§ * THE CHANCELLOR OF THE EXCHEQUER (Sir M. HICKS BEACH, ) Bristol, W.
On each of the previous occasions during the last five years on which it has been my duty to place before the Committee a statement of the financial condition of the country, I have been happily able to congratulate them on the generally increasing prosperity of the people—1899 was perhaps an exceptional year in that respect. This time, my retrospect is not quite so satisfactory. I do not say that there is any 617 step in a backward direction, but the year 1900, especially in its last six months, did show symptoms of a change. Our foreign trade during the year considerably increased, but it was an increase in value rather than in volume. That increase was mainly derived from the very high prices of certain articles, notably coal, which, of course, in its turn must have done injury to some of our important industries, especially the railway interest, and which cannot but have restricted the spending powers of the community. Nevertheless, my revenue for the last year shows no sign of adversity.
My estimate of the Exchequer revenue was £127,520,000; the actual receipts were £130,385,000, or £2,865,000 more than my estimate. But I am bound to say that that excess was due practically to forestalments on dutiable articles, and had it not been for these fore, stalments my estimate of revenue would have been barely realised. Now there may be, perhaps, a good deal to be said in favour of forestalments; there is, I am sure, a great deal to be said against them. But of one thing I am quite certain, and that is that they are an unmitigated nuisance to financial statisticians. The forestalments of revenue in 1899–1900 amounted to as much as £3,250,000, which, of course, properly belonged to the revenue of last year. The forestalments of revenue in last year, I think, somewhat exceeded that sum, but it is extremely difficult, perhaps impossible, to form an accurate estimate of what they amounted to, because they principally took place in the months of January and February, some time before the close of the financial year. But the statistical difficulty that arises from these forestalments is that they entirely upset the relations between the revenue of any year and the consumption of dutiable articles within that year, so that it is practically impossible to form any accurate conclusion as to the increase or decrease in the consuming power of the people. Therefore, this evening, I shall not detain the Committee with any detailed comparison of the receipts under the various heads of Customs and Excise between the past and the previous years, because only hypothetical conclusions could be drawn from a 618 comparison of this kind. Generally, I will venture to say this, that I think the consuming power of the people is maintained, but there is no material evidence of the expansion of that power beyond what can be fairly attributed to the increase of population, and there are some points which I shall notice, from which undoubtedly we may draw lessons for the future, which by no means diminish my present difficulty.
The receipts from Customs in the last year amounted to £20,262,000, which is £2,642,000 beyond my estimate. That was practically due to an increase beyond my estimate of £1,050,000 on tea, and £1,680,000 on tobacco. I may say in passing that so far as Customs are concerned, my estimates of the yield of the additional taxation imposed last year were, irrespective of the forestalments, realised; but these forestalments to which I have referred accounted for the increase of the Customs revenue above my estimate. On the other hand, Wine produced only £1,492,000, a decrease of £128,000 as compared with my estimate, and of £238,000 as compared with the previous year. Turning to Excise, Spirits almost exactly realised my estimate of £19,000,000, but this I have to admit was considerably due to anticipatory clearances. When I come to Beer, which, of course, is not affected in this way, the produce of Beer last year was only £13,500,000, which was £470,000 less than my estimate, and therefore showed a decrease as compared with my estimate both in regard to the ordinary taxation on beer and the increased taxation on beer. That may be attributed partly to the fact that very many beer drinkers and persons who excite to beer drinking in others were absent in South Africa; perhaps it was due to the eloquence of my right hon. friend the Member for the Sleaford Division of Lincolnshire in making so much of the arsenic scare; but I fear it may have been also due to a decrease in the spending power of the people affected by the high price of coal. At any rate, the fact remains that there was a noticeable decrease in the number of standard barrels of beer that paid duty during the last financial year. And yet, curiously enough, I believe that the number of liquid barrels of beer consumed by the people 619 did not decrease at all. The process, I imagine, was this: the dealers in beer imposed the additional duty on their customers, not by raising the price, but by what is euphemistically called "lowering the gravity." I am sure it will be a source of pleasure to hon. Members below the gangway opposite to hear that the only part of the, United Kingdom, so far as the Excise authorities are aware, in which that did not take place to a serious extent was Ireland. But I am afraid that even in Ireland the dealers in spirits followed the example of the dealers in beer, and the result has been that I have, though unwittingly, been a greater promoter of temperance than any of its recognised apostles, because the people at large did not take so readily to the consumption of the weaker article as they took to the consumption of the stronger. The result of my examination of the revenue from spirits in the course of the past year, coupled with the experience of 1894, is that we have now practically reached the limit of profitable taxation on spirits.
Now, Sir, I come to a more agreeable subject—namely, the Death Duties. The yield of the Death Duties was absolutely abnormal in the year 1899–1900. It amounted to £18,473,000, £14,020,000 going to the Exchequer and £4,453,000 to the Local Taxation Fund. Last year the total yield of the Death Duties was £17,090,000, £12,980,000 going to the Exchequer and £4,110,000 to the Local Taxation Fund, so that the Exchequer yield of the Death Duties almost exactly realised my estimate of £13,000,000. That was a cautious estimate. It was rather objected to as being too cautious at the time it was made, but I knew what I had to expect, because in these matters, with regard to the administration of large estates, the receipts of the year do not so much depend on the deaths in the year as on the deaths that have taken place in the previous year, and, therefore, I was aware that there was likely to be a considerable falling off in the value of the larger estates which came in for administration and payment of duty during last year. The fact was this, that, whereas in the year 1899–1900 the estates of twelve millionaires, amounting to £26,533,000, paid £2,151,000 in Death Duties, last year we had to be content 620 with ten millionaire estates, amounting to £16,198,000, and paying only £1,317,000 in Death Duties. I do not complain, but I do mourn the falling off, and the Committee will be glad to hear that I have better expectations for next year. More than £1,000,000 less was received last year from estates of over £250,000 in value than in the previous year, and nearly £500,000 less from estates under that value, which diminished both in number and value. I dare say the hon. Member for King's Lynn will say that this is a clear proof of the falling off in the yield of the Death Duties. I do not think so. I think it is largely due to chance, but it is also due to a fact which many persons have to deplore, namely, the great reduction in value of the best securities on the Stock Exchange. Some of these securities have been reduced by as much as 15 per cent., and, of course, when they form part of an estate which comes in for Death Duties the value of that estate must be proportionately less. The total capital value of the property on which Estate Duty was paid last year amounted to £262,162,000. The year before it amounted to £291,981,000, so that there was a decrease of £29,817,000 in value last year, mainly on free personalty and personalty abroad. Yet I do not think we need be alarmed on that account, for the reason I have already stated, because the capital value of the personalty paying duty last year exceeded by £6,500,000 that which paid duty in 1898–99.
The yield of Stamps last year was most unsatisfactory. They only yielded £7,825,000, which was £725,000 less than my estimate and £675,000 less than the previous year. This, I believe, was due to the prolongation of the war and the practical absence of business on the Stock Exchange.
I now come to the Income Tax. The yield of the Income Tax last year was very remarkable. It amounted to £26,920,000, or £1,120,000 above my estimate. It was not until the year 1889 that a penny of Income Tax produced more than £2,000,000. That year it produced £2,045,000. Now, although £1,440,000 a year has been given away by abatements to the poorer income tax payers since 1889, and, as I think, rightly given away, one penny 621 of Income Tax produces more than £2,400,000. In twelve years the income assessed to Income Tax has been increased by no less than £120,000,000. I hope the Committee will remember that when I come to a later point, and will remember also that there has been at least a corresponding increase in the position of the classes who are below the Income Tax limit, as the Returns of the savings banks and of wages paid conclusively show.
The only other points in the revenue to which I need call the attention of the Committee are the facts that we have had an exceptional receipt from the Mint owing to the profits on the silver coinage, and that the telegraph receipts contrast very unfavourably with the expenditure. I wish to impress the latter fact on many hon. Members who are always asking us for additional expenditure on the telegraph system, either for the payment of the staff or for the extension of the system both at home and abroad. The total Exchequer revenue was £130,385,000, the amount paid to the Local Taxation Fund was £9,634,000, or in all £140,019,000.
The Budget estimate of the Exchequer expenditure was £150,001,000. Since then there have been, as the Committee will recollect, Supplementary Estimates amounting to £30,704,000 for the wars in South Africa and China, and £578,000 added to the Consolidated Fund Services for interest on debt, and there have been large additional Civil Service Supplementary Estimates, mainly due to the wars in Ashanti and East Africa. There has been a Supplementary Estimate for the Navy of £2,519,000, owing to the necessity of providing increased reserves of guns, ammunition, and stores, and to the high price of coal, so that the total estimated expenditure for the year amounted to £185,178,000. If we deduct from that the saving under various heads of £1,586,000 we arrive at a total Exchequer expenditure of £183,592,000. Out of this, over one-third, or £68,620,000, was war expenditure—£65,120,000 in South Africa, and £3,500,000 in China, If we deduct the Exchequer revenue of £130,385,000 from the total expenditure of £183,592,000, we find a deficit for last year of £53,207,000, showing that we paid £15,413,000 out of revenue 622 towards the cost of the war. The deficit was raised by £20,909,000 from the war loans, £20,194,000 from Exchequer bonds, £5,000,000 from Treasury bills, and the balance of £1,044,000 was temporarily borrowed on Ways and Means pending the receipt of the final instalment of Exchequer bonds which were authorised by Parliament last December, amounting to £3,230,000, payable this month. On the 1st April last our total borrowings on Ways and Means amounted to £3,000,000, including the £1,044,000 which I have already mentioned, and the rest was devoted to strengthening the balances, with the result that the Exchequer balances, which at the end of the financial year 1899–1900 were £3,517,000, on the 1st of this month stood at £5,597,000.
Now I have to inform the Committee of the amounts which the Exchequer provided in addition to the expenditure which I have already stated. It provided £9,739,000 for the Local Taxation Fund, and £4,915,000 borrowed on terminable annuities from the National Debt Commissioners for capital expenditure on naval and military works, the Uganda railway, telephones, and matters of that kind, the capital and interest of which, as the Committee are aware, are repaid from year to year by Votes on the Estimates of the year, being outside the Consolidated Fund charges, so that the total amount provided by the State last year came to the enormous sum of £198,246,000.
I now come to the National Debt, and I am afraid that my account of it will be a painful contrast to some which I have given in former years. The total National Debt on the 1st April, 1900, was £639,165,000. In that is included £10,180,000 for reproductive services of the nature to which I have just alluded, and that amount has been increased this year to £14,731,000. But that is outside the fixed debt charge. The deadweight debt was on the 1st of April. 1900, £628,979,000; on the 1st of this month it was £687,932,000, owing, of course, to the increase of £59,000,000 on account of the war. There has been a slight decrease in the funded debt, in which I do not include the war debt at all, of £1,425,000, owing to the operation of the 623 life annuities held by the public, which, of course, cannot be suspended with the suspension of the Sinking Fund. There is, on the other hand, a slight increase in the capital value of terminable annuities, amounting to £1,378,000, principally owing to the fall in Consols, by which the equivalent in stock of the cash value of these annuities became increased.
Now, Sir, I have done with the review of the past, and I come to the future, which will be more interesting to the Committee. I will take the expenditure first, as it is the least interesting part. The Consolidated Fund Services for the year in which we stand amount to £27,800,000, including provision for the Sinking Fund and for the interest on the War Debt already incurred. The Supply services, for which Estimates have been laid on the Table of the House, amount to £159,802,000, which is £31,720,000 more than last year. There has been an increase for war expenditure on the Army Estimates of £20,433,000, and of £6,327,000 for ordinary services. The Navy Estimates show an increase of £3,353,000; the Civil Service Estimates of £791,000; the Post Office and Telegraph Services, £759,000, making a total Estimate for war services, included in the Army Estimates for this year, of £58,230,000, as compared with £37,797,000 in the original Estimates of last year. I would just point out to the Committee, in passing, that that amount of over £58,000,000 is £10,000,000 less than the actual war expenditure in South Africa and China last year. Therefore the total estimated Exchequer expenditure for this year is £187,602,000.
I now come to the estimated revenue on the present basis of taxation. I put the Customs at £23,000,000, a reduction of £2,662,000 on the receipts of last year on account of the forestalments which have taken place. I put the Excise at £33,100,000, the Estate Duty at £14,000,000, which may seem a high estimate, but is accounted for by the anticipations of the yield on large estates which I have already indicated to the Committee. I put Stamps at £8,000,000, Land Tax and House Duty at £2,500,000, and Income Tax at £30,000,000, owing to the fact that there are large arrears from last year 624 which will be included in this year's receipts; and my advisers assure me that they do not think there will be any real falling off, taken all round, in the profits of the year 1900 as compared with the profits of the year 1897, in calculating the three years upon which the duty under Schedule D is paid. That makes a total estimated revenue of £111,200,000 from taxation. Of the non-tax revenue, I put the Post Office at £14,300,000. Telegraphs £3,450,000, Crown Lands £475,000, recipts from Suez Canal shares, etc., £830,000, and miscellaneous receipts £2,000,000, making a total of £21,055,000. The two together make £132,255,000, which, deducted from the Exchequer expenditure, shows a deficit for the coming year of £55,347,000.
I come now to the interesting question of how that deficit is to be met. At first sight it would appear to be only a war deficit, because, as the Committee may recollect, out of the expenditure £58,230,000 is war expenditure; and if you put that aside you will find that the ordinary revenue as compared with the ordinary expenditure shows a surplus of £2,883,000. But even if it were only a war deficit I should have to propose to the Committee additional taxation towards meeting it as I proposed last year. I never will be responsible for the fatal policy of paying the whole cost of the war out of loans, without charging a reasonable amount to the taxpayers of the day. But I am afraid that it is not only a war deficit. I am afraid that the real difficulty before us is not so much the cost of the war in South Africa and China as the increase of what may be called our ordinary expenditure. Five years ago, when first I had the honour of introducing a Budget in the House of Commons, I ventured to the best of my power to give a warning to Parliament and to the country. I took the history of the previous twenty years, and I showed that the proportionate increase of expenditure in those twenty years had been far and away greater than the increase in our revenue, and I impressed to the best of my ability upon the House and the country my grave doubts as to the possibility of our existing financial system bearing 625 such a burden if it continued to increase. What are the facts? I then showed that, after making a fair allowance for increases or decrease of taxation in the twenty years before 1896, the receipts from Customs, Excise, Stamps and House Duty had increased by 16¾ per cent., and the receipts from Income Tax had increased by 15½ per cent., but that the expenditure had increased by no less than 68 per cent., and that the direct taxpayers had borne the bulk of the new burden. What has happened since? In the past five years our Exchequer revenue, which was £102,000,000 in 1895–6, at the time I spoke, has increased—speaking in round numbers, and of course putting aside receipts from increased taxation—to an amount which, on the basis of taxation which prevailed in 1896, would have yielded about £118,000,000 in the present year, or an increase of £16,000,000, a very satisfactory increase too. But how much has our expenditure increased? The Navy Estimates in 1895 were £18,701,000; this year they are £30,876,000. In round numbers the Army Estimates were £18,000,000 in 1895–6; this year they are £30,000,000. They have grown to that amount under what I see described in some quarters as the "blighting influence of the Treasury" The Civil Service Estimates which were £19,297,000 in 1895–6, are this year £23,630,000. In round numbers this is an increase of £28,000,000 in expenditure as compared with £16,000,000 of revenue.
The question we have to ask ourselves is. How has this increased expenditure been provided? It has been provided simply by the additional taxation imposed last year. What was that additional taxation imposed for? It was not for ordinary expenditure, but for war services. It was proposed and it was intended by the House to be additional taxation for war expenditure, and we all hoped and expected that at the end of the war it could be remitted. But since then our ordinary expenditure, apart from the war, has enormously increased; and looking at the way in which the increase is going on, supposing the war came to an end three or four months hence—[Opposition cries of "Oh, oh!"]—well, supposing it came to an end sooner 626 than hon. Members opposite expect, as it possibly may, our ordinary expenditure would not permit us to remit the additional taxation which was imposed for war purposes last year, and which, let me remind the Committee, included an income tax of no less than 1s. in the £. I hope the Committee will feel that I am trying to place, before it the financial situation frankly and fearlessly. I should fail in my duty if I did not do so. That is why I have said that to my mind the great difficulty with which we have to deal now is not the war expenditure, but the ordinary expenditure of the country; and, therefore, in imposing additional taxation to meet the additional expenditure of the present year, I think we are bound to make some endeavour to put our financial system on a broader basis, so as to enable us to bear the increase in our ordinary expenditure which may be necessary.
I rather gather from the way in which my observations have been received on the opposite side of the House that some hon. Members, perhaps many hon. Members, may be disposed to question the necessity of this increased expenditure. I do not refer—and I hope this will be clearly understood—in what I am about to say, to hon. Members from Ireland below the gangway opposite. They have frequently protested against the increased expenditure, and have done their best to prevent it. I speak to hon. Members opposite, and I speak to hon. Members behind me. I think that this increased expenditure is necessary, or I should not be standing at this box to-day; but I would venture to remind the Committee that that has been the opinion repeatedly expressed not only by great majorities in this House, but by the constituencies in the country.
Let us take the Navy expenditure. I do not care where you go in Great Britain, I do not care what the political complexion of your meeting may be; I venture to say that there is one tiling which will be popular in that meeting irrespective of political opinion, and it is that we must have a strong Navy. Hon. Members opposite are equally responsible, and rightly responsible, wit us, for the increase of expenditure that is taking place on our Navy. Now let 627 us turn to the Army, If there is one, thing that both parties agreed upon in canvassing the country at the last General Election, surely it was this, that there must be great reforms in our Army. And reforms cost money. [Opposition cries of "No, no."] They must cost money. When my right hon. friend the Secretary of State for War made his proposals to the House earlier in this session what happened? Why, I think the Leader of the Opposition himself—I am certain that the right hon. Gentleman the Member for the Forest of Dean—objected—to those proposals as insufficient. [Cries of "No."] Oh, yes; because they did not include the most costly of all expenditure—an addition to the pay of the Regular Army. Then I come to the expenditure on the Civil Service, the Post Office, and the Telegraphs. From all quarters during the past five years, from every quarter of the House, including that quarter [the Irish benches], there have been continual proposals for increased expenditure under I these heads; but there is one matter, perhaps, in which hon. Members opposite may think that they could promote a saving—namely, in the grant under the Agricultural Rating Act—a matter of a million and a half a year! An important sum, but just look what the demands of those hon. Members would be on other matters. It was not very long ago that the right hon. Gentleman the Leader of the Opposition bound his party, including, I suppose, the right hon. Gentleman the Member for West Monmouthshire, to adopt a system of compulsory land purchase in Ireland. [Sir WILLIAM HARCOURT dissented.] So we have not got a united Front Bench opposite yet! I took it that the silence of the right hon. Gentleman gave assent. At any rate, the party opposite, both above and below the gangway, are pledged to the adoption of something of that kind, which must involve increased expenditure. Then I turn to the right hon. Gentleman the Member for East Wolverhampton. He is always urging us, backed by the sentiment of the great body of the House, to give India £5,000,000 sterling, when the finances of India are in an infinitely better condition than our own. We have proposals from 628 various quarters to expend money from the Exchequer in aiding great towns to solve the difficult and important problem of the housing of the working classes, to improve the port of London, and, above all, to promote the great work of education. [An HON. MEMBER: All profit!] Never mind, it is expenditure. I am not questioning the profit of any of these matters. That would not be a fit argument for a Budget speech. I am only endeavouring to impress on the Committee that what hon. Members opposite might possibly save under one head of expenditure they would certainly expend under another. It is among, I believe, the most favoured articles of their political creed to impose infinitely larger burdens on the taxpayers for the promotion of education, whether elementary, secondary, or university, than the taxpayers have hitherto borne; and therefore, though we may be divided—and we are divided—as to the manner in which the money should be spent, yet we are of one accord, I am afraid, in this matter—that the money should be spent in some way or other. At any rate, there is no party, or section of a party, in this House that is in favour of economy for economy's sake. I speak with the experience of five years as Chancellor of the Exchequer, and I have suffered a good deal depart mentally under the universal feeling in favour of increased expenditure. That only en forces what I ventured to say just now—namely, that we have come to a point where it is necessary, in dealing with our financial system, to widen the basis on which our taxation rests. That, of course, does not refer to direct taxation.
I have to raise a certain sum from taxation now. I must ask both direct taxpayers and indirect tax payers to take their share of that burden. I have seen some natural grumbling from income tax payers, who already groan under a shilling in the £, against any further increase in the Income Tax. I do not wonder at it; but I think it was rather a protest, in reality, against the whole additional burden being thrown on their shoulders than against the idea that they should bear some portion of it. At any rate, I know that in the great war of the early part of last century for thirteen years Income- 629 Tax payers had to pay 2s. in the £, and that in the Crimean War their burden went up in one year to 1s. 4d. in the £. It is a shilling now. We have to find additional money for war expenditure and for preparations for war, and I shall be obliged to ask income-tax payers in the course of the present year to bear a burden of two-pence additional income tax, or in all 14d. in the £. That, Sir, will raise a sum in this year of £3,800,000, and next year £900,000 in the shape of arrears, making £4,700,000.
Now I come to the great problem of indirect taxation. Our thoughts naturally turn in respect of indirect taxation to articles which are already subject, to duty. I will briefly review them. First of all there are Spirits. I have already intimated to the Committee that I do not think it feasible, at any rate in the present condition of the country, profitably to the revenue, to impose additional taxation on Spirits. I turn to Beer. I must remind the Committee that, for the first time for many years, the number of standard barrels of beer that paid duty last year showed a substantial decrease. I cannot venture, under these circumstances, to impose additional taxation on Beer, though I shall have something to say later on about the brewers. I turn to Wine. It is a falling revenue. Nothing more can be got out of Wine ["Oh!"] absolutely nothing. I turn to Tea. Tea is already taxed up to 75 per cent. of its value. Tea is the produce mainly now of India and Ceylon—a crop in which our fellow subjects at home and abroad are deeply interested, and the trade in which, owing largely. I think, to overproduction, is at present in by no means a satisfactory condition. I do not think we ought to increase the duty on Tea.
I turn to Tobacco. Sir, twice in three years the Tobacco Duties have been changed. There is no trade more sensitive to a change of duty, whether it be up or down; there is none in which I know from experience such sensitiveness is more detrimental to the revenue, and I do not think it wise to impose, for the sake of the revenue, additional taxation on Tobacco. I have had suggested to me many new ideas. One comes from 630 Sheffield. It is the favourite theory of my hon. friend that we should impose a Customs duty on £100,000,000 of manufactured imported goods. I think my hon. friend and those who support this view really forget how often it happens—in fact I think generally—that the finished product of one industry is but the raw material of another. I confess I believe that the removal from our tariff list of the scores and hundreds of articles which were on that list before the middle of last century was even a greater boon to the working classes of this country than free trade in corn or anything else that was given to them. I believe it opened up the industries of the country, it increased employment, it developed industry in a way which was of infinite benefit to our working classes. And I believe, though I know that on that point my hon. friend does not agree with me that it is largely due to that policy that at the present moment we raise so magnificent a revenue with so little effort to the country. I think my hon. friend will be prepared for the announcement that I am not disposed to impose a Customs duty on £100,000,000 worth of manufactured articles. I have had many other suggestions. The Post Office is a nuisance to a Chancellor of the Exchequer who is expected to impose taxation for many weeks before the date of the Budget. I marvel at the wonderful simplicity of numberless people in this country—I marvel at their blissful ignorance of the history and the yield of our taxes, who appear to suppose that a tax on cats or on dogs, according to weight, or on bicycles, or a graduated receipt stamp, would pay for the expenditure of the South African War. Well, Sir, my experience in such matters is that anything like the imposition, which has been often suggested to me, of a stamp or licence duty on every conceivable thing—from theatre, music hall, and railway tickets on the one hand, to auction sales and racehorses on the other—would have this certain result, that it would worry and disorganise the whole of our social fabric, so to speak, while on the other hand, owing to the number of exemptions that would be necessary, owing to evasions, and owing to the cost of collection, it would produce to the revenue hardly anything worth having. Sir, 631 I am not disposed to embark on such a policy as that. I want a tax that will he largely productive; I must levy a tax, therefore, on some article of universal consumption which is very cheap; I want a tax that shall not be open to the economical objection to which a protective duty on an article largely produced in this country would certainly be open, namely, that it would raise the price of the whole amount of that article to the consumer by a far larger sum than it would yield to the Exchequer. I want a tax that everybody shall pay, not only those who are privileged to pay Income Tax and Death Duties, or those who indulge in alcohol or tobacco.
Therefore I am bold enough to propose a duty on sugar. Now, the imports of sugar imported for home consumption in this country last year were 31,500,000 cwts.; and it has been calculated that something like 90 lbs. per bead of the population is consumed in the course of a year. I think that that is a very exaggerated estimate—I speak of household consumption. Such an estimate would include the amount of sugar that is wasted in the process of refining and in manufacture; it would include the amount of sugar manufactured into goods which are exported or which, at any rate, do not come into use in the ordinary household. In my belief it would be a much nearer estimate to say that the household consumption of the people of this country averages about 56 lbs. per head in a year, and amongst the poorer classes very considerably less. Well, Sir, sugar is an article which is taxed in every country in Europe and in the United States, and all economists are agreed that it is an article which may be fittingly taxed in financial necessity. We have acted upon that principle ourselves. A tax on sugar is, in no sense, a protective duty; it never was so, and for obvious reasons it cannot be so in this country. And therefore long after Free Trade was established in this country a tax on sugar was continued at a point far above anything I should like to propose now. In the first year of the Crimean War the tax on refined sugar varied from 13s. 4d. to 17s. 4d. per cwt. The first act of Mr. Gladstone in order to find money for that war was to raise that tax by an amount 632 which was calculated to yield £700,000 a year. In the next year the tax was raised by Sir George Cornewall Lewis to no less than 20s. per cwt., and even in the year after the close of the Crimean War the tax on refined sugar amounted to 18s. 4d. per cwt. After that date it was gradually reduced till the year 1874, when it was abolished by Sir Stafford Northcote. But Sir Stafford Northcote, I think, had some compunction about the possible effect on the revenue, for he referred to the argument that you might carry the practice of cutting off duties too far and leave yourself with so few channels through which the wealth of the country could find its way that the Exchequer might permanently suffer a loss. What was Mr. Gladstone's reply? Mr. Gladstone said that it was—a superstition to suppose, merely because we abolish a duty in this country, that we cannot reimpose it, provided we are able to show an adequate public necessity.Well, in our opinion that "adequate public necessity" has arisen. The position is that to which Mr. Gladstone himself referred in 1860, when he said—If we are to have a very large scale of expenditure and a very high income tax, I cannot think, while the bulk of the burden should fall on the shoulders of those having property"—as it certainly does now—that it is otherwise than desirable that the labouring classes should bear their share of the burden in a form in which it will be palpable and intelligible to them.Sir, it is, in our opinion, in the true interests of peace and of economy that the labouring classes, as well as other classes in the country, should know that they bear the burden of the cost of the war, and of preparations for war.
§ * SIR M. HICKS BEACH
What is likely to be the effect on the price of sugar of the imposition of this duty? In my opinion that is a very doubtful question, because the price of sugar is not governed solely by the ordinary conditions, but it is governed largely by 633 the bounty system. The great bulk of our imports of sugar comes from bounty-giving countries. What is that system? It amounts to this: that the country giving a bounty encourages the production of sugar within its own borders, and at the same time does its best to restrict the consumption by its own people by every possible means. So that the result is that there is an enormous surplus of sugar produced which must find a foreign market, and which, under present circumstances, can only find that market here. And therefore it is quite conceivable—unless, of course, the bounty-giving countries either reduce the area of their sugar production, or lower their own Excise duties on sugar for the benefit of their own population, both of which would mean the abolition of the bounty system—it is quite conceivable that the result of the imposition of a tax on sugar here might be that although, at first, the price might go up and the consumption of sugar be consequently decreased, there would be such an inflow into this country of bounty-fed sugar that could not go anywhere else that the price would be brought down again. I merely put that hypothesis to the Committee, because I think it is one which ought to be considered by anyone who takes an interest in this question. Let us take the ordinary results of the imposition of a duty. Suppose it results in the price of the article being increased to the consumer by the amount of the duty and something more.
Very well now, the duty I propose on refined sugar is 4s. 2d. per cwt. I do not propose a uniform duty on all sugars. I propose a duty on raw sugar diminishing from that 4s. 2d. in certain proportions which I will presently explain. But the duty on refined sugar which I propose would be 4s. 2d. per cwt. Now a halfpenny on a pound of sugar would be 4s. 8d. per cwt. Therefore I have left a margin of 6d., and that margin ought to be sufficient to enable the dealer in sugar to pay for the Customs handling, which in regard to refined sugar would be a small matter, for the expense of agency, for the interest on the duty, and any other charges he might have to bear. So that I see no reason why 634 the imposition of a duty of 4s. 2d. per cwt. on refined sugar should increase the retail price of refined sugar by more than a halfpenny per pound. Of course opinions will differ in the Committee as to the effect of that burden, assuming it is imposed, on the working classes; but I will venture to call attention to this fact in the past, In 1893, not many years ago, when, as we may remember, Parliament was almost entirely occupied with Home Rule and with the new Magna Charta granted by the Parish Councils Act, the price of refined sugar, without any duty, was 18s. a cwt. The price of sugar last year was under 13s. a cwt.; and this year, I believe, it is even lower. Therefore I am at any rate justified in saying that the price of sugar with the duty, if it rose in the ordinary way, would not be more than it was in 1893. Well, there never was the slightest complaint made by the working classes or by the manufacturers in the year 1893 as to the injury done to them by the excessive price of sugar; on the contrary, the consumption of sugar in that year was nominally as much as seventy-five pounds a head, and in my belief the increase in consumption since has been principally due, not to increased household consumption on the part of any class of the population, but to the increased use of sugar, owing to its cheapness, in various manufactures, such as, for example, beer, or cheap and unwholesome confectionery, which a good many people think is not to the unmixed advantage of the country.
§ SIR HOWARD VINCENT (Sheffield, Central)
Does my right hon. friend propose to exempt West Indian sugar?
§ * SIR M. HICKS BEACH
No, Sir. I now come to a matter winch must be explained, and as to which, I fear, I must ask for the patient indulgence of the Committee, because it is a very technical, complicated matter—the mode in which the duty on raw sugar will he assessed. Our old sugar duties were graded in five classes, varying according to a colour test in descending shades 635 from pure white through yellow to brown. That gave rise to constant friction between the Customs officers and the merchants, because the eye of the Customs officer was not always the same, and was not always correct. And the test would be inapplicable to raw beet sugar, which is now the principal material of British refiners. Since 1874 a new method has been invented by which the amount of crystallisable sugar contained in any parcel of raw sugar can be tested by an instrument called a polariscope, which has been adopted by the trade for the purpose, a scale being recognised by an association in which both sellers of raw sugar and refiners are represented, under which the amount of pure sugar in the parcel is judged according to the number of degrees of polarisation recorded by the instrument. This scale forms the basis of the tariff. The Customs would accept, as a rule, the degrees of polarisation recorded in the invoice, subject to the occasional test of a parcel by their own polariscopes, so that the trouble and delay in clearing would be reduced to a minimum. Refined sugar which polarises above 98 deg., and amounts to nearly two-thirds of our total imports, being the only kind imported at all but at a few of our largest ports, would pass direct to the distributor without delay, paying the full duty of 4s. 2d. per cwt.; and the duty on all raw sugar polarising below 98 deg. would gradually diminish with each diminishing degree of polarisation by a percentage of the duty, until it fell to the minimum of 2s. per cwt. on raw sugar polarising at no more than 76 deg., which would yield little more than half its weight of pure sugar. The percentage of duty allowed on each degree of unrefined sugar commences at 2.4. and varies at three points in the scale. I propose to lay the exact scale on the Table of the House this evening, and I think it would be better seen than, heard. I hope, with regard to it, that hon. Members will bear two things in mind. In the first place, it may appear very complex, but that must be so for the simple reason that there are, as hon. Members are aware, great varieties and different kinds of 636 raw sugar, and in order to be fair to each you must make certain variations, and fractional variations, which will be very easy to work because they will all be worked on large parcels of sugar—sugar, of course, not being imported in small parcels at all. Secondly, we have endeavoured to adapt the scale so as to meet the different conflicting interests, and not unduly favour anybody. We must not, of course, in the first place, do anything that would protect the British refiner to the disadvantage of the British consumer, and, on the other hand, we must give fair play to the British refiner as compared with his Continental rival. We must be prepared to treat cane sugar and beet sugar alike; we must not favour the refiner of beet sugar as against the refiner of cane sugar, or vice versa, because if we favoured the refiner of beet sugar (and most of the refining here is of beet sugar) we should be extremely unfair to a colonial product; and if we favoured the refiner of cane sugar we should simply throw the business of refining beet sugar into the hands of our French or German rivals. Therefore the framing of the scale has necessarily been a matter of great difficulty and delicacy; but I wish the Committee to understand, and the trade to understand, that it must be looked upon as a tentative scale. We have worked on the best materials we could obtain, and we shall be perfectly ready to listen to criticism with regard to it, and to benefit by the teaching of experience or better knowledge.
There are some articles classed as sugar to which this scale could not apply; for example, molasses. Molasses cannot be tested by the polariscope, and we are, therefore, obliged to name a fixed duty for molasses. More than half the molasses imported is used in distilleries. It would be perfectly possible, I believe, that that should be sent to the distilleries under bond, but under the term molasses are included what are called grocery syrups, and articles of that kind, which are largely consumed by the poor. We have, therefore, thought that a duty of 2s. a cwt. on molasses would be as high as it ought 637 to be placed, and that is the duty we propose. Glucose is another product of which a great deal has been heard lately. Glucose contains, I believe. 45 per cent. of pure sugar; it is said to be used principally for the manufacture of jam, of aerated waters, and beer. So many persons have suggested to me that aerated waters ought to be taxed that I think they will not object to this indirect taxation on aerated waters. And, with regard to beer, I confess I do not myself see any reason why sugar and glucose used by brewers should not pay duty. They need not use it unless they like, and we have understood from the recent debates that a very small proportion is necessary. Therefore I propose to put a duty on glucose of 1s. 8d. per cwt. The duty that would be paid would be very small, either on that or on the low class of sugar which I believe is as a rule, used in breweries. I certainly suppose that the additional taxation on breweries, having regard to the comparatively light taxation of the alcohol in beer relatively to spirits, is one they can very well stand, I have received very many representations from brewers to a contrary effect, and I will only say this, that at present I am of opinion that the sugar and glucose used in breweries ought to hear a, tax, but that I am open to hear what may be alleged to the contrary before coming to a final decision.
There is one matter with regard to this tax to which I ought to allude, and that is the position of the manufacturers who use sugar in their business. A great deal has been said about that lately in the anticipation that a tax on sugar was to be proposed. The importance of the trade, I think, has been somewhat exaggerated. I do not at all deny that it is a useful and flourishing trade, but it is not a very large trade as compared with that of the whole country. On that account, however, there is no reason why it should not he justly dealt with, and I do not believe that the manufacturers who use sugar will be injured in any measure to the, extent that they anticipate. Take, in the first place, their home market. They seem to anticipate a very large reduction in the consumption; I do not believe it 638 will be so; I think that the people have got habituated to sugar—the use of goods, I mean, which contain sugar in their manufacture I am certain that the condition of the people, is better than it was in 1893, when as I have just reminded the Committee, the price of sugar was as much as it would be now with the tax added to it, and I cannot myself believe that the consumption of these goods will seriously diminish in the country on account of the imposition of his tax. Take, again, their export trade. Of course, provision will be made for imposing import duties on the manufactured articles that come from foreign countries in competition with them, under the provisions of the Customs Tariff Act. 1876, and for allowing manufacturers drawback on the articles which they export; and therefore I do not see that, beyond the, trouble, which no doubt will be something, and the additional charges they will be put to for the interest on the duty they will have to pay, these manufacturers will have, any cause to complain. It is, as I have said, a flourishing trade; if they require, additional capital for the purpose they can raise it; and I have no doubt they will take care, as the tobacco manufacturers take care, that they receive very good interest on the capital they have to put into it. I should add that, in the case of saccharine, an article said to be, several hundred times as sweet as sugar, which is used in certain manufactures, the tax must, in fairness to sugar, be very high; the tax I propose is 20s. a pound. Now I come to the statement of what we may anticipate will be the yield of the duty. We have lost three weeks of the present year, during which time there have been certain anticipatory importations of sugar which have, of course, increased the supply in the country. I put the yield of the tax for the year in which we stand at £5,100,000, after allowing £200,000 for drawbacks on exports and £40,000 for the expenses of collection.
I now come to another proposal for taxation. It is a novel proposal, or at least of a kind that has not been known in this country for fifty-five years. It is a tax which is not a direct tax, in my mind, because it will not be paid, as I believe, by the producer of the article; nor, on the 639 other hand, is it a tax which falls within the ordinary description of indirect taxation, because I do not think it will be borne by consumers in this country. It is a tax which will affect only a part of the United Kingdom and which will not trouble Ireland at all, except, perhaps, to the benefit of those who live there. It is an export duty of one shilling a ton on coal. Now, of course, I know the stock arguments against export duties, but I am not going to deal with them, for the simple reason that coal has always been accepted as a material occupying a unique position. It is not like corn, or wool, or cotton, or timber, raw materials which the beneficence of nature and the labour of man are continually producing; coal once extracted from our earth is gone. It is capital, not interest. On the other hand, coal is not like those mineral ores which are exported by many countries which cannot use them profitably for themselves. Coal is the life-blood of our industries, it is essential to the comfort of our great population. Without coal our great industries would languish, our population would diminish and decay.
Coal is what has made Great Britain what she is, and the absence of coal in my belief is a main reason for the comparative poverty of Ireland. Therefore, two of the greatest men who, through the last century, have dealt with the finance of this country have considered coal on a different footing from other materials. I refer to Sir Robert Peel and Mr. Gladstone. In 1842 Sir Robert Peel readjusted the export coal duty, and what did he say on that occasion I He said—I must say I cannot conceive any more legitimate object of a reasonable and just duty than coal exported to foreign countries.When he abolished the duty in 1845, why did he abolish it? Not because he objected to the duty itself—because, in the first place, the yield of it then was very small, the export was, I believe, only about 1½ million tons, and there were many exemptions—but mainly because as he argued it was his desire to establish the principle that there should be no duty leviable in regard to exports, and he did not think it wise to reserve coal as an exception. I cannot help thinking that if at that time the export of coal 640 had amounted to 46 million tons, as it did last year, Sir Robert Peel would not have included it in his proposals for abolition. Then what did Mr. Gladstone say? He was at that time Vice-President of the Board of Trade, and the yield of the duty was estimated at £130,000. But Mr. Gladstone was not influenced by the small yield of the duty. He said that he believedthe sum could be raised in no less objectionable a way, and that no duty could be more fair. If this country, by her superior natural advantages, could afford to supply coal on such terms as to make it for the advantage of foreign nations to buy it in preference to the coal of other places, those foreign nations had no right to complain of a duty placed on the exportation of the article not intended to put a stop to the trade. It was proposed to make the wealth that was given us subserve the interests of the country, not only in the way of trade, but of revenue.This last sentence brings me to a matter of great importance. We must not, in aiming at revenue, sacrifice trade.
Now I want, if I may ask the patient attention of the Committee, to detail to them the reasons that make me believe that a shilling duty on coal will not sacrifice trade. Of course, our coal exports are an important item in our export trade. In 1845, after the repeal of the duty, they amounted to rather more than two million tons, and the duty amounted to 1½ per cent. of the total value, of our exports. In 1889—that is, forty-four years afterwards—they had risen to 5 per cent. of the total value of exports; and in 1899 they had risen to 8 per cent. of the total value of exports. In 1900—and of course in all these statements I do not include bunker coal, of which 11¾ millions were exported last year for the use of ships on voyage—in 1900, owing to the enormous rise in prices, and also, let the Committee mark, to the rise of 7 per cent. in the amount of exports of coal, the total value of coal exported amounted to 12 per cent. of the total value of our exports. Of course, we receive for our exports in coal goods from other countries, and that export provides remunerative freight for our shipping, enabling them to bring back commodities from foreign countries at lower rates than would otherwise be possible; but let the Committee consider where our coal trade goes to. I have said 641 that the total exports of coal last year amounted to forty-six million tons. Now of that amount 88 per cent. went to Europe and the countries bordering on the Mediterranean. Russia. Scandinavia, Germany, France, Spain, and Italy took two-thirds of the whole exports. Now let me remind the Committee that in this year, when the total amount of our exports of coal had increased by 7 per cent., there was an enormous increase in shipment f.o.b. prices. I have examined the returns of exports of coal f.o.b. at sixteen English, Welsh, and Scotch ports for 1899 and 1900, and I find that the increase per ton in 1900, as compared with 1899 (a very good year for coalowners), was in very few cases less than 4s. per ton, and ranged from 4s. a ton to as high as 7s. 2d. a ton. And what were the average freights? I take the freights from two places and compare them per ton in 1896 and 1900, from the Tyne and from Cardiff. From the Tyne to St. Petersburg they increased 3s. 6d., to Sweden 2s. 1d., to Hamburg 1s., to Bordeaux 1s. 6d., to Portugal 2s. 3d., to Italy 4s. 1d., and to Egypt 6s. From Cardiff the increases in freight in 1900 over 1896 were:—To St. Petersburg 4s., to Germany 1s. 8d., to Bordeaux 1s. 7d., to Havre 1s. 5d., to Portugal 2s. 9d., to Italy 3s. 7d., and to Egypt 5s. 4d. Remember these are increases in freight, not the actual charges for freights. Now, had this any effect on trade? It had the effect of increasing trade. It might have been supposed that the American competition, of which we hear a good deal, would have diminished the British trade, for, whereas the average price of British coal in 1900 f.o.b. at ports of shipment was His. 3d. per ton, the average price of American coal at ports of shipment in the same year was 10s. 6d. per ton. But we increased our trade to Europe in 1900 as compared with the preceding year by no less than 3,500,000 tons, in spite, of increase in prices and freight. The American trade to Europe increased only by 600,000 tons. Practically, then, I think I have shown we held the market. But that is not all. Our trade was not only able to bear this increase in price, it was also able to bear an import duty in several of those countries to which our coal goes.
France, to which we sent last year 642 8,635,000 tons—2,000,000 more than we sent in the previous year—charges 11¾d. per ton import duty on our coal. Russia charges at her northern ports 1s. 11¾d. per ton. We sent to Russia 3,229,000 tons. To Spain, which charges 2s. per ton. we sent 2,619,000 tons; Denmark charges 1s. per ton. and we sent 2,125,000 tons; Portugal charges 1s. 6¾d., and we sent her 787,000 tons. Why is this? I contend that our coal is of a class, taking the bulk of it, which the European consumer cannot do without, and that is certainly true of the coal in South Wales, which is almost entirely steam coal. I believe it is largely true of the coal in the north of England, which is gas coal of almost as superior a quality of its kind as the steam coal of South Wales. Therefore, I contend that the imposition of 1s. duty (which, let me point out to the Committee, is infinitely less than the fluctuations of the price through which over a long series of years our exports of coal have shown a continual increase) would do no real injury at all to our coal trade. I argue that from the facts of last year. But I am fortified in that argument by expert opinion, and the expert is fortunately also a Member of this House. I refer to the hon. Member for Merthyr. I do not know whether he is present. In 1897 the hon. Member for Merthyr wrote a book, and a very interesting book it is. I have read it with great pleasure as the product of an hon. Member who is himself largely interested in this very trade, and who has the confidence of a large part of the population in South Wales, who are also largely interested in it. The conclusions at which the hon. Member arrived, stated, as they were, at a time of depression in the trade, are peculiarly applicable to the present moment, when prices of course have largely fallen as compared with what they were last year. What did the hon. Member say? He will excuse me, I am sure, for quoting his conclusions generally. He wrote, of course, of steam coal alone, which forms nearly the whole of the Welsh export of 18,000,000 tons last year, and also forms a very large part of the exports of the whole country. He thought that in 1897 we were selling that coal to the foreigner too cheaply, and that a very 643 simple combination among the producers to fix the price—
§ MR. D. A. THOMAS (Merthyr Tydvil)
Not to fix the price. I am afraid the right hon. Gentleman has not read me carefully. I was very careful to abstain from any attempt to fix the price.
§ * SIR M. HICKS BEACH
Well, let us say to raise the price, would easily make the foreigner pay 2s. per ton more than he was paying then without any risk of losing the trade.
§ * SIR M. HICKS BEACH
Quite so. So much the better for me. The hon. Member pointed out in his book that steam coal is an article of prime necessity to the consumer. He did not believe that the temporary depression in price which existed in 1897 had been brought about by foreign competition, and I think events have proved that he was right. He pointed out the great advantages which our exporting collieries had as compared with the European coal fields in their proximity to sea ports (there can be no doubt of that), and he showed by an admirable argument—I wish I could reproduce the whole of it—that Welsh coal has practically a monopoly in the markets to which the bulk of it is shipped; that among such markets the only place where it meets with serious competition is the Baltic, where its competitor is our own north country coal, and therefore Welsh and north country coal producers may safely raise their prices to a remunerative level without running serious risks of materially affecting the demand. Of course, the hon. Member is not infallible, but he is a great authority, and I accept his argument with one difference, that when he and his friends raise the price of their exported coal by 2s. per ton, I ask them to give me half of it. Of course, 644 it may be said that the hon. Member's views and my argument may be perfectly true of the better class of coal which is exported from this country, but that there is an inferior class of coal exported in which we can have no monopoly at all. With regard to that, I think I may remind the Committee that in the years between 1842 and 1845, when there was an export duty of 1s. per ton on small coal, the exports of small coal very largely increased, although at that time it was said to be worth no more than 1s. 6d. per ton at the pit's mouth; and the average price of our exports of coal at the present day shows, I think, clearly that the exports of coal of small values must form a very small proportionate amount of our whole exports. But supposing the increase in the export trade of coal in this country was checked, supposing it was even diminished, I am not quite sure that even that result would be an unmixed evil. What would happen? Either that the coal would continue to be produced, in which case it would be sold more cheaply to the consumer here, or it would not continue to be produced, and it would be husbanded for future consumption. I am not a believer in the approach, within any time that we can foresee, of the exhaustion of our coalfields. But I think that the part of those coalfields which can be cheaply worked has in some parts of the country already come perilously near exhaustion, and that we may be within measurable distance of a time when owing to that the increased price of coal may be so great as to be a material injury to our industries and to the bulk of our population. If there were any force in that view at all, any check in the increase of our exports, or even some diminution, would not be an unmixed evil to the country as a whole, whose interests must first be considered, whatever might be the immediate effect upon the owners or miners of coal.
I have said that in my judgment this duty will fall on the consumer abroad. Among these customers abroad, however, we must not forget that there is our own shipping interest. They not only take their bunker coal, on which I have said the duty would not be levied, when they start on voyages from this country, but stores of coal are sent to 645 different places abroad, which they purchase for their use when they arrive at those places. I do not think it would be feasible, I must own, to make an exemption on behalf of our shipping industry in this matter. But the additional price which they would have to pay for their coal would be but a small percentage on the cost of that coal at the foreign port at which they have to buy it, and the burden that it might impose on the shipping industry would be the merest trifle when compared with the burden imposed upon that industry by the great increase in the price of coal last year or on previous occasions; and I must say that, having regard to the enormous profits which the shipping industry has been making of late years, having regard to the fact that it of all industries in this country may be fairly expected to make some contribution, some special contribution, towards the, increasing cost of our Navy. I do not think I am asking too much of the shipping industry if I ask it to bear this small additional burden, for, after all, they can relieve themselves of it to a great extent if they choose. This coal is exported, as I have shown, mainly to ports in Europe and the Mediterranean. They are short voyages. If the merchant chooses, he can devote more bunker space in his ship to coal and less to his cargo, and escape the duty altogether. I think I am making no unreasonable demand on the patriotism of the shipping industry. I may say that the yield of this duty will, I expect, be £2,100,000.
The Committee will see that I propose to raise by way of additional taxation £3,800,000 this year from income tax, £5,100,000 from sugar. £2,100,000 from coal—£11,000,000 in all. The result of my in dealing with this matter will be not merely to retain the existing proportions of direct versus indirect taxation, but to adjust them in favour of indirect taxation. In 1899 out of our taxation, calculated on the regular basis, 48.4 was derived from direct taxation and 51.6 from indirect taxation. Last year 40.9 per cent. was derived from direct taxation and 50.7 per cent. from indirect taxation. This year I must omit the coal duty from the comparison, because if it is paid by the producer, which I do not expect, it would be direct 646 taxation, and if it is paid by the consumer, as I expect, it would be paid abroad. Omitting it, therefore, from our calculation, the proportion this year would be 50.3 per cent. of direct taxation and 49.7 per cent. of indirect taxation—for the first time more direct taxation than indirect taxation.
§ * SIR M. HICKS BEACH
Because of the largely-increased yield of the Income Tax and Death Duties. I do not think that the advocates of the interests of the working classes need complain of such a balance as that. It is a result which, as I believe, Chancellors of the Exchequer for the last sixty years have endeavoured to arrive at, and I think it is opportune that the result should be arrived at in a year when I have been obliged to find a new item of indirect taxation in order to widen the basis of our existing taxes.
My final balance-sheet, then, will be as follows:—I estimate that the Customs will produce £30,800,000; Excise, £33,100,000; Death Duties. £14,000,000; Stamps, £8,000,000; Land Tax and House Duty, £2,500,000; Income Tax, £33,800,000; total taxation revenue, £122,200,000. Add to that non-taxation revenue. £21,055,000, and we have a total revenue of £143,255,000.
I propose to reduce the expenditure, as I did last year, by again suspending the Sinking Fund. That will bring down the expenditure to £182,962,000. Deducting the revenue from that, there will be a deficit on the Estimates of £39,707,000; but to that, of course. I have to add, say, a million and a quarter for interest on the fresh debt which I shall have to incur.
And as I am referring to that point, perhaps I may say that I must ask the Committee to give me borrowing powers considerably in excess of that sum of nearly £41,000,000, for these two reasons. In the first place, as I pointed out to the Committee when I was going through my estimate of expenditure, our estimate of the expenditure on the wars in China 647 and South Africa is ten millions less than was actually expended on those wars last year. Well, Sir, I want to be on the safe side. I have been often charged with under estimating the cost of the war in the figures I have placed before the House, and I must add something to my borrowing powers on that account. But, further, there is a very necessary addition to the borrowing powers which must be made on account of the way in which the revenue accrues to the Exchequer. When we levy, as we do this year, so large a proportion of our revenue upon the income tax, the result is that the great receipt of the revenue is in the last quarter, and that the first three quarters are comparatively void. And therefore I must ask for additional powers, to the extent of, say, £10,000,000, in order to finance the Exchequer during the first three quarters. Of course, if anticipations are realised, which hon. Gentlemen opposite do not seem to entertain, and the whole is not required, I can easily devote the surplus towards paying off our war Treasury bills or other portions of our debt. Therefore, Sir, I shall ask the Committee to give me when the time conies borrowing powers to the extent of £60,000,000.
Now I come to a question on which I think it right to say something to the Committee, and that is whether, with regard to this borrowing, we are able in any way to look to the Transvaal. When we met last December I held out hopes to the Committee that I should be able, on the occasion of this Budget, to say something definite as to a proposal for obtaining from the Transvaal some contribution towards the cost of the war. I informed the Committee that we had appointed Sir David Barbour to visit the Transvaal and to report upon the financial situation and upon the prospects of such a contribution. Sir David Barbour undertook the commission, but I need not say the prolongation of the war has very much hindered and deterred him in his work. It has been practically impossible for him to complete the inquiry in the time which I anticipated, and therefore I have no report from him at the present moment. But I have received some preliminary observations, which in all frankness I ought to state to 648 the Committee, although, I am sorry to say, they are not of a very encouraging character. Sir David Barbour informs me that it would be impossible to arrive at any definite or final conclusion regarding the amount of contribution to the cost of the war that could be fairly claimed from the Transvaal until a considerable period has elapsed after the restoration of peace and the establishment of civil government. He puts that period at two or three years. I think the Committee will understand that the prolongation of the war has brought the Transvaal for the time almost to the verge of ruin.
§ * MR. JOHN WILSON (Falkirk Burghs)
Is it not the tact that there are the gold mines which are not ruined?
§ * SIR M. HICKS BEACH
I do not want to enter upon controversial topics now. The ruin is the fault of those who have prolonged a hopeless struggle. Sir David Barbour goes on to say that he does not think anything towards the cost of the war can be expected from the Orange River Colony, and I have never held out the faintest hopes to the Committee that anything of the kind could be expected—unless, of course, some mineral wealth should be discovered with which we are not acquainted. But, with regard to the Transvaal, he says that, owing to the condition to which the country has been reduced, there must be a heavy deficit for two years after the conclusion of the war in the charges for the administration of the country, even allowing for the increase of taxation after the mines are reopened and business is resumed, which I have no reason whatever to doubt it will be perfectly possible to impose. This, of course, shows that we cannot expect any immediate or early contribution from the Transvaal towards the cost of the war. But that is all the more reason why we should keep the matter in view, for what does Sir David Barbour go on to say? He says that he is satisfied that there is a large and valuable property belonging to the Transvaal Government, composed of bank and railway 649 securities, mineral rights such as the Bewaarplaatzen, and other rights over land known to be rich in minerals, which he puts at even a higher value; and, besides, an immense area of country in which minerals have not yet been worked, but in which it is considered very probable that they exist. He has not made an accurate estimate of the value of all this property. [Opposition laughter.] How could he do so when war was going on in the country? But, of course, it is clear that such property can only be gradually realised, and the amount and time of payment of any contribution towards the cost of the war must considerably depend upon its successful realisation. That, Sir, is the position. We shall keep our claim alive, and when prosperity returns to the Transvaal, as we believe it will return when peace is restored, I have so arranged the borrowings hitherto sanctioned by Parliament that they will mature from time to time at such intervals that it will be easy for anyone having charge of the finance of this country, if the Transvaal is in a position to give good security for a loan, to enable it to pay a reasonable contribution towards the cost of the war, and to raise a loan to be devoted to paying off such portion of our borrowings as may be possible. Now I would remind the Committee that so far we have borrowed towards the cost of the war £67,000,000—£13,000,000 Treasury bills, £10,000,000 Exchequer Bonds maturing rather less than three years hence, £14,000,000 Exchequer Bonds maturing about five years hence, and £30,000,000 War Loan maturing in 1910—and, Sir, I think it is clear that any contribution that can be obtained from the Transvaal cannot, at any rate, exceed that £67,000,000. We cannot, I mean, take any question of Transvaal contribution into consideration in dealing with the fresh borrowing which I now ask the Committee to authorise. Now, Sir, in what mode may we fairly borrow such a large sum as we now require? This can no longer be considered a small war. Let me just make a statement to the Committee as to what, so far, the estimated cost of this war has been. In 1890–1900 the Estimates of the cost were £23,217,000, Last year 650 they were £68,020,000, and this year's Estimates amount to £60,230,000, including in each case the interest on the sums borrowed. That amounts to over £152,000,000.
§ * SIR M. HICKS BEACH
I must ask the Committee to remember that in those figures I include the cost of both the South African and Chinese wars. Then I have to add a million and a quarter for interest in this year's borrowing, making in all over £153,000,000. This is double the cost of the Crimean War, and when I look back at the Peninsular War I find the two most expensive years were 1813 and 1814. The forces engaged, of course, were very much smaller than those engaged now; but in those two years the total cost of our Army and Navy amounted to £144,581,000. This amount is less than the charges for the South African and Chinese wars, in which, the Committee must remember, the ordinary cost of our Army and Navy, amounting to sixty millions this year, is not included. Therefore I think I am justified in saying that in cost this has been a great war. I think, then, it is clear we can no longer, in borrowing towards the cost of it, rely on temporary borrowing. We have already £67,000,000 of unfunded debt borrowed for this purpose and maturing within the next ten years. We have also some £36,000,000 of the old funded debt of 2¼ and 2½ per cent., redeemable in 1905. Therefore, whatever may be the prosperity of the country, whatever may be the condition of our finances, it is perfectly obvious to my mind that the staunchest advocate of the redemption of the debt will have ample scope for his energies in the years that are before us. For this reason I propose to ask the Committee to extend the powers of borrowing, which they gave me in previous Acts, to Consols. I believe that that is a necessary option on the present occasion.
I think I have now finished the task which I set before me. I have to thank the Committee for the 651 patience with which they have listened to me. I think they will do me the justice to say that I have not attempted to conceal anything, however unpleasant it might be for me to state it, in the financial condition of the country. I have tried to put before them a full account of the condition of our finances in the present and in the immediate future. I have seen it stated that in our time no Chancellor of the Exchequer has had so difficult a task. I am sure that no Chancellor of the Exchequer has had a more indulgent audience. Sir, I have thought it necessary—we have thought it necessary—in the present financial situation, to propose a departure of great importance from that system of taxation to which we have all become accustomed, and from which, I think, very few of us would be willing to depart. I have laid my proposals on that matter before the Committee. Of course, they will receive strong criticism. They may be met with strenuous opposition. But I have not made them, as I have not made my speech, with any view to gain transient popularity. It is easy for a Minister in charge of the Army or the Navy to come down to Parliament and propose some enormous increase in the Estimates, and to receive his meed of popular applause. I know very well that when his colleague comes down and proposes new and, perhaps, objectionable taxation in order to find the means, he may meet with a very different reception. But, Sir, I would remind hon. Members that with regard to the cost of the South African and the Chinese wars, with regard to the great and the continuous increase in the Estimates for our ordinary expenditure, the great majority of this House have, year by year, during the last five years, encouraged, demanded, and approved that expenditure; and, further, their decision has been ratified at a General Election by the voice of the people. I will not rate the intelligence of my fellow-countrymen so low as to suppose that when they supported and cheered this expenditure they did not know that they would have to pay the bill. When I remember that among those who supported it were the working classes—the majority of the working 652 classes—and when I also remember that the working classes in many matters set to us all an example of unselfishness, I will not think so ill of them as to imagine that they supported this expenditure with the idea that it should all be put on other shoulders than their own. All increased taxation is odious—I know that very well. I defy anyone to suggest a new tax that shall not be odious; but if one kind of taxation is more odious than any other it is unfair taxation; and I can conceive nothing more unfair than that the policy of this country, and the increased expenditure it may cause, should be controlled by the voice of the whole of the people, and that one class alone should be left to bear the increased burden. Sir, at any rate, the principle of my Budget is in direct opposition to that view. Parliament may accept it or reject it. If they reject it, they will, at least, relieve us from a burden heavy enough in any case, but which would then become insupportable. If they accept it, they will have done something to establish, that principle of equitable contribution of the whole community to the burdens of the State which is not merely an incentive to economy and peace, but which is a necessary safeguard against financial ruin.