amount received. This, however, is not done. Ten men may receive the same sum, and yet each pay a different rate of duty. Or take another case mentioned in the Committee. A man left £260,000; in his will he bequeathed something over £200,000 in charities and to younger children, leaving for his eldest as residuary legatee about £50,000. Now the rate of duty on £260,000 is 6½ per cent.; the unfortunate son would have to pay at that rate on the whole £260,000 which would amount to over 30 per cent. on his inheritance. Surely this is most unjust Now, I come to the discouragement of thrift. It is obvious that if you say to a man that if he saves, you will make him pay not only in proportion to what he saves, but at a higher rate, you weaken materially the inducement to economy. This is especially the case when he is near any of the breaks in the scale. The right hon. Gentleman the 182 Leader of the Opposition put the case of a man who had £996,000, and said very justly that he would think twice before he would save another £5,000. In reply the Chancellor of the Exchequer said that—He had more confidence in human nature than to believe that in such a case as that mentioned by the right hon. Gentleman a man would be induced not to add to his capital merely because the Chancellor of the Exchequer would thereby get a hundred or two more of that money.Now, Sir, that shows that the Chancellor of the Exchequer has not fully realised the effect of his own proposal, because if such a man save £5,000 the effect would be that his estate would have to pay not £100 or £200 more, but it would come under a higher scale, and have to pay £5,400. That is to say, the effect of his saving £5,000 would be that his heirs would get £400 less than if he had not saved the £5,000. As long as the Duty was 1 or 2 per cent. people did not think much about it; but when you raise it to 4, 6, or 8 per cent. the case is very different. It cannot then, I think, be doubted that the proposal will be a great discouragement to thrift. Professor Fawcett justly said, in his Manual of Political Economy that "progressive taxation would operateas a discouragement to prudence." My next objection is that there is no natural limit. You are on an inclined plane, and will not know where to stop. My next objection is that the tax being a tax on capital will ultimately fall on the poor. No one, I suppose, will deny that it is a tax on capital, and I may again quote Professor Fawcett that—Capital is the fund from which labour is remunerated. It thus becomes obvious that wages in the aggregate depend upon the ratio between capital and population.That has been the general opinion of economists. On this point I may refer to a writer, who will, I am sure, carry great weight with the Government. Mr. Henry George, in his Progress and Poverty says—The theory that wages are fixed by the ratio between the number of labourers and the amount of capital devoted to the employment of labour . … holds all but undisputed sway. It bears the endorsement of the very highest names among the cultivators of political economy. … . It is taught in all or nearly all the great English and American Universities, and is laid down in the books. … It has been accepted by economists from the time of Adam Smith to the present day.183 Mr. George is himself of a different opinion, but I quote him to show that in the opinion of all economists from Adam Smith to the present day this Estate Duty, though paid in the first instance by those who are comparatively rich, will really fall on the poor. But there is another way in which this legislation will injure the poor. M. Jules Simon—formerly Prime Minister of France—in a recent article against graduated taxation, justly says that—Security is a boon which the poor require as much or even more than the rich, and it will no longer exist in a country after so great a blow given to our Institution.Sir, these are wise words, and I repeat with regret that these proposals are a great blow to our Institutions—to that security on which the happiness and prosperity of us all, of poor as well as rich, so greatly depends. To my mind these are overwhelming objections to these proposals. There are others which do not belong to the essence of the proposal, but which seem quite gratuitously introduced. It is certainly a grievous hardship that property passing from husband to wife should pay the same Estate Duty as if it went to a stranger. Certainly it should be the policy of a wise statesman to unite as far as possible the interests of husband and wife. Again the Government propose not only to tax museums and collections of pictures (even in some cases if given for public purposes), but to use them to raise the rate on the rest of the estate. In collections of family pictures the case seems peculiarly hard. In the "School for Scandal," old Moses encourages Charles Surface to sell his family portraits to meet an emergency, but the Chancellor of the Exchequer goes further and thinks it a good thing in itself to break up such collections. This is no doubt a matter of sentiment, and if hon. Members above the Gangway have no feeling on the subject I can only regret it. Again, scientific collections, though bringing in no income, are to pay Estate Duty. This is clearly a discouragement to Art and Science, and is, I submit, contrary to public policy. Again, it has been pointed out in many cases during the course of these Debates, especially by the hon. Member for the Isle of Wight, that executors will under this Bill have extraordinary difficulties—difficulties in estimating value, the im- 184 portance of which will be much greater than it is now—in presenting accounts; above all, in raising the funds to pay such heavy sums. All these, moreover, are aggravated by the drastic, and I must say tyrannical, powers given to the Commissioners; powers which I hope they will never intentionally exercise, but which nevertheless we ought not to confer upon them. Apart from the difficult task imposed upon executors, and from the amount levied, there will be cases of great hardship from the plans proposed. I can only mention one or two. Take for instance, the case of merchants and manufacturers. Merchants will be very hardly dealt with by the provision that in determining Estate Duty debts abroad are not deducted. The right hon. Gentleman the Member for Liverpool has told us that when cotton is purchased the price is payable in New York. Now in these cases the executor has to pay, in the first instance, without any deduction for the foreign debts. No doubt afterwards, months, perhaps even two or three years, he may claim back the amount overpaid—perhaps at great inconvenience—but is not entitled to any interest. Take, again, the case of our manufacturers. If their mills are freehold they may spread the payment over eight years; but if, as is generally the case, they are leasehold, the whole amount must be paid down, unless they make an appeal to the Commissioners, which certainly would not improve their credit. It would be easy to multiply instances of the hardships inflicted by the Bill, but I must pass on. Sir, no one can doubt that this Bill will be injurious in many ways, and I very much doubt whether the Government will receive the amount they expect under it. Rightly or wrongly, it is regarded as unjust, as being in the words of Thiers un vrai pillage, or in those of John Stuart Mills a "form of robbery," and when people are smarting under the sense of injustice, and have the highest scientific authority for considering that they are being robbed, depend upon it they will not submit if they can help it. I know, for instance, of one case in which a man had left over £250,000 to charities. He is now distributing it. That, of course, will benefit the charities, but the State will get no Estate Duty and will lose over £30,000 of Legacy Duty which it would otherwise have re- 185 ceived. I understand there are already cases in which fathers are already distributing some of their shares among their children. But there is a second way in which the Chancellor will lose, which has not, so far as I know, yet been referred to in these Debates. Let me ask the House to consider how these provisions will affect the Income Tax. It is admitted on all hands that the Estate Duty is a tax on capital. A man dies, and the State takes—I will not take an extreme case, but we will say—7 per cent. of his property. In that case his heir is so much the poorer. If you had not taken it the heir would have paid the same Income Tax on it as the deceased; but as yon have taken it he will have a smaller income, and will therefore pay less Income Tax. The Estate Duty has been compared to deferred Income Tax. The analogy does not seem to me satisfactory. I should rather compare it to anticipated Income Tax. I may be told that Income Tax is only 8d. in the £1. Yes; but yon take your Estate Duty only once; your Income Tax comes in every year; in a few years it would mount up, and in this way also the Estate Duty will be no clear gain, but a certain, I might say a considerable part of what you take in Estate Duty you will lose in Income Tax. You are in fact to this extent killing the golden goose. I for one have very great confidence in the judgment of the House of Commons, when it has heard the arguments. But, Sir, that has not been the case in the present instance. I make no complaint; it is impossible for hon. Gentlemen to be always in their places, but I feel sure I shall not be contradicted when I say that on Amendment after Amendment the Government would have been defeated if the question had been decided by those who listened to the Debate. Another strong reason for delay is the very doubtful meaning of many provisions in the Bill. We have heard, evening after evening, the learned Attorney and Solicitor General contending with other eminent lawyers in the House, not merely as to what the law should be, but as to what the meaning of the Bill really is, and we must all have observed, except in one or two cases, that no other lawyer in the House has supported the views expressed by Government. Why, Sir, on Report the Government them- 186 selves put down over 100 drafting Amendments. Now, we often speak lightly of drafting Amendments. They pass easily in Committee. But they are most important. The Courts of Law must decide, not according to what we mean, but to what we say. They are bound by the letter of the Act. In other countries the course of legislation is very different. In France, for instance, the Legislature only lays down general principles. It is the Conseil d'Etat—not an elective body at all, but a Court of permanent officials, which reduces the general propositions to rules, and is careful to permit no cases of individual injustice. There, then, the exact wording is not so material, here it is of great importance. But even here, in any but a finance Bill, drafting Amendments can be made in the other House. This being a finance Bill they have no opportunity of doing so. No one can doubt that if there were any opportunity the Government themselves would make many other Amendments, and the only way we can enable them to do so, is by postponing the Bill, so that they may, if they see fit, re-introduce it next year. I am not finding any fault with either the very able draftsmen or with the learned law officials. But with such a Bill as this, dealing with such complex and difficult subjects, mistakes are unavoidable, and it is impossible to doubt that if the Bill passes in its present form it will lead to endless litigation and great injustice. Passing on to the equalisation of the Death Duties on real and personal property, the reasons which have led wise statesmen to make the difference are certainly very cogent. I will only allude to the greater facility of sale, to the numerous calls on the holders of real property in support of this, and pass on to the main reason—namely, to the fact that rates fall mainly on real property. The whole of the Death Duties only bring in £11,000,000, to which, moreover, real property contributes a substantial part, while rates now amount to £30,000,000, so that if we consider not only national, but, as in fairness we must, local burdens also, real property is already overburdened. Perhaps it may be said that local burdens should be equalised also, but I believe that those who have looked into the matter agree that this is impracticable. The only way in which the difficulty can 187 be met is by national subventions in aid of rates. This Bill will greatly strengthen those who wish these national grants to be largely increased. You will indeed make their claim from this point of view almost irresistible. I have hitherto opposed these grants, believing that they lead to extravagance; but if this Bill becomes law, I do not see how the claim can be resisted. The only other section of the Bill to which I will refer is that relating to the National Debt. With one trifling exception it has been the custom for years and years, when any change has been made in the National Debt, to do so in a separate Bill. The only real exception was more than 100 years ago, by Mr. Pitt, and he had to go back more than another century to find any precedent.
§ SIR J. LUBBOCK
I have not been able to find any other precedent. I do not believe the Chancellor of the Exchequer will be able to produce one. We shall see. The right hon. Gentleman the Member for Midlothian always dealt with this matter in a separate Bill. The course adopted by Mr. Pitt was denounced by Charles James Fox and the Liberal Party, because it rendered it more easy to tamper with the subject, and deprived the House of Commons of reasonable opportunities for consideration. The right hon. Gentleman the Member for Midlothian always acted on this view, and it has been reserved for the present Government to sacrifice a principle of great importance for a temporary convenience. I do not, however, wonder that they wished to avoid discussion on this unfortunate proposal. This clause alone would, on the principles laid down by the Chancellor of the Exchequer himself, justify the rejection of the Bill. It is greatly to be regretted that in a time of peace the Government should tamper with the Sinking Fund. Adam Smith justly said that the practice of borrowing "has gradually enfeebled every nation that has adopted it," and he proposed that one-third of the Revenue should be devoted to repayment of debt. Mr. Cobden quotes with approbation the saying of an American statesman that the reduction of debt gave more strength to a nation than 100 ships of the line ready for battle, or 100,000 armed soldiers. It 188 is not going too far to say that if the nation does not destroy the Debt, the Debt will destroy the nation. But there is another statesman whom I should like to quote. He said—To touch the Sinking Fund in time of peace in order to meet expenditure which we regard as indispensable for the defence of the country would be a fatal and cowardly error, unworthy of a great nation. I pray the Committee to consider the vital consequences, alike in peace and in war, of this great, perhaps the greatest of all national reserves, a reserve not less valuable, even more valuable than the Naval and Military Reserves. In peace times our financial credit depends upon the confidence that is felt that the nation is ready and willing to make all the sacrifices necessary to meet its needs and obligations; that its policy is not to increase, but to diminish the Public Debt. … In times of war this fund becomes a priceless resource—a resource not less powerful than ships, or guns, or men. … You could not do a more unwise or spendthrift act than to dissipate in peace this great reserve. It is your war-chest. Let nothing induce us to shuffle our responsibilities off our own shoulders, and foist them on our successors.Sir, these are the words of the Chancellor of the Exchequer himself. It is not I who call these proposals of the Chancellor of the Exchequer a "fatal and cowardly error." That is his own condemnation of his own proposals. It is not I who say that we cannot do "a more unwise or spendthrift act than in a time of peace to dissipate the Sinking Fund." That is what the Chancellor of the Exchequer says. It is not I who say that "we have no right to shuffle our obligations off our own shoulders and foist them on our successors." That is what the Chancellor of the Exchequer says. But who is shuffling our obligations off our own shoulders and foisting them on our successors? The Chancellor of the Exchequer himself. I adopt his words; I implore the House—To consider the vital consequence of this great reserve—a reserve not less valuable, even more valuable than the Naval and Military Reserves. Our financial credit depends upon the confidence that the nation is ready to make all the sacrifices necessary to meet its needs and obligations, that its policy is not to increase, but to diminish the Public Debt.That is admirable wisdom, eloquently stated. It was loudly cheered from the Government Benches, and I hope they will act on their opinion. Sir, I thank the House for the courtesy with which they have listened to me. I beg to move the rejection of this Bill, because amongst other reasons:—(1) It will introduce 189 innumerable difficulties in winding up estates; (2) because the system of Death Duties proposed have been condemned by the general voice of political economists as unjust; (3) because taxes on capital tend to discourage thrift and lower wages; (4) because it is undesirable to tax so heavily property passing to widows and children; and, last, not least, because it tampers with the Sinking Fund, which, in the words of the Chancellor of the Exchequer, is "an unwise and spendthrift act" and weakens a reserve which, to quote the right hon. Gentleman once more, is "even more valuable to the country than our Naval and Military Reserves," and on the maintenance of which "our financial credit as a nation depends."
MR. GIBSON BOWLES (Lynn Regis)
seconded the Motion for the rejection of the Bill. He said, that after exactly three months and one day of debate on this measure—a Debate unexampled in the case of a Budget Bill, but absolutely necessitated by the character of this Bill—the House must be quite fatigued of it, and glad that the end had come. But if the House remembered the extraordinary complications of the Bill, and the enormous number of questions embodied in it, the wonder would be that the Debate had lasted so short a time, and not that it had continued so long. It had been recognised by a financial authority, second only to the Chancellor of the Exchequer—namely, the right hon. Gentleman the Member for Midlothian, that any attempt to deal with the Death Duties must necessarily occupy the whole of the Session; and, as a matter of fact, an attempt to deal with one of the Death Duties had been considered adequate work for one Session. But here they had proposals to deal with the Probate Duty, the Legacy Duty, the Succession Duty, Estate Duty, Account Duty, and the temporary Death Duties imposed by the late Chancellor of the Exchequer, all of which were thrown into the melting pot, and out of them arose this new Estate Duty that they were now considering. Instead of taking three months of one Session a Bill like this should have taken nine months of three or four Sessions. He regretted so many matters had been introduced into the Bill, because he felt they had not been adequately discussed, 190 but he regretted still more the spirit in which this matter had been introduced into the House. It had not been introduced in the spirit of a statesman, nor even in the spirit of an expert tax collector, but, he regretted to say, in the spirit of hatred, malice, and all uncharitableness, which some of the most advanced Radicals of this day believed to represent true policy. The Chancellor of the Exchequer had not gone about the matter as he would have done in order to collect a tax, but he had gone about it in order to satisfy those of his followers who felt envious of men wealthier than themselves, hateful of the possessors of land, and hateful, above all, of the men who did not always vote on the same side of politics. It could not be said that the Opposition had treated this Bill unfairly, for never was there a Bill at once more complex or more closely debated and more pertinently dealt with than this Bill had been. He considered the Chancellor of the Exchequer would have got all he wanted by imposing a surtax of 10 per cent. on existing duties, and such a proposal would only have involved three or four days' debate instead of three months, a course which he himself (Mr. Bowles) had proposed at the outset in a letter published in the Press. The right hon. Gentleman would not listen to that practical suggestion, and instead of getting £1,000,000, as he thus would have done out of the Death Duties this year, his belief was that the Chancellor of the Exchequer would now get nothing at all. How little consideration was given to the framing of the Bill, and how greatly it required amendment could be shown by a few figures. As the Bill was introduced the 22 clauses relating to the English portion of the Death Duties consisted of 523 lines. There were omitted by the Government 26 lines, so that the Bill consisted then of 497 lines. There were then added by Amendment 157 new lines in Committee, and subsequently on Report 203 lines; consequently to the 497 original lines there had been added 360, so that the Bill as it stood at this moment was to the extent of nearly half entirely composed of new matter, while the important, impounding, Clause 8 had been abandoned. Of this new matter page after page had been put down by the Government, showing that when they originally framed the Bill they 191 did not know their own mind. A Bill more grossly and shamefully prepared had never been put before the House, and never had a draftsman done his duty so badly. The fault, however, was not so much with the draftsman as with the Chancellor of the Exchequer. So difficult was the duty he had to perform, so completely absurd were the principles that had to be put into the Bill, that he scarcely wondered the draftsman should have performed his task even so ill as he had done. The first principle of taxation was to go where the money was—to "stick to the bush with the berries on." Another principle was to follow the property into the hands of the man who had it—to go so far as your arm could reach and no farther. These principles of taxation had been pursued since taxation was first invented, but from both of them the Chancellor of the Exchequer had departed. The right hon. Gentleman had elected to go not to the man who had the property now, but to the man who had had it; he went to foreign countries where the arm of the tax collector could not reach, and he turned his attention not to the beneficiary to whom he should go for taxation, but entirely to the dead man who no longer possessed the property. Like a modem Orpheus, the Chancellor of the Exchequer descended to the realms of Pluto, with his lyre of graduation in his hand, clutched his deceased Eurydice, and, like Orpheus again, he would find he would lose her before he brought her into light. There was a special reason why the Death Duties should not be brought before the world for discussion. The system of collection of these duties had worked admirably hitherto, because the duties had been most carefully concealed from the public gaze, and had worked like a mole in the ground, out of sight of all but the victims as they came up singly for taxation. But now the Chancellor of the Exchequer had exposed them to public view, and not only did so, but put an end to the arrangement which experience had found to work so well, put before the whole of the possible taxpayers of the country the probability that they would be mulcted in these large sums, and thus suggested the temptation to discover the means of evasion and avoidance of these duties. There were two principles upon 192 which this Bill rested, aggregation and graduation. How was the principle of aggregation carried out? It had been explained over and over again that the principle of the Bill was this: When a man died they were to take the whole of his property and make it into one heap. The big heaps were to be charged at a higher, and the little heaps at a lower rate, but the whole justification for the differential system of taxation lay in the fact that one aggregation was made of the whole of the property a man had left. According to the Bill, however, instead of there being only one there were no fewer than 19 different aggregations or segregations, or segregations of segregations. A man might leave one of each of the 19 classes of property. Suppose 17 of the classes represented £1,000 each, and two of them consisted of an annuity of £25, and an Indian pension which would make up together £ 1,000. The result would be that the man would have left £18,000, and the first suggested aggregation would be on £18,000, but they then had to deduct from this ten of those kinds of property which were either to be aggregated separately as estates by themselves or were to be exempted from the Estate Duty altogether. In other words, from the £18,000 they would have to deduct £9,000, so that the aggregation would only amount to half the man's property. Take now the case of a man whose property consisted of only one kind not subject to any of these separate aggregations or segregations, but aggregated entirely under the first aggregation. That man paid on £18,000. So that they taxed one man according to one principle and another according to another principle, not because he had more property but because his property was of a different kind. As soon as they found that they had made 19 aggregations, it would be seen that the Government had cut away from their feet the only ground on which they could rely for imposing on these properties a graduated and increasing duty. Yet these systems of aggregation and segregation had been adopted with a view of what the right hon. Gentleman the Secretary for India called "equality of sacrifice." This equality of sacrifice would make one man pay on £18,000 and another with the same amount of property on £9,000. The greatest flaw in the calculations 193 of the Government had reference to the foreigner. The hon. Member for Carnarvonshire told them that he had invested half his property in foreign securities. Well, suppose the hon. Member was a millionaire, and that he had invested half-a-million in foreign securities. Mark what happened in the name of equality of sacrifice and simplification. The half-a-million that the hon. Member had abroad was aggregated with the half-a-million at home, and there was to pay 8 per cent. on a million, or £80,000. But the hon. Member for Carnarvonshire was a shrewd person. He had ascertained that to make his foreign half-a-million safe all he had to do was to put it in the hands of a foreign executor. If the hon. Member had not done it already he would probably do it now. The effect would be that the Chancellor of the Exchequer would not be able to get a halfpenny on the half-a-million abroad, but he would come upon the English executor and levy the whole of the duty on him and the half-a-million at home.
§ An hon. MEMBER: Of course he does.
MR. GIBSON BOWLES
"Of course he does," said an hon. Member, who presumably came from the northern half of the country. The result was that on the British part of the estate the duty would not be 8 per cent. but 16 per cent., because the Government had been so foolish as to try to get duty on the other half-a-million which was beyond their reach. That was equality of sacrifice and simplification! Then, take the man whose whole million was in this country. His successor would only pay 8 per cent., while the unfortunate successor of the hon. Member for the Carnarvon Boroughs would pay 16 per cent., because the Chancellor of the Exchequer in his search for taxes had committed a blunder which had never entered into the mind of any tax collector before this year. He came now to the probable effects of the Bill. The right hon. Gentleman the Chancellor of the Exchequer three months ago reminded them that Probate Duty was now payable only on personalty, or by the Account Duty on voluntary settlements, and he proposed to impose it on realty, and also on property settled for valuable consideration, which practically meant a pro- 194 perty under marriage settlement. He also increased the Succession Duty by charging it on principal value, wherever the fee simple passed, and the right hon. Gentleman had rather given them to understand that this was a tremendous matter. Yet he had since had to avow that all the increase of duty he expected to get under this head was £100,000, which was an infinitesimal part of the £10,000,000 the Death Duties were to produce. He (Mr. Gibson Bowles) had always held that when a man got the fee simple of an estate he should pay on the value of the estate, but at the same time he had always said that the amount which would be realised from the change would be a mere trifle, and his words were now proved to be accurate. It was a mere drop in the bucket. But what did the right hon. Gentleman hope to get out of the whole scheme? From personalty, which now paid £8,910,000, the right hon. Gentleman hoped to get £2,000,000 more, and from realty, which now produced £1,150,000, he hoped to get £1,350,000 more. Mark this: they took the swollen money bags and on them they charged an extra 23 per cent., and then they took the shrunken and shrinking acres and charged upon them not an extra 23, but an extra 117 per cent.—as to which every practical man would remark, "Don't you wish you may get it?" The right hon. Gentleman, in short, hoped to get these tremendous increases of from £3,500,000 to £4,000,000 by taxing realty, which could not pay, and by taxing personalty of the larger kind, which, he undertook to say, would not pay. And now he came to the most interesting part of the matter. The Chancellor of the Exchequer had been very chary of figures—more so even than the Commissioners of Inland Revenue—and in spite of his (Mr. Bowles's) heartrending appeals had always consistently refused to give any data on which they could judge whether the right hon. Gentleman's calculation of £3,500,000 or £4,000,000 was correct, and therefore Members had had to speculate upon the possible results for themselves. He had worked out tables for himself with great trouble and sacrifice of time, but as the figures were, like those of the Chancellor of the Exchequer, founded on imperfect data and on expectation that might prove 195 to be ill-founded—though he was sure of the general drift of them—he would not give the details. There were five heads of expected increase; and the first was aggregation, which was professedly carried out by the Bill, but, as he had shown, was not really carried out. By the system of aggregation or of charging property altogether instead of separately, he did not believe the Chancellor of the Exchequer would get a farthing. By the next head of increase, which was graduation, he should get a great deal; but he begged the House to note this remarkable fact about the duty: that although it professed to extend over all property passed by death, if the figures were examined it would be seen that there was no increase of duty on estates up to £50,000. That seemed a bold thing to say; but if anyone had carefully worked out the figures as he had, he must have been driven to the same conclusion. He believed, as a matter of fact, that on such estates rather less duty would be levied than was collected at present in consequence of the exemptions that were allowed. No doubt in regard to estates of over £50,000 the system of graduation came in with such strength and increases of duty were so rapid that a large amount of extra duty should be levied if all went right. He had, therefore, allowed a large amount for the increase under the head of graduation, but he would not give the Chancellor of the Exchequer the details of his calculations, because the right hon. Gentleman had himself persistently refused to give his own figures to the House. He (Mr. Bowles) would give the general result. The extension of Probate Duty to real estate and marriage settlements was the third head of increase, which might represent a considerable amount, but not so much as graduation. The fourth head was the increase of duty on property in the United Kingdom belonging to foreigners—and on paper this increase was quite stupendous. For instance, at present if a foreigner domiciled abroad died leaving £500,000 in the United Kingdom, his widow paid £20,000. Under the Bill the widow would pay £35,000. So that on paper the increase in the duty on that class of property was very great; but when the duties came to be realised he did not believe that they would amount to any- 196 thing at all. With regard to the fifth, and last, head, there would also be a great increase—on paper. They were attempting for the first time to put Probate Duty on property not within the jurisdiction of an English Court. He referred to the Estate Duty on property situated outside the United Kingdom. That property was something quite immense. Few of them realised the vast amount of English property abroad—very small in France, strange to say; very large in America and in the Colonies. Out of the £200,000,000 passing annually by death his estimate was that there was £40,000,000 abroad. The Chancellor of the Exchequer proposed to tax that property, but he (Mr. Bowles) did not think anything would be got out of it. At any rate, he had allowed nothing for it in his calculation. Now, if the right hon. Gentleman got all he expected, his (Mr. Bowles's) estimate of the total increase was larger than that of the Chancellor of the Exchequer; but he would not get it. But the domiciled foreigner would take his property away, and the Chancellor of the Exchequer would not get anything out of the property of persons domiciled here situated out of the United Kingdom. He (Mr. Bowles) allowed, therefore, nothing for these; but on the second and third heads of increase his calculation was that there might be realised under the Bill in England £2,500,000. Those were the total increases of duty that he thought might reasonably be expected to be got. What had they to set against this? He thought the House would be surprised when it came to see the sacrifices that the Chancellor of the Exchequer had made. He did not think the right hon. Gentleman quite realised them himself. He had avowed that the Bill diminished the yield of the Succession Duty more than one-half. The yield would, indeed, be far less than half, because the right hon. Gentleman had not taken into account the various diminutions he had effected in Succession Duty as it still existed. How was real estate to be valued under the Bill? At the moment of the death of the person who left it, that was to say, it was to be valued at its value at a forced sale at a given moment. A forced sale took 10 per cent. at least off everything. Then there was the further limitation of the value by the proviso that it was never to 197 exceed 25 times the annual value as set down in Schedule A of the Income Tax, with all the deductions allowed in Schedule A plus all the other deductions allowed by the Succession Duty Act. Finally, from the sum thus reached, they were to make a deduction of 12½ per cent. in the case of land, and 16⅔ in the case of houses, as a general recognition of the extra burdens that land and houses bore. That might be averaged at 15 per cent. In addition to that they had to deduct 5 per cent. for management, or a total of 20 per cent., which, with the 10 per cent. on the forced sale, would amount to 30 per cent. So that they had to take 30 per cent. off the value before they began to charge the property. That would have an enormous effect in reducing the amount of Succession Duty that would come into the Exchequer, which was the first great sacrifice of duty. Where the estate was of moderate value and the successor's life was fairly young, instead of getting more duty out of real estate they would get less. Where the life was very old, or the estate very large, then alone they might get more. As to the abolition of the 1 per cent. Legacy Duty, he did not reckon that it would produce more than a loss of £200,000 at the outside, which was the second sacrifice. Then there was a great sacrifice made in respect of estates under £500. The duty levied now was £10, but this was to be reduced to 50s. He was not saying whether this was right or wrong, but it was a serious sacrifice of taxation, because it must be remembered that the value of these properties was immense. Their amount was at least £7,000,000. Then he came to estates between £500 and £1,000, and here, too, a large sacrifice of duty was made, as these estates formed 69 per cent. of the whole estates on which Death Duties were charged and amounted to some £17,000,000. The duty on joint annuities of £25 was also sacrificed, also that on Indian pensions (in the case of widow and child), also that on specified property consisting of articles of historic or national interest left to Public Bodies, and that on advowsons. Again, the colonial deductions were very important indeed, and the sacrifice of duty on them would be very large, so large that he believed that, instead of getting more out of property situated abroad, 198 they would, in the end, get far less. Finally, there were the exemptions as to settlement. Here the loss to the Exchequer would be tremendous, and he doubted whether the Chancellor of the Exchequer or any of the enthusiastic Radicals who advised him had the slightest notion of what the amount would be. He would give a case within his own knowledge. There were four lives where a large property was involved held now by a gentleman of 75. His next successor was 72 and unmarried; the next 71, and the fourth 66. In a few years they would all die, and under the system now existing duty would be payable at, say, 5 per cent. on each of the four deaths, or in all 20 per cent. But under this Bill the property, being settled, would pay under the same circumstances only one 5 per cent. plus 1 per cent.—6 per cent. Had the Chancellor of the Exchequer considered what he would lose under the new system? He (Mr. Bowles) very much doubted it. As a final result, then, he reckoned that from the £2,500,000, which he estimated would be the increase of the Budget, deductions to the amount of £1,800,000 must be made on account of these sacrifices. That left a total net increase which would be derived from the proposals of the Chancellor of the Exchequer of £700,000 instead of 3½ or 4 millions. He was aware the Chancellor of the Exchequer might say this was speculation, but so were the right hon. Gentleman's own estimates. And now how were they to get this £700,000? They were going to get it by levying £2,500,000 of extra taxation on no more than 500 people—that was to say, on those 500 whose estates were over £50,000, while leaving the remaining 50,000 estates untouched or even diminished in charge. Mark the danger of this! Surely the House would see the enormous oppression, difficulty, and danger of levying a greatly increased taxation from a few people. It had always been recognised that if they imposed duties which were too high, or imposed them on too few people, they ran the risk of not getting them paid. The course taken by the Chancellor of the Exchequer in this Bill was, therefore, eminently calculated to lead to evasion — that was, unlawful avoidance — or avoidance — that was, lawful evasion—the same lawful evasion 199 which the gentleman practised on Hounslow Heath when he put his watch in his boot because he was afraid of the highwayman. He did not know that anyone ever blamed the gentleman who successfully carried his watch across the heath by that device, neither should he blame those gentlemen whom it was proposed to tax out of existence if they found and adopted some decent means of avoiding these duties. There were two palpable methods of evasion: One would be to convert property into securities payable to bearer, which could be done even with Consols, which thus became like so many £5 notes, which could be passed from hand to hand, requiring no registration and leaving no more trace of themselves than sovereigns. With public attention called to this duty, and these 500 persons challenged to protect their own property as far as they could from the rapacity of the Chancellor of the Exchequer, did the House not think that the idea would occur to them to turn a deal of their property into securities payable to bearer, and to hand them over, perhaps on their death-bed, to their heirs, in that way depriving the Chancellor of the Exchequer of property he would never be able to tax? That was one method of evasion which would, he feared, be largely adopted. It had been largely practised in the past, and would probably be still more extensively used in the future. Another plan by which the payment of this unjust tax could be evaded would be to insure with American offices. As hon. Members were well aware, there had of late years been an extraordinary development of the system of insurance with American offices. He believed that that course would be still more largely resorted to, for a man could insure his life for a lump sum and at his death the office would pay it over in cash to his heirs as directed in the policy, and the Chancellor of the Exchequer would not get one penny piece. Those two methods he called evasion, and he did not approve of them, but there were also half-a-dozen equally simple methods of avoidance of which he could not disapprove—a voidance in conformity with the law of this Bill which could be practised in a perfectly honourable and straightforward manner under the very nose of the Chancellor of the Exchequer, 200 and he could not prevent it. First, the payment of the tax might be avoided by a bonâ fide transfer inter vivos, which could not be set aside, provided it took place 12 months before the death of the donor. He was able to state from personal knowledge that during the last three mouths this method of transferring property had been made use of very largely in the fear of this Bill; in fact, he himself knew that fully two millions of money had changed hands in this way. He thought it was probably a good thing for aged fathers to pass during their lifetime some portion of their property to their youthful or middle aged sons, but the Chancellor of the Exchequer would certainly lose enormously if this method of passing on property were adopted generally. Such transfers might have a good effect socially and morally, but they would prove deadly for the Exchequer. A second method of avoidance would be to buy land situated out of the United Kingdom. This was not liable to the payment of Succession Duty, nor, therefore, under the Bill, to the new Estate Duty or to aggregation, and by this means a millionaire might deprive the Exchequer of every farthing of duty on his estate. Then he came to a third method of avoidance. Supposing that a man wished to leave money legacies to persons in this country, all he would have to do would be to charge the land he held in foreign countries or the colonies with the payment of the legacies. These, too, not being liable to Legacy Duty, were not liable under the Bill to the new Estate Duty or to aggregation. The land would be sold and the money handed over to the legatees in cash, and again the Chancellor of the Exchequer would not get a farthing of duty. There was also a fourth method of avoidance. Personalty situate abroad, say in the colonies, might be settled by deed executed in the colonies with colonial trustees. Again there would be an escape from liability to Succession or Legacy Duty, and consequently under the Bill from the new Estate Duties, and the Chancellor of the Exchequer would not get a farthing. The Chancellor of the Exchequer had said repeatedly that he was opposed to settlements, and it was curious to see how, in spite of his express desire to restrict rather than favour settlements, the result of the Bill would be to drive more property 201 than ever into settlement, with considerable loss to the Exchequer in consequence of the fifth method of, not complete but partial, avoidance thereby effected as already adverted to, which would be much encouraged by this Bill. Now, as to the effect upon this year's finances, the Chancellor of the Exchequer had stated that he expected to realise a million of money from the Death Duties this year. He had himself pointed out the fallacy of that hope, and, although he had during the Debates given it as his opinion that the Chancellor of the Exchequer might realise £700,000, he himself felt sure that the figure was too high, and that most of it would be swallowed up by the means of evasion and avoidance to which he had referred. And the main result of that ill-considered, bad, and foolish scheme of taxation would be that in future years the Chancellor of the Exchequer would get less instead of additional duties. As to this year, he pointed out that the Bill was now to come into operation on August 1 instead of June 1, as was originally intended, and he very much doubted, therefore, whether the Chancellor of the Exchequer would find, at the end of the financial year, that the Revenue had been increased from this source to the amount of even half-a-million. Probably £300,000 would be nearer the mark. Of course, he was aware that many people did, as a matter of fact, pay the duties before the date legally fixed, because they wished to distribute the property and get rid of their liability, but there were also a great many who would not wish to do it, and, if his anticipations were realised, he was at a loss to understand how the Chancellor of the Exchequer proposed to make up the difference between his estimate and what would be the actual receipts from these increased duties during the current financial year. Why they felt so indignant with the main provisions of the Bill was because it aimed at taxing most oppressively and unjustly one very small class of the community. It was intended to oppress one class alone, and it was rankly dishonest. The whole principle of the Bill stunk in their nostrils. He could well surmise what the effect of the Bill would be when it came to be put into practice at the Inland Revenue Office. He knew there were many able officials in that office, 202 but he doubted if even they would be able to work this extraordinarily complicated machine in the place of the one so ruthlessly destroyed by the Chancellor of the Exchequer. The mere thought of the lengthy and intolerably complex forms that would have to be filled up in every case was enough to convince him how impracticable the whole proposal was, and pointed more clearly than anything else perhaps to the immense increase in the working expenses of the department. That would have to be taken into account when estimating the net returns. There would also be so many difficulties and objections to be met that he very much doubted whether the duties would ever be properly collected. Indeed he strongly suspected that that view was beginning to pervade the Department itself. They had done their best on his side of the House to improve the wretched Bill, and they were content now that the Chancellor of the Exchequer should take this wreck and remnant, this thing of shreds and patches, and do with it as he pleased. Let the right hon. Gentleman go on imposing a penalty of £100 on the honest executor because he refused to commit perjury; let him go on imposing a tax on the colonies despite their protests; let him endeavour to do the same thing in regard to foreign countries, thereby laying the foundation for future quarrels. The right hon. Gentleman had launched his ship; they had endeavoured to point out the holes in the vessel; they had shown that she could not float, and could never carry her cargo of taxation; whoever sat on that Bench next year would have to re-caulk and dismantle her, and re-rig her from truck to keelson. It was extremely doubtful if the damage now being done to that delicate machine of Death Duty taxation could ever be repaired now that the Chancellor of the Exchequer had gone through it with his democratic sledge-hammer. The Chancellor of the Exchequer might console himself with the constant plaudits of hon. Members who sat behind him, but he could assure the right hon. Gentleman that the Bill would be received by those who saw it at work as it was now by those who were conversant with the principles of true finance neither with plaudits nor with curses, but with universal shouts of inextinguishable laughter.
§ Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day three months."—(Sir J. Lubbock.)
§ Question proposed, "That the word 'now' stand part of the Question."
§ MR. EVERETT (Suffolk, Woodbridge)
said, the hon. Member for Lynn Regis had referred to the extraordinary length to which the Debates had been carried, and certainly no hon. Member had better reason to be accepted as an authority on that point, for no one had contributed more amply to the length of the Debates. He was only doing the hon. Member, however, justice when he said that in the many speeches he had made, the height, depth, width, and length of knowledge he had shown in regard to the whole realm of the subject of the Death Duties had been exceedingly great, and if he were now disposed to employ his leisure hours in editing his speeches they would form a valuable compendium of information on the subject, lit up by much humour; the only thing that would militate against the sale of the volume would be its enormous bulk. He did not intend to follow the hon. Member into the Delphian prophecies which he had uttered. He felt that he would soon be out of his depth if he attempted to do so, and were to enter into all the intricate points of argument by which the hon. Member had attempted to justify those prophecies. But he had been struck whilst listening to the hon. Member with the thought that if the hon. Member was right and there was to be only a very small addition to the receipts of the Exchequer by virtue of this Bill, there surely had been on the part of hon. Gentlemen opposite a great deal of cry about very little wool, and it was certainly strange that hon. Members had fought so much against this Bill if it would take so little out of their pockets. Of course all must admit that this Finance Bill had a painful side to it. They knew that it was to increase taxation, and nobody liked to be taxed. Whatever the nature of his property, no man liked to give up a part of that property in taxes. It was especially hard to be called upon to pay more at the present time, when the majority of people found their incomes dwindling and the value of their property vanishing away. It was to be lamented 204 that in this great and rich country, when they were enjoying a period of peace, the necessity had arisen for an expenditure in excess of the income which their ordinary taxation had brought in. Looking at the circumstances of the case in this respect, his greatest hope in regard to this particular Bill was that it would have a wholesome effect in promoting economy in the future. He ventured, indeed, to submit that they would that night, in reading the Bill a third time, be setting their seal to a good work. They would, at any rate, have passed a thoroughly popular Budget—a Budget based on common sense—a Budget based on true principles which stood out clearly and plainly, and commended themselves to the judgment of everybody — namely, that to the needs of the State those that were rich should pay the most, and that all wealth, whether it was derived from real or from personal property should pay in equal proportions. If a man was fortunate enough to inherit, say, £50,000 worth of real property, why should he not pay the same as if he inherited property of another kind? On these two points he was sure, from what he had heard through the country, that, with the exception of a few very rich people, everyone commended this Budget. Some, indeed, even of the richest people, had expressed their perfect willingness to pay their share of the burdens of the country out of the fortunes with which through many happy circumstances they had become possessed. He believed that they would find that the Chancellor of the Exchequer had succeeded in doing what before he introduced this Bill would have been thought an impossible task, and that was to make a popular Budget when a deficiency had to be met and taxation increased. The reason of the Chancellor's success was that while he had got to raise more money, he had so adjusted the taxes that the poor among the people would actually pay less than they had been paying. Persons whose incomes were under £500 a year would make actually smaller contributions than before. He wished, however, more especially to look at the Budget from an agricultural point of view. By far the most numerous class in the country districts were the agricultural labourers; and they all knew that 205 neither aggregation nor graduation would trouble the agricultural labourers in the very least. These Death Duties would not cause them any nightmares, nor would they have any occasion to conceive schemes of evasion or schemes of insurance to provide against what they would be called upon to pay. In regard to their savings—for happily in their better circumstances now many of them were able to save money—the exemptions which had been attached to this Budget would put them in a better position than before. Those hon. Members who represented largely agricultural labourers could go to them with pleasure and tell them that this was a Budget which imposed nothing in the way of taxation on them, but which, if they were fortunate enough to possess savings, would in respect to those savings give them relief in the Death Duties. But with regard to the agricultural labourers, he could imagine some hon. Gentleman saying—"But there is the Beer Duty, the addition of 6d. per barrel." An hon. Member who addressed the House last night referred to small or cottage brewers. He, however, was glad to know that this Budget would not add to the taxation of the cottagers' beer, at least in the county from which he came. Owing to what the Member for Midlothian did in 1880 in sweeping away the Malt Tax, and owing to what the present Chancellor of the Exchequer did when he was Chancellor of the Exchequer in 1886, in sweeping away the cottage brewing licence, the cottager in Suffolk was in the position of being able to brew his beer free of any taxation whatever. He had his barley and malt at the prime cost of them, and brewed from them his own beer. No tax-gatherer troubled him. He rejoiced in a privilege which labourers in this country had not had for a century before the present generation. He was only sorry that the labourers in other counties did not avail themselves more of this privilege. Though he was not a beer-drinker himself, he agreed that to those who worked hard in the fields there was no drink more wholesome, as there was none better appreciated by them, than home-brewed beer. But next they came to the second most numerous class in the agricultural districts—the farmers. To them this 206 Budget was a Budget of relief. It placed them in a position superior to any they had been in since the Income Tax was first imposed. For many years the Scotch and the Irish farmers had been in a position of favour in regard to taxation as compared with the English farmers. But now this inequality was done away with. The net result of what they were doing in this Budget was that every farmer whose rent and tithe came to £480 a year and under would be exemtp altogether from Income Tax. The Chancellor of the Exchequer, by the alterations he had made in Schedule B of the Income Tax, had in fact conferred on the farmers of this country a boon unprecedented since the Income Tax had been instituted. Finally, they came to the owners of land; and he submitted that to the owners of land this Budget was, in one sense, a Budget of relief. The Chancellor of the Exchequer would allow them in future to deduct 12½ per cent. from gross rent. It was in the past a very unjust thing to charge under Schedule A on the gross amount which was only paid into the owner's pocket to be paid away directly. The 12½ per cent. which would now be allowed would, in many cases, represent the difference between the gross and the net. This would be a considerable relief, and it had the additional merit that it would be given every year, and given to them while they were alive; and, speaking for himself, he preferred a present annual relief to a relief given to his estate after he was dead, which could do him no good whatever. He could not but think that there would be a further advantage, and that was that the landowners would not any longer stand in a position of privilege. It could no longer be said that they had certain exemptions in Imperial taxation, and were, therefore, not entitled to be dealt with on terms of equality in other matters. They would now be in a better position to fight the battle with regard to local rates. There was no doubt a good deal to be said as to the way in which the burden of local rates fell upon real property, and the ground was now cleared for the discussion of that subject. The Opposition had consumed an enormous amount of time in debating this measure in its different stages, and he could not say but what there had been abundant material 207 for debate in the propositions which they had brought forward; but a good deal of the discussion had been of what he might call the red herring type. Hon. Members opposite had been trailing the red herring across the scent in order to divert them from what was their real object. The real object of the Bill, as the Chancellor of the Exchequer announced to them when he introduced the Budget, was that the money which he wanted should come from where the money was, and the estate left by the dead man was to be the object to which he directed his attention. The discussions which had taken place had been devised to draw their minds away from that issue. One other tihng had struck him about the opposition to this Bill. It was the curious combination of the wealthy brewer and the poverty-stricken landowner. They had had Dives and Lazarus working together, both of them desiring the crumbs that fell from John Bull's table, and both praying that his tax-collecting dogs should not be permitted to touch their sores. Speaking as an agricultural Member, he said, under all the circumstances, they ought all of them to receive the Chancellor of the Exchequer's proposal with thankfulness.
§ MR. W. LONG (Liverpool, West Derby)
said, he was sure the House must have listened with great interest to the speech of the hon. Member who had just sat down. He put the case of the Chancellor of the Exchequer in so happy a manner that the impression left upon their minds was that, notwithstanding that the Chancellor of the Exchequer had been able to raise a large sum of money for Imperial purposes, no one had been taxed in an undue degree, but, on the contrary, everybody had been relieved from taxation. He did not dispute the title of the right hon. Gentleman to represent an agricultural constituency, but it was a remarkable thing that if the labourers and tenant farmers and owners had been relieved of burdens they had hitherto borne that with regard at all events to the vast bulk of them no impression had been left on their minds that any such service had been rendered to them. A very contrary and a very deep and permanent impression had been left upon their minds that so far from having been relieved from taxation their position would be made infinitely worse 208 by the passing of this Budget than it was at present. He would like to point out that in the concessions which had been granted by the Chancellor of the Exchequer—for which he tendered him his thanks—he had had some regard to the exigencies and hardships of their situation. He could not go further, and say with the right hon. Gentleman opposite that they ought to be grateful because they had received a greater relief than burden laid upon them. He must say that he had listened with amusement to the commencement and to the end of the hon. Member's speech. The hon. Member told them at the commencement of his speech that it was a painful thing that taxation should be laid upon anybody. Then he said he hoped this burden would have the effect of promoting economy. No doubt the hon. Gentleman hoped that, but he (Mr. Long) did not think his wish would be realised. And then at the end of his speech the hon. Member had to say that taxation was levied on a limited number of persons in order to relieve the vast number of the people. Would it promote economy to say that the longer number should call the tune and that a limited number should pay the piper? The principle of the Budget might be a just and wise one. He thought it was an unwise and unjust one; but it might be wise and just and capable of being supported by argument and good reason. But he maintained, whatever effect it might have, they were altogether changing the system under which taxes had been hitherto raised, and that whether it would or would not have the effect of shifting the burden of taxation on to the shoulders of those better able to bear it, most unquestionably it could not have the effect of impressing upon the minds of the vast majority of the people of this country the necessity of economy.
§ MR. EVERETT
explained that what he meant was that expenditure did not come from the bottom upwards, but from the top.
§ MR. W. LONG
, continuing, said, he had in his mind the recollection of a speech made by the Chancellor of the Exchequer, when he dwelt with great force upon the demands for money made by Representatives in that House, and pointed out that such a course must lead 209 to great difficulties in the future, and that year by year the national expenditure was going on because they were seeking to relieve first one person and then another from the burdens which they had hitherto borne. The practice had been to make use of the Public Exchequer to lighten these burdens which fell with special seventy upon the poorer class of the community. He submitted that whatever effect the Budget might have, it would not have the effect, to which the hon. Gentleman attached so much importance, of inducing a spirit of economy in the land. With regard to the remark that whoever else might feel the burden of this taxation the agricultural labourer would not, he would have a word to say later. He had listened to the speech of the right hon. Baronet the Member for London University with the greatest possible interest, and he rejoiced that he came to a conclusion much the same as that of the hon. Gentleman opposite—namely, that whatever else resulted, as they had endeavoured to put real and personal property on an equal footing, the next step must be the readjustment of the burdens of local taxation, with the object of putting the two classes of property on an equality for that purpose. He hoped that when next year came, and some effort was made in that direction, they would not only have the sympathetic words of the hon. Gentleman, but, his assistance by speech and vote, the assistance of all those who with him represented agricultural districts, and who were entitled to speak for those who bore these large burdens at this time. In that case some good might be got out of this Budget. The object of this great democratic Budget, as he understood it, was to put real and personal property on the same footing. Those of them who had contended against these principles and had endeavoured to establish the fact that the Government were doing an injustice to a certain class of real property, had been confronted with the difficulty that the true definition of realty and personalty did not cover the various classes of property that the terms designated. They had been confronted with the difficulty in the first instance that in the case of two properties of the same character—houses in the City of London, one being freehold and one leasehold—although the 210 freehold house might be of the greater value and the larger and the more valuable property, yet, under the system of taxation affecting realty and personalty, the freehold house, under the Death Duties, had enjoyed a greater advantage as compared with leasehold property. That was au injustice, and he did not defend it. If they could get at the actual value of property, and if they adopted the principle which had been suggested by hon. Members opposite—namely, the taxation of those who were able to pay and who had surpluses which were over and above the amount which they required for subsistence—then he admitted their principle would be good. But he contended that the difficulty they had to contend with arose out of the fact that there was no classification of the different sorts of property in this country. Instead of dividing them arbitrarily into realty and personalty, they ought to be classed according as they were or were not remunerative. He would not go into the wide field which had been occupied by the hon. Member for Lynn Regis (Mr. Gibson Bowles), who had made a most important speech to the House, and whose ability in dealing with the matter he much admired. He was glad to hear the observations of the hon. Gentleman opposite with regard to the Amendments which had been moved by the Opposition, but he did not know why he should have described some of them as "red herrings," because he did not think that any Amendment had been moved with the object of diverting attention from the main principles of the Bill, but only for the purpose of diminishing what they conceived to be its injurious tendencies. He was glad to hear the hon. Gentleman say that in his opinion the Debates had not been unduly prolonged, and that the vast importance of the subject had justified the discussion which to a large extent had been carried on from that quarter of the House. The hon. Gentleman began his speech in words with which he had the greatest sympathy. He said it was a very bad time indeed to cast extra taxation upon any class in the country, especially upon the class which he represented in that House and with which he was closely connected. He could not believe that the Chancellor of the Exchequer had realised how grave 211 was the condition of owners of that class of real property, and how horrified they were that at a time when they were more seriously affected than for many years past, when the difficulties surrounding them had become greater than they ever were, and when they were confronted with problems which were insuperable, and did not know how to meet the obligations placed upon them—when these difficulties were confronting them in a greater and more painful degree than ever before, that was the moment chosen to cast upon that kind of property an increased burden, how to meet which it was impossible to say. When the Chancellor of the Exchequer brought in his Budget he ventured to put to him a case of persons who would be unfairly hit by his proposals. Nothing that had been done had met that particular case. He quite understood that it was useless to present it again to the House now. They had reached what the right hon. Gentleman described last night as Private View Day, and he presumed there was no more touching up to be done. Although they might bewail their misfortune, and might be tempted to recapitulate some points in respect to which they thought injustice would be done, he understood the time had gone when they could hope to effect any change. The hon. Member for Sudbury said labourers would not feel these proposals, and that their savings were not to be aggregated or graduated, and from the speech of the hon. Member for Lynn Regis he gathered that in any case the results would be very small, in which case, of course, they would be grateful to the Chancellor of the Exchequer, and would apologise for any harshness used in criticism of his proposals. But he was afraid the result must be to cast upon owners of property a burden which it was impossible that they should meet, and that those who would suffer were the limited owners of real estate, who had to the best of their power made provision for the payment of the Death Duties as they at present stood, and who have endeavoured to leave their successors in a better position than they were themselves, and more able to carry on the duties and responsibilities of ownership of land. Those persons found themselves in the difficulty that if the property was settled there was no means of meeting 212 the duty except by saving out of income or life insurance. To talk about saving to an owner of agricultural land was either a confession of absolute ignorance of his condition or a cruel sarcasm. The difficulty for them, so far from saving, was to maintain as best they could the duties and responsibilities of the properties which belong to them, and to keep together the homes in which they lived, which they had to do without any thought of luxury or personal pleasure or amusements. The only thing they could do was to still further decrease their personal expenditure, and how they were going to do that he did not know, because he was sure they had been compelled a long time since to put an end to any expense which could come under the head of luxury, or amusement, or personal enjoyment. In the vast majority of cases the landlords were obliged to live in a much more simple style than hon. Gentlemen opposite generally suppose. They had had to cut down their expenses to the lowest possible degree, and he did not see what form any further economy could take except a man lessened the number of hands employed about the estate. There was no doubt that with regard to the majority of agricultural properties in this country the owners ask themselves not how few men they could do with, but how could they find work to pay the wages of the agricultural labourers wanting employment in the neighbourhood. They had been employing labour under great stress and difficulty, and when they were hardly able to make both ends meet. The House must be sure that owners of land, if they realise what their duty was to their property and to their successors, must find some means of paying the duty. Under the existing duties, even, it was the case that owners found it impossible to live in their own homes, and had to shut them up and go abroad. If that was so at present, what would be the case in the future, when the duty would be three or four times more than now? He had heard sneers cast at the agricultural interest, and it had been suggested by the Chancellor of the Exchequer himself that they were actuated by self-interest and selfish motives in endeavouring to press their views upon the House. He ventured to say that no charge of that 213 kind could be reasonably brought against them. They were not thinking of their own protection, but of the protection of their children and those who came after them. And he thought they were abundantly justified in standing up for rights and interests which were superior to their own. He said, therefore, that the statement that they had been actuated by personal motives was one that was unworthy and could not be sustained. He could not say how much he regretted that the Chancellor of the Exchequer had refused, either in Committee or in Report, to introduce an Amendment which would have excluded from aggregation a sum set apart, either by way of life insurance or in any other way, for payment of the Estate Duty. Such an exemption would have been an act of justice to those who showed by their action that they were desirous of relieving those who came after them from the burden of having to find the money to pay this tax. The position of those with whose case he had tried to deal—namely, the owners of agricultural realty—was a very hard one, and he ventured to say that if these Death Duties were to be permanent they would inflict great injury upon the agricultural interest of this country. On many and many an estate the greatest possible difficulty would be found in providing these Death Duties. He did not know what the Inland Revenue was going to do in some cases which would constantly arise where the land could not produce it. Hon. Gentlemen opposite laughed—he had heard them do so frequently—at the idea of land not being saleable. They said, "It is not that it is not saleable, but that you will not sell it except at your own price. If you were prepared to take a fair price it would be sold." He could assure hon. Gentlemen opposite that if they believed that they had not got to the bottom of the agricultural difficulty by any means. He could assure hon. Gentlemen that there was plenty of land in his county and in adjoining counties that the owners could not sell, not only for the price they would like to receive or the price their predecessors gave for it, but for one-third of that price. People could not be tempted to buy land. Land carried with it the great difficulty that while in many cases, unfortunately, there were no occupying tenants, in cases where 214 there were such tenants the purchaser had to ran the risk of having to recoup them for expenditure they had incurred upon their farms. In addition to that they had to face the necessity of having to provide money for the occupation of the farms when the tenants quitted them. The consequence was that, although people with money to invest might look at property of this kind, in his own county he did not believe that a thousand acres of agricultural land had changed hands during the last five years. What were the owners of this class of property to do? They could not sell. They had the greatest difficulty in keeping the land and in keeping their affairs going. Yet the Government said they were equalising the conditions between real and personal estate and putting land on an equality with other property as regarded taxation. In regard to personal property, a man had no difficulty in estimating the value of that which he left behind him. He could tell by the simplest calculation the amount he would have to set apart to pay the Death Duty, and when the time came, by the payment of a small commission, sell out a portion of his property. But that could not be done in the case of real estate. You could not effect the sale of land by sending a telegram to your broker or a letter to your banker. Money could not be raised except by mortgage at a very heavy rate of interest. The Government said they were putting land on an equality with other classes of property. He ventured to say they were attempting an impossible task. They were endeavouring to equalise two things which could not be made equal. They could not put agricultural land and personal estate upon anything like the same footing when the conditions were so various and so varying, and the contention of the Chancellor of the Exchequer that this burden would be confined to the rich, who would be able to bear it, would be found to be unsound. The labourers would have to bear their share of the burden, and they would feel it quite as much as anyone. He only hoped that these anticipations might turn out to be unduly depressed. He asked the House to believe that in taking the course they had taken on this Bill the Members of the Opposition had been actuated by honest and sincere motives.
§ THE SECRETARY OF STATE FOR INDIA (Mr. H. H. FOWLER,) Wolverhampton, E.
I am sure I only re-echo the general feeling of the House when I say that on this side of the House, and I am sure on the other, the credit which the hon. Gentleman claims in regard to motive, will be readily and freely accorded him. There is no necessity in discussions of this sort to impute motives to either side, or to say that hon. Members are moved by principles other than those which should influence them in defending their legitimate rights. But I would point out a difficulty the Government has experienced during the whole of this Debate, and of which, to-night, we have had a conspicuous illustration. The difficulty is in deciding exactly on what line it is that we are to defend the Bill. There have been two speeches delivered to-night, one by an hon. Member who has been justly complimented for the yeoman service he has rendered the Opposition throughout these Debates, and for his great mastery of all the details and intricacies of this legislation, and the other by an hon. Member whom we all recognise as an able representative of the agricultural interest. These two hon. Members do not agree. The hon. Member for King's Lynn (Mr. Bowles) has drawn a picture of the Bill and its financial defects which should be most encouraging to the Opposition. According to the hon. Gentleman, under the most favourable conditions, the Chancellor of the Exchequer will not get more than £700,000 by his new Death Duties, and he added that there is a strong probability that he will not realise that sum, but that the revision of the Death Duties will mean a less revenue from that source than under present circumstances. But the hon. Member for Liverpool (Mr. Long) has said the Budget will impose burdens which the agricultural interests are unable to bear, and will affect most injuriously not only the owners of land but the occupiers and the labourers employed by them. Which argument are we to fight—which are we to take as the serious one—that the Bill will produce nothing at all, or that it will create an intolerable burden which ought not to be imposed on any class of the community? We are asked by the right hon. Gentleman the Member for the University of London to reject this Bill as a whole. 216 The Motion is that the Bill be read a second time this day six months. Therefore it is impossible to confine the discussion of this measure—or rather we can hardly call it a discussion, and I would, therefore, say this review of the measure—to one particular branch of the subject. The whole scheme is before the House. It has been before the House a long time. It has been discussed with great power, eloquence, ingenuity, and may I also say to great weariness. The condition of the House shows that it is now thoroughly tired of the Debate. But when a Motion is made that their scheme should be rejected the Government are entitled, in a sentence or two, to ask the House to look upon the scheme as a whole, remembering that we are face to face with a deficit, and remembering also that the Chancellor of the Exchequer has to provide for what he very well knows will be an increasing expenditure in the course of the next few years. The scheme of the Chancellor of the Exchequer is twofold. He proposes a great relief from taxation and he proposes a very considerable addition to taxation. The House ought not to sever the consideration of one branch from the other, but should look both to the relief given as well as to the taxation imposed. I think one of the most attractive features of the Budget, and one which will be long remembered in connection with my right hon. Friend's financial career, is the relief which the Budget gives to a very large and deserving class of the community. The right hon. Gentleman the Member for St. George's made some remarks on this question which afford a complete justification for the proposals of the present Government. The right hon. Gentleman, when he brought in his first Budget as the Chancellor of the Exchequer, said—The direction in which I now look to give relief is a class upon which I have always looked as being heavily taxed as compared with the rest of the community—I mean the class just above the working class, the class—if it is not offensive to say so—that begins to wear a black coat, the class which has a very hard battle to tight, and which has demands made upon it in many respects severer than those falling upon the ordinary working man. I refer to men with incomes ranging from £150 to £400 a year, men of the poorer trading class, small tradesmen, and clerks, men who generally live in houses between £20 and £60 a year.The Chancellor of the Exchequer has 217 given broad and substantial relief to that class; he has put on the Statute Book a principle of the application of which it is to be hoped Parliament has not heard the last word; I hope that this will not be the final settlement on those lines. It is the class on which the right hon. Gentleman opposite says local and Imperial taxation falls severely. The Income Tax they pay means to them the deprivation, if not of some luxury, at all events of some pleasure, some advantage to health, or some personal rest. The sacrifice of nearly a million will give relief under Schedule D to 350,000 taxpayers, and to a great many more who were not in Schedule D—widows and others with small incomes. It will give relief not only to the class described in the quotation I have read, but also to the great bulk of the clergy, Established and Nonconformist, to the smaller professional men, and to men and women engaged in education; all these will benefit by the enlarged exemption from Income Tax. Relief is also afforded to landowners in respect of their assessments under Schedule A. The right hon. Gentleman the Member for Midlothian—and his successors—has admitted that the present assessment under Schedule A is unfair. As that is now taken away, the Chancellor of the Exchequer is entitled to the recognition he has received from hon. Gentlemen opposite for making an allowance of 12½ per cent. in one case and 16 2–3rds per cent. in another. I have made some calculations which indicates, as the hon. Member for Woodbridge has shown, the relief which these adjustments of Income Tax will afford to the small farmer and even to the farmer who does not come under that description. Up to the present time no one has found fault with these remissions of taxation. I am not going to waste the time of the House by discussing the Chancellor of the Exchequer's additions to taxation. He has added 6d. to the barrel of beer and 6d. to the gallon of spirits—or something like ¾d. per bottle. The Debate on that subject may be re-opened, but I think the sense of the House was so clearly expressed on it in Committee that I need not trouble Members by going into it again. The other new duty which the right hon. Gentleman has imposed is in connection with the Death Duties, and the principles he has advocated have been 218 challenged both from this side of the House and from the other. The principle the Chancellor of the Exchequer lays down, I take it, is equality of taxation between all classes of property—equality of liability and also equality in respect of the different modes of distribution, whether by will made to take effect on the death, or by settlement which takes effect inter vivos; and he added a third principle, graduation of duty in respect of amount. I congratulate my right hon. Friend upon having reached the end of one of the longest controversies on financial matters of modern times. It is 99 years since a practically identical proposal was first made in the House of Commons. Mr. Pitt's original proposal was to tax landed property on the same lines as personal property; but in the Bill, as amended in Committee, it took the form of the present Succession Duty—namely, the levying of a tax upon the value of a life interest. In those days Bills were introduced in manuscript, so that the difference between the original draft and the measure as altered in Committee cannot well be observed. Some things of historical interest occurred in the Debate on that Bill which have been reproduced on the present occasion. The Budget was brought in on December 7th, 1795. The Bill was brought in on April 21st, but the Debate did not take place until the Bill went into Committee. It was read a second time on April 22nd, the day after its introduction. On May 5th a Motion to postpone the Committee for three months was defeated by 40, which was Mr. Pitt's largest majority on the Bill, and he was then in the plenitude of his power. That was all he could obtain for the first proposal to tax real property. One of the most powerful opponents of the proposal to tax real property was the representative of the great house of Cavendish, Lord George Cavendish, and he anticipated the arguments which have been used in the present Debates. He said this taxwould tend to equalise all property and would operate as a confiscation of all the great landed estates of the country for the use of the Government.Mr. Pitt's majority on that occasion went down to 29. On the Motion that the Bill be now read a third time, the Government were defeated by two. The word "now" having been struck 219 out of the Bill, Mr. Pitt proposed to add "to-morrow morning," for which Mr. Sheridan moved to substitute "this day three months." This was defeated by one; on the Main Question that the Bill be read a third time there was a tie; and the Speaker, as I believe is the custom with Speakers on such occasions, gave his vote in favour of the House having another opportunity of considering the matter. Mr. Pitt withdrew the Bill, and for 60 years no change was made in regard to these duties. That was the first attempt made to equalise real and personal property. At that time the value of personal property was estimated by Mr. Pitt at 600 millions and real property at 700 millions. Nothing was done until 1853, and it is the scheme then adopted that is to give way to the scheme now proposed. The historic review is interesting because of the analogy between the arguments used then and now. I now come to the arguments that have been used against the scheme as now proposed—the scheme of equalisation between realty and personalty, of making no difference between property, settled and unsettled, and of graduation. The hon. Gentleman who has just sat down made out a case—a very strong one no doubt—why the tax should not be imposed on landed property. His argument was depression of landed interests.
§ MR. W. LONG
said, he had referred to the existing condition of agriculture as a special reason why it should not be hit hard now.
§ MR. H. H. FOWLER
I submit with some confidence that the first reason urged—namely, the present condition of the landed interest, is not a conclusive argument, because the duty will be levied only on value, whatever the value is; and if the value of a property is nothing no duty will be levied. If a property is mortgaged and has decreased in value the duty will be levied only on the margin of value that remains. The speech I made with reference to the local burdens on agricultural land has been somewhat misunderstood. The object of the inquiry I instituted was to ascertain facts, and the accuracy of the facts and figures I gave have not been challenged. I am aware that there is difference of opinion as to the lessons to be drawn from them, and I am ready to admit that on this question the door is 220 not closed; but two wrongs do not make a right. No doubt we have a condition of affairs in which landed property is exempt from Imperial taxation which it ought to bear, and personal property is exempt from local taxation which it ought to bear. I will not say that the time has not come when there should be inquiry as to the real incidence of local taxation, and how that taxation—which I can assure the House is not a decreasing quantity, and which I hope will in many cases continue to increase—should be borne by the two descriptions of property. It would be a great injustice to put that on any particular property. I am talking of houses quite as much as of land. That has nothing to do with the present issue. We are now attempting to adjust equally and fairly the liability of every description of property, no matter of what character it may be, to pay its fair share of Imperial taxation. There have been objections taken to the mode of payment and assessment, but the Amendment of the Leader of the Opposition, which has been accepted by the Chancellor of the Exchequer, removes the objections with regard to the mode of assessment. The value of real property has been taken at its forced saleable value at the time of the death, and the tax is subject to a limitation that the forced value is not to exceed 25 years' purchase. I think every one one will agree that the Chancellor of the Exchequer has acted very liberally in that matter. [Mr. A. J. BALFOUR: Hear, hear.] Then the extension of the period of payment is that it shall reach to eight years, eight instalments. The first will not fall due for 12 months and no interest will be charged. I think that is a fair alleviation of the burden. Therefore I do not think the fears of the hon. Gentleman will be realised under this modified system of payment. I pass now to the equality of distribution. Has any reason been shown why settled property should not pay the same as other property? Much of the settled property is not land, but houses and money. I do not see why a difference should be made because a father gives his daughter money by deed instead of by will; I cannot see why there should be a large exemption in one case. Then there is the question of aggregation. Aggregation is to me simple addition. We are going 221 to tax a man according to what he has got. We do that now. We add up his Stocks and his shares and we find the total. The terrible return-forms to which the hon. Member referred are already in existence in every Government office. A man has property abroad, say invested in America; but he is not on that account to escape payment to the English Government in respect of the whole of his property. Aggregation is simply the adding up of what a man has got. The hon. Baronet the Member for the University of London has declared that graduation is a violation of all sound principles of political economy, and he denied that graduation had the authority of Mill. I happen to have an extract from Mill's Political Economy, and I will read it the House. It is as follows:—I conceive that inheritances and legacies, exceeding a certain amount, are highly proper subjects for taxation; and that the revenue from them should be as great as it can be made without giving rise to evasions, by donation during life or concealment of property, such as it would be impossible adequately to check. The principle of graduation (as it is called), that is, of levying a larger percentage on a larger sum, though its application to general taxation would be in my opinion objectionable, seems to me both just and expedient as applied to Legacy and Inheritance Duties.
§ SIR J. LUBBOCK
That is exactly what I said. We endeavoured to induce the Government to put the duty on legacies, but they refused.
§ MR. H. H. FOWLER
I have read the quotation, and the House will put its own interpretation upon it. We believe in the principle that men should pay in proportion to the aggregation of their income, and we do not believe we are inflicting any injustice in endeavouring to remove the existing inequality. Most of the figures which have been used on this subject seem to be based on the assumption that everybody is going to die worth £1,000,000. I must call attention to this fact, that up to £25,000 personal property there is no additional taxation whatever. Up to £50,000 the additional amount charged is £250. This is the scheme which is to break up families and destroy all motives for thrift. Between £50,000 and £100,000 the additional payment will be £1,500. I do not consider that there is any injustice in putting that taxation on persons who are possessed of that amount of property. It is only just that they should pay, seeing that those who 222 have smaller incomes pay much larger amounts in proportion. At present the yield from the Legacy and Succession Duty is £10,060,000, including realty and personalty, and of this total the latter pays £8,910,000. We believe that when this Bill comes into full operation we shall add three and a-half millions to the 10 millions, making in round figures 13 millions sterling. Of this increase, personalty will pay £2,130,000, and realty £1,320,000. It is this which is to scatter families, to turn Dukes into paupers, scatter works of art broad-cast from Christie's, and reduce the stately splendour of great houses. My answer to all this is that I do not believe a word of it. I do not believe the increase on the very wealthy people will be felt, but where it will fall heavily is upon the moderate landowner with a moderate rental. No one denied that. The right hon. Gentleman the Member for the University of London has given us a most vivid picture of the business man working away to save all that he can, but so soon as he had saved £999,000 he began spending right and left so as not to let his property get above a £1,000,000. The class of person to whom I have alluded is a very different one to that which possesses £999,000. The right hon. Gentleman said that the effect of this Bill is to tax the rich and spare the poor.
§ SIR J. LUBBOCK
That is exactly what I said you do not do. To effect that the duty should have been put on the legacy each man inherited.
§ MR. H. H. FOWLER
I am sorry if I have misunderstood the hon. Gentleman. The object that the Government had when framing the Bill was not excessively to tax the poor to spare the rich. We propose to relieve the Income Tax-payer of moderate means, to remove a grievance in respect of the taxation of land, to put a moderate addition on indirect taxation, to redress the inequality between real and personal property, and to make the broad shoulders bear the big burdens.
§ SIR J. LUBBOCK
said, he wished to explain that, whatever motive might have actuated the framers of the Bill, their modus operandi was not such as would have the effect of sparing the poor while it taxed the rich.
§ SIR G. CHESNEY (Oxford)
wished to explain briefly the reasons that would 223 determine his vote. They had just heard that the main object of the Bill was to equalise the burdens of taxation. They were told that the additional taxation placed upon the rich was really very trifling to the individual, although in the aggregate it amounted to a great deal. His sympathies were entirely in favour of the view that the rich should contribute more than the poor proportionately, because the sacrifice they were called upon to make in most cases was less, and that it often happened that the rich got their money very easily, or even in some cases by what might be termed accident. But it seemed to him that the whole tone of the Bill was based upon the false assumption that there was an inherent opposition between capital and labour—that if anybody became rich someone else must become poor. The assumption, too, was often made that the useful man to the community was the man that freely spent his money. He submitted that that was not so, and that no one in that way did any real good to the community at all. The man that did good was the man that saved his money and invested it wisely in commercial enterprises and large companies, that gave employment to others of the community and increased the wealth of the nation as a whole. If the population did not increase, then no doubt the necessity for increasing the wealth of the nation would not exist, and no harm followed if everyone spent all he got; but unless the national wealth increased in proportion to the growing population, the country would become year by year poorer and poorer. Under the Bill the man who applied his money to useful purposes was the very man whose property it was proposed specially to attack. No form of taxation was defensible, no matter how good the object might be, if it were in itself unjust. Everybody knew that the poor man would not get off any more because the burden of the rich was increased. The days of economy were passed. However much the Revenue was increased the Government would next year ask again for more. It seemed to him that the Bill was in its character an ill-natured Bill, as was most of the legislation that came from the other side of the House. Those Members opposite whom he had the honour to count among his friends he 224 always found individually reasonable and sympathetic, but collectively all the milk of human kindness appeared to be squeezed out of them. When they came to act in the aggregate, they seemed, instead of trying to alter the Bill so as to assist their fellow-countrymen, to be determined to do all in their power to oppress them. In spite of all this, no doubt the aggregation of property would still go on; but he considered, for the reasons he had stated, that the principle of taxation now brought forward was altogether opposed to the sound principles of finance. It was, in his opinion, an unwise measure, and economically unsound, and he should therefore record his vote against the Bill.
§ COLONEL KENYON - SLANEY (Shropshire, Newport)
said, that the Secretary of State for India was hardly fair in the use he had made of the quotation from John Stuart Mill, though he admitted that the right hon. Gentleman had quoted the passage pretty correctly. The essence of the quotation was that John Stuart Mill thought the principle of graduation unobjectionable as applied to Legacy and Succession Duty. But the House had heard over and over again that the main principle of the Bill was to treat the Death Duties as if they were postponed or deferred Income Tax.
§ COLONEL KENYON-SLANEY
said, that the observation, if it did not fall from the right hon. Gentleman, fell from the Chancellor of the Exchequer. What Mill said was—To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbours. It is partial taxation, which is a mild form of robbery. A just and wise legislation would scrupulously abstain from opposing obstacles to the acquisition of even the largest fortune by honest exertion.When this Bill was brought in by the Chancellor of the Exchequer it was heralded by its supporters as a new departure, as an epoch-making Budget, which would raise money easily, simply, and equitably, without oppression, without disturbance of trade: and, indeed, that the Bill would scarcely need any Amendment or discussion. How did the Bill fulfil those predictions? It had been so amended and altered that 225 scarcely anything of the original Bill remained. He maintained that from an agricultural point of view they had everything to lose and nothing to gain by the Government proposals, because agriculture was affected harmfully and injuriously. If the liquor propositions were carried into effect he maintained that the farmers would feel the effects of them through the price of barley. The Government were on the side of impure as opposed to pure beer, and this fact was not likely to bring them any political capital in the country. The owners of land would also have to pay from three to five times more taxation than before, a fact which might react on the whole national life of the country. The Bill would take away that continuity of possession in the ownership of land upon which the whole of our rural life had hitherto hinged. It was idle to tell them that these things were of no value to the nation because he was certain the nation had benefited enormously in every particular owing to the maintenance of this principle of continuity. When they looked back upon these Debates it might be that some of them would think they had at times said something they would perhaps rather not have said. He would undertake to say that when such feelings came in there would be no Member of the House who would have so much to regret, and who ought to be more willing to withdraw much of what he had said than the Chancellor of the Exchequer. Time after time, night after night, day after day, on the slightest provocation or no provocation at all, he had chosen to attack in the most violent way the landed gentry of this country. He would venture to say, in making these attacks, the right hon. Gentleman was derogating from the position he held in that House, and attacking those who were not deserving of attack, and saying things of them he was neither justified by the facts nor ought to have said in ordinary courtesy. Those attacks ought to be most emphatically repudiated, and he maintained that if anybody ought to apologise for what he had said or done in the course of this Debate it was the Chaucellor of the Exchequer. Had the right hon. Gentleman been present he should have liked to have said more on this subject. The right hon. Gentleman himself was one of 226 the last who ought to indulge in these kinds of attacks. The Chancellor of the Exchequer came from the landed class in this country; he bore two names which were chiefly known because they were names of large landed families, and he did think the right hon. Gentleman might have remembered the old proverb, that "It was an ill bird that fouled its own nest." Under this Bill the occupier would suffer almost as severely as the owner by the destruction of the ability of the owners for a long length of time, at all events after succession, to continue to help and to develop agriculture on the properties to which they succeeded. They must now have recourse to the most strict economy, and one of the results of this would be to cut off the stream of the healthy support which they had allowed to flow over their farms, and in the direction of promoting agriculture. He was amused to hear the hon. Member for the Wood-bridge Division congratulating the Chancellor of the Exchequer for having placed the English farmer on a par with the Scottish and Irish farmers with respect to Income Tax. He would remind the hon. Member that when that point was raised the Chancellor of the Exchequer absolutely scouted with scorn the idea that there was any inequality at all, or that there was any necessity to give relief, and it was not until the arguments had been recapitulated that the right hon. Gentleman saw their strength, and with a very ill grace indeed gave way to the force of conviction. The right hon. Gentleman gave way because he could no longer resist the arguments, and to take credit to him for that was to take credit for what he did not deserve. He must enter his protest against the growing habit of taking credit on the other side for Amendments which had been extracted from the Government by the repeated efforts of the Opposition. Passing to the third class affected by the Death Duties—namely, the agricultural community, he contended that it was grotesque, absurd, and ridiculous to argue that the labourer was not affected by the proposals of this Budget. What was the prime interest of the labourer at this moment? The first essential to his happy existence was continuous wages, and the one thing he dreaded more than another was a break in the continuity of 227 these wages and inability to earn steadily and regularly that on which his livelihood depended. This Budget absolutely assured to him that his employment would be broken off periodically. Hundreds and thousands depended on the maintenance of these country houses and demesnes, and their dismissal must be the first step to the economy which would be necessary on account of the provision of this Bill. The effect of the Bill would be earlier and more injuriously felt by the labourer than by either the owner or the occupier. He thought he had seen all throughout where the real difficulty had lain with the Chancellor of the Exchequer, and he gave credit to the right hon. Gentleman for wishing it had not fallen to his lot to place this bitter penalty on agricultural properties which, he knew, must feel it deeply. The Chancellor of the Exchequer's difficulty was how to separate urban from rural realty, and if it had been possible to differentiate between the one class of realty and the other, he thought they should have had rural and agricultural realty treated with a lighter hand than they had. The fact was, that the crushing, cruel, unfair, and unjust penalty the owners of rural and agricultural properties were called upon to pay was because they were being dragged behind urban realty; and because the Government saw, in the taxation of urban realty, a chance of getting a large and valuable revenue, they were obliged to lump in rural realty with that larger and more important section, and rural realty had to suffer in order that the Government might get out of urban realty that which the owners of it could afford to pay to the State. He felt pretty certain that this line of thought had occurred more than once to the right hon. Gentleman the Chancellor of the Exchequer, and he imagined it had presented itself over and over again to the Cabinet in the consideration of this matter, and doubtless if combined Ministerial intelligence, could have differentiated in any way between these two classes of property, there would have been a plan in which the one class would not have been sacrificed in order that as much as possible should be extorted from the other. However, the Government could not devise a different treatment, and here was the result, but none the less better was the penalty imposed upon property— 228 in nothing did it mitigate the suffering that would follow. If it was true, as true he held it to be, that the effect of this measure would be to injuriously affect the spending power of owners of land throughout our rural districts, then it stood to reason it must affect the employment of the poorer inhabitants of those districts. British agriculture was undergoing a severe trial, and agricultural experts had insisted on the importance of endeavouring by scientific and other means to keep abreast of the needs of the day, which meant that heavy expenses must fall on the agricultural interest by experiments and improvements—heavy expense upon landowners. Then was it not reasonable to say, and could it not be absolutely proved, that by preventing these experiments and improvements and the development of agriculture a serious injury would be inflicted on the agricultural district? He claimed for this question that it was not of mere class or social importance, but that it was a national question of the highest importance. Just in proportion as injury was inflicted on this interest, so was national prosperity injured. Easy would it be to refer to the immediate outcomes of this precious Budget. Loudly expressed by right hon. Gentlemen opposite was the desire to keep the labourers on the land. Why, then, bring in a Budget the effect of which will be to sweep them off? They (the Government) professed a de sire to prevent labourers from crowding into towns, and here they had a Bill that would force them to the towns. The agricultural labourer had no stored-up capital or invested funds; he lived by his work from day to day, and he must follow work and get it where he could. Cut him off from his resources in the country, and he must seek the means of life in towns, and certain it was, perhaps unwillingly, perhaps through ignorance and want of clear conception of the position, this proposal would assist in driving hundreds of thousands of agricultural labourers from their employment in the country to join the crowd of those who struggled for a precarious existence in our manufacturing centres. This was the very thing owners of property had made every effort to prevent, for this they had made sacrifices and "done their level best" to find employment for men 229 in double or treble the number they really required. Every effort had been made to prevent country districts from being denuded of the labouring population. Then came a Government proposal to defeat all these efforts making them vain and worthless, and the Government must take the responsibility of the results. What these would be a very little time would show, and the country would have little reason to thank the Liberal Party and the labouring classes would have every reason to lament the disastrous interference of the Government in finance. Between the richer and the poorer classes the Budget was unfair and inequitable, and many points had cropped up in these discussions which it would be easy to elaborate and press home, but he did not wish to detain the House longer. He urged that, apart from its agricultural and commercial aspects, there was a national aspect very much indeed affected by the results of these proposals. He had not very many intimate acquaintances among very wealthy men or the honour or the means of knowing much of the working of very rich men's concerns, but he did know of one estate of over £500,000 and another of £220,000 now being so dealt with that they would not pay one farthing of duty to the Exchequer. Such cases as these the right hon. Gentleman should bear in mind; such cases as these could not be left out of consideration when proposals of excessive taxation were made, frightening capital and inducing men to take perfectly legitimate, fair, and honourable means to secure their successors from a cruel and unjust impost. By proposals of excessive taxation they depleted instead of adding to the National Exchequer. We had also heard, and not for the last time, of the difficulties arising out of this Budget in our colonial and foreign relations. A good deal of feeling had been excited between the Mother Country and some of her Colonies, and if the result should be to embroil this country in unfriendly relations with her colonies, then a great deal more injury would be done to the country than the amount of benefit that could possibly be supposed to accrue in any other way. As men of business the Government would fail; they would not realise the money they expected to secure, and for which they had disturbed trade and business throughout the 230 country. As men of business they failed, and as statesmen their failure was complete, and he was perfectly certain that the net results of the Bill would be the oppression of that class of the community least able to bear the pressure. He was certain that, from the point of view of rich and poor, this should be regarded as an unfair, inequitable, and unjust imposal. As such, he cordially and heartily would vote against it in the earnest hope that the country in a short time, recognising the position, would bring about a return to a more sensible and legitimate style of finance.
§ SIR R. TEMPLE
said, that, as one of the few Members who had followed the whole of the Debates on this Bill and been present in every Division, he desired to offer a few remarks upon the present occasion. It was not his intention to perambulate the whole field of that long and historical controversy, but he proposed to touch rapidly on the salient points and to state as briefly as possible the arguments against the Bill as they seemed to him to be applicable. This was a Finance Bill which bristled with hardships and complications, and, notwithstanding all that the Chancellor of the Exchequer had said, he ventured to assert that they had not to find three and a half, or, as had sometimes been stated, five millions at present; all they had to do was to provide the million or so during the present year under this Bill. All they were bound to do was to provide for the finance of the current year, and they might well let the next year take care of itself. Therefore, the argument of financial necessity afforded no answer to the objections raised to the Bill. The fact of the other argument being urged seemed to show that behind the financial policy of the Government lay another and a political policy, and one, he feared, of a partisan character. The suggestion of the Chancellor of the Exchequer that when a man died his property was not his own, but belonged to the State, had filled him with amusement, and was worthy of an Eastern potentate. It was a most astonishing argument to be put forward in a free country. To suggest that property not inherited, but saved by a man, and saved probably through personal exertions in exploiting foreign regions and adding them to the dominions of the British Empire, and 231 simultaneously increasing British commerce and trade, was most extraordinary; and yet that was the position taken up by the Chancellor of the Exchequer. Such a claim might have been expected to be made by the Shah of Persia, the ruler of Tartary, or the Emperor of China; but surely we in these days of democratic civilisation could not undertake to follow uncivilised countries in that respect. The inequalities caused by the scheme of the Bill would be felt keenly by all future successors to property. It was not quite correct to say that the poor would only be taxed as at present, and he only hoped that the middle classes would not be as hardly dealt with as he feared, owing also to the scheme of aggregation adopted in the Bill. The difficulty was that the system of graduation as introduced in the Bill was unlimited—that it might stop at nothing short of confiscation. It was exactly one of those routes which lead to the goal of general confiscation. That, therefore, was a fundamental objection to the Bill. Another objection was that a man was to pay Death Duties not upon the value of the property he received, but according to the estate of the testator. That surely would be most unfair to individual legatees, and constituted an inequality which would be most keenly felt by all of them. The fact was that these highly-graduated duties would make serious inroads upon capital, which was the motive power of the whole nation, and the prime mover, so to speak, of the social machine, and the wage fund of the country. He wished that working men would realise that fact. If the scale had been adopted which was suggested by his hon. Friend, the Chancellor of the Exchequer would have got more money, and would at the same time have deprived the taxpayer both of the possibility and motive of evasion. When they had these great jumps—he was speaking as an old tax collector—from one class to another, they supplied a motive to everybody to so diminish their estates as to keep them below the mark. He supposed that one great mitigation of all their woes under these Death Duties was that there would be large facilities afforded for evasion. Generally there was a certain amount of loyalty to the State, but the rich men 232 who found that they were being specially singled out for taxation could not be expected to exhibit any such loyalty. If all taxpayers were treated alike there would be loyalty to the State, but when some 500 men in a year were singled out for oppressive taxation they were not likely to entertain any sentiments of loyalty towards the State. On the contrary, they would be inspired with a feeling of disloyalty to which they had hitherto been strangers, and he was sure that they were already scheming for the purpose of evading the operation of the Act. The argument put forward was perfectly true that real property was heavily burdened by local taxation. He hoped that state of things would be mitigated, but, as a practical man, he did not believe that such mitigation was possible. The great difficulty was to locate personal property. It was only real property that could be located, while personalty was distributed all over the country and could not be located. Consequently, the land must necessarily bear the burden of local taxation in the main. The Chancellor of the Exchequer talked about equalisation. That, of course, was impossible. The land must continue to bear local taxation and could not be exempted, and the only thing that could be done was to exempt it from Death Duties. Then as to graduation. It was all very well for the Chancellor of the Exchequer to say that land would only be valued upon the basis of a forced sale. What did he mean by a forced sale? Supposing the land could not be sold at all. Was any one of them so sanguine as to suppose that because land would not sell it would be exempt from the Death Duties, and would not be aggregated? He was sure that some value would be put upon it, and that an income would be assumed although it might be swallowed up by the income. He was glad to hear the hon. Gentleman for King's Lynn explain the deductions, but even then they must look for an over-valuation, under which the owners and taxpayers would sure to be credited with the receipt of incomes that they had never received, and never expected to receive. In regard to personalty a valuation could be arrived at that would approximately represent the truth; but that was not so in the case 233 of land. What would be the condition of the landed estates in the future? A large portion of them would be sold. Did not that very fact imply a condemnation of the tax? What were they to say about the equity of a tax which compelled the taxpayer to sell his property in order that it might be paid? If such things as these were done in India instead of at home they would never hear the end of it in that House. It came to this—that this tax was so oppressive that in most cases the unfortunate property owner would have to sell his property in order to pay it. The tendency of the tax would be, amongst other things, to disperse art collections, and that of course would tend to the migration of these works across the water, where these oppressive Death Duties were unknown. If there was such a thing as compassion, he should think that the various considerations which he had urged would have availed with the Government, especially the fact that this taxation would mainly fall upon the widow of the dead man at the moment when the bread-winner of the family had gone. This tax would be execrated by generation after generation. With regard to the Income Tax proposals of the Government, he must make the remark that this Budget would to some extent limit the area over which the Income Tax was imposed. He had had as much experience with regard to that as any hon. Member in the House, and he meant to say that it was very desirable to keep the tax as low as possible in its incidence upon the humbler classes, but not to limit the area, because when the enemy was at the door the Income Tax was a great reserve, and to limit its area would be to diminish the opportunities of raising money in time of need. The area over which the Income Tax could be imposed, having once been narrowed, great difficulty would be found in again enlarging it. Although it was a very proper thing to reduce the amount of taxation as far as possible, the area ought to be maintained, so that in the day of need the necessary amount could be obtained. He understood the Chancellor of the Exchequer to have said that this Budget was an equal one for all classes, but in the next breath he seemed to say something quite different, because 234 he understood his observation to be that while he had caught the rich man the poor man would bear no share of the taxation. The right hon. Gentleman said in effect that the poor man would not feel the tax, and that it would come out of the pockets of the brewers and the whisky and spirit dealers. He submitted that that was not a just policy. In his view everybody should pay according to their means; but the poor men ought to contribute because the larger expenditure of the country was undertaken on their behalf. So much money being expended upon them, surely they ought to bear some portion of the burden of taxation. It was a fallacy to suppose that only the richer and upper class had an interest in the country; the poor had as large and even a larger interest in the country, and for the maintenance of their interests they ought to pay according to their means. He was confident that he was voicing the general sentiment. In his constituency, for instance, he knew that the working men were just as anxious as anybody to see the Navy strengthened, and he was sure they were ready to pay their share of any taxation that was involved. Yet the Chancellor of the Exchequer had dared to boast that he had so contrived the Budget as to tax the rich and leave out the poor. One word about the Naval Defence Act. He was not going to repeat the argument which he had used before as to the misapplication of the £290,000. He understood the Chancellor of the Exchequer to say that he would suspend the repayment of the Sinking Fund, so far as it related to the arrangements of the late Government. If it was cowardly in time of peace to suspend the payment of the National Debt, it was equally cowardly to suspend the Sinking Fund. [Sir W. HARCOURT: I do not.] Yes, it was distinctly said in the last clause but one of the Finance Bill that the £3,000,000 for the Naval Defence Fund and the £2,000,000 for the Imperial Defence Fund were to be repaid out of the Sinking Fund. That amounted to a suspension of the payment of the National Debt. There were £10,000,000 distinctly alluded to in the Bill, which money was to be applied to naval defence by the issue of £1,400,000 a year for seven years, and which was to be provided by taxation, and to be 235 paid out of the Exchequer by Exchequer issues. What happened? The Government decided to finish their Programme in five years, and they borrowed £3,000,000, and at the end of five years they had a balance in hand for two years of £1,400,000 a year. Now, what was the Chancellor of the Exchequer going to do? He was not going to repay this money by taxation, but he was going to take it out of the Sinking Fund; and this sum, amounting to almost £3,000,000, was being applied, not to the purposes of Naval Defence or the reduction of the National Debt, but for the prosecution of the financial purposes of the Chancellor of the Exchequer. He did not say that all the terrible consequences which had been predicted would follow from this system of finance, but he did say that there were so many faults of policy and construction and so many blemishes in the Chancellor of the Exchequer's scheme that no course was open to him but to give, as he should do with unqualified satisfaction, his vote against the Third Reading of this Bill.
§ MR. HOLLAND (Salford, N.)
said, the hon. Baronet opposite (Sir R. Temple) had told them that the Bill would receive the execration of generation after generation. He, however, had heard it stated that this condition of things could not be of long duration. Disastrous it might be for a short time, but not for a long time, because as soon as the Party opposite came into power they could, of course, very easily repair the blunders of the Government. Apart from that, he altogether failed to see why the policy of the Government should receive the execration of succeeding generations of legatees. The principle of graduation had been condemned by different speakers on the ground that when once the proposal was started one did not know where it would stop. There was, however, the same limit in regard to the principle of graduation as there was in regard to all legislation—namely, the limit imposed by the good sense of the people at large. The hon. and gallant Member for Newport (Colonel Kenyon-Slaney) had stated that he knew of two estates the owners of which had already made arrangements for the entire evasion of all Death Duties. Well, if the owners of those estates were 236 not going to pay it was hard to see how they would be hurt by the principle of the Bill. The hon. and gallant Member had appealed to the House in the interests of realty. He (Mr. Holland) should like to point out that if realty had its hardships personalty also had its hardships, and when the Chancellor of the Exchequer had any favours to bestow he thought that personalty would put in some claim for consideration. The right hon. Gentleman the Member for the London University had put his finger upon one of the hardships from which personalty suffered—namely, the prompt payment insisted upon when Death Duties were levied. Another hardship was that when the owners of factories and other buildings made their Income Tax Return notification was allowed with regard to the buildings themselves, although depreciation was allowed in regard to machinery. This was a matter in which he knew the manufacturing districts felt that they suffered a great injustice. He was more or less intimately acquainted with some of the populous manufacturing centres of the North, and there the present Budget was extremely popular. The people in those centres had felt that the principles of taxation had hitherto been unjust, inasmuch as some had been crushed by them while others had barely felt them. Believing as he did that this measure was one which, to a large extent, would redress this evil, and that it was a measure of tardy justice, he should have great pleasure in recording his vote in its favour.
§ SIR E. ASHMEAD-BARTLETT (Sheffield, Ecclesall)
said, the hon. Gentleman who had just sat down had told the House that his experience, derived from a knowledge of the great towns in the North, was that this was a popular Budget. He (Sir E. Ashmead-Bartlett) ventured to traverse that opinion of the hon. Gentleman. Possibly, when the Budget was first mentioned, and before it was discussed and understood, it might have had among a certain section of the Radical Party some popularity, but that popularity had been steadily waning, and it was likely, at no distant date, to become one of the most unpopular Budgets ever produced in this country. It was called a democratic Budget, but it was only democratic in one sense—namely, that it 237 did the greatest injury possible to the greatest number of people. As a matter of fact, it was probably the worst Budget that was ever produced, and every fresh examination of it had disclosed fresh inequalities, fresh inconsistencies, fresh injustices, and fresh ignorance of its meaning and its results on the part of its authors. The veneer with which the Budget was first covered had worn off, and the country had at last discovered how harmful it would be to a great number of interests. Its effect must certainly be to injure the agricultural interest of the country; it must tend to drive capital from the land; it would undoubtedly close many country houses, and it would throw out of employment hundreds and thousands of the working classes—household servants, farm labourers, and a great number of working men who, with their families, found useful and beneficial employment in and around country houses and landed estates. These facts were not, perhaps, as rapidly as could be wished, but still steadily and purely being grasped and understood by the people, and especially by the agricultural labourers, and when they were fully understood by them he did not envy the position of the authors of the Budget. The only class that would benefit by the Budget was that of the lawyers. In every part of the land they were now engaged with the wills, settlements, and other deeds which would have to be altered in consequence of the provisions of the Budget, and he believed also that they were very largely examining into the means of evading it. It was an extraordinary thing that this Government of all others should deal this most injurious if not fatal blow at the agricultural interest, because they came into power very largely owing to the excessive promises with which they had deluged the agricultural constituencies. This was probably the largest Budget ever seen in modern times, as it involved £102,700,000. Whilst their predecessors reduced taxation in every direction—direct, indirect, and local alike—the present Government were increasing taxation on all sides; and so increasing it as to inflict the maximum of taxation with the minimum of benefit. Thus, from their new Income Tax they would raise £1,780,000, but only £320,000 of this would go into the 238 Exchequer. The graduated Death Duties, which were the principal features in the so-called democratic Budget, were so arranged as to place the greatest possible burden upon the land and also to give the greatest possible stimulus to evasion. Personal property might possibly succeed in evading these crushing and unjust duties, and he believed it was no secret that schemes were at present being devised by ingenious minds throughout the country for evading the duties. Land, however, could not evade them, enormous and crushing as they were, and imposed as they were at a time when, owing to agricultural depression, land was least able to bear them. He would give only one instance to show how the burden would fall upon land. He would take the case of a landed estate valued at £1,000,000. This property would on an average produce about £22,500 a year. He assumed that the estate was burdened with mortgages amounting to £500,000, the interest on which would be £17,500, leaving the land owners a net income of exactly £5,000 a year. Under the new Estate Duties the successor would be called upon to pay on the £500,000 which was free from mortgage at the rate of 7 per cent., and he would therefore have to meet a burden of £35,000, having only £5,000 a year to pay it with; consequently, he would have to pay away in duty seven times his annual income, and if the instalments were distributed over a period of eight years he would be left with the magnificent sum of £625 a year during the eight years after paying the Death Duty. If in addition to the original misfortune of the imposition of this costly burden there should, owing to a series of deaths, be a series of Succession Duties to pay there was probably no large landed estate which would be able to bear the burden, and the result would undoubtedly be the forced sale of the property and its distribution. If the Government were compelled to impose a graduated duty, surely a graduated Income Tax would have been much fairer, because it would have fallen upon the great Radical plutocrats who had enormous incomes and who now could easily escape the payment of this duty by investing their money abroad or by transferring it during their lifetime, or adopting 239 any of the other devices which were now under the consideration of lawyers, and of those who wished to evade the tax. The Government had, on the one hand, tried to play to the Gallery by bringing forward a sham democratic scheme, and on the other hand they had tried to avoid taxing their own rich supporters, who made such huge incomes out of "the toil and sweat of the people." The extra Beer Duty would, like the Death Duty, fall with especial severity on the agricultural interest. The undoubted result of the imposition of the extra Beer Duty would be to drive good English barley out of employment in the manufacture of beer, and to encourage the use of wheat, foreign barley and, what was worse, foreign maize, sugar, and rice. The Budget was in reality an all-round attack upon agriculture, made at a time when agriculture was suffering most. The effect of the Estate Duties would be to drive capital away to foreign countries to produce much less revenue than the Government anticipated, to cause many country houses to be shut up, to break up landed properties, and to throw out of employment hundreds of thousands of industrious persons. Reference had already been made to the juggling with the Sinking Fund that had taken place with the Budget. The Government were taking from the Naval and Imperial Defence Fund the money that had been allocated to them, and were devoting it to other purposes, whilst they were placing a considerable sum upon the general taxation of the country. The way in which the Chancellor of the Exchequer got his balance was most extraordinary. He deliberately took the sum of £289,000, which remained unspent last year under the Naval Defence Act, put it to the other side of the account, and treated it as an asset this year. In conclusion, he affirmed that the Budget was most crudely and imperfectly constructed, that it inflicted a maximum of taxation and distress with a minimum of result and benefit, that its authors had been proved to be on many critical points ignorant of its meaning and its consequences. It imposed heavy and intolerable burdens on the land at a time when the land was least able to bear them, and no class would suffer more heavily from it than the agricul- 240 tural labourer. It would favour the agricultural products of foreign countries at the cost of British agriculture. It would fall with excessive severity on real property and would favour personal property. It would impose heavy taxation, only a small portion of which would go into the Exchequer. It would tend to fraud and would provoke evasion. It was in no sense democratic, because it would benefit but few and injure many of our people.
§ MR. T. H. BOLTON (St. Pancras, N.)
said, the main principle of the Budget was to tax the capital value of property right through. Personal property had hitherto been taxed on its capital value, and the Government said they saw no reason why real property should not also be taxed on its capital value. That was a proposition which was rather difficult to meet, because, broadly speaking, property was property whether it was realty or personalty, but in dealing with it for purposes of taxation one had to consider the character and nature of realty as distinguished from personalty. Hitherto personal property had been taxed in this particular way because it could be fairly taxed in that way, while real property had been taxed in a different way because it had had to bear other burdens, and because it would have been not only difficult, but unfair to tax it in the same way as personal property. Millions of personal property could be transferred with a penny receipt stamp, but when real property came into the question it had to be transferred in a different way and had to bear heavy Stamp Duties. No doubt, certain personal property bore certain Stamp Duties, but the bulk of it was transferred without reference to Stamp Duties. Again, until recent years real property had borne the whole burden of local taxation. It was now proposed to put the Death Duty upon the capital value of real property. He hoped it would be thoroughly understood and remembered that in this democratic Budget land was treated as ordinary property. Vague statements were sometimes made to the effect that land was a special kind of property. It would now be very difficult for those who talked about land nationalisation and "land restoration" and "the single tax" to refer to real property as being ear-marked 241 property in which the State had a particular interest and the individual only a limited interest; therefore, underlying this Budget there was another large principle — namely, the recognition of the complete ownership of real property. This was a proposition which he thought would not be at all acceptable to those who held the peculiar views about land to which he referred. It was impossible to tax the holders and occupiers of landed property in the drastic and complete way proposed on principles of equality without recognising the ownership of property in connection with land. What he complained of in connection with the principles of the Government was that they did not have regard to all the circumstances or difficulties connected with particular classes of landed property. Whilst he was prepared to recognise the fairness of increased taxation with reference to certain classes of landed property, he thought there should have been a certain amount of discrimination with regard to other landed property. But as to that he would make a few observations later on. The principle of aggregation of property adopted in the Budget was open, he thought, to a good deal of criticism. So far as he could understand, it appeared to be an entirely new principle. It was quite reasonable to aggregate property that came from the same man and went to the same class of people; but it was an entirely different thing to aggregate property coming from different people, going to people not connected with each other, and only passing on the accidental circumstance of the death of a person who might be only the temporary occupant, or who was temporarily interested in the property; that was a very difficult principle to carry out without a great deal of injustice. The proposal was to aggregate settled property in which a man might have only a small interest with property of his own which was under his absolute control. The interest the man might have might be only temporary, yet under this Bill it was aggregated with his own property for the purpose of increasing the rate of duty which both properties would have to pay. For the life of him he could not see the justice of that policy. Another principle in the Bill was that of graduation. He admitted that graduation was a prin- 242 ciple that had a certain hold upon the popular party, and he thought that if they could carry out the principle of graduation it would not be unacceptable. Most of them would admit that, broadly speaking, property should pay a higher rate of duty upon passing at death, but the question was what was the rate of duty that should be paid, and by whom should it be paid? Under the present Bill the graduation was calculated with regard to the aggregate amount of the property of the deceased; it should be according to the amount of benefit received by the individual and not according to the amount of the estate from which that benefit was derived. The Government had carried out their views and applied the principles of the Probate Duty, which hitherto had applied to personalty only, to this new Estate Duty, and he could not help thinking that in many cases that would work a good deal of injustice. On the Report stage they had considerable discussion on the hard case of the payment of duty on the passage of property from the wife to the husband, or from the husband to the wife. He believed that the natural feeling of the community would be very much opposed to the Government on this question, and every husband succeeding to property from his wife, or every wife who succeeded to property from the husband, would feel a sense of injustice at having to bear a tax, and an increased tax which, but for this Bill, would not have had to be borne. A good deal had been said as to the bearings of this Budget upon land. He had already said in the House more than once that he thought town property could bear more taxation; that was in accordance with the principle of putting the taxation on the shoulders of those who could afford to bear it, but the Government did not discriminate between town property and the class of property they had in the rural districts which at present, as was generally admitted, was suffering under the most grievous depression, and they chose to lay down a hard and fast rule that while it raised the taxation on town property also raised taxation upon country property. He said unhesitatingly as a town member that the people in the towns had the greatest feelings of regard and sympathy for the people of the agricultural 243 districts, as they knew that if the difficulties in the agricultural districts were increased it must drive the people into the towns to swell an already congested labour market, The interest of the people in the towns was not to oppress the people in the agricultural districts and make the conditions of life by taxation so hard that the people were driven from them; but their interest was to keep the people in the agricultural districts. The desire of the people of the towns was that the people in the country should be under no taxation that was not perfectly fair and considerate to them, having regard to the depression from which the whole agricultural interest was suffering. He might be told this taxation only affected the landowners. Immediately it did only affect the landowners, but indirectly it affected the people employed by the landowners and all the rural population, because as a landowner had to provide for the payment of these Death Duties, it would mean that this provision would have to come out of the income of the estate, and therefore a less number of persons would be employed in the agricultural districts. That, he thought, would appeal to the common sense of Members representing town constituencies. He saw a letter in The Times from a landowner, who stated that in the last eight or 10 years he had expended upon the improvement of farm-houses, cottages, and in various other ways upon his estate, some thousands of pounds which had not produced one shilling additional income. He had kept six men regularly employed in making these improvements; but after this Budget passed, having to set apart some of his income to meet the Death Duties, he would have to get rid of four out of the six men he now employed. What were these men to do? He quite admitted they might say this landowner employed these men because he thought it was in his own interests to do so; but there was no doubt it was done for other reasons as well, and his contention was that the effect of the Budget would be to reduce in a similar way the expenditure of a large number of landowners throughout the country, and thus drive a certain proportion of unemployed men into the towns. Whilst they 244 were passing Parish Councils Bills, Small Holdings Bills, and holding out all sorts of inducements to the agricultural labourers to remain in the agricultural districts, at the same time they were initiating a system of taxation, without discrimination, which would help to drive the agricultural labourers into the towns. He thankfully accepted the concessions the Chancellor of the Exchequer had made both with reference to Schedule A and Schedule B, but he thought the right hon. Gentleman might have gone a little further with reference to Schedule A. He was not complaining—in fact, he gratefully accepted what the right hon. Gentleman had done; but he thought that the scale the right hon. Gentleman had laid down, whilst it would be perfectly fair and reasonable with respect to the better class property would not be sufficiently considerate to the poorer class of property. He could take the right hon. Gentleman to old-fashioned cottages, which were let at low rents, where the repairs to keep them up amount to something like 20 to 30 per cent. They ought, according to some modern notions, to be pulled down; but inasmuch as they were old-fashioned, roomy places that the tenants had lived in from 20 to 50 years, they did not wish them to be pulled down; therefore they were patched up from time to time, the owner expending from 20 to 30 per cent. upon the repairs. This class of cottage could be found all over the country, and though the hard-and-fast rule of the right hon. Gentleman might in many cases be fair and reasonable, in others, and particularly in the case of this kind of cottage property, the relief would not be sufficient. Therefore, he was sorry that the Chancellor of the Exchequer had not adopted the broad proposition of charging Income Tax under Schedule A upon the clear net income derived rather than upon the gross, with a certain proportionate abatement. There had evidently been a confusion of principles in the mind of the Chancellor of the Exchequer as to a graduated Income Tax. Did he accept this new Estate Duty in lieu of a graduated Income Tax? If the right hon. Gentleman really believed in such a tax he ought to have brought it forward instead of this deferred Income Tax. He 245 had heard in this discussion that whatever else the Bill might do it would do something for the lawyers. He hoped it might, for speaking as a lawyer he could say they were a class of people whose business at the present time was not very flourishing. Therefore, if the effect of this Bill was to give them some increased business he personally, on behalf of his fraternity, thanked the Chancellor of the Exchequer, but he did not know that the public would thank him. Standing here he spoke as a representative of the public and not as a lawyer, and he said that any Act of Parliament which immediately set the lawyers to work to find out a means of evading it stood condemned, to some extent at all events. He believed that the lawyers would have a good deal to do with the working of the Act, and that the ingenuity of the lawyers would be able to entrench on the income which the Chancellor of the Exchequer hoped to derive from this Bill. Speaking generally, this Bill was one that he did not believe would bring in the large sum the Chancellor of the Exchequer hoped; it would upset all sorts of arrangements all over the country, and greatly interfere with many business transactions. It professed to carry out large principles, but it would carry them out in a very unsatisfactory way, and would be found to bear very heavily on certain classes and certain interests in the country. He thought the great talent and ability of the right hon. Gentleman might have invented a Budget that would have been more satisfactory than the one he had brought forward, and therefore he should not support the Third Reading of this Bill.
§ MR. H. FOSTER (Suffolk, Lowestoft)
said, he should not have interposed but for an observation that fell from the hon. Member for the Woodbridge Division of Suffolk (Mr. Everett), which might be misleading. The hon. Member said his one ground of support of this particular Budget was that it would do a great deal for the agricultural labourer. It was true that the hon. Member did not condescend to give particulars how the agricultural labourer was to be benefited by any particular provision in 246 this Budget, and he would therefore ask him to state how he made out that the agricultural labourer would be benefited by any provision contained in this Budget. Would the hon. Gentleman attempt to say that in his County of Suffolk, a portion of which he represented, that any benefit would be conferred on the labourer? During the last few years a large area of land in the county had gradually gone out of cultivation, and was still going out of cultivation, because the owners found that land cultivation did not pay. If the hon. Member admitted that the result of this decreasing area of land under cultivation was to drive a large number of labourers off the soil, to make the conditions of their employment and their mode of life harder, then he would ask the hon. Member and the House to consider what the effect of such legislation as this Budget must be upon the lives of such men as the agricultural labourer. To his mind this Budget illustrated the cardinal difference between this and the other side of the House. He submitted there was this great difference in the policy of the two great Parties in the State: gentlemen opposite were in favour of increasing the burdens of taxation, while they on that side were in favour of lightening and alleviating those burdens. They believed that land at present was overburdened, and if they were to increase the area of land under cultivation and to attract back to the land the labourer and capital they must lighten the burden that at present pressed so heavily upon land. By this Budget the burdens on land would not be lightened but increased by the taxation imposed, and, that being so, he wished to know how the hon. Member for the Wood-bridge Division of Suffolk (Mr. Everett) was going to make good his claim that this was a poor man's Budget in the sense that it was going to benefit the agricultural labourer? That argument was elaborated somewhat by the Secretary of State for India, who made a speech which was not only important in character, but contained a vast amount of matter of the greatest historical interest, but towards the conclusion of his speech 247 the right hon. Gentleman fell into what he might call, with all respect to the right hon. Gentleman, political clap-trap of the worst possible description, for he raised the argument with which they were so familiar, of the rich against the poor, and in conclusion he made some observations, mostly written, in the nature of a peroration which appeared to him (Mr. Foster) more in the nature of an election address than a speech in support of a serious Government measure. What was the right hon. Gentleman's argument—what did he wish to convey, not to Members of this House, but to the general public? That this was a Budget to the interest and advantage of the majority who were poor against the minority of the people who were rich, and he wished to ask the House what was there in this Budget to justify the observation that the Budget was in favour of the poor man? Supposing that was so, was the Budget wise or just because the poor man was the more numerous class in this country? But the right hon. Gentleman did not proceed to illustrate his point nor did he proceed to deal materially with the illustration used from the writings of Mr. John Stuart Mill by the right hon. Gentleman the Member for the London University (Sir J. Lubbock). The argument adduced from the writings of Mr. John Stuart Mill was that taxation should be graduated in proportion to the means of the person who was taxed. But this fallacy seemed to underlay the argument of the Secretary of State for India and the Chancellor of the Exchequer, that they should proceed on the basis, not that they were taxing the living, but that they were taxing the man who was dead and gone. In the graduated Probate Duty that was the principle upon which he had acted. A man who was alive and possessed a certain amount of money, should be taxed according to his means. They were all in favour of graduated taxation if it were so applied, and it was a misrepresentation of their views on that (the Opposition) side of the House to say that they were opposed to the principle of graduated taxation. But what they did protest against was that a man who was left a legacy by a rich man should have to pay a larger Estate Duty than 248 if the legacy had been left him by a poor man. It was a misapplication of the principle of graduation to tax a man to whom property was left, not because he had been left a large amount of property but because the man who had left it to him was a rich man. That was not taxing the rich and relieving the poor, but it might well be that it was taxing a poor man because a rich man happened to have left him a small legacy. He rose principally for the purpose of protesting against that part of this Budget which increased the taxation upon land, and which thereby must have the tendency of driving more land out of cultivation, and by that means make the occupation of the agricultural labourer a more difficult one; which must send the labourers more from the country into the towns than was even the case at the present moment, and he ventured to say when the principles of this Budget were understood—as they were gradually being understood—by the agricultural community, so far from thanking the Government for having done anything to relieve them, they would recognise that the very reverse was the case, and they would bring pressure to bear upon their representatives for the purpose of securing the repeal of the unjust provisions of this measure, so far as they affected the agricultural districts, and directing legislation towards relieving the present burdens upon land.
§ MR. BIRRELL (Fife, W.)
did not think he should have ventured to intervene in this Debate if it had not been for the fiery sarcasm thrown across the floor of the House by an hon. and gallant Gentleman he did not see now in his place, who spoke of the dumb fidelity of the supporters of Her Majesty's Government. An insult of that character could only be avenged in words. He should therefore avail himself of the few minutes at his disposal to say one or two words in support of the general principles of the Budget. The hon. Member for the West Derby Division of Liverpool, who spoke at an earlier period of the Debate, and who made himself, as he was perfectly entitled to do, the mouthpiece of agricultural distress, which existed, he 249 dared say, in this country, seemed sometimes to forget that he no longer represented an agricultural constituency, but was now in the proud position of representing an arbitrarily - selected spot of ground, covered, so far as he remembered—and at one time he knew it well—with dingy houses and fourth-rate shops many of leasehold tenure. He could assure the hon. Member that if he would direct his attention to the distress which existed in his own constituency, arising from the great depreciation in the value of house property in the West Derby Division of Liverpool, he would find that the agricultural interest was my no means the only distressed industry at the present time. None the less these leaseholders had for a long period of years, without any protest from hon. Gentlemen opposite, been obliged to pay—he did not say they were content to pay—Probate Duty upon their property. They had paid probate always. Sometimes, as in the case of a lease for 99 years, the leasehold interest might very likely have paid Probate Duty four times over, whilst the freeholder, who had derived during the whole of that 99 years the rent of the property, had paid no Probate Duty whatever. The hon. Member acknowledges that this was a great injustice; he said he recognised the fact that this distinction between the freehold and leasehold interest in land was entirely arbitrary, and that he could conceive of no reason why the freehold interest should be exempted from the impost which the leasehold interest had to bear. The hon. Member asserted that the principle of this Budget was unjust, and yet he recognised that this great injustice was being remedied. He wanted to know how the hon. Member could make out that this Budget, which was the first Budget which remedied this injustice, was framed on an unjust principle. He had no doubt that the right hon. Member for St. George's recognised the injustice of this state of things just as much as the hon. Member for the West Derby Division. But for his part, he confessed he cared very little for Chancellors of the Exchequer who only recognised injustices—he preferred those who remedied them. The great principle of the Budget, apart from details and minor injustices, was that all property, by whatever name 250 lawyers chose to call it, should bear the same tax upon its principal value. No one had risen in his place to say that that principle was unjust. On the contrary, he thought that almost all the speakers who had taken part in the discussion had one and all recognised that that was the proper principle to act upon if it was only possible to apply it. Everybody agreed that all property alike should pay whatever Death Duties the State might think fit to impose upon the principal value. No one would say that any class of property of this kind was entitled to be exempted from a just and fair impost, consequently they started with a general admission that if it was possible of application the principle of this Budget was a fair one. No one would now contend that there was anything in the nature of freehold interests in land which entitled them to be treated apart from other kinds of property. Household franchise had rendered all such arguments impossible. He was perfectly well aware there was a time when the landed interest in that House spoke in a very different tone, when it was thought a shocking thing that land should bear these imposts, because it was asserted that any tax upon land robbed the heir, and he had a position in that House which the heir to personalty had not—namely, that of a person entitled to protection. So much was he entitled to protection, that it was only after a long controversy, extending over a number of years in that House, that freehold lands were made liable to pay the debts of a deceased proprietor. When Sir Samuel Romilly introduced a Bill to make the estates of dead men available assets for the payment of debts, no less a man than Mr. George Canning declared that he saw in the Bill a distinct attempt to sacrifice the landed to the commercial interest, a project which would undoubtedly ruin the landed interest, and which would introduce into this country all the horrors of the French Revolution. Sir Samuel Romilly, like a wise man, bowed to the storm, and was content to confine his reform to one small point. He brought in a Bill to make freehold estates of deceased tradesmen assets to pay their debts. The House of Commons passed that Bill, and Sir Samuel Romilly went home and recorded in his 251 diary that the House of Commons was a queer Assembly, but at all events it had some sense of honour, for it did not mind making a tradesman pays his debts. It was not until many years after that time that the House of Commons could be induced even to go so far as to make the lands of a deceased freeholder assets to pay his debts. The reason was the same—namely, that it would be robbing the heir. The heir had to be considered. He had made his plans on the assumption that he would inherit the estate of his ancestors; perhaps he had entered into a matrimonial alliance and begotten children and incurred liabilities and responsibilities on the assumption that he was to inherit an estate of a particular value, and anything that would take away that value was a thing to be deprecated. He mentioned that to show it was impossible now, at this date, when all proposals had to receive the sanction of a large mass of people, for the landed interest to talk in that way any longer. They had consequently now based their objections to being taxed upon the principal value of their land on the extreme difficulty that existed in ascertaining what that value was. He was perfectly ready to admit that that difficulty might exist in a small number of cases, but it must be a very small number indeed. If they could ascertain the probate value of a leasehold estate held for 999 years, there would be no great difficulty in ascertaining the value of a similar estate held for ever, and, in fact, even the landed interests themselves, when they desired to obtain a mortgage on their property, experienced no difficulty in producing evidence of an entirely satisfactory character from surveyors and land agents of repute in the county, showing in black and white exactly what the value of the estate was, and thereby inducing a mortgage to the extent of two-thirds or half of that value. He did not believe that in the great majority of instances any difficulty would arise with regard to the valuation. After all, he would point out that it was not from the depressed agricultural interest that the Chancellor of the Exchequer hoped to fill his coffers. There was a vast amount of freehold property in this county as to which the Chancellor of the Exchequer was perfectly right in assuming that there would be no difficulty in obtaining 252 a valuation. In the first clause of the Bill, by a stroke of the pen, two great, glaring, and admitted inequalities were removed. If a man died possessed of £30,000 in funds and a freehold estate worth £30,000—which could be sold to-morrow, and as to ascertaining the value of which there was no difficulty—no one would say that the estate worth £30,000 should be extracted from what the man had left in order to ascertain the amount of the Death Duty payable. Both the money and the estate should be put together and included in the same duty. That was one inequality which was removed by this Bill, and the other was with regard to the Succession Duty. If a man died and left £30,000 to one nephew and an estate worth £30,000 to another, and the latter sold the estate for £30,000, would anybody say that they both ought not to pay the same duty. These were two inequalities which were about to disappear for ever from their law. He wanted to know how anybody could say that a Budget which took that as the outline and principle on which it worked was an unfair Budget. A Budget must be very little just unless it proceeded upon the plain and intelligent principle that the duty should be levied on the value of the property passing, and the time had come when the distinction between all classes of property should disappear. That time had all the more arrived, because, as the hon. Member for the West Derby Division had very well pointed out, these distinctions between real and personal property were very fantastic, and when they found an enormous amount of property in this country which any layman would call real estate, did pay the same tax as personalty, the time had come when every kind of land and house property should be made to pay a tax based upon the principal value. The whole question, therefore, resolved itself into this—whether a case could be made out not on general principles, but for special and temporary reasons, for exempting land. The agricultural argument, it was obvious, did not apply to the greater part of the property in question. It did not apply, for instance, to house property or to estates in urban districts, but only to those agricultural estates which, at the present time, were depressed. Upon those, as had been pointed 253 out over and over again, the hardship was very much limited by the fact that the worse property was at the present time, the less would be the duty payable upon it. It might well be that those on behalf of whom their pity was largely excited would not be called upon to pay duty at all. They were only called upon to pay the tax upon the value of the inheritance they received. If the inheritance was of no value they would pay no tax. He quite agreed that the result in many cases would be that estates would have to be put up for sale, and that might be a very hard and disagreeable thing to the persons who had to sell them. A number of pictures would very likely come into the market. He deplored and regretted it. He took no pleasure in the sale of a man's property to pay the duty, but if it so happened that a man to whom property was left could not support the burden of the estate left to him, he was no more entitled to pity than he (Mr. Birrell) should be if someone were to leave him Chatsworth or any other magnificent house, which he should have to sell because he could not afford to keep it up. He wanted to know why any particular class of property should escape the burdens of taxation simply because the person who had to bear it could not maintain the property in its former state? He invited any hon. Member to point out in what respect the principle of this Budget was unjust. Local burdens upon land were taken into consideration. If land paid local burdens, the principal value was only ascertained after the outgoings and burdens had been taken into account. After all, there was such a thing as a damnosa heriditas. No doubt people repudiated such inheritances, and did not accept them. They were now dealing with inheritances which gentlemen opposite were perfectly ready to accept; therefore he took it they attached some value to them, and grievous as it might be to see estates brought into the market, he did not think it advisable, at this time of day, for anybody to say that this was a ground for exemption. People were not disposed to believe that owners of freehold interests in land were entitled to any exemption. Their services to the country had not been so great as to entitle them to exemptions. They 254 could not make out any case of past services which would justify their being treated in an exceptional manner; therefore, without going any further into detail, he was bound to say he supported the Budget because it removed two glaring inequalities which had been admitted over and over again—namely, in the first place, the exemption of these fantastic freehold interests in land from payment of money corresponding to the Probate Duty; and, in the second place, the difference of treatment between the modes of taxation on the inheritance of two classes of property, for it made the man who succeeded to real estate pay on the principal value of that estate in exactly the same way as it made the man who succeeded to leasehold houses or money in Stocks or shares or other securities. These were the very simple reasons which induced him to give his support to the Budget. He was only surprised that the Liberal Party or the Tory Party should have made them wait so long for an opportunity of giving support to these principles, and he was perfectly sure when the time came to go to the country it would be extremely difficult for hon. Gentlemen opposite to make out reasons for the vote they were going to give that night—namely, that the Budget should be read a third time that day three months.
§ MR. A. J. BALFOUR (Manchester, E.)
I suppose we have now reached the last act of the drama which has been dragging its slow length along. [Ministerial cheers.] I dare say it has wearied some hon. Gentlemen in this House, but it cannot have wearied the gentlemen who interrupted me by that cheer just now, for they have not done us the honour of being present at our Debates. Had they been present and had they listened to the arguments which in all seriousness were pressed upon the Committee and to the House on the Report stage, I think it not impossible that they would have shown their impartiality by occasionally putting the Government in a minority. But whether I overrate or underrate their Parliamentary principles, this, at all events, I will say—that the House and the country owe a great deal to the comparatively small number of 255 gentlemen on both sides of the House who have devoted themselves to the consideration of the details of this most complex and difficult subject. It has been technical to an unprecedented degree, and it has necessarily not been prolific in exciting or interesting incidents and except for an occasional sally from the Attorney General or from the inherent humours of the draftsmanship we have had but small opportunities of amusing our lighter hours by the discussion of these details. All the more honour to those gentlemen who have devoted themselves in a serious spirit to this difficult work. I do not, of course, deal with gentlemen on the other side—far too few—outside the ranks of the Front Bench opposite, but I am speaking of gentlemen on my own side of the House. We all of us, irrespective of Party, owe a debt of gratitude to such gentlemen as the hon. and learned Member for Essex (Mr. Byrne), the hon. and learned Member for York (Mr. Butcher), who have given us their legal assistance in this matter, and the hon. Member for the Thirsk Division (Mr. Grant Lawson). [Opposition cries of "King's Lynn!"]. Yes, and the hon. Member for King's Lynn. My hon. Friend the Member for King's Lyun has brought to this Bill a degree of industry and knowledge which might well shame some of the gentlemen opposite who cheered the name when I mentioned it. It would be invidious not to mention the hon. Member for Islington (Mr. Bartley). The hon. Member has done work on this Bill for which we ought to be grateful, and I am certain the Chancellor of the Exchequer, who has listened to these Debates, will not endeavour in what he says to-night to underrate the hon. Member's services. But I must pass to the consideration of the more important question now before the House, which is the question of the merits of this Budget which we are asked to pass into law finally, for, as the other House of Parliament does not interfere in these matters, I suppose we may regard tonight as the last occasion upon which there will be any opportunity of reviewing or rejecting the proposals made by the Government. What are the merits of this Budget? The Chancellor of the Exchequer has invariably posed before us as a Minister who had to meet, I will 256 not say an alarming, but a formidable deficit, and who has taken the opportunity afforded by his having to meet this deficit to carry out a great fiscal reform in the principles of taxation hitherto adopted in this country. That, I understand, is the right hon. Gentleman's view, but I deny both propositions which by implication are contained in that statement. I deny that the present financial position of the country requires heroic remedies, and I deny that this is a heroic remedy or a remedy of which we ought to say that it is a great fiscal improvement upon our existing system, which introduces order where chaos reigned before, which introduces justice where injustice has hitherto prevailed. Let me consider this point of the financial deficit. I understand that the right hon. Gentleman is providing funds to meet the expenditure of the year 1894–95. He sometimes talks as if upon his shoulders had fallen the onerous and responsible task of framing a Budget for all his successors. That is not what he is asked to do, and it is not what his office requires him to do. What he is asked to do and required to do is to find ways and means for meeting the deficiency in the current year. What is the deficiency in the current year? In moments of enthusiasm the right hon. Gentleman calls it £5,000,000. As a matter of fact, I believe, to be accurate, it is in round numbers £4,500,000. That deficiency is not being met on the right hon. Gentleman's own principles out of taxation. He has, in defiance of his own utterances, appropriated the Sinking Fund and the taxes meant to meet the Sinking Fund, which my right hon. Friend established for the purpose of dealing with the naval programme of the last Government; and by that means and by various other hocus-pocus expedients which I do not mean to criticise now, though I think that they are open to criticism, he has, without putting a single penny of taxation on the community, reduced this deficit to the more manageable amount of £2,379,000. That is a large deficit; but does it, on the face of it, require any enormous fiscal revolution in order to meet it? I think not. Let us just consider the matter. The right hon. Gentleman put 1d. on the Income Tax in the first place. After making 257 two classes of deductions—the deductions at the lower end of the Income Tax scale and the deductions in respect of the Income Tax on real property—the net result of his 1d. is £330,000. If he had not introduced the Death Duties he need not have made those deductions on Income Tax with regard to real property, and that would have increased his return from the Income Tax for the current year by £715,000. That is the best calculation I can make in the absence of figures from the right hon. Gentleman. In addition to this he has put an Excise Duty on beer and spirits which amounts to £1,300,000. We voted at an earlier stage of our proceedings for reducing that Excise Duty by one-half. I will give the right hon. Gentleman credit for that half, which would be £670,000; and if you add that to what he gets from the Income Tax, leaving out of account the deductions at the lower end of the scale, the Chancellor of the Exchequer would have had to meet a deficit of £2,379,000 no less a sum than £1,700,000. It is evident that the Chancellor of the Exchequer might in the first place have put only half the Excise Duty on, and he might have left the Death duties absolutely alone. He might have made all the deductions at the lower end of the Income Tax scale, and his financial ingenuity would only have been asked to make up a deficit for the present year of £650,000. That is an important sum to make up, but I do not believe this Heaven-sent financier would find himself at the last gasp if he had to make it up by other means. [Cries of "What?"] What does this prove? It proves that the right hon. Gentleman by his own showing and his own figures had not to make up that enormous deficit, which by itself would justify a financial revolution. Therefore we have to consider the merits of the financial revolution by themselves, and to consider whether it is worth while to make this great change in our fiscal system, and also whether the change is one which merits all the eulogies passed on it by his friends, or whether it is open to all the criticisms passed upon it by its opponents. I must say a word with regard to what fell from the Secretary of State for India in connection with the reductions on the Income Tax. He seemed to think that if we carried this 258 Amendment of my right hon. Friend, we should do away with all the relief given by this Budget to the small Income Tax-payers. What is the foundation for that statement? We should do away with the Budget, but is the other point the necessary collateral consequence of the Budget? Not at all, because, as I have pointed out, even if we give these exemptions, it is not necessary to revolutionise the Death Duties in order to find the money. The right hon. Gentleman spoke as if the Chancellor of the Exchequer was the only person who had ever realised the fact that the taxpayer who paid taxation at the lower end of the Income Tax scale was of all the subjects of Her Majesty the one most in need of relief. That has long been recognised by important authorities in this country. Sir Stafford Northcote, and not the right hon. Gentleman, was the first person to recognise this principle and to carry out this kind of reform. And though the late Chancellor of the Exchequer has pointed out that it was contrary to the view of the right hon. Member for Midlothian.
§ MR. A. J. BALFOUR
Certainly, and his own—that this alteration at the lower end of the Income Tax should be made, my right hon. Friend has been in the forefront of those financial reformers who wish to relieve this particular class. In his own Budget my right hon. Friend has given relief not less important and far-reaching than the relief given by the right hon. Gentleman opposite to the very class which, according to the Secretary of State for India, the Chancellor of the Exchequer has taken under his own bountiful and munificent protection. If, as I have shown, the right hon. Gentleman is not making a Budget required for this year, for what year is he making a Budget? Who asks him to find a surplus for the Chancellor of the Exchequer who will have to deal with the financial problems of 1895–96? In this year a million, and a million only, will come from the new taxes imposed. Next year the right hon. Gentleman anticipates, rightly or wrongly—and the question is 259 open to doubt—a much larger return. For what expenditure is that greater return going to be used? Why is the right hon. Gentleman finding expedients this year to meet the expenses of next year? Perhaps he will say that it is for the naval programme of next year. That would be a fair argument in the mouth of a Unionist Chancellor of the Exchequer, but it is not permissible in the mouth of the right hon. Gentleman. Why? Because he has always refused to commit himself to a naval programme. That is the very difference between his view of meeting naval expenditure and ours. We have always thought, and still think, that if you lay down a programme lasting for many years, you should, in the year in which you lay it down, commit the country to the expenditure and provide for it. But the right hon. Gentleman has refused to commit the country to the expenditure. Then why does he commit the country to the taxation necessary to meet it? Why has he provided money to meet obligations the binding character of which he does not admit and thinks ought not to be admitted? Why does he frame a Budget, not to meet a deficit in the present year, but to meet the hypothetical and unknown expenditure which may or may not be imposed by the Chancellor of the Exchequer of 1895–96? Perhaps hon. Gentlemen differ from me in that respect, and perhaps they think it is the Chancellor of the Exchequer's business—being a Member of the Government which has made promises about the Navy—to provide the next year's financial expenditure. If they take that view, how can they account for the Chancellor of the Exchequer's way of dealing with the Spirit Duties? For, while his reformed Death Duties are to be permanent, his increased Beer and Spirit Duties are only to last for one year. Why that distinction? Everybody knows that there could not be a worse way of putting on taxation on such a commodity as beer or spirits than putting it on for a year. It upsets the trade and every calculation, and throws a great burden on future Sessions if the duty is to be continued. Why has he done it? He has done it, of course, for votes. Pressure was put on him by those on whom his political existence depends. He gracefully yielded to force 260 majeure, but by so doing he has deprived himself of all claim to be regarded as a financial reformer, because he has done that which no financier in his senses would do if he had only the financial interests of the country to consider. I pass to the consideration of what has been the main subject of our controversies during the last two months. What is, after all, the most important question by which the merits or demerits of this Budget will be decided? Are the right hon. Gentleman's Death Duties, as he has proposed them, a good form of taxation or a bad form? That is the question by which his fame as a financier will be decided. I will put a few simple questions to the House on that point, before they finally sanction the plan of the Government. There are a few very plain principles of taxation to which every tax ought to conform if it is good. In the first place, it ought to be simple. In the second place, the amount of it ought to be easily calculated by those on whom it falls. In the third place, it ought to enrich the Treasury at the smallest cost to the taxpayer. In the fourth place, it ought to be easy and safe of collection; and in the fifth place, it ought to be just. Which of those tests is satisfied by the scheme of the right hon. Gentleman? [Cries of "All!"] We will take them in turn. Is this scheme simple? I do not put that question to the gentlemen who do not attend our Debates, but to those who do. I defy any human being, on reading the Bill—even the amended Bill, though we have endeavoured to elucidate it as far as we could—to say that the Government scheme is simple. When it was originally proposed, the Chancellor of the Exchequer gave us to understand that the Death Duties were in a hopelessly complicated position; that there was a Probate Duty, a Succession Duty, a Legacy Duty—five of them altogether, but I forget the names of all. He was going to reform and clean out this Augean stable. What is the result? There were five kinds of duty, and now there are four. Surely this is a modest and moderate reform. This is the result of that immense simplification of the Death Duties which was the proud boast of the Chancellor of the Exchequer. I will not dwell upon a point which has been most 261 ably put before the House by previous speakers—namely, the complications introduced into your old system by the combined effect of aggregation and graduation. I will not say whether they are wise or unwise, but only that they are not simple, but most complicated. The Secretary of State for India, in reply to the hon. Member for King's Lynn, told us that aggregation was not so difficult and mysterious an operation after all; that it was a sum of simple addition; that you added together all a man had, and did the sum by the first rule of arithmetic and had the result. Not at all, Sir. I understand addition of what a man has, but the addition involved in aggregation is not at all addition of what a man has, but includes what a man has not got and also what he never had. In summing up the ghost's property for the purpose of taxing the successors, you not only deal with what a man had at the moment of his death, but with what he gave away in his lifetime in the form of settlements, and with what he never had at any time—namely, the property settled on another person which passes on his decease to another heir. I do not know what that process is to be called, but it cannot be described as a process of simple addition. The system of aggregation by itself is a most complicated process, involving questions of the utmost technicality and difficulty, and in some cases of the grossest injustice. I come now to the second point. Is the tax under this plan easy of calculation by the person who has to bear it? Will those who have got to pay the tax easily find what it is they have to pay? In other words, will the ghost know what it is the successors will have to give to the Treasury? He cannot know; it all turns on the accident of valuation. It does not depend upon income which can be known; it does not depend upon the fancy or the turn of the market at the instant of his decease. It turns upon that and upon nothing else, and that necessarily introduces an incalculable element into every man's settlement of his property which, I venture to say, is contrary to all the best principles of taxation. I come to the third point. Will this tax enrich the Treasury at the least cost to the community? That is a fundamental question which every Chancellor of the 262 Exchequer ought to ask himself before he imposes any burden upon the people; and I say emphatically that this form of taxation, which directly taxes capital as distinguished from income, is the most costly form of levying money to the community which it is easy to conceive. I quite grant that Death Duties have the advantage that they do not, by the very nature of the case, affect the living. The man who is taxed is the ghost, and the ghost is beyond the greed of any Chancellor of the Exchequer. But, Sir, what we have got to ask ourselves as members of the community is whether it will touch the income of the community, or whether it will make a breach in the capital value which the community has at its disposal for productive employment; and is it not plain, on the face of it, that a Death Duty of this kind, which levies large sums at the moment of death, on the whole touches capital, and leaves income on one side? I will give an instance which will bring my contention home to every Member of this House. Take an ordinary business firm, of which the largest partner, a wealthy man, dies. The duty would be levied upon his property at a very high rate because he was a rich man, and because under the principles of graduation he would have to pay more than the proportionate amount which would be due were he only in the position of his poorer partners. The result of that probably will be that out of the business of which he was the main partner a large amount of capital will be extracted. This is a neutral case which has been put to me, and I give it to the House for what it is worth. The result will inevitably be that you will find great firms engaged in important industries, upon which the prosperity of large districts depends, hampered by this form of taxation as they never could have been hampered if you had confined yourselves to taxes on income or indirect taxes upon commodities. I have purposely taken for my illustration a business, because I know if I mentioned land I should be told I was simply influenced by my desire to preserve the interests of the owners of large estates. One more illustration I will give of the effect which this will have upon the prosperity of the country and upon the income-earning power of 263 the country. The Chancellor of the Exchequer has resisted throughout our proceedings, and I have supported him in resisting, anything which would throw a premium upon foreign investments. But, Sir, the whole Budget, by the nature of the case, throws a premium upon foreign investments so long as these foreign investments are in land or houses. Investments in leasehold or freehold property abroad escape taxation under this Bill altogether. If any man is afraid of the Chancellor of the Exchequer, he has only got to sell out his English securities, get rid of his English property, and invest his money in foreign land or houses, leasehold or freehold, and he can snap his fingers at the Chancellor of the Exchequer. Not a penny will be levied, no question will be asked his executor, there will be no aggregation, no graduation, the money will be safe from the Chancellor of the Exchequer, and his heirs can take it without paying one single sixpence under the Bill in any shape or form whatsoever to the British Exchequer. I feel for the Chancellor of the Exchequer. I know he would tax this property if he could, but he finds he cannot, because if he could not do it he could not do it. What is the moral? The moral is that this form of taxation by Death Duties is a form of taxation which, by the very nature of the case, does put a premium upon certain kinds of foreign investments, and does tend to drive capital out of this country to be spent abroad. I have got through three of my points, and I have only two remaining, and I will not occupy the time of the House very long with them. What is my fourth test? It is that the tax should be easily collected. Is this tax going to be easily collected? From one point of view I suppose that the Government think it is, for they have systematically and incessantly refused to allow anything in the nature of insurance being made against it, although such insurance would have enabled them to make certain of getting the money on the death of the deceased. Yet several other parts of the Bill show well enough the difficulties they anticipate in this matter. I do not know whether the House realises what inquisitorial powers the Government have given to the Inland Revenue Department, what duties they 264 have thrown on the unhappy executor, by what penalties they mean to enforce the extra, and revealing of every 6d. belonging to the deceased. We look back at the days of the Star Chamber as days when tyranny prevailed, but, upon my word, the system of tyranny under this Bill far surpasses any ingenuity which ever occurred to such apprentices as those of the time of Charles I. They never thought of the tax which has suggested itself to the ingenuity of the Chancellor of the Exchequer. Perpetual imprisonment is the penalty by which failure to do all kinds of difficult duties is visited upon the unfortunate executor. I do not know who is going to be an executor. I asked a legal friend of mine that question. I said, "I do not think I shall ever take upon myself those responsible duties. Who would do it? Yon cannot make a man an executor." "No," he said, "you certainly cannot make a man an executor, but somebody will be found." "But why should anybody subject himself to perpetual imprisonment?" I asked. He said, "After all, any tradesman who has got a debt due from the deceased, any creditor, will be able to take out letters of administration." "But," I said, "suppose the deceased leaves no debts?" "Surely," he said; "there will be the undertaker. The funeral expenses will have to be paid out of the estate, and if nobody else comes forward the undertaker will, I suppose." That is true, but I do think it is a serious consequence of this Budget if we are not only going to be buried by the undertaker, but when we die our estates are going to be managed by the undertaker. That is throwing on this interesting personage duties that he is ill qualified to perform. On this question of difficulty of collection there is this further point to be mentioned. I do not dwell upon it because it has been dwelt upon at length before. Observe that by this Bill you are going to collect your addition to the Death Duties from about 500 persons a year. That is the calculation that has been made by the hon. Member for King's Lynn (Mr. Gibson Bowles), and I do not think it has been contradicted by the Chancellor of the Exchequer. When the base of your system of taxation is so small the whole inverted pyramid will 265 be apt to topple over. You cannot depend on 500 persons dying in the year without subjecting yourselves to some very serious risks of failure. You are setting the wits—I will not say of the family solicitor, but even more acute intellects—to the task of trying to defeat the Exchequer. Of course they will fail in many cases, but do you doubt they will succeed in many others? Every man knows that at this moment donations amongst the living are going on in consequence of this precious financial scheme at a rate never heard of before. I do not question for one moment that there will be an amount of manipulation of these Death Duties which will greatly disappoint the Chancellor of the Exchequer. Observe how serious it is to depend on 500 persons a year. Of those 500 persons the duty is looked for from a comparatively small number of very rich men, and if they happen to give away their property during their lives your Budget is upset. The Chancellor of the Exchequer calculates that if Mr. A dies he will be able to get a new torpedo-boat or, at all events, meet some of the ever-pressing demands of his colleagues. Well, Mr. A does die, as was expected—I will not say desired—but when he dies it was found that some time before his death he disposes of his property to his son or nephew, or some relation, and because Mr. A has succeeded in carrying out that operation the finances of this country are embarrassed. I would ask whether anything can be so absurd as a system of finance which rests our annual Budget upon the ingenuity or dexterity of a few rich men, whom you expect to die within each year. Surely a tax like that cannot be described as one which fulfils the canon I have laid down—namely, that it will be easy of collection. It will not be easy of collection. It will be evaded at every turn, and you will find yourselves greatly and quite unnecessarily embarrassed in carrying on the financial work of the country. There remains but one other point that I have got to deal with, and it is a most important one. When all is said and done, is this tax a just tax? Hon. Gentlemen now doing us the honour of most kindly listening to me and who have attended to the Debates must know that on this 266 side of the House we have from time to time brought forward a very large number of hard cases. It may be said that hard cases must occur under every system of taxation. That is no doubt true, and if the hard cases formed but a small proportion of the whole I should say nothing more about it. But do they bear a small proportion to the whole? We have appealed to the Chancellor of the Exchequer whenever we have brought forward these hard cases, and we have never been met in argument. We have never been shown that the case is not a hard one, but have only been told that the Exchequer could not afford to have that particular hard case dealt with; and that has been said not of one only, but of each that has occurred. The inference is that it is a Budget of hard cases. Each of these hard cases really makes such a breach in the amount of money to be collected under this tax that these hard cases taken together and aggregated form a large portion of the whole amount of the Revenue. I admit that a few hard cases do not count, but if a very large amount of the whole taxation is to be raised by these hard cases, then the injustice of your plan stands exposed by your own arguments, and you stand committed yourselves to be the advocates of a Budget intrinsically unjust. I shall not dwell on these hard cases; I shall only mention three of them in a sentence each. In the first place, observe that one property by the mere accident of death may be taxed to half or more than half its total amount in a very small number of years. Is that just? It is not just, and nobody can pretend that it is. In the second place, you tax a man not for what he gets but for what he leaves, not according as he benefits by property, but simply and solely according to the amount of the wealth of the man who leaves him the property, an amount which, so far as he is concerned, is a pure accident, and has no relation whatever to his property or to his power of bearing any of the burdens imposed upon him. In the third place, you do not even carry out your own principle of taxing a man according to what he leaves. You tax him not upon property which he has enjoyed, but upon property which by some technical and arbitrary method of computation 267 you assert to have passed at his death but which he has never enjoyed. I have only left myself one moment to talk of a matter which to me and to our Friends on this side of the House appeals as much or even more than any other. The Secretary for India to-night told us that equality was the principle of the Budget. He was alluding to taxation as between personalty and realty. I have no objection to that principle. If you gave us equality I should not say a word against your Budget, but you do not give us equality. You talk of equality. Equality is on your lips, but very far, I hope, not from your hearts, but at all events from your Budget. The right hon. Gentleman practically admitted that there was a hardship in connection with local taxation. He said it deserved inquiry. He thought the time would come, he even thought it had come, when an inquiry might be instituted into the relative incidence of local taxation upon realty and upon personalty. Would it not have been better to have had that inquiry before you tried to equalise your Death Duties? If the matter deserves investigation, does it not deserve investigation before you make your plan, and not after? The Chancellor of the Exchequer has boasted that he at least, and he alone among all financiers, has placed the finances of this country upon an equitable basis, and his chief supporter in the Cabinet comes and tells us that that branch of taxation, not teast important and not least onerous, which is given to public purposes, but given to public purposes through Local Bodies, still requires investigation and still requires equalisation. Until we know how that is to be dealt with and equalised, is it not folly to come down to us and ask us to accept with gratitude the equalisation of half only of the burdens which fall upon British citizens for public purposes? The Budget, then, is not simple; it is not easy for those taxed to know what they have to pay. It will not enrich the Treasury at the least possible cost to the taxpayer; it is not easy of collection; and, above all, it is not just. What, then, are we to say of it? That it is democratic! I never could understand why that democracy which we all serve, and whose interests are first with all of us, 268 should be saddled with every scheme which is more than peculiarly absurd and more than peculiarly unjust. What have our fellow-countrymen done that they should be made responsible for these absurdities? As far as I know anything about them—and I suppose I know as much about them as my neighbours—they are very honest, honourable, intelligent gentlemen, who desire nothing more than to see justice done as between class and class, and a fair system of taxation carried out in this country, irrespective of the social position or any other accident of those who have to pay the money. Why should we foist upon these people the folly for which the Chancellor of the Exchequer and his majority alone are responsible? Why should we describe that as democratic which, after all, is merely crude, ill-considered, and hasty? I do not wish to attack the motives of the Chancellor of the Exchequer, but I am bound to say that I think he has lost a great opportunity. He has spoken to us sometimes in the spirit of an accountant and sometimes in the spirit of a demagogue, but never, or hardly ever, on this question has he addressed us as a statesman. No man is more capable of doing so when he chooses, but on this Bill, and on this Bill especially, he has alternated between a pettifogging desire—[Cries of "Oh!"]—I admit it was an improper phrase, and I withdraw it. He has been animated either by a desire to drag every sixpence into the Treasury or a desire to draw a few cheers from Gentlemen behind him, and those whom they represent, upon what he calls the virtues of his democratic Budget. I do not think either of those motives are of a kind which should animate those who guide our destinies in financial matters. He has aimed by this Budget a blow at the Income Tax, he has aimed a blow at the Death Duties, he has aimed a blow at the Excise. Every settlement will have to be revised, every will will have to be altered, everything is destroyed by it and nothing created, and I prophesy as the only permanent result of the revolution of which he is the author, that future Chancellors of the Exchequer, and future Parliaments will be engaged in the weary task of revising the Bill, which with such trouble and at such cost of labour we have been 269 endeavouring during the last few months to lick into shape. I feel confident that neither the financial necessities of this year, nor the necessities of years to come, require this particular expedient, and it is because I think the Budget bad in itself, and because I think it would be easy for others to substitute other Budgets to meet our necessities not open to the same objection, that I ask this House without misgiving to give their vote in the Lobby in order to prevent this unhappy measure—["Oh, oh!"]—this unfortunate measure—being placed on the Statute Book.
§ THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT,) Derby
I presume that if the right hon. Gentleman had wished or expected that I should make an elaborate reply to the speech to which we have just listened, he would have left me some time to do it in. I do not complain, because it is needless. The first remark the right hon. Gentleman made is one with which I cordially agree. He said that this discussion has "dragged its slow length along." If that has been true for the last two mouths, I think those who know the House of Commons would say it is eminently true of the Debate to-night. I wonder the right hon. Gentleman did not complete the couplet from which these words are taken, and I would say to him—A needless Alexandrine ends the song,Which, like a wounded snake, drags its slow length along.That is the position which the leaders of the Opposition occupy to-night with reference to this Budget. One cannot help feeling the unreality of this Debate. If it were true that the Opposition really contemplated overthrowing this Budget, to destroy in the presence of a great deficit the financial arrangements of the Empire at the end of July, it would be the most reckless and unscrupulous proceeding of which any Parliamentary Opposition had ever been guilty. But I acquit them of it. They have not the smallest desire to upset it. They dare not take the responsibility of doing it. The right hon. Gentleman has told us with the greatest candour what his own policy would be. He says I have lost a great opportunity, and that I might have brought in the Budget he has sketched. 270 What was that Budget? It was an Income Tax without exemptions for Schedule A. That is the first part of the opportunity I have lost. Indeed, he says he would have left the exemptions of the lower scale, but then he has got a Chancellor of the Exchequer sitting by him who has denounced that as the worst and most profligate system of finance that could be introduced. He would have found himself to-morrow in the unfortunate position of being deprived of these exemptions or of his future Chancellor of the Exchequer. He then revealed to me a fact of which I was not fully conscious, that the policy of the Opposition is to put 3d. a barrel on beer, and 3d. a gallon on spirits. I do not know whether that is received with favour altogether by his supporters below the Gangway. That is the Budget of the Opposition. That is the great opportunity I have lost, the not having brought forward a Budget of which I think any man might be ashamed. But, Sir, he did reveal the fact that it was a Budget that would leave us with a deficiency of £650,000. But I can tell the right hon. Gentleman where he would have found that £650,000. He would have found it from the Chancellor of the Exchequer, who sits by him, in striking off the exemptions on the lower scale of the Income Tax. That would have brought him an equilibrium, and probably a slight surplus. Well, this is the financial policy of the great Unionist Party. He says that I need not have dealt with the Death Duties, but I venture to tell the right hon. Gentleman that if instead of a deficit of £2,500,000 I had had a surplus of that amount I would still have attempted to deal with the Death Duties. He asks me what I will do with the surplus which arises from them in future years? He also asks whether that is to meet further expenditure? I hope not. If that surplus should accrue, I hope it will be devoted to diminishing the taxation of the people. If by imposing a just tax you may remit oppressive taxation, that, in my opinion, is the soundest principle of finance. I am not going to weary the House tonight by going over and over again the arguments which have been bandied from one side to another now for the last two months; but, if the House will bear with 271 me for a few minutes, I do desire to say a few words for the purpose of removing apprehensions which seem to me to be altogether unfounded. I listened with respect and with sympathy to the able, and I might almost call it the pathetic, speech of the hon. Member for Liverpool. He spoke of the distress and the difficulties in which the landed interest would be placed. He rather reproached me for not having encouraged the principle of insurance—the hon. Gentleman used the phrase that I have prevented insurance. I have not prevented insurance. If I had wished to do so I could not have done it, and nothing has been further from my desire; but I have received information from many Insurance Companies on this point. I will not mention their names lest it might be thought I desired to advertise them. But there is one respectable company which makes this statement—It will be observed that the rates are brought down to exceptionally low figures, and the reduction will, in the great majority of cases, be more than equivalent to the duty on the policy moneys, thus getting over the difficulty occasioned by the proposal to exempt these from duty.Thus the Insurance Companies have reduced the rates below the amount of the duty. When I am told that these enormous charges are going to ruin great estates, to shut up great houses, will the House allow me to cite one or two figures bearing upon this point? I will take a man leaving the conventional million. There are happy people in this country who leave several millions, but I will content myself with one. I will take the case of personalty first. The man will be subject under this Bill to an additional payment of £40,000. The rate offered by this Insurance Company is £25 11s. per annum at the age of 40 for each £1,000, and £37 10s. at the age of 50. In order to cover the additional Death Duty of £40,000 the present owner would have to pay £1,020 per annum at the age of 40 or £1,500 at the age of 50. [An hon. MEMBER: Provided he is a good life.] To say that a man with this fortune who has to lay by £1,000 or £1,500 a year at the age of 40 or 50 is going to shut up his palaces, to dismiss his labourers, to invest all his money, as the right hon. Gentleman says, in real estate abroad, is really the most extravagant and absurd 272 statement that I ever heard. Why, a man with that fortune loses more money than that in an afternoon upon a racecourse. It is the price of a moderate two-year-old. Yet we are told that these houses are to be shut up, that the labourers and the servants are to be dismissed, and that the public are to be excluded from that which they have hitherto enjoyed. I will take the case of a more moderate fortune. The additional charge upon a man who leaves £100,000 is £ 1,500, and to insure against that at the age of 40 would cost £38 a year, and at the age of 50 he would have to pay £56 a year. The representation that taxation of this kind is going to destroy families and shut up houses is devoid of foundation or fact. I turn now to the benefits which will be enjoyed by the smaller people under this Bill. I want the House to consider this: A man leaves personalty of £500 net. That will be the case of the small farmer, the small tradesman, the clergyman, clerks, with various employments, and people of that description. The absolute minimum he now pays on that is £10, and it might be as high as £59 in the case of collaterals or strangers. Under this Bill the absolute maximum will be £5. That is the advantage he will get under the Death Duties. Supposing that man had an income of £200 per annum, he gets additional relief under the Income Tax in the Budget at the rate of 8d. in the £1, he would get an advantage of £1 6s. 8d. per annum. This relief would discharge the whole of his Death Duties in four years. This is what is called by gentlemen opposite an unjust Budget. I want to give one example also of real property. Take a freehold house and land of £10 per annum at 20 years purchase. That would be £200. In the case of lineals that property pays now, at the age of 44, Succession Duty on £140, 1½ per cent.—that is, two guineas. It will pay hereafter 30s. If it was worth double that £20 per annum it would now pay four guineas. Under the Bill it will pay 50s. Therefore, with reference to these classes, I venture to say classes as deserving of the attention of this House as any class of the community, there is a double relief given, a relief under the Death Duties and relief under the Income Tax. You 273 may overthrow this Budget if you will, and if you can; but depend upon it you will not thereby secure the support or the approval of this class of the community. The right hon. Gentleman talks about foreign investment here and property going abroad. Do yon think that men who carry their millions abroad are going to make a better thing on it? That has not been the experience in the last 10 years. Why, if the right hon. Gentleman himself tries that experiment I am quite sure he will find that he is far better off in the Lothians than he is likely to be even in Argentine. I do not desire to occupy any further the attention of the House. We have laid before the House what, at all events, we consider to be a fair and a just financial arrangement. We have endeavoured in dealing with a heavy deficit to so arrange it that the burden shall fall upon those who are best able to bear it. There has been every opportunity of testing that plan to the utmost. I am quite willing to take, first of all, the judgment of this House upon it, and then I will take upon it the judgment of that democracy which the right hon. Gentleman has truly described as a just and a sensible people. And as I believe that to-night for this Budget we shall have the sanction of the House of Commons, so I know that we have already the approval of the people of this nation.
§ Question put.
§ The House divided:—Ayes 283; Noes 263.—(Division List, No. 186.)
§ Main Question put, and agreed to.
§ Bill read the third time, and passed.